Rio Tinto says it will have the $13 billion needed for an expansion of the Oyu Tolgoi copper-gold mining complex in southern Mongolia by the end of the year. Development of Oyu Tolgoi began in 2009 and the project is expected to begin producing ore by the end of August - six months ahead of schedule.
The second phase of development at the $7 billion Oyu Tolgoi complex is estimated to cost more than $5 billion. Rio Tinto owns a majority stake in Ivanhoe Mines, which is the company with full operational control of the mine.
The project is in a remote area of Mongolia, with little existing infrastructure including electricity supply. Rio Tinto is negotiating commercial agreements with Chinese and Inner Mongolia power generators but is also awaiting approval for construction of its own on-site power plant.
Rio Tinto’s Mongolian manager Cameron McRae says, “We are in the process of working with banks, and have been for a couple of years, to put in place the world’s largest ever project finance raising for the industry and hopefully in the next six months we will conclude that.”
In May this year, the overall construction of the complex was 82% complete, with the installation of two ore-processing production lines in the 100,000 tonne per day concentrator, and construction of the second shaft at the Hugo North underground mine continuing. Long-term contracts have also been signed for a substantial portion of the mine’s total concentrate production.
Investment in the project is credited with making up more than one-hird of Mongolia’s total economy, however moves by some politicians to strengthen scrutiny of foreign investment in the mining sector under a new law has some mining companies concerned the government may make foreign investment in local developments more difficult.
Cameron Macrae says there are quite a lot of politicians and partners that are putting the pro-foreign investment view forward. “The law is not a bad thing. But what is important for Mongolia is how they finalize it and what regulations are in place so it becomes a good law that attracts foreign investment and enables domestic investment to occur.”