Rio Tinto may be forced to renegotiate terms of Oyu Tolgoi Mine
Lawmakers in Mongolia approved plans to revise the 2015 Oyu Tolgoi copper mine agreement between the country and Rio Tinto which is known as the Dubai Agreement. The revised terms would make it more beneficial to Mongolia, which currently owns 34 percent of the project.
Rio Tinto could be forced to renegotiate terms of the deal that has become complex as the project runs over budget and behind schedule. Reuters reported that the delays at the Oyu Tolgoi Mine, Mongolia’s biggest foreign investment project, have left Mongolian lawmakers impatient for income, while Rio Tinto says it has invested billions.
Rio Tinto-owned Turquoise Hill Resources has a 66 percent stake in the multi-billion-dollar project and the Mongolian state owns 34 percent under the Dubai Agreement.
Rio Tinto said in an email that it understood that the Mongolian parliament's vote to revise the deal needed to be finalized and that it would provide a further update once that happened.
The Nov. 21 vote was the culmination of a two-year process after a working group was set up to establish the benefits of the Dubai Agreement and submitted its report to parliament.
“For now, the Oyu Tolgoi agreement is not benefiting Mongolian citizens," Battumur Baagaa, a member of the Mongolian parliamentary working group, said when he first presented the report in July.
In July, Rio Tinto announced a cost overrun of up to $1.9 billion, saying total capital expenditure was expected to be in a range of $6.5 billion-$7.2 billion, and it expected a delay of up to 30 months at the Oyu Tolgoi underground extension.
The recommendations approved by parliament include replacing the 34 percent interest with a special royalty and bringing forward the date - currently set at 2041 - when Mongolia begins receiving dividends.
The working group argued the Dubai agreement was never ratified by parliament and was not legally binding.
Turquoise Hill, which is 51 percent-owned by Rio Tinto, also said it would provide a further update once the parliamentary resolution was finalized.