TSX- and NYSE-listed Turquoise Hill Resources has flagged potential further delays in the development schedule of the Oyu Tolgoi underground mine project, saying that the completion of ‘technically complex’ installations at Shaft 2 could take longer than previously thought.

The Rio Tinto-owned company, which holds the giant mine in a 66:34 partnership with the Mongolian government, last year said that sustainable production at the  $5.3-billion underground mining project would only be achieved in the third quarter of 2021 rather than the previously guided start of 2021.

However, Turquoise Hill on Wednesday reported that it was increasingly likely that sustainable first production would be delayed beyond the third quarter of 2021.

The miner explained that the completion of Shaft 2 continued to experience challenges during the last quarter of 2018, with structural, mechanical, piping and electrical installation productivity below expectations.

“Current expectations are that the completion of this technically complex installation and commissioning work will now take longer than previously anticipated. In addition to the Shaft 2 challenges, it was found that increased ground support was required in some key areas resulting in delays to mass excavations such as Ore Bin 11 and Primary Chamber 1 and some areas on the footprint.”

The company explained that, while total lateral development or equivalent development metres remained on budget, these challenging ground conditions have had a direct impact on the project’s critical path.

Rio Tinto, as project manager, has also advised Turquoise that more detailed geotechnical data had improved the understanding of the rock mass around and under the orebody and that the data had revealed there were areas of the mine footprint where the strength of the rock mass was more variable than anticipated. This would require some potentially significant changes to the design of some future elements of the development, and the development schedule.

“This, combined with the delay to Shaft 2, is ultimately expected to result in an overall schedule delay to sustainable first production beyond the end of the third quarter of 2021,” the company said.

Rio Tinto has delayed the completion of the 2019 definitive estimate review to include the impact on cost and development schedule resulting from this anticipated delay, as well as any impacts from the reoptimised aspects of the development.

The company’s underground development is anticipated to advance between 15 km and 16 km during 2019. In 2018, Turquoise constructed critical above and below ground infrastructure.

Oyu Tolgoi already operates an openpit mine and Turquoise Hill also on Wednesday provided an operating cash costs guidance for 2019 of  between $800-million and $850-million. This translates to between $1.75/lb and $1.95/lb of copper produced.

The Oyu Tolgoi project is expected to produce between 120 000 t and 155 000 t of copper and between 180 000 oz and 220 000 oz of gold in concentrates for 2019. In 2018, it produced 159 100 t of copper and 285 000 oz of gold.

Openpit operations are expected to mine ore primarily from Phase 4 throughout the year, with contributions from Phase 6.

Mill throughput for 2019 is expected to be about 40-million tonnes and includes the processing of some material from mine stockpiles.

The company aims to spend capital expenditure of between $150-million and $180-million for openpit operations and between $1.3-billion and $1.4-billion for underground development.