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Stand-off delays Mongolia mega-mine export

Oyu Tolgoi has all permits but miner Rio Tinto delays project at government's request ahead of presidential polls.

Last Modified: 22 Jun 2013 17:35
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Oyu Tolgoi is predicted to boost Mongolia's economy by a third by 2020 [Getty Images]

Wednesday's presidential elections and a revenue spat have reportedly caused the delay of the first copper export at Mongolia's $6.6 billion Oyu Tolgoi mine.

Anglo-Australian mining giant Rio Tinto said its plan to start exporting copper from the $6.2 billion copper and gold mine on Friday had been delayed, 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.

Rio Tinto spokesman Bruce Tobin said on Friday that Oyu Tolgoi was ready to start its first shipments of copper concentrate from its Mongolian mine and all necessary permits to do so had been received from relevant authorities.

"However, plans to start shipping on Friday 21 June have been postponed at the request of the government of Mongolia," Tobin said.

The mine operator declined to comment on what was behind the latest delay, but sources have told Al Jazeera that it is no coincidence that it has occurred just before Mongolia's presidential poll on Wednesday, as Oyu Tolgoi is the biggest foreign investment in the country and resource nationalism has been a major election issue.

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. 

Accounts frozen

The event on June 14 was postponed because the government said that Rio Tinto should keep all export revenue in Mongolia, Prime Minister Norov Altankhuyag said earlier this week. That issue has been resolved, insiders told Reuters.

The agreement that governs the project known as OT gives Rio Tinto the freedom to put the export revenue anywhere it wants, they said.

However, Bloomberg News reported that the stand-off had continued and quoted a government official on Friday as saying that the revenue must remain in Mongolia before sales could start. 

The government earlier briefly froze the accounts of Rio Tinto and Canada's SouthGobi Resources his year, making investors nervous about their ability to repatriate earnings and sources have told Al Jazeera that concerns of keeping revenue in Mongolia remain because of this.

Rio Tinto has been producing at OT for several months, and aimed 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

President 'influential'

Turquoise Hill Resources unit owns 66 percent of the mine, with the remainder owned by the Mongolian government.

Tsakhia Elbegdorj, the Incumbent president and Democratic Party leader, who is seen as more friendly to foreign investors, is expected to win re-election.

Ganbayar Khotgoid, Foreign Relations Manager and journalist at Mongoliam media group NTV, said the presidential elections on Wednesday would have a big impact on OT.

"Mr Elbegdorj is very influential on the OT mine," Khotgoid told Al Jazeera.

"He regularly meets with the party and government officials.

"He is a head of state, but he is not powerless. He has rights to appoint judges."

Elbegdorj's election rivals include wrestling champion Badmaanyambuu Bat-Erdene of the Mongolian People's Party, a critic of the mine deal; and Natsag Udval of the Mongolian People's Revolutionary Party representative, the first woman to run for the country's top office.

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.

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Source:
Al Jazeera and agencies
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