TURQUOISE Hill Resources expects to produce between 130,000 and 160,000 tonnes of copper and 100,000 to 140,000 ounces of gold from the Oyu Tolgoi open pit in 2017. The guidance is lower than 2016 production primarily due to approximately 25% less copper head grade and 50% less gold head grade.

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Inside the concentrator at the Oyu Tolgoi Copper-Gold-Silver Project in southern Mongolia.

Open pit operations are expected to mine in Phase 6 as well as continue the stripping of Phase 4. Stockpiled ore will also be processed.

During 2016, the mine plan for Phase 4 was divided into two parts, 4A and 4B, in expectation of reaching the high-grade gold zone of Phase 4 around mid-2018. Accordingly, mine stripping for 2017 will focus on Phase 4A.

Operating cash costs for 2017 are expected to be approximately US$720 million with the reduction from 2016 reflecting cost improvements and the impact of lower logistics costs from decreased production.

Capital expenditures for 2017 are expected to be approximately $100 million for open-pit operations and $825 million to $925 million for underground development. Open-pit capital includes about $40 million of deferred stripping and reflects lower maintenance costs, reduced deferred stripping costs due to optimisation and improved tailings storage costs.

Underground development capital includes expansion capital and VAT. In an effort to encourage bidding by Mongolian suppliers, Oyu Tolgoi has incorporated longer tendering periods resulting in a slightly longer capital deployment process. The company continues to expect production from the first underground draw bell in mid-2020 and first sustainable production from early 2021.

Good progress continued during the September quarter on underground development, including ongoing contractor mobilisation and the signing of an additional contract for sinking of Shafts 2 and 5. At the end of the quarter Oyu Tolgoi had spent $105.8 million on underground expansion capital and had commitments of more than $750 million.

The mine recorded revenue of $226.3 million in the third quarter, a decrease of 31.4% on the previous quarter, primarily reflecting reduced gold sales due to lower production.

Copper production of 46,600 tonnes was 9.9% lower than the June quarter as a result of lower recovery from Phase 6 ore while, as expected, gold production of 37,000 ounces was 47.1% lower due to lower grades from the completion of mining Phase 2. There were 361,000 ounces of silver produced, down from 395,000.

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