Rio Tinto confirms timeline for Oyu Tolgoi underground

December 16, 2020

Underground production from the Oyu Tolgoi copper-gold mine in Mongolia will begin in October 2022, according to Rio Tinto.

The company unveiled a pathway for the ongoing development of the underground project at Oyu Tolgoi, one of the largest known copper and gold deposits in the world on Dec. 16. The cost of the mine is now projected to be $6.75 billion.

Rio Tinto and its partners, the Government of Mongolia and Turquoise Hill Resources (TRQ), need to continue to work together to finalize three other milestones – the outstanding government approvals, funding and a power solution – in order to ensure that the project can commence caving operations in 2021. “This will unlock the most valuable part of Oyu Tolgoi, delivering significant benefits for the shareholders of Oyu Tolgoi and the people of Mongolia,” the company said in a release.

At peak production, Oyu Tolgoi is expected to be the fourth largest copper mine in the world producing an average of 480 kt/a (530,000 stpy) of copper from 2028 to 2036 from the openpit and underground, compared with 146 kt (161,000 st) in 2019 from the openpit alone. The underground ore reserve has an average copper grade of 1.52 percent, which is more than three times higher than the openpit ore reserve, and contains 0.31 g/t of gold.

“The size and quality of this Tier 1 asset provides additional expansion options, which could see production sustained for many decades,” Arnaud Soirat, Chief Executive of Copper & Diamonds said, “We now have a pathway to bring the underground project into production, which will unlock the most valuable part of Oyu Tolgoi. We will continue to work together with the Government of Mongolia and TRQ to progress the project, including finalizing all necessary approvals and agreeing a solution on power and funding.”

Earlier in December, The board overseeing the Oyu Tolgoi Mine approved forming a special committee to conduct an independent review of cost overruns and delays related to the development of the underground copper mine.

Reuters reported that Rio Tinto-controlled Turquoise Hill and the Mongolian state own the Oyu Tolgoi deposit in south Mongolia. The project has come under scrutiny over its funding plan, with Hedge Fund Odey recently raising concerns over the project finance package for the mine.
In a letter to the Australian exchange, an investor in the Mongolian project accused Rio of mismanaging costs, and then unfairly restricting Turquoise Hill’s ability to obtain finance to pay for those costs.

Turquoise Hill began arbitration proceedings against its biggest shareholder Rio Tinto to seek “clarity” on financing for Oyu Tolgoi, one of Rio’s biggest growth projects.

Turquoise Hill said each shareholder of Oyu Tolgoi, as well as Rio Tinto, is required to support the work of the committee and to contribute, on a confidential basis, “any internal or third-party report(s) in its possession relating to the cost overruns and delays.”

Rio Tinto had said in September it planned to raise up to $500 million through additional lending to develop the giant copper mine.

More than $11 billion has been invested in Oyu Tolgoi to date, including the openpit mine, concentrator and associated infrastructure. Of this, $4 billion has been spent on the underground project, with more than $3 billion awarded to Mongolian companies and suppliers.

Oyu Tolgoi has a workforce of more than 12,000, of which 95 percent is Mongolian. It has paid more than $2.8 billion in taxes, fees and other payments to the Government of Mongolia since 2010. Oyu Tolgoi has consistently been one of the top three taxpayers in Mongolia.
 

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