Written in Mongolia and read by professionals
in over 160 countries worldwide

Wednesday, July 6, 2011

Mongolia Briefing is a magazine and daily news service about doing business in Mongolia. We cover topics relating to the Mongolian economy, the market in Mongolia, foreign direct investment and Mongolian law and tax. It is written in-house by the foreign investment professionals at Dezan Shira & Associates

Mongolia’s Oyu Tolgoi Copper-Gold Mine on Track for 2012 Start

Apr. 3 – Ivanhoe Mines has reported that construction of the Oyu Tolgoi (OT) copper-gold mining complex is advancing toward its planned start-up in 2012 with commercial production scheduled for the first half of 2013. The project is currently 72.7 percent complete, according to the company.

Ivanhoe, which began investing in the project in April 2011, has spent US$4 billion on the Oyu Tolgoi complex. In total, including drilling exploration and preparation work on the mine, the company has currently spent US$10 billion on the project.

OT – located 550 kilometers south of Ulaanbaatar and 95 kilometers from the China-Mongolia border – has large copper, gold, silver and molybdenum reserves. The mine is subdivided into three sections:

  • Hugo Dummett
  • Herugo
  • Southern Oyu

By October 2011, a total of 14,760 employees were working on construction.

The Oyu Tolgoi Project is initially being developed as an open-pit operation, with the first phase of mining to start with the near-surface Southern Oyu deposits, which include Southwest Oyu and Central Oyu. A copper concentrator plant, with related facilities and the necessary infrastructure to support an initial throughput of 100,000 tons of ore per day, is being constructed to process ore scheduled to be mined from the Southern Oyu open pit.

Ivanhoe Mines owns 66 percent of OT and 58 percent of South Gobi Resources Ltd. The latter made a profit of US$79.8 million by selling its coal for US$54 per ton in 2010 and generated a profit of US$179 million when the price and demand for coal increased in 2011.

The Board of Directors at Ivanhoe approved the budget for OT’s next stage. It is currently in discussion with key loan providers that include the Canadian Export Development Bank, European Bank for Reconstruction and Development, Export Development Canada, International Finance Corporation, BNP Paribas and Standard Chartered Bank.

According to an agreement made between Ivanhoe Mines and Rio Tinto in October 2010, if a power plant with the capacity of 50 megawatts or more is built before 2015, funding will be provided from Rio Tinto through a loan. Forty percent of the loan is to be paid back in 2015, with the remainder to be paid the following year.

Difficulties in delivering power to the mine’s remote location in the Gobi Desert poses a significant problem and Ivanhoe confirmed that a deal to import power from China had still not been reached.

The current plan would see the mine site, which includes concentrator plants and a large workers’ village, connected to the power grid on the Chinese side of the border for the first four years of the mine’s life.

But such a deal requires an agreement between Chinese and Mongolian authorities, and Ivanhoe confirmed last week that officials from the two nations had still not agreed terms.

The company said it remained hopeful that talks would be ”expedited” to ensure the imported power was available to meet the first production target in the third quarter of 2012.

”If the establishment of a dedicated power plant is required for the early production at Oyu Tolgoi, the required revisions to the construction schedule for the Oyu Tolgoi project could adversely affect the project’s ability to achieve the planned start of commercial production in 2013,” Ivanhoe said in an official statement last week.

This entry was posted in Business, Energy, Foreign Trade, Mining, Politics and tagged , , , , . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

Dezan Shira & Associates provide a range of services for companies looking to undertake foreign direct investment into Asia, These include corporate establishment, accounting, tax, payroll, audit and due diligence. To learn more about the firm, please contact one of our specialists at mongolia@dezshira.com, download our corporate brochure or visit at us www.dezshira.com

Dezan Shira & Associates, Twenty years of Excellence

The Asia Briefing Bookstore

Our best selling legal, financial, tax and regional guides to Asia business, industry reports and more…
Click here to view all titles now

China Briefing Book Store China Briefing Book Store China Briefing Book Store China Briefing Book Store China Briefing Book Store China Briefing Book Store China Briefing Book Store China Briefing Book Store China Briefing Book Store


MSE Top 20 Index