Tag Archives: Mongolia

Rio revises Oyu Tolgoi cost and production estimates on rock stability issues

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Rio Tinto has provided an update on its majority-owned Oyu Tolgoi copper-gold underground project, in Mongolia, admitting that stability risks identified with the previously approved mine design has led to an estimated cost increase and delay to first production.

First output is now expected to be achieved between May 2022 and June 2023, a delay of 16 to 30 months compared with the original feasibility study guidance in 2016, while preliminary estimates for development capital spend is now $6.5-$7.2 billion, $1.2-$1.9 billion up on the $5.3 billion previously disclosed.

These estimates are preliminary in nature – the equivalent of a conceptual or order of magnitude study – but Rio said a definitive estimate should be forthcoming in the second half of 2020.

Oyu Tolgoi Underground is Rio’s major copper growth project. When the underground mine is fully ramped up, the existing open pit and underground, combined, are expected to produce more than 500,000 t/y of copper.

Alongside this announcement, Rio Tinto also published its June quarter production results, which showed Rio’s share of production of the Oyu Tolgoi open-pit mine was 13,100 t of copper over the period.

Since February, key below ground infrastructure such as the control room facility and the jaw crusher system have been completed and construction of shafts 3 and 4 is progressing well, according to Rio. The commissioning of shaft 2 remains on track for October 2019.

As Rio previously advised, enhanced geotechnical information and data modelling suggests there may be some stability risks identified with the approved mine design. As a result, several other mine design options are under consideration to complete the project.

Rio said: “Studies to date indicate that these options may result in some of the critical underground infrastructure, such as the mid-access drive and the ore handling system, being relocated or removed. Options relating to the sequence of crossing the panel boundaries during mining operations are also being analysed.”

These options are being evaluated to determine the final design of the first panel of mining, “Panel 0”, with the work anticipated to continue until early 2020, Rio said. This is where the definitive estimate date of the second half of 2020 comes from. This estimate will include the final estimate of cost and schedule for the remaining underground project and the preferred mine design approach.

Rio said: “All options under consideration present a pathway to sustainable first production, and have different cost and schedule implications. To date, these have been defined to a level of accuracy associated with a conceptual study or order of magnitude study, and, therefore, significantly more work is required to complete the final assessment.”

Preliminary information now suggests, depending on which mine design options are adopted, first sustainable production could be achieved between May 2022-June 2023. This range includes contingency of up to eight months reflecting the “unexpected and challenging geotechnical issues, complexities in the construction of shaft 2 and the detailed work still required to reach a more precise estimate”, Rio said.

The company added: “The company will continue to focus on minimising the impact to project schedule and cost, as it works through the detailed analysis and testing of each mine design option. Although further work is necessary to reach definitive conclusions, Rio Tinto is reviewing the carrying value of its investment in the project and will announce if any changes are required in the half year results on August 1, 2019.”

Stephen McIntosh, Group Executive, Growth & Innovation, said: “We have made significant progress on a number of key elements in the construction of the underground project during 2019. However, the ground conditions are more challenging than expected and we are having to review our mine plan and consider a number of options. Delays are not unusual for such a large and complex project, but we are very focused as a team on finding the right pathway to deliver this high value project.”

Arnaud Soirat, Chief Executive, Copper & Diamonds, said: “Oyu Tolgoi is a world-class orebody and a world-class business that is already producing copper, employing around 16,000 people and benefitting Mongolia through taxes, royalties and significant procurement. We are working with Turquoise Hill Resources and the Government of Mongolia to complete the underground, which will unlock the most valuable part of the mine for the benefit of all stakeholders.”

Oyu Tolgoi is owned 66% by Turquoise Hill Resources (THR) and 34% by the Mongolian government, with Rio Tinto holding a majority stake in THR.

Components Only expands offering to Chile, Mongolia

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Australia-based business, Components Only says it is establishing offices in Chile and Mongolia as it looks to tap into the high-profile mining markets in those regions.

Calling itself a leader in the buying, selling and sourcing of new, used and rebuilt components for heavy machinery across the mining, construction and earthmoving industries, the company said the move was predicated on responding to increased demand for its services and expertise.

Components Only Accounts Director, Ben Hailes (pictured on the left), said: “Both rich in resources, Chile and Mongolia utilise similar equipment to our existing markets of Australia and North America and we are confident that with local staff we can respond to the increasing trade requirements of these economies.”

Chile is the world’s largest producer of copper, with the mining industry a major employer in the country. The sector represents around 10 percent of the nation’s GDP. Mongolia, meanwhile, boasts significant proven deposits of gold, copper, iron ore and coal, with its minerals sector underdeveloped and holding enormous potential, Components Only said.

Hailes continued: “Our expansion into Chile and Mongolia is an opportunity for us to leverage our proven business model, as well as to create positive economic impacts for both nations through employment and development of infrastructure. We’re committed to improving these regions, and we look forward to working with the local communities.”

Components Only’s services encompass the sourcing of new, used and rebuilt components worldwide; selling, appraising and disposing of excess and obsolete stock; and providing online marketplace services that facilitate the trade of components on one platform.

Variable rock mass pushes Rio off course at Oyu Tolgoi Underground project

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Rio Tinto has said completion of the Oyu Tolgoi underground copper-gold mine, in Mongolia, could be delayed for several months as detailed geotechnical data has revealed the rock mass is more variable than previously envisaged.

Oyu Tolgoi Underground is Rio’s major copper growth project. When the underground mine is fully ramped up, the existing open pit and underground, combined, are expected to produce more than 500,000 t/y of copper.

In Rio’s 2018 results, the company said the underground project continued to progress last year with the construction of critical above- and below-ground infrastructure. Detailed engineering design work and overall construction progress was mostly on track, with the main focus, in 2018, being on underground lateral development, the fit out of shaft 2 (the main production shaft), support infrastructure and the convey-to-surface decline.

Recent achievements at the operation, owned 66% by Turquoise Hill Resources (THR) and 34% by the Mongolian government, with Rio Tinto holding a majority stake in THR, include the completion of the overland conveyor connecting shaft 2 to the coarse ore stockpile, significant progress on the second underground crusher and the expansion of the central heating plant, Rio said.

“Overall, the underground lateral development has been proceeding well, with a total of 19 km achieved at the end of January 2019, against our second annual reforecast target of 19.8 km,” Rio said.

But, for the second quarterly report in a row, Rio flagged delays in completing the underground project.

“With the structural, mechanical and electrical fitout of shaft 2, it is now clear that the completion of this technically complex installation and commissioning work will be delayed by several months,” Rio said. “Delayed completion of the shaft, which provides additional hoist capacity to accelerate lateral development, will further delay the date we reach sustainable production beyond the nine-month delay indicated in October 2018.”

Back then, difficult ground conditions had slowed progress in some areas of the underground development, but, as the lateral development has continued, Rio said it had learnt more about the rock mass around and under the orebody and has access to more detailed geotechnical data than was available from surface drilling.

“This data reveals there are areas of the mine footprint where the strength of the rock mass is more variable than anticipated in the feasibility study,” Rio said. “This will require some potentially significant changes to the design of some future elements of the development and the development schedule.”

Detailed design work is now underway as is the work necessary to estimate the impact on cost and schedule from these changes and the delay in commissioning shaft 2, Rio said, while admitting that first production was unlikely to occur in the September quarter of 2021 as previously guided.

There were still many positive development takeaways from the mining major’s 2018 results, in addition to the record $13.5 billion it returned to shareholders as part of last year’s operational performance.

This included, among others, an update on the Kemano hydropower project in Kitimat, British Columbia, and the latest on AutoHaul™, the world’s first automated heavy-haul, long distance rail network.

On the former, a $500 million project in its aluminium business where Rio is constructing a required second tunnel at its hydropower facility, the company said it was expecting to complete the project by late-2020.

It will supply the Kemano powerhouse with water from the Nachako Reservoir, creating a back up to the original tunnel built over 60 years ago.

“We completed the starter tunnel in December 2018 and began boring the main tunnel in January 2019,” it said.

The company is carrying out this excavation with a 1,300-t tunnel boring machine (pictured) that will dig 7.6 km of tunnel through a mountain as part of a project to enhance the long-term security of a clean power supply for the BC Works aluminium smelter.

On AutoHaul, Rio said, in December 2018, it successfully deployed the autonomous rail network.

“Since completing the first autonomous haulage run in July 2018, we have steadily increased the number of driverless journeys, with more than 1.6 million km travelled autonomously in 2018,” Rio said.

The programme is now focused on optimising autonomous operations, according to Rio.

Oyu Tolgoi power solution is on the cards

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Turquoise Hill Resources has announced the signing of a Power Source Framework Agreement (PSFA) between Oyu Tolgoi and the Government of Mongolia.

The PSFA provides a binding framework and pathway forward for the construction of a Tavan Tolgoi-based power project, as well as the basis for a long-term domestic power solution for the copper-gold mine, Turquoise Hill said.

Ulf Quellmann, Chief Executive Officer of Turquoise Hill, said: “We are encouraged by the pivotal decision to proceed with the power project at Tavan Tolgoi. Resolving Oyu Tolgoi’s long-term power requirements is critically important to the mine’s long-term development and today’s signing of the PSFA is a positive milestone toward that goal.

“We will continue to work closely and collaboratively with our partners to finalise the details of the power project, which will allow this truly great world-class asset to achieve its full potential for the benefit of all stakeholders.”

The PSFA formalises the role of each party and sets out an amended timetable for Oyu Tolgoi to source power domestically, according to the company. Construction is expected to start in 2020 following further studies and commissioning of the power plant is scheduled for mid-2023.

Oyu Tolgoi will now move forward to confirm the technical design of the project and finalise the commercial arrangements, including financing, underpinning the PSFA, the company said.

The 300 MW plant will be majority owned by Oyu Tolgoi LLC, 51%-owned by Turquoise Hill, and will be situated close to the Tavan Tolgoi coalfields.

Turquoise Hill Resources is 51%-owned by Rio Tinto.