Mongolia hits Rio Tinto by axeing licence

 
City A.M. Reporter
MONGOLIA has dealt a blow to Rio Tinto by cancelling some of the licences for the firm’s Oyu Tolgoi mine.

The cancellation follows a string of complaints by the Mongolian government over Oyu Tolgoi, which is controlled by Rio Tinto through its Turquoise Hill Resources unit, in the lead-up to a presidential election due in June.

At full tilt, Oyu Tolgoi will account for nearly a third of Mongolia’s economy, while Rio Tinto is dependent on Oyu Tolgoi to drive growth outside its massive iron ore business.

Among the issues raised by the Mongolian government, are that it has accused Oyu Tolgoi of failing to pay taxes and overspending on the project, which is eventually expected to produce 425,000 tonnes of copper and 460,000 ounces of gold a year.

There was also a dispute over development costs, which Mongolia’s president said had surged above $7bn (£4.6bn). Rio contends the project is on budget at $6.2bn.Rio Tinto has vowed to negotiate hard to protect the pact and said it would not start selling copper from the project until the problems were resolved.

“Subject to the resolution of these issues, first commercial production from Oyu Tolgoi is scheduled to commence by the end of June 2013,” Rio said in a results announcement on 14 February.