Rio Unit Says Cost of Oyu Tolgoi Mine Jumps 16% to $6.6 Billion
The cost of building Rio Tinto Group’s Oyu Tolgoi copper and gold mine rose 16 percent to $6.6 billion, according to a company statement responding to criticism of the project in Mongolia’s parliament last week.
The estimate compares with the initial 2010 costing of $5.7 billion, according to a statement on the website of Oyu Tolgoi LLC, the mine’s operator that is owned 66 percent by Rio unit Turquoise Hill Resources Ltd. and 34 percent by Mongolia’s government.
President Tsakhia Elbegdorj said Mongolia should have more control of the mine that will be the biggest contributor to its economy once it’s in full production. Elbegdorj also said it took Rio months to respond to questions about the project, which the government said had been subject to cost increases.
“During last Friday’s session, many issues were raised that Oyu Tolgoi and its investors have previously addressed through numerous meetings with government and ministry officials and staff,” Cameron McRae, president Oyu Tolgoi LLC, said in the statement. “The fact that these issues are still being raised underscores the importance of our ongoing efforts to communicate fully with the government and citizens of Mongolia.”
The president’s comments heightened tension with London- based Rio over the ownership and future development of the project, which is currently the world’s biggest copper mine under construction. Rio is considering a temporary halt to work to protest government demands for a greater share of profit, two people familiar with the plans said last week.
Turquoise Hill rose 1.9 percent C$7.71 at the close yesterday in Toronto. Rio gained 0.3 percent to 3,625 pence in London.
Oyu Tolgoi will hold a shareholder meeting in Mongolia today, where it expects to address concerns held by the government.
In October, Rio rejected a second move by Mongolia to renegotiate a 2009 investment agreement for the development of Oyu Tolgoi. Rio Tinto owns 51 percent of Turquoise Hill, which was founded by Robert Friedland.
Oyu Tolgoi was Mongolia’s sixth-biggest taxpayer in 2011, before the mine was operational, the company said, addressing accusations it doesn’t pay taxes in the Asian nation. It paid $280 million in 2012 in taxes and other government fees, according to the statement. The company also spent more than $1.1 billion during 2010-2012 with Mongolian suppliers.
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