“Long-term copper fundamentals remain strong and Oyu Tolgoi as a tier one asset will be a globally important source of supply as the market moves back into structural deficit over the next few years,” Rio Tinto copper and coal chief executive Jean-Sébastien Jacques said in a statement.
The owners of Oyu Tolgoi are seeking to raise up to $6 billion of limited recourse project finance to refinance existing shareholder funding and support development of the underground phase.
The initial project finance tranche of $4.4 billion was secured on Tuesday and will be drawn down subject to customary approvals as well as Rio Tinto, Turquoise Hill Resources and Oyu Tolgoi board approvals of the underground mine development.
Twenty financial institutions have agreed to finance the second phase of the $6 billion expansion.
These include Export Development Canada, the European Bank for Reconstruction and Development, the International Finance Corporation, the Export-Import Bank of the United States, the Export Finance and Insurance Corporation of Australia and commercial lenders comprising BNP Paribas, ANZ, ING, Société Générale Corporate & Investment Banking, Sumitomo Mitsui, Standard Chartered Bank, Canadian Imperial Bank of Commerce, Crédit Agricole, Intesa Sanpaolo, National Australia Bank, Natixis, HSBC, The Bank of Tokyo-Mitsubishi UFJ, KfW IPEX-Bank and Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden.
“Rio Tinto and all Oyu Tolgoi shareholders will now continue to work towards updating the feasibility study, including the revised capital estimates, and securing all necessary permits for the development of the underground mine,” the miner said.
Oyu Tolgoi is a copper-gold mine in the South Gobi region of Mongolia and is one of the largest undeveloped high-grade copper deposits in the world.
Oyu Tolgoi is 66% owned by Turquoise Hill and 34% by Erdenes Oyu Tolgoi, which is wholly-owned by the government of Mongolia. Rio Tinto owns 51% of Turquoise Hill and has managed the Oyu Tolgoi project since 2010.
About $6.4 billion has been invested to develop the open-pit mine at Oyu Tolgoi, with an additional $500 million of capital costs for initial development of the underground mine.
While all of the copper concentrate currently produced is from the open pit mine, more than 80% of the value of the Oyu Tolgoi project lies in the proposed underground mine, Rio Tinto has said.
More than 1.5 million tonnes of copper concentrate has so far been produced from the Oyu Tolgoi mine, which started production in 2013.