Rio Tinto waits on Oyu Tolgoi financing
The social and environmental impacts of the massive copper and gold mine were thrust into the spotlight this week when the US revealed why it had abstained from supporting a recent International Finance Corporation decision to fund the project.
Washington's concerns over a lack of information in the project's environmental assessment did not prevent the IFC's $US1.4 billion funding package being approved. But they did give ammunition to opponents of the project at a time when relations between Rio and the Mongolian government are strained.
Australia's Export Finance and Insurance Corporation has been talking to Rio and its subsidiaries over a funding package for Oyu Tolgoi for almost 18 months, and EFIC's final funding decision is believed to be imminent.
Most observers expect EFIC to follow the IFC's lead and commit taxpayer funds to the Oyu Tolgoi, but EFIC's deliberations have dragged on longer than some expected.
EFIC has applied a category A ranking to the project, a description applied to projects the corporation judges to have "potential for significant adverse environmental and/or social impacts".
An EFIC spokeswoman, Gabriella Hold, said the main project risks relate to "water resources, resettlement, biodiversity, stakeholder engagement and the project's management systems".
The comments echo the concerns of international aid groups who have focused on the plight of nomadic herders who roam the lands around Oyu Tolgoi.
Rio has argued that Oyu Tolgoi will bring unprecedented opportunities to such communities, given the mine is tipped to account for half the impoverished nation's exports by 2019.
EFIC has engaged with aid agencies such as Oxfam and Jubilee Australia during its recent deliberations. Jubilee's Carmelan Polce said EFIC should ensure impact studies were thorough before committing to the project.
Rio pointed to the IFC funding as a sign that financing of the project was progressing as expected. The IFC funding is for the second stage of Oyu Tolgoi, which is expected to cost more than $US4 billion.
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Rio Tinto has been waiting for a decision from Australia's Export Finance and Insurance Corporation (EFIC) after nearly 18 months of talks. EFIC's final funding decision is believed to be imminent, though the corporation's deliberations have taken longer than some expected.
The International Finance Corporation (IFC) approved a US$1.4 billion funding package for Oyu Tolgoi. That IFC funding is for the mine's second stage, which overall is expected to cost more than US$4 billion.
Washington abstained because of concerns about a lack of information in the project's environmental assessment. Those concerns did not block the IFC vote, but they gave opponents ammunition and highlighted social and environmental issues around the project.
EFIC has applied a Category A ranking to Oyu Tolgoi, meaning it sees potential for significant adverse environmental and/or social impacts. EFIC spokeswoman Gabriella Hold cited main risks including water resources, resettlement, biodiversity, stakeholder engagement and the project's management systems.
International aid groups and critics have raised concerns about the plight of nomadic herders who roam lands around Oyu Tolgoi, pointing to risks from resettlement and water impacts. Rio Tinto argues the mine will bring unprecedented economic opportunities to such communities and to Mongolia more broadly.
Rio Tinto has said Oyu Tolgoi is tipped to account for around half of Mongolia's exports by 2019, highlighting the project's potential significance for the impoverished nation's economy.
EFIC engaged with aid agencies such as Oxfam and Jubilee Australia during its deliberations. Jubilee's Carmelan Polce urged EFIC to ensure impact studies were thorough before committing to the project.
Most observers expect EFIC to follow the IFC's lead and commit taxpayer-backed financing to Oyu Tolgoi, but EFIC's own Category A assessment and extended deliberations mean its final decision has been cautious and closely watched.
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