The Oyu Tolgoi underground expansion cost $7bn (Photo via Rio Tinto)

Rio Tinto has increased cost estimates for the ongoing expansion of the Oyu Tolgoi copper-gold mine in Mongolia by $300m to $7.06bn.

According to the mining firm’s cost and schedule reforecast, which was concluded in June 2022, the project’s cost increased by almost $1.8bn compared with its original estimate in 2015, according to Mining.com.

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The project’s original estimated cost was $5.3bn. It was intended to be operational by early 2021.

This cost surge has been attributed to workforce constraints due to the Covid-19 pandemic.

Currently being reviewed by the Oyu Tolgoi board, the new reforecast assumes that the project will face no disruptions in the future.

Rio Tinto said that the project’s technical progress had been hindered. The firm now expects to commission shafts three and four in the first half of 2024, 15 months later than estimated in 2020.

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Rio Tinto owns nearly 50.8% of Turquoise Hill Resources, which in turn holds a 66% stake in the Oyu Tolgoi copper-gold mine in the South Gobi region.

The remaining 34% stake in the mine is owned by Erdenes Oyu Tolgoi, which is wholly owned by the Mongolian Government.

Rio Tinto is currently considering purchasing all the shares it doesn’t already own in Turquoise Hill.

Rio Tinto CEO Jakob Stausholm said the acquisition would simplify the ownership structure while strengthening the miner’s copper portfolio.

The offer followed an agreement between Rio Tinto and the Mongolian government to move ahead with the Oyu Tolgoi underground project.

In a separate statement, Turquoise Hill said that it expected its portion of Oyu Tolgoi’s total operating cash costs to increase by $50m for 2022.

The firm said this is due to increased costs of key raw materials, particularly fuel and higher royalties.

From 2028 to 2036, the project is expected to have an average annual copper production of 500,000tpa from open-pit and underground operations.