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Rio Tinto delays Oyu Tolgoi underground mine

Keywords: Tags  Oyu Tolgoi, copper, gold, Mongolia parliament, Rio Tinto, Turquoise Hill, underground mine, Shivani Singh

SINGAPORE — Rio Tinto Plc has delayed development of the underground mine at Oyu Tolgoi in Mongolia as the terms of project financing will need to be approved by the country’s parliament, the miner said July 29.

"The Mongolian parliament is currently in summer recess and the parliamentary approval process may take some time to work through," Rio Tinto said.

All funding and work on the underground mine will be delayed until matters with the government are resolved and a new timetable has been agreed upon, the company said.

In the interim, Rio Tinto will focus on the ramp-up of the Oyu Tolgoi open-pit mine and exports of concentrate, it said.

"Oyu Tolgoi is largely uneconomic without the underground (mine) being put in place," a market expert told AMM sister publication Metal Bulletin.

"From the start, Mongolia has been saying it will have to approve the funding," said Dale Choi, an analyst at Mongolian Metals & Mining Research. "As a shareholder (Mongolia will) have to pay their share of the capex and they have to accept it. (The issue) will be a solid discussion (in the parliament)."

Rio Tinto made its first copper concentrate shipment from the mine July 9 after a number of delays.

According to prior estimates, the underground mine was expected to be operational in 2018-19 and account for 35 percent of Mongolia’s gross domestic product by 2020.

Average annual production over 20 years from open-pit and underground mining at the Oyu Tolgoi project is expected to be 430,000 tonnes per year of copper and 425,000 ounces of gold per year, Rio Tinto has said.

The Mongolian government has a 34-percent stake in Oyu Tolgoi and Turquoise Hill, a unit of Rio Tinto, holds the rest.

A version of this article was first published in AMM sister publication Metal Bulletin.

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