Turquoise Hill Resources today announced its financial results
for the quarter ended June 30, 2019.
All figures are in U.S. dollars unless otherwise stated.
VANCOUVER, July 31, 2019 /PRNewswire/ - "The Oyu Tolgoi open
pit mine continued its strong performance through the second
quarter of 2019," said Ulf Quellmann, Turquoise Hill's Chief
Executive Officer. "Revenue of $382.7
million in Q2'19 was a 12% increase on a year-over-year
basis, while copper and gold production were essentially flat and
up 44% over Q2'18 respectively.
"As discussed in our second quarter 2019 production update
conference call on July 16, the
underground development during Q2 was very strong with the
completion of critical infrastructure components, Shaft 2
transitioning into rope up phase, shafts 3 & 4 progressing
well, and a record month of lateral development in June.
"We continue to review mine design modifications with Rio Tinto
and are assessing the potential impact on the cost and schedule of
the underground project. Critically, all underground development to
date has not been impacted at all by pending changes to our mine
design, and all infrastructure developed to date remains usable and
in the appropriate locations for all of the mine design options
under review. Supported by our current liquidity of $3 billion we continue to drive forward with the
underground development of the Oyu Tolgoi mine whilst we are
reviewing a variety of funding options."
HIGHLIGHTS
- Oyu Tolgoi achieved another strong All Injury Frequency Rate of
0.12 per 200,000 hours worked during the six months ended
June 30, 2019.
- During Q2'19, Oyu Tolgoi produced 39,156 tonnes of copper and
71,825 ounces of gold, with copper guidance remaining unchanged
while the upper range of gold production has been increased from
220,000 to 230,000 ounces.
- Revenue of $382.7 million in
Q2'19 is an increase of 12% over Q2'18 primarily reflecting the
large increase in gold production as Oyu Tolgoi benefitted from the
processing and sale of Phase 4 ore in Q2'19 that contained higher
gold content.
- For Q2'19, Oyu Tolgoi cost of sales was $2.19 per pound of copper sold, C1 cash costs
were $0.79 per pound of copper
produced, and all-in sustaining costs were $1.54 per pound of copper produced.
- Operating cash costs1 of $206.7 million in Q2'19 increased 2.5% over
Q2'18. This was principally due to higher royalty costs associated
with higher sales revenue and higher power study costs.
- For Q2'19, the Company recorded a loss of $736.7 million, and a loss attributable to owners
of Turquoise Hill of $446.5 million
or $0.22 loss per share. Results
reflect the impact of adjustments made for the $0.6 billion impairment of the Oyu Tolgoi
cash-generating unit and deferred tax asset de-recognition
adjustments in the period.
- At the end of June 2019,
Turquoise Hill has approximately $3.0
billion of available liquidity, split between remaining
project finance proceeds of $1.4
billion and $1.6 billion of
cash and cash equivalents. In addition, we expect to generate free
cash flow at our existing open pit operations which will also be
available to help fund the underground development. We currently
expect to have enough liquidity to fund our operations and
underground development through the end of 2020.
- Capital expenditures for 2019 on a cash-basis for open-pit
operations are unchanged at $150
million to $180 million. For
underground development, we now expect capital expenditures of
$1.1 billion to $1.2 billion compared with the $1.3 billion to $1.4
billion previously disclosed.
- During Q2'19 underground expansion spend was $292.0 million, resulting in total project spend
since January 1, 2016 of
approximately $2.9 billion.
- Turquoise Hill generated cash flow from operating activities
before interest and taxes of $262.6
million in Q2'19, an increase of 75.5% versus Q2'18.
- Underground development progressed during Q2'19, with 3.2 total
equivalent kilometres completed during the quarter.
- Since the restart of underground development, 24.4 total
equivalent kilometres and 18.9 equivalent kilometres of lateral
development have been completed.
- Shaft 2 Rope up preparation was well advanced in Q2'19 and
related work is expected to continue through Q3'19.
- Shafts 3 and 4 are progressing well and as of June 30, 2019 were 52 metres and 80 metres below
the shaft collar respectively.
- 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, Rio Tinto, in its role as manager of Oyu Tolgoi, has advised
that it continues to review mine design options for the completion
of the underground development of Oyu Tolgoi. 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 or more panels.
- 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.
- Preliminary estimates indicate that sustainable first
production could be delayed by 16 to 30 months compared with the
Q1'21 estimate in the original feasibility study guidance in 2016,
and the development capital spend for the project may increase by
$1.2 billion to $1.9 billion over the $5.3
billion previously disclosed.
- All infrastructure developed to date remains usable and in
appropriate locations with no material expenditure as of
June 30, 2019 that is not required
for first or ongoing production.
- The Company received an automatic notice from the New York
Stock Exchange (the "NYSE") on July 31,
2019 that the Company is no longer in compliance with the
NYSE's continued listing standards because the average closing
price of the Company's common shares has fallen below US$1.00 per share over a consecutive 30
trading-day period. The Company will notify the NYSE that it
intends to pursue measures to cure the share price non-compliance.
Further details can be found below, under Corporate
Activities.
__________
1 Please refer to Section 14 – NON-GAAP MEASURES –
on page 21 of the MD&A for further information.
|
FINANCIAL RESULTS
Loss in Q2'19 was $736.7 million
compared with income of $204.4
million in Q2'18. The principal reason for this change is
the impairment charge of $0.6 billion
recorded in Q2'19. The other reason is the $0.4 billion difference in deferred tax asset
recognition in Q2'19 when compared to Q2'18. Both items were
impacted by the Company's update on the Oyu Tolgoi underground
project which was affected by a range of possible further delays to
sustainable first production now expected between May 2022 and June
2023, compared with the previous estimate of Q1'21.
Additionally, both items were also affected by a projected increase
in underground development capital ranging between $1.2 billion and $1.9
billion above the $5.3 billion
previously disclosed. These adjustments increased the loss in Q2'19
when compared to Q2'18 and were partly offset by the $41.0 million increase in sales revenue in Q2'19
versus Q2'18 driven primarily by the increased gold revenue in the
period arising from the higher gold production, partly offset by
the impact of lower copper prices.
Cash generated from operating activities in Q2'19 was
$141.5 million compared to cash
generated of $48.4 million in Q2'18.
Cash generated from operating activities before interest and tax
was $262.6 million in Q2'19 compared
to $149.6 million in Q2'18 primarily
reflecting the impact of higher sales revenue and benefits incurred
from movements in working capital. Interest paid in Q2'19
totalled $139.8 million compared to
$118.6 million in Q2'18 reflecting
the bi-annual payment of interest on the project finance facility,
with the amount paid increasing due to higher LIBOR rates in the
period.
Capital expenditure on property, plant and equipment was
$335.0 million on a cash basis in
Q2'19 compared with $318.0 million in
Q2'18, attributed principally to underground development
($292.0 million) with the remainder
related to open-pit activities.
Turquoise Hill's cash and cash equivalents at June 30, 2019 were $1.6
billion.
OYU TOLGOI
The Oyu Tolgoi mine is approximately 550 kilometres south of
Ulaanbaatar, Mongolia's capital
city, and 80 kilometres north of the Mongolia-China border. Mineralization on the property
consists of porphyry-style copper, gold, silver and molybdenum
contained in a linear structural trend (the Oyu Tolgoi Trend) of
deposits throughout this trend. They include, from south to north,
the Heruga Deposit, the Oyut deposit and the Hugo Dummett deposits
(Hugo South, Hugo North and Hugo
North Extension).
The Oyu Tolgoi mine was initially developed as an open-pit
operation. The copper concentrator plant, with related facilities
and necessary infrastructure, was originally designed to process
approximately 100,000 tonnes of ore per day from the Oyut open
pit. However, since 2014, the concentrator has improved operating
practices and gained experience, which has helped achieve a
consistent throughput of over 105,000 tonnes per day. Concentrator
throughput for 2019 is targeted at 110,000 tonnes per day and
expected to be approximately 40 million tonnes for the year.
In August 2013, development of the
underground mine was suspended pending resolution of matters with
the Government of Mongolia
(Government). Following signing of the Oyu Tolgoi Underground Mine
Development and Financing Plan (Underground Plan) in May 2015 and the signing of a $4.4 billion project finance facility in
December 2015, Oyu Tolgoi received
formal notice to proceed approval by the boards of Turquoise Hill,
Rio Tinto and Oyu Tolgoi LLC in May
2016, which was the final requirement for the re-start of
underground development. Underground construction recommenced in
May 2016. Prior to suspending
underground construction in August
2013, underground lateral development at Hugo North Lift 1
had advanced approximately 16 kilometres off Shaft 1.
At the end of Q2'19, Oyu Tolgoi had a total workforce (employees
and contractors), including underground project construction, of
approximately 15,500, of which 92% were Mongolian.
Underground development progress
Turquoise Hill, in conjunction with Rio Tinto, in its role as
manager of Oyu Tolgoi and underground construction contractor,
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.
Shaft 2 construction work is progressing well and holding to the
October 2019 commissioning
schedule. Shaft 2 auxiliary hoist and emergency hoist
inspections have been conducted and regulatory approval has been
received. These hoists are now in use for the final Shaft 2
installation and commissioning work. Turquoise Hill completed an
independent review of the construction and preparation for rope up
in July verifying this schedule and the associated risks.
Service hoist no-load commissioning commenced in June. Rope up work
commenced in late July on the first of the two remaining hoists to
be commissioned in Shaft 2. The service cage is at the shaft collar
ready for installation and the service hoist counterweight has been
installed in the shaft. The Shaft 2 jaw crusher has been
no-load commissioned and is ready for load commissioning once the
production hoist rope up is completed.
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 or more
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. Following a period of additional data collection and
model updates, two phases of geotechnical modelling work are
planned to inform staged mine design updates. The
geotechnical modelling is expected to continue into early 2020 with
final design decisions to be made at this time. A period of
detailed design, schedule and cost estimation will follow resulting
in the delivery of a final definitive estimate 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. All infrastructure developed to date
remains usable and in appropriate locations with no material
expenditure as of June 30, 2019 that
is not required for first or ongoing production.
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
months2 reflecting the unexpected and
challenging geotechnical issues, complexities in the commissioning
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, inclusive of
contingency, over the $5.3 billion
previously disclosed. This results in sustainable first production
now being expected between May 2022
and June 2023. The first drawbell is
now expected between October 2021 and
September 2022, and is delayed by 16
to 30 months. The range of project durations under consideration
are largely driving the differences in capital costs estimated to
complete the project and the increase includes the Shaft 2 delay
related costs. These ranges incorporate a range of productivity
assumptions, and a new program of productivity work is underway at
site to optimize performance as well as ongoing technical review to
guide the final inputs into the definitive estimate.
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
conducted 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.
Underground development progressed 3.2 total equivalent
kilometres during the quarter. Since the restart of
underground development, 24.4 total equivalent kilometres and 18.9
equivalent kilometres of lateral development have been completed.
The following table provides a breakdown of the various components
of completed development since project restart:
Year
|
Total Equivalent Kilometres
|
Lateral Development (kilometres)
|
Mass Excavation ('000 metres1)
|
2016
|
1.6
|
1.5
|
3.0
|
2017
|
6.1
|
4.8
|
31.7
|
2018
|
10.3
|
7.9
|
59.5
|
Q1'19
|
3.2
|
2.3
|
21.4
|
Q2'19
|
3.2
|
2.4
|
19.3
|
Total
|
24.4
|
18.9
|
134.8
|
|
|
|
|
Notes:
|
1. Totals may
not match due to rounding.
|
This period also witnessed the completion of final construction
activities including the central heating plant upgrade, the mine
dry, offices and control room facility. Shafts 3 and 4 are
progressing well and as of June 30,
2019 were 52 metres and 80 metres below the shaft collar
respectively. In June, the team achieved a record 1,000 metres of
lateral underground development. We also commissioned the surface
discharge conveyor, which links Shaft 2 to the existing overland
conveyor.
Oyu Tolgoi spent $292.0 million on
underground expansion during Q2'19. Total underground project spend
from January 1, 2016 to June 30, 2019 was approximately $2.9 billion. Underground project spend on a cash
basis includes expansion capital, VAT and capitalized management
services payment and excludes capitalized interest. In addition,
Oyu Tolgoi had further capital commitments3
of $0.9 billion as of June 30, 2019. Since the restart of project
development, Oyu Tolgoi has committed over $2.6 billion to Mongolian vendors and
contractors.
____________________
|
2
|
As described above,
the level of accuracy of these estimates is preliminary in nature
and subject to a range of variables. The confidence level of these
estimates is at a level associated with a Conceptual or Order of
Magnitude Study, and further work is required between now and the
second half of 2020 to refine the mine design options and study
them to a level of confidence and accuracy associated with
Feasibility Study quality estimates. The estimate of up to 8 months
contingency is the result of the use of simulation techniques to
assign an appropriate level of contingency to the deterministic
schedule.
|
3
|
Please refer to
Section 14 – NON-GAAP MEASURES – on page 21 of the MD&A for
further information.
|
Q2'19 open-pit operations performance
Key financial metrics for Q2'19 are as follows:
Oyu Tolgoi Key Financial Metrics(1)
($ in millions,
unless otherwise noted)
|
2Q 2018
|
3Q 2018
|
4Q 2018
|
1Q 2019
|
2Q 2019
|
1H 2019
|
1H 2018
|
Full
Year 2018
|
|
|
|
|
|
|
|
|
|
Revenue
|
341.7
|
246.5
|
346.2
|
352.7
|
382.7
|
735.4
|
587.3
|
1,180.0
|
Revenue by metals in
concentrates
|
|
|
|
|
|
|
|
|
Copper
|
273.7
|
180.4
|
210.3
|
223.9
|
232.4
|
456.3
|
475.8
|
866.5
|
Gold
|
64.1
|
63.3
|
132.7
|
125.7
|
146.8
|
272.5
|
104.3
|
300.4
|
Silver
|
4.0
|
2.9
|
3.0
|
3.1
|
3.5
|
6.6
|
7.2
|
13.1
|
Cost of
sales
|
239.6
|
181.0
|
187.7
|
169.1
|
224.7
|
393.8
|
408.5
|
777.2
|
Production and
delivery costs
|
174.2
|
135.9
|
143.3
|
126.0
|
170.1
|
296.1
|
288.8
|
568.0
|
Depreciation and
depletion
|
64.1
|
45.2
|
44.6
|
44.6
|
54.6
|
99.2
|
119.7
|
209.5
|
Capital expenditure
on cash basis
|
318.0
|
328.8
|
371.8
|
325.3
|
335.0
|
660.3
|
603.8
|
1,304.3
|
Underground
|
291.2
|
304.8
|
347.3
|
296.4
|
292.0
|
588.4
|
561.7
|
1,213.8
|
Open
pit(2)
|
26.8
|
24.0
|
24.5
|
28.9
|
43.0
|
71.9
|
42.0
|
90.5
|
Royalties
|
20.3
|
15.5
|
20.1
|
19.7
|
20.7
|
40.4
|
35.2
|
70.8
|
Operating cash
costs(3)
|
201.7
|
196.4
|
242.3
|
198.1
|
206.7
|
404.8
|
378.4
|
817.1
|
Unit costs
($)
|
|
|
|
|
|
|
|
|
Cost of sales (per
pound of copper sold)
|
2.36
|
2.28
|
2.12
|
1.99
|
2.19
|
2.10
|
2.30
|
2.25
|
C1 (per pound of
copper produced)(3)
|
1.72
|
1.65
|
1.24
|
0.77
|
0.79
|
0.78
|
1.74
|
1.59
|
All-in sustaining (per
pound of copper produced)(3)
|
2.42
|
2.29
|
2.01
|
1.45
|
1.54
|
1.48
|
2.25
|
2.20
|
Mining costs (per
tonne of material mined)(3)
|
2.12
|
2.18
|
2.28
|
2.10
|
2.05
|
2.07
|
2.03
|
2.13
|
Milling costs (per
tonne of ore treated)(3)
|
6.70
|
7.38
|
6.82
|
8.06
|
6.17
|
7.06
|
7.05
|
7.11
|
G&A costs (per
tonne of ore treated)
|
2.25
|
3.43
|
4.55
|
3.65
|
3.34
|
3.35
|
2.08
|
3.03
|
|
|
(1)
|
Any financial
information in this press release should be reviewed in conjunction
with the Company's consolidated financial statements or condensed
interim consolidated financial statements for the reporting periods
indicated.
|
(2)
|
Open-pit capital
expenditure includes both sustaining and non-underground
development activities.
|
(3)
|
Please refer to the
NON-GAAP MEASURES section of this press release for further
information.
|
Revenue of $382.7 million in Q2'19
increased 12.0% compared to $341.7
million in Q2'18. This increase was primarily due to the 44%
increase in gold production, as Oyu Tolgoi benefitted from the
processing of Phase 4 ore that contained higher gold content in
Q2'19. This was partly offset by lower copper revenue driven
by the 11.0% decrease in average copper prices in Q2'19 compared to
Q2'18.
Cost of sales for Q2'19 was lower at $224.7 million compared to $239.6 million in Q2'18, which was due primarily
to the reduced depreciation and depletion on certain long-lived
assets reaching the end of their depreciable lives during 2018.
Capital expenditure on a cash basis for Q2'19 was $335.0 million compared to $318.0 million in Q2'18, comprising amounts
attributed to the underground project and open-pit activities of
$292.0 million and $43.0 million, respectively.
Total operating cash costs4 at Oyu Tolgoi
were $206.7 million in Q2'19 compared
to $201.7 million in Q2'18, which was
principally due to higher royalty costs associated with higher
sales revenue and higher power study costs. Operating cash costs
include the 5% royalty payable to the Government of Mongolia and exclude deferred stripping
costs.
Cost of sales was $2.19 per pound
of copper sold in Q2'19 compared with $2.36 per pound of copper sold in Q2'18,
reflecting the impact of reduced depreciation and depletion due to
certain long-lived assets reaching the end of their depreciable
lives during 2018.
Oyu Tolgoi's C1 cash costs5 in Q2'19 were
$0.79 per pound of copper produced, a
substantial decrease from $1.72 per
pound of copper produced in Q2'18, primarily due to the benefit
incurred from the gold credits arising from the $82.7 million increase in gold revenue from Q2'18
to Q2'19. In addition, unit C1 cash costs benefitted from a
higher deferred stripping offset as a result of differences in mine
sequencing in the periods.
All-in sustaining costs5 in Q2'19 were
$1.54 per pound of copper produced,
compared with $2.42 per pound of
copper produced in Q2'18. Consistent with C1 cash costs, this
decrease was primarily due to the impact of higher gold sales
together with higher deferred stripping offset in mining
costs. The decrease in all-in sustaining costs was partly
offset by an increase in the amount of sustaining capital
expenditure in the period together with increased royalty expenses
associated with higher sales revenue and increased power plant
study costs.
Mining costs5 in Q2'19 were $2.05 per tonne of material mined compared with
$2.12 per tonne of material mined in
Q2'18. The decrease was mainly due to higher material mined driven
by increased truck payload partly offset by higher fuel and tire
costs associated with increased cycle time as the open pit
deepens.
Milling costs5 in Q2'19 were $6.17 per tonne of ore treated compared with
$6.70 per tonne of ore treated in
Q2'18. The decrease was mainly due to lower maintenance costs and
lower operating supply costs such as lower grinding media
costs.
G&A costs in Q2'19 were $3.34
per tonne of ore treated compared with $2.25 per tonne of ore treated in Q2'18. The
increase was due to higher power study costs during Q2'19 compared
to Q2'18.
Key operational metrics for Q2'19 are as follows:
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
|
91,310
|
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
|
Concentrates 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
|
Copper production in Q2'19 decreased 0.6% over Q2'18 due to
decreased head grade. Gold production in Q2'19 increased 43.7% over
Q2'18 due to a 19% increase in head grade resulting from the
increased contribution of Phase 4A. Mill throughput in Q2'19
increased 2.3% over Q2'18 benefitting from increased mill
availability.
___________________
|
4 Please refer to Section 14 –
NON-GAAP MEASURES – on page 21 of the MD&A for further
information.
|
5 Please refer to Section 14 –
NON-GAAP MEASURES – on page 21 of the MD&A for further
information.
|
Operational outlook
2019 operational guidance for copper in concentrates remains in
the 125,000 to 155,000 tonnes range while the upper production
range of gold in concentrates has been increased from 220,000 to
230,000 ounces. Open-pit operations are expected to continue
transitioning from the higher grade Phase 4 ore, to the lower grade
Phase 6 ore through the remainder of the year. Mill throughput for
2019 is expected to be approximately 40 million tonnes and it
includes the processing of some material from mine stockpiles.
Average gold mill head grades are expected to decline significantly
over the remainder of 2019, particularly in the second half as
softer, lower grade Phase 6 ore, and some material from mine
stockpiles are processed. Average copper mill head grades are also
expected to be lower over the remainder of the year. However, the
Company remains on track to achieve full year copper and gold
production guidance.
Operating cash costs for 2019 are expected to be $800 million to $850
million.
Capital expenditures for 2019 on a cash-basis for open-pit
operations are unchanged at $150
million to $180 million. For
underground development, we now expect capital expenditures of
$1.1 billion to $1.2 billion compared with the $1.3 billion to $1.4
billion previously disclosed. Open-pit capital is mainly
comprised of deferred stripping, equipment purchases, maintenance
componentization and tailings storage facility construction.
Underground development capital includes both expansion capital and
VAT.
The 2019 C1 cash cost guidance of $1.75 to $1.95 per
pound of copper produced assumed the midpoint of expected 2019
copper and gold production ranges and a gold price of $1,281 per ounce. 2019 C1 cash costs are now
expected to be at the lower end of the range due to the impact of
the increase in the gold production guidance provided above. Q2'19
C1 cash costs of $0.79 per pound of
copper produced were below the full year expected range due to the
impact of higher gold sales revenue driven by the 72,000 ounces of
gold in concentrates produced in the second quarter of 2019
(against an expected full year production of up to 230,000 ounces).
Gold production is expected to decline significantly over the
remainder of 2019 which is expected to lead to the average annual
C1 cash costs to remain within the guidance range.
Funding of Oyu Tolgoi by Turquoise Hill
In accordance with the Amended and Restated Shareholders'
Agreement (ARSHA) dated June 8, 2011,
Turquoise Hill has funded Oyu Tolgoi's cash requirements beyond
internally generated cash flows by a combination of equity
investment and shareholder debt.
For amounts funded by debt, Oyu Tolgoi must repay such amounts,
including accrued interest, before it can pay common share
dividends. As of June 30, 2019, the
aggregate outstanding balance of shareholder loans extended by
subsidiaries of the Company to Oyu Tolgoi was $5.5 billion, including accrued interest of
$1.0 billion. These loans bear
interest at an effective annual rate of LIBOR plus 6.5%.
In accordance with the ARSHA, a subsidiary of the Company has
funded the common share investments in Oyu Tolgoi on behalf of
Erdenes. These funded amounts earn interest at an effective annual
rate of LIBOR plus 6.5% and are repayable, by Erdenes to a
subsidiary of the Company, via a pledge over Erdenes' share of Oyu
Tolgoi common share dividends. Erdenes also has the right to reduce
the outstanding balance by making cash payments at any time. As of
June 30, 2019, the cumulative amount
of such funding was $1.1 billion,
representing 34% of invested common share equity; unrecognized
interest on the funding amounted to $0.6
billion.
At the end of June 2019, Turquoise
Hill has approximately $3.0 billion
of available liquidity, split between remaining project finance
proceeds of $1.4 billion, which are
drawn and currently deposited with Rio Tinto, and $1.6 billion of cash and cash equivalents. In
addition, we expect to generate free cash flow at our existing open
pit operations, which will also be available to help fund the
underground development.
We currently expect to have enough liquidity to fund our
operations and underground development through the end of 2020.
Taking into consideration the estimated impacts of recently
announced increases to underground development capital as well as
delays to first sustainable production, the Company expects to need
incremental financing to sustain its underground development beyond
2020. Important variables impacting the ultimate amount of
additional financing required include: the amount of incremental
underground development capital needed, timing of sustainable first
production and its resulting cash flows, timing of principal
repayments drawn on the project finance facility and the amount of
cash flow that can be generated from open-pit operations. As has
been previously noted, Turquoise Hill and Oyu Tolgoi have the
option to raise additional external financing to assist in funding
underground development going forward, including during
commissioning and ramp up.
Turquoise Hill continues to evaluate the impact of the estimated
delays to sustainable first production, which were announced on
July 15, 2019, 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.
Additionally, Oyu Tolgoi is currently undertaking a feasibility
study and is in discussions with the Government to progress the
construction of a coal-fired power plant and related infrastructure
at Tavan Tolgoi. While it is necessary to await the completion of
this study to reliably estimate the associated cost, and further to
await the outcome of related negotiations to determine the quantum
of Oyu Tolgoi's funding requirement, there is a provision under the
existing project finance documentation to increase Oyu Tolgoi's
current total debt capacity of $6.0
billion to assist in funding an expansion facility, such as
a Tavan Tolgoi-based power plant and related infrastructure.
Oyu Tolgoi Power Supply
As previously disclosed, a long-term source of power for Oyu
Tolgoi must be sourced domestically within four years of
February 15, 2018, in accordance with
the 2009 Oyu Tolgoi Investment Agreement (Investment Agreement).
The Power Source Framework Agreement (PSFA) entered into between
Oyu Tolgoi and the Government on December
31, 2018 provides a binding framework and pathway forward
for the construction of a Tavan Tolgoi-based power project, as well
as establishes the basis for a long-term domestic power solution
for the mine. Construction is currently expected to start in 2020
following further studies and commissioning of the power plant is
scheduled for mid-2023. Oyu Tolgoi LLC has developed the technical
specifications for the plant, commenced a competitive tender
process with a view to awarding a "turnkey" engineering,
procurement and construction (EPC) contract for its construction,
and is progressing related commercial arrangements, including
financing. The power plant will be majority owned by Oyu Tolgoi LLC
and will be situated close to the Tavan Tolgoi coalfields. The
Company continues to work with the Government of Mongolia toward satisfying the milestones
outlined in the Power Source Framework Agreement (PSFA). Although
certain milestones due in 2019 are delayed, the Company is in
ongoing discussions with the Government of Mongolia around satisfying their delivery. The
Company continues to work toward commencement of construction of
the Tavan Tolgoi Power Plant by March 31,
2020.
Oyu Tolgoi tax assessment
On January 16, 2018, Turquoise
Hill announced that Oyu Tolgoi had received and was evaluating a
tax assessment for approximately $155
million from the Mongolian Tax Authority (MTA) relating to
an audit on taxes imposed and paid by Oyu Tolgoi LLC between 2013
and 2015. In January 2018, Oyu Tolgoi
paid an amount of approximately $4.8
million to settle unpaid taxes, fines and penalties for
accepted items.
Following engagement with the MTA, Oyu Tolgoi was advised that
the MTA could not resolve Oyu Tolgoi's objections to the tax
assessment. Accordingly, on March 15,
2018, Oyu Tolgoi issued a notice of dispute to the
Government under the Investment Agreement and on April 13, 2018, Oyu Tolgoi submitted a claim to
the Mongolian Administrative Court. The Administrative Court
has currently suspended the processing of the case for an
indefinite period based on current procedural uncertainty in
relation to the tax assessment disputes.
Chapter 14 of the Investment Agreement sets out a dispute
resolution process. The issuance of a notice of dispute is the
first step in the dispute resolution process and includes a
60-working-day negotiation period. The parties were unable to
reach a resolution during the 60-working-day period; however, the
parties have continued discussions in an attempt to resolve the
dispute in good faith. If unsuccessful, the next step would be
dispute resolution through international arbitration.
Turquoise Hill remains of the opinion that Oyu Tolgoi has paid
all taxes and charges required under the Investment Agreement, the
ARSHA, the Underground Plan and Mongolian law.
Mongolian parliamentary working group
In March 2018, the Speaker of the
Mongolian Parliament appointed a Parliamentary Working Group
(Working Group) that consisted of 13 Members of Parliament to
review the implementation of the Investment Agreement. The Working
Group established five sub-working groups consisting of
representatives from government ministries, agencies, political
parties, non-governmental organizations and professors, to help and
support the Working Group. The Working Group's fieldwork has been
completed and they were expected to report to the Parliament before
the end of spring session in late June
2018; however, this has been delayed to date.
On December 13, 2018, Oyu Tolgoi
received a letter from the head of the Working Group confirming
that the consolidated report, conclusions and recommendations of
the Working Group have been finalized and was ready to be presented
to the Parliament.
On March 22, 2019, the
Parliamentary press office announced that the Working Group report
had been submitted to the National Security Council (President,
Prime Minister and Speaker of the Parliament).
On May 3, 2019, a summary of the
Working Group report was received by Oyu Tolgoi. On
May 6, 2019, Oyu Tolgoi provided the
Economic Standing Committee of the Parliament with a written
response to the summary of the Working Group report. As an outcome
of the hearing, a new working group of nine Members of Parliament
was established to draft a resolution directing the Cabinet on
actions related to Oyu Tolgoi. The newly established working group
is in the process of drafting the resolution. The draft resolution
is expected to be discussed during an extraordinary session to be
held until September 1, 2019.
Anti-Corruption Authority information requests
Oyu Tolgoi LLC has received information requests from the
Mongolian Anti-Corruption Authority (ACA) for information relating
to Oyu Tolgoi. The ACA has also conducted interviews in
connection with its investigation. Turquoise Hill has inquired
as to the status of the investigation and Oyu Tolgoi has informed
the Company that the investigation appears to relate primarily to
possible abuses of power by certain former Government officials in
relation to the Investment Agreement, and that Oyu Tolgoi is
complying with the ACA's requests in accordance with relevant
laws. To date, neither Turquoise Hill nor Oyu Tolgoi have
received notice from the ACA, or indeed from any regulator, that
either company or their employees are subjects of any investigation
involving the Oyu Tolgoi project.
The Investment Agreement framework was authorized by the
Mongolian Parliament, concluded after 16 months of negotiations and
reviewed by numerous constituencies within the
Government. Turquoise Hill has been operating in good faith
under the terms of the Investment Agreement since 2009, and we
believe not only that it is a valid and binding agreement, but that
it has proven to be beneficial for all parties.
Adherence to the principles of the Investment Agreement, ARSHA
and Underground Plan has allowed for the development of Oyu Tolgoi
in a manner that has given rise to significant long-term benefits
to Mongolia. Benefits from Oyu
Tolgoi's open-pit operations and underground development include,
but are not limited to, employment, royalties and taxes, local
procurement, economic development and sustainability
investments.
CORPORATE ACTIVITIES
Receipt of NYSE Non-Compliance Notification
The Company received an automatic notice from the New York Stock
Exchange (the "NYSE") on July 31,
2019 that the Company is no longer in compliance with the
NYSE's continued listing standards because the average closing
price of the Company's common shares has fallen below US$1.00 per share over a consecutive 30
trading-day period. Under NYSE rules, the Company has six months
from receipt of the notice to cure the share price non-compliance
(or until the Company's next annual meeting of shareholders if
shareholder approval is required to effect such cure) and the
Company can regain compliance at any time during the cure period if
on the last trading day of any calendar month during the cure
period the Company's common shares have a closing price of at least
US$1.00 and an average closing price
of at least US$1.00 over the 30
trading-day period ending on the last trading day of that month or
on the last day of the cure period. The Company will notify the
NYSE that it intends to pursue measures to cure the share price
non-compliance. The Company is in compliance with all other NYSE
continued listing standard rules. The Company's common shares will
continue to be listed and traded on the NYSE during the cure
period, subject to compliance with the NYSE's other continued
listing standards. The notification from the NYSE does not affect
the continued listing and trading of the Company's common shares on
the Toronto Stock Exchange. The Nasdaq, however, also has a
US$1.00 minimum price listing
standard and, if the closing price of the Company's common shares
is below US$1.00 for 30 consecutive
business days, the Company expects to receive a notification of
non-compliance from the Nasdaq and will respond to the Nasdaq in
the same manner as it responds to the NYSE.
Director Resignation
On July 10, 2019, Turquoise Hill
announced that the Company's Board of Directors had accepted the
resignation of director Dr. James
Gill.
NON-GAAP MEASURES
The Company presents and refers to the following non-GAAP
measures, which are not defined in IFRS. A description and
calculation of each measure is given below and may differ from
similarly named measures provided by other issuers. These measures
are presented in order to provide investors and other stakeholders
with additional understanding of performance and operations at Oyu
Tolgoi and are not intended to be used in isolation from, or as a
replacement for, measures prepared in accordance with IFRS.
Operating cash costs
The measure of operating cash costs excludes: depreciation and
depletion; exploration and evaluation; charges for asset write-down
(including write-down of materials and supplies inventory) and
includes management services payments to Rio Tinto and management
services payments to Turquoise Hill which are eliminated in the
consolidated financial statements of the Company.
C1 cash costs
C1 cash costs is a metric representing the cash cost per unit of
extracting and processing the Company's principal metal product,
copper, to a condition in which it may be delivered to customers
net of gold and silver credits from concentrates sold. This metric
is provided in order to support peer group comparability and to
provide investors and other stakeholders with additional
information about the underlying cash costs of Oyu Tolgoi and the
impact of gold and silver credits on the operations' cost
structure. C1 cash costs are relevant to understanding the
Company's operating profitability and ability to generate cash
flow. When calculating costs associated with producing a pound of
copper, the Company deducts gold and silver revenue credits as the
production cost is reduced by of selling these products.
All-in sustaining costs
All-in sustaining costs (AISC) is an extended cash-based cost
metric providing further information on the aggregate cash, capital
and overhead outlay per unit and is intended to reflect the costs
of producing the Company's principal metal product, copper, in both
the short term and over the life-cycle of its operations. As a
result, sustaining capital expenditure on a cash basis is included
rather than depreciation. As the measure seeks to present a full
cost of copper production associated with sustaining current
operations, development project capital is not included. AISC
allows Turquoise Hill to assess the ability of Oyu Tolgoi to
support sustaining capital expenditures for future production from
the generation of operating cash flows.
A reconciliation of total operating cash costs, C1 cash costs
and all-in sustaining costs is provided below.
|
Operating and unit
costs
|
|
(Three Months
Ended)
|
|
(Six Months
Ended)
|
C1 costs
(Stated in $000's of dollars)
|
June 30,
2019
|
June 30,
2018
|
|
June 30,
2019
|
June 30,
2018
|
Cost of
sales
|
224,656
|
239,622
|
|
393,790
|
408,491
|
Cost of sales:
$/lb of copper sold
|
2.19
|
2.36
|
|
2.10
|
2.30
|
Depreciation and
depletion
|
(54,546)
|
(64,086)
|
|
(99,175)
|
(119,696)
|
Provision against
carrying value of copper-gold concentrate
|
86
|
(1,366)
|
|
1,533
|
-
|
Change in
inventory
|
(34,275)
|
(30,207)
|
|
(27,843)
|
(14,821)
|
Other operating
expenses
|
57,897
|
56,079
|
|
128,243
|
86,364
|
Less:
|
|
|
|
|
|
- Inventory
(write-down) reversal
|
8,126
|
(4,693)
|
|
(4,432)
|
5,301
|
-
Depreciation
|
(3,321)
|
(539)
|
|
(3,631)
|
(1,258)
|
Management services
payment to Turquoise Hill
|
8,105
|
6,937
|
|
16,295
|
13,986
|
Operating cash
costs
|
206,728
|
201,747
|
|
404,780
|
378,367
|
Operating cash
costs: $/lb of copper produced
|
2.39
|
2.32
|
|
2.16
|
2.19
|
Adjustments to
operating cash costs
|
12,065
|
15,828
|
|
21,168
|
33,076
|
Less: Gold and silver
revenues
|
(150,378)
|
(67,996)
|
|
(279,124)
|
(111,667)
|
C1 costs
($'000)
|
68,415
|
149,579
|
|
146,824
|
299,776
|
C1 costs: $/lb of
copper produced
|
0.79
|
1.72
|
|
0.78
|
1.74
|
|
|
|
|
|
|
All-in
sustaining costs (Stated in $000's of dollars)
|
|
|
|
|
|
Corporate
administration
|
5,759
|
7,372
|
|
10,303
|
12,265
|
Asset retirement
expense
|
2,322
|
1,707
|
|
4,063
|
3,402
|
Royalty
expenses
|
20,722
|
20,261
|
|
40,461
|
35,174
|
Ore stockpile and
stores write-down (reversal)
|
(8,126)
|
4,693
|
|
4,432
|
(5,301)
|
Other
expenses
|
696
|
211
|
|
259
|
173
|
Sustaining cash
capital including deferred stripping
|
42,973
|
26,734
|
|
71,855
|
42,159
|
All-in sustaining
costs ($'000)
|
132,761
|
210,557
|
|
278,197
|
387,648
|
All-in sustaining
costs: $/lb of copper produced
|
1.54
|
2.42
|
|
1.48
|
2.25
|
|
|
(1)
|
Adjustments to
operating cash costs include: treatment, refining and freight
differential charges less the 5% Government of Mongolia royalty and
other expenses not applicable to the definition of C1
cost.
|
Mining costs and milling costs
Mining costs and milling costs are included within operating
cash costs. Mining costs per tonne of material mined for the three
months ended June 30, 2019 are
calculated by reference to total mining costs of $49.9 million (Q2'18: $48.3 million) and total material mined of 24.4
million tonnes (Q2'18: 22.8 million tonnes).
Milling costs per tonne of ore treated for the three months
ended June 30, 2019 are calculated by
reference to total milling costs of $64.1
million (Q2'18: $68.3 million)
and total ore treated of 10.4 million tonnes (Q2'18: 10.2 million
tonnes).
Working capital
Consolidated working capital comprises those components of
current assets and liabilities which support and result from the
Company's ongoing running of its current operations. It is provided
in order to give a quantifiable indication of the Company's
short-term cash generation ability and business efficiency. As a
measure linked to current operations and the sustainability of the
business, the Company's definition of working capital excludes:
non-trade receivables and payables; financing items; cash and cash
equivalents; deferred revenue and non-current inventory.
A reconciliation of consolidated working capital to the
financial statements and notes is provided below.
Working
capital
|
|
June
30,
|
|
December
31,
|
(Stated in $000's of
dollars)
|
|
2019
|
|
2018
|
|
|
|
|
|
Inventories
(current)
|
|
$
|
208,430
|
|
$
|
242,970
|
Trade and other
receivables
|
|
38,486
|
|
30,264
|
Trade and other
payables:
|
|
|
|
|
|
- trade payables and
accrued liabilities
|
|
(414,667)
|
|
(395,883)
|
|
- payable to related
parties
|
|
(58,536)
|
|
(51,490)
|
Consolidated working
capital
|
|
$
|
(226,287)
|
|
$
|
(174,139)
|
Contractual obligations
Section 9 of the Company's Management's Discussion and Analysis
of Financial Condition and Results of Operations for the six months
ended June 30, 2019 ("MD&A")
discloses contractual obligations in relation to the Company's
lease, purchase and asset retirement obligations. Amounts relating
to these obligations are calculated on the basis of the Company
carrying out its future business activities and operations as
planned at the period end. As such, contractual obligations
presented in the MD&A will differ from amounts presented in the
financial statements, which are prepared on the basis of minimum
uncancellable commitments to pay in the event of contract
termination. The MD&A presentation of contractual obligations
is provided in order to give an indication of future expenditure,
for the disclosed categories, arising from the Company's continuing
operations and development projects.
A reconciliation of contractual obligations at June 30, 2019 to the financial statements and
notes is provided below.
(Stated in $000's of
dollars)
|
Purchase
obligations
|
Power
commitments
|
Lease
liabilities
|
Decommissioning
obligations
|
|
|
|
|
|
Commitments
(MD&A)
|
$
|
861,706
|
$
|
460,789
|
$
|
26,011
|
$
|
275,354
|
Cancellable
obligations
|
(709,393)
|
(115,671)
|
-
|
-
|
(net of exit
costs)
|
|
|
|
|
Accrued capital
expenditure
|
(114,343)
|
-
|
-
|
-
|
Discounting and other
adjustments
|
-
|
-
|
(159)
|
(141,698)
|
Financial
statement amount
|
$
|
37,971
|
$
|
345,118
|
$
|
25,852
|
$
|
133,656
|
INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in the Company's internal control over
financial reporting (as such term is defined in Rule 13a-15(f) and
15d-15(f) under the Exchange Act) that occurred during the three
months ended June 30, 2019 that have
materially affected, or are reasonably likely to materially affect,
the Company's internal control over financial reporting.
QUALIFIED PERSON
Disclosure of information of a scientific or technical nature in
this press release in respect of the Oyu Tolgoi mine was approved
by Jo-Anne Dudley, Chief Operating
Officer of Turquoise Hill. Ms. Dudley is a "qualified person" as
that term is defined in National Instrument 43-101 - Standards
of Disclosure for Mineral Projects ("NI 43-101").
SELECTED QUARTERLY DATA
The Company's interim financial statements are reported under
IFRS applicable to interim financial statements, including
International Accounting Standard (IAS) 34 Interim Financial
Reporting. The following table sets forth selected unaudited
quarterly financial information derived from financial information
for each of the eight most recent quarters.
($ in millions,
except per share information)
|
|
Quarter
Ended
|
|
|
Jun-30
|
Mar-31
|
Dec-31
|
Sep-30
|
|
|
2019
|
2019
|
2018
|
2018
|
|
|
|
|
|
|
Revenue
|
|
$
|
382.7
|
$
|
352.7
|
$
|
346.2
|
$
|
246.5
|
|
|
|
|
|
|
Income (loss) for the
period
|
|
$
|
(736.7)
|
$
|
105.2
|
$
|
95.0
|
$
|
15.2
|
|
|
|
|
|
|
Income (loss)
attributable to owners of Turquoise Hill
|
|
$
|
(446.5)
|
$
|
111.2
|
$
|
101.0
|
$
|
53.2
|
|
|
|
|
|
|
Basic and diluted
income (loss) per share attributable to owners of Turquoise
Hill
|
|
$
|
(0.22)
|
$
|
0.06
|
$
|
0.05
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
|
Jun-30
|
Mar-31
|
Dec-31
|
Sep-30
|
|
|
2018
|
2018
|
2017
|
2017
|
|
|
|
|
|
|
Revenue
|
|
$
|
341.7
|
$
|
245.6
|
$
|
251.7
|
$
|
246.9
|
|
|
|
|
|
|
Income for the
period
|
|
$
|
204.4
|
$
|
79.7
|
$
|
33.9
|
$
|
47.7
|
|
|
|
|
|
|
Income attributable
to owners of Turquoise Hill
|
|
$
|
171.3
|
$
|
85.7
|
$
|
51.1
|
$
|
65.3
|
|
|
|
|
|
|
Basic and diluted
income per share attributable to owners of Turquoise
Hill
|
|
$
|
0.09
|
$
|
0.04
|
$
|
0.03
|
$
|
0.03
|
TURQUOISE HILL
RESOURCES LTD.
|
|
|
|
|
|
Consolidated
Statements of Income (Loss)
|
|
|
|
|
|
(Stated in
thousands of U.S. dollars)
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended June
30,
|
|
Note
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
4
|
|
$
|
382,748
|
|
$
|
341,743
|
|
$
|
735,428
|
|
$
|
587,335
|
Cost of
sales
|
5
|
|
(224,656)
|
|
(239,622)
|
|
(393,790)
|
|
(408,491)
|
Gross
margin
|
|
|
158,092
|
|
102,121
|
|
341,638
|
|
178,844
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
6
|
|
(57,897)
|
|
(56,079)
|
|
(128,243)
|
|
(86,364)
|
Corporate
administration expenses
|
|
|
(5,759)
|
|
(7,372)
|
|
(10,303)
|
|
(12,265)
|
Other
income
|
|
|
1,279
|
|
3,012
|
|
2,522
|
|
334
|
Impairment
charges
|
11
|
|
(596,906)
|
|
-
|
|
(596,906)
|
|
-
|
Income (loss)
before finance items and taxes
|
|
|
(501,191)
|
|
41,682
|
|
(391,292)
|
|
80,549
|
|
|
|
|
|
|
|
|
|
|
Finance
items
|
|
|
|
|
|
|
|
|
|
Finance
income
|
7
|
|
29,062
|
|
41,395
|
|
61,891
|
|
80,290
|
Finance
costs
|
7
|
|
(1,709)
|
|
(16,816)
|
|
(3,727)
|
|
(40,802)
|
|
|
|
27,353
|
|
24,579
|
|
58,164
|
|
39,488
|
Income (loss) from
operations before taxes
|
|
|
$
|
(473,838)
|
|
$
|
66,261
|
|
$
|
(333,128)
|
|
$
|
120,037
|
|
|
|
|
|
|
|
|
|
|
Income and other
taxes
|
14
|
|
(262,844)
|
|
138,185
|
|
(298,354)
|
|
164,113
|
Income (loss) for
the period
|
|
|
$
|
(736,682)
|
|
$
|
204,446
|
|
$
|
(631,482)
|
|
$
|
284,150
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to
owners of Turquoise Hill Resources Ltd.
|
|
(446,515)
|
|
171,295
|
|
(335,278)
|
|
256,987
|
|
Attributable to owner
of non-controlling interest
|
|
|
(290,167)
|
|
33,151
|
|
(296,204)
|
|
27,163
|
Income (loss) for
the period
|
|
|
$
|
(736,682)
|
|
$
|
204,446
|
|
$
|
(631,482)
|
|
$
|
284,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
earnings (loss) per share attributable
|
|
|
|
|
|
|
|
|
|
to Turquoise Hill
Resources Ltd.
|
|
|
$
|
(0.22)
|
|
$
|
0.09
|
|
$
|
(0.17)
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted
average number of shares outstanding (000's)
|
|
|
|
2,012,314
|
|
|
2,012,314
|
|
|
2,012,314
|
|
|
2,012,314
|
The notes to these financial statements, which are available on
our website, are part of the consolidated financial statements.
TURQUOISE HILL
RESOURCES LTD.
|
|
|
|
Consolidated
Statements of Comprehensive Income (Loss)
|
|
|
|
(Stated in
thousands of U.S. dollars)
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
Six Months Ended June
30,
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) for
the period
|
|
$
|
(736,682)
|
|
$
|
204,446
|
|
$
|
(631,482)
|
|
$
|
284,150
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Items that will not
be reclassified to income:
|
|
|
|
|
|
|
|
|
|
Changes in the fair
value of marketable securities at FVOCI
|
|
(74)
|
|
902
|
|
(609)
|
|
(2,298)
|
Other
comprehensive income (loss) for the period (a)
|
|
$
|
(74)
|
|
$
|
902
|
|
$
|
(609)
|
|
$
|
(2,298)
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income (loss) for the period
|
|
$
|
(736,756)
|
|
$
|
205,348
|
|
$
|
(632,091)
|
|
$
|
281,852
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to
owners of Turquoise Hill
|
|
(446,589)
|
|
172,197
|
|
(335,887)
|
|
254,689
|
|
Attributable to owner
of non-controlling interest
|
|
(290,167)
|
|
33,151
|
|
(296,204)
|
|
27,163
|
Total
comprehensive income (loss) for the period
|
|
$
|
(736,756)
|
|
$
|
205,348
|
|
$
|
(632,091)
|
|
$
|
281,852
|
|
|
|
(a) No tax charges
and credits arose on items recognized as other comprehensive income
or loss in 2019 (2018: nil).
|
The notes to these financial statements, which are available on
our website, are part of the consolidated financial statements.
TURQUOISE HILL
RESOURCES LTD.
|
|
|
|
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
|
|
|
|
(Stated in
thousands of U.S. dollars)
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended June
30,
|
|
|
|
|
Note
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash generated
from operating activities
|
|
|
|
|
|
|
|
|
|
before interest and
tax
|
17
|
|
$
|
262,568
|
|
$
|
149,647
|
|
$
|
312,406
|
|
$
|
164,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
received
|
|
|
22,353
|
|
20,949
|
|
46,110
|
|
39,968
|
Interest
paid
|
|
|
(139,751)
|
|
(118,586)
|
|
(218,325)
|
|
(130,807)
|
Income and other
taxes paid
|
|
|
(3,643)
|
|
(3,634)
|
|
(4,353)
|
|
(5,702)
|
Net cash generated
from operating activities
|
|
|
$
|
141,527
|
|
$
|
48,376
|
|
$
|
135,838
|
|
$
|
67,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities
|
|
|
|
|
|
|
|
|
|
Receivable from
related party: amounts withdrawn
|
18
|
|
255,000
|
|
230,000
|
|
530,000
|
|
550,000
|
Expenditures on
property, plant and equipment
|
|
|
(334,989)
|
|
(318,048)
|
|
(660,283)
|
|
(603,764)
|
Other investing cash
flows
|
|
|
-
|
|
616
|
|
-
|
|
616
|
Cash used in
investing activities
|
|
|
$
|
(79,989)
|
|
$
|
(87,432)
|
|
$
|
(130,283)
|
|
$
|
(53,148)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities
|
|
|
|
|
|
|
|
|
|
Net proceeds from
project finance facility
|
|
|
1,511
|
|
4,158
|
|
1,511
|
|
4,158
|
Payment of project
finance fees
|
|
|
(107)
|
|
(192)
|
|
(107)
|
|
(192)
|
Payment of lease
liability
|
|
|
(1,405)
|
|
-
|
|
(3,813)
|
|
-
|
Cash generated
from (used in) financing activities
|
|
|
$
|
(1)
|
|
$
|
3,966
|
|
$
|
(2,409)
|
|
$
|
3,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of exchange
rates on cash and cash equivalents
|
|
(111)
|
|
(69)
|
|
8
|
|
(113)
|
Net increase
(decrease) in cash and cash equivalents
|
|
|
$
|
61,426
|
|
$
|
(35,159)
|
|
$
|
3,154
|
|
$
|
18,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents - beginning of period
|
|
|
$
|
1,544,795
|
|
$
|
1,498,433
|
|
$
|
1,603,067
|
|
$
|
1,444,783
|
Cash and cash
equivalents - end of period
|
|
|
1,606,221
|
|
1,463,274
|
|
1,606,221
|
|
1,463,274
|
Cash and cash
equivalents as presented on the balance sheets
|
$
|
1,606,221
|
|
$
|
1,463,274
|
|
$
|
1,606,221
|
|
$
|
1,463,274
|
The notes to these financial statements, which are available on
our website, are part of the consolidated financial statements.
TURQUOISE HILL
RESOURCES LTD.
|
|
|
|
|
|
Consolidated
Balance Sheets
|
|
|
|
|
|
(Stated in
thousands of U.S. dollars)
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
|
December
31,
|
|
|
|
|
Note
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
Cash and cash
equivalents
|
8
|
|
$
|
1,606,221
|
|
$
|
1,603,067
|
Inventories
|
9
|
|
208,430
|
|
242,970
|
Trade and other
receivables
|
|
|
38,486
|
|
30,264
|
Prepaid expenses and
other assets
|
|
|
68,901
|
|
30,213
|
Receivable from
related party
|
10
|
|
1,356,284
|
|
1,620,073
|
|
|
|
|
|
|
3,278,322
|
|
3,526,587
|
Non-current
assets
|
|
|
|
|
|
Property, plant and
equipment
|
11
|
|
9,040,377
|
|
8,838,305
|
Inventories
|
9
|
|
3,832
|
|
18,655
|
Deferred income tax
assets
|
14
|
|
370,915
|
|
649,421
|
Receivable from
related party and other financial assets
|
10
|
|
11,573
|
|
279,019
|
|
|
|
|
|
|
9,426,697
|
|
9,785,400
|
Total
assets
|
|
|
$
|
12,705,019
|
|
$
|
13,311,987
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
Borrowings and other
financial liabilities
|
13
|
|
$
|
7,643
|
|
$
|
-
|
Trade and other
payables
|
12
|
|
483,939
|
|
459,244
|
Deferred
revenue
|
|
|
37,252
|
|
75,162
|
|
|
|
|
|
|
528,834
|
|
534,406
|
Non-current
liabilities
|
|
|
|
|
|
Borrowings and other
financial liabilities
|
13
|
|
4,202,417
|
|
4,187,297
|
Deferred income tax
liabilities
|
14
|
|
63,132
|
|
47,934
|
Decommissioning
obligations
|
15
|
|
133,656
|
|
131,565
|
|
|
|
|
|
|
4,399,205
|
|
4,366,796
|
Total
liabilities
|
|
|
$
|
4,928,039
|
|
$
|
4,901,202
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
Share
capital
|
|
|
$
|
11,432,122
|
|
$
|
11,432,122
|
Contributed
surplus
|
|
|
1,558,251
|
|
1,558,264
|
Accumulated other
comprehensive income
|
|
|
235
|
|
844
|
Deficit
|
|
|
|
(4,006,710)
|
|
(3,670,310)
|
Equity
attributable to owners of Turquoise Hill
|
|
|
8,983,898
|
|
9,320,920
|
Attributable to
non-controlling interest
|
16
|
|
(1,206,918)
|
|
(910,135)
|
Total
equity
|
|
|
$
|
7,776,980
|
|
$
|
8,410,785
|
|
|
|
|
|
|
|
|
|
Total liabilities
and equity
|
|
|
$
|
12,705,019
|
|
$
|
13,311,987
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies (Note 19)
|
|
|
|
|
|
The notes to these financial statements, which are available on
our website, are part of the consolidated financial statements.
TURQUOISE HILL
RESOURCES LTD.
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in
thousands of U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2019
|
|
Attributable to
owners of Turquoise Hill
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other
|
|
|
|
|
|
|
Non-controlling
|
|
|
|
|
|
|
|
Contributed
|
|
comprehensive
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
Share
capital
|
|
surplus
|
|
income
(loss)
|
|
Deficit
|
|
Total
|
|
|
(Note 16)
|
|
Total
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance
|
|
$
|
11,432,122
|
|
$
|
1,558,264
|
|
$
|
844
|
|
$
|
(3,670,310)
|
|
$
|
9,320,920
|
|
|
$
|
(910,135)
|
|
$
|
8,410,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of change
in accounting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
policy (Note
2)
|
|
-
|
|
-
|
|
-
|
|
(1,122)
|
|
(1,122)
|
|
|
(579)
|
|
(1,701)
|
Restated opening
balance
|
|
$
|
11,432,122
|
|
$
|
1,558,264
|
|
$
|
844
|
|
$
|
(3,671,432)
|
|
$
|
9,319,798
|
|
|
$
|
(910,714)
|
|
$
|
8,409,084
|
Income (loss) for the
period
|
|
-
|
|
-
|
|
-
|
|
(335,278)
|
|
(335,278)
|
|
|
(296,204)
|
|
(631,482)
|
Other comprehensive
loss for the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
period
|
|
-
|
|
-
|
|
(609)
|
|
-
|
|
(609)
|
|
|
-
|
|
(609)
|
Employee share
plans
|
|
-
|
|
(13)
|
|
-
|
|
-
|
|
(13)
|
|
|
-
|
|
(13)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing
balance
|
|
$
|
11,432,122
|
|
$
|
1,558,251
|
|
$
|
235
|
|
$
|
(4,006,710)
|
|
$
|
8,983,898
|
|
|
$
|
(1,206,918)
|
|
$
|
7,776,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2018
|
|
Attributable to
owners of Turquoise Hill
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other
|
|
|
|
|
|
|
Non-controlling
|
|
|
|
|
|
|
|
Contributed
|
|
comprehensive
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
Share
capital
|
|
surplus
|
|
income
(loss)
|
|
Deficit
|
|
Total
|
|
|
(Note 16)
|
|
Total
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance
|
|
$
|
11,432,122
|
|
$
|
1,558,102
|
|
$
|
3,719
|
|
$
|
(4,081,508)
|
|
$
|
8,912,435
|
|
|
$
|
(893,211)
|
|
$
|
8,019,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income for the
period
|
|
-
|
|
-
|
|
-
|
|
256,987
|
|
256,987
|
|
|
27,163
|
|
284,150
|
Other comprehensive
loss for the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
period
|
|
-
|
|
-
|
|
(2,298)
|
|
-
|
|
(2,298)
|
|
|
-
|
|
(2,298)
|
Employee share
plans
|
|
-
|
|
232
|
|
-
|
|
-
|
|
232
|
|
|
-
|
|
232
|
Closing
balance
|
|
$
|
11,432,122
|
|
$
|
1,558,334
|
|
$
|
1,421
|
|
$
|
(3,824,521)
|
|
$
|
9,167,356
|
|
|
$
|
(866,048)
|
|
$
|
8,301,308
|
The notes to these financial statements, which are available on
our website, are part of the consolidated financial statements.
About Turquoise Hill Resources
Turquoise Hill (TRQ: TSX, NYSE, NASDAQ) is an international
mining company focused on the operation and further development of
the Oyu Tolgoi copper-gold mine in southern Mongolia, which is the Company's principal and
only material mineral resource property. Turquoise Hill's ownership
of the Oyu Tolgoi mine is held through a 66% interest in Oyu Tolgoi
LLC; the remaining 34% interest is held by Erdenes Oyu Tolgoi LLC,
a Mongolian state-owned entity. Turquoise Hill is 50.8% owned by
Rio Tinto plc, one of the world's largest metals and mining
corporations.
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, statements
regarding timing and status of underground development, the
development options under consideration for the design of the 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.
With respect to specific forward-looking information concerning
the continued operation and development of Oyu Tolgoi, the Company
has based its assumptions and analyses on certain factors which are
inherently uncertain. Uncertainties and assumptions include, among
others: the timing and cost of the construction and expansion of
mining and processing facilities; the timing and availability of a
long-term domestic power source (or the availability of financing
for the Company to construct such a source) for Oyu Tolgoi; the
ability to secure and draw down on the supplemental debt under the
Oyu Tolgoi project financing facility and the availability of
additional financing on terms reasonably acceptable to Oyu Tolgoi
LLC, Rio Tinto and the Company to further develop Oyu Tolgoi; the
impact of changes in, changes in interpretation to or changes in
enforcement of, laws, regulations and government practices in
Mongolia; the availability and
cost of skilled labour and transportation; the obtaining of (and
the terms and timing of obtaining) necessary environmental and
other government approvals, consents and permits; delays, and the
costs which would result from delays, in the development of the
underground mine (which could significantly exceed the costs
projected in the 2016 Oyu Tolgoi Feasibility Study and the 2016 Oyu
Tolgoi Technical Report); the anticipated location of certain
infrastructure and sequence of mining in Panel 0, projected copper,
gold and silver prices and their market demand; and production
estimates and the anticipated yearly production of copper, gold and
silver at Oyu Tolgoi.
The cost, timing and complexities of mine construction and
development are increased by the remote location of a property such
as Oyu Tolgoi. It is common in mining operations and in the
development or expansion of existing facilities to experience
unexpected problems and delays during development, construction and
mine start-up. Additionally, although Oyu Tolgoi has achieved
commercial production, there is no assurance that future
development activities will result in profitable mining
operations.
This press release also contains references to estimates of
mineral reserves and mineral resources. The estimation of reserves
and resources is inherently uncertain and involves subjective
judgments about many relevant factors. The mineral resource
estimates contained in this press release are inclusive of mineral
reserves. Further, mineral resources that are not mineral reserves
do not have demonstrated economic viability. The accuracy of any
such estimates is a function of the quantity and quality of
available data, and of the assumptions made and judgments used in
engineering and geological interpretation (including future
production from Oyu Tolgoi, the anticipated tonnages and grades
that will be achieved or the indicated level of recovery that will
be realized), which may prove to be unreliable. There can be no
assurance that these estimates will be accurate or that such
mineral reserves and mineral resources can be mined or processed
profitably. See the discussion under the headings "Language
Regarding Reserves and Resources" and "Note to United States
Investors Concerning Estimates of Measured, Indicated and Inferred
Resources" in Section 17 – CAUTIONARY STATEMENTS – of the MD&A.
Such estimates are, in large part, based on the following:
- Interpretations of geological data obtained from drill holes
and other sampling techniques. Large scale mineral continuity and
character of the deposits can be improved with additional drilling
and sampling; actual mineralization or formations may be different
from those predicted. It may also take many years from the initial
phase of drilling before production is possible, and during that
time the economic feasibility of exploiting a deposit may change.
Reserve and resource estimates are materially dependent on
prevailing metal prices and the cost of recovering and processing
minerals at the individual mine sites. Market fluctuations in the
price of metals or increases in the costs to recover metals or the
actual recovery percentage of the metal(s) from the Company's
mining projects may render mining of ore reserves uneconomic and
affect the Company's operations in a materially adverse manner.
Moreover, various short-term operating factors may cause a mining
operation to be unprofitable in any particular accounting
period;
- Assumptions relating to commodity prices and exchange rates
during the expected life of production, mineralization of the area
to be mined, the projected cost of mining, and the results of
additional planned development work. Actual future production rates
and amounts, revenues, taxes, operating expenses, environmental and
regulatory compliance expenditures, development expenditures, and
recovery rates may vary substantially from those assumed in the
estimates. Any significant change in these assumptions, including
changes that result from variances between projected and actual
results, could result in material downward revision to current
estimates;
- Assumptions relating to projected future metal prices. The
Company uses prices reflecting market pricing projections in the
financial modeling for Oyu Tolgoi which are subjective in nature.
It should be expected that actual prices will be different than the
prices used for such modeling (either higher or lower), and the
differences could be significant; and
- Assumptions relating to the costs and availability of treatment
and refining services for the metals mined from Oyu Tolgoi, which
require arrangements with third parties and involve the potential
for fluctuating costs to transport the metals and fluctuating costs
and availability of refining services. These costs can be
significantly impacted by a variety of industry-specific as well as
regional and global economic factors (including, among others,
those which affect commodity prices). Many of these factors are
beyond the Company's control.
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 "Risks and
Uncertainties" section in the MD&A.
Readers are further cautioned that the list of factors
enumerated in the "Risks and Uncertainties" section of 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. Furthermore, the forward-looking statements
and information contained in this MD&A are made as of the date
of this document and the Company does not undertake any obligation
to update or to revise any of the included forward-looking
statements or information, whether as a result of new information,
future events or otherwise, except as required by applicable law.
The forward-looking statements and information contained in this
press release are expressly qualified by this cautionary
statement.
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SOURCE Turquoise Hill Resources Ltd.