The development of the Oyu Tolgoi underground mine in Mongolia took an important step forward with the signing of a $4.4 billion project financing agreement. Oyu Tolgoi has secured project finance for the underground mine development with funding by international financial institutions and export credit agencies representing the governments of the United States, Canada and Australia, along with 15 commercial banks.

A signing ceremony on December 15 in Ulaanbaatar included Mongolian Prime Minister Ch. Saikhanbileg and representatives from Turquoise Hill Resources, Rio Tinto, Erdenes Mongol, Erdenes Oyu Tolgoi, as well as many of the financial institutions and commercial banks that participated in the facility. An agreement on the Oyu Tolgoi underground mine development and financing plan was reached earlier this year by the government of Mongolia, Turquoise Hill and Rio Tinto, which set out a pathway toward development, including the basis for the funding of the project.

Turquoise Hill CEO Jeff Tygesen said the signing was an, “unprecedented milestone for Turquoise Hill and Oyu Tolgoi.” He also noted that Turquoise Hill is a “long-term believer in copper and absolutely committed to Oyu Tolgoi and the corresponding economic development of Mongolia,” and Turquoise Hill, “looks forward to working with Rio Tinto and the Mongolian government to complete the remaining steps leading to the commencement of underground development in mid-2016.”

Rio Tinto Copper and Coal chief executive Jean-Sébastien Jacques said, “This kind of mining development partnership model sets the industry benchmark for future schemes and underscores Rio Tinto’s commitment to responsible and prudent growth. Long-term copper fundamentals remain strong and Oyu Tolgoi as a tier one asset will be a globally important source of supply as the market moves back into structural deficit over the next few years.”

Oyu Tolgoi is a copper-gold mine in the South Gobi region of Mongolia and is one of the largest undeveloped high-grade copper deposits in the world. Construction of an open-pit mine was completed on schedule in less than two years and production started in 2013. More than 1.5 million metric tons (mt) of copper concentrate has been produced from Oyu Tolgoi.

While all of the copper concentrate currently produced is from the open-pit mine, more than 80% of the value of Oyu Tolgoi lies in the proposed underground mine.