ULAN BATOR, June 21: Rio Tinto said its plan to start exporting copper from the $6.2 billion Oyu Tolgoi mine on Friday has been delayed at the request of the Mongolian government, heightening investor concerns about the risks of mining in the country.
Uncertainty over what was behind the delay sparked an exodus out of shares in other Mongolian miners on Friday, with Canadian and Australian listed miners exposed to the country sliding between 10 and 20 percent.
Journalists had been invited last week to attend a ceremony at the copper and gold mine on June 14 to mark the first exports. That was postponed to June 21, but the event was again cancelled at the last minute. Mongolia is due to hold a presidential election on June 26.
‘Oyu Tolgoi is ready to start its first shipments of copper concentrate from its Mongolian mine and all necessary permits to do so have been received from relevant authorities,’ Rio Tinto spokesman Bruce Tobin said on Friday.
‘However, plans to start shipping on Friday 21 June have been postponed at the request of the government of Mongolia.’
The company declined to comment on what was behind the latest delay.
The event on June 14 had been postponed due to a demand from the government that Rio Tinto keep all export revenue in Mongolia, Prime Minister Norov Altankhuyag said earlier this week.
That issue has been resolved, people familiar with the situation said. The agreement that governs the Oyu Tolgoi project gives Rio Tinto the freedom to put the export revenue anywhere it wants, they added.
The government earlier this year briefly froze the accounts of Rio Tinto and Canada’s SouthGobi Resources, making investors nervous about their ability to repatriate earnings.
Rio, operator of the mine, has been producing at Oyu Tolgoi for several months, and has been aiming to start exports by the end of June.
‘Rio Tinto is keen to start shipping as soon as possible in order for the benefits from Oyu Tolgoi to start flowing to all parties, including the people of Mongolia,’ Tobin said.
‘Shipping will commence as soon as the government indicates its support for us to do so.’
Rio has said since February it would not begin exporting until it resolved disputes with the Mongolian government over royalties, costs, management fees and project financing. Rio’s Turquoise Hill Resources unit owns 66 percent of the mine, with the remainder owned by the Mongolian government.
The latest delay may be to stave off controversy ahead of the presidential poll, as Oyu Tolgoi is the biggest foreign investment in the country and resource nationalism has been a major election issue.
‘Rather than speculating on what may or might be going on behind the scenes it is obvious that this continued uncertainty is having an impact on stocks with Mongolian exposure, albeit in very difficult macro conditions,’ said Sam Spring, chief executive of Kincora Copper, which is exploring near Oyu Tolgoi.
Among stocks that were dumped, Aspire Mining, with a coal project in northern Mongolia, slumped 15 percent, and Xanadu Mines with copper interests, dropped 20 percent, in a broader market down 0.4 percent.
Turquoise Hill itself fell 4 percent overnight.
‘If the delay comes down to where cash proceeds from sales are held, you can understand why this is an issue (for investors), given the government of Mongolia’s recent history of freezing bank accounts,’ he added.
President Tsakhia Elbegdorj, seen as more friendly to foreign investors, is expected to win re-election.
By 2020, Oyu Tolgoi is expected to boost Mongolia’s economy by about a third. In the first 10 years, its annual output is expected to average 330,000 tonnes of copper and 495,000 ounces of gold.
(AGENCIES)
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