ULAN BATOR/MELBOURNE, May 19 (Reuters) – Mongolia and Rio Tinto have reached an agreement paving the way for work to resume on a stalled $5 billion underground copper mine that is expected to drive growth for both the country and the global miner.
The Oyu Tolgoi project, which started producing from an open pit mine two years ago, is the biggest single foreign investment in Mongolia, and resolution of the disputes over the second phase has revived hopes for a string of other stalled mining projects.
Rio Tinto’s Turquoise Hill Resources arm owns 66 percent of Oyu Tolgoi, while the Mongolian government owns the remainder. Rio is operator of the project, located in the Gobi desert near Mongolia’s border with China.
Vancouver-based Turqoise Hill shares leapt by as much as 11 percent to C$5.80 on the Toronto Stock Exchange on Tuesday after Rio Tinto announced the agreement on Monday which it said was signed by itself, Turquoise Hill and the government of Mongolia.
Turqoise Hill shares were last trading at $5.49, 4.8 percent higher on the day. “There is no doubt that moving forward with the Oyu Tolgoi project will improve the investment climate in Mongolia,” Prime Minister Chimediin Saikhanbileg said in a statement.
The project is expected to boost Mongolia’s economy by a third when it reaches full capacity.
Disputes between Rio Tinto and Mongolia over taxes and the costs of building the first stage stopped work on the second phase in 2013.
Along with changes in Mongolia’s minerals law and the cancellation of 106 mining licenses, the row has deterred foreign investment and worsened the hit to the country’s economy from sliding commodity prices, leading the new prime minister to push hard to resolve all the issues.
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