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Investing.com – Rio Tinto ADRs (NYSE:RIO) were trading 1.2% higher in Monday’s premarket but underperforming other big miners after agreeing to write off a $2.3 billion loan to the Mongolian government as part of its plans to accelerate work on the Oyu Tolgoi copper and gold project.
Shares across the mining sector were buoyed on Monday by a 7% rise in iron ore futures in China on speculation about an imminent announcement of fiscal stimulus there. BHP Group (LON:BHPB) stock was up 1.7% in London while Anglo American (LON:AAL) stock was up 1.6%.
Oyu Tolgoi is one of the largest deposits of copper in the world. Its proximity to the Chinese market, which accounts for over half of global copper consumption, gives the project a particular appeal, given China’s status as the world’s largest electric vehicle market.
EVs routinely need between three and four times more copper than conventional internal combustion engine vehicles.
Cancelling the loan would speed up the timeline for when the project can start paying dividends, according to a December 13 letter written by Chief Executive Officer Jakob Stausholm to Mongolian Prime Minister Oyun-Erdene Luvsannamsrai.
The Mongolian government owns 34% of the project company, with the rest held by Turquoise Hill Resources (NYSE:TRQ). Rio Tinto holds a 51% stake in Turquoise Hill.
The financing agreement for the mine was signed in 2015 but the project has been mired in controversy from its birth. Mongolian politicians have often called for the original investment agreement to be renegotiated.
According to Reuters, Prime Minister Oyun-Erdene Luvsannamsrai said on Monday Rio has committed to completing the much-delayed expanded underground section of the mine by 2023.
The company will also conduct an independent audit into the financing of the project’s underground expansion and improve governance, Reuters quoted Luvsannamsrai as saying.
