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In an apparent bid to end its stand off with the government, Rio Tinto has proposed amendments to plans for developing the giant Oyu Tolgoi copper gold project in Mongolia.

In a report issued on March 26 by Turquoise Hill Resources - the Oyu Tolgoi development company majority owned by Rio Tinto - several changes to the original project schedule have been proposed. Most notable is the scaling down of plans for the second phase development of the mine.

Key changes include a lower volume of copper concentrate production during the second phase, and dropping the plan to build a dedicated power station at the mine. Under the new proposals, Oyu Tolgoi would buy electricity from an unspecified Mongolia-based provider.

However, despite the pullbacks, the Turquoise Hill report still confirms that the second phase development of Oyu Tolgoi will cost more than double the $2.5bn originally planned, at a total of $5.1bn.

The rising costs of Oyu Tolgoi have caused a rift between Rio Tinto and the Mongolian government, which is a minority stakeholder in the project. Ulaanbataar says it will only approve the 2013 investment programme after it has examined the feasibility study for the second phase of the project, which includes the construction of an underground mine. In the meantime, the project is being operated on a month-by-month budget, even as the start of commercial production approaches in June.

Although the changes proposed by Turquoise Hill will reduce the upfront investment costs for Oyu Tolgoi, they will also result in higher operating costs of $0.89 per pound of copper, once commercial production begins.

That suggests the Mongolian government may not be too impressed with the latest proposals. Still, unnamed sources claimed last week that Rio Tinto is well on the way towards raising the capital it needs to push Oyu Tolgoi forwards. According to a report from Bloomberg, the international miner has received commitments from banks of at least $3bn, putting it on track to raise the $4bn needed to launch second phase development. Overall, Rio Tinto has said it plans to raise $2bn in 12-year loans from commercial banks, with a further $2bn to be sourced from international financial institutions and export credit agencies.