Rio Tinto (NYSE:RIO) -1.2% pre-market after saying the estimated cost of its giant Oyu Tolgoi copper and gold mine in Mongolia could blow out by $1.9B and the project may be delayed by as much as two and a half years.
Rio says the potential cost and time needed to complete the underground mine has increased because of possible stability risks with the mine design, and the mine will not start producing copper until between May 2022 and June 2023, a delay of 16-30 months.
"The ground conditions are more challenging than expected," says Stephen McIntosh, Rio's head of growth and innovation, adding that a new mining plan probably will not be ready until next year.
The capital cost of the project is now estimated at $6.5B-$7.2B, up from an original estimate of $5.3B.
Rio, which manages the Oyu Tolgoi project, holds 50.8% of Turquoise Hill Resources (NYSE:TRQ), which in turn owns 66% of the mine while the Mongolian government owns 34%; TRQ -11% pre-market.
Meanwhile, Rio says Q2 iron ore shipments fell 3.5% Y/Y to 85.4M metric tons, hurt by disruptions caused by tropical cyclone Veronica, which ravaged the coast of Western Australia earlier this year.
Rio also reiterates its guidance cut in full-year iron ore exports of 320M-330M mt.