Rio Tinto challenges independent report into Oyu Tolgoi cost woes
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Rio Tinto challenges independent report into Oyu Tolgoi cost woes

01 Oct 2021 (Last Updated October 1st, 2021 10:59)

Rio Tinto has challenged the findings of an independent report into the $1.4bn cost overruns and delays at the Oyu Tolgoi mine in Mongolia. The report by the Independent Consulting Group (ICG) concluded last month that mismanagement was the primary reason the mine’s underground expansion was running almost two years late and $1.45bn over budget.

Rio Tinto objected to the independent report, arguing that while it understands stakeholders’ frustration, it believes the review did not sufficiently recognise the full impact of weaker than expected rock conditions, which forced the mining giant to redesign the project.

“We are concerned that the report takes a narrow view of what constitutes geotechnical impacts on the project,” said the letter signed by Rio’s head of projects Mark Davies.

The Oyu Tolgoi mine is located in the South Gobi Desert of Mongolia, in close proximity to the border with China, where the copper is expected to be shipped after processing. Over its anticipated life span, it is expected to produce 430,000 tonnes (470,000 short tons) of copper per year, an amount equal to 3% of global production.

Costs and delays

Costs for the project, however, have ballooned from an initial estimate of $4.6bn in 2010 to over $10bn in costs. This has created tension between Rio Tinto and the Mongolian Government, which holds a 34% share in the project and expects it to account for more than 30% of Mongolia’s GDP upon completion.

In an emailed statement, the ICG said: “[We] have not seen any response from Rio to our report so cannot comment but we stand by the content of the report.”

Davies said that other issues that had affected the project included problems fitting out a key access shaft, which were “transparently reported” to its partners, and the fact that 96% of Oyu Tolgoi’s workforce was Mongolian  – far higher than it had initially planned.
Rio revealed the full extent of the delays and cost blowout at Oyu Tolgoi in July 2019. However, Richard Bowley, who worked for Rio’s copper business in Mongolia between 2017 and 2019 as head of strategic projects, has alleged that the company was aware of problems months before they were disclosed to investors.

Rio’s response to the report could stoke further tensions with the Mongolian Government, which has called for more transparency from the Anglo-Australian miner on the problems at Oyu Tolgoi.