Rio Tinto’s (ASX: RIO) Oyu Tolgoi mine is in the news after confirming its project schedule and cost ranges. The Rio Tinto share price will be on watch today.
What is Rio Tinto?
Rio Tinto’s origins date back more than 145 years but today it is one of world’s largest aluminium and iron ore producers, with much of its sales revenue coming from its operates in Western Australia. It also owns, fully or partly, mining projects for copper, diamonds, uranium and other minerals.
What did Rio Tinto announce?
The Oyu Tolgoi mine has completed its updated feasibility study and is going to submit that to the Mongolian Government. It includes a new mine design for Panel 0 of the Hugo Dummett North underground mine at Oyu Tolgoi.
The new design also confirms that the caving method of mining remains valid and that the underground schedule and costs remain within the ranges previously disclosed.
The ranges include a delay of 21 to 29 months for sustainable production compared to the initial study in 2016 and an increase of $1.3 billion to $1.8 billion on the original $5.3 billion development capital. Detailed work is ongoing to support the definitive estimate to develop the orebody, which remains due in the second half of 2020. COVID-19 may also cause delays in increased costs.
Rio CEO of copper and diamonds Arnaud Soirat said: “This amended mine design is another positive step in the development of the underground mine which will unlock the most valuable part of Oyu Tolgoi. We remain focused on delivering the underground project safely and within the guidance ranges we have announced on both cost and schedule.”
Rio Tinto is a quality miner. You have to expect medium term volatility with miners, even the big ones. Rio Tinto may be worth buying when commodity prices are low, which would send the Rio Tinto share price down, but that isn’t the situation right now. Chinese demand for iron ore remains strong and iron prices remain strong, particularly with the COVID-19 problems that Brazil is facing.
I’d rather invest in something like Bubs (ASX: BUB) today for its small size and continued growth.
Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned.