A report released by Turquoise Hill on Monday estimates that the cost of second-phase development of its Oyu Tolgoi copper and gold project at $5.1 billion. This equals what the company had estimated the year prior. However, this year’s estimates differ from that of 2012 in that it neglected to include costs for building a power plant and expanding a concentrator by 60 metric tons per day. The power plant and concentrator would add an additional $1.8 billion. A Turquoise Hill spokesperson stated that it is still unclear whether it is necessary to expand the concentrator. The report points to a 30 percent increase in costs to build an underground mine among other growing expenses.
Turquoise Hill and its largest shareholder Rio Tinto are trying to raise $3 billion to $4 billion from lenders. The Mongolian government has expressed concerns that the escalating costs of the project will “erode prospective earnings” and that Rio Tinto had agreed to cover all costs using the company’s own funds. The Mongolian government owns just over one-third of the Oyu Tolgoi project. Rio Tinto and the Mongolian government are currently negotiating a new project agreement.
(Edited from Reuters and Dow Jones Newswires)