* Power line construction complete in China, Mongolia
* Talks with China on power deal gain momentum
* Underground expansion study delayed to 1st half 2013
* Shares closed down 0.9 percent at C$8.41 on TSX (Adds share movement, Rio CEO comment)
TORONTO, Oct 9 (Reuters) - Turquoise Hill Resources Ltd said on Tuesday it has completed construction of power lines for its Oyu Tolgoi copper-gold mine project in Mongolia and that it is confident a power transmission deal will be reached with China, with commercial production expected early next year.
The company also said a feasibility study on an underground expansion of the project will be delayed until the first half of 2013, though it still expects production from the expansion in 2016.
Shares of Turquoise Hill, which is controlled by global mining giant Rio Tinto , closed down 0.9 percent at C$8.41 on Tuesday on the Toronto Stock Exchange.
Turquoise Hill said power lines in China and Mongolia have been tested with full loads and are ready to operate. The Toronto-based company is still in talks with Chinese authorities on a power purchase agreement for the mine, located about 80 km (50 miles) north of the Mongolia-China border.
Separately, Rio Tinto Chief Executive Tom Albanese told reporters in London on Tuesday that he saw "real momentum" in the power talks, and that they have come down to commercial terms.
Turquoise Hill holds a 66 percent stake in Oyu Tolgoi, which will become one of the world's largest copper and gold mines when it reaches full production in 2018.
$1=$0.98 Canadian Reporting by Julie Gordon in Toronto and Bhaswati Mukhopadhyay in Bangalore,; Editing by Sreejiraj Eluvangal