Jan 30 Rio Tinto Plc said its Oyu Tolgoi
project in Mongolia is on track to reach commercial production
in the first half of 2013, countering a media report saying the
company was considering a temporary halt to construction work
because of political issues.
Shares of Turquoise Hill Resources, the Rio Tinto
subsidiary that owns 66 percent of Oyu Tolgoi, tumbled as much
as 10 percent on the Toronto Stock Exchange on Wednesday after
the report, triggering a circuit-breaker halt. The Mongolian
government owns the remaining 34 percent stake.
"The power is secured, first ore produced and the
concentrator switched on," said Rio Tinto spokesman Illtud
Harri. "We are on schedule for first commercial production in
the first half of the year."
Bloomberg News reported on Wednesday that the company was
considering temporarily halting construction at the $6.2 billion
project, citing two unnamed sources.
The suspension, according to the story, was under
consideration to protest Mongolia's demands for a bigger stake
in the project and new mining royalty rates.
With the first phase of the project on schedule and nearing
commercial production, it is unlikely that the companies would
suspend the initial project, said Tony Robson, a mining analyst
with BMO Capital Markets, in a note to clients.
"It remains possible, however, that the companies are
considering a delay of the Phase II underground development
until the political situation is resolved," he said.
Turquoise Hill shares closed down 3.4 percent at C$7.87,
while Rio Tinto's stock closed down 0.7 percent at 3,552 pence
on the London Stock Exchange.
Rio and Turquoise Hill signed an investment agreement with
Mongolia in 2009 that covered the construction and operation of
the copper-gold mining complex, which will be one of the biggest
copper producers in the world.
In October, the two companies rejected a request from the
government to renegotiate the deal.
With metal prices near historic highs, resource nationalism
has become a top concern in the mining industry as governments
and local stakeholders around the world demand a bigger piece of
Higher taxes and royalties on big mining companies are often
used by politicians as populist moves to help rally the public
and serve as platforms ahead of elections.