VANCOUVER, May 15, 2019 /CNW/ - Turquoise Hill Resources
today announced its financial results for the quarter ended
March 31, 2019. All figures are in
U.S. dollars unless otherwise stated.
"Oyu Tolgoi has made a strong start to 2019," said Ulf
Quellmann, Turquoise Hill's Chief Executive Officer. "Copper and
gold production at our open pit operations are up 18% and 188% over
Q1'18 respectively, and we remain on track to achieve our full-year
2019 production guidance. Over the last three months, Oyu Tolgoi
has completed key surface and underground infrastructure, commenced
sinking shafts 3 and 4 and also progressed underground lateral
development.
"We remain engaged with our mine manager, Rio Tinto, to
incorporate new geotechnical data into the mine design, and we
expect to provide an update along with our mid-year results.
"Oyu Tolgoi is truly a world-class deposit, with the potential
to produce low-cost copper over a multi-decade life. Turquoise Hill
provides a unique opportunity for shareholders to directly
participate in the world's next Tier-1 copper mine."
HIGHLIGHTS
- Oyu Tolgoi achieved a strong All Injury Frequency Rate of 0.09
per 200,000 hours worked for the three months ended March 31, 2019.
- During Q1'19, Oyu Tolgoi produced 45,800 tonnes of copper and
120,000 ounces of gold and is on track to achieve 2019 copper and
gold production guidance.
- Revenue of $352.7 million in
Q1'19 increased 43.6% over Q1'18 primarily reflecting the
significant increase in gold production as Oyu Tolgoi benefitted
from the processing of Phase 4 ore that contained higher gold
content.
- For Q1'19, Oyu Tolgoi's cost of sales was $1.99 per pound of copper sold, C1 cash costs
were $0.77 per pound of copper
produced and all-in sustaining costs were $1.45 per pound of copper
produced1.
- Operating cash costs1 of $198.1 million in Q1'19 increased 12.1% over
Q1'18 primarily reflecting higher freight and royalty costs
associated with higher sales revenues, higher power study costs and
increased community development costs.
- For Q1'19, the Company recorded income of $105.2 million and net income attributable to
owners of Turquoise Hill of $111.2
million or $0.06 per
share.
- During Q1'19, underground expansion spend was $296.4 million, resulting in total project spend
since January 1, 2016 of
approximately $2.6 billion.
- Turquoise Hill generated cash flow from operating activities
before interest and taxes of $49.8
million in Q1'19, an increase of 239.5% over Q1'18.
- Underground development progressed during Q1'19, with 3.2 total
equivalent kilometres completed during the quarter, an increase of
0.6 total equivalent kilometres from Q1'18.
- Since the restart of underground development, 21.2 total
equivalent kilometres and 16.6 equivalent kilometres of lateral
development have been completed.
- The Shaft 2 development jaw crusher is complete and currently
being commissioned.
- The Surface Discharge Conveyor is complete and tied to the
existing Overland Conveyor and is now in commissioning phase.
- Shafts 3 and 4 works are progressing well and as of
March 31, 2019 were 10 metres and 50
metres below the shaft collar respectively.
- Rio Tinto, in its role as manager of Oyu Tolgoi, has advised
that it has completed a detailed review of the Shaft 2 schedule and
Shaft 2 is now expected to be completed by the end of October 2019.
1 Please refer to the NON-GAAP MEASURES section of
this press release for further information.
FINANCIAL RESULTS
Income in Q1'19 was $105.2 million
compared with $79.7 million in Q1'18
reflecting the $107.1 million
increase in revenue driven primarily by the 187.6% increase in gold
production and also the 18.2% increase in copper production. This
was partly offset by the $58.1
million impact of the difference in deferred tax asset
recognition in Q1'19 when compared to Q1'18, together with
increased operating expenses at Oyu Tolgoi. Operating expenses were
impacted principally by an increase in net adjustments to the
carrying value of ore stockpiles caused by a reduction in
medium-term copper price projections, as well as increased freight
and royalty costs associated with higher sales revenues.
Cash used in operating activities in Q1'19 was $5.7 million compared to cash generated of
$19.4 million in Q1'18. Cash
generated from operating activities before interest and tax was
$49.8 million in Q1'19 compared to
$14.7 million in Q1'18 primarily
reflecting the impact of higher sales revenue partly offset by
increased operating cash costs in the period. Interest paid
in Q1'19 totalled $78.6 million
compared to $12.2 million in Q1'18
reflecting the timing of the annual payment of the completion
support fee to Rio Tinto.
Capital expenditure on property, plant and equipment was
$325.3 million on a cash basis in
Q1'19 compared with $285.7 million in
Q1'18, attributed principally to underground development
($296.4 million) with the remainder
related to open-pit activities.
Turquoise Hill's cash and cash equivalents at March 31, 2019 were $1.5
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 Q1'19, Oyu Tolgoi had a total workforce (employees
and contractors), including underground project construction, of
approximately 16,600, of which 92.6% were Mongolian.
Underground development progress
The principal focus of underground development for 2019 will be
the fit out and commissioning of Shaft 2, underground lateral
development, support infrastructure and the convey-to-surface
decline. The completion of Shaft 2 remains the primary focus for
the construction team and the structural, mechanical and piping fit
out is now well advanced. The Central Heating Plant is also
progressing well, with the Boiler 5 dry out and chemical cleaning
completed during March, as well as Boiler 6 water wall cladding,
plastering and economizer masonry brick installation. The Central
Heating Plant expansion has now moved into the commissioning phase.
Shaft 3 and 4 works are progressing well and are 10 metres and 50
metres below the shaft collar respectively.
As announced in April 2019, Rio
Tinto, in its role as manager of Oyu Tolgoi, has advised that the
fit-out and commissioning work on Shaft 2 is now expected to be
completed by the end of October 2019.
Rio Tinto has advised that this further delay to the completion of
Shaft 2 is expected to contribute to the previously announced
overall schedule delay to sustainable first production beyond the
end of Q3'21.
Rio Tinto has also advised that more detailed geotechnical
information and different ground conditions have required a review
of the mine design and the development schedule. This includes
potentially relocating the ore passes on the footprint and this may
modify the initiation sequence within Panel 0. Rio Tinto has
advised that the impact of these changes, including the further
delay to Shaft 2, will be included in the definitive estimate
review, which is expected to be completed towards the end of the
year.
Oyu Tolgoi spent $296.4 million on
underground expansion during Q1'19. Total underground project spend
from January 1, 2016 to March 31, 2019 was approximately $2.6 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 commitments2 of
$1.1 billion as of March 31, 2019.
At the end of Q1'19, the underground project had committed
almost 94% of direct project contracts and procurement packages, of
which 74% were to Mongolian companies. Since the restart of project
development, Oyu Tolgoi has committed nearly $2.5 billion to Mongolian vendors and
contractors.
Underground development progressed 3.2 total equivalent
kilometres during the quarter. Since the re-start of development, a
total of 21.2 total equivalent kilometres and 16.6 kilometres of
lateral development have been completed. As previously announced,
Oyu Tolgoi is currently reviewing the forecast underground
development quantities for 2019. The following table provides a
breakdown of the various components of completed development since
project restart:
2 Please refer to the NON-GAAP MEASURES section of
this press release for further information.
Year
|
Total
Equivalent
Kilometres
|
Lateral
Development
(kilometres)
|
Mass
Excavation
('000
metres1)
|
2016
|
1.6
|
1.5
|
3.0
|
2017
|
6.1
|
4.8
|
31.7
|
2018
|
10.3
|
7.9
|
59.5
|
Q1'19
|
3.2
|
2.3
|
21.4
|
Total
|
21.2
|
16.6
|
115.5
|
1.
|
Totals may not match
due to rounding.
|
During Q1'19, development of the convey-to-surface decline also
continued to progress and has now reached a cumulative development
of 6.0 equivalent kilometers. The convey-to-surface system enables
production ramp up beyond the Shaft 2 30,000 tonnes per day
capacity to the full 95,000 tonnes per day underground production
from the mine.
Q1'19 open-pit operations performance
Key financial metrics for Q1'19 are as follows:
Oyu Tolgoi Key Financial Metrics(1)
($ in millions,
unless otherwise noted)
|
1Q
2018
|
2Q
2018
|
3Q
2018
|
4Q
2018
|
1Q
2019
|
Full
Year
2018
|
|
|
|
|
|
|
|
Revenue
|
245.6
|
341.7
|
246.5
|
346.2
|
352.7
|
1,180.0
|
Revenue by metals in
concentrates
|
|
|
|
|
|
|
Copper
|
202.1
|
273.7
|
180.4
|
210.3
|
223.9
|
866.5
|
Gold
|
40.3
|
64.1
|
63.3
|
132.7
|
125.7
|
300.4
|
Silver
|
3.2
|
4.0
|
2.9
|
3.0
|
3.1
|
13.1
|
Cost of
sales
|
168.9
|
239.6
|
181.0
|
187.7
|
169.1
|
777.2
|
Production and
delivery costs
|
114.6
|
174.2
|
135.9
|
143.3
|
126.0
|
568.0
|
Depreciation and
depletion
|
55.6
|
64.1
|
45.2
|
44.6
|
44.6
|
209.5
|
Capital expenditure
on cash basis
|
285.7
|
318.0
|
328.8
|
371.8
|
325.3
|
1,304.3
|
Underground
|
270.5
|
291.2
|
304.8
|
347.3
|
296.4
|
1,213.8
|
Open
pit(2)
|
15.2
|
26.8
|
24.0
|
24.5
|
28.9
|
90.5
|
Royalties
|
14.9
|
20.3
|
15.5
|
20.1
|
19.7
|
70.8
|
Operating cash
costs(3)
|
176.6
|
201.7
|
196.4
|
242.3
|
198.1
|
817.1
|
Unit costs
($)
|
|
|
|
|
|
|
Cost of sales (per
pound of copper sold)
|
2.23
|
2.36
|
2.28
|
2.12
|
1.99
|
2.25
|
C1 (per pound of
copper produced)(3)
|
1.76
|
1.72
|
1.65
|
1.24
|
0.77
|
1.59
|
All-in sustaining (per
pound of copper produced)(3)
|
2.07
|
2.42
|
2.29
|
2.01
|
1.45
|
2.20
|
Mining costs (per
tonne of material mined)(3)
|
1.94
|
2.12
|
2.18
|
2.28
|
2.10
|
2.13
|
Milling costs (per
tonne of ore treated)(3)
|
7.42
|
6.70
|
7.38
|
6.82
|
8.06
|
7.11
|
G&A costs (per
tonne of ore treated)
|
1.90
|
2.25
|
3.43
|
4.55
|
3.65
|
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 $352.7 million in Q1'19
increased 43.6% compared to $245.6
million in Q1'18. This increase was primarily due to the
significant 187.6% increase in gold production as Oyu Tolgoi
benefitted from the processing of Phase 4 ore that contained higher
gold content, as well as an 18.2% increase in copper
production. This was partly offset by a 10.5% decrease in
average copper prices in Q1'19 compared to Q1'18.
Cost of sales for Q1'19 was marginally higher at $169.1 million compared to $168.9 million in Q1'18. The increase in cost of
sales was due to the 13.4% increase in volumes of concentrate sold
offset by reduced depreciation and depletion due to certain
long-lived assets reaching the end of their depreciable lives
during 2018. Gross margin increased by 139% over Q1'18, benefitting
from the impact of significantly higher gold grades that directly
impacted the volume of gold in concentrates sold and the amount of
gold revenue recorded in the period.
Capital expenditure on a cash basis for Q1'19 was $325.3 million compared to $285.7 million in Q1'18, comprising amounts
attributed to the underground project and open-pit activities of
$296.4 million and $28.9 million respectively.
Total operating cash costs3 at Oyu Tolgoi were
$198.1 million in Q1'19 compared to
$176.6 million in Q1'18. This was
principally due to higher freight and royalty costs associated with
higher sales revenue, higher power study costs and increased
community development costs. Other contributors included increased
maintenance costs and higher input prices for key items such as
fuel and power. Operating cash costs include the 5% royalty payable
to the Government of Mongolia and
exclude deferred stripping costs.
Cost of sales was $1.99 per pound
of copper sold in Q1'19 compared with $2.23 per pound of copper sold in Q1'18,
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 costs4 in Q1'19 were
$0.77 per pound of copper produced, a
decrease from $1.76 per pound of
copper produced in Q1'18. Operating cash costs per pound of
copper produced only decreased marginally due to reduced unit costs
of production benefitting from increased copper grades and
recovery. C1 cash costs decreased primarily due to the
benefit incurred from the gold credits arising from the
$85.4 million increase in gold
revenue from Q1'18 to Q1'19.
All-in sustaining costs4 in Q1'19 were $1.45 per pound of copper produced, compared with
$2.07 per pound of copper produced in
Q1'18. Consistent with C1 cash costs, this decrease was
primarily due to the impact of higher gold sales together with a
marginal reduction in unit costs of production. 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.
Mining costs4 in Q1'19 were $2.10 per tonne of material mined compared with
$1.94 per tonne of material mined in
Q1'18. The increase was mainly due to higher maintenance costs and
higher tire costs associated with increased cycle time as the open
pit deepens.
Milling costs4 in Q1'19 were $8.06 per tonne of ore treated compared with
$7.42 per tonne of ore treated in
Q1'18. The increase was mainly due to higher raw material costs
such as steel and increased energy costs required to process the
harder Phase 4 ore.
G&A costs in Q1'19 were $3.65
per tonne of ore treated compared with $1.90 per tonne of ore treated in Q1'18. The
increase was mainly due to higher power study costs and increased
community development costs during Q1'19 compared to Q1'18.
3 Please refer to the NON-GAAP MEASURES section of
this press release for further information.
4 Please refer to the NON-GAAP MEASURES section of this
press release for further information.
Key operational metrics for Q1'19 are as follows:
Oyu Tolgoi Production Data
All data represents full
production and sales on a 100% basis
|
1Q
2018
|
2Q
2018
|
3Q
2018
|
4Q
2018
|
1Q
2019
|
Full Year
2018
|
|
|
|
|
|
|
|
Open pit material
mined ('000 tonnes)
|
23,131
|
22,792
|
22,523
|
22,863
|
23,943
|
91,310
|
Ore treated ('000
tonnes)
|
9,561
|
10,164
|
9,652
|
9,361
|
9,255
|
38,738
|
Average mill head
grades:
|
|
|
|
|
|
|
Copper (%)
|
0.51
|
0.48
|
0.51
|
0.55
|
0.57
|
0.51
|
Gold (g/t)
|
0.25
|
0.26
|
0.38
|
0.56
|
0.58
|
0.36
|
Silver
(g/t)
|
1.32
|
1.17
|
1.19
|
1.22
|
1.25
|
1.22
|
Concentrates produced
('000 tonnes)
|
177.3
|
178.8
|
179.8
|
189.0
|
210.1
|
724.9
|
Average concentrate
grade (% Cu)
|
21.9
|
22.0
|
21.9
|
21.9
|
21.8
|
21.9
|
Production of metals
in concentrates:
|
|
|
|
|
|
|
Copper ('000
tonnes)
|
38.8
|
39.4
|
39.4
|
41.5
|
45.8
|
159.1
|
Gold ('000
ounces)
|
42
|
50
|
77
|
117
|
120
|
285
|
Silver ('000
ounces)
|
221
|
225
|
230
|
238
|
247
|
914
|
Concentrates sold
('000 tonnes)
|
163.1
|
220.0
|
171.9
|
191.4
|
184.9
|
746.4
|
Sales of metals in
concentrates:
|
|
|
|
|
|
|
Copper ('000
tonnes)
|
34.3
|
46.1
|
36.0
|
40.2
|
38.5
|
156.7
|
Gold ('000
ounces)
|
31
|
51
|
55
|
111
|
98
|
248
|
Silver ('000
ounces)
|
206
|
250
|
201
|
216
|
200
|
873
|
Metal recovery
(%)
|
|
|
|
|
|
|
Copper
|
79.5
|
79.7
|
80.9
|
84.8
|
83.8
|
81.4
|
Gold
|
55.0
|
59.8
|
64.7
|
71.7
|
70.1
|
65.2
|
Silver
|
54.6
|
58.4
|
62.8
|
67.1
|
63.2
|
60.9
|
Copper production in Q1'19 increased 18.2% over Q1'18 due to
increased head grade and recovery rate. Gold production in Q1'19
increased 187.6% over Q1'18 primarily due to a 135.2% increase in
head grade resulting from the increased contribution of Phase 4A.
As anticipated, mill throughput in Q1'19 decreased 3.2% over Q1'18
due to the concentrator processing harder Phase 4 ore and planned
maintenance.
Operational outlook
Oyu Tolgoi is expected to produce 125,000 to 155,000 tonnes of
copper and 180,000 to 220,000 ounces of gold in concentrates for
2019. Open-pit operations are expected to mine ore primarily from
Phase 4 throughout the year, with contributions from Phase 6. 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 are expected to be
$150 million to $180 million for open-pit operations and
$1.3 billion to $1.4 billion for underground development.
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.
2019 C1 cash costs are expected to be $1.75 to $1.95 per
pound of copper produced. Q1'19 C1 cash costs of $0.77 per pound of copper produced were below the
full year expected range due to the impact of significantly higher
gold sales revenue driven by the 120,000 ounces of gold in
concentrates produced in the first quarter of 2019 (against an
expected full year production of 180,000 to 220,000 ounces). Unit
cost guidance assumes the midpoint of expected 2019 copper and gold
production ranges and a gold price of $1,281 per ounce.
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 March 31, 2019, the
aggregate outstanding balance of shareholder loans extended by
subsidiaries of the Company to Oyu Tolgoi was $5.2 billion, including accrued interest of
$0.8 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
March 31, 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 $0.5
billion.
Turquoise Hill continues to have access to substantial funding
options, including cash forecast to be generated from operating
activities, cash and cash equivalents of $1.5 billion as at March
31, 2019, and the remaining net proceeds from project
finance of $1.6 billion, which are
drawn and currently deposited with Rio Tinto. Further, Oyu Tolgoi
has the ability to raise additional external financing to assist in
funding underground development going forward including
commissioning and ramp up.
In parallel with the definitive estimate review, Turquoise Hill
will assess the impact of any further delay to sustainable first
production beyond the end of Q3'21 on the Company's cash flows,
liquidity and funding requirements, as well as investigate
potential mitigation options.
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 expected to start in 2020 following
further studies and commissioning of the power plant is scheduled
for mid-2023. Oyu Tolgoi is confirming the technical design of the
project and finalizing the commercial arrangements, including
financing, underpinning the PSFA. The 300 megawatt plant will be
majority owned by Oyu Tolgoi LLC and will be situated close to the
Tavan Tolgoi coalfields.
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. It is the
Company's understanding that the timeline to review the Working
Group report by the Economic Standing Committee of the Parliament
has not been fully established.
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
Communication with shareholders
On April 25, 2019, the Board of
Directors of Turquoise Hill issued a news release responding to an
open letter from SailingStone to shareholders.
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. It 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 as a result 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)
|
|
(Year
Ended)
|
C1 costs
(Stated in $000's of dollars)
|
March 31,
2019
|
|
December 31,
2018
|
|
March 31,
2018
|
|
December 31,
2018
|
Cost of
sales
|
169,134
|
|
187,730
|
|
168,869
|
|
777,248
|
Cost of sales:
$/lb of copper sold
|
1.99
|
|
2.12
|
|
2.23
|
|
2.25
|
Depreciation and
depletion
|
(44,629)
|
|
(44,625)
|
|
(55,610)
|
|
(209,496)
|
Provision against
carrying value of copper-gold concentrate
|
1,447
|
|
255
|
|
1,366
|
|
255
|
Change in
inventory
|
6,432
|
|
17,910
|
|
15,386
|
|
983
|
Other operating
expenses
|
70,346
|
|
85,118
|
|
30,285
|
|
234,072
|
Less:
|
|
|
|
|
|
|
|
- Inventory
(write-down) reversal
|
(12,558)
|
|
(11,886)
|
|
9,994
|
|
(14,286)
|
-
Depreciation
|
(310)
|
|
(216)
|
|
(719)
|
|
(1,705)
|
Management services
payment to Turquoise Hill
|
8,190
|
|
8,035
|
|
7,049
|
|
30,055
|
Operating cash
costs
|
198,052
|
|
242,321
|
|
176,620
|
|
817,126
|
Operating cash
costs: $/lb of copper produced
|
1.96
|
|
2.65
|
|
2.06
|
|
2.33
|
Adjustments to
operating cash costs(1)
|
8,954
|
|
6,738
|
|
17,246
|
|
52,904
|
Less: Gold and silver
revenues
|
(128,798)
|
|
(135,629)
|
|
(43,671)
|
|
(313,338)
|
C1 costs
($'000)
|
78,208
|
|
113,430
|
|
150,195
|
|
556,692
|
C1 costs: $/lb of
copper produced
|
0.77
|
|
1.24
|
|
1.76
|
|
1.59
|
|
|
|
|
|
|
|
|
All-in
sustaining costs (Stated in $000's of dollars)
|
|
|
|
|
|
|
|
Corporate
administration
|
4,544
|
|
6,287
|
|
4,893
|
|
24,370
|
Asset retirement
expense
|
1,741
|
|
1,741
|
|
1,695
|
|
6,797
|
Royalty
expenses
|
19,739
|
|
20,104
|
|
14,913
|
|
70,782
|
Ore stockpile and
stores write-down (reversal)
|
12,558
|
|
11,886
|
|
(9,994)
|
|
14,286
|
Other
expenses
|
(437)
|
|
5,809
|
|
(38)
|
|
6,771
|
Sustaining cash
capital including deferred stripping
|
30,453
|
|
24,554
|
|
15,417
|
|
90,796
|
All-in sustaining
costs ($'000)
|
146,806
|
|
183,811
|
|
177,081
|
|
770,494
|
All-in sustaining
costs: $/lb of copper produced
|
1.45
|
|
2.01
|
|
2.07
|
|
2.20
|
(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 March 31, 2019 are
calculated by reference to total mining costs of $50.1 million (Q1'18: $44.7 million) and total material mined of 23.9
million tonnes (Q1'18: 23.1 million tonnes).
Milling costs per tonne of ore treated for the three months
ended March 31, 2019 are calculated
by reference to total milling costs of $75.0
million (Q1'18: $71.2 million)
and total ore treated of 9.3 million tonnes (Q1'18: 9.6 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, 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
|
|
March
31,
|
|
December
31,
|
(Stated in $000's of
dollars)
|
|
2019
|
|
2018
|
|
|
|
|
|
Inventories
(current)
|
$
|
245,916
|
$
|
242,970
|
Trade and other
receivables
|
|
48,872
|
|
30,264
|
Trade and other
payables:
|
|
|
|
|
- trade payables and
accrued liabilities
|
|
(383,028)
|
|
(395,883)
|
- payable to related
parties
|
|
(51,235)
|
|
(51,490)
|
Consolidated working
capital
|
$
|
(139,475)
|
$
|
(174,139)
|
Contractual obligations
Section 9 of the Company's 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 March 31, 2019 to the financial statements and
notes is provided below.
(Stated in $000's of
dollars)
|
|
Purchase
obligations
|
|
Power
commitments
|
|
Operating
leases
|
|
Lease
liabilities
|
|
Decommissioning
obligations
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
(MD&A)
|
$
|
1,119,052
|
$
|
481,778
|
$
|
3,867
|
$
|
30,918
|
$
|
275,258
|
Cancellable
obligations
|
|
(871,663)
|
|
(169,494)
|
|
-
|
|
-
|
|
-
|
(net of exit
costs)
|
|
|
|
|
|
|
|
|
|
|
Accrued capital
expenditure
|
|
(210,141)
|
|
-
|
|
-
|
|
-
|
|
-
|
Discounting and other
adjustments
|
|
-
|
|
-
|
|
-
|
|
(1,018)
|
|
(142,310)
|
Financial
statement amount
|
$
|
37,248
|
$
|
312,284
|
$
|
3,867
|
$
|
29,900
|
$
|
132,948
|
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 March 31, 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 Bernard Peters, Technical
Director – Mining, OreWin Pty Ltd., B. Eng. (Mining), FAusIMM
(201743), and Sharron Sylvester,
Technical Director – Geology, OreWin Pty Ltd., BSc (Geol.), RPGeo
AIG (10125) based on information currently available. Each of these
individuals is a "qualified person" as that term is defined in NI
43-101. The reader is referred to the 2016 Oyu Tolgoi Technical
Report. Turquoise Hill has commenced an independent review of the
advice received from Rio Tinto regarding the underground delay.
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
|
|
Mar-31
|
Dec-31
|
Sep-30
|
Jun-30
|
|
2019
|
2018
|
2018
|
2018
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
352.7
|
$
|
346.2
|
$
|
246.5
|
$
|
341.7
|
|
|
|
|
|
|
|
|
|
Income for the
period
|
$
|
105.2
|
$
|
95.0
|
$
|
15.2
|
$
|
204.4
|
|
|
|
|
|
|
|
|
|
Income attributable
to owners of Turquoise Hill
|
$
|
111.2
|
$
|
101.0
|
$
|
53.2
|
$
|
171.3
|
|
|
|
|
|
|
|
|
|
Basic and diluted
income per share attributable to owners of Turquoise
Hill
|
$
|
0.06
|
$
|
0.05
|
$
|
0.03
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
Mar-31
|
Dec-31
|
Sep-30
|
Jun-30
|
|
2018
|
2017
|
2017
|
2017
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
245.6
|
$
|
251.7
|
$
|
246.9
|
$
|
203.7
|
|
|
|
|
|
|
|
|
|
Income (loss) for the
period
|
$
|
79.7
|
$
|
33.9
|
$
|
47.7
|
$
|
(0.4)
|
|
|
|
|
|
|
|
|
|
Income attributable
to owners of Turquoise Hill
|
$
|
85.7
|
$
|
51.1
|
$
|
65.3
|
$
|
23.8
|
|
|
|
|
|
|
|
|
|
Basic and diluted
income per share attributable to owners of Turquoise
Hill
|
$
|
0.04
|
$
|
0.03
|
$
|
0.03
|
$
|
0.01
|
TURQUOISE HILL
RESOURCES LTD.
|
|
|
|
Consolidated
Statements of Income
|
|
|
|
(Stated in
thousands of U.S. dollars)
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
Note
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
Revenue
|
4
|
|
352,680
|
|
$
|
245,592
|
Cost of
sales
|
5
|
|
(169,134)
|
|
|
(168,869)
|
Gross
margin
|
|
|
183,546
|
|
|
76,723
|
|
|
|
|
|
|
|
Operating
expenses
|
6
|
|
(70,346)
|
|
|
(30,285)
|
Corporate
administration expenses
|
|
|
(4,544)
|
|
|
(4,893)
|
Other income
(expenses)
|
|
|
1,243
|
|
|
(2,678)
|
Income before
finance items and taxes
|
|
|
109,899
|
|
|
38,867
|
|
|
|
|
|
|
|
Finance
items
|
|
|
|
|
|
|
Finance
income
|
7
|
|
32,829
|
|
|
38,895
|
Finance
costs
|
7
|
|
(2,018)
|
|
|
(23,986)
|
|
|
|
30,811
|
|
|
14,909
|
Income from
operations before taxes
|
|
|
140,710
|
|
$
|
53,776
|
|
|
|
|
|
|
|
Income and other
taxes
|
|
|
(35,510)
|
|
|
25,928
|
Income for the
period
|
|
|
105,200
|
|
$
|
79,704
|
|
|
|
|
|
|
|
Attributable to owners
of Turquoise Hill Resources Ltd.
|
|
|
111,237
|
|
|
85,692
|
Attributable to owner
of non-controlling interest
|
|
|
(6,037)
|
|
|
(5,988)
|
Income for the
period
|
|
|
105,200
|
|
$
|
79,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
earnings per share attributable to Turquoise Hill Resources
Ltd.
|
|
|
0.06
|
|
$
|
0.04
|
|
|
|
|
|
|
|
Basic weighted
average number of shares outstanding (000's)
|
|
|
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
|
|
|
|
|
|
(Stated in
thousands of U.S. dollars)
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
Income for the
period
|
$
|
105,200
|
|
$
|
79,704
|
|
|
|
|
|
|
Other
comprehensive loss:
|
|
|
|
|
|
Items that will not
be reclassified to income:
|
|
|
|
|
|
Changes in the fair
value of marketable securities at FVOCI
|
|
(535)
|
|
|
(3,200)
|
Other
comprehensive loss for the period (a)
|
$
|
(535)
|
|
$
|
(3,200)
|
|
|
|
|
|
|
Total
comprehensive income for the period
|
$
|
104,665
|
|
$
|
76,504
|
|
|
|
|
|
|
Attributable to owners
of Turquoise Hill
|
|
110,702
|
|
|
82,492
|
Attributable to owner
of non-controlling interest
|
|
(6,037)
|
|
|
(5,988)
|
Total
comprehensive income for the period
|
$
|
104,665
|
|
$
|
76,504
|
|
|
|
|
|
|
(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
March 31,
|
|
Note
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Cash generated
from operating activities before interest and tax
|
17
|
|
$
|
49,838
|
|
$
|
14,680
|
|
|
|
|
|
|
|
|
Interest
received
|
|
|
|
23,757
|
|
|
19,019
|
Interest
paid
|
|
|
|
(78,574)
|
|
|
(12,221)
|
Income and other
taxes paid
|
|
|
|
(710)
|
|
|
(2,068)
|
Net cash generated
from (used in) operating activities
|
|
|
|
(5,689)
|
|
|
19,410
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities
|
|
|
|
|
|
|
|
Receivable from
related party: amounts withdrawn
|
18
|
|
|
275,000
|
|
|
320,000
|
Expenditures on
property, plant and equipment
|
|
|
|
(325,294)
|
|
|
(285,716)
|
Cash generated
from (used in) investing activities
|
|
|
$
|
(50,294)
|
|
$
|
34,284
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities
|
|
|
|
|
|
|
|
Payment of lease
liability
|
|
|
|
(2,408)
|
|
|
-
|
Cash used in
financing activities
|
|
|
$
|
(2,408)
|
|
$
|
-
|
|
|
|
|
|
|
|
|
Effects of exchange
rates on cash and cash equivalents
|
|
|
|
119
|
|
|
(44)
|
Net increase
(decrease) in cash and cash equivalents
|
|
|
$
|
(58,272)
|
|
$
|
53,650
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents - beginning of period
|
|
|
$
|
1,603,067
|
|
$
|
1,444,783
|
Cash and cash
equivalents - end of period
|
|
|
|
1,544,795
|
|
|
1,498,433
|
Cash and cash
equivalents as presented on the balance sheets
|
|
|
$
|
1,544,795
|
|
$
|
1,498,433
|
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)
|
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
Note
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
8
|
|
$
|
1,544,795
|
|
$
|
1,603,067
|
Inventories
|
9
|
|
|
245,916
|
|
|
242,970
|
Trade and other
receivables
|
|
|
|
48,872
|
|
|
30,264
|
Prepaid expenses and
other assets
|
|
|
|
91,307
|
|
|
30,213
|
Receivable from
related party
|
10
|
|
|
1,446,649
|
|
|
1,620,073
|
|
|
|
|
3,377,539
|
|
|
3,526,587
|
Non-current
assets
|
|
|
|
|
|
|
|
Property, plant and
equipment
|
11
|
|
|
9,244,795
|
|
|
8,838,305
|
Inventories
|
9
|
|
|
14,258
|
|
|
18,655
|
Deferred income tax
assets
|
14
|
|
|
623,708
|
|
|
649,421
|
Receivable from
related party and other financial assets
|
10
|
|
|
176,425
|
|
|
279,019
|
|
|
|
|
10,059,186
|
|
|
9,785,400
|
Total
assets
|
|
|
$
|
13,436,725
|
|
$
|
13,311,987
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
Borrowings and other
financial liabilities
|
13
|
|
$
|
8,466
|
|
$
|
-
|
Trade and other
payables
|
12
|
|
|
512,923
|
|
|
459,244
|
Deferred
revenue
|
|
|
|
13,127
|
|
|
75,162
|
|
|
|
|
534,516
|
|
|
534,406
|
Non-current
liabilities
|
|
|
|
|
|
|
|
Borrowings and other
financial liabilities
|
13
|
|
|
4,200,270
|
|
|
4,187,297
|
Deferred income tax
liabilities
|
14
|
|
|
55,424
|
|
|
47,934
|
Decommissioning
obligations
|
15
|
|
|
132,948
|
|
|
131,565
|
|
|
|
|
4,388,642
|
|
|
4,366,796
|
Total
liabilities
|
|
|
$
|
4,923,158
|
|
$
|
4,901,202
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
Share
capital
|
|
|
$
|
11,432,122
|
|
$
|
11,432,122
|
Contributed
surplus
|
|
|
|
1,558,414
|
|
|
1,558,264
|
Accumulated other
comprehensive income
|
|
|
|
309
|
|
|
844
|
Deficit
|
|
|
|
(3,560,415)
|
|
|
(3,670,310)
|
Equity
attributable to owners of Turquoise Hill
|
|
|
|
9,430,430
|
|
|
9,320,920
|
Attributable to
non-controlling interest
|
16
|
|
|
(916,863)
|
|
|
(910,135)
|
Total
equity
|
|
|
$
|
8,513,567
|
|
$
|
8,410,785
|
|
|
|
|
|
|
|
|
Total liabilities
and equity
|
|
|
$
|
13,436,725
|
|
$
|
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 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 as
previously reported
|
$
|
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)
|
|
-
|
|
-
|
|
-
|
|
(1,342)
|
|
(1,342)
|
|
|
(691)
|
|
(2,033)
|
Restated opening
balance
|
$
|
11,432,122
|
$
|
1,558,264
|
$
|
844
|
$
|
(3,671,652)
|
$
|
9,319,578
|
|
$
|
(910,826)
|
$
|
8,408,752
|
Income for the
period
|
|
-
|
|
-
|
|
-
|
|
111,237
|
|
111,237
|
|
|
(6,037)
|
|
105,200
|
Other comprehensive
loss for the
period
|
|
-
|
|
-
|
|
(535)
|
|
-
|
|
(535)
|
|
|
-
|
|
(535)
|
Employee share
plans
|
|
-
|
|
150
|
|
-
|
|
-
|
|
150
|
|
|
-
|
|
150
|
Closing
balance
|
$
|
11,432,122
|
$
|
1,558,414
|
$
|
309
|
$
|
(3,560,415)
|
$
|
9,430,430
|
|
$
|
(916,863)
|
$
|
8,513,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 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
|
|
-
|
|
-
|
|
-
|
|
85,692
|
|
85,692
|
|
|
(5,988)
|
|
79,704
|
Other comprehensive
loss for the
period
|
|
-
|
|
-
|
|
(3,200)
|
|
-
|
|
(3,200)
|
|
|
-
|
|
(3,200)
|
Employee share
plans
|
|
-
|
|
92
|
|
-
|
|
-
|
|
92
|
|
|
-
|
|
92
|
Closing
balance
|
$
|
11,432,122
|
$
|
1,558,194
|
$
|
519
|
$
|
(3,995,816)
|
$
|
8,995,019
|
|
$
|
(899,199)
|
$
|
8,095,820
|
The notes to these financial statements, which are available on
our website, are part of the consolidated financial statements.
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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, 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, 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; matters relating to proposed
exploration or expansion; mining operational and development risks,
including geotechnical risks and ground conditions; litigation
risks; regulatory restrictions (including environmental regulatory
restrictions and liability); Oyu Tolgoi LLC's ability to deliver a
domestic power source for the Oyu Tolgoi project within the
required contractual time frame; communications with local
stakeholders and community relations; activities, actions or
assessments, including tax assessments, by governmental
authorities; events or circumstances (including strikes, blockages
or similar events outside of the Company's control) that may affect
the Company's ability to deliver its products in a timely manner;
currency fluctuations; the speculative nature of mineral
exploration; the global economic climate; dilution; share price
volatility; competition; loss of key employees; cyber security
incidents; additional funding requirements, including in respect of
the development or construction of a long-term domestic power
supply for the Oyu Tolgoi project; capital and operating costs,
including with respect to the development of additional deposits
and processing facilities; and defective title to mineral claims or
property. Although the Company has attempted to identify important
factors that could cause actual actions, events or results to
differ materially from those described in forward-looking
statements and information, there may be other factors that cause
actions, events or results not to be as anticipated, estimated or
intended. All such forward-looking statements and information are
based on certain assumptions and analyses made by the Company's
management in light of their experience and perception of
historical trends, current conditions and expected future
developments, as well as other factors management believes are
appropriate in the circumstances. These statements, however, are
subject to a variety of risks and uncertainties and other factors
that could cause actual events or results to differ materially from
those projected in the forward-looking statements or
information.
Readers are cautioned not to place undue reliance on
forward-looking information or statements. By their nature,
forward-looking statements involve numerous assumptions, inherent
risks and uncertainties, both general and specific, which
contribute to the possibility that the predicted outcomes will not
occur. Events or circumstances could cause the Company's actual
results to differ materially from those estimated or projected and
expressed in, or implied by, these forward-looking statements.
Important factors that could cause actual results to differ from
these forward-looking statements are included in the "Risk Factors"
section in the Company's Annual Information Form dated as of
March 13, 2019 in respect of the year
ended December 31, 2018 (the "AIF")
as supplemented by our Management's Discussion and Analysis of
Financial Condition and Results of Operations for the three months
ended March 31, 2019 (MD&A).
Readers are further cautioned that the list of factors
enumerated in the "Risk Factors" section of the AIF and in the
MD&A that may affect future results is not exhaustive.
When relying on the Company's forward-looking statements and
information to make decisions with respect to the Company,
investors and others should carefully consider the foregoing
factors and other uncertainties and potential events.
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SOURCE TURQUOISE HILL RESOURCES LTD