JOHANNESBURG (miningweekly.com) - The Mongolian government on Tuesday signed the long-awaited investment agreement for the development of the Oyu Tolgoi copper/gold mine in the country's South Gobi region with miners Rio Tinto and Ivanhoe Mines.

Australia's Rio Tinto and Canada's Ivanhoe, the development partners for the project, will now move forward with the development phase of the mine, which will produce 450 000 t/y of copper and 330 000 oz/y of gold over a 35 year life-of-mine.

Rio Tinto said in a statement that production would start in 2013.

The country's government will own 34% of Ivanhoe Mines Mongolia, which is the license holder of the Oyu Tolgoi project. The deal is seen as a vital step for Mongolia to begin reaping the economic benefits of its vast mineral wealth.

Rio Tinto said that key terms of the agreement with Mongolia also included a stable operational and tax environment, provisions dealing with the government's equity participation and financing arrangements.

Mongolia's Parliament approved changes to four laws in August, which cleared the way for the signing of the Oyu Tolgoi deal before the end of September.

However, the signing was delayed because additional time was needed to ensure the wording in the English and Mongolian language versions of the document was clear and that the two versions were synchronised.

Rio Tinto's CEO for the copper and diamonds group, Bret Clayton, said that Oyu Tolgoi was consistent with the company's strategy of investing in large, long -life, low-cost ore bodies.

"While the size and grade of the existing Oyu Tolgoi ore reserves and mineral resources are already world class, we are also excited by significant exploration upside that still remains," he said.

Rio Tinto initially made a $303-million investment in a 9,95% shareholding in Ivanhoe Mines in October 2006, under the terms of a placement agreement, and had the obligation to invest $388-million for a further 9,95% holding at the conclusion of an unconditional investment agreement with the Mongolian government.

The diversified miner and Ivanhoe have also recently agreed to a short-term, month-by-month extension of the October 27 deadline for completing this placement.

Under its current agreements with Ivanhoe Mines, Rio Tinto has the right to acquire up to 43,1% of Ivanhoe's shares under fixed price options, with a right to further increase that interest to 46,65% through on-market purchases.

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