Giant Mongolia mine starts copper exports

Copper concentrate exports have started to leave Mongolia’s giant Oyu Tolgoi mine for China after repeated delays.

Mine operator Rio Tinto, which helped fund Oyu Tolgoi’s $6.2bn development cost, said that the mine known as OT was expected to make up a third of Mongolia’s economy by 2020.

Rio Tinto also said that at full tilt OT would produce about 450,000 tonnes of copper and 330,000 ounces of gold a year.

“Oyu Tolgoi starts production at a time when undeveloped quality copper assets are scarce and the outlook for copper continues to be strong,” the Anglo-Australian mining giant said on Tuesday.

Journalists had been invited to attend a ceremony at the mine 80km north of the Mongolia-China border on June 14 to mark the first exports. That was postponed to June 21, but the event was again cancelled at the last minute.

Mongolia’s mining minister had said that the delay in exports was because the government and Rio disagreed on the arrangement of revenue generated from Oyu Tolgoi as well as the disclosure of the mine’s $8bn sales agreements.

OT, two-thirds owned by Rio Tinto’s Turquoise Hill Resources unit, is a vital new source of growth for the company, which is dependent on iron ore mining in Australia for two-thirds of its revenue.

The mine is on par with many of the big lodes of South America although only about half the size of Chile’s Escondida mine, the world’s largest, run by BHP Billiton and in which Rio Tinto owns 30 percent.

Rio Tinto has been producing at Oyu Tolgoi for several months and stockpiling concentrate, ground ore ready for smelting, ahead of acquiring permits for transport.

Copper shortage

Exports from the mine will be vital to copper output in China as Chinese smelters are already facing a shortage of alternative raw material scrap. Several have even cut production owing to a lack of scrap.

Investors had been concerned with persistent delays at the mine. 

Karr McCurdy, president and chief executive of mining industry advisor Behr Dolbear, told Al Jazeera that uncertainty over OT was a reason why Mongolia had slipped to 11th place in the minerals industry advisor’s 2013 Ranking of Countries for Mining Investment.

Mark Crosby, Associate Professor at the University of Melbourne’s Business School, said OT mine would have an initial impact on global copper prices and would be worth about three percent of global copper production.

“It’s significant enough to change prices a little bit,” Crosby said.

“But this is a very important mine for Mongolia.”