Rio Tinto’s ambitious Kestrel extension project, which will now cost $2 billion according to its latest figures released with its half yearly reports, come at a time when then Reserve Bank is coming under pressure from industry groups to intervene and rein in the Australian currency.

The Australian dollar is remaining stubbornly high at record levels despite a plunge in commodity prices over the last six months.

Rio Tinto said 20% of the Kestrel cost overrun resulted from higher inflation, while 30% was due to delays and scope changes.

The Kestrel project is for a 20-year extension and expansion from 4.3 million tonnes per annum to 5.7Mtpa.

The investment will extend the life of Kestrel to 2031 with first coal from the extension expected to come on stream in the second quarter of 2013.

Compared with 2011 first half, on average, the US dollar was unchanged against the Australian dollar but strengthened by 3% against the Canadian dollar, by 7% against the Euro and by 15% against the South African Rand.

Ironically, the effect of all currency movements was to increase underlying earnings relative to the 2011 first half by $200 million for Rio Tinto.

Rio Tinto is also currently ramping up the $300 million 6Mtpa thermal coal expansion of its Hunter Valley and Mount Thorley Warkworth mine in New South Wales.

It is also upgrading infrastructure and purchasing additional mining equipment as part of the $200 million expansion of its Bengalla thermal coal mine to 7.5Mtpa.