The Government of Mongolia and Rio Tinto have resolved some of the issues that have stalled expansion of the $6.6 billion Oyu Tolgoi Copper-Gold Project, according to a Mongolian board member of the operation, but some points remain unresolved. Rio delayed work on the underground expansion of the mine in July until issues with the government are resolved.  1

Davaadorj Ganbold, one of three Mongolian nationals on the Oyu Tolgoi LLC board, said within the last 10 days some issues had been resolved and "we have reduced the state of urgency.” He said, “Issues related to cost overruns, the feasibility study and project financing are large and broad issues that cannot be resolved in four or five days.”

He said issues relating to water use, transportation of the concentrate, exports to China and company management were closer to resolution. “Both sides are being very tolerant and cooperative towards each other. Solving one thing may bring some movement or success in other items.”

Ganbold has been an Oyu Tolgoi LLC board member since September and is also executive director at Erdenes Oyu Tolgoi LLC, the company that holds the government’s 34% stake in the project. Turquoise Hill Resources holds the other stake and Rio, the world’s second-biggest mining company by market value, manages the venture through its 51% stake in Turquoise Hill.

Rio delayed work on the expansion, which is expected to cost about $5.1 billion, until the issues with the government are resolved. While open-pit work continues, the dispute led to suspension of underground construction and the lay-off of about 1700 workers.

As well as damaging Turquoise Hill's share, the saga has hurt Mongolia by weakening investor confidence and delaying other projects. Oyu Tolgoi, located 80km north of the Chinese border, is forecast to account for about a third of Mongolia’s economy when in full operation.

Mongolia had listed 30 points of dispute with its partner over the mine. Chief among these have been criticism of cost overruns on the open-pit operation and objections to the mine being used as collateral for financing of the underground portion.

On October 1, Mongolian board members said the number of outstanding issues was down to 15 following discussions with Rio in London, conceding that some Oyu Tolgoi assets could be used as collateral.

The second phase of the mine includes extensive underground tunnelling needed to reach the richest parts of the ore body. The open pit section currently in operation will only yield about 20% of the mine’s total wealth.

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