Rio Tinto's $5.3-billion (U.S.) underground expansion of Oyu Tolgoi mine in Mongolia will increase its output in about four years when the copper market is in deficit, according to the company's deputy chief executive officer.
The investment to expand the copper and gold mine required courage due to the "challenging economic climate," Jean-Sébastien Jacques said at an event Saturday in Mongolia, according to an e-mail transcript provided by the company. A global surplus of refined copper could maintain pressure on the market with a number of mine expansions expected during 2016, Bloomberg Intelligence said in a April 7 report.
"The long-term need for copper remains strong and production from Oyu Tolgoi underground will commence when copper markets will be in deficit," said Mr. Jacques, who will become CEO in July, replacing Sam Walsh.
Work on the project will begin from the middle of this year and first production from the underground mine is expected in 2020, London-based Rio said last week. When the operation is fully running in 2027, Oyu Tolgoi is expected to produce more than 500,000 tonnes of copper a year.
Copper demand may catch up with supply next year and a deficit will then widen on a lack of new mines, Freeport-McMoRan Inc., the largest publicly traded producer, said in March. Oyu Tolgoi, about 80 kilometres north of the Chinese border, will rank as third largest in the world at full production, according to Wood Mackenzie Ltd.
Turquoise Hill Resources Ltd., which Rio Tinto controls through a 51-per-cent stake, owns 66 per cent of the deposit, according to data compiled by Bloomberg. Mongolia's state-owned Erdenes Oyu Tolgoi LLC holds the share of the mine not owned by Turquoise Hill.