Rio Tinto Group, the Anglo-Australian mining giant, is denying it may pause development of a $6.2 billion copper and gold project in Mongolia in an apparent dispute with the government over how to divide profit, according to a published report.
The $6.2 billion Oyu Tolgoi mine, which lies in the southern Gobi Desert near the border with China, has been expected to begin producing this year, with annual output rising over the next five years to about 500,000 tons per year of copper and 330,000 ounces of gold.
Bloomberg News said Wednesday the company, with some 77,000 employees in more than 40 countries, could temporarily halt construction over government demands for more profit than earlier agreed upon.
The government’s current stake in the Rio Tinto subsidiary handling the project is 34 percent. In 2011 government officials expressed the desire to raise that to 50 percent and also increase royalty payments.
“Whilst a shutdown would be negative in the short term, the fact such a move is under consideration suggests Rio is prepared to play hardball to retain its stake in the project,” Richard Knights, a mining analyst at Liberum Capital Ltd. in London, told Bloomberg.
Rio Tinto quickly denied the news report and reaffirmed its expectation that commercial production will begin in the first half of this year.
"The power is secured, first ore produced and the concentrator switched on," Rio Tinto spokesman Illtud Harri, told Reuters. "We are on schedule for first commercial production in the first half of the year."
Mike Obel assigns, edits and writes stories about business, markets, finance and economics. Before coming to International Business Times, he worked on the Finance Desk of...