Rio Tinto announced that along with Turquoise Hill it has reached an agreement with the government of Mongolia on the preferred domestic power solution for the $6.8 billion Oyu Tolgoi copper project.

The agreement paves the way for the government of Mongolia to fund and construct a state owned, coal-fired power plant at Tavan Tolgoi.
The agreement, which is a revision of the Power Source Framework Agreement (PSFA) signed in 2018, states that the parties will work toward finalizing a Power Purchase Agreement by the end of March 2021. In addition, the amended PSFA sets a proposed timetable for development, with construction of the coal-fired power plant set to begin no later than 1 July 2021, and commissioning within four years thereafter.

The deal comes days after the ruling Mongolian People’s party scored a landslide general election victory and will give the government greater influence over the project, the country's biggest source of foreign direct investment, the Financial Times reported.

Oyu Tolgoi currently uses imported power and both the government of Mongolia and Oyu Tolgoi have committed to extending the current arrangement to ensure continued stable power is supplied to the mine and underground project until the state owned power plant is commissioned and is able to supply stable, reliable and continuous power, Rio Tinto said in a statement.

Arnaud Soirat, Rio Tinto Copper & Diamonds chief executive, said, “This agreement provides a potential pathway to securing a domestic power supply for the Oyu Tolgoi Mine and underground project for the benefit of all shareholders and the wider community. We look forward to working with the government of Mongolia to progress the solution.”