London 06/05/2016 - Rio Tinto and its partners, the Mongolian government and Turquoise Hill Resources, have approved the next stage of development of the Oyu Tolgoi copper-gold mine in Mongolia, Rio Tinto said on Friday.
Development of the underground mine will start in mid-2016, following the approval of a $5.3 billion investment by the partners and the recent granting of all necessary permits.
First production from the underground, which has an average copper grade of 1.66 percent - more than three times higher than the open pit - is expected in 2020.
The underground is expected to be fully ramped up in 2027. Oyu Tolgoi’s production is expected at an average of 560,000 tonnes of copper a year between 2025 and 2030, where it is expected to operate in the first quartile of the copper cost curve. This compares with current annual production of 175,000-200,000 tonnes.
The brownfield expansion will utilise the existing concentrator and infrastructure.
The mine also has gold by-products, with an average gold grade of 0.35 grams per tonne.
“Today’s investment…will transform Oyu Tolgoi into one of the most significant copper mines globally, unlocking 80 percent of its value,” Rio Tinto deputy chief executive Jean-Sébastien Jacques said.
“Long-term copper fundamentals remain strong and production from the Oyu Tolgoi underground will commence at a time when copper markets are expected to face a structural deficit,” he added.
In December, Rio Tinto signed a $4.4-billion project financing agreement with a group of 20 financial institutions to finance the expansion of the $6 billion project.
Production at the open-pit mine at Oyu Tolgoi started in 2013. Underground development plans had received setbacks in the past due to disagreements between Turquoise Hill and the Mongolian government over taxation and royalties from the mine's proceeds.
Oyu Tolgoi is 34-percent owned by the Government of Mongolia and 66 percent by Turquoise Hill Resources, of which Rio Tinto owns 51 percent. Rio Tinto has been the manager of the Oyu Tolgoi project since 2010.
(Editing by Kathleen Retourne)