Oyu Tolgoi, Mongolia

Rio Tinto is expecting to commence production at the Oyu Tolgoi copper and gold mine in Mongolia in the coming months, as investment talks with the government advance.

In an interview in Santiago, Rio Tinto Copper chief executive Jean-Sebastien Jacques told Bloomberg that the company is currently in a clarification process with the Mongolian government over the project, which will be completed in two phases.

Jacques said, "Subject to ongoing support from the government we are cautiously optimistic that we will have first commercial production during the summer."

Rio Tinto and the government have been at loggerheads over issues concerning future operations at the mine.

In September 2012, a group of influential backbenchers attempted to negotiate a 51% stake in the Oyu Tolgoi mine, which is expected to account for about 30% of Mongolia’s domestic product when it reaches full production.

Rio Tinto’s subsidiary Turquoise Hill Resources owns a 66% stake in the mine, while the government owns the remaining stake.

According to the government, the cost of the project has risen 40% over budget.

A technical report, commissioned by Turquoise Hill in March, shows that the development of the second phase would require a budget of $5.1bn, a cost increase of $1.4bn.

This budget does not include plans to construct a power facility and expansion of the concentrator from 100,000t a day to 160,000t a day.

Turquoise Hill said the estimates have increased because of a 30% surge in direct capital costs connected with the construction of an underground mine.

The mine is currently operating under a temporary budget on a month-to-month basis, with funds being provided by Rio Tinto, as the two parties failed to reach an agreement over taxes and increasing costs, which the government fears will affect its prospective earnings.

Image: The Oyu Tolgoi mine project is considered to be the essential driver of Mongolia’s $10bn economy.

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