Rio Tinto reaches deal for ‘full reset’ in Mongolia mine dispute

Rio Tinto chief executive Jakob Stausholm has agreed to waive $US2.4 billion ($3.35 billion) of debt owed by the Mongolian government under a deal to put a key growth project, the Oyu Tolgoi copper mine expansion, back on track.

In an effort to achieve a “full relationship reset” following a years-long dispute over Rio Tinto’s problem-plagued $US6.9 billion project in the Gobi Desert, the Anglo-Australian mining giant, its subsidiary Turquoise Hill Resources and the government of Mongolia this week formalised an agreement to move the project forward and increase the value it delivers for Mongolia.

The deal marks a positive development for Rio Tinto’s efforts to expand its output of commodities that will be needed in increasingly vast quantities to build green energy technology as the world decarbonises after the Serbian government last week revoked its licences to build Europe’s biggest lithium mine.

Mr Stausholm, who was elevated to chief executive after Rio Tinto’s destruction of Aboriginal rock shelters in Western Australia forced the resignation of his predecessor, has made a top priority of forging closer ties with governments and stakeholders around the world. He has visited Mongolia twice in recent months in a bid to address deepening concerns in the country that the economic benefits of the project for Mongolians were being eroded.

Under the deal ratified by the Mongolian parliament, Rio Tinto will wipe the government’s debt owed for the nation’s share of the mine’s construction costs, plus interest, and will begin underground operations imminently with a mining method known as the “undercut”. The Oyu Tolgoi project has also agreed to buy electricity from the Mongolian grid, while Rio Tinto will help expand renewable energy generation.

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“This agreement represents a reset of our relationship and resolves historical issues between the Oyu Tolgoi project partners,” Mr Stausholm said on Tuesday.

“We would like to thank the government of Mongolia for their commitment to working productively with Rio Tinto and Turquoise Hill Resources to reach this crucial agreement that will see one of the world’s largest copper growth projects move forward and firmly establish Mongolia as a global investment destination.”

The Oyu Tolgoi deposit in Mongolia’s Gobi Desert is one of the world’s biggest-known copper and gold deposits. The Mongolian government holds a 34 per cent stake in Oyu Tolgoi and Rio Tinto’s majority-owned Turquoise Hill Resources owns 66 per cent.