Monsters: Rio settles deal with Mongolia to develop copper monster Oyu Tolgoi
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Rio Tinto’s (ASX:RIO) Turquoise Hill will wave goodbye to US$2.4 billion in loan repayments from the Mongolian Government in a make good to get the Oyu Tolgoi underground mine off the ground.
The oft-delayed expansion of the giant copper and gold operation in the Asian country has long been one of its biggest headaches.
Rio has faced accusations it has been responsible for delays on the project, one of the most important businesses in Mongolia, and was not forthcoming on the reasons for setbacks and cost blowouts.
The settlement with the Mongolian Government comes after two diplomatic visits from Rio CEO Jakob Stausholm, and will see the start of underground operations with first sustainable production due in the first half of 2023.
“We would like to thank the Government of Mongolia for their commitment to working productively with Rio Tinto and TRQ to reach this crucial agreement, that will see one of the world’s largest copper growth projects move forward and firmly establish Mongolia as a global investment destination,” Stausholm said.
“This agreement represents a reset of our relationship and resolves historical issues between the OT project partners. We strongly believe in the future of this country and I am personally committed to ensuring that the people of Mongolia benefit strongly from OT along with our shareholders.”
“The OT underground development will consolidate Rio Tinto’s position as a leading global supplier of copper at a time when demand is increasing, driven by its role in enabling decarbonisation and electrification in the race to net zero,” Stausholm said.
“We will also explore additional opportunities to decarbonise the OT operations, including sourcing renewable power.”
The agreement will see a big restructuring of the financing for the project which is forecast to cost US$6.925 billion, including US$175m in Covid-19 impacts and underground capex of US$1.8b.
A new forecast will be undertaken during the first half of 2022.
The mine is predicted to be one of the largest copper producing operations in the world, churning out 500,000tpa at its peak between 2028 and 2036 and 350,000tpa for another five years after that. The open pit alone produces just 163,000tpa currently.
The other bonus of the underground development is its 1.52% copper grade and 0.31g/t gold reserve. The copper grade is three times the current open pit, putting Oyu Tolgoi in the lowest quartile of WoodMac’s global copper cash curve.
The ASX was a black hole today enveloping all who deigned to travel near its path.
The bad mood enveloped a couple gold miners who actually had something decent to report.
African gold miner Perseus (ASX:PRU) mitigated losses seen across the sector after pushing gold production up 14% quarter on quarter to 128,378oz, with its 2021 output a massive 66% up year on year to 432,410oz.
Its costs fell on the higher production rate as well, with the company’s weighted all in sustaining costs decreased 3% of US$32/oz quarter on quarter to US$934/oz and 5% lower year on year to US$985/oz.
Perseus was well within guidance through the second half, producing 241,164oz at US$949/oz (guidance of 225-255,000oz at US$925-1025/oz) across the Yaoure, Edikan and Sissingue mines in Cote d’Ivoire and Ghana.
St Barbara (ASX:SBM) on the other hand became the latest miner to note the impact of Covid-19 on its operations, saying the pandemic has caused issues sourcing labour and equipment for its Atlantic operations in Canada and Simberi in PNG.
It has also been preparing for the impact of Covid-19 cases and restrictions in WA, although those may be some way off after the State Government reversed its decision to reopen its border on February 5 last week.
The company drew down $50 million from its Australian debt facility as “a prudent measure taken to maintain liquidity in a volatile operating environment due to potential COVID-19 interruptions.”
St Barbs has revised its guidance for the Atlantic Gold business down from 65-85,000oz for FY22 to 55-65,000oz along with higher costs after rainfall and hitting delays in obtaining routine waste rock permits.
Although production at the Gwalia gold mine in WA is expected to be at the upper end of guidance issues at Atlantic and Simberi have seen it reduce guidance from 305,000-355,000oz to 305,000-335,000oz.
However, the restart of mining at Simberi following the completion of the tailings pipeline will see a drop in AISC guidance across the business from $1710-1860/oz to $1,650-A$1,815oz.
St Barbara produced 65,523oz at $1587/oz in the December quarter, selling its gold bounty at an average margin of $836/oz with realised prices of $2423/oz.
The gold miner’s MD Craig Jetson pointed to the acquisition of Bardoc Gold, which will add ounces to its Leonora operations, as a major development.
MinRes (ASX:MIN) has become the latest lithium miner to report a big jump in spodumene prices as shortages of the battery metal spur buyers to pay more.
MinRes received US$1153/dmt for spodumene from its 50% owned Mt Marion mine in WA, up 56% on the September quarter.
The rise in prices augers well for the return to production this year of MinRes and Albemarle’s Wodgina mine in the Pilbara and the start of production at the Kemerton refinery near Perth.
MinRes and its JV partner Ganfeng produced 98,000t of spodumene concentrate and shipped 136,000t in the December quarter, putting Mt Marion on track to deliver its 450,000-475,000t guidance for FY22.
It came as the prices realised for its iron ore pushed on the margins due to elevated discounts for low grade product.
MinRes was impacted by adjustments of US$29.4m for prior quarter shipments, with shipments in the December quarter priced at US$69.19/t when they were excluded.
It saw MinRes’ iron ore division press on the margins at its lower margin operations like the Koolyanobbing mine in the Yilgarn region, where it has reduced production.
The Chris Ellison-led miner exported 4.9Mwmt of iron ore in the quarter, in line with the September quarter and 12% up on the same quarter in 2020 due to the ramp up of its Utah Point hub.
The company is on track to deliver its revised full-year guidance of 18.5-19.5Mtpa.