Rio Tinto Plc.’s (LON:RIO) copper mine in the southern Gobi desert of Mongolia is likely to be delayed by more than two years after the project hit bedrock at Oyu Tolgoi; Mongolia’s border with China. According to Rio Tinto, one of the world’s largest copper mine comprising of series of underground tunnels, some of them extending as deep as 4,000 feet have come in contact with rocks of varying strengths, leading to heightened risk of landslides, compelling the mining giant to come up with an alternate plan which is projected to be ready only next year.
Rio Tinto has an indirect interest of 50.8% in the mine and the 30-month delay is expected to spike the project cost by $1.9bn-7.2bn, the impact of which will be directly felt on Rio Tinto’s net profit in the short-term. In addition, with global copper demand anticipated to exceed supply by 190,000 metric tons this year and 250,000 metric tons next year on the back of a stable 25m metric tons annual output, prices of the industrial commodity used in the production of everything from power cables to smartphones and electric cars are expected to surge.
Shares of Rio Tinto Plc. have soared more than 30% YTD while copper futures (HG) on the Comex have gained a little more than 3% this year.
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