Rio faces more hurdles at Oyu Tolgoi, Mongolia shareholder says

Wed Jul 17, 2013 3:54am EDT
 
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ULAN BATOR, July 17 (Reuters) - Rio Tinto faces lingering disputes with the Mongolian government over its Oyu Tolgoi copper mine, said a director of the state company that owns a third of the mine, highlighting risks confronting the massive project.

According to Tserenbat Sedvanchig, executive director of Erdenes Oyu Tolgoi, the government still has 22 points of dispute with Rio Tinto, operator of the project which is expected to boost the country's economy by 35 percent by 2020.

Grievances include "four issues related to violations of Mongolia legislation and the investment agreement," he said, adding that capital expenditure was the biggest issue.

"If we don't make clear what was the amount of initial investment, resolution of some of the other 21 issues will be hindered," Sedvanchig told Mongolian online news service News.mn in an interview released on Tuesday.

Rio Tinto, whose Turquoise Hill Resources subsidiary owns 66 percent of Oyu Tolgoi, declined to comment on his remarks.

Oyu Tolgoi, one of the world's five biggest copper mines, began exporting copper to China on July 9 after two delays in June. It won the all-clear to export after Rio Tinto agreed to notify Mongolian authorities of all foreign and local bank accounts that it would be using to deposit Oyu Tolgoi revenue.

"Any action aimed to tax evasion will be strictly prosecuted under our law and Rio Tinto and the company management team probably understand this well. We requested Oyu Tolgoi to register all its domestic and foreign accounts with relevant state agencies," Sedvanchig said.

He said exports were pushed forward despite the unresolved disputes because the project needed the cashflow and stockpiles were getting full.

"All parties agreed that exports should commence immediately to let Oyu Tolgoi have a source of income," he said.   Continued...