RE: g l e n n n n4 Jul 2020 00:18
Rio Tinto slashes reserves estimate at giant Mongolian copper project
Revised figures deal further blow to $6.8bn Oyu Tolgoi development
Rio has lowered the copper reserves at Oyu Tolgoi by 15 per cent and gold by 17 per cent to address previously disclosed stability issues at the deposit © Bloomberg
July 3, 2020 9:17 am by Neil Hume , Natural Resources Editor
Rio Tinto has slashed its estimate of how much gold and copper it can mine at its giant underground project in Mongolia’s Gobi desert, in the latest setback to the $6.8bn development.
In an updated feasibility study, Rio lowered the copper reserves at Oyu Tolgoi by 15 per cent and gold by 17 per cent to address previously disclosed stability issues at the deposit.
The move means production is likely to be lower than expected and the mine’s life could be shorter.
The new estimates come days after Rio announced a shake-up of its senior leadership team and said the executive charged with developing the project, Rio’s growth and innovation boss Steve McIntosh, would retire this year.
The downgrading adds to the pressure facing Rio chief executive Jean-Sébastien Jacques, who is under fire for a series of mis-steps that led the company to destroy two sacred aboriginal heritage sites in Western Australia to make way for a mine expansion against the wishes of traditional landowners.
The underground expansion of Oyu Tolgoi is Rio’s most important growth project. When finished it will make the mine one of the world’s largest sources of copper, producing more than 500,000 tonnes a year of the metal used in everything from cars to air-conditioning units. There is already an open pit that produces copper at the site.
The underground project, which is closely associated with Mr Jacques from his time running Rio’s copper business, has been beset by delays, investigations, cost overruns and government pressure.
It also has a complex ownership structure. While Rio operates OT, it does not have a direct shareholding. It is 66 per cent owned by Toronto-listed Turquoise Hill Resources, in which Rio has a 50.8 per cent controlling stake, and 34 per cent by the Mongolian government.
Last July Rio said the first sustainable production from OT was expected between May 2022 and June 2023 — a delay of up to 30 months compared with original guidance — and would cost $1.2bn-$1.9bn more than expected.
This was blamed on difficult ground conditions that had forced a rethink of the original design and development schedule for the project.
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The updated feasibility study, which is required under Mongolian law, reflects the results of that review.
Rio is planning to use a technique called block caving to extract the copper ore and send it to the surface at Oyu Tolgoi. Although technically challenging, it is considered one of the most cost-effective methods of mining ore from deep below the ground.
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