* Improving copper prices offset by decline in volumes
* Open-pit production suffering decline in ore grades
* Underground expansion hit by construction delays
ULAANBAATAR, March 16 (Reuters) - Annual revenue from Mongolia’s giant Oyu Tolgoi copper-gold mine fell 22 per cent last year, the Rio Tinto unit in charge of the project said, with construction delays leaving it unable to take full advantage of higher prices.
Oyu Tolgoi booked $939.8 million in revenue for 2017, down from $1.2 billion the previous year, Turquoise Hill Resources said in its 2017 financial report published on Thursday. That reflected “lower sales volumes partially offset by higher copper prices,” it said.
Net profit attributable to Turquoise Hill stood at $181.2 million in 2017, down 14 percent on the year.
Turquoise Hill is the 66-percent owner of the mine, one of the world’s biggest copper-gold deposits, having signed a landmark investment agreement in 2009, with the Mongolian government holding the remainder. Giant miner Rio Tinto holds a majority stake in the Canada-based firm and also operates the mine.
Revenue rose 1.9 percent in the fourth quarter of 2017 compared with the July-September period, as copper prices surged to a four-year high in late December.
The mine is expected to produce 125,000-155,000 tonnes of copper and 240,000-280,000 ounces of gold in concentrates in 2018. That compares with 157,400 tonnes of copper and 114,000 ounces of gold in 2017.
With ore grades deteriorating, the mine is raising production volumes from its open pit mine, which has been in operation since 2013.
Rio Tinto is in the middle of an underground expansion project designed to unlock 80 percent of the deposit’s wealth. The first draw from the underground section is expected to take place in 2020, with sustainable mining to begin a year later.
Total spending on the expansion project has reached $1.1 billion since it was launched in 2016 following a three-year delay, with Rio Tinto at loggerheads with the government over claims of unpaid taxes and complaints about cost overruns.
Mongolia made an additional tax claim of $155 million from Oyu Tolgoi last year. Turquoise Hill said it has paid an additional $5 million to settle unpaid taxes and fees, saying that it considers all its taxes now to have been paid.
Anti-corruption authorities in Mongolia are now probing the 2009 investment pact for possible abuses of power by officials, but Turquoise Hill said it does not believe Oyu Tolgoi itself to be a subject of the investigation. (Reporting by Terrence Edwards Editing by David Stanway and Kenneth Maxwell)