Mongolia, Rio Tinto have resolved nearly all copper mine tax issues

The partners spent years mired in a tussle over development of the Gobi Desert mine which is the country’s biggest foreign investment and is set to become the world’s fourth largest copper mine by 2030 as demand heats up for the metal key to the energy transition.

A resolution to the outstanding tax issues would avoid an arbitration process and would signify the restoration of relations with one of Rio’s top partners that were at one stage so poor they threatened to derail the mine’s development.

“In the past, we had more than 10 issues that we had to address with Rio Tinto on the Oyu Tolgoi project, but we have successfully resolved more than 90% of them,” Mongolian Prime Minister L. Oyun-Erdene said in an interview during a visit to Washington.

“There are still some remaining issues but we are confident that we can continue our talks and discussions with our investors so that we can resolve them,” he added.

Rio Tinto last year bought out majority mine owner Turquoise Hill for $3.3 billion in an effort to simplify development of the mine which will produce more than 500,000 metric tonnes per year. It now owns a 66% stake and the Mongolian government the remainder.

Rio last year agreed to waive $2.4 billion in debt owed to it by the government and commit to a structure that did not require additional loan financing after development costs blew out to $7.06 billion from $5.3 billion slated in 2016.

Rio Tinto said at its results that discussions with Mongolia’s government were ongoing. Rio started producing copper from underground operations in March and the copper mine is expected to be a pillar of profit in coming years.

L. Oyun-Erdene credited Rio Tinto’s board for attending the Mongolia Economic Forum in July, which allowed them to “see the real situation and make proper decisions,” praising the leadership of Chairman Dominic Barton in particular.

“I’m confident that will not have any disputes in the future and we can successfully resolve all those issues,” he said.

“And this will serve as a clear demonstration that Mongolia is open to business and investment and also it will contribute to investors’ greater knowledge of Mongolia’s investment climate.”

Rio said last month that it had submitted an offer to resolve the tax dispute, and CEO Jakob Stausholm said that the “transformed relationship with the Mongolian government and the people of Mongolia is creating serious momentum”.