--Renegotiation of Oyu Tolgoi stakes unlikely, Mongolia's ambassador to China says

--Inner Mongolia Power agrees to provide electricity to Oyu Tolgoi

--Australian lawyer needed in Mongolia for graft investigation, envoy says

--Australian lawyer not accused, free to travel within Mongolia

--Mongolia coal exports to China sharply lower in 2012

(Adds power-supply agreement with Inner Mongolia Power, estimate of Oyu Tolgoi production schedule, identity of mining official under investigation)

 
   By Chuin-Wei Yap

TIANJIN--A campaign in Mongolia to assert more national control over mining, including calls for the renegotiation of a mine-ownership deal with global mining giant Rio Tinto PLC (RIO), is unlikely to succeed, Mongolia's ambassador to Beijing, Tsedenjav Sukhbaatar, said Monday.

Also, the Oyu Tolgoi project, one of the world's largest gold and copper mining projects, took another step toward the start of production when Inner Mongolia Power Corp. agreed to supply electricity to the venture, Rio Tinto subsidiary Turquoise Hill Resources Ltd. (TRQ), which holds a majority stake in the project, said Monday.

The project is expected to begin producing concentrate in the next several months, with commercial production likely to follow three to five months after that, Turquoise Hill said.

Rio Tinto holds a 51% stake in Turquoise Hill, which has a 66% stake in Oyu Tolgoi.

Mongolia, which has huge but lightly exploited mineral reserves, has been a prime beneficiary of a mining boom in recent years, but resource nationalism has delayed some major foreign-backed projects and thrown others into uncertainty. Oyu Tolgoi, one of Mongolia's flagship projects, has reserves estimated at 41 billion pounds of copper and 21 million ounces of gold.

During the run-up to national elections in June, some candidates called for terms of the Oyu Tolgoi deal to be renegotiated, suggesting that Rio Tinto's stake be cut to 49% from 66%. Rio Tinto manages the development of the mine. The Mongolian government owns a 34% interest.

"I don't think it will go that way. We will stick as far as possible to the current agreement," the ambassador told Dow Jones Newswires. "This [renegotiation attempt] was raised by some politicians, not by the government...it is a political campaign tool. The majority of the government understands how to handle foreign investments."

Mongolia's soul-searching on its resources sector has coincided with a crackdown on corruption, which has snared Australian lawyer Sarah Armstrong, chief legal counsel for Mongolia coal miner SouthGobi Resources Ltd. (1878.HK) in a government graft probe. SouthGobi is controlled by Rio Tinto.

Mr. Sukhbaatar said Monday that Ms. Armstrong had been prevented from leaving the country because her assistance was needed in the government's investigation of D. Bakthuyag, the former chief of Mongolia's mining authority, who is suspected of illegally handling mining licenses.

SouthGobi isn't being investigated, he said.

Ms. Armstrong hasn't been accused and can move freely within Mongolia, said Mr. Sukhbaatar, who didn't specify how long the probe or the departure restriction might last.

Mongolia also faces problems stemming from an economic slowdown in China. Coal exports, Mongolia's largest export category, are likely to reach just 11 million-12 million metric tons this year, down from 22 million last year, he said.

The envoy said the government wanted to move ahead fast on the stalled project to develop its enormous Tavan Tolgoi coking coal reserves. Efforts to raise money for this in an initial public offering for shares in a state mining company and by inviting international miners to carry out the extraction work have faced repeated delays.

"It's high on the agenda of the government. It's time to start the exploitation of Tavan Tolgoi," the ambassador said.

Write to Chuin-Wei Yap at chuin-wei.yap@dowjones.com

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