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Home›Force Majeure›Rio Tinto says Covid-19 adds to delays and costs of Mongolian copper project

Rio Tinto says Covid-19 adds to delays and costs of Mongolian copper project

By Merry Smith
October 14, 2021
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By Rhiannon Hoyle

Rio Tinto PLC said on Friday that the development of an underground operation at the Oyu Tolgoi copper mine in Mongolia’s southern Gobi region continues to be severely constrained by restrictions related to Covid-19, and that costs associated with pandemic delays are increasing.

The world’s No. 2 miner by market value now expects the project’s first sustainable production to be January 2023 at the earliest, up from an earlier projection of October 2022. In addition to the pandemic-related setbacks, some parties of the project are blocked because its owners have not approved the additional funds needed for the development, Rio Tinto said.

Oyu Tolgoi is 66% owned by Turquoise Hill Resources Ltd., in which Rio Tinto has a majority stake. The Mongolian government owns 34%.

Rio Tinto estimated that the commissioning of wells three and four at the site would be delayed by about nine months due to restrictions linked to the pandemic, including difficulties in bringing experts to the mine. The impact on project costs of the additional restrictions linked to Covid-19 until the end of September 2021 is estimated at $ 140 million, Rio Tinto said in a quarterly operational report.

Oyu Tolgoi is one of the largest known copper and gold deposits in the world. A Rio Tinto-led company plans to build an extensive network of underground tunnels at the site, where it has previously built an open-pit mine, to make it one of the largest copper mining operations in the world.

However, the project has been repeatedly delayed, not only by Covid-19 but by negotiations with the Mongolian government on how to share the profits from the mine.

Copper production from the existing Oyu Tolgoi open pit mine increased 16% in the third quarter of 2021 compared to the same period a year ago as the operation seeks to recover from the geotechnical problems of the first half of the year despite a reduced workforce due to Covid-19, Rio Tinto said in its operational report.

As the transport of copper concentrate to China from Mongolia has resumed, a declared force majeure on shipments from March 30 remains in place due to uncertainties regarding the movement of goods across the Mongolia-China border. , said Rio Tinto.

“We continue to work closely with Mongolian and Chinese authorities and our customers to manage the risk of supply chain disruption,” he said.

Write to Rhiannon Hoyle at [email protected]

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