ULAN BATOR, July 4 (Reuters) – The Mongolian government and Rio Tinto have not yet reached an agreement on whether the miner can repatriate earnings from the $6.2 billion Oyu Tolgoi mine, the country’s mining minister said, delaying first copper shipments.
The dispute could heighten investor concerns about the risks of mining in Mongolia and threaten Rio Tinto’s plans to grow its copper portfolio to ease dependence on iron ore.
Metals traders have been closely watching whether Rio gets official approval to export concentrate from Oyu Tolgoi amid a shortfall in shipments from the Grasberg mine in Indonesia, run by Freeport McMoRan Copper & Gold. The unlocking of ore shipments would increase supply in top copper consumer China and boost treatment and refining charges charged by smelters there.
Exports from the copper and gold mine were initially due to start on June 14, but were then postponed to June 21, before the Mongolian government told Rio to delay them again without setting a date. Uncertainty over the reasons for the delay has slashed the share price of other Mongolian miners.
Analysts had expected Rio to be able to start first shipments after elections which saw incumbent president, Tsakhia Elbegdorj, win a second term last week.
But Mongolia said it is still in talks with Rio to keep the money generated from Oyu Tolgoi in local banks and both parties also have disagreements over the disclosure of the mine’s $8 billion sales agreements.
“The delay caused is because the OT LLC (Oyu Tolgoi) didn’t seek approval from its Mongolian board on the sales agreements,” Mongolia’s Mining Minister Davaajav Gankhuyag said, according to a transcript of a June 28 press conference published on news portal business-mongolia.com.
“Secondly, OT LLC is putting the sales income into offshore accounts. We asked them if they are not going to show us the agreements, they must process its transactions through Mongolia-based banks,” the minister added.
It was not immediately clear how the two parties plan to sort out their differences.
Mongolian government officials could not be reached for comment. An Oyu Tolgoi spokesman in Mongolia and a Rio Tinto spokesman in Melbourne were not immediately available to comment.
Sources with knowledge of the matter say the 2009 investment agreement for Oyu Tolgoi allows Rio to choose where funds are kept.
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