PERTH (miningweekly.com) – Mining giant Rio Tinto has secured $4.4-billion in project financing to construct an underground operation at its Oyu Tolgoi project, in Mongolia.

The miner said on Tuesday that the project finance was secured by international financial institutions and export credit agencies, representing the governments of the US, Canada and Australia, along with 15 commercial banks.

“This project finance agreement is significant in the industry and is the next important step towards further development of the world class Oyu Tolgoi mine in Mongolia,” said Rio’s copper and coal CEO Jean-Sébastien Jacques.

“This kind of mining development partnership model sets the industry benchmark for future schemes and underscores Rio Tinto’s commitment to responsible and prudent growth. Long-term copper fundamentals remain strong and Oyu Tolgoi as a tier one asset will be a globally important source of supply as the market moves back into structural deficit over the next few years.”

The inking of the finance agreement followed an earlier agreement between the Mongolian government, and project partners Rio and Turquoise Hill Resources, which set out a pathway for the development and financing of the Oyu Tolgoi underground mine.

Under the project financing, Initial Senior Loans will total A$4.4-billion and will consist of facilities provided and funded by a number of financial institutions, including Export Development Canada, the European Bank for Reconstruction and Development, the International Finance Corporation, the Export-Import Bank of the United States, the Export Finance and Insurance Corporation of Australia and commercial lenders.

The parties have agreed a debt cap of $6-billion, providing the option for an additional $1.6-billion of supplemental debt in future.

Rio said on Tuesday that all Oyu Tolgoi shareholders would now continue to work towards updating the feasibility study, including the revised capital estimates, and securing all necessary permits for the development of the underground mine.

Once these steps have been completed the project will be submitted to the various boards for approval and the $4.4-billion tranche would be drawn down.

Construction of an openpit mine at Oyu Tolgoi was completed on schedule in less than 24 months and production started in 2013. More than 1.5-million tonnes of copper concentrate have now been produced from the mine.

While all of the copper concentrate currently produced was from the open-pit mine, Rio estimated that more than 80% of the value of the Oyu Tolgoi lies in the proposed underground mine.