New | Rio Tinto, Mongolia clinch deal on building huge copper mine

Mongolia and Rio Tinto have reached an agreement paving the way for work to resume on a delayed US$5 billion underground copper mine that is expected to underpin the growth prospects of both the country and the global miner.

The Oyu Tolgoi project, which started producing from a $6.5 billion open pit mine two years ago, is the biggest single foreign investment in Mongolia and has long been seen as a bellwether of the country’s openness to foreign investment.

However, disputes between Rio Tinto and Mongolia over taxes and the costs of building the first stage stopped work on the second phase underground mine, which Rio says will unlock 80 per cent of the copper wealth at the project.

The row has also deterred investment in Mongolia over the past two years and worsened the hit to its economy from sliding commodity prices, leading the country’s new prime minister to push hard to resolve the issues.

"Oyu Tolgoi is a world-class copper-gold asset and its further development is of great economic significance for Mongolia," Prime minister Chimediin Saikhanbileg said in a statement. "There is no doubt that moving forward with the Oyu Tolgoi project will improve the investment climate in Mongolia."

Rio Tinto’s Turquoise Hill Resources arm owns 66 per cent 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.