August 2, 2013 / 8:30 AM / 4 years ago

Mongolia says parliament approval not needed for Oyu Tolgoi financing

3 Min Read

ULAN BATOR, Aug 2 (Reuters) - Rio Tinto does not need to seek Mongolian parliamentary approval for a $4 billion financing package to fund development of an underground mine at the Oyu Tolgoi copper project, Mongolia's prime minister said.

"Parliament has already made the decision and signed their agreement," Prime Minister Norov Altankhuyag said at a weekly press briefing on Thursday.

"Cabinet doesn't have to be involved. All issues can be discussed and decided at the board of directors' level," he added.

Rio Tinto on Monday put all work on the underground expansion of the Oyu Tolgoi mine on hold, saying it had been advised that project financing provisionally secured for the project would need to be approved by parliament.

It expected the process would take some months to work through as parliament was on summer recess.

Rio Tinto and the Mongolian government have had a bumpy relationship over the politically sensitive project, which started exporting copper earlier in July following two last-minute hiccups in securing government approval.

Oyu Tolgoi is 66 percent owned by Rio Tinto's Turquoise Hill unit, and 34 percent owned by the Mongolian government.

Turquoise Hill shares slumped as much as 28 percent after Rio's announcement on Monday, but partly recovered on Thursday to be down 16 percent from last Friday's close.

The Mongolian government has raised concerns about the cost of the expansion project and the potential that rising costs will delay when it starts receiving its share of profit from the mine.

The expansion is designed to take production to 425,000 tonnes of copper and 460,000 ounces of gold a year.

Altankhuyag told the briefing that any question over costs for the underground expansion, which is expected to cost more than $5 billion, should be resolved at the board level.

"The only issue is that the financing issue has not been thoroughly discussed at the board level. It's just a matter of a technicality," he said. "Otherwise, there is no serious conflict with Oyu Tolgoi at all."

Rio did not immediately reply to requests for comment.

Production at the open pit mine and export of copper concentrate is continuing.

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