By Robb M. Stewart
MELBOURNE--Rio Tinto PLC (RIO.LN) plans to make its first
shipment of copper and gold from the Oyu Tolgoi mine in Mongolia on
Friday, an operation the mining company estimates will account for
over 30% of the country's gross domestic product when it reaches
full production in 2020, a person familiar with the matter
said.
A ceremony marking the event will be held that day at the mine
in the southern Gobi Desert, about 100 kilometers north of the
Mongolia-China border, the person said.
The US$6.2 billion Oyu Tolgoi mine is key to Rio Tinto reducing
its dependence on iron ore, which accounts for about 80% of its
earnings. Faced with volatile commodities markets, new Chief
Executive Sam Walsh is moving to simplify the company's structure
and is selling non-core and poor performing assets and targeting
more than US$5 billion in cost savings by the end of next year. A
number of senior managers at Rio Tinto's iron ore division in
Western Australia were laid off this week.
The first copper-gold concentrate was produced at Oyu Tolgoi in
January and Rio Tinto had forecast commercial output would begin by
the end of June, provided it could settle a dispute with Mongolia's
government over costs and the further development of the mine.
Rio Tinto operates and controls Oyu Tolgoi through its majority
stake in Turquoise Hill Resources Ltd. (TRQ.T), which owns 66% of
Oyu Tolgoi and the Mongolian government the remaining 34%.
Mr. Walsh, who took over as CEO after the departure of Tom
Albanese in January, last month said the mining operation had
concentrate bagged and ready for shipment as production continued
to ramp up. Progress had been made to resolve outstanding issues
with the government and to secure project financing to continue
developing Oyu Tolgoi, he said at the time.
When fully operational in 2020, Oyu Tolgoi is set to produce an
average of 450,000 metric tons of copper and 330,000 ounces of gold
a year as well as silver and molybdenum. The mine currently is an
open-pit operation, but plans call for an underground section to be
developed that would begin production in 2016.
The launch of shipments of copper from Oyu Tolgoi comes at time
when global supply of the metal has been dented by a landslide at
Rio Tinto's Bingham Canyon mine in Utah in April and a fatal
accident that shut Freeport-McMoran Copper & Gold Inc.'s (FCX)
Grasberg mine in Indonesia in May. Rio Tinto has estimated planned
output in Utah will be reduced by about 50% this year after the
business produced roughly 163,000 tons of refined copper last
year.
Write to Robb M. Stewart at robb.stewart@wsj.com
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