Mongolia pressures Rio over $5.8bn financing
MONGOLIA is refusing to support Rio Tinto's efforts to raise as much as $US6 billion ($5.8bn) in loans tied to its Oyu Tolgoi gold and copper mine in the Gobi Desert.
"The government of Mongolia does not support the Oyu Tolgoi phase two project-finance effort initiated by Rio Tinto, due to the still ongoing shareholder discussions," a Mongolian government official said. "The government might support the financing if its concerns over the project were resolved."
The government doesn't have a veto over the lending and the official said it wasn't telling the lenders what to do. Nevertheless, the government's move could complicate Rio's relationship with its lenders.
Mongolia, meanwhile, hopes to pressure Rio without alienating the lenders, who the government needs to finance an ambitious infrastructure spending plan that includes railroads, power plants and mines.
Rio has said it hopes to close project financing this quarter. A consortium including private banks, the European Bank for Reconstruction and Development and the World Bank's International Finance Corporation are involved. The company has said it was seeking about $US4bn to finance the mine's phase two underground works. Government officials and Rio executives held meetings in the capital, Ulan Bator, this week to resolve differences over Oyu Tolgoi, which Rio controls. Oyu Tolgoi is the country's biggest investment project.
Under a 2009 agreement, the government holds a 34 per cent stake in the mine.
Government officials have complained that the Anglo-Australian miner hasn't been transparent about the operation and has structured the project's capital in a way that benefits the miner at the expense of the government.
Rio has rebutted that argument and said it is working closely with Ulan Bator to resolve differences.
"We have always been fully transparent with all our shareholders regarding our project finances, costs and operations," Cameron McRae, head of Rio's Oyu Tolgoi unit, said. "We will continue to hold as many frank and open discussions as needed to help clarify issues raised by the government of Mongolia."
The project financing would be used in part to build the second stage of Oyu Tolgoi, which includes a massive underground cave where the mine's most highly concentrated copper lies.
The mine's first phase cost more than $US6bn and took nearly three years of digging.
"The government of Mongolia does not support the Oyu Tolgoi phase two project-finance effort initiated by Rio Tinto, due to the still ongoing shareholder discussions," a Mongolian government official said. "The government might support the financing if its concerns over the project were resolved."
The government doesn't have a veto over the lending and the official said it wasn't telling the lenders what to do. Nevertheless, the government's move could complicate Rio's relationship with its lenders.
Mongolia, meanwhile, hopes to pressure Rio without alienating the lenders, who the government needs to finance an ambitious infrastructure spending plan that includes railroads, power plants and mines.
Rio has said it hopes to close project financing this quarter. A consortium including private banks, the European Bank for Reconstruction and Development and the World Bank's International Finance Corporation are involved. The company has said it was seeking about $US4bn to finance the mine's phase two underground works. Government officials and Rio executives held meetings in the capital, Ulan Bator, this week to resolve differences over Oyu Tolgoi, which Rio controls. Oyu Tolgoi is the country's biggest investment project.
Under a 2009 agreement, the government holds a 34 per cent stake in the mine.
Government officials have complained that the Anglo-Australian miner hasn't been transparent about the operation and has structured the project's capital in a way that benefits the miner at the expense of the government.
Rio has rebutted that argument and said it is working closely with Ulan Bator to resolve differences.
"We have always been fully transparent with all our shareholders regarding our project finances, costs and operations," Cameron McRae, head of Rio's Oyu Tolgoi unit, said. "We will continue to hold as many frank and open discussions as needed to help clarify issues raised by the government of Mongolia."
The project financing would be used in part to build the second stage of Oyu Tolgoi, which includes a massive underground cave where the mine's most highly concentrated copper lies.
The mine's first phase cost more than $US6bn and took nearly three years of digging.
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