16th Jul 2019 08:51
(Alliance News) - Rio Tinto PLC said Tuesday its Oyu Tolgoi underground project in Mongolia could be delayed by 16 to 30 months.
The miner said enhanced geotechnical information and data modelling has identified "some stability risks" with the approved mine design. Rio Tinto is now considering "a number" of other mine designs to complete the project.
"Studies to date indicate that these options may result in some of the critical underground infrastructure, such as the mid-access drive and the ore handling system, being relocated or removed. Options relating to the sequence of crossing the panel boundaries during mining operations are also being analysed," the miner explained.
Once completed, Rio Tinto said Oyu Tolgoi will be one of the largest copper mines in the world.
Depending on which mine design is chosen, first sustainable production from the mine is expected between May 2022 and June 2023 - which represents a potential 16 to 30 month delay compared to the original guidance.
Rio Tinto now expects the project development capital spend to come in at between USD6.5 billion to USD7.2 billion - which represents an increase of between USD1.2 billion and USD1.9 billion from the original guidance of USD5.3 billion.
In a statement, Rio Tinto said: "The company will continue to focus on minimising the impact to project schedule and cost, as it works through the detailed analysis and testing of each mine design option. Although further work is necessary to reach definitive conclusions."
Growth & Innovation Executive Stephen MacIntosh added: "We have made significant progress on a number of key elements in the construction of the underground project during 2019. However, the ground conditions are more challenging than expected and we are having to review our mine plan and consider a number of options. Delays are not unusual for such a large and complex project but we are very focused as a team on finding the right pathway to deliver this high value project."
Elsewhere, the miner said it has completed the sale of its entire interest in the Rossing uranium mine in Namibia to China National Uranium Corp Ltd for an initial cash payment of USD6.5 million plus a contingent payment of up to USD100 million.
The contingent payment is linked to uranium spot prices and Rossing's net income in the next seven years.
Chief Executive Jean-Sebastien Jacques said: "This sale demonstrates Rio Tinto's commitment to further simplifying and strengthening our portfolio and brings the total divestment proceeds received since 2017 to USD11.2 billion, of which USD9.7 billion has been returned to our shareholders."
Late Monday night, the miner reported a drop in first half iron ore production at the company's Pilbara operations in Western Australia due to operational and weather-related issues.
In the six months to June 30, Rio Tinto's Pilbara iron ore production, on a 100% basis, slipped 8% year-on-year to 155.7 million tonnes. Iron shipments also decreased 8% to 154.6 million tonnes.
Pilbara iron production in the second quarter was down 7% to 79.7 million tonnes. Iron ore shipments in the three month period was 3% lower at 85.4 million tonnes.
Rio Tinto blamed the fall in shipments due to recovery works following Tropical Cyclone Veronica and a fire at Cape Lambert. The miner said all repairs are now complete.
Previously, Rio Tinto revised its 2019 Pilbara shipment guidance down to between 320 million tonnes and 330 million tonnes. The miner said this remains unchanged following the second quarter, but will "remain subject to the weather".
The miner's unit cost guidance for Pilbara in 2019 has been revised higher to USD14 to USD15 per tonne from USD13 to USD14 per tonne previously.
"We saw a challenging operational performance across our portfolio in the first half, while also investing in future growth at Richards Bay Minerals and Resolution. Whilst we experienced operational and weather issues at our iron ore operations in Australia, pricing and market demand has remained robust," said Jacques.
Rio Tinto's copper equivalent production was down 2% in the first half, attributed to the lower iron ore production.
The miner produced 13.4 million tonnes of bauxite in the second quarter, 1% ahead of the same period last year. Aluminium production was flat at 800,000 tonnes.
Jacques added: "We remain focused on safely improving and optimising the performance and productivity of our assets in order to drive future cash flow. This, combined with our value over volume strategy and the disciplined allocation of capital, will continue to deliver superior returns to our shareholders in the short, medium and long term."
Rio Tinto shares were trading flat in London early Tuesday at 4,869.23 pence.
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