RIO TINTO IN MONGOLIAN POWER STRUGGLE

A POWER SOLUTION FOR ONE OF RIO TINTO'S MOST PROSPECTIVE MINES REMAINS ELUSIVE, RAISING DOUBTS OVER WHETHER PLANS TO BE IN PRODUCTION WITHIN SIX MONTHS CAN BE ACHIEVED.

THE OYU TOLGOI COPPER AND GOLD MINE IN MONGOLIA LOOMS AS ONE OF RIO TINTO'S MOST EXCITING GROWTH PROJECTS ON THE BACK OF THE COMPANY'S RECENT TAKEOVER OF OYU TOLGOI'S MAJORITY OWNER IVANHOE MINES.

But difficulties in delivering power to the mine’s remote location in the Gobi desert are continuing to fester, with Ivanhoe confirming that a deal to import power from China had still not been reached.

The current plan would see the mine site, which includes concentrators and a large workers village, connected to the power grid on the Chinese side of the border for the first four years of the mine’s life.

But such a deal requires an agreement between Chinese and Mongolian authorities, and Ivanhoe confirmed today that officials from the two nations had still not agreed terms.

The company said it remained hopeful that talks would be ”expedited” to ensure the imported power was available for meet the target of first production in the third quarter of 2012.

Ivanhoe said extra diesel-generated power was bringing bought into the mine site in the meantime, and warned that production schedules could slip if the plan to import Chinese power had to be abandoned in favour of building a coal-fired power station on site at Oyu Tolgoi sooner than planned.

Under the mine contract, all power must be sourced from within Mongolia after four years of mine life.

”If the establishment of a dedicated power plant is required for the early production at Oyu Tolgoi, the required revisions to the construction schedule for the Oyu Tolgoi project could adversely affect the project’s ability to achieve the planned start of commercial production in 2013,” Ivanhoe said yesterday in a statement.

peter.ker@theage.com.au

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