Oyu Tolgoi expansion put on hold
The proposed $5 billion underground expansion of the Oyu Tolgoi copper mine in Mongolia has been put on hold by Rio Tinto after the Mongolian government said parliament would need to approve financing for the project, Reuters reported.
The Oyu Tolgoi Mine began exporting copper from its openpit mine in July, but that came after securing late approval from the government.
Mongolia has raised concerns about the costs of the Oyu Tolgoi expansion and the potential that rising costs will delay the government from receiving its share of profits.
Mongolia's parliament will sit again from October.
"The Mongolian Parliament is currently in summer recess and the parliamentary approval process may take some time to work through," Rio Tinto said in a statement.
Rio Tinto said given the current uncertainty, including continued discussions with the government on a range of other issues, all funding and work on the underground development would be delayed until these matters were concluded and a new timetable agreed.
"The decision to stall underground development appears to be a clear signal from Rio that it is not going to invest more risked capital until the country's issues are sorted," Investec analysts said in a note.
Rio Tinto had already lined up more than $4 billion of financing for the expansion - more than $2 billion of that from commercial banks in one of the largest resource financing deals in Asia this year. That agreement expires in the coming weeks, but is expected to be extended.
Oyu Tolgoi is 66 percent owned by Rio Tinto's Turquoise Hill unit and 34 percent owned by the Mongolian government.
The expansion is designed to take production at the mine to 425 kt/a (468,000 stpy) of copper and 14.3 t/a (460,000 ozpy) of gold.
Production at Oyu Tolgoi's open pit mine and export of copper concentrate is continuing.