Canada's Turquoise Hill rejects review of Mongolia deal
TORONTO (Reuters) - Turquoise Hill Resources Ltd (TRQ.TO: Quote) and its majority shareholder, Rio Tinto Ltd (RIO.AX: Quote), have rejected a request from Mongolia to renegotiate an investment agreement for its Oyu Tolgoi mine, the world's largest undeveloped copper-gold project.
The Mongolian government's push to review the deal, which took effect in March 2010, sent Turquoise Hill's shares down more than 6 percent on Monday and added weight to concerns about rising resource nationalism in the landlocked Asian country.
The Canadian-listed miner, formerly known as Ivanhoe Mines, announced its stance in a news release on Monday.
Mongolia's new mining minister told local media in August that the government should try to raise its stake in Oyu Tolgoi, which will become one of the world's largest copper and gold mines when it reaches full production in 2018.
Mongolia previously tried to revise the deal about a year ago, with Turquoise Hill - then known as Ivanhoe - refusing to negotiate and Mongolia eventually affirming its support for the existing deal.
"This is just a matter of the government bowing down to political pressure to ask the company to renegotiate," said Adam Graf, a mining analyst at Dahlman Rose in New York.
"This is a major project in Mongolia, one that has led to rapid growth of the economy of Mongolia over the last five years," he said. "You have parties in that country that are coming out and saying that Rio is not giving (them) a big enough piece."
Under the current agreement, the Mongolian government owns 34 percent of the project, while Turquoise Hill holds the remaining 66 percent. Rio controls Oyu Tolgoi through its majority stake in Turquoise Hill.
Mongolia can increase its stake in the project to 50 percent only after an initial period of 30 years of commercial production. Continued...