The beholden horde

19 May 2015 By John Foley Follow @johnsfoley

Rio Tinto and Mongolia have ended a two-year stand-off on the giant Oyu Tolgoi mine by both giving ground. The nomad state now has a fix for plummeting investment inflows. While the miner’s hand looks stronger, falling metals prices have made civility the better part of valour.

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Mining companies Turquoise Hill Resources and Rio Tinto, its majority owner, signed an agreement with the Mongolian government that could enable them to restart work on the Oyu Tolgoi copper and gold mine.

Following the announcement on May 18, the mining companies agreed to make concessions on fees payable to the government, and settle a tax dispute, in return for ending a disagreement that has held up progress on the giant mining complex since July 2013. The next steps would include a final feasibility study, and securing financing.

Mongolia’s Prime Minister Chimed Saikhanbileg heralded the agreement by saying that Mongolia was “back to business”. Saikhanbileg called a referendum by text message at the end of January, in which 56 percent of respondents supported further development of Oyu Tolgoi, but with a turnout of just 10 percent of mobile subscribers.

Oyu Tolgoi’s first phase, an open-cast mine, is already producing and shipping copper concentrate. The second phase, which would involve an investment of around $5.4 billion, is an underground mine that holds 80 percent of the total mine’s value, according to Turquoise Hill.

Turquoise Hill owns 66 percent of Oyu Tolgoi’s operating company, with the rest in the hands of the Mongolian government. Rio Tinto in turn owns 51 percent of Turqouise Hill, which is listed in Toronto.

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