By Alex MacDonald
LONDON--Mongolia's massive Oyu Tolgoi copper and gold mine has
already begun to receive payments for copper concentrate shipped to
a warehouse in China but hasn't yet recorded any revenue due to
Chinese customs approval delays, a majority-owned unit of Anglo
Australian miner Rio Tinto PLC (RIO) said Monday.
The delay represents another stumbling block for the project
which has been mired in years of spats over matters, including how
to maximize returns and the ratio of foreigners in its workforce.
The $6.2 billion Oyu Tolgoi project represents a key pillar of the
Mongolian government's economic growth plans but recent attempts to
change the terms of the project following the introduction of a
more restrictive foreign investment policy has taken its toll on
the Mongolian economy. Foreign direct investment is down 43% in the
first half of the year, according to a Renaissance Capital
note.
Turquoise Hill Resources Ltd (TRQ.T), which owns 66% of Oyu
Tolgoi and is majority owned by the project's operator, Rio Tinto
PLC (RIO), said the mine "has begun to receive payments from
customers. However, as revenue is recognized [only] when customers
withdraw concentrate from the warehouse, to date Oyu Tolgoi has not
recorded any revenue."
Oyu Tolgoi has produced 160,000 metric tons of copper
concentrate and shipped approximately 38,000 tons of concentrate to
a bonded warehouse in China between the time it began its first
shipments in July and Sept. 18. Another 122,000 tons is currently
being held in inventory at the mine, the company said.
Although Oyu Tolgoi has established the logistics process with
Mongolian customs officials enabling concentrate to be delivered to
the bonded warehouse in China, Oyu Tolgoi's customers are currently
engaged with Chinese customs officials to receive the necessary
approvals to enable them to collect purchased concentrate from the
warehouse, the company said.
Production at the mine has not been affected while customers
work through the Chinese customs process, the company added. Oyu
Tolgoi's concentrator continues to ramp up and is currently running
at full capacity or approximately 100,000 tons of ore processed a
day. "Turquoise Hill continues to expect Oyu Tolgoi sales to be
aligned with production rates by the end of this year," it
added.
Earlier this summer, Rio Tinto decided to put on hold the next
stage of Oyu Tolgoi's development and begin laying off some 1,700
workers and contractors after the Mongolian government said project
financing for Oyu Tolgoi's next expansion phase would need to be
pre-approved by its parliament.
The Mongolian government, which owns a 34% stake in the project,
is keen to resolve outstanding issues. Chimed Saikhanbileg, a
government minister and chief of the Cabinet Secretariat said last
week that Oyu Tolgoi's board, which includes representatives from
the Mongolian government, would meet in London this week to discuss
the outstanding issues.
At full output, Oyu Tolgoi is set to produce an average of
450,000 tons of copper and 330,000 ounces of gold a year, as well
as silver and molybdenum. The International Monetary Fund has
estimated that the mine will generate up to one-third of Mongolia's
gross domestic product when it reaches full production, which had
been expected in 2021.
Write to Alex MacDonald at alex.macdonald@wsj.com