Rio Tinto has agreed to write off a $2.3bn loan it provided to the Mongolian Government to cover its share of the construction and development costs of the Oyu Tolgoi copper mine.

The write off was announced by Mongolian Prime Minister Oyun-Erdene Luvsannamsrai on Monday. The prime minister stated that his office had received a letter from Rio Tinto agreeing to write off the debt, conduct an independent audit into the financing of the project’s expansion, and improve overall governance on the project.

“We have proposed that the benefits of Oyu Tolgoi be in the interests of the Mongolian people,” Oyun-Erdene told a briefing.

In addition to the debt write-off, Rio has offered to terminate the underground development plan and make an additional investment. This is expected to allow the next phase of the mine’s development to begin in January.

The agreement also means that Erdenes Oyu Tolgoi, the state-owned company that holds the government’s equity in the project, won’t incur additional debt after the mine is put into operation in the first half of 2023.

In a statement, the miner said: “Rio Tinto and Turquoise Hill Resources have made an offer to the Government of Mongolia that aims to reset the relationship and allow all parties to move forward together.”

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Disputes and delays

The Oyu Tolgoi gold and copper project is situated in the south Gobi region of Mongolia. It is one of the world’s biggest gold and copper mines, with the potential to produce more than 500,000 tonnes per annum by 2027.

However, the development of the Oyu Tolgoi mine has been beset by a myriad of issues and delays. The Mongolian Government has been pushing for better terms on the project after spiralling costs, with the investment needed for the underground expansion effort increasing from $1.3bn to $1.8bn from Rio Tinto’s original development capital.

According to Rio Tinto, the decision to write off the loans “reflected months of discussion between Rio Tinto and the Government of Mongolia to understand the government’s issues and priorities, deliver greater economic value to Mongolia, and build a stronger partnership for a prosperous future for all”.