The Government of Mongolia owns 34% stake in Oyu Tolgoi. Credit: Copyright © 2017 Rio Tinto.

Rio Tinto is considering options to develop domestic energy generation for the Oyu Tolgoi operation after the Government of Mongolia terminated the power sector cooperation agreement (PSCA) for the country’s southern region.

Under the PSCA signed in August 2014, Rio Tinto reached a framework for cooperation with the Government of Mongolia to deliver an energy plan for the South Gobi region.

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According to an investment agreement reached by Oyu Tolgoi, the company agreed to set-up power supply within the country four years from the start of commercial production.

The termination of PSCA requires Oyu Tolgoi to meet the domestic power supply commitment within four years.

Originally, the government intended to develop a new independent power plant at the Tavan Tolgoi coalfields with Oyu Tolgoi as off-taker rather than the owner.

Among the multiple options being considered, Rio Tinto is exploring the possibility of the construction of an Oyu Tolgoi site-based power plant.

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“Rio Tinto has already set aside $250m a year to fund the development of a power station in the country in its 2019 and 2020 CAPEX forecasts.”

The company noted that it would meet all obligations agreed to under the investment agreement.

It is understood that the cost and means of financing the power supply solution will be finalised between shareholders.

Meanwhile, the company indicated that it would continue to review its capital expenditure forecasts for the project.

Rio Tinto has already set aside $250m a year to fund the development of a power station in the country in its 2019 and 2020 CAPEX forecasts.

Oyu Tolgoi is in the southern Gobi desert of Mongolia, 550km south of the capital, Ulaanbaatar.

The copper and gold mining project is jointly owned by the government of Mongolia and Turquoise Hill Resources, with 34% and 66% respectively.

Rio Tinto is a majority stakeholder in Turquoise Hill with a 51% interest.