Oyu Tolgoi Contractor Assembling Project Team for “Next Phase of Major Copper, Gold Underground” Mine in Mongolia
March 4 (Cover Mongolia) UK-based AMEC, a leading global EPCM firm, is assembling a project team for the “next phase of a major EPCM mining project in Mongolia,” according to a job posting on Seek.com.au dated 4 March, 2014.
The project is a “copper and gold, underground and surface mining operation located in Mongolia. Over the next 8-year period, the project will embark on a large scale expansion of the newly commissioned copper mine and concentrator facilities.”, according to the ad.
AMEC has been working on OT since 2010, after having been commissioned by Oyu Tolgoi LLC to undertake the feasibility study for Lift 1 of the underground Hugo North block cave operation.
This perhaps could be the best sign yet that project financing resolution is nearing for Rio Tinto and Government of Mongolia (GoM). Turquoise Hill Resources (NYSE:TRQ, TSX:TRQ), which owns 66% of Oyu Tolgoi and in turn is 50.8% owned by Rio Tinto, had reported in December that the deadline of the commitment of the 15 commercial banks to the project financing is extended to March 31, 2014. EBRD and IFC’s commitments though had expired “unceremoniously” on February 26, according a client update by Nick Cousyn, Chief Operating Officer of Mongolia’s largest broker BDSec.
In another positive sign, on February 21, GoM had approved the signing of a “Legal Protection for Guaranteed Foreign Investments” agreement with the World Bank’s Multilateral Investment Guarantee Agency (MIGA), which is offering political risk guarantees to the lenders. So far MIGA reports that only Standard Chartered Bank had formally applied in 2012 for a guarantee to its US$1 billion contribution to the financing. Since then the project financing has been put on hold by Rio Tinto until it has gained backing from GoM.
On February 12, TRQ gave a warning shot to the world saying that “further delays may occur if outstanding shareholder issues, including project finance, are not resolved before the expiration of lender commitments,” signaling that there is still an unresolved fundamental dispute between the sides. In response to this announcement, Erdenes Oyu Tolgoi LLC, the state-owned firm controlling Mongolia’s 34% stake, released its own understanding of the situation, stating that it understands the matter of the US$4.2 billion project financing to be subject to the release of an updated Feasibility Study on the underground development, which TRQ had said will be ready in the second quarter of 2014.
This feasibility study, in reality, is believed be much closer to completion than officially stated, leaving the possibility of an earlier publication than the official “Q2” and meet the March 31 deadline. EBRD and IFC though are yet to declare whether they will extend their commitments.
TRQ closed +5.79% to US$3.84, +5.45% to C$4.26 on Tuesday.