Rio Tinto (ASX:RIO) share price climbs amid $3.2 billion Mongolia ‘reset’

The Rio Tinto Limited (ASX: RIO) share price is rising. It’s currently up 0.8% amid news of a Mongolian reset to the tune of $3.2 billion.

Oyu Tolgoi is located in the South Gobi region of Mongolia. It is is one of the largest known copper and gold deposits in the world. When the underground mine is eventually completed, it will be the world’s fourth-largest copper mine according to Rio Tinto. It’s not the only copper interest that Rio Tinto has.

Open pit mining began at Oyu Tolgoi in 2011, it’s jointly owned by the government of Mongolia, which owns 34%, and Turquoise Hill Resources, which owns 66%. Rio Tinto owns 50.8% of Turquoise Hill Resources and manages the operation on behalf of the owners.

Mongolian reset

After years of delays and setbacks, it seems that Rio Tinto is on track to expand the Oyu Tolgoi copper project.

The offer from Rio Tinto and Turquoise Hill Resources is to cancel US$2.3 billion of debt owed by Mongolia to Turquoise Hill Resources.

The suggestion is improved terms from a 2015 finance agreement that would underpin the expansion.

If the debt is written off, it would speed up when Mongolia can receive the economic benefits.

The purpose of the offer is to reset the relationship and allow all parties to move forward together, with Mongolia wanting a better deal.

What’s the offer to Mongolia?

According to Turquoise Hill Resources, the offer includes, among other elements, a proposal to forgive and write-off the entirety of the approximately US$2.3 billion carry account loan owing by the Mongolian-owned shareholder (Erdenes) to the company and cancellation of the UDP agreement.

Turquoise Hill and Rio Tinto have been in months of discussions to understand the Government’s issues and priorities, deliver greater economic value to Mongolia.

In a statement, Turquoise Hill said:

Turquoise Hill remains committed to working with the Government of Mongolia to advance the Oyu Tolgoi project for the benefit of all stakeholders, including securing approval for the commencement of the undercut as quickly as is practical following the entering into of a definitive agreement among the parties. Negotiations continue and remain subject to required approvals, with all parties focused on being in a position to finalise an agreement. A further market update will be provided as and when appropriate.

Rio Tinto share price snapshot

Over the last six months, Rio Tinto shares have dropped by 22% amid the heavy decline of the iron ore price.

However, over the last month the Rio Tinto share price has actually risen by around 8%.

The post Rio Tinto (ASX:RIO) share price climbs amid $3.2 billion Mongolia ‘reset’ appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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