Mongolia”s new government has given its strongest indication yet that it
will seek to renegotiate a landmark deal to develop the Oyu Tolgoi project with
global mining giant Rio Tinto , adding to uncertainty over one of the world”s
largest copper-gold mines.

Mining Minister Ganhuyag Davaajav told the Odriin Sonin (Daily News) paper
on Wednesday his government would seek to raise its current stake of 34 percent
in Oyu Tolgoi, as part of an “action plan” that has not yet been
finalised.

The initial Oyu Tolgoi agreement, signed in 2009, allowed for the two sides
to renegotiate the deal once the investors recouped their first investment, the
paper quoted Ganhuyag as saying.

“It”s just clear that the new contract should say that after the first
investment is paid back (to Rio Tinto) Mongolia will own 50 percent,” he
added.

Ganhuyag”s office confirmed the accuracy of the newspaper report when
contacted by Reuters.

The government has long been under pressure to implement a parliamentary
resolution that Mongolia should own 50 percent of the project once the
principal investors — Rio Tinto and Turquoise Hill Resources — have recouped
their start-up investment.

Ganhuyag”s comments come a week after 24 members of parliament sent a letter
to prime minister Altankhuyag Norov, demanding that the agreement be
renegotiated.

Rio Tinto responded to the petition by saying the MPs” comments
“did not reflect the reality of the agreement”, and urged the
Mongolian government to show “leadership”.

At a recent mining conference, Cameron McRae, chief executive of Oyu Tolgoi
and Mongolia country representative for Rio Tinto, told delegates it would take
two decades for investors to break even, by which time the government would
have earned $7 billion to $8 billion from the project.

Oyu Tolgoi, located 80 km north of Mongolia”s Chinese border, is expected to
become one of the world”s three largest copper and gold mines when it reaches
full production in 2018. It is expected to begin commercial production in the
first half of next year.

Sept 12 (Reuters) –