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Rio boss defends Gudai-Darri mine cost blowout

Rio Tinto iron ore boss Simon Trott has defended a cost blow-out and delays on the company’s Gudai-Darri mine, noting COVID impacts, supply chain disruptions and inflation could not have been foreseen in the project’s original costings.

His comments come after the mining giant revealed a $US500 million ($727m) cost overrun on the 43 million tonne per annum project in the Pilbara while declaring first production from the new replacement mine.

The original budget for the mine had been $US2.6b with first ore scheduled late 2021 but Rio said on Wednesday the capital cost was expected to be $US3.1b.

The update comes after guidance from Rio in February that its iron ore replacement projects in the Pilbara, including Gudai-Darri, were subject to potential capital increases of about 15 per cent due to ongoing COVID-19 restrictions, including labour access and supply chain quality issues.

However Rio said the cost escalation would not affect its full-year group capital expenditure guidance which remained unchanged at about $US8 billion.

Rio is not the only company to experience blow-outs amid the prevailing high price environment, with Fortescue Metals Group forced to twice update the cost of its Iron Bridge magnetite project in the Pilbara, with estimates rising by $US1b to $US3.6b-$US3.8b.

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