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Mongolia has concerns about Rio Tinto’s management of Oyu Tolgoi

Mongolia is anxious about Rio Tinto’s administration of the Oyu Tolgoi copper and gold mine within the Gobi desert within the southern a part of the nation, a authorities official instructed CNBC.

“We’ve considerations concerning the transparency and we even have considerations whether or not this mine is being operated effectively,” Solongoo Bayarsaikhan, deputy chief of the Mongolian authorities’s cupboard secretariat, stated Friday on CNBC’s “Squawk Box Asia.”

The open-pit and underground mining venture is being collectively developed by the federal government, which owns about 34% of Oyu Tolgoi, and Rio Tinto’s Canadian subsidiary Turquoise Hill Resources that has a 66% stake in it.

The Anglo-Australian miner owns almost 51% stake in Turquoise Hill Sources.

What occurred?

Oyu Tolgoi’s underground growth has been hamstrung by delays, improvement points and value overruns for years.

Rio Tinto and Turquoise Hill Sources signed a development and financing plan with Mongolia in 2015 that supplied foundation for funding the venture — however six years on, manufacturing has but to start in a sustainable method.

As soon as the underground expansions are accomplished, Oyu Tolgoi is predicted produce greater than 500,000 tonnes of copper per 12 months.

Preliminary projections estimated that the mine would be able to sustainably produce copper from 2021 onwards.

Nonetheless, final December, Rio Tinto pushed the timeline again and stated “sustainable manufacturing” was anticipated to start in October 2022. The miner additionally stated the underground expansion would cost $6.75 billion, larger than earlier estimates.

On Friday, Rio Tinto again delayed that forecast and stated sustainable manufacturing will occur “no sooner than January 2023.”

The corporate cited the impression of Covid-19 and excellent points round caving operations. It warned that Mongolia’s extra Covid restrictions this 12 months to sort out group transmission is ready so as to add an estimated $140 million to the finances as of the top of September.

Whereas Rio Tinto blamed the delays and rising prices on difficult floor circumstances, an unbiased evaluation this 12 months contradicted that rationalization.

Employees stroll by means of a tunnel within the underground mining venture on the Oyu Tolgoi copper-gold mine, collectively owned by Rio Tinto Group’s Turquoise Hill Sources unit and state-owned Erdenes Oyu Tolgoi, in Khanbogd, Mongolia, on Sept. 22, 2018

Taylor Weidman | Bloomberg | Getty Pictures

The Unbiased Consulting Group’s report, commissioned by Rio Tinto’s companions on the venture, concluded that poor administration was the primary purpose the mine’s underground growth was working virtually two years late and $1.45 billion over finances, the Financial Times reported.

Mongolia reacts

Rio Tinto reportedly challenged the findings of the report in a letter to Mongolia’s justice minister and stated the evaluation didn’t absolutely acknowledge the total impression of weaker-than-expected circumstances that compelled the mine to be redesigned.

“We requested Rio Tinto to clarify the discrepancies between the unbiased evaluation report and Rio Tinto’s place,” Bayarsaikhan instructed CNBC on Friday.

“We did not discover the letter passable, when it comes to responding to our particular queries and particular considerations over why there’s a price overrun and scheduled delays, why there’s very totally different conclusions within the unbiased evaluation report,” she stated. “Rio Tinto did not present enough responses.”

Bayarsaikhan defined that the Mongolian authorities desires to discover a “mutually helpful answer” and keep away from additional surprises when it comes to additional price improve and delays.

https://www.cnbc.com/2021/10/18/mongolia-has-concerns-about-rio-tintos-management-of-oyu-tolgoi.html | Mongolia has considerations about Rio Tinto’s administration of Oyu Tolgoi

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