Rio cops $2.7bn blowout as it builds one of world's biggest copper mines
The estimated cost of global miner Rio Tinto's ambitious underground copper mine in Mongolia has grown by up to $US1.9 billion ($A2.7 billion), and its "first sustainable production" could now be delayed by 16-30 months.
On Tuesday morning Rio said geotechnical information and data modelling had confirmed possible stability risks with the approved mine design for its Oyu Tolgoi underground project and that this would have cost and timing implications.
"Preliminary estimates for development capital spend for the project...is now $US6.5 billion to $US7.2 billion, an increase of $US1.2 billion to $US1.9 billion from the $US5.3 billion previously disclosed," it said.
But the company warned that this was a preliminary estimate only, subject to a range of productivity assumptions, and that it could change again prior to completion of the final estimate.
On timing the global miner said first sustainable production could be achieved between May 2022 and June 2023, which equates to "a delay of 16 to 30 months compared to the original feasibility study guidance in 2016".
"This range includes contingency of up to eight months reflecting the unexpected and challenging geotechnical issues, complexities in the construction of shaft 2 and the detailed work still required to reach a more precise estimate," the company said.
Because further technical work is required, Rio said the "definitive estimate" for Oyu Tolgoi, which includes the final schedule for the remainder of the underground mine project and its final cost estimate, is now expected to be released in the second half of 2020.
Aside from the geotechnical and cost challenges experienced by the project, Rio insisted that Oyu Tolgoi had "continued to progress in 2019 towards its path to become one of the largest copper mines in the world".
Bad weather impact
The Anglo/Australian mining giant also released a production update for the June quarter.
Total iron ore shipments, at 85.4 million tonnes for the quarter, were down 3 per cent on the June quarter of 2018, with shipments affected by the impact of Cyclone Veronica in the Pilbara in April.
But Rio said iron ore shipments were up 24 per cent in the quarter compared to the March quarter of 2019.
Rio maintained its iron ore shipment guidance of 320-330 million tonnes for the full 2019 year, but lifted its unit cost guidance to $US14-$US15 per tonne. Unit cost guidance was previously $US13-$US14 per tonne.
The quarterly report also revealed more detail of the impact of the massive spike in iron ore prices this year, in the wake of production cuts by Vale after a devastating, fatal dam disaster hit the Brazilian miner in January.
Rio said its average pricing for iron ore in the first half of 2019 was $US78.5 per wet metric tonne, compared to a much lower $US57.9 per wet metric tonne in the first half of 2018.
"We saw a challenging operational performance across our portfolio in the first half, while also investing in future growth at Richards Bay Minerals and Resolution," said Rio chief executive Jean-Sebastien Jacques.
"Whilst we experienced operational and weather issues at our iron ore operations in Australia, pricing and market demand has remained robust."