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CEO Sam Walsh told Rio Tinto (LON:RIO) investors at the mining giant’s annual general meeting that approvals for shipment of material from the controversial Oyu Tolgoi mine are expected “in the next couple of weeks.”
Fox Business quotes Walsh as saying: “I think we have moved well down the path in terms of resolving issues the government had tabled with us, enabling us really to move forward with the project.”
Turquoise Hill Resources (NYSE:TRQ TSE:TRQ), the owner of the massive copper-gold mine in Mongolia, which is controlled by Rio Tinto, has been locked in often bitter negotiations with the government of Mongolia about the future of Oyu Tolgoi (turquoise hill in the vernacular) for months.
Mongolia owns 34% of Oyu Tolgoi located in the South Gobi desert and has taken Rio to task over cost overruns pegged at some $2 billion. Rio for its part threatened to halt construction if an agreement could not be reached and according to Walsh, now long-term budget for the mine which has been operating on a month-to-month basis, has been agreed upon.
Both sides have called the ongoing talks centred on funding for a $5 billion expansion of the existing open pit mine, the use of Mongolian contractors and workers and a new royalty regime, “constructive,” and relations between the miners and the government of the Asian nation has gone through rough patches before.
Mongolia has long coveted a bigger slice of Oyu Tolgoi and has twice in the past couple of years floated proposals to take majority control of the mine which at full production would constitute as much as 30% of the Asian nation’s economy.
The mine is set to produce more than 1.2 billion pounds of copper, 650,000 ounces of gold and 3 million ounces of silver each year if built to capacity.
In April Mongolia signaled a new softer line after foreign investment in the country drop 17% to $3.9 billion in 2012 amid threats about mine seizures, blocking of deals (including between a Turquoise Hill coal subsidiary in the country and a Chinese investor) and far-reaching proposed new mining laws.
Turquoise Hill shares have been trending higher – up 15% over the past month – in anticipation of an end to the impasse, in contrast to heavy losses in the sector amid lower gold and copper prices.
The Vancouver-based company is worth $7.6 billion on the Toronto big board. The counter’s all-time high was in January 2011 with a peak market cap of $20 billion.
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