Rio Tinto plans expansion of Mongolian mine Oyu Tolgoi amid drop in copper & gold production

While mining giant Rio Tinto has shelved aside its $20-billion Simandou project in Guinea because of the huge iron ore overcapacity, it plans to expand the Oyu Tolgoi mine in Mongolia. The expansion plan comes amid reports on Tuesday that the mine’s copper and gold output declined.

For the second quarter of 2016, copper production in concentrate went down to 51,700 tonnes compared with 55,300 tonnes for the same quarter in 2015. Gold production drastically was reduced to only 70,000 ounces in Q2 from 238,000 ounces in Q2 2015, reports The Australian.

With areas being mined for the second half of 2016 having reduced grades, Rio Tinto (ASX: RIO) expects lower gold production for the period, says Jeff Tygesen, chief executive of Turquoise Hill, a subsidiary of Rio Tinto which owns the majority in Oyu Tolgoi. He says the lower production was expected because of reduced mining in Phase 2’s open pit.

For Q3 and Q4 of 2016, Rio Tinto’s guidance for copper production is between 175,000 and 195,000 tonnes, while it is between 255,000 and 285,000 ounces of gold. But silver production logged an increase to 391,000 ounces compared to Q2 2015’s 297,000 ounces.

Also on Tuesday, the giant miner reported lower shipment of iron ore of 80.9 million tonnes from the Pilbara region. Analysts’ expectation was 83.3 million tonnes, reports the Australian Financial Review.

With its Q1 shipment of 80.8 million tonnes, it would be a challenge for Rio Tinto to meet its full year goal to ship 350 million tonnes of iron ore from its global operations. Iron ore prices slightly improved to US$56.86 (A$75.09) per tonne from the six-month average of US$52.16 (A$68.92).

VIDEO: Oyu Tolgoi underground development