Two poor, fragile, post-Soviet democracies; two spectacular holes in the ground
It is hard to exaggerate the importance of these two mines to their respective economies. Open-pit extraction began at Oyu Tolgoi in 2013. The second phase, a $6.75bn expansion in which 200km of tunnels will reach 1.3km deep, is expected to treble the output of concentrate, to over 500,000 tonnes a year. Once completed, Oyu Tolgoi will be the world’s fourth-biggest copper mine.
Oyu Tolgoi has long been controversial. Politicians often accuse Rio Tinto of fleecing the country. The language grew sharper six years ago, after a balance-of-payments bust. A renegotiation of the terms in 2015 is now being challenged by the ruling party. It claims the deal is unfavourable to Mongolia, which has a 34% stake in Oyu Tolgoi, and was even negotiated illegally. Meanwhile, costs for underground development at Oyu Tolgoi have overrun by more than $1.
Accusations of being cheated are common in poor, resource-rich countries. With Oyu Tolgoi, the stand-off is more easily resolved. First, Rio Tinto is not widely suspected of corruption . Power in Mongolia is too fragmented to make bribery at scale an attractive option to foreign investors, says Julian Dierkes of the University of British Columbia—though what happens to revenues once they reach government coffers is another matter.
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