Rio Tinto said it is committed to expanding its Oyu Tolgoi copper mine in Mongolia based on a positive outlook for the metal and confidence that low production costs can buoy profits even as competitors cut output.
The miner wants to lock in up to $4.2 billion in project financing by November to build more than 200 km of tunnels to access higher-quality ores at the deposit over the next five to seven years, Craig Kinnell, Rio's chief development officer for copper and coal, said during a media tour of the mine this week.
The expansion should extend the mine's lifespan past 2100 and open up 80 percent of the resources available, making it the world's third-largest mine for copper and gold.
With new project approvals slowing elsewhere, Kinnell said he was confident demand would hold up, particularly in China.
"I can't see anything to reconsider given the quality of our resource," he said. "Our commitment is to bring this on as soon as possible".
Oyu Tolgoi is expected to produce 175,000 to 195,000 tonnes of copper in 2015 and has a key role in Rio Tinto's strategy to ease its dependence on iron ore, but there have been concerns that its expansion is coming at the wrong time.
"Rio Tinto has to develop the mine as it is a core copper asset to the company," said Yang Changhua, senior analyst at state-backed research firm Antaike in Beijing.
"But expected additional copper from the Oyu Tolgoi mine would pile pressure on the global copper market, which is not likely to improve strongly in the coming two years," he said.
However, Kinnell said that while the expansion of Oyu Tolgoi would raise ore production, there were no plans to expand concentrator capacity at the project.
He added that low production costs meant the project would be a "bedrock" for the firm, and that he remained bullish on the long-term fundamentals for copper.
While Rio plans to expand operations its four key copper assets - Oyu Tolgoi, Kennecott, Escondida and Grasberg - rival Glencore said it would cut supplies by 400,000 tonnes.
Rio is also looking for new supplies with plans to get online the Resolution project in the United States and La Granja in Peru, raising concerns that the industry will be hit by the sort of glut now affecting iron ore.
"The market is aware that supply cuts such as those by Glencore can only lay the basis for a tightening of the market," said Carsten Menke, commodities research analyst at Julius Baer.
"This is different to 2009, when for example copper demand collapsed because we had a global recession. This time the oversupply in the copper market is due to the expansion of mine production over the last few years." (Additional reporting by Polly Yam in HONG KONG and Pratima Desai in LONDON; Editing by Ed Davies)
Source:Reuters
0 comments:
Post a Comment