Rio Tinto details major delay and costs for Mongolia copper project

Rio Tinto has confirmed delays and a major cost blowout at its flagship copper project in Mongolia, saying the underground expansion of its Oyu Tolgoi project will come in more than a quarter over the original budget (reports The Australian).
18th December 2020
Resources Rising Stars

Rio Tinto has confirmed delays and a major cost blowout at its flagship copper project in Mongolia, saying the underground expansion of its Oyu Tolgoi project will come in more than a quarter over the original budget (reports The Australian).

The underground operation at the giant mine — scheduled to become the biggest copper operation in the world when complete — will be delivered by October 2022, marking a near two-year delay from the original timeline.

The underground expansion, originally tipped to cost $US5.3bn ($7bn), will now cost $US6.75bn, or over 27 per cent more than when the project was approved in 2016.

The figures are in line with guidance released by the mining major in October, when Rio flagged production starting in the earlier part of a window between October 2022 and June 2023, and costs of $US6.6bn to $US7.1bn.

The latest estimates also include the impact of COVID-19, although Rio said that could change again should the global pandemic spark tougher restrictions.

“The definitive estimate assumes restrictions in 2021 that are no more stringent than those experienced in September 2020. Should COVID-19 constraints continue beyond 2021, or should the COVID-19 situation escalate further in 2021 leading to tougher restrictions, additional costs and schedule impacts will arise,” Rio said in a statement issued late on Wednesday.

Oyu Tolgoi is forecast to produce 480,000 tonnes of copper per year from 2028 to 2036 from the open pit and underground, compared with 146,300 tonnes in 2019 from the open pit.

The $US5.3bn budget relates to “Panel 0” of the underground expansion, with the next two panels still hinging on further studies, and initial recommendations expected mid-2021.

“These studies will also consider options and associated costs to recover the copper contained within the pillars added to the mine design of Panel 0,” Rio noted.

Limited progress appears to have been made over an ongoing funding argument with Rio’s joint venture partner on Oyu Tolgoi, Turquoise Hill Resources.

“Progress has been limited although Rio Tinto remains committed to implementation of the funding plan agreed in the memorandum of understanding,” Rio said. “Rio Tinto has, through Turquoise Hill Resources, made significant equity contributions to fund Oyu Tolgoi to date and is providing completion support undertaking in respect of the $US4.4bn project finance facility. Rio Tinto remains of the view that all shareholders should contribute proportionately and share equitably in the benefit.”

Rio said it, along with the Mongolian government and Turquoise Hill, need to clear outstanding government approvals, funding and a power solution to allow the project to start caving operations in 2021.

“We will continue to work together with the government of Mongolia and Turquoise Hill to progress the project, including finalising all necessary approvals and agreeing a solution on power and funding,” Rio’s head of copper and diamonds Arnaud Soirat said.

 

Image: Rio Tinto

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