Rio Tinto Settles Tax Dispute with Mongolia; Oyu Tolgoi Mine Back On Track

UK mining giant Rio Tinto (LON:RIO) is on the verge of getting its $6.5 billion Oyu Tolgoi project back on track after resolving a lingering tax dispute with the Mongolian government.

The mine, which is expected to become one of the largest copper-gold resources in the world, was temporarily side tracked after the government threatened to delay the project over ongoing tax issues.

Mongolia’s vice-minister of mining, Oyun Erdenebulgan confirmed to reporters the government would settle for a $30 million payment from Rio, which is much less than the $130 million the Mongolian government originally said was owed.

"I understand both parties are now working closely and effectively and nobody wants to delay because of this tax issue," Erdenebulgan said.

The first stage of the copper and gold mine is already in operation, but the second stage is where the majority of the value lies. Once construction is fully completed, the Oyu Tolgoi mine will produce more than 300,000 tons of copper concentrate a year.

According to Oyun, all remaining disputes between Rio Tinto and the government regarding the project are now settled, and both sides are waiting for the completion of the new feasibility study.

"When it has been received, we will appoint a committee to approve it," he said.

The timing of the tax resolution is right in line with a September 30 deadline that lenders have set for Rio Tinto and Mongolia to settle their differences. Banks have already pledged more than $4 billion towards development of the second stage of Oyu Tolgoi.