Turquoise Hill Resources releases a Q3'17 report

Turquoise Hill Resources Ltd. released its 2017 third quarter report on November 2, 2017.

The Oyu Tolgoi underground development project spend totaled 1.9 billion USD in Q3'17. The project's Shaft II sinking has reached 1,249 meters and is expected to be completed by the end of the quarter.

Underground mine exploration will begin in 2020 with production set to begin in 2021. Operational cash costs equaled 161.9 million USD in Q3’17, a 17.7 percent decline over 2016. Sales reached 197.8 million USD, 8.9 million USD higher than the previous quarter. Ministry of Finance stated that increased content of gold concentrate at the Oyu Tolgoi mine could contribute to state revenue in 2017 and 2018.

HIGHLIGHTS

 Oyu Tolgoi achieved an All Injury Frequency Rate of 0.25 per 200,000 hours worked for the nine months ended September 30, 2017.

 During Q3’17, underground lateral development made good progress and since the re-start of development a total of 5.4 equivalent kilometres has been completed.

 Shaft 2 sinking was at 1,249 metres at the end of Q3’17 and sinking is expected to be complete by the end of 2017 with fit out occurring over 2018.

 During September 2017, the underground development team achieved the best sinking rate for Shaft 5 since project restart averaging 2.6 metres per day.

 At the end of Q3’17, total underground project spend since re-start and capital commitments totaled $1.9 billion.

 First draw bell is planned for mid-2020 and sustainable first production in 2021.

 Oyu Tolgoi set three operational records during Q3’17 for total material mined, ore treated and average daily concentrator throughput.

 Revenue of $246.9 million in Q3’17 increased 21.2% over Q2’17 reflecting higher copper and gold prices partly offset by lower concentrate sales.

 Cash generated from operating activities before interest and taxes in Q3’17 was $94.7 million and $234.7 million year- to-date at the end of Q3’17.

 In Q3’17, the Company recorded net income attributable to owners of Turquoise Hill of $65.3 million or $0.03 per share.

 Copper production in Q3’17 was essentially flat compared to Q2’17 while gold production increased 29.2% over Q2’17 due to higher head grades from the medium-grade stockpile and Phase 4A.

 For Q3’17, Oyu Tolgoi’s cost of sales was $2.43 per pound of copper sold; C1 cash costs were $1.83 per pound of copper produced and all-in sustaining costs were $2.76 per pound of copper produced1 .

 Operating cash costs1 of $161.9 million for Q3’17 were relatively flat over Q2’17 while year-to-date operating cash costs of $494.0 million at the end of Q3’17 declined 17.7% over year-to-date Q3’16.

 Turquoise Hill’s cash and cash equivalents at September 30, 2017 were approximately $1.5 billion. 

OYU TOLGOI

The Oyu Tolgoi mine is approximately 550 kilometres south of Ulaanbaatar, Mongolia’s capital city, and 80 kilometres north of the Mongolia-China border. Mineralization on the property consists of porphyry-style copper, gold, silver and molybdenum contained in a linear structural trend (the Oyu Tolgoi Trend) of deposits throughout this trend.

They include, from south to north, the Heruga Deposit, the Oyut deposit and the Hugo Dummett deposits (Hugo South, Hugo North and Hugo North Extension). The Oyu Tolgoi mine was initially developed as an open-pit operation. The copper concentrator plant, with related facilities and necessary infrastructure, was originally designed to process approximately 100,000 tonnes of ore per day from the Oyut open pit.

However since 2014, the concentrator has improved operating practices and gained experience, which has helped achieve a consistent throughput of over 110,000 tonnes per day. This is expected to continue through 2017 with softer ores from the Central zone.

In August 2013, development of the underground mine was suspended pending resolution of matters with the Government of Mongolia. Following signing of the Oyu Tolgoi Underground Mine Development and Financing Plan (Underground Plan) in May 2015 and the signing of a $4.4 billion project finance facility in December 2015, Oyu Tolgoi received the formal notice to proceed approval by the boards of Turquoise Hill, Rio Tinto and Oyu Tolgoi LLC in May 2016, which was the final requirement for the re-start of underground development. Underground construction recommenced in May 2016.

Oyu Tolgoi is expected to be the world’s third-largest copper mine at peak production in 2025. Copper production is expected to increase by more than 300% between 2017 and 2025 when Hugo North Lift 1 reaches peak production.