Ivanhoe to build Oyu Tolgoi power plant by 2017

LONDON -(MarketWatch)- Ivanhoe Mines Ltd will need to build a new power plant by the summer of 2017 as part of its agreement with the Mongolian government to develop the country's massive Oyu Tolgoi copper-and-gold deposit.

Peter Meredith, deputy chairman of Canada-based Ivanhoe Mines, which owns a 66% stake in Oyu Tolgoi, told the Terrapinn Mongolia Investment Summit that: "We are required to build a power plant within four years of first production."

Oyu Tolgoi is due to begin first commercial production by mid-2013.

The requirement is part of an investment agreement that Ivanhoe signed with the Mongolian government in 2009. The Mongolian government owns the remaining 34% stake in the project.

Meredith said Oyu Tolgoi will need a 325 megawatt power plant for safety purposes, given the number of people that will be working underground. Ivanhoe, however, is considering building a 600MW power plant, with a view to selling some of that power back to the grid, Meredith said.

He said that the project has access to enough power to meet its needs until August or September 2012. After that it will need to use diesel power generation to meet any additional needs.

Continuing with diesel power generators would be very expensive, he noted, and as a result Ivanhoe is in negotiations to secure a three- to four-year contract to import electricity from neighboring China. Ivanhoe could potentially build a power plant now, Meredith said, but it would require an investment of $1 billion and require a work force of 7,000 people, Meredith said. Ivanhoe is already spending several billion dollars to get Oyu Tolgoi into production. It already employs 14,000 people and Oyu Tolgoi is now the third largest city in Mongolia, a country with 3.1 million people, according to Meredith.

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