On August 7, 2022 local time, Mongolian Prime Minister and Chairman of the Mongolian People's Party Luvsannamsrai Oyun-Erdene met with State Councilor and Foreign Minister Wang Yi in Ulaanbaatar.

Oyun-Erdene asked Wang Yi to convey his sincere greetings to Chinese leaders and thanked China for providing vaccines and other anti-pandemic materials to Mongolia to help the country safeguard the health and well-being of its people, which fully demonstrates that a friend in need is a friend indeed. Mongolia follows a policy of giving priority to neighbors, regards China as a good neighbor that is more valuable than gold, and expects to work with China to seek greater synergy between development strategies to advance bilateral cooperation in various fields at an accelerated pace. The Mongolian People's Party has also just celebrated the centenary of its founding. He wishes the 20th National Congress of the Communist Party of China (CPC) a complete success and hopes to strengthen exchanges with the CPC at a new starting point to draw on its experience in party governance and state administration.

Oyun-Erdene stressed Mongolia's firm belief that all countries' independence, sovereignty and territorial integrity, as well as their own choice of development path, should be respected. Mongolia firmly supports the one-China principle and opposes external interference in China's internal affairs such as Taiwan, Xizang, Xinjiang and Hong Kong. China is a responsible major country representing the future of Asia, and China's development serves the common interests of all Asian countries. Mongolia firmly supports the further development and growth of its friendly neighbor China and hopes to realize common development and prosperity with China.

Wang Yi conveyed Chinese leaders' sincere greetings to Prime Minister Oyun-Erdene. He said that China and Mongolia are linked by mountains and rivers and the only right choice for us is peace, friendship, mutual benefit, mutual understanding and mutual support. China appreciates Mongolia's adherence to the one-China principle and its support for China's efforts to safeguard core interests. China also respects Mongolia's independence, sovereignty and territorial integrity, supports Mongolia in choosing a development path suited to its national conditions in accordance with the will of its people, and backs Mongolia's efforts to maintain stable governance and focus on development.

Wang Yi said that China has always stayed committed to the principle of amity, sincerity, mutual benefit, and inclusiveness in its neighborhood diplomacy, has always accommodated its neighbors' comfort level, and has always been ready to share China's development opportunities. China puts advancing friendly cooperation with Mongolia in an important place in its neighborhood diplomacy. No matter how China may develop in the future, this policy will not change. As a Chinese saying goes, "If brothers are of the same mind, their sharpness can cut through metal". China is ready to work with Mongolia to seek greater synergy between the Belt and Road Initiative and the Steppe Road Program, between the Global Development Initiative and Mongolia's new revival policy, and between China's "two-step" development strategy and Mongolia's long-term development vision, so as to create three engines of development for bilateral relations and inject strong impetus into the mutually beneficial and friendly cooperation between the two countries.

The two sides had in-depth exchanges on experience in governance and development, and plans for practical cooperation in the next stage. Both sides agreed to maintain high-level and party-to-party exchanges, remain focused on achieving lasting greatness for the two Parties, both in their 100s, and accelerate respective development and revitalization. The two sides will promote the development of ports and corridors, improve the efficiency of customs clearance, forge major demonstration projects in infrastructure and energy, among others, and strengthen youth exchanges and sub-national cooperation. Wang Yi said that the economies of China and Mongolia are highly complementary, and China is ready to help Mongolia turn its resource endowment into development advantages and tangible development outcomes.

At least $1.36 billion in evaded taxes was recovered by governments thanks to the Panama Papers leak of 2016, which unearthed millions of financial documents from the law firm Mossack Fonseca. An even bigger investigation into tax evasion is underway following the emergence of the Pandora Papers in October 2021.

Leaks like these show the complicated lengths that companies and ultra-wealthy people go to avoid paying taxes. They’re a gift to governments trying to crack down on the illicit practice, but tax agencies can’t simply wait for the next leak to shed light on prevailing routes of evasion.

Instead, they have to engage in time- and resource-consuming audits based on educated guesses or through random selection. In any given year, only a sliver of potential tax fraud can be investigated. When tax agencies are understaffed and underfunded, it becomes harder to carry out successful audits.

So it was a big deal when Mongolia — not long after a financial crisis — announced that it had recovered $228 million in owed taxes from a multinational mining giant in 2019.

The case happened to be the initial fruits of a campaign to strengthen the country’s tax system through a collaboration with the Organization of Economic Cooperation and Development, the United Nations Development Programme, and other groups.

The successful outcome shows that curbing tax evasion can facilitate the global fight against poverty.

3 Key Things You Should Know About Mongolia’s Tax Win

Mongolia recovered $228 million in evaded taxes from the mining company Turquoise Hill and prevented the company from writing off $1.5 billion in taxes going forward.

If the $228 million was collected at the time it was owed, Mongolia could have doubled its spending on health care and education.

Global tax evasion costs countries more than $500 billion annually, with developing countries losing more than $100 billion. This deprives governments of money that would otherwise be spent on education, health care, transportation, electricity, shelter, and other services.

What Happened in Mongolia?

Mongolia is sometimes referred to as “Mine-golia” because the country possesses trillions of dollars worth of copper, gold, silver, and coal deposits, along with other minerals.

Despite having opened up its natural resources to multinational corporations for decades, the country has yet to reap the rewards. In fact, nearly one-third of Mongolians live in poverty, while another 15% are perilously close to falling below this line. An estimated 65% of families struggle with food insecurity and the government spends less than half the global average on health care.

In 2009, the Canadian mining company Turquoise Hill, which is owned by the conglomerate Rio Tinto, signed an agreement with the Mongolian government to manage and operate the Oyu Tolgoi mine, one of the world’s largest sites of copper and gold.

Mongolia would get a portion of sales generated from Oyu Tolgoi’s minerals, while also raising money through taxes on Turquoise Hill. If all things went according to plan, this revenue could boost public spending on things like education, health care, and poverty reduction.

But the mine failed to yield much financial benefit for the government over the next several years, despite Turquoise Hill eventually announcing more than $1 billion in annual revenue from the project.

Even when accounting for the loans Turquoise Hill provided to finance Mongolia’s share of the construction costs, things didn’t seem to add up. So Mongolia enlisted the help of various international tax groups to “modernize its legal framework, build capacity to tackle complex tax schemes and to implement the international standards on transparency and exchange of information (EOI) for tax purposes.”

One thing was clear from the start: Mongolia’s tax agency was underfunded, understaffed, and lacked the expertise to effectively oversee multinational corporations.

So the partnership first advised the government on how to build and staff tax departments dedicated to compliance, audits, and specific tax rules. Once these teams were in place, international experts trained members to look for, gather, and analyze different types of information.

In particular, they provided guidance on how to carry out transfer pricing audits, which is what ultimately led to the $228 million settlement. Transfer pricing is when a company sells goods or services to related divisions or companies under the same ownership umbrella at a manipulated price, or funnels revenue through a subsidiary set up in a tax shelter.

Carrying out a transfer pricing audit can take up to 18 months of rigorous work as auditors look through a company’s financial records, organizational charts, and other documents and gain access to international lending databases.

The Mongolian audit found that Turquoise Hill had funneled money related to Oyu Tolgoi through shell companies in the Netherlands and Luxembourg to heavily reduce its tax burden. The evidence was so cut-and-dry that the tax bill of $228 million was paid soon after it was brought to light.

With so many multinational companies operating in the country's mining sector, the tax team is preparing to carry out more transfer pricing audits in the months and years ahead. It’s unclear how much tax evasion has been going on in the country, but it’s likely that more money will be recovered as these investigations commence.

Additional structural changes have been made to the country's tax department. Mongolia enacted formal transfer pricing rules to deter the practice and joined 140 countries in signing the Convention on Mutual Administrative Assistance in Tax Matters (the MAAC), which will make it easier for the government to gain access to financial documents.

The country also enacted a law preventing companies from offsetting their current tax bills by pointing to ongoing investments and future expenses. This “ring-fencing” rule, which isolates taxable income, is what blocked Turquoise Hill from offsetting $1.5 billion.

Mongolia is now in a better position to benefit from its natural resources, hold corporations accountable, and generate revenue for public spending on things like education, health care, transportation, electricity, housing, and more.

Mongolia’s Financial Crisis

The economic crisis that engulfed Mongolia in 2016 was due to “government overspending and declining revenues from commodity exports,” according to CNBC.

That makes it seem like Mongolia has a bloated federal budget. But between 1981 and 2020, the government had an average annual budget of $750 million, with yearly expenditures reaching $2.1 billion in 2020.

The United States federal government, by comparison, spent $6.82 trillion in 2021.

A few hundred million in evaded taxes would hardly affect the US federal government. But for Mongolia, that’s a significant fraction of annual spending. And that’s just one company’s tax fraud.

Mongolia’s mining sector accounts for 94% of the country’s exports and 19% of gross domestic product and is dominated by multinational companies like Turquoise Hill that have the technical expertise and financial resources to manage projects. It seems possible that some of the companies operating mines are engaging in similar forms of tax evasion.

If the ongoing audits recover more taxes, then a new picture of the financial crisis of 2016 could emerge. Was government “overspending” at the root of the problem, or was tax evasion an instigating factor?

We won’t know for several years, but the initial audit’s tax haul would have been enough to double the country’s spending on health care and education during the years in which they were due, investments that experts say would have been profoundly helpful to citizens.

If the newly strengthened tax team roots out more tax evasion, then it might be possible that the money for the budget was there all along; it was just being hoarded by the companies enriching themselves with Mongolia's natural resources.

Tax evasion occurs in large part because of power imbalances that exist between government tax agencies and the lawyers that corporations and wealthy individuals enlist to navigate tax law and exploit loopholes and weak spots.

If a country's tax agency had full oversight of the flow of money within its borders, then it would be able to collect all relevant taxes. But no country has that capacity.

As a result, tax evasion becomes a game of cat-and-mouse, with companies and the ultra-wealthy spending huge sums of money to launder and hide money in tax shelters, bribe and lobby officials, engage in transfer pricing, manipulate financial markets, and rewrite the rules. The Panama and Paragon papers show that these practices are happening at scandalous rates.

In fact, it’s estimated that $500 billion is lost annually as a result of tax evasion, with developing countries losing upwards of $100 billion each year. This is money that could otherwise be spent on education, health care, electricity, safety, and the effective functioning of tax departments.

But when taxes go uncollected, governments have less money to spend on these essential services, including effective tax collection. If too little money is being received, then tax departments may get reduced as part of downsizing efforts to limit "overspending," making it even harder for them to get a handle on the problem.

This is how tax evasion becomes a vicious cycle. When it becomes the norm, it signals to entire industries that it’s an easy way to save money, and companies running their cost-benefit analyses determine that it’s smarter to evade taxes than to play by the rules.

Unless a company or person is engaging in underground or informal activity, tax evasion can only really occur when there are different tax jurisdictions. That’s because the tax rules of one environment — say, Mongolia — are evaded by putting money in another environment with different tax rules — say, Luxembourg or the Netherlands.

Hence the proliferation of tax havens around the world that make these schemes possible. Luxembourg and the Netherlands, the countries that abetted Turquoise Hill, ranked as the sixth and eighth most sought-after tax shelters in the world, according to the Tax Justice Institute. The US alone is responsible for other countries losing $20 billion in taxes annually.

It's not like countries passively become tax shelters. In reality, they establish tax shelter laws and then allow financial and legal firms to actively market their services.

In developing countries with fledgling economies and rudimentary tax departments, the ways in which multinational companies take advantage of the tax system can be truly egregious, a modern-day form of imperialism, according to the Global Alliance for Tax Justice.

“The richest countries, much like their colonial forebears, have appointed themselves as the only ones capable of governing on international tax, draped themselves in the robes of saviors and set loose the wealthy and powerful to bleed the poorest countries dry,” Dr. Dereje Alemayehu, executive coordinator of the Global Alliance for Tax Justice, said in a statement.

“Rules on where and how multinational corporations and the superrich pay tax must be set at the UN in the daylight of democracy, not by a small club of rich countries behind closed doors.”

Who Are the Key Players in Creating a Future of Tax Justice?

Indignation about tax evasion and how it robs poor countries had been growing long before the Panama and Pandora papers. But these leaks helped governments crack down on the worst offenders, recover taxes, and enact fines in ways that may deter evasion in the future.

The leaks also helped to educate the public and build momentum for ways to fix the problem.

In recent years, countries have taken steps to ensure global tax fairness, transparency, and consistency. Currently, 136 countries representing 90% of the global economy have agreed to enact a minimum 15% corporate tax rate and change rules around where large companies pay taxes to ensure that the countries that foster corporate profit actually benefit.

The US, the world’s largest economy, is on the cusp of joining a version of this agreement, which would transform how companies engage in tax compliance worldwide, and the European Union seems poised to enact the rule if it can overcome resistance from Hungary.

Efforts are also underway to improve tax enforcement capacity in developing countries, similar to what happened in Mongolia. Various countries are currently being advised on how to expand and improve their tax departments, devise new rules in line with the global economy, and perform successful audits for a range of technical and challenging financial schemes.

Tax Inspectors Without Borders — a joint project between the Organization of Economic Cooperation and Development and the United Nations Development Programme — was instrumental in the restructuring and training of Mongolia’s tax department.

“Without borders” is a clear nod to Doctors Without Borders and all groups focused on international solidarity. Both groups deal with different kinds of crises, and both work to bring about justice.

In the case of Tax Inspectors Without Borders, justice means stopping tax fraud and enabling struggling governments to receive the funds that they're owed. In doing so, it’s helping to generate revenue that flows outward, funding government-wide operations and uplifting entire communities in the process.

What Does This Mean in the Fight to End Extreme Poverty?

We live on a planet with enough food, water, and shelter for everyone to live comfortably. Yet extreme inequalities exist worldwide, with billions of people struggling to secure the most basic of human necessities. More than one-third of people worldwide struggle to get adequate food, nearly half of people lack reliable access to clean water and sanitation, and 62% of people live on less than $10 a day.

Meanwhile, the world’s 10 richest men doubled their wealth to $1.5 trillion during the COVID-19 pandemic. The world’s billionaires — some of the primary beneficiaries of tax shelters — could fund the annual amount needed to end poverty and achieve the Global Goals in the poorest countries 30 times over. That estimated amount is $350 billion, less than recorded tax evasion each year.

Taxation is a powerful tool for combating poverty and injustice, and reining in runaway inequality like this. But it’s only effective when adequate resources are made available and countries cooperate to ensure transparency, accountability, and fairness.

Mongolia’s tax win shows that progress can be made to ensure tax justice. The odds are still stacked against developing countries, but as knowledge and expertise are shared and solidarity grows, those evading taxes will have fewer places to hide.

By Joe McCarthy August 9, 2022

Mongolia reported 362 new cases of COVID-19 infection for the past 24 hours.

203 of them were confirmed in Ulaanbaatar and 159 cases were confirmed in regions.

No linked deaths were reported in the country in 24 hours.

The death toll of Mongolia remains 2,123.

Today, Minister for Foreign Affairs B.Battsetseg has received UN Secretary-General António Guterres, who is visiting Mongolia on 8-11.

Following the meeting, they held press briefing.

At the press briefing, Minister B.Battsetseg said, “This visit of UN Secretary-General António Guterres, which coincides with the 20th anniversary of the first deployment of Mongolian peacekeepers to UN peacekeeping operations and the 30th anniversary of Mongolia’s declaration of its territory a nuclear-weapon-free zone, is a sign of appreciation for the contribution of our country to strengthening international peace and security.

Mongolia is a democratic country that respects human rights and considers that women should have equal rights without discrimination. In this sense, our country supports the call to increase the number of female personnel participating in peacekeeping operations to 15 percent in accordance with UN Security Council Resolution 1325 on Women, Peace and Security, and is pursuing a policy to achieve this goal by 2027.

In 1992, Mongolia declared its territory a nuclear weapon-free zone. I would like to emphasize that the significance of Mongolia’s nuclear-weapon-free status is growing more at a time that international peace and security are strained.

In December, 2021 Mongolia acceded to the Treaty on the Prohibition of Nuclear Weapons. Our country aspires to continue its contribution to the efforts of the international community to prevent the spread of nuclear weapons.”

“…Mongolia considers that the goals and activities put forward by António Guterres in his speech ‘Our Common Goals’ are timely and crucial for strengthening multilateral cooperation aimed at intensifying the implementation of development goals and programs.

Mongolia will continue to cooperate with the United Nations to strengthen and develop the International Think Tank for Landlocked Developing Countries, which was initiated and established by our country, as a knowledge and innovation center, which will give effective support to the implementation of the Vienna Programme of Action and the 2030 Sustainable Development Agenda.”

“Mongolia will closely cooperate with the UN in the areas of key priorities: human development and well-being; green, inclusive and sustainable growth; and people-centred governance, the rule of law, and human rights within the framework of the UN Sustainable Development Cooperation Framework (UNSDCF) for Mongolia 2023-2027 signed by the Government of Mongolia and the United Nations in May, 2022.

Particularly, we believe that the UN’s support will play an important role to achieve the goals of our country to reform education, become a ‘digital nation’, and make renewable energy the main energy supply.”

At the press briefing, UN Secretary-General António Guterres expressed his sincere gratitude to all the peacekeepers of Mongolia for their service in the most difficult field of UN Peacekeeping operations. He also thanked Mongolia for playing a leading role in the implementation of the ‘Women, Peace and Security’ initiative, which shows Mongolia’s contribution, leadership, solidarity and consistent efforts to ensure gender equality—a common global goal.

He said, “Mongolia's support to the multilateral mechanisms is not limited by its contribution to UN Peacekeeping. Mongolia’s declaration of its territory as a nuclear-weapon-free zone demonstrates its policy of non-proliferation and disarmament to the international community. I believe that other countries will follow Mongolia’s example in order to make the world free from nuclear weapons.

Mongolia plays an important role in ensuring peace and security in the region, which is clearly proven by its Ulaanbaatar Dialogue Initiative on North-East Asian Security.”

“…Mongolia’s food security has been affected by many years of drought, and about 77 percent of its total territory has been affected by desertification. To cope with these challenges, the Government of Mongolia is working hard to combat climate change and desertification. In this frame, the country is implementing initiatives including ‘One Billion Trees’. We praise Mongolia's example in adapting to climate change through the implementation of sustainable management of natural resources. As Mongolia has large renewable energy resource that can supply not only itself but also other countries, it can become a leader in the field of renewable energy. I hope that Mongolia is able to create economic opportunities aside of ensuring energy security.”

“Despite being landlocked, Mongolia's creative foreign policy that prioritizes dialogue and cooperation serves as a bridge between countries and supports to forward sustainable development.”

In the conclusion of his speech, Mr. António Guterres expressed gratitude to Mongolia for its contribution to the activities of the United Nations, and said that even further the country can count on the UN’s support in the areas of peace, human rights and sustainable development.

UN Secretary-General António Guterres today arrived in Ulaanbaatar, Mongolia for his 3-day visit.

The Secretary-General was welcomed at Chinggis Khaan International airport by Minister of Foreign Affairs of Mongolia B.Battsetseg.

Within the framework of his visit, the UN Secretary-General will pay a courtesy call on President U.Khurelsukh and hold meetings with Speaker of the State Great Khural G.Zandanshatar, Prime Minister L.Oyun-Erdene and Foreign Minister B.Battsetseg. Moreover, he will take part in a tree planting ceremony to recognize the ‘One Billion Trees’ initiative and learn about Mongolia’s culture and traditions.

It is the first visit by the UN Secretary-General to Mongolia since Ban Ki-moon’s visit in 2009.

China’s State Councilor and Minister of Foreign Affairs Wang Yi today paid a courtesy call on Prime Minister of Mongolia L.Oyun-Erdene.

While underscoring that the development of good neighborly relations and mutually beneficial cooperation with China is the top priority of Mongolia's foreign policy, Prime Minister Oyun-Erdene said that he is satisfied with the fact that the parties have maintained the frequency of high-level meetings and visits, and discussed and resolved issues of bilateral cooperation in a timely manner even during the difficult times of the pandemic.

During the meeting, the sides exchanged views on increasing the capacity of border checkpoints, creating new railway routes, increasing the export of mining products, and creating new sources of energy within the framework of the ‘New Revival Policy’, which is aimed at stimulating post-pandemic economy.

Both parties agreed to intensify the construction of the Erdeneburen hydropower plant project. Also, the Chinese side took into account the request regarding the connection of the Khangi-Mandal border checkpoint by railway.

Foreign Minister Wang Yi expressed his gratitude to Prime Minister Oyun-Erdene for receiving him and conveyed the greetings of Premier of the Chinese State Council Li Keqiang. He noted that China and Mongolia are friendly neighbors connected by mountains and rivers, while expressing his satisfaction with the constant development of bilateral relations and cooperation, the frequency of high-level reciprocal visits, and the deepening of cooperation in all fields.

He then expressed that the Chinese government will provide all-round support to accelerate the implementation of projects and programs being implemented with the grants and concessional loans provided by the Chinese government.

Minister for Foreign Affairs of Mongolia B.Battsetseg and Minister of Foreign Affairs of China Wang Yi have held official talks and made a joint statement today.

At the press conference, Minister B.Battsetseg said, “Within the framework of talks on Mongolia-China friendly relations and cooperation, the parties reviewed the cooperation between the two countries and discussed economic and border issues and regularization of the frequency of visits. The parties agreed to strengthen friendly relations and comprehensive strategic cooperation between the neighboring countries amid the pandemic and unstable international relations situation. Furthermore, the parties agreed to deepen the mutually beneficial cooperation between Mongolia and China in all sectors. Specifically, conditions are being created for the export of mining products in a stable period by connecting the border port with a railway and creating a new gateway.

Both parties agreed to intensify the construction of the Erdeneburen hydropower plant project.

During the talks, the parties emphasized the achievement of a goal of increasing bilateral trade turnover to USD10 billion, and concluded that trade can be further increased. The parties also exchanged views on exporting agricultural products, advancing the progress of joint construction projects, and increasing cooperation in oil products.

Moreover, during the official talks, the issue on connecting Gashuunsukhait - Gantsmod checkpoints by railway has been finalized and a long-term coal supply agreement was signed with China. The issues such as increasing the train exchanges on the Zamyn Uud-Erlian checkpoints, improving the border checkpoints capacity, and developing the checkpoints were discussed.

The parties agreed to jointly implement projects within the framework of the ‘One Billion Trees’ national movement as agreed by heads of state of the two countries. In the humanitarian sphere, an agreement was reached to continue the in-person study of Mongolian students in China and to facilitate mutual travel of citizens. Our two countries are actively cooperating within the framework of the United Nations and other international organizations, and we will continue to cooperate in this direction."

Chinese Foreign Minister Wang Yi said, “I am happy to visit Mongolia again in two years. Our two countries are good neighbors, partners and friends who overcome difficulties together and are ready to build strong partnerships in the future.

During the talks, the parties reaffirmed their mutual respect for the sovereignty, independence and territorial integrity of each other. We will also respect each other's fundamental interests. The Mongolian side reaffirmed its strong support for the ‘One China’ policy.

The parties expressed willingness to strengthen border cooperation and cooperate in opening border ports, intensifying infrastructure cooperation such as railway and highways, and maintaining the transport network between the two countries.

During the official talks, the two sides also signed a memorandum of understanding on the cross-border rail line between Gashuunsukhait and Gantsmod ports, which will play an important role in the development of Mongolia.

The parties also agreed to advance the work of the Erdeneburen Hydropower Plant and cooperate in environment sector. An agreement was reached on the joint implementation of projects for the construction of housing complexes in the Ger districts of Ulaanbaatar, the construction of water treatment facilities, a plant for processing meat and meat products.

China and Mongolia have stepped up cooperation to fight the pandemic, protect people's health and life, increase the frequency of direct flights between the two countries, and support Mongolian students in China to study in classrooms."

Mongolia confirmed 179 new daily COVID-19 infections for the past 24 hours.

136 of them were revealed among persons who had contacts with the infected in Ulaanbaatar, 43 cases were confirmed in regions.

No new linked deaths were reported in the country in 24 hours.

The death toll of Mongolia from the virus stands at 2,123 as of Aug 8.

Erenhot, the largest land port on the China-Mongolia border, has logged 10,000 China-Europe freight trains since the cross-border railway service via this port was launched in 2013, according to the local railway authorities.

The 10,000th train passing through the port left for Malaszewicze in Poland at 12:30 p.m. Saturday, fully loaded with 50 40-foot containers.

"It took over eight years for the number of China-Europe freight trains handled by the port to reach 5,000, and only less than two years for it to grow from 5,000 to 10,000," said Qin Zhicang, with the Erenhot rail port under China Railway Hohhot Group.

The port in north China's Inner Mongolia Autonomous Region now serves 58 China-Europe freight train routes. The routes reach more than 60 destinations across 10 countries.

Canada’s Turquoise Hill Resources (TSX, NYSE: TRQ) flagged after markets closed on Thursday a $200 million cost increase for the ongoing expansion of the massive Oyu Tolgoi copper-gold mine in Mongolia.

The Montreal-based company currently estimates its base case incremental funding requirement at $3.6 billion, up from the $3.4 billion forecast at the end March.

Turquoise Hill said the updated cost and schedule for the ongoing underground expansion of Oyu Tolgoi incorporates the known, incremental covid-19 cost impacts, associated taxes and an estimate of further pandemic-related management costs over the remaining development schedule.

It means that the project total cost has climbed to $7.06 billion, almost $1.8 billion higher than the original estimate in 2015.

As of the end of the second quarter, the firm had invested a total of $5.3 billion in the Mongolian asset, leaving the $1.8 billion remaining.

Mining giant Rio Tinto (ASX, LON, NYSE: RIO), which controls and operates Oyu Tolgoi through its 51% stake in Turquoise Hill, is currently trying to buy all the shares it doesn’t already own in the Canadian miner.

Rio’s chief executive Jakob Stausholm has said he believes the acquisition would simplify the ownership structure, and further strengthen the company’s copper portfolio.

The offer followed an agreement between the miner and the government of Mongolia to complete the long-delayed underground expansion.

That deal saw Rio agree to write off $2.4 billion in loans and interest used by Ulaanbaatar to fund its share of the development costs.

Turquoise Hill, which had $500 million of available liquidity by the end of June, said it continues to consider Rio Tinto’s unsolicited C$34.00 per share buyout.

It noted the amount of cash and cash equivalents it holds, together with access to funding under an agreement with Rio Tinto, will be enough for the company to meet its minimum obligations for at least 12 months.

Three-year delay and counting

The ongoing expansion of Oyu Tolgoi, located is 550 km (342 miles) south of Mongolia’s capital Ulaanbaatar, has been plagued by delays and costs overruns.

At time the situation has triggered the Mongolian government’s ire to the point of threatening to revoke the 2009 investment agreement, which underpins the mine development.

First production, initially expected in late 2020, was rescheduled for October 2022 and later to the first half of 2023.

Oyu Tolgoi is Rio Tinto’s main copper growth project. Once completed, the underground section will lift production from 125,000–150,000 tonnes in 2019 to 560,000 tonnes at peak output, which is now expected by 2025 at the earliest.

According to the miner, this would make it the biggest new copper mine to come on stream in several years and, by 2030, the operation would be the world’s fourth largest copper mine.

Oyu Tolgoi is expected to produce 110,000-150,000 tonnes of copper and 150,000-170,000 ounces of gold in concentrates in 2022 from processing ore from the open pit, underground and stockpiles.