Rio Tinto Ltd's (ASX:RIO) will still pursue its planned Oyu Tolgoi copper and gold project in Mongolia despite some strain with Canadian partner Ivanhoe Mines.

In an interview with ABC TV Rio Tinto's CEO Mr Tom Albanese said that he would like "to fast track the development of Oyu Tolgoi project to see first production in 2013."

Rio Tinto recently blocked plans of its Canadian partner Ivanhoe to acquire more than $1 billion to speed up the project Oyu Tolgoi project, which would have seen first production in the last quarter of 2012.

Last week Rio announced it would spend an additional US$2.1 billion to expand capacity at its iron ore operations in the Pilbara of Western Australia.

Rio Tinto posted a $7.36 billion profit in the first six months of the year.

Government agreement

Mr. Albanese also noted in the interview that he is still optimistic that the issue on offsetting future increases in mining royalties would still be resolved with the Australian government.

"I just see continued engagement," he said on Australian Broadcasting Corp.'s "Inside Business" program on Sunday. "I am quite confident that the government, that the transition committee, will work through this, and a number of other points that will come along the way before final implementation."

BHP Billiton Ltd., the world's largest mining company, and Rio have raised some questions on the mine tax accord reached with Prime Minister Julia Gillard in July.

The issue arose on the state royalties and how this can be offset with the planned mineral resources rent tax.

Although the Australian three states, Western Australian, Queensland, and South Australian Governments have no immediate plans to increase their state mining royalties, the companies would like to clarify this issue with urgency.

Reports gathered showed the MRRT agreement forged on July 2 allowed for all state royalties to be offset against the tax, regardless of the implementing date, which according to the Australian and news.com.au is also the view supported by the Institute of Chartered Accountants.

However, Australian Resources and Energy Minister Mr. Martin Ferguson had said future increases in state royalties could not be offset by cuts to the planned 30 percent mining tax on iron ore and coal. The deal is now limited to to state royalties that were in place or "scheduled" when the original resource super-profits tax was announced in May.

"The government's position on this issue is clear - royalty rates that applied or changes to royalty rates that were scheduled to apply in the future, as at May 2, 2010, will be credited," Mr. Ferguson said in an e-mailed statement today and reported on Bloomberg.

Prime Minister Julia Gillard told Parliament yesterday she would not allow commonwealth revenue from the MRRT to suffer by allowing the states and territories to increase mining royalty rates.

"In implementing the mineral resources rent tax, we obviously won't be giving a green light to state and territory governments to increase their royalties in a way which means the federal government effectively foots the bill," Ms Gillard said.