SMM1 2 / PRNewswire-Asianet /-Rio Tinto and Mongolia have signed an agreement to provide electricity for the miner's large copper mine expansion project in Oyu Tolgoi (Oyu Tolgoi) by mid-2023.
Both sides said the framework agreement marked a step forward after a protracted dispute. The Oyu Tolgoi project is at the heart of Rio's shift from iron ore to diversification, but it has faced a series of challenges as the fragile Mongolian government wrangles over how to maximise benefits for the country.
The $5.3 billion underground expansion project is scheduled to go into production early next decade, making it one of the largest copper suppliers in the world. Under the new agreement, a 300MW power plant will be built near the (Tavan Tolgoi) coalfield in Tavan Tolgoi to provide electricity to the mine, which will start construction in 2020. The plant is expected to open in mid-2023, slightly later than 2022, proposed by the government after canceling an earlier power agreement in February.
The Mongolian government owns 34 per cent of the Oyu Tolgoi mine and the rest is owned by Turquoise Hill Resources, which is 51 per cent owned by Rio Tinto. In a joint statement with the Oyu Tolgoi coal mine, the Mongolian government said the agreement was "an important step towards improving the efficiency of the Tavan Tolgoi coal mine" and an important step in providing domestic electricity to the wider region.
Partners will also consider how to include the use of renewable energy, the statement said. Oyu Tolgoi will become the majority shareholder in the plant and the financing may include third-party debt, but did not provide further details, the statement said. Analysts welcomed the deal but said the 2023 deadline looked optimistic. "this is the last major obstacle to underground mining," said (Badral Bontoi) (Badral Bontoi), chief executive of Cover Mongolia, a Mongolia-based market intelligence group.
A spokesman for the Mongolian government said the agreement was the first step in retaining Oyu Tolgoi (Oyu Tolgoi) in Mongolia, which is currently paying $150 million a year to China, a figure that will rise with the launch of underground expansion projects.
In July 2018, Rio Tinto reached an agreement with three Chinese contractors to design a power station to power the Oyu Tolgoi (Oyu Tolgoi).
On Monday, a spokesman declined to comment on the status of the bids.
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