On December 13, Rio Tinto and Turquoise Hill Resources sent an official letter addressed to Prime Minister L. Oyun-Erdene, agreeing the proposals and demands of the Government’s working group and confirming to write off Mongolia's USD 2.3 billion debt for its share (34 percent) in the Oyu Tolgoi copper-gold project, and to be fully responsible for the additional costs required until the underground mine is commissioned, which means Erdenes Oyu Tolgoi LLC, the state-owned company that holds the government’s equity in the project will not incur additional debts. Moreover, Rio Tinto expressed its readiness to cancel the Oyu Tolgoi Underground Mine Development and Financing Plan, known as ‘Dubai Agreement’, signed in 2015, and ‘Additional financing plan for Oyu Tolgoi underground mine development’.
The letter reads,
“We have recently held a meeting with You, Mr. Oyun-Erdene Luvsannamsrai, and Chairman of State Great Khural and members of the Temporary Committee to exchange views on improving the Oyu Tolgoi project’s benefits in the interests of the Mongolian people, cancelling the Oyu Tolgoi Underground Mine Development and Financing Plan, known as ‘Dubai Agreement’, writing off Erdenes Oyu Tolgoi’s debts as well as further making the project activities more transparent.
Taking into account your proposals, we are ready to take the following measures based on the discussions at the Board of Investors. These include:
-To write off Mongolia's USD 2.3 billion-debt for its share (34 percent) in the Oyu Tolgoi copper-gold project. With the debt write-off, the previously estimated USD22 billion-debt will not be incurred, which will increase the value of Erdenes Oyu Tolgoi’s 34 percent stake, and the timeline to start receiving dividends gets closer for Mongolia;
- To cancel the Oyu Tolgoi Underground Mine Development and Financing Plan, known as ‘Dubai Agreement’ and the ‘Additional financing plan for Oyu Tolgoi underground mine development’;
- To conduct an independent audit into the financing of the project's underground expansion;
-The Investor also agrees to cover the costs required until the first half of 2023, when the underground mine is commissioned, not incurring additional debts to Erdenes Oyu Tolgoi LLC;
-To take measures to improve control of the underground mining project through the improvement of governance of Oyu Tolgoi LLC, and the company will pay the related costs in accordance with the mutually agreed terms; establish an agreement on power supply from the energy grid of Mongolia; as well as to work together in improving the project's environment, society and governance.
The letter also reads that “the above decisions were difficult to make and represent our final offer. The investors are transferring significant value to Mongolia, which we believe will be the basis for a long-term, trusting partnership. By doing so, we believe that Parliament Resolution No. 92 of 2019 on ‘Ensuring interests of Mongolia in the exploitation of the Oyu Tolgoi gold-copper mine’ has been implemented.”
Rio Tinto also seeks to resolve arbitration disputes between the government and Oyu Tolgoi LLC by consensus within the working group.
“Our shared goal is to start a complex underground caving process at Oyu Tolgoi-known as undercutting- in January 2022. Thus, we would like to work together within the working group to determine the prerequisites for the start of underground caving process."