In a related development, RIO Tinto (ASX, LON, NYSE: RIO) is preparing to lower the interest rate on loans to the Mongolian government to finance its share of construction costs for the underground expansion of the giant Oyu Tolgoi copper and gold mine.
In return, Rio and its holding company Turquoise Hill (TSX: TRQ) said it hoped to resolve several regulatory and budgetary issues and reach a long-term power agreement for Oyu Tolgoi.
Rio owns 50.8% of Turquoise Hill, which owns 66% of Oyu Tolgoi. The rest is held by the Mongolian government.
The move follows a fresh stand-off between the two companies and the government earlier this month after an independent report rejected Rio's explanations for delays and cost overruns at the project.
The final estimate for the development of the new deposit, announced in December, put the cost of the underground portion of Oyu Tolgoi at $6.75 billion, about $1.4 billion higher than the original 2015 estimate.
The first production, originally expected to take place in late 2020, was rescheduled for October 2022. Rio tinto blamed unfavorable geological conditions on cost and schedule reviews, but an independent report released earlier this month suggested this was due to poor management by the miners.
Financial regulators in the UK and US are also examining Rio's disclosures about the delays.
Rio and Turquoise Hill Resources were locked in a standoff over funding for mine expansion in the first few months of the year, forcing the Canadian miner's chief executive to resign.
The two companies finally reached an agreement in April that settled the remaining $2.3bn needed for the underground project and replaced a deal under a memorandum of understanding signed in September.
Oyu Tolgoi is Rio's main copper growth project. Once completed, the underground portion of the mine will increase production from 125,000-150,000 tonnes in 2019 to a peak production of 560,000 tonnes, now expected by 2025 at the earliest. That would make it the biggest new mine to come online in years.
