Rio Tinto's Mongolian copper mine on hold awaiting local approval
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 New South Wales 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.
Frequently Asked Questions about this Article…
Rio Tinto has paused funding and work on the Oyu Tolgoi underground development while it awaits financing approval from the Mongolian government. The company downscaled the second stage in response to the government's concerns about soaring costs and is negotiating other issues before agreeing a new timetable.
The Mongolian government is involved because of negotiations around revenue processing, tax matters and the scale and cost of the project. Parliament must approve the financing arrangements, and the parliamentary summer recess may slow the approval process.
Yes. Oyu Tolgoi made its first shipment in July after earlier delays. First sales had originally been scheduled for June, and planned ceremonies and ribbon-cutting events were postponed while financing and government discussions continued.
The financing delay means underground development and associated expansion work are on hold, so future production growth tied to the second stage will likely be pushed back until the Mongolian government and Rio agree a new timetable. The article does not provide a revised schedule.
Rio Tinto has agreed to sell its 80% stake in the Northparkes copper and gold mine in central New South Wales to China Molybdenum for US$820 million as part of its strategy to divest non-core assets and rein in costs.
The sale is conditional on Rio Tinto’s joint-venture partner Sumitomo either waiving or not exercising its matching rights, customary regulatory approvals, and approval by China Molybdenum’s shareholders.
Rio’s CFO Chris Lynch said Northparkes is a successful business but not large enough to fit Rio Tinto’s strategy. The sale is part of a wider plan to divest non-core assets and rein in costs.
Investors should watch Rio Tinto announcements and Mongolian government updates on financing approval and any new timetable for the Oyu Tolgoi underground development. For Northparkes, follow updates on Sumitomo’s decision about matching rights, regulatory clearances and China Molybdenum shareholder approval, as these will determine whether the sale completes.
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