Rio Tinto signs mine deal with Mongolia

Mining giant Rio Tinto Ltd and Canada's Ivanhoe Mines Ltd are to develop a $US3
billion ($A3.38 billion) gold and copper project in Mongolia after signing an
investment deal with that nation's government.

Rio Tinto said production was expected to commence in 2013 - 10 years after the Oyu
Tolgoi deposit was discovered by the Robert Friedland-chaired Ivanhoe, which had
originally planned to commission the mine in 2009, according to its 2005 integrated
development plan.
Oyu Tolgoi, in the South Gobi region, is expected to produce 450,000 tonnes of
copper and 330,000 ounces of gold per year for at least 35 years.
Mongolia's government will own 34 per cent of Ivanhoe Mines Mongolia Inc LLC, the
licence holder of the Oyu Tolgoi project, under the terms of the investment
agreement and associated shareholders agreement signed in the capital Ulan Bator on
Tuesday.
"Key terms include a stable operational and tax environment, provisions dealing with
the government's equity participation and financing arrangements," Rio Tinto said in
a statement on Tuesday.
Rio Tinto said it would "now move forward with the government to address the
conditions precedent and commence the development phase".
Ivanhoe's talks with the Mongolian government hit a roadblock in 2006, when
Mongolians protested against increasing levels of mineral asset ownership by foreign
entities, and a `windfall tax' of up to 68 per cent was levelled on profits from
mining projects when commodity prices reached certain levels.
Mongolia's government scrapped the tax in August this year, clearing the path for an
investment deal to be reached.
Mr Friedland told a mining conference in Western Australia in August 2008 that there
was about $400 billion worth of metal in the ground at Oyu Tolgoi, based on metals
prices at the time.
Bret Clayton, chief executive of Rio Tinto's copper and diamonds group, said in a
statement on Tuesday that the project was consistent with the miner's strategy of
investing in large, long-life, low-cost ore bodies.
"While the size and grade of the existing Oyu Tolgoi ore reserves and mineral
resources are already world class, we are also excited by significant exploration
upside that still remains," Mr Clayton said.
"We plan to be a partner here in Mongolia for decades to come."
A Rio Tinto spokesman told AAP on Tuesday that the joint venture expected to meet
the conditions of the Oyu Tolgoi agreement within six months, at which stage the
miner would be obliged to double its interest in Ivanhoe, from 9.95 per cent
currently, under agreements between the companies.
Rio Tinto has a right to ultimately increase its interest in Ivanhoe to 46.65 per cent.