RPT-UPDATE 1-Turquoise Hill says inventory building at Mongolia's Oyu Tolgoi

Wed Jan 15, 2014 4:40pm EST

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Jan 15 (Reuters) - Inventories at Rio Tinto's Oyu Tolgoi copper and gold mine in Mongolia are expected to rise during the first quarter, Turquoise Hill Resources Ltd said on Wednesday.

Turquoise Hill, which owns a majority interest in Oyu Tolgoi and is controlled by Rio, said the mine was still producing more concentrate than it is shipping.

Two of the smelters it sends material to have been hit by technical problems, and "consistent customer delivery schedules have not yet been embedded."

Some sales have been deferred to the second and third quarters, and inventory levels at the massive mine should return to normal by the end of this year, the company said.

Global miner Rio Tinto owns 50.8 percent of Vancouver-based Turquoise Hill, which in turn holds a 66 percent interest in Oyu Tolgoi. Rio operates the mine.

A customs dispute held up Oyu Tolgoi's shipments to China last year, forcing the mine to stockpile material, but the conflict was resolved in October, and in November Turquoise Hill said inventories should fall "steadily" in 2014, reaching normal levels by the end of the year.

The mine produced 76,700 tonnes of copper and 157,000 ounces of gold in concentrates in 2013.

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