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Monday, 5 November 2012
Rio Tinto signs power supply deal in major milestone for Mongolia
Mining giant Rio Tinto (LON:RIO) has signed a binding agreement that has secured the supply of electricity to its flagship copper and gold mine in Mongolia.
The deal with a Chinese power company will pave the way for production to start at the mine in less than three months.
It is the first cross-border power supply agreement between China and Mongolia.
“Rio Tinto and its partners have invested almost US$6 billion in this vast project, completing it in only 28 months,” said chief executive Andrew Harding.
“We have trained and employed thousands of Mongolians and Oyu Tolgoi will be a vital contributor to Mongolia's economic development.”
The deal represents a major milestone for the vast Asian country as the mine, which will be one of the world’s biggest copper mines once it is up and running, already accounts for a third of Mongolia’s gross domestic product (GDP).
Oyu Tolgoi is 66%-owned by Turquoise Hill, which is in turn owned by Rio through its majority stake.
The news will be a boost for other miners in the region, including Toronto-listed Kincora Copper (CVE:KCC), which is hoping its Bronze Fox mine can be the next Oyu Tolgoi.
The company, whose mine is 140km from Rio’s giant mine, has been active on the corporate front with the acquisition of two important licences adjacent to Bronze Fox.
This gives it an impressive land holding along the world-class Oyu Tolgoi belt, in the Gobi desert, which is one of the last frontiers for copper exploration.
At the end of last October, Kincora raised C$6 mln through a private placing to continue drilling and exploration at the project, as well as for working capital.
The company also recently revealed it is using more aggressive tools to target deep copper porphyries.
Christopher Welch, an analyst at Ocean Equities, said Kincora’s Bronze Fox project “clearly warrants” more drilling following the “encouraging results” earlier this year.
The most recent hole, F62, located in the West Kasulu zone at Bronze Fox, averaged 0.44% copper equivalent over 661 metres. Around 37 metres of that was over 1% copper equivalent.
Grades of 0.4% to 0.5% copper near surface could possibly be high enough to justify an open-cast mine, Kincora chief executive John Rickus said last month.