* Rio lining up funds for Oyu Tolgoi mine
* Copper chief says final investment decision expected early
2016
* Says could see copper supply deficit in 2 or 3 years
(Recasts on Mongolia mine; adds comment, detail)
By James Regan
SYDNEY, Nov 26 (Reuters) - Rio Tinto RIO.AX RIO.L is
lining up project financing for a $4 billion expansion of its
long-delayed Oyu Tolgoi copper mine in Mongolia and will make a
final investment decision early next year, a senior executive
said on Thursday.
The mine, which started producing from an open pit over two
years ago, is the biggest single foreign investment in Mongolia,
and resolution of disputes over its second phase in May revived
hopes for a string of other stalled mining projects.
"At the end of the day, what we need is consistency and
stability and we believe we have the right environment today,"
Rio Tinto copper and coal chief executive Jean-Sebastien Jacques
said at a Bloomberg News-sponsored forum.
"As we speak, we are putting together the project finance
and anticipate that will happen this year," he said.
"We expect early in the next year we will be able to take a
decision about restarting the underground construction."
The Anglo-Australian miner's Turquoise Hill Resources
TRQ.TO arm owns 66 percent of Oyu Tolgoi. The Mongolian
government owns the remainder of the project, located in the
Gobi desert near Mongolia's border with China.
Disputes over taxes and construction costs on the first
stage stopped work on the second phase in 2013.
The underground expansion, with 25 billion pounds of copper
and 12 million ounces of gold reserves, will make Oyu Tolgoi one
of the world's top 10 copper mines and propel growth for Rio
outside iron ore, where most of its revenue is generated.
Copper and other commodity prices are likely to remain
subdued in the short term as markets come to terms with
oversupply and slower Chinese growth, Jacques said.
"At some stage the winds will change and we will be asked
how we are planning to grow the topline not just manage the
bottom line," he said.
A supply overhang in copper that's left prices at their
lowest in more than six years CMCU3 could take two to three
years before shifting to a deficit, according to Jacques.
Separately, Rio Tinto declined to comment on a media report
it was poised to approve an expansion of its South of Embley
bauxite mine in Australia at a cost of $1 billion. Bauxite is
used to make aluminium.