Rio Tinto and its partners in the Mongolian Government and Turquoise Hill Resources have given approval to invest $5.3bn to expand the Oyu Tolgoi copper and gold mine in Mongolia.
The partners are planning to start next stage of development on the underground copper and gold mine in mid-2016, with first production scheduled in 2020.
Oyu Tolgoi mine development is expected to fully ramp up by 2027, and will produce more than 500,000t of copper a year, compared to be current production of 175,000t-200,000t.
According to the company, the underground mine will produce copper at an average grade of 1.66%, which is three time more than the open pit operation.
Rio Tinto deputy chief executive Jean-Sébastien Jacques said: "Today’s investment takes it to another level and will transform Oyu Tolgoi into one of the most significant copper mines globally, unlocking 80 per cent 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 Tinto’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."
Production at the open-pit mine at Oyu Tolgoi started in 2013 and more than 440,000t of copper has been sold since then.
Mongolia Prime Minister Chimediin Saikhanbileg said: "The development of the underground will create further jobs, support Mongolian suppliers and unlock substantial value for all stakeholders, delivering benefits for all Mongolians for generations to come."
The latest decision to expand the operations follows the signing of a $4.4bn project financing agreement in December 2015 with international financial institutions and export credit agencies representing the governments of the US, Canada and Australia for the mine development.
Oyu Tolgoi is jointly owned by the Government of Mongolia (34%) and Turquoise Hill Resources (66%, which Rio Tinto owns 51% of).
The partners have invested about $6.4bn to develop the open-pit mine, concentrator and associated infrastructure while additional $500m has been spent on initial development of the underground mine.
Image: Oyu Tolgoi underground mine. Photo courtesy of Rio Tinto
