LONDON/ULAANBAATAR (Reuters) – Nearly 10 years on from the launch of a giant copper and gold project in Mongolia, Rio Tinto is still looking to secure a domestic power source it needs for the mine under an agreement with the government.
Oyu Tolgoi, located in the South Gobi region near landlocked Mongolia’s southern border with China, is scheduled to complete a $5.3 billion underground expansion for first production by 2020, creating one of the world’s biggest copper suppliers.
The project, launched in 2009 and 34 percent-controlled by Mongolia, is set to transform the country’s tiny economy, and is also key for Rio as the biggest potential growth area for its copper business. But it has been beset by squabbles over cost overruns and claims of unpaid taxes.
Under an agreement with the government, by 2022 a domestic power source must be found for the project, currently running on power imported from China. But while Rio has invited three state-owned Chinese firms to submit bids to build a power station at a cost of up to $1.5 billion, it has yet to make a final decision on a go-ahead.
Rio also has yet to have its permits for the plant renewed by the Mongolian government, according to a government source. “The main challenge remains the same: political instability and unpredictability,” said Otgochuluu Chuluuntseren, a former government official who also served as an Oyu Tolgoi board member.