Rio Tinto PLC (LSE:RIO) and the Mongolian government have reached an agreement in their long-running dispute over who pays for the US$7bn underground expansion of the huge Oyi Tolgoi copper mine.
"It's a major relief. It's a huge step forward for us," Rio chief executive Jakob Stausholm told Reuters
"We are very comfortable with this outcome and, more than anything, achieving a full reset of the relationship," he added.
Rio operates the mine and owns a 51% stake in Toronto-listed Turquoise Hill Resources, which has a majority stake in the project with Mongolia owning 34%.
As part of the deal, Turquoise Hill will waive a US$2.4bn carry loan owed to it by the government while Rio will provide US$750mln of direct funding with Turquoise Hill to raise up to US$1.5bn in new equity.
Existing debts are also being rescheduled with payments to come from sales of copper concentrate to Turquoise Hill.
Rio has also agreed to run the project using electricity supplied from the Mongolian grid and instead of building a new coal-fired plant will use wind power instead.
Luvsannamsrain Oyun-Erdene, the Prime Minister of Mongolia said "The commencement of Oyu Tolgoi underground mining operations demonstrates to the world that Mongolia can work together with investors in a sustainable manner and become a trusted partner".