Rio Tinto and Mongolia sign power deal for Oyu Tolgoi copper mine

January 3, 2019

Rio Tinto got a step closer to resolving a long-standing dispute with the government on Mongolia when the two sides agreed on a deal that will supply power to Rio Tinto’s copper mine extension at Oyu Tolgoi by 2023.

The Oyo Tolgoi project is a joint venture with Mongolia holding 34 percent of the project while the remainder is held by Turquoise Hill Resources, which in turn is 51 percent owned by Rio Tinto. The project is Rio Tinto’s largest push to diversify away from iron ore, however, it has faced a series of challenges as Mongolia’s fragile government wrangles over how to maximize benefits for the country.

Reuters reported that tirst production at the $5.3 billion underground expansion located near the southern border with China is scheduled for early next decade, creating one of the world’s biggest copper suppliers.

The construction of a 300 megawatt plant, close to the Tavan Tolgoi coalfields, to supply electricity to the mine will start in 2020 under the new agreement.

The plant is expected to be operational by mid-2023, slightly later than the 2022 date mooted after the government cancelled an earlier power agreement in February.

In a joint statement with Oyu Tolgoi, the Mongolian government said the agreement was “a significant step toward enhancing the efficiency of the Tavan Tolgoi coal mines,” and to supplying the wider region with domestic power.

The statement said the partners would also consider how to incorporate the use of renewable power.

Oyu Tolgoi would be the majority owner of the power plant, with funding possibly including third party debt, the statement said, without giving further details.

A Mongolian government spokesman said the agreement was the first step to retain in the country the estimated $150 million Oyu Tolgoi currently pays China for electricity each year, with the figure set to rise when the underground extension comes online.

Rio Tinto in July entered agreements with three Chinese contractors on designing a power station to supply Oyu Tolgoi.

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