By Robb M. Stewart
MELBOURNE--Rio Tinto PLC's /zigman2/quotes/202627887/composite RIO -0.35% massive Oyu Tolgoi copper and gold project in Mongolia is nearing completion and remains on track for commercial production next year, with the cost for the first phase of development expected to come in as expected at US$6.2 billion, the mining company's Turquoise Hill Resources Ltd. subsidiary said Wednesday.
Additional diesel-powered electrical generating capacity has been installed at the South Gobi Desert site to meet power needs during construction, and electrical transmission lines running from neighboring China are in place but it is still waiting for a supply agreement to be signed between the two countries before power can be imported, the company said.
Canada's Turquoise Hill, formerly known as Ivanhoe Mines Ltd., in its second-quarter earnings statement said the first phase of construction of the project was 94% complete at the end of July. Initial output of copper and gold concentrate is set to begin before the end of this year, and commercial production is expected in the first half of 2013.
Transmission lines in both Mongolia and China have been tested with full power loads and are ready for commissioning, and the venture is pushing on with arrangements to ensure power from China is available in the second half of the year, the company said. Commercial discussions on a power deal between the countries continue, it said, adding that if negotiations aren't successful a dedicated power plant would be required which would set back the start of commercial output.
Rio Tinto is managing the development of Oyu Tolgoi and owns a 51% stake in Turquoise Hill, which in turn holds a 66% stake in the project to the Mongolian government's 34% interest. Oyu Tolgoi, Mongolian words that in English mean "turquoise hill," is one of the world's largest undeveloped copper and gold assets, with a measured and indicated resource estimated at 41 billion pounds of copper and 21 million ounces of the precious metal.
Turquoise Hill said it swung to a net loss of US$285.9 million in the three months through June from a profit of about US$0.6 million a year earlier, including US$168.7 million in financing costs, US$8.7 million in foreign exchange losses plus other expenses. Revenue for the period fell to US$28.2 million from US$47.3 million.
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