OYU Tolgoi copper mine agreement reached, Rio Tinto says

(Adds quotes and details about the two-year delay)

SYDNEY, May 19 (Reuters) - An agreement to develop the OYU Tolgoi copper mine in Mongolia has been reached, Rio Tinto (Xetra: 855018 - news) said on Tuesday, ending a two-year hiatus that saw the underground project delayed amid disputes over costs and taxes after the open pit mine was built.

The Mongolian government, Turquoise Hill Resources (Toronto: IVN.TO - news) and Rio Tinto reached an agreement regarding shareholder issues and setting out an agreed basis for funding the project, the global miner said in a statement.

Before the development can begin, Rio Tinto said the project will need to finalise financing, conduct a feasibility study and secure all necessary permits.

"OYU Tolgoi is a world-class copper-gold asset and its further development is of great economic significance for Mongolia," said Mongolian Prime Minister Chimediin Saikhanbileg.

"We have finalised a way forward with our partners which re-establishes the foundations of a new and constructive relationship based on mutual trust and our joint long-term commitment to Mongolia's growth." (Reporting by Colin Packham; Editing by Bernard Orr)