Mongolia has concerns about Rio Tinto’s management of Oyu Tolgoi
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Mongolia has concerns about Rio Tinto’sA government official said that the Oyu Tolgoi gold and copper mine is under management in the Gobi Desert in the south of the country.
“We have concerns over the transparency of this mine and whether it is being run efficiently.” Solongoo Bayarsaikhan was the deputy chief of Mongolia’s cabinet secretariat. He spoke Friday to CNBC’s “5”.Squawk Box Asia“
It open-pitThe government is developing an underground mining project together with Rio Tinto, which has a Canadian subsidiary, and Oyu Tolgoi. Turquoise Hill ResourcesIt holds a 66% share.
Turquoise Hill Resources is owned by almost 51% of the Anglo-Australian mining company.
Was it a mistake?
Oyu Tolgoi has faced delays and development problems for underground expansion that have hampered it over the years.
Rio Tinto and Turquoise Hill Resources signed a development and financing plan with Mongolia in 2015 that provided basis for funding the project — but six years on, production has yet to begin in a sustainable way.
Oyu Tolgoi will produce over 500,000 tonnes copper annually once the underground expansions have been completed.
The mine was estimated to be open for business in the first projections. would be able to sustainably produce copper from 2021 onwards
Rio Tinto however, changed the timeline last December and announced that sustainable production would start in October 2022. According to the miner, underground expansion would cost $6.75 billionThis is higher than any previous estimates.
On Friday, Rio Tinto again delayed that forecastAnd he stated that sustainable production will not take place before January 2023.
It cited Covid-19’s impact and the remaining issues surrounding caving operations. The company warned that Mongolia’s new Covid restrictions for community transmission will add $140 million annually to its budget by September end.
Rio Tinto believed that delays and increasing costs were due to difficult ground conditions. But, an independent review of the year this year found otherwise.
On Sept. 22, 2018, workers walked through the tunnel of the underground mining project Oyu Tolgoi copper/gold mine. It was jointly owned by Rio Tinto Group’s Turquoise Hill Resources unit, and the state-owned Erdenes Oyu Tolgoi.
Getty Images| Bloomberg | Getty Images
Rio Tinto’s partner on this project requested the Independent Consulting Group report. It concluded that poor management had caused underground mining to be nearly two years late, and almost $1.45B over budget. the Financial Times reported
Mongolia reacts
Rio Tinto reportedly challenged the findings of the reportThe letter was addressed to the Mongolian justice minister, and stated that the review didn’t fully reflect the effects of poorer-than-expected circumstances which caused the mine to have to be redesigned.
Bayarsaikhan, a CNBC reporter on Friday, said: “We asked Rio Tinto for explanations of the discrepancies in the independent review report with Rio Tinto’s position.”
“We found the letter insufficient to address our particular queries, specific concerns, and explain why there was a cost overrun, scheduled delays, and why the independent review report came up with very different conclusions,” she stated. “Rio Tinto didn’t provide sufficient responses.”
Bayarsaikhan said that the Mongolian government would like to come up with a “mutually-beneficial solution” in order to prevent any further delays or cost rises.
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