News: RIO UPDATE 1-Rio Tinto's Oyu Tolgoi underground production to kick off in late 2022

(Adds background on project, details on expansion timeline)

Dec 16 (Reuters) - Rio Tinto (RIO) said on Wednesday that underground mining at its biggest growth project, the Oyu Tolgoi copper mine in Mongolia, would achieve sustainable production by October 2022.

Oyu Tolgoi is one of the world's largest-known copper and gold deposits, located in the South Gobi region of Mongolia. The Mongolian government holds a 34% stake in the project, and Rio's majority-owned Turquoise Hill TRQ.TO owns the rest.

The project was held up as Mongolia sought to strike a better bargain, with Rio and Turquoise locked in a feud over the expansion's funding, and costs ballooning because of the difficult geology of the site.

Rio said expansion of the first section of the underground zone would require development capital of $6.75 billion, which accounted for the expected impact from COVID-19.

Rio said Oyu Tolgoi is expected to produce 480,000 tonnes of copper per year on average from 2028 to 2036 from both the open pit and underground mine, against 146,300 tonnes in 2019 from just the open pit.

By 2030, Oyu Tolgoi is expected to be the fourth-largest copper mine in the world, the company said.

The miner said the next two sections of the underground mine, which would support a ramp-up to 95,000 tonnes of ore per day, were still being studied, with initial recommendations expected by mid-2021.