Oyu Tolgoi: A catalyst for change

(China Daily)
Updated: 2010-09-13 09:37
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The Oyu Tolgoi copper-gold project, Mongolia's largest ever mining development, marks "one step forward for the economy", according to the President of Mongolia, Tsakhiagiin Elbegdorj.

Following a landmark agreement between Canada's Ivanhoe Mines Mongolia Inc and Rio Tinto, which took effect in March this year, the South Gobi desert mine will become operational in 2013.

Its lifespan has been set at 65 years, and it will require an initial capital outlay of approximately $5 billion, making it not only the largest mine development project, but also the largest foreign investment in the country's history.

The discovery of major mineral deposits in 2001 by Ivanhoe was made after an intensive exploration program in the country. The local company was renamed Oyu Tolgoi LLC in December 2009, and today, the project is 34 percent owned by the Mongolian


Mining a brighter future

The mammoth project will be a catalyst for Mongolia to expand its manufacturing and industrial sectors.

Mongolia's gross domestic product is projected to rise by an average of 34 percent per year, and national employment levels are slated to go up by 10.3 percent a year. Of the 4,000 jobs created for the construction phase, 67 percent have gone to Mongolian nationals.

"Oyu Tolgoi respects the needs and customs of the local communities and will ensure Mongolia and Mongolians benefit from this investment," said Keith Marshall, CEO of Oyu Tolgoi and a "mining nomad" who has been in the business for over 30 years.

The project will benefit regional infrastructure, generating new road links, electricity generating stations and power transmission lines.

Oyu Tolgoi is committed to community support initiatives, with priorities in education, health, rural business, small and medium enterprise and herder-support programs.

The company recently signed a Memorandum of Understanding with the Ministry of Education which will see Oyu Tolgoi invest a minimum of $58 million over the next five years to develop a strong Mongolian workforce suitable for Oyu Tolgoi and other mining projects throughout Mongolia.

Plans are afoot for the setting up of two mining-focused professional training and vocational centers and a student scholarship scheme.

"It is a great pleasure to be in Mongolia and to be dealing with such a phenomenal country with so much tradition, pride and history," Marshall said.

"Within Oyu Tolgoi and Tavan Tolgoi, a coal mine also in South Gobi, we have world-class mineral deposits that could run for 50-100 years. Mongolia has a population of 2.7 million people. It is very unusual to find two major deposits like that coupled with such a small population. The per capita potential is enormous."

High production yields

With the future mine sitting just 120 km north of the Chinese border, and relations continually being strengthened between the two countries, China is an important potential customer.

To facilitate access, Oyu Tolgoi LLC will be developing a road system to link the mine to China at the point where many of the goods and services come in.

"We have a huge advantage in relation to the low freight costs involved, compared to other countries that have to put their concentrate on a ship for 6-8 weeks for example," Marshall said. "We haven't yet developed our marketing strategy, but we will certainly be in discussion with China."

Oyu Tolgoi believes production yield will be somewhere between 450 and 555,000 tons of copper, and around 650,000 ounces of gold per year for the first 10 years and that the mine may become one of the three largest copper mines in the world.

In July this year, the company began construction on a $1.2 billion copper-gold concentrator. One of the most significant parts of the Oyu Tolgoi mining process, the concentrator enriches mined copper ore to produce a concentrate that is then sold to clients for smelting and refining. Once up and running, the device will treat up to 100,000 tons of ore a day.

"The concentrator will be one of the best of its kind," Marshall said. "We are aiming to use only world-class technology at Oyu Tolgoi."

Oyu Tolgoi has pledged to ensure Mongolia's sustainable development and will be complying with local and international standards to safeguard the South Gobi environment and the mine's employees.

(China Daily 09/13/2010 page20)