MONTREAL, April 16, 2020 /PRNewswire/ - Turquoise Hill
Resources Ltd. ("Turquoise Hill" or the "Company") today announced
first quarter 2020 production for Oyu Tolgoi and provided an update
on underground development, COVID-19 and power.
Highlights
Q1 production was another strong performance given the mining
position within the open pit sequence with results exceeding
expectations despite quarterly copper and gold production being
lower than the same quarter of the previous year. This is due to
decreased head grade driven by the continued planned transition
from Phase 4a and Phase 6a to Phase 4b, Phase 6b and
lower grade stockpiles resulting in:
- Copper production of 35,203 tonnes, a decrease of 23% vs Q1
2019
- Gold production of 26,154 ounces, a decrease of 78% vs Q1
2019
- Mill throughput increased 17% vs Q1 2019 due to lower overall
feed hardness as well as good availability and effective
utilization performance
- On track to achieve 2020 copper and gold production
guidance
"The first quarter of 2020 was another notable effort from the
Oyu Tolgoi team as we continue to mine through the lower grade
material on the periphery of the South West pit. As we progress
through 2020, Phase 4b will sink
towards the higher gold and copper grades which is expected to
result in a significant increase in gold production in 2021,"
stated Ulf Quellmann, Chief Executive Officer of Turquoise Hill,
"Oyu Tolgoi is adapting to the challenges posed by the COVID-19
pandemic on both the open pit and underground operations, with the
open-pit continuing to operate without interruption, while the
underground development is experiencing a slow-down. We will
continue to update the market as the impact of COVID-19 becomes
clearer."
Underground Development, COVID-19 and Power Updates
- As announced on March 16, 2020,
work on the Oyu Tolgoi underground continues, and we are achieving
strong productivity in underground advancement (1,939eqm in March,
average monthly 1,815eqm for the quarter).
- Despite these gains, the unprecedented circumstances of
COVID-19 have had an impact on the underground development by
restricting access for teams from Oyu Tolgoi, Rio Tinto and our
construction partners, and although the open pit has continued to
operate uninterrupted, COVID-19 restrictions have challenged our
supply logistics.
- Shafts 3 and 4 have been placed on care and maintenance until
expert service providers can return to site to complete technical
commissioning of specialised equipment and commence sinking
activities. Work has also slowed on some critical underground
material handling infrastructure, in particular the construction of
primary crusher one, which has been reduced to day shift activity
only.
- Ordinary course elongation of newly commissioned ropes may
impact shaft 2 ore hoisting and consequently underground
development progress may be impacted by 30% as a result of travel
restrictions due to COVID-19 preventing experts from travelling to
the Oyu Tolgoi site. Payload and speed have been reduced to prolong
the ability to use the hoist until specialised personnel are able
to reach the site to perform rectification work. Mine management
believes the situation is manageable; however, development progress
could be impacted should experts not be able to get to site by the
end of Q2. People and materials movement via the service hoist
continue to operate normally.
- Work continues on the mine design and we still expect this to
be completed in the first half of 2020 with the Definitive Estimate
of project cost and schedule to be provided in the second half of
2020.
- Based on current information, the underground project remains
within the range announced in July
2019 of a 16 to 30-month delay in schedule, and an increase
of $1.2 to $1.9 billion in development capital, with
indications of the preferred technical solution falling in the
upper half of the schedule delay range and the development capital
overrun trending away from the lower end of the range.
- Although sales in January and February were impacted by
curtailed operations in China
during peak COVID-19 restrictions, strong collections occurred in
March and sales exceeded expectations at the end of the quarter.
Concentrate transportation remains a challenge in the current
environment and engagement with both the Mongolian and the Chinese
governments continues in an effort to minimize the impact on future
sales.
- Oyu Tolgoi has notified its project lenders that the COVID-19
pandemic constitutes a force majeure event under its project
finance facilities, which will have the effect of extending the
June 30, 2028 project longstop date
under those facilities for the duration of the force majeure, and
certain suppliers of Oyu Tolgoi have declared force majeure on
their contracts, however this has not had a material adverse impact
on the business to date.
- Notwithstanding any of the updates provided above, the Company
recognizes the unprecedented situation surrounding the COVID-19
pandemic. Turquoise Hill has established a business resiliency team
and is closely monitoring the effect of the COVID-19 pandemic on
its business and operations and will continue to update the market
on the impacts to the Company's business and operations in relation
to these extraordinary circumstances.
- On February 14, 2020, Oyu Tolgoi
LLC and the Government of Mongolia
(GoM) commenced a negotiation process under the PSFA to confirm a
mutually acceptable pathway to secure long term domestic power
supply for Oyu Tolgoi. Under Phase 1 of this process, the parties
had until April 14, 2020 to agree a
way forward for a Tavan Tolgoi-based power plant (TTPP). As the
parties have yet to be able to do this, they are now also
considering the alternatives specified in the PSFA, an Oyu Tolgoi
mine site-based power plant; a primary renewables solution; and
grid supply. (which could incorporate consideration of Cabinet's
recent resolution to progress a State-owned, coal-fired power plant
at Tavan Tolgoi). Under the PSFA, Oyu Tolgoi and GoM currently have
until June 14, 2020 to consider these
alternatives, failing which Oyu Tolgoi has the right to choose one
or a combination of these options to pursue.
Oyu Tolgoi Production Data
All data
represents full production and sales on a 100% basis
|
|
|
|
|
|
|
|
|
1Q
|
2Q
|
3Q
|
4Q
|
1Q
|
Full Year
|
|
2019
|
2019
|
2019
|
2019
|
2020
|
2019
|
|
|
|
|
|
|
|
Open pit material
mined ('000 tonnes)
|
23,943
|
24,408
|
24,844
|
28,122
|
26,834
|
101,316
|
Ore treated ('000
tonnes)
|
9,255
|
10,394
|
10,040
|
11,088
|
10,889
|
40,777
|
Average mill head
grades:
|
|
|
|
|
|
|
Copper (%)
|
0.57
|
0.46
|
0.37
|
0.42
|
0.42
|
0.45
|
Gold (g/t)
|
0.58
|
0.31
|
0.14
|
0.15
|
0.15
|
0.29
|
Silver
(g/t)
|
1.25
|
1.2
|
1.03
|
1.06
|
1.14
|
1.13
|
Concentrates produced
('000 tonnes)
|
210.1
|
180.6
|
131.3
|
152.6
|
164.5
|
674.6
|
Average concentrate
grade (% Cu)
|
21.8
|
21.7
|
21.7
|
21.6
|
21.4
|
21.7
|
Production of metals
in concentrates:
|
|
|
|
|
|
|
Copper ('000
tonnes)
|
45.8
|
39.2
|
28.4
|
32.9
|
35.2
|
146.3
|
Gold ('000
ounces)
|
120
|
72
|
25.6
|
24.3
|
26.2
|
241.8
|
Silver ('000
ounces)
|
247
|
238
|
191
|
190
|
214
|
866.6
|
Concentrate sold
('000 tonnes)
|
184.9
|
225.3
|
157
|
157.5
|
125.9
|
724.7
|
Sales of metals in
concentrates:
|
|
|
|
|
|
|
Copper ('000
tonnes)
|
38.5
|
46.6
|
32.4
|
32.3
|
25.8
|
149.9
|
Gold ('000
ounces)
|
98
|
116
|
35.4
|
24.7
|
19.7
|
273.6
|
Silver ('000
ounces)
|
200
|
245
|
207
|
243.6
|
145.7
|
895.9
|
Metal recovery
(%)
|
|
|
|
|
|
|
Copper
|
83.8
|
80.2
|
75.1
|
74.2
|
74.3
|
78.7
|
Gold
|
70.1
|
63.6
|
54.7
|
48.2
|
46
|
63.6
|
Silver
|
63.2
|
59.2
|
56
|
53.5
|
51.5
|
58.1
|
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 potential impact of COVID-19 on the
Company's business, operations and financial condition, 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, and the preparation of a new mine plan,
the development options under consideration for the design of Panel
0 and the related cost and schedule implications, short-term and
long-term financing options under consideration and related
negotiations, timing and status of the Tavan Tolgoi-based power
project and the possible alternatives thereto, the expectations set
out in the Tavan Tolgoi Power Plant Feasibility Study, capital and
operating cost estimates, timing of completion of the definitive
estimate review, mill and concentrator throughput, the initiation
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 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, the availability and timing of required
governmental and other approvals for the construction of the Tavan
Tolgoi Power Plant, 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; 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'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
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 the 2016
Oyu Tolgoi Feasibility Study and the 2016 Oyu Tolgoi Technical
Report); 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 the Company's Annual Information Form dated as of
March 18, 2020 in respect of the year
ended December 31, 2019 (the "AIF")
as supplemented by our Management's Discussion and Analysis of
Financial Condition and Results of Operations for the year ended
December 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.
View original content to download
multimedia:http://www.prnewswire.com/news-releases/turquoise-hill-announces-first-quarter-2020-production-and-provides-updates-on-underground-development-covid-19-and-power-301042285.html
SOURCE Turquoise Hill Resources Ltd.