Rio Tinto's (ASX: RIO) $6.2 billion copper and gold project in Mongolia has finally began to record revenues, months after the completion of construction and first production.
Oyu Tolgoi, which is 66% owned by Rio subsidiary Turquoise Hill Resources and the Mongolian Government, has encountered many delays since it started construction but both parties can now start to book revenues.
The final hurdle for the mines owners was to gain approval from Chinese customs officials. The approval was necessary in order to allow the mines customers to withdraw copper concentrate from warehouses across the Mongolian-Chinese border and the owners couldn't record revenue until customers had successfully received their product.
In July Turquoise Hill began exporting concentrate to China after disagreements on costs, management and employment between its JV partner, the Mongolian government, led to numerous setbacks and delays.
However the company can now move forward, it released a statement saying, "Oyu Tolgoi's customers have been engaged with Chinese customs officials and have received the necessary approvals allowing them to collect purchased concentrate." According to The Wall Street Journal customers began withdrawing their product on Saturday, which marks a significant step forward for all parties involved.
In Rio's quarterly report released last week, the company announced record copper production and although it acknowledged it was unable to record revenue from its Oyu Tolgoi project it expected Chinese approval soon. Turquoise Hill said the delay from Chinese customs would not affect production targets, "Shipments of concentrate are expected to be aligned with production rates by the end of 2013."
Since shipments first started in July and up until September 18, the mine produced 160,000 tonnes of copper concentrate but at full capacity it will average annual production of 450,000 tonnes of copper and 330,000 ounces of gold.
Foolish Takeaway
Oyu Tolgoi's development and production is significant for shareholders because it adds a crucial amount of diversification to Rio's revenue base and will prove lucrative for both JV partners in years to come. By 2021, when the mine is at full production, it will account for approximately one third of Mongolia's entire GDP.
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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.
