ULAANBAATAR – Rio Tinto’s long-awaited approval of a $5.3 billion extension for its giant Oyu Tolgoi copper mine is fuelling hopes of a revival at last for Mongolia, battered by a slowdown in neighboring China that has left it deep in debt.
Oyu Tolgoi, one of the world’s largest undeveloped copper projects, has been a bellwether for Mongolia since its discovery more than a decade ago. But as discussions with the government stalled in 2013 and prices collapsed, Rio put the flagship project on the backburner – and confidence in Mongolia crumbled.
Rio’s decision to go ahead with the costly and complex expansion is a bet on copper’s recovery for a miner that badly needs to recalibrate its iron ore-heavy portfolio. Mining executives, government officials, diplomats and analysts say it is also a potentially game-changing boost for Mongolia that could spark the unblocking of other projects and restore investor trust, key steps for the country to meet debt repayments due from 2017.
“This is a vital vote of confidence in Mongolia,” said David Paul, chief executive of Aspire Mining, which is raising money to study a rail line for its Ovoot and Nuurstei coking coal projects in the country’s north.
The Oyu Tolgoi expansion could also be key to winning over the public – in some cases reluctant to compromise with foreign investors – to deals on troubled Tavan Tolgoi, Mongolia’s largest coal project, and the Gatsuurt gold mine owned by Centerra Gold.
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