An expert group examining the cause of a $1.4 billion cost overrun at a giant copper mine run by Rio Tinto PLC in Mongolia said in a report that it was caused by mismanagement and not the unfavorable rock conditions blamed by the world’s second-largest miner.
The 157-page report, which was reviewed by The Wall Street Journal, was commissioned by the owners of the Oyu Tolgoi mine— Turquoise Hill Resources Ltd. and a Mongolian state-owned company—to examine why construction of an underground pit was delayed and costs rose. Separately, the U.S. Securities and Exchange Commission and British regulators are looking into whether Rio Tinto, which has a majority stake in Turquoise Hill, should have detailed problems at the Oyu Tolgoi underground mine to investors sooner, according to a person familiar with the matter.
The report spoke of an unhealthy culture across the site of the underground mine at Oyu Tolgoi, which it attributed to a lack of coordination between teams. “People were working in silos with one group blaming the other for any failings,” it said.
While Rio Tinto had attributed problems at the mine largely to ground and geotechnical conditions proving to be more challenging than expected, the report mainly rejected this explanation. Its authors, the Independent Consulting Group, said they found no evidence to suggest that the quality of the rock and general ground conditions were significantly different to that forecast by the miner’s owners in 2016. In some cases, the report said, the rock quality was better.
The Oyu Tolgoi operation has a complex ownership structure. Rio Tinto has an indirect interest in the mine through its 50.8% shareholding in Turquoise Hill Resources, which is listed on the Toronto Stock Exchange. Turquoise Hill owns 66% of Oyu Tolgoi LLC, which owns the mine, with the remainder held by the Mongolian government.
