Mongolia Eyes $300M Royalty from Oyu Tolgoi Mine

The standoff between the Mongolian government and Rio Tinto (ASX: RIO) is worth $303 million in a planned progressive royalty to be collected on the Oyu Tolgoi copper mine.

The World Bank came up with the figure based on an analysis of the Mongolian government's budget for 2013. While a 2009 deal with Rio fixed the royalty rate at 5 per cent, the Mongolian government wants to renegotiate the rate n a bid to raise 445 billion tugriks to state coffers.

Ahead of a renegotiation, which Rio is rejecting, the government already included the amount in its annual budget.

As it is, Rio and its subsidiary, Turquoise Hill Resources, is reeling from a $1.4 billion cost blowout that raised total expenses for the mine's second phase at more than $5.1 billion.

The higher operating cost due to a sharp rise in construction expenditures for the first decade of the venture is reckoned to be 37 per cent higher or 89 cents per pound of copper produced, leading Turquoise to opt not to build its own power station and instead tap a third-party provider.