08.09.2011 update on oyu tolgoi project, mr. cameron mcrae
TRANSCRIPT
Oyu Tolgoi –Strengthening and Growing Mongolia
Cameron McRaeChief Executive Officer – Oyu Tolgoi LLC
Country Director – Rio Tinto
8 September 2011
3
• The total global demand for refined copper is
expected to rise by more than 40 percent to 27
million tonnes by 2020.
• By 2025, it has been estimated that 221 Chinese
cities will have a population of at least one million
people. Of these, 23 will have over 5 million
people.
• China will have built between 4 and 5 million new
buildings between 2005 and 2025.
• This could be in the form of 50,000 skyscrapers –
the equivalent of constructing up to ten cities the
size of New York.
• In addition to China, India’s large population and
strong GDP projections also presents strong
potential for demand growth
There is significant scope for demand growth over the medium to long-term
Current demand for copper is driven by China
China and India copper consumption forecast
(kg per capita)
GDP per capita
China
2010
China
2016
India
2010
India
2016RoW
2010
RoW
2016
US
$43,000
China
$7,000
US
450
China
2010 GDP per capita
(2005 PPP$)
Vehicles (Passenger
cars per 1000 people)
Sources: Brook Hunt A Wood Mackenzie Company, International Copper Association,
International Energy Agency, Bloomsbury Mineral Economics
Note: Figures are based on declared resources.
Source: Metals Economics Group
Copper reserves and resources – 1.96Bt of copper in 866 deposits
10%
China
Australia
31%
Peru
3%Mexico
4%
Canada
Russia
Mongolia
Zambia
Others 11% Indonesia
2%
Philippines
KazakhstanPoland
DRC
Argentina
8%
Chile
USA
3%
2%
2%
4%
2%1%
3%
2%
6%
5%
Fourteen per cent of reported global resources are in Asia
Reserves
Weighted average grade: 0.53% copper
Total contained copper: 705Mt
Resources
Weighted average grade: 0.46% copper
Total contained copper: 482Mt
The largest 13% of deposits contain 77% of the copper
Oyu Tolgoi - significant additional low cost production and further growth potential
• Oyu Tolgoi will be a top five copper
producer and major gold producer1
• Average annual production of 450 kt of
copper and 330 koz of gold.
Large
Long life
Low cost
• 3.1bt resource & 1.4bt reserve.
• Potential for a > 50 year mine life.
• Highly prospective region with further
exploration potential.
• Significant by-product credits from gold.
• Expected to have first quartile net unit
cash costs.
Note: 1. Ranked using 2013 Brook Hunt mine production data and Oyu Tolgoi’s full capacity production.
Source: Brook Hunt a Wood Mackenzie Company, Rio Tinto, Oyu Tolgoi LLC
Oyu Tolgoi: Current Investment and Ownership Model
Rio Tinto has invested over US$3 billion in the Oyu Tolgoi project over
the past 5 years
Rio Tinto
48.5%
Other
Shareholders
Ivanhoe Mines
66%
Government of
Mongolia 34%
Oyu Tolgoi LLC
• In December 2010, Rio Tinto and Ivanhoe Mines
announced a number of key agreements.
• These agreements:
• Provide Rio Tinto with a clear pathway to
49% ownership in Ivanhoe Mines
• Secure additional funding for the project
• Established Rio Tinto as the development
and operating manager of Oyu Tolgoi
• Through its 48.5% stake in Ivanhoe, Rio Tinto has
a 32% indirect ownership of Oyu Tolgoi
Transition to Rio Tinto Management
Intellectual Property
Global Experience
The Oyu Tolgoi project now fully enjoys the benefits
of Rio Tinto’s world-class skills base
The Oyu Tolgoi project can call on the full suite of
Rio Tinto’s patented technical know-how
The Oyu Tolgoi project benefits from the ‘best-
practice’ systems and processes refined over
decades in over 40 countries worldwide
Functional and Technical Expertise
The Oyu Tolgoi Investment Agreement provides stability for future investment
• Long term investment
• Sustainable development
Terms of Investment
• Stable tax environment
• Tax and royalty revenue
Taxation
• Flexible energy options
• Provision for transport systems
Infrastructure
• 90% Mongolian employees
• 5 year training & strategy plan
• Scholarships for local students
Employment & Training
• Mongolia First Initiative
• Transparent community plans
Regional development
• Detailed environmental impact
assessments and protection plan
Environment
Source: Oyu Tolgoi LLC
Capital expenditure
Education & Training
Employment
• US$100m in taxes and fees were paid to GoM from 2000-2010
• We expect to pay over US$220m in taxes and equities to GoM in 2011
• Infrastructure plans include an airport, paved road to Gashuun Sukhait,
and 220kv power line
• 5 major construction projects are 100% managed by Mongolian
contractors
• US$10m annual budget for local community relations programs and
projects
• Work towards ISO 14001 certification – environmental standard
• US$85m committed to education and training
• Target of 90 per cent Mongolian workforce by 2013
• US$700m has been spent with over 1,000 Mongolian suppliers since the
project’s inception
• US$1m micro loan scheme to support the growth of South Gobi micro
businesses
The OT Investment Agreement is a catalyst for economic and social development
The Investment Agreement is enabling Mongolia to strengthen
Source: Oyu Tolgoi LLC
Because of Oyu Tolgoi, Mongolia’s economy is growing
Source: World Bank Quarterly Economic Update, August 2011
OT Economic Impact Assessment, School of Economic Studies NUM and BA Economics Pty Ltd
Mongolia’s economy is growing (Q2 2011 results compared to Q2 2010)
• Oyu Tolgoi will make up about one-third of Mongolia’s economy
by 2020.
• Oyu Tolgoi will lift GDP per person by MNT1.7 million (over
US$1000) by 2020 – an increase equivalent to over 60% of
today's GDP per person.
• The average growth rate from 2013-2020 is projected to be
12.7% - compared to 7.7% without Oyu Tolgoi.
• Economy grew by 17%, compared to ~10% in Q1
• Transportation up 39%
• Construction up 38%
• Retail and wholesale trade up 24%
• Manufacturing sectors up 13%
By 2020, Mongolia’s economy will increase by 35% because of Oyu Tolgoi
Rio Tinto is committed to investing in Mongolia for the long term
• Training the first of a new
generation of Mongolians
through Rio Tinto’s Graduate
Program
• First Gold Partner of the
Mongolian National Olympic
Committee
• Supporting biodiversity
protection through planning and
conservation projects in the
South Gobi
• Supporting health care
improvement in Mongolia and
taking care of basic needs like access to water