Rio Tinto Group will cancel $2.3 billion in debt owed by Mongolia as the miner seeks to push forward with expanding the giant Oyu Tolgoi copper project that’s been beset by years of disputes, delays and cost blowouts.

Rio’s Chief Executive Officer Jakob Stausholm proposed improved terms for a 2015 financing agreement that underpins the mine’s underground expansion, according to a Dec. 13 letter to Prime Minister L.Oyun-Erdene posted on Mongolia’s government website. Writing off the debt would speed up the timeline for when the country can start to receive dividends, it said.

Oyu Tolgoi is one of the largest known copper and gold deposits in the world. The Mongolian government has 34% ownership, with the rest held by Turquoise Hill Resources Ltd., which is 51% owned by Rio.

The mine is Rio’s flagship growth project, but has increasingly become a headache. Mongolia has been pushing for better terms as costs spiraled, with the investment needed for the underground expansion ballooning to $1.4 billion more than originally planned. Rio in October said Covid-related disruptions had furthered delayed its start and added to cost overruns.

Rio Tinto and Turquoise Hill made an offer “which aims to reset the relationship and allow all parties to move forward together,” the miner said in a statement. It reflects months of discussion, will deliver greater economic value to Mongolia and build a stronger partnership, it said.

Stausholm was in Mongolia last month for talks on Oyu Tolgoi, fueling speculation that a deal would be struck.

The agreement also means Erdenes Oyu Tolgoi, the state-owned company that holds the government’s equity in the project, won’t incur additional debt after the mine is put into operation in the first half of 2023.

(Bloomberg)