Mining operations in the open pit at Oyu Tolgoi Copper-Gold Project in southern Mongolia  (Copyright © 2014 Oyu Tolgoi).

Mining operations in the open pit at Oyu Tolgoi Copper-Gold Project in southern Mongolia
(Copyright © 2014 Oyu Tolgoi).

OYU Tolgoi recently signed a Power Sector Cooperation Agreement (PSCA) with the Government of Mongolia for investigation into establishment of a Tavan Tolgoi-based independent power producer, according to Turquoise Hill Resources. The agreement provides a pathway to strengthening the power supply network in Mongolia and providing the Oyu Tolgoi gold and copper mine with domestic power rather than power from China.

The agreement lays out a framework for long-term strategic cooperation between the Mongolian Government and Oyu Tolgoi to deliver a comprehensive energy plan for the South Gobi region. Participation in the agreement meets Oyu Tolgoi's obligation in the Investment Agreement to establish a long-term power supply within Mongolia four years from the commencement of commercial production.

Turquoise Hill chief executive officer Kay Priestly says, "The cooperation agreement is an important opportunity for Oyu Tolgoi to work with the government toward developing sustainable solutions to secure a long-term, economic power supply from Mongolia."

The agreement provides a framework for a broad range of power-related issues, including establishment of a power generation source, transmission lines and power imports. The centrepiece of the PSCA is an open, international tender process to identify and select an independent power provider to privately fund, construct, own, and operate a power plant to supply electricity, with Oyu Tolgoi as the primary consumer.

Full evaluation of the independent power producer option is expected to take nine to 12 months.

The Minister of Energy M Sonompil, on behalf of the Government of Mongolia, and Oyu Tolgoi LLC signed the agreement. He said: "Successful implementation of the PSCA will add significant domestic power capacity, strengthening Mongolia's energy supply network. It will also encourage investment and jobs – both during construction and in operation."

Meanwhile, Kay Priestly says Turquoise Hill is working to resolve a tax dispute with the Mongolian government before an extension runs out on funding commitments for the underground expansion of Oyu Tolgoi.

"We are all aware of the September 30 date and are all working toward that deadline," she said during a conference call with investors. She was referring to the expiration of a six-month extension on bank commitments to fund the underground project. "The underground is a significant part of the value of this mine, and right now, we're focused on progressing the underground."

The company says all parties remain committed to the underground development and are working through the outstanding shareholder issues. Underground development is subject to resolution of shareholder issues, the finalization and approval of the feasibility study by all shareholders, and the agreement of a comprehensive funding plan including project finance and receipt of all relevant permits.

Resource Center Whitepapers, Videos, Case Studies