|Mining operations in the open pit at Oyu Tolgoi in Mongolia’s South Gobi region. Photo courtesy of Oyu Tolgoi LLC.|
TURQUOISE Hill Resources, Rio Tinto and the Government of Mongolia continue to work together with the aim of resolving remaining shareholder matters and finalizing project finance to develop the underground mine at the Oyu Tolgoi Copper-Gold Project. Turquoise Hill and Rio Tinto have made an offer to the Government of Mongolia to resolve shareholder matters in a manner the company believes is beneficial to all stakeholders.
Upon successful resolution of shareholder matters, Turquoise Hill and Rio Tinto intend to formalize the agreement between the parties to enable underground development to commence.
Underground development is subject to resolution of remaining shareholder matters, agreement of a comprehensive funding plan including project finance, approval of the feasibility study by shareholders and acceptance by the Mongolian Minerals Council and receipt of necessary permits.
In October Turquoise Hill received repayment for its US$115 million Mongolian Treasury Bill, which matured on October 19 and the company also released its third quarter Oyu Tolgoi project production statistics which show that metals production was in line with the previous quarter.
Production for the quarter was 36,600 tonnes of copper and 132,000 ounces of gold in concentrates. Production was in-line with quarter two as higher copper grades offset lower throughput due to the failure of the rake arms in one of Oyu Tolgoi’s two tailings thickeners.
Material mined of approximately 19.5 million tonnes was higher than Q2 but was impacted by lower equipment availability. The high-grade zone of the open pit was progressively accessed during Q3 with consistent mining of the high-grade zone starting in September. As a result, gold grades improved during Q3 and are expected to increase during Q4.
Strong concentrate sales continued during Q3 with sales exceeding production resulting in an inventory drawdown for the quarter. Long-term contracts account for 92% of 2015 planned concentrate production, with the remaining volume committed to one customer. Discussions are ongoing to place volumes from 2016 onwards as some of the existing contracts start to expire from the end of 2015.
As a result of the delayed mine advancement in Q3, Turquoise Hill expected Oyu Tolgoi to produce between 550,000 and 600,000 ounces of gold-in-concentrates for 2014. Previously anticipated Q4 gold-in-concentrates production is expected to shift to Q1 2015.
Throughout 2014, Oyu Tolgoi has focused on cost reduction and productivity initiatives designed to generate increased cash flow and improve financial performance. As a result, Turquoise Hill expected a reduction of approximately US$130 million in Oyu Tolgoi’s operating cash costs for 2014 from the previously announced US$1.0 billion. Turquoise Hill has also reduced expected capital expenditure for 2014 from US$160 million to approximately US$110 million.