May 6 (Reuters) - Rio Tinto Plc RIO.L :
* Approves development of Oyu Tolgoi underground mine
* Development of underground mine will start in mid-2016 following approval of a $5.3 billion investment by partners and recent granting of all necessary permits
* First production from underground, which has an average copper grade of 1.66 per cent, more than three times higher than open pit, is expected in 2020
* Mine also benefits from significant gold by-products, with an average gold grade of 0.35 grams per tonne
* Expansion provides an attractive investment for all shareholders with an expected internal rate of return of more than 20 per cent.
* When underground is fully ramped up in 2027, Oyu Tolgoi is expected to produce more than 500,000 tonnes of copper a year
* Parties have agreed a senior debt cap of $6 billion for project financing agreement, providing option for $1.6 billion of supplemental senior debt
* Oyu Tolgoi is expected to produce 560,000 tonnes of copper a year, on average, between 2025 and 2030 Source text for Eikon: ID:nRSF4613Xa Further company coverage: (Bengaluru Newsroom: +91 80 6749 1136)