Rio flags delays at Oyu Tolgoi mine

The coronavirus is hampering the pace of expansion at Rio’s massive Mongolian project.

Mining giant Rio Tinto may face further delays on its massive Oyu Tolgoi project in Mongolia with the coronavirus hampering the pace of expansion.

The underground expansion, expected to cost between $US6.5bn ($10.5bn) to $US7.2bn, was continuing at a slower pace due to Mongolia’s efforts to contain the spread of COVID-19.

“Work on the underground project continues, however, progress is being slowed as a result of these measures,” Rio said in a statement. “There is restricted access for teams from Rio Tinto, Oyu Tolgoi and our construction partners to oversee development and provide specialist technical services.”

Rio said it could not quantify any changes to the timeline.

“The full impact of the slowdown on the underground project is unknown at this time and the company will update the market once more information is available,” the miner said. “The mine design for the underground project currently remains on track to be completed in the first half of this year, with a definitive estimate to be provided for the development of this world-class orebody in the second half of 2020.

Last July, Rio warned it faced a $US1.9bn blowout over a redesign that would push back initial production by up to two years.

First announced in 2016, with production originally forecast for 2020, Oyu Tolgoi’s underground phase could be delayed by up to 30 months. Rather than achieving sustainable production late next year, that milestone will likely be reached between May 2022 and June 2023, according to Rio.

And the underground expansion, originally tipped to cost $US5.3bn will now cost $US6.5bn to $US7.2bn.

The underground development will more than triple Oyu Tolgoi’s production, from about 160,000 tonnes of copper last year, turning the mine into a major centrepiece of Rio’s non-iron ore assets. The mine is 66 per cent-owned by Rio’s Canadian subsidiary Turquoise Hill.

Rio shares fell 4.2 per cent to $77.65 while its London shares tumbled 6.7 per cent in early trade on Monday.