Photo by: Bloomberg
PERTH (miningweekly.com) – Mining major Rio Tinto and its joint venture partners in the Oyu Tolgoi copper-gold mine, in Mongolia, have approved the development of an underground operation, slated to start in mid-2016.
The new operation would require a capital investment of $5.3-billion, and first production was expected in 2020.
Rio’s deputy CEO Jean-Sébastien Jacques said that the investment would transform the Oyu Tolgoi operation into one of the most significant copper mines globally, unlocking 80% of its value.
“Long-term copper fundamentals remain strong and production from the Oyu Tolgoi underground will commence at a time when copper markets are expected to face a structural deficit. In line with Rio’s other tier one assets, Oyu Tolgoi offers opportunities for further expansions, leveraging existing infrastructure and supply chains, and will provide attractive returns for all shareholders and Mongolia more broadly, for decades to come.”
The Oyu Tolgoi mine is jointly owned by Rio, the government of Mongolia and Turquoise Hill Resources.
The openpit operation has been producing since 2013 and, to date, more than 440 000 t of copper have been sold from the operation.
Oyu Tolgoi was expected to produce an average 560 000 t/y of copper between 2025 and 2030.
The project currently has a workforce of around 3 000 and has paid more than $1.4-billion in taxes, fees and other payments to the government of Mongolia.
Mongolian PM Chimediin Saikhanbileg said on Friday that the significant investment in the underground operation at Oyu Tolgoi demonstrated the confidence of all the partners in both the mine and the country.
“It also demonstrates the attractiveness of Mongolia as a place to do business and invest, which will be a catalyst for future investments that will strengthen Mongolia’s economy.”
The decision to start underground mining at Oyu Tolgoi followed a December signing of a $4.4-billion project financing agreement with a number of financial institutions and export credit agencies in the US, Canada and Australia.
Meanwhile, Rio had reduced its near-term maturing gross debt by $1.5-billion after accepting a total of $141-million of debt under its Dutch Auction offer and a further $1.35-billion under its any-and-all offer.
Rio in April this year announced its intention to launch cash tender offers for some of its 2017 and 2018 notes, with the miner using its strong liquidity position to reduce the debt through the early repayment of some near-term maturing debt.
The Dutch Auction portion of the offer, which commenced on April 21 and would expire on May 18, was oversubscribed on May 4, therefore only $141-million of Dutch Auction securities would be purchased.
No Dutch Auction securities tendered after the above time would be accepted.
Rio said on Friday that $80.2-million in aggregate principal amount of Rio’s 6.5% notes, due 2018, would be purchased and $60.5-million in aggregate principal amount of Rio’s 2.25% notes, due 2018 would be purchased, pursuant to the Dutch Auction offer.
The Dutch Auction securities purchased would be retired and cancelled and no longer remained outstanding.