MONTREAL, Oct. 15, 2020 /PRNewswire/ - Turquoise Hill
Resources Ltd. ("Turquoise Hill" or the "Company") today announced
third quarter 2020 production for Oyu Tolgoi and provided an update
on underground development, COVID-19 and the definitive
estimate.
Q3' 2020 Highlights
- Copper and gold production guidance for 2020 remains within the
ranges of 140,000 to 170,000 tonnes and 155,000 to 180,000 ounces
respectively, with gold production trending towards the higher end
of the range.
- Limited flights adhering to Mongolian protocols allowing
expatriates to return to Mongolia
began in July.
- Access to higher copper and gold grades is expected to continue
for the remainder of 2020, and into 2021.
- C1 cash costs1 guidance remains in the $1.60 - $2.00
range.
- The 2020 operating cash cost estimate remains in a range
between $780 million - $830 million.
- Capital expenditure for 2020 on a cash-basis for open-pit
operations is trending toward the lower end of the $70 million - $90
million range.
- TRQ now expects to have sufficient liquidity to meet its
requirements, including for its operations and underground
development, into Q2 2022.
Q3' 2020 Production
- Q3' 2020 mill throughput was slightly higher than Q3' 2019 due
to slightly higher mill availability and an increased milling rate
associated with softer ore.
- Copper production of 36,286 tonnes, an increase of 28% vs Q3'
2019, was due to a planned increase in head grade as the open pit
moves deeper into the higher grade Phase 4B.
- On a sequential basis, Q3' 2020 Copper production was slightly
lower driven by a decrease of copper head grade as central ore
proportion in the ore blend to the crusher was decreased.
- Gold production of 36,743 ounces, an increase of 43% vs Q3'
2019 due to increased head grade as the open pit moves deeper into
the higher grade Phase 4B.
_______________________________
|
1 C1
cash costs are a non-GAAP (Generally Accepted Accounting
Principles) measure (i.e. not defined by International Financial
Reporting Standards (IFRS)). It is presented in order to provide
investors and other stakeholders with an additional understanding
of performance and operations at the Oyu Tolgoi mine and is not
intended to be used in isolation form, or as a replacement for,
measures prepared in accordance with IFRS. Please refer to Non-GAAP
Measures section of the Company's Q2 MD&A for further
information.
|
Oyu Tolgoi underground project
- Work on the project has continued to progress despite COVID-19
controls and ongoing international travel restrictions issued by
the Government of Mongolia. 40
expatriates returned to Mongolia
in July - the first time this has been possible since the onset of
the pandemic. Further flights are planned in order to return the
required specialists to site.
- Care and maintenance activities continue at shafts 3 and 4 but
some commissioning activities have advanced in preparation for
shaft sinking, including rope installation and no-load testing of
the Shaft 4 hoisting system. Further substantial progress will
require the remobilisation of international shaft-sinking
specialists, and subject to local border restrictions, preparation
is underway to mobilise these contractors before the end of the
fourth quarter 2020. Review of the impacts of the shaft 3 and 4
delays are ongoing, but first sustainable production for Panel 0 is
not anticipated to be affected. We will communicate any
implications, particularly for Panel 1 and Panel 2 ramp-up which
shaft 3 and 4 support, at an appropriate time.
- Overall, underground lateral development has now reached 48,604
equivalent metres, and progress continues broadly in line with the
OTTR20 Technical Report.
- All surface infrastructure required for first sustainable
production is complete and the team is focused on the safe and
efficient delivery of the critical underground Material Handling
System 1 (MHS1). The balance of project infrastructure to be
delivered post the completion of MHS1 is not needed for first
sustainable production; however, it is needed to support the
production ramp-up profile and the life of mine material handling
infrastructure capacity.
- In the fourth quarter of 2020, the definitive estimate cost and
schedule update for Panel 0 is expected, and as advised by the
manager, preliminary indications from the definitive estimate
process are that first sustainable production is trending towards
the earlier months of the previously guided range of October 2022 to June
2023, and that the forecast development capital cost remains
within the range of $6.6 to
$7.1 billion. This is subject to
ongoing internal assessment and review as part of finalising the
definitive estimate process by the manager. Turquoise Hill is
undertaking an independent technical assurance review into the
indications and findings of the definitive estimate communicated by
the manager.
- As part of its ongoing review, Turquoise Hill has received an
independent consultant's report with respect to the delay and cost
overruns at OT, which were announced by the Company in July 2019. The management and independent
directors of the Company are currently reviewing the report with
their advisors.
- Due to the ongoing nature of the COVID-19 pandemic, its full
impact remains unknown. The cost and schedule range assumes an
easing of travel restrictions and COVID-19 related controls from
the time of reporting, which will continue to be monitored and
reviewed.
Liquidity Outlook
TRQ regularly reviews its available liquidity and short-term
cash flow forecasts as information changes or becomes available. An
updated liquidity forecast will be included in TRQ's third quarter
earnings release on November 13,
2020. However, based on an initial review, which takes into
account higher commodity prices as well as updated assumptions
regarding delays in underground capital expenditure caused by
COVID-related travel and other restrictions, TRQ now expects to
have sufficient liquidity to meet its requirements, including for
its operations and underground development, into Q2 2022. Further
updates to its liquidity forecast will be provided by the Company
as and when available.
Oyu Tolgoi Production Data
All data represents full production and sales on a 100%
basis
|
3Q
|
4Q
|
1Q
|
2Q
|
3Q
|
9 months
|
9 months
|
Full Year
|
|
2019
|
2019
|
2020
|
2020
|
2020
|
2020
|
2019
|
2019
|
|
|
|
|
|
|
|
|
|
Open pit material
mined ('000 tonnes)
|
24,844
|
28,122
|
26,834
|
23,218
|
23,979
|
74,032
|
73,195
|
101,316
|
Ore treated ('000
tonnes)
|
10,040
|
11,088
|
10,889
|
9,645
|
10,072
|
30,606
|
29,689
|
40,777
|
Average mill head
grades:
|
|
|
|
|
|
|
|
|
Copper (%)
|
0.37
|
0.42
|
0.42
|
0.47
|
0.45
|
0.45
|
0.46
|
0.45
|
Gold (g/t)
|
0.14
|
0.15
|
0.15
|
0.19
|
0.21
|
0.18
|
0.34
|
0.29
|
Silver
(g/t)
|
1.03
|
1.06
|
1.14
|
1.22
|
1.22
|
1.19
|
1.16
|
1.13
|
Concentrates produced
('000 tonnes)
|
131.3
|
152.6
|
164.5
|
169.9
|
168.5
|
502.9
|
552.1
|
674.6
|
Average concentrate
grade (% Cu)
|
21.7
|
21.6
|
21.4
|
21.5
|
21.5
|
21.5
|
21.7
|
21.7
|
Production of metals
in concentrates:
|
|
|
|
|
|
|
|
|
Copper ('000
tonnes)
|
28.4
|
32.9
|
35.2
|
36.5
|
36.3
|
108.0
|
113.4
|
146.3
|
Gold ('000
ounces)
|
26
|
24
|
26
|
31
|
37
|
94
|
218
|
242
|
Silver ('000
ounces)
|
191
|
190
|
214
|
212
|
219
|
645
|
677
|
867
|
Concentrate sold
('000 tonnes)
|
157.0
|
157.5
|
125.9
|
194.3
|
167.9
|
488.1
|
567.2
|
724.7
|
Sales of metals in
concentrates:
|
|
|
|
|
|
|
|
|
Copper ('000
tonnes)
|
32.4
|
32.3
|
25.8
|
39.7
|
34.4
|
99.9
|
117.6
|
149.9
|
Gold ('000
ounces)
|
35
|
25
|
20
|
31
|
34
|
84
|
249
|
274
|
Silver ('000
ounces)
|
207
|
244
|
146
|
220
|
201
|
566
|
652
|
896
|
Metal recovery
(%)
|
|
|
|
|
|
|
|
|
Copper
|
75.1
|
74.2
|
74.3
|
79.1
|
78.9
|
77.4
|
80.3
|
78.7
|
Gold
|
54.7
|
48.2
|
46.0
|
52.0
|
53.7
|
51.0
|
66.2
|
63.6
|
Silver
|
56.0
|
53.5
|
51.5
|
55.8
|
54.6
|
54.0
|
59.6
|
58.1
|
Class Action Complaint
On October 14, 2020, a class
action complaint was filed in the U.S. District Court, Southern
District of New York against the
Company, certain of its current and former officers as well as Rio
Tinto and certain of its officers. The complaint alleges that the
defendants made material misstatements and material omissions with
respect to, among other things, the schedule, cost and progress to
completion of the development of Oyu Tolgoi in violation of Section
10(b) of the U.S. Securities Exchange Act and Rule 10b-5 thereunder. The Company believes that
the complaint against it is without merit.
Forward-looking statements and forward-looking
information
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,
statements and information regarding: the completion and potential
benefits of the share consolidation; the expectations set out in
the 2020 Oyu Tolgoi Technical Report ("OTTR20"); the timing and
amount of future 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
sources, funding requirements and planning and the status and
nature of the Company's ongoing discussions with Rio Tinto plc and
its subsidiaries with respect to future funding plans and
requirements (including as contemplated by the Memorandum of
understanding dated September 9, 2020
(the "MoU")); the amount of any funding gap to complete the Oyu
Tolgoi underground project; the amount and potential sources of
additional funding; the Company's ability to re-profile its
existing project debt in line with current cash flow projections;
the amount by which a successful re-profiling of the Company's
existing debt would reduce the Company's currently projected
funding requirements; the Company's and Rio Tinto's understanding
regarding the raising of supplemental senior debt and the Company's
ability to raise supplemental senior debt; the Company's and Rio
Tinto's understanding regarding the process for identifying and
considering other funding options; the Company's and Rio Tinto's
understanding regarding the scope and timing for an equity offering
by the Company to address any remaining funding gap; the Company's
intention to prioritize funding by way of debt and/or hybrid
financing over equity funding; the Company's expectation of the
anticipated funding gap; the timing of studies, announcements and
analyses; status of underground development; the mine design for
Panel 0 of Hugo North Lift 1 and the related cost and production
schedule implications; the re-design studies for Panels 1 and 2 of
Hugo North Lift 1 and the possible outcomes, content and timing
thereof; expectations regarding the possible recovery of ore in the
two structural pillars to the north and south of Panel 0; the
possible progression of a state-owned power plant ("SOPP") and
related amendments to the Power Source Framework Agreement ("PSFA")
as well as power purchase agreements; the timing of construction
and commissioning of the potential SOPP; sources of interim power;
the potential impact of COVID-19 on the Company's business,
operations and financial condition; capital and operating cost
estimates, timing of completion of the Definitive Estimate review
and the scope thereof; mill and concentrator throughput; the
outcome of formal international arbitration proceedings;
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; projected
gold, copper and silver grades; anticipated capital and operating
costs, anticipated future production and cash flows; the
anticipated location of certain infrastructure in Hugo North Lift
1; sequence of mining within and across panel boundaries; the
availability and timing of required governmental and other
approvals for the construction of the SOPP; the ability of the
Government of Mongolia to finance
and procure the SOPP within the timeframes anticipated in the PSFA,
as amended; the willingness of third parties to extend existing
power arrangements; the status of the Company's relationship and
interaction with the Government of Mongolia on the continued operation and
development of the Oyu Tolgoi mine and Oyu Tolgoi LLC internal
governance; the status and nature of the Company's ongoing
discussions with Rio Tinto plc and its subsidiaries with respect to
future funding plans and requirements (including as contemplated by
the MoU) as well as the completion and potential benefits of the
share consolidation. 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; public health crises such as COVID-19; 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 or the Government of Mongolia'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, blockades 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 reasonable and 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 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 or the Government of Mongolia 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 as well as the status and nature of the Company's ongoing
discussions with Rio Tinto plc and its subsidiaries with respect to
future funding plans and requirements (including as contemplated by
the MoU); the potential impact of COVID-19; 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 OTTR20);
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.
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 Company's annual information form for the year ended
December 31, 2019 ("AIF"), as
supplemented by the "Risks and Uncertainties" section of the
Company's second quarter 2020 management's discussion and analysis
("MD&A") dated July 28, 2020.
Readers are further cautioned that the list of factors
enumerated in the "Risk Factors" section of the AIF and in the
"Risks and Uncertainties" section of the Company's second quarter
2020 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 herein 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 herein are expressly qualified by this cautionary
statement.
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SOURCE TURQUOISE HILL RESOURCES LTD