Mongolia election won't impact Rio Tinto's $5.3 billion deal - mining CEO

By Karin Strohecker

LONDON (Reuters) - The outcome of Mongolia's election next month will have no impact on Rio Tinto's $5.3 billion (4 billion pounds) Oyu Tolgoi copper mine extension plan, the head of country's state-owned joint partner in the deal said on Wednesday.

Earlier in May, Rio (RIO.L) gave its long-awaited approval for the costly and complex extension of Oyu Tolgoi, one of the world's largest undeveloped copper projects.

Rio is operator of the mine, which is 66 percent owned by Rio's Turquoise Hill arm and 34 percent owned by the Mongolian government through Erdenes Oyu Tolgoi LLC.

The project hit hurdles when discussions between Rio and the government stalled in 2013 and prices collapsed, and there is still some lingering opposition in Mongolia over the extension.

"Politics is politics everywhere - there might be some individuals or some in parliament who will represent different political positions and opinions, and who will ... try and bring some more radical change into this investment agreement," said Davaadorj Ganbold, CEO of Erdenes Oyu Tolgoi.

"But no matter who wins the election - the major political parties do not have any political motivation to disturb, or bring any big large sensitive changes into this investment agreement now," Ganbold told Reuters in an interview on the sidelines of the annual meeting of the European Bank for Reconstruction and Development.

Changes to the agreement would be possible, he acknowledged, but only if mutually agreed between the business partners and without any political interference.

Mongolia's economy, which grew at the fastest rate in the world in 2011 but has since faded, depends heavily on copper exports to China and has been hammered by the global slide in commodity prices in the past few years.

The ruling Mongolian Democratic Party is expected to come under pressure at this year's elections, scheduled for June 29, after four years of slowing growth and declining foreign investment.

The landlocked country badly needs to restart stalled mining projects to cope with its ballooning external debt, and the new extension will employ some 3,000 people - 95 percent of them Mongolian.

While Ganbold was confident about the agreement with Rio, he said the global outlook for commodities, the new technology used for the underground extension of mines and the reality of operating in a remote area all posed challenges.

"Block caving technology is relatively new, and we cannot hurry this project and implement everything immediately and now, because we need to be careful," he said.

"It is one of the largest and one of the very first in the Gobi (desert), in the open steppes, which is a difficult environment to operate in from an infrastructure, safety and technical point of view," he added.

(Reporting by Karin Strohecker, editing by David Evans)