Mongolia Says Committed to Resolving Oyu Tolgoi Financing DelaysMichael Kohn
Mongolia is committed to resolving issues delaying expansion of the $6.6 billion Oyu Tolgoi copper and gold mine, the government said in a statement after a Rio Tinto Group unit failed to arrange funding for their joint project.
“The Government of Mongolia is flexibly available to prioritize and continue the discussions on terms and conditions of the project financing separate from any other issues,” according to a press release issued today by Erdenes Oyu Tolgoi LLC, the state-owned company that holds 34 percent of the mine.
Turquoise Hill Resources Ltd., the Rio Tinto unit which holds 66 percent of the mine, was unable to obtain long-term project financing for the project due to uncertainty over negotiations with the Mongolian government, the Vancouver-based company said in a statement on November 14.
In order to repay loans that would have been covered by project financing, Turquoise Hill may sell shares to raise as much as $2.4 billion, in an offer to be completed no later than Jan. 15, Rio Tinto said.
Rio Tinto, which manages the project through its 51 percent stake in Turquoise Hill, halted development of the mine’s underground expansion and laid off about 1,700 workers until discussions with the government on funding and other issues are resolved.
Talks will continue to resolve all issues, Erdenes OT said in the statement, adding that “the timing of shareholder approval and continuation of the underground expansion are dependent on the completion of the feasibility study and therefore not certain.”
The feasibility study is expected to be complete in the first half of 2014, Turquoise Hill said in its November 14 press release.
Oyu Tolgoi, located 80 kilometers (50 miles) north of the Chinese border, is forecast to account for about a third of Mongolia’s economy when in full operation. The first stage of the mine, which included development of an open pit and concentrator, cost around $6.6 billion. The second phase is expected to cost an additional $5.1 billion.