Underground development at Rio Tinto's crucial Oyu Tolgoi copper mine project in Mongolia will be delayed while the company waits for financing approval from the country's government.
Originally expected to become the world's third-biggest copper mine (behind Grasberg and Escondida in Chile), the future for Oyu Tolgoi is starting to look more humble, after Rio downscaled its second stage in a bid to calm the Mongolian government's concerns about soaring costs.
The $US6.2 billion ($6.7 billion) Oyu Tolgoi copper project made its first shipment earlier in July, after long delays and tensions with the Mongolian government over revenue processing and tax.
First sales from Mongolia's Oyu Tolgoi copper and gold mine were originally scheduled for June, and Rio staff sent out invitations to guests - including the Mongolian Prime Minister - to attend a ceremony for the milestone.
That function was delayed.
Just a month ago Rio Tinto was preparing for a ribbon-cutting ceremony for the project, but that was also put on hold.
"The Mongolian parliament is currently in summer recess and the parliamentary approval process may take some time to work through," Rio Tinto said in a statement on Monday.
Rio Tinto remains committed to working with the government of Mongolia to secure project financing. However, in view of the current uncertainty, including continued discussions with the government on a range of other issues, all funding and work on the underground development will be delayed until these matters are concluded and a new timetable has been agreed.
Meanwhile, Rio Tinto has agreed to sell its majority stake in a NSW copper and gold mine to a Chinese firm. The mining giant will sell its 80 per cent stake in Northparkes mine, in central NSW, to China Molybdenum for $US820 million. Rio is in the process of divesting itself of non-core assets to rein in costs.
"Northparkes is a successful business but is not of sufficient size to be a good fit with our strategy," Rio chief financial officer Chris Lynch said in a statement on Monday.
The sale is subject to Rio's joint-venture partner, Japanese company Sumitomo, waiving or failing to exercise its rights to match China Molybdenum's bid.
It is also conditional upon customary regulatory approvals, and the approval of China Molybdenum shareholders.