Turquoise Hill Resources Ltd. and Rio Tinto have made a joint offer to the Government of Mongolia to reset its tumultuous relationship and allow all parties to move forward together with the Oyu Tolgoi copper and gold project. The companies will forgive and write-off the entirety of the approximately US$2.3 billion carry account loan owed by the Mongolian-owned shareholder (Erdenes) to the company and cancel the UDP agreement moving forward.

The project has experienced cost increases and delays, and the government had become frustrated. Underground production was initially expected in 2021 and was moved to the first half of 2023. While budgets increased from $4.6 billion to more than $7 billion.

Turquoise Hill said the offer follows months of discussions between Turquoise Hill, Rio Tinto and the government to understand the issues and priorities, deliver greater economic value to Mongolia and build a stronger partnership.

Turquoise Hill said it remains committed to working with the government to advance the Oyu Tolgoi project and secure approval for the commencement of the undercut as quickly as possible. Negotiations continue and remain subject to required approvals.

With the debt write-off, the previously estimated $US22 billion-debt will not be incurred, which will increase the value of Erdenes Oyu Tolgoi’s 34% stake. It will also cancel the Oyu Tolgoi Underground Mine Development and Financing Plan, known as the Dubai Agreement and the Supplemental Underground Development Plan.

Mongolia owns 34% of Oyu Tolgoi, and Rio Tinto controls the rest through its 51% stake in Toronto-listed Turquoise Hill Resources and operates the mine.