ULAANBAATAR, Oct 7 (Reuters) - Rio Tinto is waiting for word on the Mongolian government’s efforts to attract investment for railway and power infrastructure projects that will boost the global miner’s Oyu Tolgoi copper-gold mine, Chief Executive Jean-Sebastien Jacques said.
The land-locked country sits on vast, untapped mineral wealth but inadequate transportation infrastructure has held back development, with several proposed railway projects to ship copper, coal and gold to China long out of reach because of prohibitive costs and arguments over security.
The country will pitch railway projects to the China-initiated Asian Infrastructure Investment Bank and other investors to support its mining industry, regional trade, as well as bring in foreign investment. (here)
“We’re looking very carefully at the situation about railways because we have a vested interest,” Jacques told Reuters on Thursday.
Jacques said he was also looking at the development of a new power source at Mongolia’s Tavan Tolgoi coal mine that will replace energy imported from China.
The country is mired in debt following a slump in its chief export commodities coal and copper, a drop in foreign investment and a declining currency, forcing the government to hike interest rates and slash spending.
One source of foreign investment will be the $5 billion Rio Tinto will spend over the next five years digging tunnels to access the bulk of the copper and gold at Oyu Tolgoi, and will expand the mine life to 75 years, Jacques said after returning from a tour of the mine for Rio’s board of directors.
Oyu Tolgoi is a flagship for foreign direct investment (FDI) in Mongolia, Jacques said. “If Oyu Tolgoi doesn’t work, there won’t be further FDI,” he added.
The launch of Oyu Tolgoi in 2009 helped kick-start a mining-driven economic boom in Mongolia.
But Rio put the project on ice in 2013 after Mongolia raised concerns about costs and repeated attempts to amend an investment agreement signed in 2009 for the project. Construction finally resumed last May following the release of $4.4 billion in project financing from lenders in December 2015.
Jacques would not disclose planned spending for next year, but said a budget was up for approval by Oyu Tolgoi’s board in late November or early December.
“When we start spending and building the mine, the sooner the mine is up and running, the better it is for the returns of the government of Mongolia, for Rio Tinto,” he said.
Rio Tinto’s majority-owned Turquoise Hill Resources has a 66 percent stake in the mine, with the Mongolian government holding the rest.
Editing by Susan Thomas