London | Rio Tinto’s partner and takeover target, Turquoise Hill, is fighting a rearguard action to prevent the Mongolian government from raking over the cost blowouts and delays at the mammoth $US6.9 billion ($10.9 billion) expansion of the Oyu Tolgoi copper mine.

In a letter seen by The Australian Financial Review, Canada-based Turquoise Hill’s interim CEO, Steve Thibeault, rejects a move by the Oyu Tolgoi LLC’s board of directors – dominated by the Mongolian side of the venture – to expand an agreed audit to include the project’s controversial “cost variances and overruns”.

Copper concentrator at Rio Tinto’s Oyu Tolgoi mine in Mongolia. Rio Tinto

The renewed tension over the copper mine comes at an awkward time for Turquoise Hill, the two-thirds owner of Oyu Tolgoi LLC, which is entertaining a $US3.3 billion takeover offer from Rio Tinto for the 49 per cent that Rio does not already own.

If Turquoise’s bid to row back the Oyu Tolgoi board’s decision is unsuccessful, the auditors – overseen by an Oyu committee – would rake over the controversy and potentially add further grist to a class action launched by one of Turquoise’s biggest shareholders.

It would also challenge the suggestion from Rio Tinto and Turquoise Hill that their tensions with the Mongolian government are now fully resolved.

The Mongolians’ previous reservations about the project appeared to have been settled by a deal in January under which Rio Tinto waived a $US2.4 billion debt it was owed by the Mongolian government.

But the document seen by the Financial Review suggests the frictions continue, with Mr Thibeault admonishing the board for its decision to “revisit past issues”.

These issues – the question of how and why the project’s costs blew out, and whether, when and how Rio and Turquoise disclosed those overruns – are also under scrutiny in a class action launched by major Turquoise shareholder Pentwater.

The class action alleges that the cause of the delays and cost overruns had been flagged by employees, but communications with investors suggested otherwise.

Rio and Turquoise commissioned Independent Consulting Group to look into some of these insider claims. ICG’s report in August 2021 found that poor project management, rather than technical issues, were responsible for the problems.

The ICG report recommended that Oyu Tolgoi LLC conduct further audits, one covering the “industry-accepted project management practices for large underground” and the other evaluating the “go-forward costs and schedules”.

Turquoise had accepted these audits, but at the September 21 meeting of the Oyu Tolgoi board, the Mongolian directors pushed through a broader audit proposal that looked back at the cost overruns and delays. The audit may also apparently scrutinise tax and transfer pricing issues.

Mr Thebault said this went beyond the scope of what had been previously agreed, and revisited the issues already covered off by the ICG.

He said the “past issues” had been resolved and the audits should “focus on the future”.

“Such an audit is not within the spirit of the Peer Review’s recommendations, which are forward-looking in nature,” he wrote.

He called for another board meeting “as soon as possible” to revisit the decision and take account of Turquoise’s views.

Rio’s bid to take over Turquoise is delicately poised. Two of the most vocal critics of Rio’s involvement in the Mongolian project over the past decade have been Sailingstone Capital Partners and Pentwater Capital Management; both of which have spent time as the second-biggest shareholder in Turquoise Hill and both of which have expressed dissatisfaction with Rio’s $C43 per share ($49.46) takeover offer.

This week, both agreed to withhold their votes at next week’s meeting of Turquoise Hill shareholders that will determine whether Rio’s bid is successful.

They will instead exercise the rights offered by a quirk in Canadian mergers and acquisitions regulations, which allows shareholders in a target company to nominate their shares as “dissenting” – suggesting they are holding out for a higher price, at the risk of having to accept a lower one. Rio Tinto has already twice had to raise its bid.

The government has announced 2023 and 2024 as the “Years to Visit Mongolia”. The Ministry of Environment and Tourism informs that within the framework of the project that will launch at the beginning of next year, all the ministries including all the relevant branches of digital communication, intercommunication, road, transportation, air transport and services will be involved in coordination.

The working sub-groups to ensure the preparations for the upcoming “Years to Visit Mongolia” were set up at the first meeting of the National Committee for Tourism Development headed by the Prime Minister. Specifically, coordination and participation of the Ministry of Foreign Affairs, Ministry of Road and Transport Development, Ministry of Culture, Ministry of Digital Development and Communications is needed.

The Ministry of Environment and Tourism emphasizes the need for all government ministries to support the tourism industry, starting with cultural promotion overseas.

Mongolia's tourism industry received a record-high 577,000 foreign tourists in 2019 and earned USD 607 million from the industry, which accounted for 6.4 percent of the GDP of 2019. During the COVID-19 pandemic, Mongolia received 58,000 in 2020 and 33,000 in 2021 respectively. Since Mongolia opened its border to foreign travelers in February 2022, it received 210,000 tourists and earned MNT 750 billion. The number of tourists this year is expected to reach 250,000 and the income to MNT 1 trillion.

In 2018, an agreement was signed for the establishment of the Museum of Tonyukuk the Wise as part of the Development Cooperation Agreement between the governments of Mongolia and the Republic of Turkiye.

In accordance with the agreement, on November 2, a ground-breaking ceremony was held for the museum which will be built with a grant of USD 6.2 million from the government of Turkiye. The ceremony was attended by Minister of Culture of Mongolia Ch. Nomin, Minister of Culture and Tourism of Turkiye Mehmet Ersoy, President of the Turkish Cooperation and Coordination Agency (TIKA) Serkan Kayalar, Ambassador Extraordinary and Plenipotentiary of Turkiye to Mongolia Zafer Ates and other corresponding officials.

It is planned to build the museum on an area of 20 hectares within the 65.58 km2 protection zone of the memorial complex of Tonyukuk the Wise in the territory of Nalaikh District, Ulaanbaatar. A general plan for the construction of the museum, its accompanying buildings, a commercial service area, and a recreation area was developed.

As part of the cooperation agreement between the former Ministry of Education, Culture, and Science and TIKA, a project has been launched in 1994 to preserve, protect and restore the heritages of Turkic Khaganate in the territory of Mongolia.

Minister of Culture Ch. Nomin said, “In order to preserve and maintain cultural heritages, promote history and culture, and pass them on to future generations, the Mongolian government is carrying out a number of significant construction projects. The Ministry of Culture is developing a strategy to boost the economic impact of these programs. It should be mentioned that the establishment of the Museum of Tonyukuk the Wise in the Nalaikh district of the capital city is directly tied to the policy goals of protecting and preserving cultural heritage and promoting economic growth. In addition, the importance of the project is further enhanced by the fact that it creates a good experience for the development of other valuable cultural heritage preserved in every corner of Mongolia according to this standard.

Born of the Ashina noble family from which most powerful aristocrats and noblemen of the Turkic Khaganate originated, Tonyukuk the Wise lived between the years of 646 to 732. After serving as an advisor for Qapaghan Khan and Kutulug Khan, he continued to work under Bilge Khan until his death at the age of 86. The Turkic Khaganate (or the Gokturk Khaganate) was a ruling Empire in Central Asia in 552-745.

On November 1, the 21st Meeting of the Council of Heads of Government of Member States of the Shanghai Cooperation Organization (SCO) was held virtually and chaired by Premier of the People’s Republic of China Li Keqiang.

Prime Minister of Mongolia L. Oyun-Erdene participated in the meeting and delivered remarks. Prime Minister Oyun-Erdene congratulated the Chinese Premier for holding the meeting successfully despite the challenging circumstances of the pandemic and the economic challenges brought on by international tensions. Then he expressed condolences over the tragic accident in the western Indian state of Gujarat, which resulted in the death of more than 130 people.

It was stated that Mongolia has been working to actively participate in the SCO's cooperation ever since it became the organization's first observer country in 2004.

Prime Minister Oyun-Erdene said that he is pleased that the meeting coincided with the day when the 745-km highway connecting Asia and Europe, an important component of the "Mongolia-Russia-China Economic Corridor", was put into operation.

According to him, Mongolia has been able to make use of its geographic advantage to create a transit corridor linking Asia and Europe and to support regional integration and trade. It was also announced by the Prime Minister that the preliminary feasibility study of the Altanbulag-Zamyn-Uud highway construction project connecting the three countries is ready and put forth his request to meet and discuss this matter with the authorities of China and Russia in the near future.

In the first ten years of its long-term development plan, Vision-2050, the Mongolian government is implementing a New Revival Policy under six sets of objectives. The objectives of the region's countries and the development strategies of China and Russia, which are neighbors, were taken into consideration when developing the policy. This policy is a thorough plan for partnerships that benefit the parties, built on the active involvement of foreign investors and businesses as well as regional nations, he added.

Prime Minister Oyun-Erdene emphasized that the government of Mongolia is devoting the construction of border checkpoint infrastructure and transportation logistics its full attention. He also invited the heads of government of the member states who participated in the meeting to work together on mutually beneficial economic projects within the framework of Mongolia’s New Revival Policy.

Saudi Arabia is seeking investment from Australian miners to support its $170-billion plan to build a mining industry and diversify its oil-dependent economy this decade.

The kingdom says it’s sitting on top of $1.3 trillion worth of untapped mineral deposits including copper, zinc, phosphates and gold. Saudi Minister of Industry and Mineral Resources Bandar bin Ibrahim Al-Khorayef is in Australia this week to drum up investment interest.

Australian miners should “come, explore, do mining — the same as they are doing here”, he said in an interview on Tuesday in Sydney.

Saudi Arabia is pursuing a Vision 2030 project to reduce reliance on fossil fuels and embrace industries from mining to renewable energy and manufacturing. Of the $170 billion sought for mining, it envisages about 60% will come from private companies and the rest from state-owned entities.

Al-Khorayef said he had met with a number of smaller Austrlalian miners already, and hoped to meet bigger players such BHP Group Ltd and Rio Tinto Plc at a major mining conference in Sydney this week.

Saudi investors are “interested in this sector”, he said, but the country lacks domestic mining expertise and “you need to have partners who understand the sector quite well, and know how to utilize the resources.”

Junior miners

Saudi Arabia’s small mining industry is dominated by state miner Saudi Arabian Mining Co., commonly known as Maaden. The country should emulate Australia’s model of junior, private-sector miners that develop riskier and early-stage mines, the minister said.

“We feel it’s quite a good model for us to copy in Saudi, because we have a lot of young entrepreneurs who I’m sure many of them would be interested in the sector,” he said.

Battery metals such as lithium and nickel are already a focus for Maaden and Saudi Arabia, but the scale of resources is still unclear. Maaden said last year it would spend a “huge amount of money” in the coming two decades to explore for battery metals.

(By James Fernyhough)

Mongolia has increased its railway transport fares by 20-50% from November 1 after Ulaanbaatar Railway's proposals were accepted by the State Board of Trade and Industry, Mongolia's Medee reported.

Transportation tariffs on coal exports have increased by 20%, copper and zinc concentrates exports 20%, iron ore exports 15% and fluorspar exports 15% starting from November 1.

Besides, local and national passenger transportation fares have also increased by 50%, according to Medee.

Mongolia is also about to raise energy prices of enterprises as the sector is in a difficult situation, although the specific schedule has yet to be finalized.

The working capital needed by coal mines reaches 109 billion MNT, according to energy minister Choijilsuren Battogtokh.

The household electricity and heating price will not increase, but for enterprises, power prices within 500 TWh will increase 14% and prices of power exceeded 500 TWh will increase by 38%, according to Gogo Mongolia.

(Writing by Emma Yang Editing by Tammy Yang)

Mongolia's forex reserves rose to 2.8 billion U.S. dollars at the end of October, up 3.7 percent from a month earlier, the Bank of Mongolia said Wednesday.

However, the figure marks a 36 percent decrease from the beginning of this year, the central bank said in a statement.

The Asian country must make sovereign bond payments in the coming two years, Byadran Lkhagvasuren, governor of the central bank, has said, stressing the necessity to increase the forex reserves.

In 2023 alone, Mongolia will have to repay sovereign debts worth 1.3 billion dollars, said Lkhagvasuren.

The country's forex reserves stood at 4.9 billion dollars at the end of April 2021, hitting an all-time high, according to the central bank.