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 the 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 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
In December 2020,  Rio Tinto confirmed that the expansion at the mine would cost $6.75-billion, about $1.4-billion higher than its estimate in 2016.

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, about 16 to 30 months later than the original feasibility study guidance in 2016.

Latest Developments
The significant increase in Covid-19 cases in Mongolia during the second quarter has had an adverse impact on the openpit operations and underground development progress of the Oyu Tolgoi mine.

Turquoise Hill Resources has said that a series of lockdowns have limited the ability of Oyu Tolgoi to maintain normal roster changes for its workers. At certain stages during the quarter, personnel numbers were below a quarter of planned requirements.

The additional 2021 development cost impact of the known Covid-19 delays up to June 30 is estimated to be about $100-million, the company has said.

Covid-19 restrictions also affected the movement of international expertise, with no significant development progress reported on Shaft 3 and Shaft 4 during the quarter. Turquoise Hill has stated that further delays could impact on the production ramp-up after Panel 0, which is the first panel for mining at the underground project.

Further, the engagements between Turquoise Hill, Rio Tinto and Mongolian authorities to resolve outstanding nontechnical undercut issues continue, although discussions have slowed, as a result of the Covid-19 situation.

A delayed resolution will delay the expected timing for the initiation of the undercut, which will have a “material impact” on the project schedule, including the timing of sustainable production for Panel 0, Turquoise Hill has said.

Any delay to the expected cash flows from the underground project will increase Turquoise Hill’s incremental funding requirement, the company has cautioned.

Oyu Tolgoi is already at the centre of a protracted dispute between Turquoise Hill and Rio Tinto over funding for the underground expansion of the mine. The companies reached a binding agreement over the funding disagreement in April.

Key Contracts, Suppliers and Consultants
Jacobs Engineering (engineering, procurement and construction management) 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.