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International press reviews regarding Rio Tinto and Oyu Tolgoi
4 сарын өмнө
By Terrence Edwards
Rio Tinto said it is committed to expanding its Oyu Tolgoi copper mine in Mongolia based on a positive outlook for the metal and confidence that low production costs can buoy profits even as competitors cut output.
The miner wants to lock in up to $4.2 billion in project financing by November to build more than 200 km of tunnels to access higher-quality ores at the deposit over the next five to seven years, Craig Kinnell, Rio's chief evelopment officer for copper and coal, said during a media tour of the mine this week.
The expansion should extend the mine's lifespan past 2100 and open up 80 percent of the resources available, making it the world's third-largest mine for copper and gold.
With new project approvals slowing elsewhere, Kinnell said he was confident demand would hold up, particularly in China.
"I can't see anything to reconsider given the quality of our resource," he said. "Our commitment is to bring this on as soon as possible". Oyu Tolgoi is expected to produce 175,000 to 195,000 tonnes of copper in 2015 and has a 
key role in Rio Tinto's strategy to ease its dependence on iron ore, but there have been concerns that its expansion is coming at the wrong time. "Rio Tinto has to develop the mine as it is a core copper asset to the company," said Yang Changhua, senior analyst at state-backed research firm Antaike in Beijing.
"But expected additional copper from the Oyu Tolgoi mine would pile pressure on the global copper market, which is not likely to improve strongly in the coming two years," he said. However, Kinnell said that while the expansion of Oyu Tolgoi would raise ore production, there were no plans to expand concentrator capacity at the project.
He added that low production costs meant the project would be a "bedrock" for the firm, and that he remained bullish on the long-term fundamentals for copper.
While Rio plans to expand operations its four key copper assets - Oyu Tolgoi, Kennecott, Escondida and Grasberg - rival Glencore said it would cut supplies by 400,000 tonnes. Rio is also looking for new supplies with plans to get online the Resolution project in the United States and La Granja in Peru, raising concerns that the industry will be hit by the sort of glut now affecting iron ore.
"The market is aware that supply cuts such as those by Glencore can only lay the basis for a tightening of the market," said Carsten Menke, commodities research analyst at Julius Baer. "This is different to 2009, when for example copper demand collapsed because we had a 
global recession. This time the oversupply in the copper market is due to the expansion of mine production over the last few years." 
Sydney Morning Herald
By Philip Wen
Rio Tinto says it remains confident in the long-term prospects for copper, as it pushes ahead with a multibillion-dollar expansion of its key Oyu Tolgoi mine despite a slowdown in the Chinese economy that has precipitated steep falls in global commodity prices.
Oyu Tolgoi, located in the desolate South Gobi desert, is one of the world's richest copper deposits and is considered a key growth asset for Rio Tinto.
"When you sit in the lowest cost quartile you should be able to make money at any point in the economic cycle," Rio Tinto's copper and coal group chief development officer Craig Kinnell, told reporters at a site visit. "It's the biggest and best new project we've got, full-stop, across the group."
When fully operational, the mine is expected to account for one-third of Mongolia's economic output. The underground expansion of the project, which will take between five and seven years and where 80 per cent of the mine value lies, was resuscitated in May after an almost three-year dispute was settled between the company and the Mongolian government, which were seeking a better deal.
In a further step forward, Mongolian government agencies this week agreed to accept a key feasibility study for the project which would allow Rio Tinto and its partners to progress talks with its lenders to recommit to a $US4 billion project finance deal, which had lapsed during the delay.
Mr Kinnell said he expected to sign the renewed project finance deal with the miner's consortium of banks in November. As well as securing finance for the project, Rio Tinto must still strike an electricity deal and obtain other permits from the government before starting construction.
In the more than two years of stop-start talks, which not only halted the expansion of the mine but also deterred potential foreign investors in Mongolia, copper prices have fallen to six-year lows.
But Rio Tinto, which has raised eyebrows for what some consider overly optimistic forecasts for ongoing Chinese steel demand, is similarly bullish on the country's appetite for copper. 
The red metal is used in everything from power lines to wind farms and electronics, and is seen as a barometer for global economic growth.
"This year is worse than the last," Shanghai Ganglian commodities analyst Li Yu said. "The speed of supply growth is obviously much faster than the growth of need."
Investment in China's power grid has shrunk significantly, Mr Li said, in part due to a shift in government policy and the suspension of large projects due to indecision caused by the country's ongoing anti-corruption campaign. "China's power industry consumes 60 per cent of copper. If investment in this sector shrinks, we can't expect growth in the copper industry."
But Mr Kinnell said the long-run fundamentals of copper remained robust despite the near-term volatility and said the trend toward urbanisation and electrification in other nations, as well as the resurgent US economy would keep demand strong even with moderating Chinese economic growth.
The Australian
By Scott Murdoch
Rio Tinto is confident next year’s Mongolian elections won’t pose a political or sovereign risk to its planned $US6 billion ($8.4bn) investment in the delayed underground copper and gold mine expansion of the Oyu Tolgoi project.
The expansion could boost production at the site by up to 80 per cent. Preliminary work has restarted after a 2½-year stand-off amid tense negotiations between the Anglo-Australian miner and the Mongolian government over the structure of royalties and tax payments.
Tunnels have started to be rebuilt after being put on hold, while commercial production is expected to begin in the next six years.
The project is estimated to cost at least $US6bn. The miner is now sounding out investors around the world to provide $US4.5bn in project financing.
Despite the delays and disputes with the Mongolian government, settled in May, the miner is confident it will not face trouble securing funding, although the global copper price has fallen sharply in the past year.
Rio Tinto’s copper and coal chief development officer, Craig Kinnell, told The Australian in Mongolia this week the elections due by mid next year were unlikely to effect the development of the underground mine.
The Democratic Party holds power in the country’s parliament, with the backing of a number of minor parties, but the Mongolia People’s Party secured 25 seats in the last election four years ago. Despite being nearly a year out from the election, most domestic political analysts do not expect major change at next year’s poll.
As part of the lengthy negotiations to restart work on the underground mine, Rio Tinto agreed to pay the Mongolian government 5 per cent royalties on its output, the same amount levied on its open-cut production.
Mr Kinnell said the refreshed investment and shareholder agreements were strong enough to ensure the development would go ahead, despite the outcome of the election.
“What we didn’t do was to sacrifice speed with the deal to get the right agreement in place that all of the shareholders could get behind,” he said.
“What we have done over the best part of the past three years is that we have a stable platform that will withstand the test of time.
“The chances are that this mine will last in excess of 85 years. That agreement is consistent in line with the original investment agreement.
“The underground investment agreement is in place. If there was a change in government, we have no concerns, absolutely not.”
Mr Kinnell said Rio Tinto had faced previous political criticism over its expansion of the Oyu Tolgoi open-cut and underground mine projects, but it was confident the renewed deal would meet its deadline and production targets.
“I think the agreements are fundamentally sound,” he said.
Rio Tinto says 95 per cent of Oyu Tolgoi’s workforce are locally employed Mongolian workers. The company paid $US1.3bn in taxes last year.
This year, The open-cut mine operations sent 1 million tonnes of copper concentrate to its major customer, China, within 18 months of commercial production. The company is confident demand from the world’s second-largest economy will remain strong despite fears the nation is headed for sharply lower growth.
Mr Kinnell said he was confident the project would also meet its project funding targets, despite the delays.
He said the mining company was dealing with global investors who were keen to initially buy into the project before it was put on hold over the government negotiations. “It’s a tier-one project, and nothing material has changed since the last time that we had agreements with these guys,” Mr Kinnell said.
The Oyu Tolgoi operation is expected to account for 30 per cent of Mongolia’s total GDP when fully operational.
Under the ownership structure, the Mongolian government has 34 per cent of Oyu Tolgoi, while Canada’s Torquoise Hill has 66 per cent. Rio Tinto owns 51 per cent of the Canadian miner and has management rights.
The West Australian
By Peter Klinger
Rio Tinto says its $US6 billion expansion of the massive Oyu Tolgoi copper-gold project in Mongolia's Gobi desert is a no-brainer and will go ahead despite the sharp slump in metal prices that has created investor unease about new big-ticket developments.
Craig Kinnell, Rio’s copper and coal division chief development officer, said early-stage works on the Oyu Tolgoi underground project had already begun and substantial activity should kick in by June.
This was predicated on the Oyu Tolgoi joint venture, owned 66 per cent by Rio subsidiary Turquoise Hill and 34 per cent by the Mongolian government, finalising about $US4.2 billion 
in project finance by the end of this year and completing a revision of the capital budget for the underground development, which was last costed several years ago.
Mr Kinnell, speaking on site at Oyu Tolgoi yesterday, would not reveal the likely final budget but hinted the tough environment for the mining industry, triggered by weaker-than-expected Chinese growth, should give rise to cost savings as contractors and suppliers were more desperate to pick up work.
“It’s probably a good time to go out there (and seek tenders),” Mr Kinnell said.
Oyu Tolgoi’s progress will be watched closely by WA mining and contracting circles because of the project's big contribution to the global copper market but also as a source of much-needed work at a time when most other developments have been shelved.
Rio’s view is the copper oversupply that is depressing the metal’s price will swing into a supply gap opening up by 2018 as the last of the boom-time projects comes on stream.
By 2025, Rio argues, the copper shortfall will be four to six million tonnes a year.
The underground expansion will seek to tap 80 per cent of Oyu Tolgoi’s known resource and turn the mine into one of the world’s biggest, lowest-cost and longest-life copper producers.
By the time the underground development is completed and fully ramped up — first ore is expected about 2021 — Oyu Tolgoi’s annual output average 430,000 tonnes of copper and 425,000 ounces of gold, trucked in concentrate form to Chinese smelter customers 80km south.
Mining from the open pit began two years ago and should this year generate up to 195,000t of copper and as many as 700,000oz.
Underground work stalled two years ago amid a stalemate in negotiations between Rio and the Mongolian Government. The disagreements were sorted in May with a new investment agreement, paving the way for an underground development that will cement Oyu Tolgoi as Mongolia’s most important project, accounting for about 30 per cent of the land-locked Asian nation’s gross domestic product.
It is also regarded as the most important growth project globally for Rio, and will lower its dependence on Pilbara iron ore earnings.
Mr Kinnell brushed off the weak copper price, which is trading around six-year lows, saying Oyu Tolgoi’s underground expansion should survive any pricing scenario.
“It supports the initial ($US6 billion) investment at Oyu Tolgoi so really, no, this is going to go ahead and it's going to be a tier one asset,” he said.
“I can’t see anything that would cause us to reconsider or want to slow down. It is the biggest and best new project we have across the group, full stop.”
Herald Sun
By John Dagge
RIO Tinto chief development officer for copper Craig Kinnell says jitters around China’s economy have not changed his bullish outlook on demand for the red metal.
And the mining titan has bedded down a strong framework for investing in its most important growth asset, the $US6 billion ($8.5 billion) underground expansion of the Oyu Tolgoi copper mine, Mr Kinnell says.
In Mongolia’s South Gobi Desert, it is one of the world’s richest copper deposits — roughly the size of New York’s Manhattan Island.
“The investment agreement is a robust document supported by successive governments,” Mr Kinnell said of a revised deal struck with the Mongolian Government earlier this year.
Rio has already spent $US6 billion building an open-pit mine at the site about 80km north of the Chinese border. It produced $US1.7 billion in revenue for its owners last year.
Work on an underground expansion was mothballed for more than two years from 2013 as the Mongolian Government pushed to change the original contract in an effort to extract more lucrative terms.
The expansion is critical given 80 per cent of Oyu Tolgoi’s value is buried deep underground.
Rio reached a partially revised deal with the government in May. That deal will face a key challenge next June when the vast landlocked nation of just 3 million people holds national elections.
Speaking at the mine site this week, Mr Kinnell said while the megaproject still faced criticism from some quarters, Rio had bedded down a solid agreement well understood by all stakeholders.
“The agreements are fundamentally sound. Everyone has signed up to them. All the appropriate resolutions are in place so we would not anticipate significant issues even with an election,” he said.
Rio expects a new $US4.2 billion financing deal for the project to be in place by the end of the year, with construction to begin around mid-2016.
Copper has not been immune from the broad slump in commodity prices. Earlier this year, it fell to its lowest price since the global financial crisis amid concerns about a slowdown in the Chinese economy.
China is the world’s biggest buyer of the metal — widely used in telecommunications, electronics and construction — consuming about 40 per cent of global supply. Mr Kinnell said while China was slowing, its economic growth remained high and came off a much bigger base.
“We are very bullish on the (copper) fundamentals,” he told Business Daily. “We have to keep focused on the long-term and we don’t anticipate anything that is going to materially adjust that.”
The Times 
By Marcus Leroux
Rio Tinto is close to agreeing a $4.2 billion loan package to construct its huge Oyu Tolgoi underground mine in Mongolia, which was held up by three years of wrangling with the government.
An earlier debt package had been agreed with 13 lenders but the deal lapsed during protracted negotiations with Mongolia’s government over how the spoils would be shared between the two parties. On a tour of the mine in the South Gobi desert, Rio executives insisted that recent turmoil in commodity markets, sparked by fears over the Chinese economy, would not deter lenders….
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