Rio Tinto, Mongolia Reach Agreement For Massive Oyu Tolgoi Expansion
Rio Tinto and the government of Mongolia have reached an agreement to move forward with a massive underground expansion at the Oyu Tolgoi copper mine. Development of the $5-billion underground mine has been stalled since 2013 due to disagreements between Rio and the government over taxes and costs for the project.
Rio Tinto (NYSE:RIO,ASX:RIO,LSE:RIO) and the government of Mongolia have reached an agreement to move forward with a massive underground expansion at the Oyu Tolgoi copper mine. The project features an open-pit operation that has been producing for roughly two years. However, development of a $5-billion Phase 2 underground mine has been stalled since 2013 due to disagreements between Rio and the government over taxes and costs for the project. The company has said that roughly 80 percent of Oyu Tolgoi's value lies in the underground mine. Rio controls the mine through its majority interest in Turquoise Hill Resources (TSX: TRQ,NYSE:TRQ), which owns 66 percent of the project. The Mongolian government owns the remaining 34 percent, and Rio Tinto manages the project. "Our joint announcement today reflects tremendous leadership by all parties and paves the way for work to resume on the underground development, which is expected to deliver significant value to shareholders," said Rio Tinto's copper and coal chief executive, Jean-Sébastien Jacques, in a statement. Canadian junior Entrée Gold (TSX:ETG) is also involved in Oyu Tolgoi through its Lookout Hill property. Lookout Hill completely surrounds the Oyu Tolgoi mining license, and Entrée has a 20-percent carried joint venture interest in two deposits that cross over the license boundaries: the Hugo North Extension and Heruga deposits. "Achievement of this major milestone signals that the parties involved are firmly committed to moving the underground development forward," commented Entree Gold CEO Gregory Crowe in a company release regarding the news. "Oyu Tolgoi's immense size and exceptionally high grades are seldom seen in our industry and this project is poised to benefit the country of Mongolia for decades to come."