MONTREAL, Jan. 18, 2021 /PRNewswire/ - Turquoise Hill
Resources Ltd. ("Turquoise Hill" or the "Company") today announced
fourth quarter 2020 production for Oyu Tolgoi, as well as
operational and financial guidance for 2021 and provided an update
on undercut criteria discussions.
Operational highlights
- Full year copper production of 149,631 tonnes vs original
guidance range of 140,000 – 170,000 tonnes
- Full year gold production of 181,858 ounces vs original
guidance range of 120,000 – 150,000 ounces
- Full year mill throughput of 40,200,279 tonnes was slightly
lower than 2019 due to the processing of more, harder Phase
4B ore
- Safety performance at Oyu Tolgoi in 2020 remained consistent
with an All Injury Frequency Rate of 0.15
- The project has exceeded one million tonnes of material moved
through Shaft 2 since commissioning
- Shaft 4 work is now focused on final pre-sinking
activities
- 2021 C11 cash costs are expected to be in the range
of negative $0.50 to negative
$0.80 per pound of copper
produced
- Access to higher copper and gold grades in Q4 2020 is expected
to continue throughout 2021. Shipments across the Chinese border
have been maintained despite COVID-19 measures in Mongolia
_____________________________
|
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 from, or as a replacement for, measures prepared in
accordance with IFRS. Please refer to Non-GAAP Measures section of
the Company's Q3 MD&A for further information
|
2021 guidance
Oyu Tolgoi is expected to produce 160,000 to 180,000 tonnes of
copper and 500,000 to 550,000 ounces of gold in concentrates in
2021 from processing of both open pit and underground development
material. The increase in gold production in 2021 compared
with 2020 is the result of transitioning to the higher-grade ore
lower in Phase 4B. We have been
advised by the manager that recent geotechnical concerns in Phase
4B have required changes to the mine
design impacting both 2021 and 2022, resulting in a reduction in
metal delivery expectations. In light of the additional
optimisation of Phase 4B currently
underway, which is expected to be completed in Q1 2021, the Company
anticipates releasing its 2022 Outlook at the conclusion
thereof.
Operating cash costs for 2021 are expected to be $800 million to $850
million.
Capital expenditure for 2021 on a cash-basis is expected to be
approximately $120 million to
$160 million for open-pit operations
and $1.1 billion to $1.2 billion for the underground, exclusive of
any expenditure on power.
Open-pit capital is mainly comprised of deferred stripping,
equipment purchases, tailings storage facility construction and
maintenance componentization. Underground capital is inclusive of
VAT.
2021 C1 cash costs are expected to be in the range of negative
$0.50 to negative $0.80 per pound of copper produced, an
improvement upon 2020 due to the increased gold production and
higher forecast 2021 price assumptions. Unit cost guidance assumes
the midpoint of the expected 2021 copper and gold production ranges
and gold commodity assumptions of $1,880 per ounce.
Oyu Tolgoi underground update
- Work on the project has continued to progress despite COVID-19
controls and ongoing travel restrictions implemented by the
Government of Mongolia. Although
expatriates started to return to Mongolia from July through December 2020, COVID-19 cases in-country have
resulted in increased restrictions on both domestic and
international travel.
- With the assistance of vendor representatives now on site,
installation and commissioning of equipment continues at Shafts 3
and 4. Activities at Shaft 4 are now focused on completing all
construction and commissioning activities for load testing and
verification in preparation for shaft sinking, which is expected to
commence early in Q1 2021. Should flight restrictions continue,
productivity on the project and the ability to perform specialised
maintenance and commissioning activities could be impacted.
- First sustainable production for Panel 0 is not anticipated to
be affected and we will communicate any implications, particularly
for Panel 1 and Panel 2 ramp-up which Shaft 3 and 4 support, at an
appropriate time.
Undercut criteria
Rio Tinto has publicly announced criteria which it considers
need to be met before the project can begin caving operations by
commencement of the undercutting process, currently scheduled for
June 2021. These criteria include
non-technical matters including securing the approval of the
Government of Mongolia for the
2020 feasibility study, reaching an agreement with Turquoise Hill
and the Government of Mongolia on
the funding plan to bring the project to completion, and an
extension of the existing power supply arrangements and the signing
of a power purchase agreement with the state-owned power company
for domestic supply. The criteria supporting the undercut decision,
including the non-technical criteria publicly announced by Rio
Tinto, have not been agreed to by the shareholders of Oyu Tolgoi
LLC. Turquoise Hill does not agree that all of these
additional non-technical criteria are either appropriate or
necessary and is engaging with Rio Tinto and Erdenes Oyu Tolgoi LLC
("Erdenes") to address the areas of disagreement, with the
objective, which Turquoise Hill believes it shares with Erdenes, of
preserving the timeline for project completion. If agreement is not
reached on the undercut criteria in a timely manner, or if the
undercut criteria proposed by Rio Tinto are included and not met,
there is a risk that the undercut will not occur as planned. Any
significant delay to the undercut would have a materially adverse
impact on schedule as well as the timing and quantum of underground
capital expenditure and would materially adversely impact the
timing of expected cash flows from the Oyu Tolgoi underground
project, thereby increasing the amount of Turquoise Hill's
incremental funding requirement.
Oyu Tolgoi Production Data
All data represents full production and sales on a 100%
basis
|
4Q
|
1Q
|
2Q
|
3Q
|
4Q
|
Full Year
|
Full
Year
|
|
2019
|
2020
|
2020
|
2020
|
2020
|
2019
|
2020
|
|
|
|
|
|
|
|
|
Open pit material
mined ('000 tonnes)
|
28,122
|
26,834
|
23,218
|
23,979
|
23,663
|
101,316
|
97,694
|
Ore treated ('000
tonnes)
|
11,088
|
10,889
|
9,645
|
10,072
|
9,594
|
40,777
|
40,200
|
Average mill head
grades:
|
|
|
|
|
|
|
|
Copper (%)
|
0.42
|
0.42
|
0.47
|
0.45
|
0.50
|
0.45
|
0.46
|
Gold (g/t)
|
0.15
|
0.15
|
0.19
|
0.21
|
0.41
|
0.29
|
0.24
|
Silver
(g/t)
|
1.06
|
1.14
|
1.22
|
1.22
|
1.16
|
1.13
|
1.18
|
Concentrates produced
('000 tonnes)
|
152.6
|
164.5
|
169.9
|
168.5
|
190.2
|
674.6
|
693.1
|
Average concentrate
grade (% Cu)
|
21.6
|
21.4
|
21.5
|
21.5
|
21.9
|
21.7
|
21.6
|
Production of metals
in concentrates:
|
|
|
|
|
|
|
|
Copper ('000
tonnes)
|
32.9
|
35.2
|
36.5
|
36.3
|
41.6
|
146.3
|
149.6
|
Gold ('000
ounces)
|
24
|
26
|
31
|
37
|
88
|
242
|
182
|
Silver ('000
ounces)
|
190
|
214
|
212
|
219
|
231
|
867
|
876
|
Concentrate sold
('000 tonnes)
|
157.5
|
125.9
|
194.3
|
167.9
|
181.5
|
724.7
|
669.6
|
Sales of metals in
concentrates:
|
|
|
|
|
|
|
|
Copper ('000
tonnes)
|
32.3
|
25.8
|
39.7
|
34.4
|
37.9
|
149.9
|
137.8
|
Gold ('000
ounces)
|
25
|
20
|
31
|
34
|
66
|
274
|
150
|
Silver ('000
ounces)
|
244
|
146
|
220
|
201
|
194
|
896
|
760
|
Metal recovery
(%)
|
|
|
|
|
|
|
|
Copper
|
74.2
|
74.3
|
79.1
|
78.9
|
85.9
|
78.7
|
79.6
|
Gold
|
48.2
|
46.0
|
52.0
|
53.7
|
68.8
|
63.6
|
58.6
|
Silver
|
53.5
|
51.5
|
55.8
|
54.6
|
64.3
|
58.1
|
56.4
|
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 scope of the undercut
criteria and the expected timing of the undercut; discussions with
the Government of Mongolia, Oyu
Tolgoi LLC (and its stakeholders) and/or Rio Tinto plc and its
subsidiaries ("Rio Tinto") with respect to the undercut criteria
and timing; discussions with, and the nature of the Company's
relationship and interaction with, the Government of Mongolia on the continued operation and
development of Oyu Tolgoi, including with respect to the definitive
estimate and the potential termination, amendment or replacement of
the Oyu Tolgoi Underground Mine Development and Financing Plan (the
"Underground Plan"); the willingness and ability of the parties to
the Underground Plan to amend or replace the Underground Plan; the
arbitration proceedings, including the potential benefits, timing
and outcome of the arbitration proceedings; 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; the merits of the
class action complaints filed against the Company; liquidity,
funding sources, funding requirements and planning and the status
and nature of the Company's ongoing discussions with Rio Tinto 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; 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 criteria to be applied before commencing
the undercutting process, and the ability of the Company to
negotiate and finalize the undercut criteria and commence the
undercutting process; the expected timing of the undercut and the
potential for delays (which could materially adversely affect the
timing of expected cash flows from the Oyu Tolgoi underground
project and increase the amount of the expected incremental funding
requirement); the status and nature 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 (including the outcome of any such interactions or
discussions); the willingness and ability of the parties to the
Underground Plan to amend or replace the Underground Plan; the
nature and quantum of the current and projected economic benefits
to Mongolia resulting from the
continued operation of Oyu Tolgoi; the status and nature of the
Company's ongoing discussions with Rio Tinto with respect to future
funding plans and requirements (including as contemplated by the
MoU) as well as the commencement and conclusion of the arbitration
proceedings, including the potential benefits, timing and outcome
of the arbitration proceedings. 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; 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,
including the outcome of the class action complaints filed against
the Company; 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 with respect to future funding plans and
requirements (including as contemplated by the MoU); the status and
nature 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 (including the outcome of any such
interactions or discussions); the willingness and ability of the
parties to the Underground Plan to amend or replace the Underground
Plan; the nature and quantum of the current and projected economic
benefits to Mongolia resulting
from the continued operation of Oyu Tolgoi; the criteria to be
applied before commencing the undercutting process, and the ability
of the Company to negotiate and finalize the undercut criteria and
commence the undercutting process; the expected timing of the
undercut and the potential for delays (which could materially
adversely affect the timing of expected cash flows from the Oyu
Tolgoi underground project and increase the amount of the expected
incremental funding requirement); 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 third quarter 2020 management's discussion and analysis
dated September 30, 2020
("MD&A").
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 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