Rio Tinto Group’s Oyu Tolgoi venture, a $6.6 billion copper and gold project in Mongolia, replaced three board members as it seeks to break an impasse with the country’s government over financing for the mine.
The new directors are Davaadorj Ganbold, executive director at project partner Erdenes Oyu Tolgoi LLC, Ganzorig Temuulen, deputy director of parent company Erdenes MGL LLC, and Chuluuntseren Otgochuluu, director-general of the Ministry of Mining’s Department of Strategic Policy and Planning, Ganbold said yesterday by telephone from Ulaanbaatar.
Progress at Oyu Tolgoi has stalled as the partners discuss how to finance a $5 billion expansion. Mongolia, which controls 34 percent, claims cost overruns are delaying future dividends and wants the mine’s underground extension funded with revenue from concentrate sales until disagreements are resolved. That’s been a subject of debate with Rio, which manages the project through its 51 percent ownership of Turquoise Hill Resources.
Illtud Harri, a spokesman for Rio Tinto in London, declined to comment on Mongolia’s complaints regarding cost overruns.
Deliveries of copper concentrate from the mine’s open pit began in July. Oyu Tolgoi plans to export 300,000 metric tons of the material this year, gaining $1 billion in revenue, Mining Minister Davaajav Gankhuyag said in August. While open-pit works continue, the dispute has led to the suspension of underground construction and the layoff of about 1,700 workers last month.
“We have an intention to move this project forward, otherwise I would not accept this position,” said Ganbold, who was hired by Erdenes Oyu Tolgoi on Aug. 19. “The problems are serious and the investment is large, I don’t know how long it will take to resolve these problems.”
The three outgoing directors are Puntsag Tsagaan, Chuluun Ganbold and Natsag Bagabandi. A fourth Mongolian national, Galsan Batsukh, remains as chairman of the board.
“According to our agreement, we should have our first dividends in 2019,” new board member Otgochuluu told a conference of investors in Ulaanbaatar yesterday. “But because of this cost escalation and project funding there will be extra debt on Erdenes Oyu Tolgoi and we will have to wait 10 or 20 more years to have our first ever dividends.”
Changes may also come from the Rio side. Cameron McRae, the chief executive officer of Oyu Tolgoi LLC, plans to vacate the CEO position by the end of his three-year contract in November, a person with knowledge of the matter said in July.
Turquoise Hill owns 66 percent of the mine in the Gobi Desert.