Name of the Project
Oyu Tolgoi underground mine project.

Location
Mongolia.

Project Owner/s
Oyu Tolgoi is jointly owned by the Mongolia government (34%) and Turquoise Hill Resources (66%, of which Rio Tinto owns 51%). Rio Tinto has been managing the project since 2010.

Project Description
The Oyu Tolgoi openpit mine was completed on schedule in less than 24 months and production started in 2013. Since then, more than 440 000 t of copper have been sold.

About $6.4-billion has been invested to develop the openpit mine, concentrator and associated infrastructure, with an additional $500-million of capital costs for initial development of the underground mine.

The underground mine is expected to produce more than 500 000 t/y of copper, compared with current openpit production of 175 000 t/y to 200 000 t/y.

The mine also benefits from significant gold by-products, with an average gold grade of 0.35 g/t.

Underground production will come from the Hugo Dummett North deposit, including the North Extension, which contains probable ore reserves of 499-million tonnes, with an average grade of 1.66% copper and 0.35 g/t of gold.

The material from this brownfield expansion will use the existing concentrator and infrastructure.

The size and quality of this Tier-1 resource provide additional expansion options, which could sustain production for many decades.

Potential Job Creation
Not stated.

Net Present Value/Internal Rate of Return
The project has an expected internal rate of return of more than 20%.

Capital Expenditure
The capital spend to bring the copper project into production is expected to range between $6.5-billion and $7.2-billion, an increase of between $1.3-billion and $1.8-billion, compared with the previous cost estimate of $5.3-billion.

Planned Start/End Date
Rio has also warned that first sustainable production from Oyu Tolgoi will be achieved only between May 2022 and June 2023, which is between 16 to 30 months later than the original feasibility study guidance in 2016.

Latest Developments
Turquoise Hill announced its updated mineral resources and mineral reserves on July 2.

The company's updated mineral resources and reserves were announced in addition to the completion of an updated Oyu Tolgoi feasibility study (OTFS), which incorporates the new mine design for Hugo North Lift 1 Panel 0. This new design reduces the mineral reserve estimate for the Hugo North underground mine, owing to the inclusion of two structural pillars to the north and south of Panel 0 to protect ore handling infrastructure. 

It is expected that part of the ore contained in these pillars will be recoverable at a later stage following additional studies that are under way. Pending the completion of this work in 2021, the material contained in the pillars has been converted from mineral reserves to mineral resources.

The mineral resources and reserves also include minor updates to the Oyut openpit resource model and account for depletions to December 31, 2019, as disclosed in the Company's Annual Information Form for the year ended December 31, 2019. 

Oyu Tolgoi LLC is submitting OTFS20 with the government of Mongolia to comply with local regulatory requirements. OTFS20 incorporates an update to the first sustainable production schedule and capital cost estimates for the underground mine development based on the updated Panel 0 mine design announced by the in May 2020.

Estimated total expansion capital for the underground project is in line with the recently disclosed range of $1.3-billion to $1.8-billion, exceeding the Oyu Tolgoi 2016 feasibility study estimate, of which $3.8-billion has been spent as of March 31, 2020. A further, more detailed cost and schedule update will be provided in connection with the definitive estimate review, the completion of which is expected before the end of the year.

OTFS20 does not reflect the impacts of the COVID-19 pandemic, which are ongoing and continue to be assessed.

Key inputs from the OTFS20 include recoverable copper of 19.5-billion pounds, 8.4-million recoverable ounces of gold and 51.7-million ounces of recoverable silver. The project will have a mine life if about 31 years. Expansion capital has been estimated at $2.2-billion, with a payback of six years.

Key Contracts and Suppliers
Jacobs Engineering (EPCM) and Cimic Group’s Thiess (underground decline contractor).

Contact Details for Project Information
Rio Tinto media relations: Australia/Asia, Ben Mitchell, tel +61 3 9283 3620 or email media.enquiries@riotinto.com.
Turquoise Hill Resources investors and media, Tony Shaffer, tel +1 604 648 3934 or email tony.shaffer@turquoisehill.com.