Oyu Tolgoi has signed a power source framework agreement (PSFA) with the Mongolian government to enable the construction of the 300MW Tavan Tolgoi Power Project (TTPP) to power its copper-gold mine in the South Gobi desert.
The agreement secures a long-term domestic power solution for the Oyu Tolgoi copper-gold mine and also the wider South Gobi region.
Construction of the power plant, which will be majority owned by Oyu Tolgoi, is slated to begin in 2020 after further studies. Its commissioning is targeted for mid-2023.
Mongolia Energy Minister Ts. Davaasuren said: “In accordance with the resolution from the Government of Mongolia, we are signing this agreement. With the PSFA, a legal basis has been put for Oyu Tolgoi LLC to fully supply its operational power needs from national sources.”
Oyu Tolgoi’s copper-gold mine is located nearly 550km south of the Mongolian capital Ulaanbaatar and 80km north of the Mongolia-China border.
The Mongolian copper-gold mine, which has been in production since early 2013, is jointly owned by the Mongolian government with a 34% stake and Turquoise Hill Resources (66%). Since July 2013, the mine has been shipping its concentrate through road to international customers, mainly in China.
Mining giant Rio Tinto owns 51% in Turquoise Hill Resources and since 2010 has been the manager of the copper-gold project.
The PSFA agreement contains the basic principles for sourcing a domestic power solution for the copper-gold mine along with the key roles of each of the parties and the technical design of the power project.
Oyu Tolgoi will now move ahead to confirm the technical design of the power project and finalize the commercial arrangements, including financing to support the PSFA.
Rio Tinto Copper & Diamonds chief executive Arnaud Soirat said: “The Power Agreement is a positive step forward for Oyu Tolgoi and outlines a path to secure reliable, long-term power for the operation.
“We will now work together with all of Oyu Tolgoi’s partners to finalise the details and develop the power project which will help ensure the operation reaches its full potential to the benefit of all shareholders.”