Rio Tinto’s (RIO) redesign of the Oyu Tolgoi underground copper mine will eat into its reserves, as the new plan has seen some 40m tonnes of ore come out of the reserve. This is the economically viable part of the mineral resource. The reserve fall was entirely in the Hugo Dummett North mine, which lost 47mt at 1.5 per cent copper, or 9 per cent, while the smaller Hugo Dummett North Extension gained 7.7mt, taking its ore reserve to 40mt.
This is the second major update on the project this week. On Monday, Rio announced the Mongolian government would “fund and construct” the power plant required for Oyu Tolgoi. The 66-per-cent mine owner Turquoise Hill (Can:TRQ), which Rio owns 50.8 per cent of, was previously going to fund the plant at an estimated cost of around $1bn (£787m).
The redesign was announced last year, as well as a two-year delay and cost blowout of $1.2-$1.9bn on top of the original $5.3bn estimate. The work is being done after Rio said in October it had identified some “stability risks” with the mine design. The new plan sees two pillars of rock kept in place to help with stability, thus removing the 40mt from the mine.
Turquoise Hill said work on the underground expansion had slowed because of Covid-19.
The power plant change means Mongolia, which owns a stake in the mine, will charge Rio for the power it uses. The existing above-ground mine imports power from China, but under the permit from Mongolia its electricity must come from a domestic source eventually.
Rio is facing criticism from its Turquoise Hill partners over its running of the operator. Nine-per-cent shareholder Pentwater Capital said this week “Turquoise Hill’s disclosures are inadequate and misleading”, and is calling for shareholders to vote off all directors who are also in the company’s management team at the 24 July annual meeting.
