The decision, Rio Tinto said, includes a move to raise about $500 million, which will reduce the remaining funding requirement of the expansion to up to $1.4 billion.

By reprofiling, the parties will get more time to repay their debt, but the principal of, or in some cases even the interest rate on, the extended debt are not reduced.

Rio said any remaining funding for the development of an underground extension at the asset will be met through a Turquoise Hill equity offering.

Investors reacted negatively to the news. Turquoise Hills shares were down almost 23% in New York, slashing the market value of the company to $1.75 billion.

The Australian giant owns Oyu Tolgoi through its majority stake in Canada’s Turquoise Hill, which has a 66% interest in it. The Mongolian state has the remaining 34% in the operation.

In July, Rio Tinto cut estimated reserves for the underground extension of Oyu Tolgoi. It also confirmed it would face delays and higher costs after ground instability forced it to redesign the mine plan.

The underground expansion has faced multiple delays and cost blowouts.

Rio and Turquoise estimated last year a cost overrun at the project due to difficult geology. They noted that total capital expenditure would be in the range of $6.5-$7.2 billion.

Five-year wait
The companies had also warned of further delays of up to two and a half years, with first sustainable production expected between May 2022 and June 2023.

Once completed, the underground section will lift production from 125,000–150,000 tonnes in 2019 to 560,000 tonnes at peak output, now expected by 2025 at the earliest. This would make it the biggest new copper mine to come on stream in several years.

Oyu Tolgoi, located in the South Gobi desert near the border with China, produced 35,203 tonnes of copper and 26,154 ounces of gold in the first three months of this year.

The mine is on track to achieve 2020 production guidance. The coronavirus pandemic, however, has caused a slow down to operations.