March 26, 2015 / 11:49 AM / 3 years ago

REFILE-Rio CEO to visit troubled Mongolia copper mine - sources

(Adds Rio in parentheses in paragraph 7 to clarify quotation)

By Terrence Edwards

ULAN BATOR, March 26 (Reuters) - Rio Tinto’s chief executive will visit its $6.5 billion Oyu Tolgoi copper mine in Mongolia on Sunday, two people familiar with the visit said, amid signs the country’s new prime minister is keen to end disputes that have delayed an expansion project.

Sam Walsh will visit the mine, located in the Gobi desert around 80 kilometers north of the Chinese border, to meet employees, said one of the sources, who asked not to be named because issues related to the mine are sensitive.

Time will also be made to greet members of the business community and some government officials, the source added.

Disputes over costs and taxes have delayed an expansion of the mine that would extend its life beyond its estimated 15 years. That has stoked investor worries about “resources nationalism”, with several governments across the world looking to renegotiate contracts to get a bigger say in mining projects.

However, some analysts say Prime Minister Chimed Saikhanbileg is keen to reach a deal as Mongolia faces slowing growth in neighbour China and a softer market for its natural resources.

“Saikhanbileg’s administration is Rio’s best chance for a deal on Oyu Tolgoi phase two,” said Nick Cousyn, chief operating officer of Ulan Bator-based broker BDSec.

“They (Rio) can either empower him by showing flexibility and respect, or risk losing Mongolia to the populist opposition.”

The visit will be Walsh’s second to the project, although his first since becoming chief executive in 2013.

Rio’s Turquoise Hill Resources owns 66 percent of the mine, with the Mongolian government owning the rest.

In addition to the open-cut mine currently in operation, the so-called “phase two” project would see the construction of an underground mining complex.

Mongolia’s talks with Rio slowed last year because of its transition to a new government, Jeffery Tygesen, chief executive of Turquoise Hill Resources said in a phone call with investors on Mar. 25.

Last year, he said, Rio handed Mongolia a proposed resolution to issues including a $127 million tax claim that was later reduced to $30 million and approval of a $4 billion project financing package to pay for phase-two construction.

“The offer remains on the table and we believe it is beneficial to all stakeholders,” Tygesen said.

Turquoise Hill on Mar. 24 reported $1.6 billion in revenue for 2014 from the sale of 733,700 tonnes of concentrate. It also recorded its first annual positive operative cash flow of $658.3 million. (Editing by Mark Potter)

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