Snapshot
Anglo-Australian mining giant Rio Tinto and Mongolian government announced on Tuesday (Jan 25) they have agreed to settle a long-running dispute over the $6.93 billion expansion project for the Oyu Tolgoi copper-gold mining project.
As part of the deal, Rio Tinto-controlled Turquoise Hill agreed to waive $2.4 billion in debt owed to it by the Mongolian government.
Anglo-Australian mining giant Rio Tinto and Mongolian government announced on Tuesday (Jan 25) they have agreed to settle a long-running dispute over the $6.93 billion expansion project for the Oyu Tolgoi copper-gold mining project.
The agreement will pave way for immediate commencement of underground mining operations at one of the world’s largest-known copper and gold deposits, with production expected to commence in the first half of 2023.
The resolution of dispute with Mongolian government comes as a shot-in the arm for the Anglo-Australian mining behemoth after the recent setback it suffered in Serbia. Serbian government announced cancellation of a plan to allow Rio Tinto to build a lithium mine in the eastern region of the country. Rio Tinto has ambitious plan to become Europe’s largest supplier of the metal used in electric vehicles.
Oyu Tolgoi Project
Mongolia controls 34% of Oyu Tolgoi, while Rio Tinto controls the rest through its 51% stake in Toronto-listed Turquoise Hill Resources Ltd and operates the mine.
As part of the deal, Rio Tinto-controlled Turquoise Hill agreed to waive $2.4 billion in debt owed to it by the Mongolian government.
A complex greenfield project comprising an underground block cave mine and copper concentrator as well as an open pit mine, Oyu Tolgoi has been successfully operating for almost ten years. Rio Tinto has so far invested a total of $13.4 billion
Oyu Tolgoi is expected to produce around 500,000 tonnes of copper per year on average from 2028 to 2036 from the open pit and underground operations. The mine is expected to yield an average of around 350,000 tonnes for a further five years.
The underground Ore Reserve has an average copper grade of 1.52 per cent, which is more than three times higher than the open pit Ore Reserve, and contains 0.31 grammes per tonne of gold.
Energy Demans For The Project
Rio Tinto Board has also approved the signing of an Electricity Supply Agreement to provide Oyu Tolgoi mines with a long-term source of power from the Mongolian grid, under terms already agreed with the Government of Mongolia. Rio’s original 2009 agreement on the mining project required a construction of a new coal-fired power plant to supply electricity.
Rio Tinto also pledged to work with the government to support long-term renewable energy generation in support of the Mongolian grid.
The Mongolian government said that it will import power from China through 2023 to support the energy demands of the projects.
Addressing Demand For Copper
“The OT underground development will consolidate Rio Tinto’s position as a leading global supplier of copper at a time when demand is increasing, driven by its role in enabling decarbonisation and electrification in the race to net zero. We will also explore additional opportunities to decarbonise the OT operations, including sourcing renewable power.” Rio Tinto Chief Executive Jakob Stausholm, said.
Copper has diverse uses as a critical metal across industries — household goods, infrastructure, electronics, capital goods, transmission and others. Therefore, usually, an increase in copper prices would usually mean higher demand due to good economic growth, and a decrease implies a potential recession.
The metal has the highest electrical and thermal conductivity in relation to other non-precious metals.
The price of copper is often used as a heuristic to predict the future of the economy, giving it the name “Doctor Copper”.
The average per capita copper consumption of the developed nation is around 10 kg. Therefore, it is quite likely that the consumption would increase multi-fold as manufacturing and infrastructure develop.
Analysts already believe that copper shortfalls would increase as copper consumption is likely to outstrip supply in the coming years if mining capacities are not ramped up.