It's that time of year, as Rio fends off Mongolia's latest deal change

IN THE 1993 film Groundhog Day, a television weatherman finds himself forced to live the same day over and over until he can break the spell.

In Rio Tinto's version of Groundhog Day, each time the Mongolian government reaches the end of the northern summer it decides it wants a bigger share of the nation's biggest mining project - Oyu Tolgoi.

Barely a year after resisting a similar approach, the Rio Tinto subsidiary in charge of Oyu Tolgoi has revealed that Mongolia is trying to renegotiate the 30-year agreement that underpins development of the giant copper and gold project.

That subsidiary, Turquoise Hill Resources, said the request came in the form of a letter from Mongolia's mining minister. It is believed the letter, which arrived on Friday, did not clearly outline what specific changes the Mongolian government would like to see.

Turquoise Hill owns 66 per cent of Oyu Tolgoi, which ranks as Rio's most important growth project, with the remaining 34 per cent owned by the Mongolian government. Last year's attempt to renegotiate the agreement focused on lifting Mongolia's stake closer to 50 per cent.

That bid was resisted by Rio and its partners, who suggested that investor confidence in Mongolia would evaporate if such a landmark contract fell victim to a bout of ''resource nationalism''.

Turquoise Hill chief Kay Priestly had a similar argument yesterday. ''The investment agreement has been fundamental in building Mongolia's reputation as an increasingly reliable and secure destination for foreign investment,'' she said.

But it is unclear if the Mongolian government now has extra leverage.

Parliament changed composition several months ago, with some new members keen to campaign on Oyu Tolgoi ownership, while presidential elections are due in seven months and ownership of the project is sure to be a major issue for debate.

More significant is that the Mongolian government is integral to securing a power supply for Oyu Tolgoi from China, which is the project's biggest remaining hurdle.

The Mongolian and Chinese governments have been unable to reach a deal for more than a year, and timing is becoming critical as deadlines for first production draw nearer.

Analysts at Goldman Sachs said news of the latest ownership struggle was ''concerning''.

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