Rio Tinto and Ivanhoe Mines have entered into an investment agreement with the Mongolian Government for developing the Oyu Tolgoi copper-gold complex in the South Gobi area of Mongolia.
The Mongolian Government will hold a 34% stake in Ivanhoe Mines Mongolia, Oyu Tolgoi project's license holder.
The companies will work to develop the mine with the government for production in 2013.
A five-year upgrade has also been planed for the mine to reach full expected annual output of 330,000oz of gold and 450,000t of copper.
Rio Tinto's copper and diamonds group's chief executive Bret Clayton said the project is in line with the company's plan to invest in major low-cost ore bodies.
In October 2006, Rio Tinto initially invested $303m for a 9.95% stake in Ivanhoe according to the terms of a placement agreement.
Rio Tinto has the obligation to make a $388m additional investment for another 9.95% share upon completion of an unconditional investment pact with the Government of Mongolia (Tranche 2).
Rio Tinto and Ivanhoe have recently consented to a short-term, month-by-month extension of the 27 October cut off date for concluding Tranche 2.
According to its current agreements with Ivanhoe, Rio Tinto is entitled to purchase up to 43.1% of Ivanhoe's stake as per fixed price options, with a right to further augment that stake to 46.65% via on-market purchases.