Rio Tinto and its partners, the government of Mongolia and Turquoise Hill Resources, have approved the next stage in the development of the Oyu Tolgoi copper and gold mine in Mongolia. The development of the underground mine will start in mid-2016 following the approval of a $5.3 billion investment by the partners and the recent granting of all necessary permits.
First production from the underground, which has an average copper grade of 1.66%, 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 metric tons (mt) of copper a year, compared with current annual production of 175,000-200,000 mt. The mine also benefits from significant gold byproducts, with an average gold grade of 0.35 g/mt.
Because it is using an existing concentrator and infrastructure, Rio Tinto said it expects an internal rate of return of more than 20% on this investment.
“Today’s investment takes it to another level and will transform Oyu Tolgoi into one of the most significant copper mines globally, unlocking 80 per cent of its value,” said Jean-Sébastien Jacques, CEO, Rio Tinto. “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.”
The open-pit mine at Oyu Tolgoi was completed on schedule in less than 24 months and production started in 2013. Since then, more than 440,000 mt of copper have been sold. Oyu Tolgoi has a workforce of approximately 3,000, of which 95% are Mongolian.