By Samantha James
RIO Tinto and its joint venture partners have approved the US$5.3 billion underground development at the Oyu Tolgoi copper and gold mine in Mongolia, which is expected to kick off in mid-2016.
The expansion – which would add more than 300,000 tonnes per annum of copper to the producing 175,000tpa open pit mine in the Gobi Desert – was previously expected to cost US$4.9 billion and pay for itself within nine years under a reserve case outlined in 2014.
In December 2015 the JV secured an initial US$4.4 billion financing agreement for proposed development however outstanding approvals delayed the final investment decision.
Following the grant of all approvals, Rio and its joint venture partners are now aiming for first production in 2020.
The underground mine, which would unlock 80 per cent of the projects value, is expected to produce more than 500,000 tonnes per annum of copper at grades three times higher than the existing open pit once ramp up is complete in 2027.
“Rio’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,” Rio deputy chief executive Jean-Sebastien Jacques said.
“[The US$5.3 billion] investment takes it to another level and will transform Oyu Tolgoi into one of the most significant copper mines globally, unlocking 80 per cent of its value.
“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.”
The open pit mine at Oyu Tolgoi has been producing since 2013 and is held 34 per cent by the Government of Mongolia and 66 per cent by Canadian-based Turquoise Hill Resources, of which Rio owns 50.8 per cent.
The underground mine will operate 24 hours a day, every day of the year, with more than 3000 employees expected at the peak of construction. Its deepest shaft would extend about 1.3km below the surface.
Oyu Tolgoi has sold more than 440,000t of copper and paid more than $1.4 billion in taxes, fees and other payments to the Government of Mongolia.