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Good news for Rio shareholders

Today, Rio Tinto (ASX: RIO) shareholders have rejoiced that two key projects are making some progress in their own way.

Mongolia

In Mongolia, Rio’s Oyu Tolgoi copper mine has begun its first shipments from the $7.3 billion project to Chinese smelters after being delayed twice in the past month. Tension rose as the Mongolian government, a 34% shareholder, disagreed with London-based Rio over the cost, tax payments and employment in the project.

It’s estimated that every day the project is delayed it costs the government $2 million in lost taxation revenue. Dale Choi, an Ulaanbaatar-based independent analyst said “every day of delay they are losing millions in lost investments because they are very cautious and they don’t want to be perceived as repeating past mistakes”.

The proceeding of shipments has appeared to ease over the tensions that existed between the two parties and Rio stands to account for about a third of the Mongolian economy once the mine is fully operational. However, shareholders will be hoping more comes from the project as it is believed it could also be transformed into the world’s third largest gold mine if it developed into ‘phase 2’.

Asset sales

Rio’s assets, much like BHP’s (ASX: BHP), have been on the chopping block as the two respond to changing demand and substantially lower prices for minerals.

Rio’s stake in Canadian iron ore business Iron Ore Co. of Canada (IOC), has been valued at $4 billion, but for some it seems a worthwhile investment. Most recently, Canada’s two biggest pension funds are believed to be interested in making potential bids to acquire the assets.

Since many other miners are also facing tough conditions, institutional investors are likely to account for a significant amount of offers for mine and infrastructure. CPP Investment Board and Caisse de depot et placement du Quebec are the two pension funds looking to separately bid for the assets. They follow private-equity firm Blackstone Group and state-controlled China Minmetals Corporation who expressed interest in past months.

Foolish takeaway

Investors and shareholders will be watching closely as Rio’s second-quarter operations review comes out this time next week. Potential investors could wait for this report and its half year results in August and make a more informed decision on the prospects of the stock and particularly the effect that lower commodity prices have on the mining giant.

No doubt the Canadian asset sales and the Mongolian project coming online are great news for shareholders and traders, but investors would be wise to understand the impact of lower prices and slowing Chinese growth before hitting the ‘buy’ button.

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Motley Fool contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.

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