Taxpayers to back Rio Tinto Mongolia mine
Australian taxpayers will help Rio Tinto to fund a $US5.1 billion mine expansion in Mongolia, after Australia's export credit agency decided to continue its controversial habit of lending to multinational corporations.
Despite pleas for it to focus on small and medium exporters that cannot source loans elsewhere in the market, Australia's Export Finance and Insurance Corporation confirmed that it would participate in financing the second stage of Rio's Oyu Tolgoi mine.
A spokeswoman for EFIC would not reveal the size of the loan, but the organisation typically lends in the tens of millions, or hundreds of millions of dollars.
Rio has reportedly secured at least half of the $US5.1 billion in finance required to build the expansion, with the World Bank's International Finance Corporation among those committed to the project.
EFIC's decision to lend money to Rio comes despite Australia's Productivity Commission urging the organisation to "substantially reorientate" its focus toward small exporters, rather than big companies that can easily source money elsewhere at low interest rates.
That view was given qualified support by the Gillard govern- ment, and a bill to reform EFIC will soon be presented to Parliament.
Rio is listed on both the London and Australian stock exchanges, and its local shares boast a market capitalisation of almost $92 billion.
Though it has a large presence in Australia and ranks as one of the nation's biggest taxpayers, its global headquarters are in London, as are about two-thirds of its shareholders.
Jubilee Australia executive director Carmelan Polce criticised the decision, saying there would be no shortage of lenders in the market that would be happy help Rio finance Oyu Tolgoi.
It is believed that Australian commercial banks like ANZ and NAB have already pledged support to the mine expansion, which will increase the volumes of copper and gold produced. A review of other recent funding decisions shows that large corporations have often benefited from EFIC loans.
A joint venture led by American giant Exxon Mobil secured a $350 million loan in recent years to build a gas project in Papua New Guinea. Leighton Holdings was also the recipient of multiple loans.
During its recent deliberations, EFIC had ranked Oyu Tolgoi as a "Category A" project; a classification reserved for proposals which have "potential for significant adverse environmental and/or social impacts." There have long been concerns that Oyu Tolgoi could disrupt the lifestyle of the nomadic herders that inhabit Mongolia's South Gobi desert, and Ms Polce said she was disappointed that approval was granted without more being known about the region.
Rio has long argued that the mine is tipped to provide half the impoverished nation's exports by 2019. Rio and the Mongolian government have recently been at loggerheads over the cost of building the second stage and the share of royalties that will flow to the government. But Rio chief executive Sam Walsh said last week good progress had been made, and first production from the first stage of the mine was expected before June 30.