Despite concerns to the contrary, Rio Tinto said plans to begin production at the Oyu Tolgoi copper-gold mine in Mongolia remain on track.
According to Bloomberg News, the Anglo-Australian miner was considering suspending activities at the US$6.2 billion Oyu Tolgoi mine in protest over Mongolian government demands for a bigger stake in the project and new mining royalty rates. However, Rio Tinto said it was sticking with its schedule.

“The power is secured, first ore produced and the concentrator switched on and we are on schedule for first commercial production in the first half of the year,” Rio Tinto said in a statement. “We continue to work together with all stakeholders including the government of Mongolia to bring the benefits of Oyu Tolgoi to all parties.”

The challenges Rio Tinto has encountered at the mine, which accounts for about a third of Mongolia’s gross domestic product, have become a symbol of the difficulty of doing business in the resource-rich country, The Financial Times reported.

The Mongolian government has tried twice in the last two years to renegotiate the investment agreement that governs the mine. During election campaigning last year, several members of the current parliament vowed to prevent foreign miners from unduly benefiting from Mongolia’s mineral resources.

Ownership of the Oyu Tolgoi Mine is currently split between the Mongolian government, which owns 34 percent, and Canada-listed Turquoise Hill, which owns the remaining 66 percent and is in turn controlled by Rio Tinto.

The mine, located in the Gobi desert, will be one the world’s five biggest copper mines once it reaches full production.

In October, Rio Tinto rebuffed an attempt by the Mongolian government to renegotiate the investment agreement for the development of the mine, which was signed in 2009 after several years of negotiations. The country’s new ruling coalition has promised to amend a number of agreements previously signed by the government.

Rio Tinto said earlier this month that it was on track to start commercial production by June. Analysts said a delay, should it materialize, would not trigger a profit warning. Production from the mine is expected to hit 67 kt (74,000 st) this year, or 1.1 percent of forecast net profit.

However, a delay would present a challenge for Rio Tinto’s new chief executive Sam Walsh, who replaced Tom Albanese earlier this month. Mr Albanese resigned after Rio took US$14bn in writedowns on its aluminium businesses and coal operations in Mozambique.

Rio Tinto has launched an in-depth review of its assets in Mozambique and is considering bringing in a partner to help share the costs of developing its mines in the country’s Tete province.