Rio Tinto facing pressure over Mongolian mine extension

Anglo-Australian mining titan Rio Tinto is facing mounting pressure from the Mongolian government as it seeks to review an expansion to the vast Oyu Tolgoi copper mine, one of the group's most vital projects.

Officials want the mining company to form a special committee to decide who should handle the task of the mine's extension.

It is currently one of the largest copper mines in the world, according to the mining giant, and is located in the Gobi desert, about 80km north of the border with China.

The expansion project is running late and has cost billions of dollars more than originally planned, therefore Ulaanbaatar has set up a review project to focus on project management and design, which will be presented to an Oyu Tolgoi board meeting.

The review is likely to increase tensions between Rio Tinto and the government, which is seeking to improve the agreements underpinning the mine's development. It also has the potential to attract the attention of regulators in both the US and UK.

The government announced it had sent a letter to Rio Tinto, but nothing else of this situation is known.

The expansion will coincide with many government's plans to switch towards more sustainable energy forms, which will drive up demand for the metal for use in wind turbines or electric vehicles.

A recent report found that renewable energy costs dropped 10% in 2019, meaning it is becoming far more cost-efficient to produce and use more renewable forms of energy such as solar and wind.

However, the metal and chemicals industries - particularly steel and concrete - have been largely ignored by the EU, and tackling these will be vital if it wants to reach its climate goals.

Increasing the mine's output will also be a steady source of income for the foreseeable future, and the mine already forms a significant portion of Mongolia's economy.

Oyu Tolgoi also provides tens-of-thousands of paid jobs for Mongolians.

Current estimates state the mine could account for as much as 30% of Mongolia's GDP once the mine is running at peak production.

However, the expansion project is facing problems with its completion, events only hampered by the ousting of CEO Jean-Sébastien Jacques.

Jacques was led to quit following the outcome of the Juukan Gorge controversy - where the company blew up a 46,000-year-old cave system sacred to Australian Aboriginies

Rio Tinto originally announced the expansion project would reach sustainable production within the first quarter of 2021, at a total cost of $5.5 billion (€4.2 billion).

Recent events have shifted this deadline to at least October 2022, while the project as a whole has gone $1.1 billion over budget.

The mining titan may operate the mine, but they do not have direct control. 66% is owned by Toronto-based minerals company Turquoise Hill Resources (THQ), of which Rio Tinto operates a 50.8% share. 

The Mongolian government is also funding their end of the deal through loans granted by the Australian mining company.

Turquoise Hill has already launched its own investigation into the delays and budget overspending, which it is currently reviewing.

Rio Tinto blames the delays on difficult ground conditions, but THQ claims botched construction was the source.

These are hardly the only controversies Rio Tinto has faced this year.

A class-action lawsuit was filed against it on behalf of more than 150 locals for the autonomous island of Bougainville, in Papua New Guinea.

The pollution caused by the mine was directly responsible for a local civil war, which 20 years later, led to a referendum in which the locals voted to declare independence from Papua New Guinea.

Back to Homepage

Back to Metals & Mining