Rio Tinto, the Government of Mongolia and Turquoise Hill Resources have approved the next stage development of Oyu Tolgoi (OT) copper and gold mine in Mongolia last Friday, and approved a 5.3 billion USD financing with all necessary permits.
First production from the underground mine, which has an average copper grade of 1.66 percent, more than three times higher than the open pit mine, is expected in 2020. When the underground mine starts operating at full capacity in 2027, OT is expected to produce more than 500,000 tons of copper per year, compared to the current annual production of 175,000 to 200,000 tons. The mine also benefits from significant gold by-products, with an average gold grade of 0.35 grams per ton.
Rio Tinto deputy chief executive Jean Sebastien Jacques said, “Rio Tinto’s partnership with Mongolia began over a decade ago and we are proud of what we have already achieved in building a world-class and safety-focused operation which has already been selling copper for nearly three years. Today’s investment takes it to another level and will transform Oyu Tolgoi into one of the most significant copper mines globally, unlocking 80 percent of its value.”
“Long-term copper fundamentals remain strong and production from the Oyu Tolgoi underground mine will commence at a time when copper markets are expected to face a structural deficit. In line with Rio Tinto’s other tier one assets, Oyu Tolgoi offers opportunities for further expansions, leveraging existing infrastructure and supply chains and will provide attractive returns for all shareholders and Mongolia more broadly for decades to come. This is a long-term partnership, built to create mutual benefit,” Jean-Sebastian noted.
OT LLC reported that its open pit mine was completed on schedule in less than 24 months and production started in 2013. Since then, the company sold over 440,000 tons of copper. OT LLC underlines that the company’s workforce has reached 3,000, 95 percent of which are Mongolians. The company contributed 1.4 billion USD in taxes, fees and other payments to the state budget since 2013, since the open pit mine was opened.
Prime Minister Ch.Saikhanbileg emphasized, “This significant investment demonstrates the confidence of all the partners in both the Oyu Tolgoi mine and in Mongolia. It also demonstrates the attractiveness of Mongolia as a place to do business and invest, which will be a catalyst for further investments that will strengthen Mongolia’s economy.”
The Prime Minister pointed out that the development of the underground mine will create further jobs, support Mongolian suppliers and unlock substantial value for all stakeholders, delivering benefits for all Mongolians for generations to come. “This is a proud day for Mongolia and is a clear demonstration that the country is back to business,” he added.
Following the financial approval for their underground mine project, OT LLC organized an event titled, “Startup of Oyu Tolgoi’s Underground Mine Development” in the presence of Prime Minister Ch.Saikhanbileg, Head of the Cabinet Secretariat S.Bayartsogt, Mining Minister R.Jigjid, executive director of Erdenes Oyu Tolgoi D.Ganbold, executive director of Rio Tinto Jean-Sebastien Jacques, and chairman of OT’s board G.Batsukh.
At the opening ceremony of the event, Ch.Saikhanbileg underlined, “Preparation for launching the underground mine project has been finalized and now we are commencing real development work. I’m happy to witness this historical event for Mongolia. We politicized about OT many times. But now, OT is no longer a political subject, but a business project.”
OT LLC cooperates with 989 supplier companies and the company expects the number of its suppliers to double by launching the underground mine and over 3,000 new jobs are expected to be created. The company will generate 2.2 billion USD in taxes, fees and other payments to the state budget of Mongolia in the near future, according to the company estimates.
Following the ceremony for launching the underground mine, government representatives were acquianted with OT’s underground mine activities.
Prime Minister Ch.Saikhanbileg said, “We went to 1,300 meters depth and met with miners. The mine’s operations has intensified and its workers came back. Around 95 percent of the company’s staff is comprised of Mongolians. They are full of motivation.”
Government representatives highlighted that the number of jobs will increase and the nation’s economy will improve with the company’s operation expansions. They underlined that launching the underground mine development spreads a positive message about Mongolia to the world that the country’s business and economy is open and Mongolia is back to business.
Rio Tinto’s investment decision followed the signing of a 4.4 billion USD project financing agreement in December 2015 with international financial institutions and export credit agencies representing the Governments of the United States, Canada and Australia, along with 15 commercial banks, for the development of the underground mine. The parties have agreed to a senior debt cap of six billion USD, providing the option for 1.6 billion USD of supplemental debt.