A technician installs a power panel during construction of the Oyu Tolgoi mine in Mongolia. The mine’s operator
and the Mongolian government recently agreed on a comprehensive energy plan for the operation and the
surrounding South Gobi region, including generation, transmission and energy importation issues.

Turquoise Hill Resources reported in mid-August the signing of an agreement between the government of Mongolia and Oyu Tolgoi LLC, the operating company for the Oyu Tolgoi mine, for cooperation in development of a comprehensive energy plan for the South Gobi region of Mongolia. Oyu Tolgoi LLC is owned 66% by Turquoise Hill and 34% by the government. 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 centerpiece of the agreement 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 its primary consumer. Full evaluation of the independent power producer option is expected to take place in nine to 12 months.

Participation in the agreement meets Oyu Tolgoi’s obligation in its investment agreement to establish a long-term power supply within Mongolia four years from the commencement of commercial production. Oyu Tolgoi came into production in early 2013 and has been building production since that time. The project currently imports its power from China.

During the second quarter of 2014, Oyu Tolgoi produced 140,000 mt of copper-gold concentrate containing 36,200 metric tons (mt) of copper and 113,000 oz of gold. Full-year 2014 production is forecast at 135,000 to 160,000 mt of copper and 600,000 to 700,000 oz of gold in concentrates. Sales contracts have been signed for 100% of Oyu Tolgoi’s expected 2014 concentrate production and 92% of planned 2015 production; 84% of the mine’s concentrate production has been contracted for up to eight years.

Oyu Tolgoi is currently engaged in discussions with the government regarding a $127 million claim against the company for unpaid taxes, penalties, and fines (E&MJ, July 2014, p. 6). Oyu Tolgoi is disputing the claim.