Special committee formed to review cost overruns at Oyu Tolgoi
The board overseeing the Oyu Tolgoi Mine in Mongolia has approved forming a special committee to conduct an independent review of cost overruns and delays related to the development of the underground copper mine.
Reuters reported that Rio Tinto-controlled Turquoise Hill and the Mongolian state own the Oyu Tolgoi deposit in south Mongolia. The project has come under scrutiny over its funding plan, with Hedge Fund Odey recently raising concerns over the project finance package for the mine.
In a letter to the Australian exchange, an investor in the Mongolian project accused Rio of mismanaging costs, and then unfairly restricting Turquoise Hill’s ability to obtain finance to pay for those costs.
Turquoise Hill last month began arbitration proceedings against its biggest shareholder Rio Tinto to seek “clarity” on financing for Oyu Tolgoi, one of Rio’s biggest growth projects.
Turquoise Hill said each shareholder of Oyu Tolgoi, as well as Rio Tinto, is required to support the work of the committee and to contribute, on a confidential basis, “any internal or third-party report(s) in its possession relating to the cost overruns and delays.”
Rio Tinto had said in September it planned to raise up to $500 million through additional lending to develop the giant copper mine.
Rio Tinto and Turquoise Hill were to jointly pursue the debt reprofiling process by engaging with existing project finance lenders, and expected a reduction of up to $1.4 billion in funding requirements for Oyu Tolgoi.
Rio Tinto in 2019 announced a cost overrun at the project of up to $1.9 billion due to difficult geology, saying total capital expenditure was expected to be in a range of $6.5 billion to $7.2 billion, and it expected a delay of up to 30 months at the mine’s underground extension.