Rio Tinto has agreed to write off $2.3bn debt owed by Mongolia to cover its share of the development costs for the Oyu Tolgoi copper-gold mine.

The company has made the proposal in a letter sent to the country’s Prime Minister Oyun-Erdene Luvsannamsrai.

The Anglo-Australian mining company has also agreed to conduct an independent audit into the financing of the Oyu Tolgoi underground mine development project and improve governance.

Turquoise Hill Resources said that the company and Rio Tinto have made the proposals to the Mongolian government, aiming to reset the relationship.

As part of the offer, Rio Tinto has also agreed to terminate the underground development plan and make an additional investment until the underground mine enters into production, which is expected to take place in the first half of 2023.

The company stated: “The offer follows on months of discussions between Turquoise Hill, Rio Tinto and the Government of Mongolia to understand the Government’s issues and priorities, deliver greater economic value to Mongolia and build a stronger partnership for a prosperous future for all.”

According to the offer, the state-owned company Erdenes Oyu Tolgoi, which owns the government’s stake of 34% in the project, will not face additional debt after the underground mine begins operations.

Canada’s Turquoise Hill, in which Rio Tinto owns a 50.8% stake, holds the remaining stake in the Oyu Tolgoi project.

Turquoise Hill stated: “Negotiations continue and remain subject to required approvals, with all parties focused on being in a position to finalise an agreement.”

In January this year, Rio Tinto-controlled Turquoise Hill said the Mongolian government is looking to terminate the underground expansion project of the Oyu Tolgoi mine due to increased development costs.

The Wall Street Journal reported in August that a review carried out to assess cost overrun at the mine has found Rio Tinto’s mismanagement as the cause for it.