UPDATE 1-Rio's $5.3 bln go-ahead fuels hopes of end to Mongolia's hangover

Mon May 9, 2016 9:54am EDT
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* Oyu Tolgoi extension could help energize investor confidence

* Will improve Mongolia's prospects, but will take time to kick in

* Economy seen growing less than 1 pct this year - ADB (Updates with external debt detail in paragraph 11)

By Terrence Edwards

ULAANBAATAR, May 9 (Reuters) - Rio Tinto's long-awaited approval of a $5.3 billion extension for its giant Oyu Tolgoi copper mine is fuelling hopes of a revival at last for Mongolia, battered by a slowdown in neighbouring China that has left it deep in debt.

Oyu Tolgoi, one of the world's largest undeveloped copper projects, has been a bellwether for Mongolia since its discovery more than a decade ago. But as discussions with the government stalled in 2013 and prices collapsed, Rio put the flagship project on the backburner - and confidence in Mongolia crumbled.

Rio's decision to go ahead with the costly and complex expansion is a bet on copper's recovery for a miner that badly needs to recalibrate its iron ore-heavy portfolio.

Mining executives, government officials, diplomats and analysts say it is also a potentially game-changing boost for Mongolia that could spark the unblocking of other projects and restore investor trust, key steps for the country to meet debt repayments due from 2017.

"This is a vital vote of confidence in Mongolia," said David Paul, chief executive of Aspire Mining, which is raising money to study a rail line for its Ovoot and Nuurstei coking coal projects in the country's north.   Continued...