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Rio Tinto reaches deal for ‘full reset’ in Mongolia mine dispute www.smh.com.au
Rio Tinto chief executive Jakob Stausholm says a deal to cancel $US2.4 billion ($3.3 billion) in debt owed by the Mongolian government will settle years of disputes and delays that have plagued the mining giant’s plans to enlarge the Oyu Tolgoi copper project.
The Anglo-Australian miner and its subsidiary Turquoise Hill Resources on Tuesday announced they had formalised an agreement that would “reset” their strained relationship with the developing nation’s government by increasing the financial benefits for the people of Mongolia. The deal has enabled the $US6.9 billion expansion, one of Rio Tinto’s most important growth projects, to begin underground mining operations in coming days.
The deal marks a positive development for Rio Tinto’s efforts to expand its output of commodities that will be needed in increasingly vast quantities to build green energy technology as the world decarbonises after the Serbian government last week revoked its licences to build Europe’s biggest lithium mine.
Mr Stausholm, who was elevated to chief executive after Rio Tinto’s destruction of Aboriginal rock shelters in Western Australia forced the resignation of his predecessor, has made a top priority of forging closer ties with governments and stakeholders around the world. He has visited Mongolia twice in recent months in a bid to address deepening concerns in the country that the economic benefits of the project for Mongolians were being eroded.
Under the deal ratified by the Mongolian parliament, Rio Tinto will wipe the government’s debt owed for the nation’s share of the mine’s construction costs, plus interest, and will begin underground operations imminently with a mining method known as the “undercut”. The Oyu Tolgoi project has also agreed to buy electricity from the Mongolian grid, while Rio Tinto will help expand renewable energy generation.
“It’s been a lot of work, but we are very happy with the outcome,” Mr Stausholm told The Age and the Herald.
“I think with this agreement we have found a way where there is the right benefits for the people of Mongolia.”
Mongolia’s Oyu Tolgoi deposit is one of the world’s biggest-known copper and gold deposits. The Mongolian government holds a 34 per cent stake in Oyu Tolgoi and Rio Tinto’s majority-owned Turquoise Hill Resources owns 66 per cent.
Rio Tinto’s Oyu Tolgoi expansion is seen as one of its most important growth projects and a key plank of its ambition to diversify away from iron ore and push deeper into minerals that will be increasingly needed to build clean-energy infrastructure such as copper and lithium. But the project has been beset by a series of long delays and cost blowouts since construction began in 2019. The mine’s expansion was first anticipated to cost $US5.3 billion but is now forecast at $US6.92 billion.
The company on Tuesday said the “undercut” would begin in coming days, unlocking the most valuable part of the mine and putting Oyu Tolgoi on track to deliver first production of copper by 2023. It is expected to become the fourth-largest copper mine worldwide by 2030.
Mongolian Prime Minister Luvsannamsrain Oyun-Erdene said the commencement of underground mining operations demonstrated that Mongolia could “work together with investors in a sustainable manner and become a trusted partner”. “I am happy to express Mongolia’s readiness to work actively and mutually beneficially with global investors and partners,” he said.
Rio Tinto’s progress in growing its exposure to copper comes after its push into lithium, another of the key raw materials needed to build electric cars, faced a setback last week. The Serbian government revoked its licences to develop the $US2.4 billion Jadar lithium mine following months of large-scale public protests over the project’s potential environmental impacts.
“We are listening to our people and it is our job to protect their interests even when we think differently,” Serbian Prime Minister Ana Brnabic said last week.
The decision to revoke Rio Tinto’s licences comes with the Serbian government under significant public pressure ahead of a general election in April. Relations between Serbia and Australia have also deteriorated since the deportation of unvaccinated tennis star Novak Djokovic.
Published Date:2022-01-25
