Oyu Tolgoi LLC has signed a new power purchase agreement (PPA) with the National Power Transmission Grid (NPTG) of Mongolia covering the Oyu Tolgoi (OT) Copper-Gold Project in southern Mongolia. The PPA forms part of a power import arrangement between NPTG and China’s Inner Mongolia Power International Corporation (IMPIC).
Oyu Tolgoi LLC is the Mongolian operating company for the OT project, which is owned by Turquoise Hill Resources and the Government of Mongolia. Turquoise Hill is majority owned by Rio Tinto.
The new arrangement takes effect on July 4, 2017, subsequent to the expiry of the existing IMPIC agreement, for a term of up to six years, with the possibility of early cancellation after the fourth year, if a domestic power plant is commissioned earlier.
Turquoise Hill’s chief executive officer of Jeff Tygesen said, “Electrical power is a critical operational component for OT and we are delighted with the contract extension. IMPIC’s performance has been very good with high-level cooperation and reliability of power supply.
“This extension is essential for OT to have secure access to power while it is working with the Government of Mongolia on establishing a permanent domestic power source.”
With the signing of the Southern Regional Power Sector Cooperation Agreement (SRPSCA) in August 2014, the Government of Mongolia and Oyu Tolgoi agreed to work together to source bridging power from IMPIC until a permanent domestic power source could be finalised. After approximately two years of collaborative work, the joint negotiation team from the government and Oyu Tolgoi have secured this bridging power arrangement
In accordance with the SRPSCA and the 2009 Investment Agreement, Oyu Tolgoi remains committed to the domestic source of electricity and is engaged with the relevant government authorities and the government selected investors to progress the development of a domestic power plant.
Pursuant to the SRPSCA, while government authorities and Oyu Tolgoi collaborate towards the development of an Independent Power Producer (IPP) plant at Tavan Tolgoi, Oyu Tolgoi’s obligation under the investment agreement to source power from within Mongolia is temporarily satisfied and the timing requirement of the obligation is suspended.
Both the government and Oyu Tolgoi have the right to withdraw from cooperation on the IPP at Tavan Tolgoi, and if either party ceases to participate in the project, Oyu Tolgoi will then have four years from the official withdrawal date to secure an alternative domestic power source.
Oyu Tolgoi is actively engaged with the government-preferred consortium led by Marubeni Corporation with participation from other domestic and foreign investors in delivering a comprehensive energy plan for OT and the South Gobi region of Mongolia.
During the March quarter OT production was as expected with lower grades from Phases 6 and early 4A of the open pit as well as stockpile material.
Jeff Tygesen said, “OT’s concentrator performed very well with record throughput levels for the quarter. The concentrator continues to benefit from earlier productivity improvements.
“Underground development advanced during the first quarter and the workforce continues to grow. Several large contracts were awarded during the quarter, with the largest for the decline material handling system.”
During Q1, open-pit operations focused mainly on Phase 6, which has higher copper grades but relatively low gold grades. Ore treated during Q1 increased 2.7% over Q4 and average daily throughput of 112,100 tonnes increased 5.1% over Q4. Copper production decreased 16.3% over Q4 and gold production decreased 49% over Q4 due to lower grade and recoveries at the lower end of the grade recovery curve.
OT is expected to produce 130,000 to 160,000 tonnes of copper and 100,000 to 140,000 ounces of gold in concentrates for 2017. Open-pit operations are expected to mine in Phases 4 and 6 during the year. In addition, stockpiled ore will be processed.