Rio Tinto’s chief executive said on Tuesday he was concerned about the Serbian prime minister’s comments against the company’s lithium project, in his first remarks after Belgrade revoked the global mining company’s exploration licences.

Bowing to environmentalists, Serbian Prime Minister Ana Brnabic pulled the plug on Rio’s lithium project last week and accused Rio of providing insufficient information to communities about the project.

“We obviously are very concerned about the comments made by the prime minister,” Chief Executive Jakob Stausholm told Reuters in an interview.

Stausholm was speaking after the company reached an agreement with Mongolia to end a long-running dispute over the $6.925 billion expansion project for the Oyu Tolgoi copper-gold mining project.

“I’m very proud of what we’ve done there (in Serbia). We have always followed the laws and regulation in Serbia as we focused on that amazing project,” he said.

“Right now we are just trying to take care of our people in the country,” he said, adding he had nothing further to say about Serbia.

Rio is reviewing the legal basis for the decision and could sue Serbia as it tries to salvage the $2.4 billion project.

The company committed to the Serbian project last year, as global miners pushed for the metals needed for the green energy transition, including lithium, which is used to make electric vehicle batteries.

The mine was slated to produce enough lithium to power 1 million electric vehicles, in addition to boric acid, used in ceramics and batteries, and sodium sulphate, used in detergents.

At full capacity, the mine was expected to produce 58,000 tonnes of refined battery-grade lithium carbonate per year, making it Europe’s biggest lithium mine by output.

(By Ernest Scheyder and Praveen Menon; Editing by Chris Reese)

Jan. 26 (Xinhua) -- Mongolia recorded 3,080 new local infections of COVID-19 in the last 24 hours, raising the national tally to 434,735, the country's health ministry said Wednesday.

Among the latest confirmed cases, 1,815 were detected in the national capital Ulan Bator, which is home to over half of the country's population of 3.4 million.

Meanwhile, two more COVID-19 patients died in the past day, bringing the pandemic death toll to 2,027, the ministry said.

Currently, there are a total of 69,375 active COVID-19 cases across the country.

Omicron cases currently account for over 90 percent of the daily total in the country, according to the National Center for Communicable Diseases.

So far, 66.7 percent of the country's total population have received two COVID-19 vaccine doses, while 1,000,344 people have received a third dose.

More than 73,400 Mongolians have received a fourth dose, which the country started to administer on Jan. 7 on a voluntary basis.

Per the order of the Minister of Justice and Internal Affairs, the regulations on issuing, extending, and nullifying the operations of foreign NGOs and monitoring their operations have been updated.

More specifically, matters concerning international organizations’ branches and representatives’ offices will be regulated by the Minister’s order instead of the order issued by the Head of the General Authority for Citizenship and Immigration of Mongolia in 2016. The regulations reflect certain issues in detail, such as the issuance of permission for running operations as a branch or representative’s office, extension, basis for nullifying the permission, and monitoring.

With the new set of regulations, it is now possible to extend permissions by 3 years based on factors such as project and program financing, implementation framework, and number of job positions that were created, and 5 years if a cooperation agreement was signed with the Government or the organization has been running stable operations for over 10 years.

As of today, there are 79 branches and representatives’ offices of international NGOs running operations in Mongolia.

On January 25, Minister of Road and Transport L.Khaltar did a working visit at MIAT Mongolian Airlines.

The Minister of Road and Transport handed over a copy of the newly amended Law on Value Added Tax, Law on Customs and the Law on Customs Tariffs and Duties to MIAT CEO B.Munkhtamir. The amendments were approved by the parliament on December 30, 2021.

During the Minister’s visit, MIAT CEO B.Munkhtamir introduced the current state of the company’s operations, financial difficulties and measures being taken as well as future plans.

Minister of Road and Transport L.Khaltar also became acquainted with the progress of maintenance repairs being done for a B737-800 aircraft, and expressed his wish for the company’s engineers to have more success on the global market in the future.

Since 2014, MIAT’s Aircraft Maintenance and Repairs Department has conducted repairs for a total of 83 aircraft owned by foreign airlines.

At the regular meeting of the Cabinet today on January 26, Minister of Energy N.Tavinbekh was tasked to carry out the corresponding works to establish a power supply agreement with Oyu Tolgoi LLC.

As the draft of the agreement on supplying power for Oyu Tolgoi’s mining operations from the country’s central power grid has been completed, the Government has given the green light for the agreement to be signed. In connection, the two sides will be holding a meeting at the Ministry of Energy today.

Currently, the mining company imports an average of 170 MW or 1.3 billion kWh of electricity from China each year. By sourcing their power domestically through the agreement, it becomes possible to keep the funds in the country. This will serve as significant support for the financing of the project on constructing the Tavantolgoi thermal power plant, the Minister highlighted.

Minister of Energy N.Tavinbekh said, “The agreement will be established for 20 years, with a minimum of USD 120 million worth of power to be supplied annually. In order to supply electricity to Oyu Tolgoi, certain preparations are needed such as establishing a power plant at Tavantolgoi. The power plant’s construction will take four years at the very minimum. However, with the plant’s first block put into operation from 2024, it will become possible to supply power for the Oyu Tolgoi project.”

Until preparations are completed by the side of Mongolia, the mining company will continue to source its power from Inner Mongolia Power International Cooperation Company of China.

The feasibility study for the construction project on the natural gas pipeline connecting Russia and China through the territory of Mongolia was finalized on January 25. A protocol finalizing the feasibility study was signed between Mongolia and Russia in a ceremony at Shangri-La Hotel. About the event, we interviewed Deputy Prime Minister of Mongolia S.Amarsaikhan.

-What plans have been finalized with the approval of the feasibility study?

-The leaders of Russia’s Gazprom Company came to Mongolia on March 12, 2021, developing the project’s feasibility study and carrying out surveillance and design work. As a result, an action plan was approved and the feasibility study was completed by December 15, 2021. What was confirmed by the feasibility study is that firstly, the project is feasible and secondly, it is economically beneficial.

Thirdly, we have completed the feasibility study, agreeing that a 975 km pipeline could be constructed along railway lines across six aimags from Kyakhta, Russia to Altanbulag and from Altanbulag checkpoint to Zamyn-Uud, and approved it today. The project now enters the actualization phase, meaning we will now commence designing and detailed engineering studies.

Talks have gotten underway with the Russian side to take some from the natural gas to be transported through the territory of Mongolia to satisfy domestic need.

A number of matters including how much and what works to carry out and what technical works will be allocated here are arising in relation to the feasibility study. In accordance with the study, a total of over 7,000 individuals will be employed and five compressor stations will be used for the implementation of the project. It is a mega project that also entails the countries involved sourcing their energy from gas power stations. The feasibility study covered everything including the project size and environmental and safety aspects. A major project is beginning to build a gas pipeline with an annual capacity of 50 billion cubic meters.

-How many soums of what aimags will the pipeline go across?

-It will go across 20 soums of six aimags including Selenge, Tuv, Dornogobi, and Gobisumber, and Ulaanbaatar city.

-To what extent will Mongolia be involved in the pipeline project? Will it get gas?

-Talks have gotten underway with the Russian side to take some from the natural gas to be transported through the territory of Mongolia to satisfy domestic need. Moreover, we have set objectives to build one or two power stations for a natural gas source in Mongolia, build new residential areas along the pipeline, supply them with gas for further development, and gradually move to natural gas.

-What documents will be signed next and how will the talks unfold? When will the construction begin? How long will the project be implemented and when will it finish?

-With the approval of the feasibility study, we are moving to detailed planning and actual designing, which are expected to take a year to year and a half. The construction is planned to begin by 2024 and preliminary estimates suggest the project will be completed in 2027-2028. The project costs have been covered in the feasibility study and are being estimated. Further, as the construction and technical plans are developed, it will become clear how much work and budget will be required.

-What responsibilities will Mongolia have? Will it be required to invest from the budget and other sources?

-A lot has been done in this regard and it will be discussed during the next round of talks. The project and talks involve three countries, Mongolia, Russia, and China. As the talks with Russia go on and necessary documents are developed, the efforts will continue with talks with China. The actions will be taken concurrently. They key principle is that we seek an opportunity for a fruitful partnership that benefits all three parties, which is why it will take a lot of effort.

Needless to say, all of this has to be economically beneficial to Mongolia. We are considering many aspects of this such as the amount of profit Mongolia gets and the cost of sourcing from the pipeline, project workforce, and maintenance. We reckon there will be more gains aside from the cost for constructing the pipeline through Mongolia. These will become clearer as the project is carried out.

-It is a project involving three countries. Has the Russian side informed of its talks with the Chinese side?

-We have been informed of talks between the other two countries, which will continue. The three countries will have concurrent talks.

-Have the sides settled on what percent of the project workforce will be from Mongolia?

-Mongolia has regulations for the workforce supply, in accordance with which, works will be carried out. They key workforce might arrive from Russia and other countries since the project is an elaborate one that has not been implemented in Mongolia before. We are also beginning the training of local workforce. Workforce will be recruited locally after having them study at Russian universities and colleges and do their training on-site, bringing teachers from abroad, and collaborating with the Mongolian University of Science and Technology and other technical universities. As I said earlier, a large skilled workforce will be in demand, as 1,500 to 7,000 people will work on the project.

In 2021, Mongolia’s coking coal exports to China fell by almost 41 percent to 12.74 million tonnes, and coking coal imports accounted for 25.7 percent.

The Fengkuang report outlines that there is still great uncertainty on the future of the coking coal import market in 2022.

This includes whether new Australian coal will be imported, and the impact on Mongolian coal customs clearance.

China imported 6.79 million tonnes of coking coal in December, a decrease of 3.28 percent from the previous month.

The cumulative import of coking coal for 2021 was 49.6 million tonnes, a decrease of 16.2 million from the same period last year or 24.6 percent.

Turquoise Hill Resources Ltd.'s shares rallied Tuesday after a deal was struck to allow the delayed expansion of the Oyu Tolgoi copper mine in Mongolia to push ahead.

In morning trading, the Toronto-listed shares were 16% higher at C$22.16, and are now up 6.5% in the new year. Rio Tinto's American depositary receipts were 1% lower at $72.50 on the New York Stock Exchange.

Majority-owner Rio Tinto said it had reached an agreement with Turquoise Hill, which owns most of the Oyu Tolgoi operation, and Mongolia's government that will see the start of underground operations at the mine in the South Gobi desert.

The agreement resolves a dispute between the partners on how to split the cost of an underground expansion, which is several years delayed.

Under the deal, Turquoise Hill will waive in full a $2.4 billion loan to Mongolia's Erdenes Oyu Tolgoi, and an updated funding plan has been agreed to address Turquoise Hill's estimated remaining funding requirement for the underground project. Turquoise Hill has agreed to an equity or rights offering of up to $1.5 billion, with an initial offering of at least $650 million no later than the end of August.

The country's parliament has approved a resolution that resolves the outstanding issues that have been subject to negotiations with the government of Mongolia over the last two years, Rio Tinto said.

Write to Robb M. Stewart at robb.stewart@wsj.com

Jan 25 (Reuters) - Rio Tinto Plc (RIO.AX), (RIO.L) and the Mongolian government said on Tuesday they have reached an agreement to end a long-running dispute over the $6.93 billion expansion project for the Oyu Tolgoi copper-gold mining project.

The deal marks a positive development for the Anglo-Australian mining giant, which is reeling from Serbia's rejection last week of its proposed lithium mine as well as local opposition to projects in Guinea, the United States and elsewhere.

"It's a major relief. It's a huge step forward for us," Rio Chief Executive Jakob Stausholm told Reuters via phone from Ulaanbaatar ahead of a flight to the mine site for a ribbon-cutting ceremony later on Tuesday with Prime Minister Oyun-Erdene Luvsannamsrai.

"We are very comfortable with this outcome and, more than anything, achieving a full reset of the relationship," said Stausholm, who became CEO last year.

Stausholm visited Mongolia multiple times in recent months in an attempt to salvage the project amid mounting concerns that the economic benefits of the project for Mongolians were being eroded.

Mongolia owns 34% of Oyu Tolgoi, one of the world's largest-known copper and gold deposits. Rio controls the rest through its 51% stake in Toronto-listed Turquoise Hill Resources Ltd (TRQ.TO) and operates the mine.

As part of the deal, Turquoise Hill will waive $2.4 billion in debt owed to it by the Mongolian government. Additionally, operations will soon start on the underground portion of Oyu Tolgoi, with first production expected in the first half of 2023.

The expansion will be paid for with cash, the rescheduling of existing debt repayments, and prepaid sales of copper concentrate to Turquoise Hill.

The project also committed to buying electricity from the Mongolian grid once it is able to meet supply. Rio said it will work to help add renewable power to the grid. In the meantime, the government extended an agreement to import power from China through 2023.

Rio's original 2009 agreement on the mining project called for the construction of a new coal-fired power plant to supply electricity. The updated deal does not include that plant and instead Rio aims to source wind power, the company said.

Stausholm said the deal's multiple terms reflect "an elegant solution" to the complex issues that had strained relations with the government. "It is possible to do something for the benefit of the people of Mongolia and also for the benefit of our investors," he said.

Luvsannamsrai, Mongolia's prime minister, said the deal "demonstrates to the world that Mongolia can work together with investors in a sustainable manner and become a trusted partner."

Reporting by Ernest Scheyder in Houston and Praveen Menon in Wellington; Editing by Lisa Shumaker

Rio Tinto’s most important growth project could be back on track after the miner struck a settlement with the Mongolian government to resolve the major disputes that have hampered progress on a $US6.9 billion ($10 billion) expansion of the Oyu Tolgoi copper mine.

Rio and its subsidiaries have agreed to waive a $US2.4 billion debt the Mongolian government owed after Rio and its subsidiaries covered the developing nation’s share of construction costs over the past decade.

In exchange, Mongolia softened its stance on several matters, most notably its desire for the mine to get all of its power from a Mongolian generator by July 2023.

While a domestic power source will still be sought eventually, the Mongolian government will in the meantime allow Rio to extend the existing power contract with a Chinese power generator to at least 2026 and possibly 2030.

Importantly for progress on the mine, Rio has agreed to push ahead with a crucial and expensive mining move called the “undercut”, which triggers the controlled collapse of rock within the mining zone and is effectively the start of a continuous mining process.

Rio had refused to go ahead with the undercut until a swathe of financial, tax and mine planning disputes were resolved, using it as a bargaining chip in talks with the government.

Some of those disputes, including over tax, remain unresolved.

But Rio said on Tuesday that enough common ground had been found for the undercut to begin in “coming days”.

Sustainable production of copper and other metals will now occur in the first half of 2023, putting Oyu Tolgoi on track to be one of the world’s top five copper producers by 2030.

Stability and peace in the relationship between Rio and the Mongolian government has only ever been achieved temporarily, but if Tuesday’s settlement can stick in the longer term, it will be a coup for new chief executive Jakob Stausholm and his Mongolian-born copper boss Bold Baatar.

“This agreement represents a reset of our relationship and resolves historical issues between the Oyu Tolgoi project partners,” said Mr Stausholm on Tuesday.

“This is a massive step forward, it started a year ago when I appointed Bold to run the copper portfolio and it has been a lot of effort.”

Speaking from the Mongolian capital of Ulaan Baatar before travelling to the mine site on Tuesday, Mr Stausholm confirmed that some disputes with the government remained unresolved.

“We have a few smaller issues which we, with a reset of relationships, for sure it will solve,” he said.

“We still have an outstanding tax dispute which I expect we will resolve in the course of the year.

“All the conditions for starting up the mine have been resolved, we have got a path forward on power and we don’t need to build a coal-fired power plant, that is a massive achievement in my view”

Complex ownership

Rio has mined copper, gold and silver from a small open pit mine at Oyu Tolgoi – located in the remote South Gobi Desert – since 2011, but the priority has always been to unlock the huge resource through a massive underground expansion of the mine.

A Mongolian company called Oyu Tolgoi LLC owns 100 per cent of the mine, and that company is 66 per cent owned by Toronto-listed company Turquoise Hill and 34 per cent owned by the Mongolian government.

Rio’s exposure to the mine comes through its 50.79 per cent stake in Turquoise Hill, and Rio’s power has been enhanced by the fact it is the main financier and technical manager of the expansion project.

Relations between Rio and the Mongolian government have always been fractious; Oyu Tolgoi is Mongolia’s largest private-sector employer, the biggest source of foreign investment and the prime bellwether for investor sentiment toward the developing nation.

Those facts have made Oyu Tolgoi a political football in Mongolia at the best of times, and relations with the government deteriorated when Rio’s management of the expansion project led to massive cost and schedule blowouts before the onset of the pandemic exacerbated those blowouts.

The blowouts were painful for the Mongolian government, which faced the prospect of stumping up more money to fund its 34 per cent share of construction costs and waiting longer for dividends from the mine to start flowing.

The Mongolian government wanted Rio, as the project manager that oversaw the blowouts, to bear the brunt of those costs, and the two parties have effectively been in a stand-off over the matter since mid-2019.

Tuesday’s agreement to waive the Mongolian government’s debt resolved those tensions.

The waiving of the debt had long been anticipated but not enthusiastically by some minority shareholders in Turquoise Hill.

Pentwater Capital has been the second biggest shareholder in Turquoise Hill in recent years and has previously suggested that Rio - as the manager of the cost blow outs - should provide financial compensation to the Mongolian government, rather than Turquoise Hill.

Pentwater spokesman Matt Halbower said Tuesday’s deal had confirmed his firm’s fears, with the Mongolian government debt to be waived by Turquoise Hill, meaning minority shareholders will take a hit as well as Rio.

“It was Rio Tinto’s concealment of the cost overruns and schedule delays which necessitated the large compensation package provided to the government of Mongolia. Turquoise Hill has now been left holding the bag by being forced to pay for Rio’s lies because Rio has steadfastly refused to allow minority shareholders to have a voice on Turquoise Hill’s board,” he said

Mr Stausholm said Ro’s contribution to the settlement was in the right proportion.

Turquoise Hill requires a further $US3.4 billion to complete the underground expansion and expects to be able to source more than half that amount by refinancing existing debt and taking on some new debt.

Turquoise Hill will also be compelled under the deal to raise funds through a share issue before August 31; the share issue must raise at least $US650 million with Rio set to take up its share of the raising.

The previous chief executive of Turquoise Hill, Ulf Quellman, had publicly pushed back against Rio over how to fund the shortfall.

Mr Quellmann was ousted soon after he took that stance and relations between Turquoise Hill and its parent have been more cordial ever since.

“We are very excited to be starting work on the undercut, which is critical to unlocking the immense potential of this world-class, high grade deposit for the benefit of all stakeholders,” said Turquoise Hill chief executive Steve Thibeault.

“Following the agreements with the Government of Mongolia and the Amended Heads of Agreement with Rio Tinto being put in place, we now have greater certainty and confidence to complete construction of this once-in-a-generation mine.”

Peter Ker covers resource companies, based in Melbourne. Connect with Peter on Twitter. Email Peter at pker@afr.com