Rio Tinto halts Oyu Tolgoi

Miner delays funding, work on underground mine on govt financing delay.

Rio Tinto Ltd has stopped work on the underground development of its $US6.2 billion Oyu Tolgoi mining project after being told its financing agreement with the Mongolian government needed a parliamentary seal of approval, in the latest delay to hit the troubled venture.

Rio said the Mongolian government had told it provisional project financing had to be approved by parliament - which is currently in recess - and the process "may take some time to work through".

"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 financing approval secured for the underground development," Rio said. 

Rio's subsidiary Turquoise Hill Resources owns 66% of Oyu Tolgoi, with the Mongolian government holding the balance.

The Mongolian government must earn its 34% stake in Oyu Tolgoi once revenue starts coming in, but capital cost issues have sparked tensions between the government and the miner.

Rio said it "remains committed" to working with the government to secure financing for the project.

Earlier this month, Rio launched the first shipment of copper-concentrate from the project, which has been hit by a string of delays amid ongoing tensions with the Mongolian government.

Rio's subsidiary Turquoise Hill Resources, which is building the mine, has struggled with significant cost blowouts, a downgrade in forecast production and hike in operating costs.

The mine is key to Rio Tinto reducing its dependence on iron ore (see Tim Treadgold's Re-examining Rio).

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