The next three to six months will be crucial to the future of the vast Oyu Tolgoi copper-gold mine in Mongolia, as the companies behind the operation engage in talks to find a way to improve the government’s financial benefits from an ongoing underground expansion.
Based on a definitive estimate for the development of the new mine level, announced by Rio Tinto (LSE: RIO; NYSE: RIO; ASX: RIO) last month, the underground section of Oyu Tolgoi will begin production in October 2022. The project will cost US$6.75 billion, about US$1.4 billion higher than its original estimate, as established in the 2015 agreement.
That deal is commonly known in Mongolia as the “Dubai agreement”, because the nation’s then Prime Minister Chimediin Saikhanbileg struck it with former Rio Tinto’s boss Jean-Sebastien Jacques in a Dubai hotel, ending an impasse that had lasted close to three years.
Ulaanbaatar is not happy with the updated figures. Last week it announced that it would ask Rio Tinto and its majority-owned Turquoise Hill Resources (TSX: TRQ; NYSE: TRQ) to revisit the economic benefits the expansion will bring to the nation.
“The government of Mongolia supports the Oyu Tolgoi underground mine development, which is viewed as holding benefits to the Mongolian economy because 80% of Oyu Tolgoi’s value lies beneath the surface,” Solongoo Bayarsaikhan, Mongolia’s Deputy Chief at Cabinet Secretariat said on Thursday.
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