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Rio Tinto copper chief quizzed on payments to Mongolian citizens www.ft.com
The head of Rio Tinto’s copper business faced tough questions from politicians in Mongolia after he arrived in the country for discussions over the future of the miner’s most important project.
During a five-hour meeting in Ulaanbaatar last week Bold Baatar, a Mongolian national who joined Rio in 2013 and was appointed to the role in December, was asked by members of parliament on a working group to explain payments Rio made to a number citizens over the past decade.
One of the individuals mentioned was Byambasaikhan Bayanjargal, a businessman who, in the capacity of a government official, cosigned the May 2015 financing agreement for the $6.75bn underground expansion of the Oyu Tolgoi copper mine in the Gobi Desert — an unpopular deal the government wants to replace.
Byambasaikhan is currently in jail. Along with three other men, he was found guilty last year by a Mongolian district court of abuse of power for signing the agreement without seeking parliamentary ratification. He has always protested his innocence and has appealed against the conviction.
Known as the Underground Mine Development Plan, or UDP, the agreement paved the way for a restart of the Oyu Tolgoi expansion project following a dispute over taxes and construction costs.
The agreement and $4.4bn of project financing were pulled together by Rio’s former chief executive Jean-Sébastien Jacques and the nation’s then-prime minister Chimediin Saikhanbileg, who also faces abuse of power charges.
However, it was never ratified by Mongolia’s parliament and has become a focal point for critics who say the country should receive a bigger share of the financial benefits from the project. A parliamentary resolution was passed in December 2019 ordering the government to improve the terms of the UDP.
A person familiar with the matter said Byambasaikhan received fees as chair of a country panel Rio set up in 2011 to gather independent expert insights.
The person said Byambasaikhan resigned from the panel in February 2015 when he became the head of Mongolia’s state-owned mining group. He then joined the board of Oyu Tolgoi in August. As a director of Oyu Tolgoi he was directly remunerated by the company.
Rio has explained this to Mongolia’s anti-corruption authority, the person added.
The future of the UDP is one of several issues the Rio negotiating team, which arrived in Mongolia last month, must address before a decision is made on whether to start complex caving operations at the project later this year.
The government of Mongolia has a 34 per cent stake in Oyu Tolgoi and has said it might need to review whether the project should go ahead.
Rio declined to comment on the meeting but said “listening, engaging and resolving the concerns of the government of Mongolia” were critical steps to “maintaining momentum on the timely delivery” of the project. First production is scheduled for October 2022.
The talks between Rio, MPs and government officials are complicated by the fact that they come ahead of presidential elections in June.
At peak production, Oyu Tolgoi would be the fourth-biggest copper mine in the world, producing more than 400,000 tonnes a year from its existing open pit and underground mine.
It accounts for 70 to 80 per cent of Mongolia’s foreign direct investment, and has created thousands of well-paid jobs.
However, the underground expansion has been dogged by problems and is more than $1bn over budget and over a year behind schedule.
Rio has already told the Mongolian government it is prepared to “explore” a reduction of its project management fees and loan interest rates and has acknowledged the government’s wish to improve the terms of the UDP.
Published Date:2021-04-19
