Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Rio Tinto has reached a long-term preferred power supply agreement with the Mongolian government for Oyu Tolgoi copper mine. A state-funded coal-fired power plant’s construction will start by July 2021 at Tavan Tolgoi in Mongolia – home to a massive undeveloped coal deposit. The plant will be commissioned within four years. The Oyu Tolgoi mine will continue to import power from China up until the state-owned plant is able to supply reliable power to the mine.    


Rio Tinto owns 66pc of Oyu Tolgoi through Turquoise Hill Resources in which it holds 50.8pc stake. The new agreement is a revision of 2018 Power Source Framework Agreement (PSFA). Now, Rio will not have to construct a 300MW power plant for its mining operations at Oyu Tolgoi. 


Oyu Tolgoi mine is expected to produce 140,000-170,000mt copper in 2020, according to the guidance issued by Turquoise Hill in May. The company will continue to expand operations of the mine at an additional cost of $1.5bn. In Q1 2020, Oyu Tolgoi produced 35,200mt copper, down by 23pc from the prior year. Amid the pandemic, Q1 copper sales fell by 32pc to 25,800mt and Turquoise Hill’s copper revenue dipped by 56.7pc to $97mn. 


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