Mongolia approves new phase of Rio Tinto mine project: PM

Mongolian Prime Minister Chimediin Saikhanbileg announced on Sunday that his Cabinet has decided to proceed with the second phase of a huge foreign-invested copper and gold mine that has divided opinion in the resource-rich Central Asian nation.

Saikhanbileg said in a nationally televised address that the decision regarding the Oyu Tolgoi mine was in the national interest.

"Some of us have to make decisions," he said. "It's time to do this," he added.

"As a prime minister, I recognise my responsibility of making historic decisions essential to the country."

Sprawling and sparsely-populated Mongolia has enjoyed world-leading economic growth in recent years -- peaking at 17.5 percent in 2011 -- on the back of a minerals boom exemplified by the giant copper- and gold-laden Oyu Tolgoi mine, which is operated by Anglo-Australian resources giant Rio Tinto.

But that performance has slumped to troubling levels, as rising resource nationalism and an increasingly stringent investment environment led many foreign investors to abandon the country.

Saikhanbileg said that Mongolia and Rio Tinto had reached agreement "in principle" and that an official announcement would come soon after final details were worked out.

The second phase of Oyu Tolgoi will result in a $4.2 billion investment in Mongolia, he said.

The government and Oyu Tolgoi had been locked in negotiations for two years on the second phase of the mine. Late last month Rio Tinto chief executive Sam Walsh visited Mongolia for talks on the issue.

The decision to move forward on Oyu Tolgoi follows a controversial text message referendum in early February in which Mongolians voted to back stalled foreign investment in natural resources.

The referendum, backed by Saikhanbileg, saw 56.1 percent of respondents support increased overseas investment in megaprojects such as the Oyu Tolgoi mine that could stimulate the troubled economy.

Saikhanbileg used the text poll to seek a mandate less than three months after he took office via parliamentary negotiations after his predecessor was ousted.

But the vote was controversial and strongly criticised by opponents who saw it as a political manouevre by the prime minister, who backs resource development as a way to boost the country's weakening economy.

Mongolia last held parliamentary elections in 2012. President Tsakhiagiin Elbegdorj was re-elected for another four-year term in 2013.

Foreign direct investment into the landlocked country wedged between giants China and Russia crashed 74 percent last year, according to the central bank.

In January, a Mongolian court sentenced three former foreign mining executives to prison for tax evasion in a case that sent a further chill over foreign investors. But Elbegdorj issued a presidential pardon for the men in February.