Rio Tinto drops after agreeing new mine plan at Oyu Tolgoi
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The news: Rio Tinto shares fell after the mining giant paused work at Panel 1 of its Oyu Tolgoi copper-gold mine in Mongolia to engage with Canadian miner Entrée Resources and the Mongolian government over licensing arrangements.
The numbers: Rio Tinto shares were down 0.8% to $108.76 at 2pm AEST, as the ASX 200 index rose 0.9%.
The context: The miner has outlined an alternative schedule which involves pausing work in Panel 1 — which was expected to support production from 2027 under the existing plan — and instead bring forward development in Panel 2.
Entrée Resources, which owns the mining lease at a section of Panel 1, has entered discussions with Rio Tinto and the Mongolian government over the transfer of licences in this area.
RBC Capital Markets analyst Kaan Peker said changes to the mine schedule will likely have a "small negative impact" on Oyu Tolgoi's valuation. He noted that Panel 2 has lower grades of gold, copper and silver compared to Panel 1.
Peker also said that despite long-term production guidance being maintained, the schedule change increases the risk of Oyu Tolgoi delivering nameplate capacity by 2028, potentially heightening geotechnical risk and trimming near-term copper production.
RBC values Oyu Tolgoi at USD15 billion ($23 billion), forming 13% of Rio Tinto's net asset value, and it is expected to contribute an average of 17% to 20% of Rio Tinto's earnings between 2027 and 2030.
The source: RBC Capital Markets research
