Rio Tinto’s (ASX:RIO) Energy Resources (ASX:ERA) unit is making headlines today. Why?

Rio Tinto (ASX: RIO) subsidiary Energy Resources of Australia Limited (ASX: ERA) has announced that the rehabilitation of the Ranger project area has exceeded company expectations. The campaign will likely cost an additional A$1.2 billion and two to three more years.

The Rangers Project Area Rehabilitation Campaign focuses on creating a landform and sustainable ecosystem that will resemble World Heritage Kakadu National Park. ERA believes it is obligated to return the land to an environment similar to adjacent areas of Kakadu.

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According to ERA’s latest analysis, the total revised cost of completing the rehabilitation of the Ranger project area is expected to be between A$1.6 billion and A$2.2 billion (including costs incurred to from January 1, 2019).

Previously, the cost estimate for the rehabilitation of the Ranger Project area was estimated at A$973 million based on a feasibility study finalized in 2019.

The updated and estimated date for completion of the Ranger Project area rehabilitation is between Q4 2027 and Q4 2028.

ERA further mentioned that its revised estimates, both of cost and schedule, are based on the Ranger Rehabilitation Project being completed under the methodology set out in the current mine closure plan.

The main factors leading to a change in forecast:

The increase in cost forecast mainly occurred due to additional technical costs related to the conversion of a tailings storage facility to a water storage facility, covering technical risks, related unbudgeted costs, water treatment costs, etc.

Another significant cause for the increased forecast is the constantly delayed schedule, including power generation and additional project and site management costs.

Funding:

The company is currently reviewing all available financing options for the rehabilitation works to ensure that they are adequately funded in line with the revised cost estimates. In addition, Rio has committed to supporting ERA so that it can carry out the rehabilitation project.

ERA had received cash funding worth A$699 million as of December 31, 2021 without any debt. It included a cash balance worth A$164 million (unaudited). The Commonwealth Government currently holds the remaining A$535 million in cash under the Ranger Rehabilitation Trust Fund. The Commonwealth government also holds $125 million in bank guarantees.

What does Energy Resource Australia do?

Energy Resource Australia Limited (ASX: ERA) is a subsidiary of mining company Rio Tinto Limited. ERA is involved in the production of uranium oxide and operates at the Ranger mine.

Meanwhile, on the ASX, ERA closed today’s trading session 1.562% higher at AU$0.325 per share.