On Monday (17 February), Turquoise Hill Resources announced the submission of the Feasibility Study for the Tavan Tolgoi Power Plant (TTPP) Project to the Government of Mongolia by Oyu Tolgoi LLC.

Oyu Tolgoi LLC is obliged under the 2009 Oyu Tolgoi Investment Agreement to secure a long-term domestic source of power for the Oyu Tolgoi mine. The Power Source Framework Agreement (PSFA) entered into between Oyu Tolgoi LLC and the Government of Mongolia on 31 December 2018 provides a binding framework and pathway for the construction of a Tavan Tolgoi-based power solution for the Oyu Tolgoi mine by June 30, 2023. The power plant would be majority-owned by Oyu Tolgoi LLC and situated close to the Tavan Tolgoi coal mining district located approximately 150 kilometres from the Oyu Tolgoi mine.

Oyu Tolgoi is currently sourcing power from China’s Inner Mongolian Western Grid via overhead power lines, under a back-to-back power purchase agreement with National Power Transmission Grid JSC (NPTG), the power-importing entity, and the Inner Mongolian Power Company (IMPC).

The Tavan Tolgoi Power Plant (TTPP) Feasibility Study is based on a 300 MW coal fired power plant to be located in Tsogttsetsii soum of Umnugovi province, with a total project cost estimate of up to $924 million, pending consideration of certain amounts yet to be finalized such as government fees, licenses and certain reimbursements per the Tavan Tolgoi Investment Agreement.

It is anticipated that back-up power requirements will be provided by IMPC until such time as they can be provided within Mongolia. The project aligns with Parliamentary Resolution No.73 (2018) and the government policies to develop a power plant at the Tavan Tolgoi coal fields.

Oyu Tolgoi LLC has made significant progress to develop a cost competitive and optimal solution for TTPP with a fully negotiated EPC contract that is now ready for signature. The current schedule targets two units of the TTPP to be operational by June 2024.

The existing PSFA specifies target dates for milestones to be achieved through mutual cooperation between Oyu Tolgoi LLC and the Government of Mongolia, several of which have now passed. In accordance with the Contingency Arrangements clause 7 4 a ii of the PSFA, Oyu Tolgoi LLC has given notice and is currently seeking a mutually acceptable alternative basis on which to proceed with securing long term domestic power supply for Oyu Tolgoi.

“Certainty of safe, reliable and stable long term power supply is fundamental to the development of an underground mining project like Oyu Tolgoi,” stated Ulf Quellmann, Chief Executive Officer of Turquoise Hill.  “We will continue to work with the Government of Mongolia and Rio Tinto on behalf of all stakeholders to determine the preferred power solution for Oyu Tolgoi.”