Oyu Tolgoi deal with Rio possibly next week

[ULAN BATOR] Talks with Rio Tinto Group to approve the stalled US$5.4 billion stage two of the Oyu Tolgoi copper mine could wrap up as soon as next week, according to Mongolian Prime Minister Saikhanbileg Chimed.

A Rio delegation is due in the country by next week and "I hope by this time we will finalize all ongoing issues because the principle agreements are already there," Mr Saikhanbileg said in an interview Thursday with Bloomberg Mongolia TV in Ulaanbaatar. "We need to go through small technical issues, some procedural steps." Rio and the Mongolian government have been locked in talks over a raft of issues related to the copper mine for two years.

The focus has been how to fund a $5.4 billion underground expansion of the mine to accompany the open pit operation that went into production in 2013.

Negotiations with the Mongolian government are continuing, Rio Chief Executive Officer Sam Walsh said Thursday at the company's annual general meeting in Perth.

"We are narrowing down on the issues and I am hopeful that at the appropriate time for all involved that we will be able to bring that project into the board," said Mr Walsh, who visited the mine in March.

"We don't want to rush anything just for the sake of doing a deal because it has to be sustainable. It has to stand the test of time and that is seriously important," he added.

Turquoise Hill Resources Ltd, which owns 66 per cent of Oyu Tolgoi LLC, has seen its shares soar 44 per cent in New York since the start of April amid speculation that a deal is close. Rio controls the project through its 51 per cent stake in Turquoise Hill.

Mongolia, which has a 34 per cent stake in the mine, has seen investment into the country plummet over the course of the dispute, with inbound foreign direct investment falling from US$4.45 billion in 2012 to just US$508 million last year.

"When moving and when making solutions on this project, I think big impacts will definitely change the overall picture of Mongolian development and Mongolian economy," said Mr Saikhanbileg.

BLOOMBERG