COLUMN-Mongolia, Rio Tinto playing high stakes on copper mine: Clyde Russell

Mon Aug 19, 2013 2:28am EDT
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By Clyde Russell

LAUNCESTON, Australia Aug 19 (Reuters) - Is Rio Tinto's dispute with the Mongolian government over the expansion of the Oyu Tolgoi copper and gold mine the signal that the nation's commodity boom is over, or is it just a hiccup?

Certainly, Mongolia's reputation as a desirable investment destination and one of the few remaining countries ripe for developing natural resources has taken a battering recently.

Rio Tinto, the world's second-largest mining company, said on Aug. 14 that it will cut 1,700 jobs at Oyu Tolgoi after a $5 billion expansion of the project was put on hold last month.

The dispute is over how the expansion gets financed, and the Mongolian parliament has been recalled from its summer recess for an emergency session to try and deal with the matter.

But the real issue is how long it will take for Mongolia to get significant amounts of money from the mine, which is slated to boost the economy by 35 percent by 2020.

Rio Tinto's Turquoise Hill Resources subsidiary owns 66 percent of the mine, while the government owns the other third.

The government has said Oyu Tolgoi, which has an operating open pit and a planned underground expansion, is at least $2 billion over budget.   Continued...