Anglo-Australian mining giant Rio Tinto secured a multi-billion deal Tuesday to finance a huge expansion of its giant but controversial Oyu Tolgoi mine in Mongolia, the focus of rising resource nationalism. Oyu Tolgoi signed the $4.4 billion deal in the Mongolian capital Ulan Bator with international financial organisations and 15 commercial banks, its parent company said in a statement, calling it "an important step forward".
The project has total copper and gold reserves estimated at 2.5 billion tonnes, and forecast earnings of over $100 bn over its lifetime, which could extend beyond the year 2100. It started production from an open-pit mine two years ago, but the financing paves the way for its second and more valuable phase underground, where the company says 80 percent of reserves lie. "Long-term copper fundamentals remain strong and Oyu Tolgoi as a tier one asset will be a globally important source of supply," said Rio Tinto Copper and Coal chief executive Jean-Sébastien Jacques. Mongolia has only three million people but an estimated $1 trillion of natural resources lie beneath its empty steppes, and the country enjoyed an economic boom in recent years on the back of foreign investment and mineral exports.
Growth reached an eye-popping 17.5 percent in 2011, but has since been hammered by rising resource nationalism and political infighting over the role of foreign firms in extraction, as well as the global resources bust. The Oyu Tolgoi project - which is projected to contribute up to one third of the country's GDP once fully operational - has been at the centre of the issue, with disputes stalling progress on the underground phase for nearly three years.