Ivanhoe Mines Ltd., the 66 percent stakeholder in the Oyu Tolgoi copper and gold project, will need to build a new power plant by the summer of 2017. The due date is per its agreement with the Mongolian government for the project's development.

“We are required to build a power plant within four years of first production,” said Peter Meredith, deputy chairman of the Canadian-based firm at the recent Mongolian Investment Summit in London.

The requirement is part of an investment agreement that Ivanhoe signed with the Mongolian government in 2009. The Mongolian government currently owns the remaining 34 percent stake in the project, but will be allowed to increase its stake after 30 years have passed since the agreement. Meredith said Oyu Tolgoi will need a 325 megawatt power plant for safety purposes, given the number of people that will be working underground.  However, the company is considering a 600 megawatt plant, with a view to sell some of the power back to the grid.

The project currently has access to enough power to meet its needs until August or September, said Meredith. After that, it will need to use diesel power generation to meet any additional needs. Since diesel power generation can be very expensive, Ivanhoe is in negotiations to secure a three-to-four-year contract to import energy from China. Ivanhoe could build a power plant now, but it would require an investment of USD 1 billion and require a workforce of 7,00 people.

Ivanhoe is already spending several billions of dollars to reach the state of production. It employs 14,000 people and Oyu Tolgoi is now Mongolia's third largest city. The Oyu Tolgoi project is due for its first commercial production by mid-2013.