Special committee to be set up to look into Oyu Tolgoi underground development issuesPolitics
Ulaanbaatar /MONTSAME/. On November 30, Oyu Tolgoi Board of Directors resolved to establish a special committee to study the reasons behind the cost overrun and delay in the development of Oyu Tolgoi underground mine, and draw conclusion, according to the press release posted by the cabinet secretariat on its website.
The special committee will be made up of 4 members, including two members nominated from the Erdenes Oyu Tolgoi LLC and two members nominated by the Turquoise Hill Resources Ltd.
The committee will have key responsibilities to select and appoint external experts to review the reasons why costs for the Oyu Tolgoi underground mine development have increased and the development is running behind its schedule, and submit their own proposals based on the experts’ final conclusion for the Oyu Tolgoi Board’s discussions.
The experts’ conclusion on relevant matters, including but not limited to, project management, mine design and cost control, is expected to be made within a maximum of 6 months.
“In spite of the original estimates of USD 5.3 billion capital for the Oyu Tolgoi underground mine development, Rio Tinto announced on November 16, 2019, that development capital spend for the project was increased by USD 1.2 billion to USD 1.9 billion, and the estimated date of the first sustainable production was postponed by 16-20 months than initially planned” the press release reads.
“Around 80 percent of the total reserves of the Oyu Tolgoi copper-gold deposits is to be extracted from the underground and once the underground mine starts producing, Oyu Tolgoi is expected to become the world’s third-largest copper producer. Oyu Tolgoi is jointly owned by Erdenes Oyu Tolgoi LLC on behalf of the Government of Mongolia (34 percent) and Canadian-based Turquoise Hill Resources (66 percent), listed on the Toronto and New York Stock exchanges. Rio Tinto has a 50.8 percent controlling stake in Turquoise Hill and manages Oyu Tolgoi on behalf of the partnership. As a manager and mine operator of the Oyu Tolgoi project, Oyu Tolgoi LLC conducts management of the mine’s activities on a day-to-day basis.”
Concerning the decision, head of the Cabinet Secretariat and Minister of Mongolia L.Oyun-Erdene shared his views by saying “It is of significance that Oyu Tolgoi’s Board of Directors is taking a certain measure to hold examination by external experts on the reasons behind the more than 30-percent growth than originally planned in the investment costs for the Oyu Tolgoi’s underground development and around two-year of delay in its expected completion date. I am delighted to see that the Board has not relaxed its control over the company’s operations, and principles of good governance are in place.”
“While we assure of our support to the decision made by the Oyu Tolgoi Board of Directors, we are convinced that making clear of causes of the investment cost increase in the underground mine development through the experts’ conclusion will serve the interest of the Oyu Tolgoi LLC and all of its stakeholders, and will help to maintain longstanding operations of the company, ensuring its effectiveness for a prolonged period of time.
The Government of Mongolia fully supports the Oyu Tolgoi’s underground mine development and is confident that the time will shortly arrive when the world-class underground mine is put into production, contributing accordingly to the economic and social development of Mongolia” says Oyun-Erdene.