Rio flags $2.7bn Mongolia mine blow-out

Rio Tinto shares are subdued in early trade after the mining giant flagged a scheduling blowout at its Oyu Tolgoi project in Mongolia that could cost it an extra $A2.7bn.

The company said mine design complications at the underground copper project could delay first sustainable production by up to 30 months, potentially out to June 2023.

It said cost estimates have now increased by $US1.2 billion to $US1.9 billion, with the total cost to come in between $US6.5 billion ($A9.24bn) and $US7.2 billion ($A10.23bn).

That’s more than 30 per cent on the previous estimate of $US5.3 billion ($A7.53bn).

Rio Tinto said on Tuesday it was reviewing the carrying value of its investment in the Mongolian project, and will announce if any changes are required when it reports its half year results on August 1.

The company’s ASX-listed shares slipped 0.15 per cent to $103.77 by 1015 AEST.

The news followed a lacklustre second quarter production report that shows the company’s Pilbara iron ore shipments fell about 3.0 per cent during a “challenging” period after Tropical Cyclone Veronica.

Shipments from the miner’s Australian operations fell to 85.4 million tonnes in the three months to June 30, compared to about 88.5 million tonnes in the same period a year ago, Rio Tinto said on Tuesday.

The result was a 24 per cent improvement on the mining giant’s first quarter shipments, which had been hampered by the disruption of Cyclone Veronica late in March.

Chief executive Jean-Sébastien Jacques said the past six months had proved a challenging operational performance.

“Whilst we experienced operational and weather issues at our iron ore operations in Australia, pricing and market demand has remained robust,” Mr Jacques said.

Rio Tinto said its annual iron ore shipment guidance remained at 320 million tonnes to 330 million tonnes following last month’s operational revision.

The miner’s Q2 iron ore production also dipped, falling 7.0 per cent to 79.7 million tonnes compared to a year ago.

First half production is down 8.0 per cent to 155.7 million tonnes.


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