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SouthGobi completes paved highway construction to Chinese border

Oyu Tolgoi, Mongolia

Oyu Tolgoi, Mongolia

Photo by Turquoise Hill Resources

30th September 2014

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – The Mongolia-focused coal miner SouthGobi Resources on Sunday reported that it had completed construction of a paved highway from its Ovoot Tolgoi complex to the Chinese border.

The company's flagship Ovoot Tolgoi mine produces and sells coal to customers to the south in neighbouring China.

SouthGobi said the highway to the Shivee Khuren border crossing was on Saturday officially opened to traffic.

"With the completion of the paved highway, I am pleased to announce that we have achieved one of our key objectives for 2014. The highway will significantly increase the safety of coal transportation, reduce environmental impacts and improve efficiency and capacity of coal transportation," president and CEO Ross Tromans said.

The paved highway has a carrying capacity of more than 20-million tonnes of coal a year.

MONGOLIAN MATTERS

Meanwhile, diversified miner Rio Tinto subsidiary Turquoise Hill Resources, which held a 26% stake in SouthGobi after selling 29.95% of the coal miner to Hong Kong-based National United Resources Holdings in July, last week reported that it had completed a detailed review of a tax ruling by the Tax Dispute Resolution Council of the Mongolian General Taxation Department issued on September 10.

The ruling had reduced the amount of tax, interest and penalties claimed to be payable by Oyu Tolgoi, in which Turquoise Hill has a 66% interest, from about $127-million to about $30-million.

The company, which is 50.8% owned by Rio Tinto, noted that despite this significant reduction being welcome, there were aspects of the ruling that required further clarification.

The company reported that it, Rio Tinto and the Mongolian government continued to engage in order to resolve outstanding shareholder issues.

OYU TOLGOI UNDERGROUND

TSX-listed Turquoise Hill also last week pointed out that it would cost $5.4-billion to expand the Oyu Tolgoi mine underground, compared with a previous estimate of $5.1-billion. The figure included $500-million of capital already spent so far this year and last year.

The world-class mine started commercial production mid-last year and was expected to produce between 135 000 t and 160 000 t of copper and between 600 000 oz and 700 000 oz of gold in concentrates for 2014.

The latest feasibility study, the publication of which had been delayed several times, was presented to the Oyu Tolgoi board for approval. Rio Tinto operated Oyu Tolgoi, with Turquoise Hill holding a 66% interest, and the Mongolian government holding 34%.

The underground development of Oyu Tolgoi, one of the world's largest undeveloped copper deposits, was put on hold last year when the Mongolian government became concerned that cost overruns would delay the flow of the government's share of profits from the mine. Development was also hampered by issues regarding the terms of project financing and claims of unpaid taxes, penalties and disallowed entitlements connected with the initial development of Oyu Tolgoi, which cost about $6.2-billion.

Further, Turquoise Hill reported last week that repairs on the failed tailings thickener rake and its recommissioning were progressing well with work scheduled to be complete by Tuesday.

The investigation found that operational issues combined with fabrication quality problems led to the failure of the rakes. Relevant operational controls and protections had been reviewed and changes implemented on both thickeners.

During the repair period, the concentrator had continued to run at about 60% throughput.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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