Rio Tinto has reportedly offered to write off $2.3 billion owed by the Mongolian government as the company continues to work to develop its Oyu Tolgoi copper mine in the Gobi Desert.

The Financial Times reported that the debt cancellation is part of a wider five-point proposal aimed at getting the underground expansion of the Oyu Tolgoi Mine back on track and repairing relations with Ulan Bator that have been damaged by years of wrangling. It includes terminating the project’s controversial financing agreement and covering the additional investment until the start of production, which is now expected in the first half of 2023.

Oyu Tolgoi is one of Rio’s most important assets. When finished it will be one of the biggest copper mines in the world, producing almost 500 kt/a (550,000 stpy).

The project has experienced two years of delays and the budget for the project has blown up to $6.45 billion, up from $5.4 billion.
The concession from Rio Tinto follows a recent visit to the country by its chief executive Jakob Stausholm, who met Oyun-Erdene Luvsannamsrai, Mongolia’s prime minister and MPs fiercely opposed to the project.

According to a letter from the company to Prime Minister Oyun-Erdene Luvsannamsrai posted on Mongolia’s government website, Rio Tinto has agreed to write off the debt, conduct an independent audit into the financing of the project’s underground expansion and improve governance.

The concession, part of wider offer to end tensions with Mongolia over the underground expansion of Oyu Tolgoi, would speed up the timeline for when the country can start receiving dividends, the letter said.

Rio’s five-point proposal includes terminating the project’s controversial financing agreement and covering the additional investment until the start of production, which is now expected in the first half of 2023.

It also means that Erdenes Oyu Tolgoi, the state-owned company that holds the government’s equity in the project, won’t incur additional debt after operations begin at the underground section.

“The above decisions were difficult to make and represent our final offer,” Stausholm said in the letter. “The investors are transferring significant value to Mongolia, which we believe will be the basis for a long-term, trusting partnership.”

Mongolia owns 34 percent of the mine, with the rest held by Canada’s Turquoise Hill Resources, in which Rio has a 50.8 percent stake.