The development of the underground mine at Oyu Tolgoi has been approved, marking the beginning of the next phase in the development of this world-class resource. The decision follows approvals by Rio Tinto, the Government of Mongolia and Turquoise Hill Resources to invest US$5.3 billion to expand the mine, and the recent granting of all necessary permits.
First production from the underground phase, which has an average copper grade of 1.66 per cent, more than three times higher than the open pit, is expected in 2020. When the underground is fully ramped up in 2027, Oyu Tolgoi is expected to produce more than 500,000 tonnes of copper a year, compared with current annual production of 175,000-200,000 tonnes. Construction of the underground mine involves developing more than 200 kilometres of underground tunnels at a depth of 1.3 kilometres. When the underground mine reaches full production, Oyu Tolgoi is expected to become one of the top-five copper mines in the world.
At the peak of construction, it is expected that Oyu Tolgoi will employ 3,000 people on the Underground project, and build on its deep relationships with Mongolian suppliers. Since construction of the open pit began in 2010, Oyu Tolgoi has spent approximately US$5.5 billion in Mongolia the form of salaries, payments to Mongolian suppliers, taxes, and other payments to the Government, making a real impact in Mongolia.
Prime Minister of Mongolia Chimediin Saikhanbileg said “This significant investment demonstrates the confidence of all the partners in both the Oyu Tolgoi mine and in Mongolia. It also demonstrates the attractiveness of Mongolia as a place to do business and invest, which will be a catalyst for further investments that will strengthen Mongolia's economy.
“The development of the underground will create further jobs, support Mongolian suppliers and unlock substantial value for all stakeholders, delivering benefits for all Mongolians for generations to come. This is a proud day for Mongolia and is a clear demonstration that the country is back to business."
Jean-Sébastien Jacques, Rio Tinto deputy chief executive, said, “Rio Tinto’s partnership with Mongolia began over a decade ago, and we are proud of what we have already achieved in building a world-class and safety-focused operation that has been selling copper for nearly three years. Today’s investment takes it to another level and will transform Oyu Tolgoi into one of the most valuable copper projects globally and unlock 80 per cent of the value of this project.
“Oyu Tolgoi offers opportunities for further expansions, leveraging existing infrastructure and supply chains, and will provide attractive returns for all shareholders and Mongolia more broadly for decades to come. This is a long-term partnership, built to create mutual benefit.”
Batsukh Galsan, Chairman of Oyu Tolgoi’s Board of Directors, said, “This is a historic moment for everyone involved in Oyu Tolgoi, and the result of immeasurable hard work and commitment from our shareholders, our many partners in Mongolia and around the world, and, most importantly, our workforce.
“The approval of the Oyu Tolgoi Underground Project sets us on a path to unlocking tremendous value and establishing Mongolia as a major player in the global copper industry.”Today’s investment decision follows the December 2015 signing of a US$4.4 billion project financing agreement with international financial institutions and export credit agencies representing the governments of the United States, Canada and Australia, along with 15 commercial banks, for the development of the underground mine. The parties have agreed a senior debt cap of US$6 billion, providing the option for an additional US$1.6 billion of supplemental senior debt in future.
About Oyu Tolgoi LLC (www.ot.mn)
Oyu Tolgoi LLC, Mongolia's largest copper and gold mining company, is a strategic partnership between the Government of Mongolia, Turquoise Hill Resources and Rio Tinto. Located in the South Gobi, Oyu Tolgoi commenced shipment of product to customers in July 2013. Oyu Tolgoi is managed by Rio Tinto, which is investing global expertise and cutting-edge technology to help develop Mongolia’s mining industry and ensure Oyu Tolgoi is one of the world’s most advanced mines. For Oyu Tolgoi, nothing matters more than safety. The business operates under the principle that if a job cannot be done safely, it will not be done at all.