Oyu Tolgoi announces q1 2020 performance results


2020-05-04 19:12 GMT+8
  • Continued its globally competitive safety performance
  • On track to achieve 2020 copper and gold production guidance
  • US$73 million taxes, fees and other payments paid 
  • US$105 million spent on national procurement
  • Donated over MNT455 million for the community support against COVID-19  

Ulaanbaatar, Mongolia – Oyu Tolgoi released the latest edition of its Scorecard, highlighting key performance metrics for the first quarter of 2020, and provided an update on underground development, and prevention measures on COVID-19.

The first quarter of 2020 has been challenging due to the COVID-19 global pandemic. Since the COVID-19 situation escalated in January, the health and safety of our workforce, suppliers and communities remains our top priority. We are closely monitoring the situation and taking all necessary measures both on site and in our UB offices. All our preventive measures are in full compliance with, and strictly aligned to, guidance and decrees issued by the Government of Mongolia, State Emergency Committee, and the local authorities in Umnugovi province and Khanbogd soum. 

Oyu Tolgoi chief executive officer, Armando Torres, said, “We would like to express our gratitude to the Government of Mongolia, the State Emergency Committee at all levels, the Ministry of Health, the Ministry of Mining and Heavy Industry, and all other relevant agencies and frontline personnel working hard to keep us safe during this unprecedented time”. 

The company and employees donated MNT455 million to support the outbreak prevention efforts of COVID-19, including MNT100 million to the Government of Mongolia through the Mongolian National Mining Association, MNT200 million to the Umnugovi Emergency Committee, and MNT10 million to the Khanbogd Emergency Committee through the Gobi Oyu Development Support Fund. Oyu Tolgoi miners also launched a “Miners’ donation campaign in the fight against COVID-19” and raised over MNT145 million and donated it to the Ministry of Health.  Thirty-eight contractor companies’ employees joined the campaign as #WeAreAllInThisTogether. 

Despite these challenges, Oyu Tolgoi has done its best to maintain its business continuity while protecting its people and communities. However, limited movements of goods and people, and border crossing restrictions, due to COVID-19 restrictions, have affected the business overall, including underground development and copper concentrate shipment.  

Q1 2020 Operational update

  • Protecting the health of our employees and communities, through rapid implementation of health and hygiene controls in response to COVID-19, remains the top priority. We have also strengthened our focus on safety programmes to ensure the safety of our employees during a period of the significant change. 
  • 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 to minimise the impact on future sales.
  • Achieved an All Injury Frequency Rate (AIFR) of 0.20 per 200,000 hours worked.
  • Performed within the water target, using  0.38 cubic metres of raw water per tonne of ore processed, achieving an average water recycling rate of 87 per cent during the period. 
  • Ninety-four per cent of Oyu Tolgoi’s workforce were Mongolian. 
  • Paid US$73 million in the form of taxes, fees and other payments. Between 2010 and the first quarter of 2020, Oyu Tolgoi paid US$2.7 billion in taxes, fees and other payments, including VAT, paid to Mongolian suppliers.
  • Collaborated with 516 suppliers in 2020, of which 361 are national businesses that account for 75 per cent of total operations procurement spend. Between 2010 and the first quarter of 2020, Oyu Tolgoi spent US$3.3 billion on national procurement.
  • Q1 2020 Performance Scorecard can be viewed here. 

Q1 2020 Production update

  • Mined copper production from the open pit was 23 per cent lower than the same quarter of 2019 due to decreased head grade.
  • Grades were 26 per cent lower than the same quarter in 2019 due to sequencing and blending of lowgrade stockpiles. 
  • First quarter sales have been affected by slower collections of product from the warehouse by customers due to curtailed operations in China during peak COVID-19 restrictions and reduced flow of traffic at the border.
  • Copper production of 35,203 tonnes, a decrease of 23 per cent vs Q1 2019.
  • Gold production of 26,154 ounces, a decrease of 78 per cent vs Q1 2019.
  • Mill throughput increased by 17 per cent vs Q1 2019 due to lower overall feed hardness as well as good availability and effective utilisation performance.
  • On track to achieve 2020 copper and gold production guidance. 

Underground development update

  • As our shareholders announced on 16 March 2020, work on the Oyu Tolgoi underground project continues, and we are achieving strong productivity in underground development (1,939 equivalent metres in March, average monthly 1,815 equivalent metres).
  • Despite these gains, progress has slowed as a result of restrictions placed on the movement of people to contain the spread of COVID-19, including specialist commissioning personnel as well as goods.
  • 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 per cent 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 cost and schedule in the second half of 2020. This will include the estimate of development capital costs and schedule for the underground project based on the updated design of Panel 0.

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 costs. Depending on how long they are in place, COVID-19 restrictions may impact the schedule range.

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