Rio Tinto's $5-billion second-stage expansion of the Oyu Tolgoi copper and gold mine in Mongolia has once again run into problems after the exit of Mongolian prime minister and the impending retirement of Rio Tinto's subsidiary firm Turquoise Hill's chairman.
Canada-based Turquoise Hill, which is 51-per cent owned by Rio Tinto, said chairman David Klingner and CEO Kay Priesly, both employees of Rio Tinto, would step down from January and December respectively.
Craig Kinnell had last month returned to the UK for family reasons.
The underground expansion of the $5.4-billion Oyu Tolgoi mine, 66-per cent held by Turquoise Hill and the remaining by the Mongolian government,
The $5.4-billion underground expansion of the mine has been delayed since the past 16 months amid differences in funding the expansion between Rio Tinto and the Mongolian government and other disagreements like tax dispute.
Although Turquoise Hill started production of the Oyu Tolgoi mine after several years of delay, the company said in March that it will reduce its anticipated output for the year and now expects Oyu Tolgui to produce between 135,000 metric tons and 160,000 tons of copper in concentrates for 2014, and 600,000 to 700,000 troy ounces of gold in concentrates.
The Oyu Tolgoi copper and gold mine in Mongolia's Gobi desert is thought to be one of the world's largest untapped copper and gold deposits. It contains approximately 37 million tonnes of copper and 1,300 tonnes of gold in measured, indicated and inferred resources.
Oyu Tolgoi is the largest single-investment in the history of Mongolia. It will require an investment of $6 billion, in addition to the $1 billion already spent on exploration and evaluation. This is a very significant investment to the Mongolian economy whose the gross domestic product was $6.2 billion in 2010.
Turquoise Hill has estimated that the average annual output from the Oyu Tolgoi mine to be around 540,000 tonnes of copper and 670,000 ounces of gold over a 27-year life and the project could account for as much as 5 per cent of Mongolia's gross domestic product.
Rio Tinto, which had initially acquired a 19.9-per cent stake in Turquoise Hill in October 2006 in order to jointly develop the Oyu Tolgoi project, has since gradually raised its stake to 51 per cent, with a long term plan of controlling the entire project.