Oyu Tolgoi is one of the most exciting developments in copper and gold mining for several decades. It contains reserves and resources that make it one of the world’s largest known copper and gold deposits. The project is expected to be a significant contributor to Mongolia’s development.
Situated in the southern Gobi desert of Mongolia, approximately 550 kilometres south of the capital, Ulaanbaatar and 80 kilometres north of the Mongolia-China border, Oyu Tolgoi is jointly owned by the Government of Mongolia (34 per cent) and Turquoise Hill Resources (66 per cent, of which Rio Tinto owns 51 per cent). Since 2010, Rio Tinto has also been the manager of the Oyu Tolgoi project.
After decades of exploration and drilling, the first major discoveries at Oyu Tolgoi were made in 2001, leading to several years of further exploration which revealed the impressive scale of the deposit. While exploration continues, even with the reserves currently identified, Oyu Tolgoi is expected to operate for over 50 years.
Once extracted, the ore from Oyu Tolgoi is processed on-site into concentrate. This saleable product contains approximately 25-30 per cent copper and much smaller amounts of gold, silver, and other metals.
Since July 2013, shipments of concentrate have been exported by road to international customers, mostly in nearby China. By December 2015, total shipments had reached 1.5 million tonnes of concentrate.
To this point, all of Oyu Tolgoi’s concentrate has been produced using ore mined from the surface using open pit mining. However, the majority of the value of Oyu Tolgoi, up to 80 per cent, lies deep underground. To access this part of the resource, underground mining techniques will be used at depths of more than 1,300 metres.
In May 2015, Oyu Tolgoi’s shareholders, Rio Tinto, Turquoise Hill Resources, and the Government of Mongolia, agreed a plan to progress the next stage of underground development at Oyu Tolgoi.
The following December a Project Financing agreement with 20 international banks and financial institutions to fund the development was signed. The US$4.4 billion unlocked by the agreement will allow the construction of more than 200 km of tunnels. Following final Board approvals, construction work is expected to begin during 2016.
Contributing to the prosperity of Mongolia
Given the scale of Oyu Tolgoi, the creation of a safe and competitive business provides the opportunity to contribute to Mongolia’s development and the prosperity of the Mongolian people.
Between 2010 and the end of 2015, Oyu Tolgoi spent more than US$5.4 billion in country in the form of salaries, payments to Mongolian suppliers, taxes, and other payments to the Government.
By the end of 2015, the workforce was more than 95 per cent Mongolian, well above the 90 per cent minimum commitment that Oyu Tolgoi has made during the mine’s operations.
The indirect impact of the project is also significant; with more than 630 national businesses working with Oyu Tolgoi in 2015, accounting for more than half of procurement spend.
One area where Oyu Tolgoi has also already had a significant impact is in education. In June 2010, Oyu Tolgoi and the Mongolian Ministry of Education, Culture and Science signed a Memorandum of Understanding (MoU) to collaborate in the development of the vocational education and training sector. Under the MoU, Oyu Tolgoi committed to invest US$126 million for implementation of a programme focused on development of the Mongolian workforce and improvement of the technical and vocational training system.
Through the MoU, Oyu Tolgoi invested in building and improving vocational training centres in seven Mongolian towns and cities, supported the training of 1,200 vocational teachers, and provided scholarships for hundreds of young Mongolians at national and international universities.
Supporting the South Gobi’s communities
The South Gobi is a large and sparsely populated area, where, for hundreds of years, residents of the region have relied on nomadic herding and animal husbandry.
With mining development comes an opportunity to support the sustainable development of the region, providing new opportunities and a stimulus to diversify the local economy.
Khanbogd, the closest town to Oyu Tolgoi, has benefitted through a partnership approach to development, involving Oyu Tolgoi working closely with local people and government. This has led to the connection of the town with a permanent supply of power, funding for new educational and healthcare facilities, the sealing of local roads, and programmes to help improve social conditions. Currently, a new bulk water supply system and waste management facilities are also under construction.
In 2015, Oyu Tolgoi signed a Cooperation Agreement with Khanbogd and other local communities, formalising the contributions that the mine will make in the coming years. As well as allocating US$5 million per year for community development, the agreement sets out how the partners will work together to ensure that local people continue to benefit, sustainably over the long term, from Oyu Tolgoi.
Protecting the environment
While a rugged desert, the unique ecosystem of the South Gobi and the proximity to herder communities and wildlife means that Oyu Tolgoi is operating in a sensitive and precious environment. Under the guidance of Rio Tinto's world-class standards of environmental protection, Oyu Tolgoi is fully committed to minimising and mitigating its impact on the local environment.
Oyu Tolgoi is designed to be one of the most water-efficient mines of its kind in the world. In 2015, the mine used 0.44 cubic metres of water per tonne of ore processed, less than half the global average for comparable mines. While only sourcing this water from a previously-undiscovered, deep and saline aquifer, the operation also continuously recycles water – at a rate of 85.5 per cent in 2015.
Working in partnership with international NGOs, the operation aims to have a net positive impact on the biodiversity of the area surrounding the site. Through compliance with over 70 specific Mongolian laws and standards governing the mine's operation, Oyu Tolgoi's environmental impact will be carefully managed for the life of the mine and beyond.
From natural wealth to enduring value, knowledge and skill
Given its significance to the copper industry globally and the likely multi-generational nature of the business, Oyu Tolgoi is being developed with a distinctly long-term view. With the expected development of underground mining, the business has a long and bright future.
Guided by Oyu Tolgoi’s vision, from natural wealth to enduring value, knowledge and skill, the partners and stakeholders involved with the project are firmly focused on delivering a safe and globally competitive copper business that contributes to the prosperity of Mongolia.