Rio Tinto and Mongolia settle long-running dispute over Oyu Tolgoi copper mine

Jan 25 (Reuters) - Rio Tinto Plc and the Mongolian government said on Tuesday they have reached an agreement to end a long-running dispute over the $6.925 billion expansion project for the Oyu Tolgoi copper-gold mining project.

The deal marks a positive development for Rio, which is reeling from Serbia's rejection last week https://www.reuters.com/article/rio-tinto-serbia/analysis-rio-tinto-has-few-options-to-save-serbia-lithium-mine-none-good-idUSKBN2JY1SZ of its proposed lithium mine as well as local opposition to projects in Ghana, the United States and elsewhere.

Rio Chief Executive Jakob Stausholm has visited Mongolia twice in recent months in an attempt to salvage the project amid mounting concerns that the economic benefits of the project for Mongolians were being eroded.

Mongolia owns 34% of Oyu Tolgoi, one of the world's largest-known copper and gold deposits. Rio controls the rest through its 51% stake in Toronto-listed Turquoise Hill Resources Ltd and operates the mine.

As part of the deal, Turquoise Hill will waive $2.4 billion in debt owed to it by the Mongolian government. Additionally, construction will soon start on the underground portion of Oyu Tolgoi, with first production expected in the first half of 2023.

The expansion will be paid for with cash, the rescheduling of existing debt repayments, and prepaid sales of copper concentrate to Turquoise Hill.

The project also committed to buying electricity from the Mongolian grid once it is able to meet supply. Rio said it will work to help add renewable power to the grid. In the meantime, the government extended an agreement to import power from China through 2023.

"We strongly believe in the future of this country and I am personally committed to ensuring that the people of Mongolia benefit from Oyu Tolgoi, along with our shareholders," Stausholm said in a statement.

Oyun-Erdene Luvsannamsrai, Mongolia's prime minister, said the deal "demonstrates to the world that Mongolia can work together with investors in a sustainable manner and become a trusted partner."

(Reporting by Ernest Scheyder in Houston and Praveen Menon in Wellington; Editing by Lisa Shumaker)