REPORT: Rio Tinto CEO to Visit Troubled Copper Mine
Like a bridge over trouble water, Rio Tinto’s chief executive Sam Walsh will visit the company’s $6.5 billion Oyu Tolgoi copper mine in Mongolia to meet with the country’s new prime minister to settle ongoing disputes, which have caused delays to an expansion project at the mine.
Walsh will visit the mine to meet employees as well as greet members of the business community and some government officials, according to a source who asked not to be named because issues related to the mine are sensitive,
The expansion, which would extend the mine’s life beyond its estimated 15 years, has been postponed due to disputes over costs and taxes. The clashes have caused concern among investors who worry about “resource nationalism”, as several governments across the world look to renegotiate contracts to get a bigger say in mining projects.
However, it’s believed that Prime Minister Chimed Saikhanbileg is in favor of reaching a deal with Rio.
“Saikhanbileg’s administration is Rio’s best chance for a deal on Oyu Tolgoi phase two,” said Nick Cousyn, chief operating officer of Ulan Bator-based broker BDSec.
“They can either empower him by showing flexibility and respect, or risk losing Mongolia to the populist opposition.”
Along with the open-cut mine, the “phase two” project would see the construction of an underground mining complex. Rio Tinto’s Turquoise Hill Resources owns 66 percent of the mine, with the Mongolian government owning the rest.
Last year, Rio Tinto handed Mongolia a proposed resolution to issues including a $127 million tax claim, which was later reduced to $30 million, and approval of a $4 billion project financing package to pay for phase-two construction.
"The offer remains on the table and we believe it is beneficial to all stakeholders," said Jeffery Tygesen, chief executive of Turquoise Hill Resources.