VANCOUVER, July 15, 2019 /PRNewswire/ - Turquoise Hill today
announced second quarter 2019 production for Oyu Tolgoi and
provided an update on underground development.
Highlights:
- Copper production of 39,156 tonnes, a decrease of 0.6% vs Q2
2018
- Gold production of 71,825 ounces, an increase of 43.7% vs Q2
2018
- Mill throughput increased 2.3% year over year and 12.3%
sequentially
The transition from mining Phase 4A to Phase 4B and stockpiles resulted in:
- Lower copper head grade of 0.46% vs 0.57% Q1 2019
- Lower gold head grade of 0.31g/t vs 0.58g/t Q1 2019
- Concentrate production decreased 14% vs Q1 2019
- Copper production decreased 14.6% vs Q1 2019
- Gold production decreased 40% vs Q1 2019
Copper and gold grades are expected to decline over the
remainder of the year as Oyu Tolgoi processes a higher proportion
of Phase 4B and Phase 6 ore, but the
company is well positioned to meet its 2019 copper and gold
production guidance.
The focus for the construction team remains completing Shaft 2,
where works are progressing. Rope up preparation is well advanced
and related work is expected to commence in July. The commissioning
of Shaft 2 remains on track for October. Other critical
infrastructure components such as the control room facility and the
jaw crusher system are now complete and construction on shafts 3
and 4 is progressing well.
By implementing productivity improvements, the underground
mining team achieved a record performance of over 1,000 metres of
lateral development in June. Record monthly development was
also achieved in June in the convey-to-surface decline as a result
of excellent productivity in improved ground conditions.
Ulf Quellmann, Chief Executive Officer of Turquoise Hill stated,
"In addition to the solid second quarter operational performance,
we have also made good progress towards the completion of the
definitive estimate. Working with Rio Tinto, we have identified a
number of mine designs to address the stability risks associated
with the original design, and continue to assess the impact on the
cost and schedule of the project. Oyu Tolgoi is a world-class ore
body with a very long life of mine. Developing the right new mine
plan is essential in delivering maximum value for Turquoise Hill's
shareholders."
Underground Development Update
Turquoise Hill, in conjunction with Rio Tinto, continues to
review mine design options for the completion of the underground
development of the Oyu Tolgoi mine and assess the impact on overall
cost and schedule for the underground development. As previously
disclosed in connection with Turquoise Hill's project development
update on February 26, 2019, this
review will result in a revised development plan reflecting
appropriate risk reduction efforts.
Improved rock mass information and geotechnical data modelling
has confirmed that there are stability risks associated with
components of the existing mine design. Therefore, to address these
risks, a number of mine design options are under consideration to
complete the project. These options include assessment of the
impact of the mid-access drives, location of the on-footprint
components of the ore handling system, the sequence of crossing the
panel boundaries during mining operations, and an option that
alters the panel boundary approach and would leave temporary
pillars in ore that would then be recovered later in the mine life,
sub-blocking the previously planned three panels into five
panels.
A number of options are being evaluated to determine the final
design of "Panel 0," and this work is anticipated to continue into
early 2020. Given the further technical work that is needed, the
definitive estimate review is now expected to be delivered in the
second half of 2020, reflecting the preferred mine design
approach.
All options under consideration present a clear pathway to
sustainable first production, albeit with different cost and
schedule implications. To date, these have been defined to a level
of accuracy associated with a conceptual study or order of
magnitude study; therefore, significantly more work is required to
complete the final assessment.
Based on these options, preliminary estimates indicate that
sustainable first production could be delayed by 16 to 30 months
compared to the original feasibility study guidance in 2016. This
range includes contingency of up to eight months1
reflecting the unexpected and challenging geotechnical issues,
complexities in the construction of Shaft 2, and reflects the
detailed work still required to reach a more precise estimate. The
development capital spend for the project may increase by
$1.2 to $1.9
billion over the $5.3 billion
previously disclosed. This results in sustainable first production
now being expected between May 2022
and June 2023. These ranges
incorporate a range of productivity assumptions, with optimization
work at site and technical review guiding the final inputs into the
definitive estimate review. Although further work is necessary to
reach definitive conclusions, Turquoise Hill is assessing the
carrying value of its investment in the Project and will announce
any changes, along with any adjustments to deferred tax, in its Q2
results at the end of July 2019.
In addition to working closely with Rio Tinto, Turquoise Hill
has engaged independent third-party consultants to provide the
company with insights into the planning and estimate process
currently underway, as well as progress of key construction work at
the mine site.
Current information indicates that Oyu Tolgoi mineral reserves
will not be materially impacted by the Hugo North mine design
options being considered; however, ongoing reviews will be
considered as the work progresses.
The company will continue to focus on minimizing the impact to
the project schedule and cost as it works through the detailed
analysis and testing of each mine design option, and work continues
concurrently to finalize the critical underground infrastructure
and shaft construction.
Turquoise Hill will evaluate the impact of the estimated delays
to sustainable first production as well as increases in underground
capital expenditure on its cash flows, liquidity and financing
projections, and will update the market in conjunction with the
progression of the definitive estimate review.
Oyu Tolgoi
Production Data
|
All data
represents full production and sales on a 100% basis
|
|
2Q
2018
|
3Q
2018
|
4Q
2018
|
1Q
2019
|
2Q
2019
|
1H
2019
|
1H
2018
|
Full Year
2018
|
|
|
|
|
|
|
|
|
|
Open pit material
mined ('000 tonnes)
|
22,792
|
22,523
|
22,863
|
23,943
|
24,408
|
48,351
|
45,923
|
91,309
|
Ore treated ('000
tonnes)
|
10,164
|
9,652
|
9,361
|
9,255
|
10,394
|
19,649
|
19,725
|
38,738
|
Average mill head
grades:
|
|
|
|
|
|
|
|
|
Copper (%)
|
0.48
|
0.51
|
0.55
|
0.57
|
0.46
|
0.51
|
0.50
|
0.51
|
Gold (g/t)
|
0.26
|
0.38
|
0.56
|
0.58
|
0.31
|
0.44
|
0.25
|
0.36
|
Silver
(g/t)
|
1.17
|
1.19
|
1.22
|
1.25
|
1.20
|
1.23
|
1.24
|
1.22
|
Concentrates produced
('000 tonnes)
|
178.8
|
179.8
|
189.0
|
210.1
|
180.6
|
390.7
|
356.1
|
724.9
|
Average concentrate
grade (% Cu)
|
22.0
|
21.9
|
21.9
|
21.8
|
21.7
|
21.8
|
22.0
|
21.9
|
Production of metals
in concentrates:
|
|
|
|
|
|
|
|
|
Copper ('000
tonnes)
|
39.4
|
39.4
|
41.5
|
45.8
|
39.2
|
85.0
|
78.2
|
159.1
|
Gold ('000
ounces)
|
50
|
77
|
117
|
120
|
72
|
192
|
92
|
285
|
Silver ('000
ounces)
|
225
|
230
|
238
|
247
|
238
|
486
|
446
|
914
|
Concentrate sold
('000 tonnes)
|
220.0
|
171.9
|
191.4
|
184.9
|
225.3
|
410.3
|
383.1
|
746.4
|
Sales of metals in
concentrates:
|
|
|
|
|
|
|
|
|
Copper ('000
tonnes)
|
46.1
|
36.0
|
40.2
|
38.5
|
46.6
|
85.1
|
80.4
|
156.7
|
Gold ('000
ounces)
|
51
|
55
|
111
|
98
|
116
|
213
|
82
|
248
|
Silver ('000
ounces)
|
250
|
201
|
216
|
200
|
245
|
445
|
456
|
873
|
Metal recovery
(%)
|
|
|
|
|
|
|
|
|
Copper
|
79.7
|
80.9
|
84.8
|
83.8
|
80.2
|
82.2
|
79.6
|
81.4
|
Gold
|
59.8
|
64.7
|
71.7
|
70.1
|
63.6
|
68.2
|
57.6
|
65.2
|
Silver
|
58.4
|
62.8
|
67.1
|
63.2
|
59.2
|
61.2
|
56.4
|
60.9
|
Turquoise Hill will host a conference call and webcast to
discuss second quarter 2019 production and the underground update
on Tuesday, July 16, 2019 at
8:00am EDT / 5:00am PDT. The conference call can be accessed
through the following dial-in details:
North America: 416 764 8609
| 888 390 0605
International: +1 416 764
8609
Online webcast link
Follow us on Twitter @TurquoiseHillRe
Forward-looking statements
Certain statements made herein, including statements relating to
matters that are not historical facts and statements of the
Company's beliefs, intentions and expectations about developments,
results and events which will or may occur in the future,
constitute "forward-looking information" within the meaning of
applicable Canadian securities legislation and "forward-looking
statements" within the meaning of the "safe harbor" provisions of
the United States Private
Securities Litigation Reform Act of 1995. Forward-looking
statements and information relate to future events or future
performance, reflect current expectations or beliefs regarding
future events and are typically identified by words such as
"anticipate", "could", "should", "expect", "seek", "may", "intend",
"likely", "plan", "estimate", "will", "believe" and similar
expressions suggesting future outcomes or statements regarding an
outlook. These include, but are not limited to, information
regarding the timing and amount of production and potential
production delays, statements in respect of the impacts of any
delays on the Company's cash flows, expected copper and gold
grades, liquidity, funding requirements and planning, and
statements regarding timing and status of underground development,
the development options under consideration for the design of Panel
0 and the related cost and schedule implications, timing and status
of the Tavan Tolgoi-based power project, capital and operating cost
estimates, timing of completion of the definitive estimate review,
mill throughput, anticipated business activities, planned
expenditures, corporate strategies, and other statements that are
not historical facts.
Forward-looking statements and information are made based upon
certain assumptions and other important factors that, if untrue,
could cause the actual results, performance or achievements of the
Company to be materially different from future results, performance
or achievements expressed or implied by such statements or
information. There can be no assurance that such statements or
information will prove to be accurate. Such statements and
information are based on numerous assumptions regarding present and
future business strategies, local and global economic conditions,
and the environment in which the Company will operate in the
future, including the price of copper, gold and silver and
projected gold, copper and silver grades, anticipated capital and
operating costs, anticipated future production and cash flows, the
anticipated location of certain infrastructure and sequence of
mining in Panel 0 and the status of the Company's relationship and
interaction with the Government of Mongolia on the continued operation and
development of Oyu Tolgoi and Oyu Tolgoi LLC internal
governance.
Certain important factors that could cause actual results,
performance or achievements to differ materially from those in the
forward-looking statements and information include, among others,
copper; gold and silver price volatility; discrepancies between
actual and estimated production, mineral reserves and resources and
metallurgical recoveries; development plans for processing
resources; the outcome of the definitive estimate review; matters
relating to proposed exploration or expansion; mining operational
and development risks, including geotechnical risks and ground
conditions; litigation risks; regulatory restrictions (including
environmental regulatory restrictions and liability); Oyu Tolgoi
LLC's ability to deliver a domestic power source for the Oyu Tolgoi
project within the required contractual time frame; communications
with local stakeholders and community relations; activities,
actions or assessments, including tax assessments, by governmental
authorities; events or circumstances (including strikes, blockages
or similar events outside of the Company's control) that may affect
the Company's ability to deliver its products in a timely manner;
currency fluctuations; the speculative nature of mineral
exploration; the global economic climate; dilution; share price
volatility; competition; loss of key employees; cyber security
incidents; additional funding requirements, including in respect of
the development or construction of a long-term domestic power
supply for the Oyu Tolgoi project; capital and operating costs,
including with respect to the development of additional deposits
and processing facilities; and defective title to mineral claims or
property. Although the Company has attempted to identify important
factors that could cause actual actions, events or results to
differ materially from those described in forward-looking
statements and information, there may be other factors that cause
actions, events or results not to be as anticipated, estimated or
intended. All such forward-looking statements and information are
based on certain assumptions and analyses made by the Company's
management in light of their experience and perception of
historical trends, current conditions and expected future
developments, as well as other factors management believes are
appropriate in the circumstances. These statements, however, are
subject to a variety of risks and uncertainties and other factors
that could cause actual events or results to differ materially from
those projected in the forward-looking statements or
information.
Readers are cautioned not to place undue reliance on
forward-looking information or statements. By their nature,
forward-looking statements involve numerous assumptions, inherent
risks and uncertainties, both general and specific, which
contribute to the possibility that the predicted outcomes will not
occur. Events or circumstances could cause the Company's actual
results to differ materially from those estimated or projected and
expressed in, or implied by, these forward-looking statements.
Important factors that could cause actual results to differ from
these forward-looking statements are included in the "Risk Factors"
section in the Company's Annual Information Form dated as of
March 13, 2019 in respect of the year
ended December 31, 2018 (the "AIF")
as supplemented by our Management's Discussion and Analysis of
Financial Condition and Results of Operations for the three months
ended March 31, 2019 (MD&A).
Readers are further cautioned that the list of factors
enumerated in the "Risk Factors" section of the AIF and in the
MD&A that may affect future results is not exhaustive. When
relying on the Company's forward-looking statements and information
to make decisions with respect to the Company, investors and others
should carefully consider the foregoing factors and other
uncertainties and potential events.
_________________________________
|
1
|
As described above,
the level of accuracy of these estimates is preliminary in nature
and subject to a range of variables including the
timing of commissioning of Shaft 2, which is currently on track for
October 2019, in line with previous guidance. The confidence level
of
these estimates is at a level associated with a Conceptual or Order
of Magnitude Study, and further work is required between now
and
the second half of 2020 to refine the mine design options and study
them to a level of confidence and accuracy associated with
Feasibility
Study quality estimates
|
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SOURCE TURQUOISE HILL RESOURCES LTD