The contract is expected to be worth more than $500 million over five years.

Mongolian state-owned miner Erdenes Tavan Tolgoi signed the contract yesterday at a ceremony in Ulaanbaatar, which was attended by Mongolian Prime Minister Sukhbaatar Batbold and German Chancellor Angela Merkel.

The contract is for open cut mining in the Eastern Tsankhi area of the deposit.

Mining will begin in January at a rate of 3 million tonnes per annum using existing equipment, before increasing to 6Mtpa in the second year, which will involve additional capital outlay.

The mining rate is expected to eventually hit 15Mtpa.

Macmahon and Operta are in talks with potential financiers for an off-balance sheet funding facility to purchase equipment for the ramp-up.

A financing solution is expected to be reached in the first half of next year.

Macmahon chief executive Nick Bowen said the company was thrilled to be part of the development of one of Mongolia’s largest assets.

“This is an enormous opportunity in a market with great potential and is a big step forward in Macmahon’s international expansion,” he said.

“Our operations in Mongolia pave the way for developing a long-term business in the region and will see our world class mining expertise on show through this project.”