AKIPRESS.COM - Rio Tinto’s chief executive is under growing pressure from investors and analysts to justify the FTSE 100 giant’s decision to build one of the world’s most expensive mines in Mongolia, says The Australian.

Shareholders are concerned that the US$12-bln project, called Oyu Tolgoi, could be a ­financial disaster. They have begun to question management about the financial and technical assumptions underpinning the initiative.

Rio has organized a trip for analysts and investors to the copper project this month where it will seek to allay their concerns.

The unrest is the first big test for Jean-Sebastien Jacques, the former L’Oreal executive who took over as boss of the resources giant three months ago. Before taking the job, he oversaw Oyu Tolgoi and led the talks to break an impasse with the Mongolian government that had led to a three-year freeze in its development.

Rio has already poured $6.4 bln into the first phase of Oyu Tolgoi, which includes a large open pit. In May, the board of directors approved a $5.3 bln underground expansion. The decision was brave for an industry still struggling to recover from a historic downturn in raw material prices. Rio lost $726 mln last year.

In July, the company forced Bernstein, the American broker, to cancel a conference call it had arranged to discuss a highly critical report published by Bernstein. The report was authored by Neal Brewster, Rio’s former general manager of valuation. He said it was “not clear” the board had fully understood the risks before signing off on Oyu Tolgoi’s expansion.

These include technical challenges to its cave excavation approach, a potential requirement to build a $1 bln power plant, bullish performance forecasts and the possibility that Mongolia could expropriate the asset.

On a trip for the board of directors to the site last week, Jacques said he did not expect the cash-strapped state to receive a dividend for at least a decade.

Rio operates the mine and owns a 33 percent stake via a controlling share in Turquoise Hill, a Toronto listed company. The Mongolian government holds a 34 percent share of the project.