Saturday, May 7, 2016

Rio Tinto gives Notice to Proceed on Oyu Tolgoi underground expansion


Rio Tinto will push ahead with a $US5.3 billion expansion of its Oyu Tolgoi copper and gold mine in Mongolia, with the project set to cost about $US400 million more than previously thought.

Ending a three-year stalemate, the approval was agreed by Rio, its Canadian subsidiary Turquoise Hill Resources and the Mongolian Government.

Development will begin within months, and first production from the underground expansion will come in 2020, when a shortage of copper is tipped to emerge.

Oyu Tolgoi mine in southern Mongolia

All I can say is Finally. Mongolia really needs this mine and the billions in investment that it will bring to the economy. Back in 2011 the Mongolian economy was growing at 17% per year. The slowdown in China and the resultant prolonged decline in commodity prices along with several own goals by Mongolia's government have conspired to slow the economy to a projected growth rate of .8% for 2016. 

Nevertheless now that this $5.3 billion dollar expansion is going to progress we should see the economy benefit. This will be good for long suffering shareholders of Mongolia Growth Group of which I am one. I believe totally in the Mongolian story which I have written about before.

Looks like the shares have bottomed

The shares are totally bombed out but they represent a long term call on the Mongolian economy. In addition, the shares are only selling for $.33 yet have over a $1.00 per share worth of prime real estate in the capital of Ulaanbaatar. If you think the economy is going to grow than a rebound in real estate is inevitable.

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