Rio Tinto听(ASX, LON, NYSE: RIO)听is challenging听the findings of an听independent review听into听$1.4 billion in cost overruns听and delays听at the Oyu Tolgoi mine in Mongolia,听restating the听project鈥檚 troubles were caused by听unpredictable听geology issues.听
The Independent Consulting Group鈥檚听(IGG)听report听concluded last month听that poor management was the听main听reason the听mine鈥檚听underground expansion听has run into problems affecting its cost and听timeline.听
While听Rio听has said it听understands听stakeholders鈥� frustration it听believes听the听review听did not sufficiently听recognize听the full impact of听weaker than expected rock conditions, which听forced听the mining giant听to听redesign听the project.听
Rio said it understands stakeholders鈥� frustration, but believes the impact of rock conditions and labour issues on the project鈥檚 delays and cost have not been fully recognized
Costs to expand the Oyu Tolgoi mine, Rio鈥檚 biggest copper growth project, have ballooned up to $6.75 billion from Rio鈥檚听original budget of $5.3 billion set in 2016, and this led to听friction over funding听with听mine operator Turquoise Hill (TSX, NYSE: TRQ).听The firms finally听reached听an agreement in April.听
Canada鈥檚听Turquoise Hill, in which Rio has a 50.8% stake, owns 66% of Oyu Tolgoi. The rest is held by the Mongolian government.听
鈥淲e are concerned that the report takes a narrow view of what constitutes geotechnical impacts on the project,鈥澨齊io鈥檚 head of projects Mark Davies said in a letter to Mongolia鈥檚 justice minister Khishgee Nyambaatar, 听
The听message, sent last week,听said other issues, such as听fitting out a key access shaft,听had听also听affected the project. It added those matters听were 鈥渢ransparently reported鈥� to its partners.听
Davies said听the fact that 96%听of the听workforce was Mongolian, which is听鈥渇ar higher鈥澨齮han听initially planned听also weighed on the project,听.听听
鈥淭he investment in the national workforce did have an impact on project costs and schedule; more than the ICG听recognizes,鈥� the letter said.听
Rio Tinto has repeatedly said the underground expansion听of Oyu Tolgoi听is its most important growth project.听First production,听initially听scheduled for听late 2020,听is now expected in听October 2022.听听
Once completed, the mine鈥檚 underground section will lift production from 125,000鈥�150,000听tonnes听in 2019 to 560,000听tonnes听at peak output, which is now expected by 2025 at the earliest. This would make it the biggest new copper mine to come on stream in several years.听
Financial听regulators in the UK听and听US听are also听examining Rio鈥檚 disclosures听about the delays.听