Mongolia puts pressure on Rio Tinto ahead of Oyu Tolgoi talks

Wed Feb 27, 2013 2:12am EST
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By Terrence Edwards ULAN BATOR, Feb 27 (Reuters) - Mongolia has cancelled a gold mining license indirectly linked to the $6.2-billion Oyu Tolgoi copper and gold project, stepping up pressure on world No.3 miner Rio Tinto ahead of talks on the project set for Wednesday.

The cancellation follows a string of complaints by the Mongolian government over Oyu Tolgoi, which is controlled by Rio Tinto through its Turquoise Hill Resources unit, in the lead-up to a presidential election due in June.

The fight is crucial to both sides. At full tilt, Oyu Tolgoi will account for nearly a third of Mongolia's economy, while Rio Tinto is dependent on Oyu Tolgoi to drive growth outside its massive iron ore business.

Mongolia's Mining Ministry this week said it had cancelled a decision made in 2009 when it converted into mining licenses the Shivee Tolgoi and Javhlant exploration licenses held by Oyu Tolgoi and Entrée Gold.

Mongolia is now reviewing the decision, originally part of the 2009 investment agreement for Oyu Tolgoi, to ensure the move was valid.

Oyu Tolgoi owns an 80 percent interest, and Entree a 20 percent interest, in production from the mining licenses.

"At this time, the company has not received formal notification from any government agency regarding the status of the licenses and is seeking clarification," Entrée told the Toronto stock exchange.

The move on the Shivee Tolgoi and Javhant mining licenses adds to other issues unsettling Oyu Tolgoi just as it ramps up for commercial production, due to start in June.

Rio Tinto has vowed to negotiate hard to protect the pact and said it would not start selling copper from the project until the problems were resolved.   Continued...