The $6.95 billion expansion project for the Oyu Tolgoi underground copper mine in Mongolia is finally back on track after Rio Tinto, Turquoise Hill Resources (TRQ) and the government of Mongolia reached an agreement that will move the Oyu Tolgoi project forward.

Rio Tinto, said in a statement that the agreement will reset the relationship between the partners and increase the value the project delivers for Mongolia.

Reuters reported that Rio Tinto Chief Executive Jakob Stausholm has visited Mongolia twice in recent months in an attempt to salvage the project amid mounting concerns that the economic benefits of the project for Mongolians were being eroded.

Mongolia owns 34 percent of Oyu Tolgoi, one of the world’s largest-known copper and gold deposits. Rio Tinto controls the rest through its 51 percent stake in Toronto-listed Turquoise Hill Resources Ltd and operates the mine.

As part of the deal, Turquoise Hill will waive $2.4 billion in debt owed to it by the Mongolian government. Additionally, construction will soon start on the underground portion of Oyu Tolgoi, with first production expected in the first half of 2023.

The expansion will be paid for with cash, the rescheduling of existing debt repayments, and prepaid sales of copper concentrate to Turquoise Hill.

The Oyu Tolgoi Board, comprised of representatives of Rio Tinto, TRQ and Erdenes Oyu Tolgoi (EOT) which is wholly owned by the government of Mongolia, has unanimously approved commencement of underground operations.

Rio Tinto and TRQ have amended the Heads of Agreement signed in April 2021 to ensure they appropriately fund the project. The capital forecast for the project is $6.925 billion, including $175 million of known COVID-19 impacts to the end of 2021. Forecasted remaining undergound capital expenditure is approximately $1.8 billion

The project also committed to buying electricity from the Mongolian grid once it is able to meet supply. Rio said it will work to help add renewable power to the grid. In the meantime, the government extended an agreement to import power from China through 2023.

Luvsannamsrain Oyun-Erdene, the Prime Minister of Mongolia, said, “The commencement of Oyu Tolgoi underground mining operations demonstrates to the world that Mongolia can work together with investors in a sustainable manner and become a trusted partner. As part of our “New Recovery Policy”, I am happy to express Mongolia’s readiness to work actively and mutually beneficially with global investors and partners.”

Rio Tinto Chief Executive Jakob Stausholm, said, “We would like to thank the government of Mongolia for their commitment to working productively with Rio Tinto and TRQ to reach this crucial agreement, that will see one of the world’s largest copper growth projects move forward and firmly establish Mongolia as a global investment destination. This agreement represents a reset of our relationship and resolves historical issues between the Oyu Tolgoi project partners. We strongly believe in the future of this country and I am personally committed to ensuring that the people of Mongolia benefit strongly from Oyu Tolgoi along with our shareholders.”By 2030 Oyu Tolgo is expected to be the fourth largest copper mine in the world. It is a complex greenfield project comprising an underground block cave mine and copper concentrator as well as an openpit mine which has been successfully operating for almost ten years. It is also one of the most modern, safe, sustainable and water-efficient operations globally, with a workforce which is more than 96 per cent Mongolian. Since 2010, Oyu Tolgoi has spent a total of $13.4 billion in-country, including $3.6 billion of taxes, fees and other payments to the state budget. The size and quality of this Tier 1 asset provides additional expansion options, which could see production sustained for many decades.