Rio Tinto PLC (LSE:RIO) has agreed to cancel a $2.3bn (£1.7bn) debt owed by Mongolia as part of the government’s share of the development costs for the giant Oyu Tolgoi copper mine, the country’s prime minister said.
“As of today, the foreign investor is fully responsible for the additional costs required to cancel the $2.3bn debt, which is 34%, and to open the underground mine, and to ensure that no additional debt is incurred by Erdenes Oyu Tolgoi LLC [the Mongolian state-owned company],” the government said on its website.
The Mongolian government has a 34% stake in the project, with Turquoise Hill Resources, in which Rio Tinto owns 50.8%, holding the remaining 66%. Rio Tinto also manages the operation.
Prime Minister Oyun-Erdene Luvsannamsrai said his office had received a letter from the FTSE 100-miner agreeing to write off the debt, conduct an external audit into the financing of the project's underground expansion and improve its environmental, social and governance.
Oyu Tolgoi is one of the largest known copper and gold deposits in the world. Open pit mining began in 2011 and completion of an underground mine is expected to create the world’s fourth-largest copper mine.
“Our common goal is to complete the excavation of the underground mine by January 2022,” the government said.
Oyun-Erdene said Rio Tinto had agreed that the much-delayed expanded underground section of the mine would be completed by 2023.
Oyu Tolgoi, the biggest investment project in Mongolia, is running late and over budget and has faced repeated calls from Mongolian politicians for the original investment agreement to be redrawn.
On its website, Rio Tinto said Oyu Tolgoi had paid more than $2.7bn to the Mongolian government in taxes, fees, and other payments since 2010.