Rio Tinto Group, the world’s second-largest mining company, said it’s well advanced in funding talks for an expansion of its Oyu Tolgoi mine in Mongolia that’s been estimated to cost $5.1 billion.
“Bank funding in the form of project finance is the most attractive finance option because it is cheaper and better tailored to the project than any other option currently available,” Cameron McRae, chief executive officer of Oyu Tolgoi LLC, a unit of Rio Tinto, said today in London according to speech notes. “The process is now well advanced.”
The underground component of the planned mine expansion includes 250 kilometers of tunnels and may cost $5.1 billion, according to a report last month by Rio Tinto unit Turquoise Hill Resources Ltd. The existing $6.6 billion open pit mine will be the largest contributor to Mongolia’s economy once operational and output is on schedule to start in June.
Oyu Tolgoi is 66 percent owned by London-based Rio Tinto with the remainder controlled by Mongolia. Rio and the government have been in dispute over alleged cost overruns and management control with three emergency shareholder meetings held this year. The government has said the company should’ve paid taxes last year and needs greater financial transparency.
“Constructive progress continues to be made,” McRae said today. “The focus is both on reviewing progress to date and ensuring that production and future expansions are delivered together – and that critical agreements and finance are supported.”
The boards of International Finance Corp., the World Bank’s funding arm, and the European Bank for Reconstruction and Development granted approval in February for the lenders to join a $4 billion project-finance deal for the Oyu Tolgoi mine.