Rio shuns Mongolia plan to swap Oyu Tolgoi equity for royalties

Thu Feb 12, 2015 11:23am EST
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LONDON Feb 12 (Reuters) - Global miner Rio Tinto is not interested in a proposal by Mongolia to cut its equity stake in key mines such as Rio's Oyu Tolgoi in exchange for more royalties, Chief Executive Sam Walsh said on Thursday.

Last week, Mongolian Prime Minister Chimed Saikhanbileg proposed an amendment to the country's mineral resources law to allow the government to exchange state-owned equity in "strategic mines" for higher royalties.

Mongolia hopes the plan will help to revive stalled foreign investment in large mining projects, but Walsh said Rio was not interested in buying a larger stake in the Oyu Tolgoi copper and gold mine.

"I met with the new prime minister... and we talked about that (proposal)," Walsh told reporters at a results news conference.

"Quite frankly we'd rather put our focus and our dollars into the project. That's for others to look at, taking equity in the project, we're happy with our 50.1 percent of the project."

Rio has stalled a $5.4 billion underground expansion project at Oyu Tolgoi due to disputes with the government over cost overruns and a $30 million tax bill.

Walsh said Rio, which owns its Oyu Tolgoi stake through its Turquoise Hill Resources arm, hopes that a solution will be found so that it can resume work on the underground expansion later this year.

"We put in a best and final offer in November and that's currently being considered by the Mongolian government, so I'm hopeful that the project will be able to go forward," he added.

Mongolia has 16 strategic deposits, including Oyu Tolgoi and the Gatsuurt gold deposit currently licensed to Toronto-listed miner Centerra Gold Inc. These deposits have the potential to generate at least 5 percent of the country's GDP.

The country has a 34 percent stake in Oyu Tolgoi. (Reporting by Eric Onstad; Editing by Vincent Baby)