MELBOURNE, March 1 Rio Tinto said on
Friday it had failed to resolve cost disputes with Mongolia over
the $6.2 billion Oyu Tolgoi copper and gold mine in talks this
week but the two sides agreed on a temporary budget to keep the
mine on track to start producing in June.
Rio Tinto's subsidiary Turquoise Hill Resources
, which owns 66 percent of the project, said the two
sides will continue talks through March. The Mongolian
government owns the remaining stake in the project.
Oyu Tolgoi is crucial to both sides. At full tilt, it will
account for nearly a third of Mongolia's economy, while Rio
Tinto is dependent on the mine to drive growth outside of its
massive iron ore business.
The battle has flared up ahead of a presidential election
slated for June and just as Turquoise Hill tries to line up $4
billion in project finance for the next stage of the Oyu Tolgoi
development to build an underground mine.
Political risk is a key factor for lenders considering
making project finance commitments due on March 8, Reuters Basis
Point reported on Thursday.
Progress had been made on disputes surrounding Oyu Tolgoi
development and costs, the operating budget, project financing,
and management fees, Turquoise Hill said in a statement,
reiterating that production would not go ahead until they were
Mongolia's representatives on the Oyu Tolgoi board refused
to approve the mine's budget for this year in January, pressing
Rio Tinto to explain why capital spending on the project had
blown out by more than $2 billion.
Rio Tinto has said that figure is incorrect and the project
remains on budget of $6.2 billion.
Mongolia is wary that it is not benefiting from an
investment agreement struck with Turquoise Hill in 2009, a view
that has twice led parliament members to attempt to raise the
country's stake in the project to 51 percent.
It is concerned it will not receive royalties for many years
as operating and project costs have increased. Royalties are not
due to be paid until Turquoise Hill recoups its investment.
"Some of the issues are complex, so it's natural that
resolution is taking some time," Oyu Tolgoi President Cameron
McRae said in a separate statement released in Ulan Bator.