MONTREAL, July 2, 2020 /PRNewswire/ - Turquoise Hill
Resources Ltd. ("Turquoise Hill" or the "Company")
today announced its updated Mineral Resources and Mineral Reserves,
prepared in accordance with the requirements of National Instrument
43-101 Standards of Disclosure for Mineral Projects ("NI
43-101") and CIM definition standards for Mineral Resources and
Mineral Reserves (2014), an improved liquidity outlook and deferral
of the Company's interim financing discussions.
The Company's updated Mineral Resources and Mineral Reserves are
being announced further to the completion of an updated Oyu Tolgoi
Feasibility Study ("OTFS20") that incorporates the new
mine design for Hugo North Lift 1 Panel 0. This new design
reduces the Mineral Reserve estimate for the Hugo North underground
mine due to the inclusion of two structural pillars, to the north
and south of Panel 0 to protect ore handling
infrastructure.
The Company's project manager has advised that it is expected
that part of the ore contained in these pillars will be recoverable
at a later stage following additional studies which are currently
underway. Pending the completion of this work in 2021, the material
contained in the pillars has been converted from Mineral Reserves
to Mineral Resources.
The Mineral Resources and Mineral Reserves also include minor
updates to the Oyut open pit resource model and account for
depletions to December 31, 2019, as
disclosed in the Company's Annual Information Form for the year
ended December 31, 2019 ("2019
AIF").
In support of the changes, an updated technical report ("2020
OTTR") prepared in accordance with the requirements of NI
43-101 will be filed on SEDAR within 45 days of this news release
under Turquoise Hill's profile at www.sedar.com.
Turquoise Hill notes that Oyu Tolgoi LLC is in the process of
submittting OTFS20 with the Government of Mongolia in order to comply with local
regulatory requirements. OTFS20 incorporates an update to the first
sustainable production schedule and capital cost estimates for the
underground mine development based on the updated Panel 0 mine
design announced by the Company on May 13,
2020. Estimated total expansion capital for the underground
project is in line with the recently disclosed range of
US$1.3 billion to US$1.8 billion in excess of the Oyu Tolgoi 2016
Feasibility Study ("OTFS16") estimate, of which US$3.8 billion has been spent as of March 31, 2020. A further, more detailed cost and
schedule update will be provided in connection with the definitive
estimate review, expected to be completed before the end of the
year.
OTFS20 does not reflect the impacts of the COVID-19 pandemic
which are ongoing and continue to be assessed. A number of work
fronts are directly impacted including Shafts 3 and 4 being put on
care and maintenance and work on Primary crusher 1 being slowed due
to the lack of availability of critical resources and restrictions
on site workforce numbers.
"With the updated Mineral Resources and Mineral Reserves now
completed, we remain focused first and foremost on delivering the
underground project safely and remaining within the guidance ranges
on cost and schedule we have previously announced", stated Ulf
Quellmann, Chief Executive Officer of Turquoise Hill. "At the
same time, the team is looking carefully at options for recovering
material within the structural pillars and to optimise the mine
plan for Panels 1 and 2 to maximise value for our
shareholders."
The following table provides a summary of key outputs from
OTFS20. Unless otherwise stated, all items are presented in real
terms on an after-tax basis and only include Mineral Reserves.
Description
|
Units
|
OTFS20
|
Material
Processed
|
bt
|
1.2
|
Copper
Headgrade
|
%
|
0.82
|
Gold
Headgrade
|
g/t
|
0.30
|
Silver
Headgrade
|
g/t
|
1.89
|
Recoverable
Copper
|
blb
|
19.5
|
Recoverable
Gold
|
Moz
|
8.4
|
Recoverable
Silver
|
Moz
|
51.7
|
Mine Life
|
Years
|
31
|
Expansion
Capital
|
US$b
|
2.2
|
Payback
Period
|
Years
|
6
|
NPV8 After
Tax
|
US$b
|
10.0
|
Notes:
|
|
1.
|
All financial metrics
reflect the Company's financial analysis of OTFS20
metrics.
|
2.
|
NPV8 is
Net Present Value of mineral reserves at a discount rate of 8% for
all years, calculated at January 1, 2021 based on expected cash
flows from and after that date.
|
3.
|
For mine planning the
metal prices used as part of OTFS20 to calculate block model Net
Smelter Returns (NSR) were copper at $3.08/lb; gold at $1,292/oz
and silver at $19.00/oz. For the open pit processing and general
administration, the following operating costs have been used to
determine cut-off grades: Southwest at $8.37/t, Central Chalcocite,
Central Covellite, and Central Chalcopyrite at $7.25/t and the
underground costs are based on $15.34/t.
|
4.
|
OTFS20
NPV8 uses long-term metal prices of: copper at $3.03/lb;
gold at $1,474/oz; and silver at $17.85/oz. The analysis has been
calculated with assumptions for smelter refining and treatment
charges, deductions and payment terms, concentrate transport,
metallurgical recoveries and royalties.
|
5.
|
NPV8 and
Payback period analysis uses the Mineral Reserves reported in
OTFS20 that are set out in this announcement.
|
6.
|
NPV8 is
calculated as of January 1, 2021 and excludes expansion capital up
December 31, 2020 of approximately $4.6b. Expansion capital costs
include only direct project costs and exclude interest expense,
capitalised interest, debt repayments, tax pre-payments and forex
adjustments.
|
7.
|
The estimate of
Mineral Reserves may be materially affected by environmental,
permitting, legal, title, socio-political, marketing, or other
relevant issues including risks set forth in the 2019 AIF and other
filings made with Canadian securities regulatory authorities and
available at www.sedar.com. These updated estimates differ from
those reported in the 2019 AIF and reflect incorporation of
changes in the Hugo North Panel 0 design.
|
8.
|
Payback period and
mine life are calculated from January 1, 2021 and are rounded to
years.
|
9.
|
OTTR16 can be
accessed under Turquoise Hill's profile at
www.sedar.com.
|
10.
|
Expansion capital
numbers are presented inclusive of VAT.
|
Refined Hugo North Lift 1 Mine Design Lowers Execution
Risk
On May 13, 2020, Turquoise Hill
announced a new block cave mine design for Panel 0 with an
anticipated delay to sustainable production of approximately 25
months (with a range of 21 to 29 months), and an increase in
development capital cost of approximately US$1.5 billion (with a range of US$1.3 billion to US$1.8
billion), subject to further studies and any additional
scheduling delays or increases in capital costs arising from the
impacts of the COVID-19 pandemic.
For the development of the Panel 0 mine design, Turquoise Hill
engaged subject matter experts to undertake an external and
independent assurance process that focused on a technical review of
the proposed mine re-design options, and a review of the schedule
and estimating process.
The Hugo North Lift 1 mine plan incorporates the development of
three panels and in order to reach the full sustainable production
rate of 95,000 tonnes per day from the underground operations, all
three panels need to be in production. During the ramp-up phase
through to full capacity of the underground operations, the Oyut
open pit will continue to provide the incremental ore to achieve
the expected 105,000 to 115,000 tonnes per day throughput for the
life of Hugo North Lift 1.
The design change results in a more resilient mine plan able to
effectively operate within the Panel 0 geotechnical conditions as
now understood. The 2020 OTTR will incorporate and reflect these
updates.
The block cave design incorporated in OTFS20 varies from the
OTFS16 design through:
- 120m structural pillars included
to the north and south of Panel 0, protecting ore handling
infrastructure and increasing the optionality of sequencing Panel 1
and Panel 2;
- Ore handling facilities moved into the structural pillars,
improving excavation stability;
- Drawpoint spacing updated from 28m x15m to 31m x
18m, improving extraction level
stability; and
- Modified panel initiation approach for Panel 0, minimising
stress damage to extraction level.
The Company believes the existing feasibility study designs for
Panel 1 and Panel 2 remain executable based on the current orebody
understanding. However, with the introduction of structural
pillars, the remaining panels become independent, allowing for much
greater operational flexibility. This provides an opportunity
to:
- Optimise the extraction level elevation for each panel
independently;
- Evaluate the potential to convert Measured and Indicated
Mineral Resources below the current Lift 1 extraction level to
Probable Mineral Reserves;
- Complete additional confirmatory drilling and data collection
in support of potential Panel 1 and Panel 2 design refinements;
and
- Include structural pillar recovery level(s) in the integrated
Hugo North Lift 1 mine design.
Panel 1 and Panel 2 design optimisation studies have been
initiated to explore these opportunities. These studies are
not expected to delay the ramp up of Panel 1 or Panel 2 Drilling
work is underway and the resulting updates to geotechnical
modelling and mine design review are expected to continue into
2021.
Sensitivity Estimates
Economic sensitivity of the project relating to a number of key
variables set forth in OTFS20 are outlined in the figures
below:
Reserve Case Price
Sensitivities
|
NPV8$billions
|
Copper
Price
|
$US, 2020
Real
|
-15%
|
-10%
|
-5%
|
Base Case
|
+5%
|
+10%
|
+15%
|
Gold
Price
|
-15%
|
5.9
|
7.1
|
8.3
|
9.3
|
10.3
|
11.3
|
12.3
|
-10%
|
6.2
|
7.4
|
8.5
|
9.5
|
10.5
|
11.5
|
12.5
|
-5%
|
6.4
|
7.6
|
8.8
|
9.8
|
10.7
|
11.7
|
12.7
|
Base Case
|
6.7
|
7.9
|
9.0
|
10.0
|
11.0
|
12.0
|
12.9
|
+5%
|
7.0
|
8.1
|
9.2
|
10.2
|
11.2
|
12.2
|
13.1
|
+10%
|
7.2
|
8.4
|
9.4
|
10.4
|
11.4
|
12.4
|
13.3
|
+15%
|
7.5
|
8.6
|
9.7
|
10.6
|
11.6
|
12.6
|
13.6
|
Notes:
|
|
1.
|
NPV8 is
Net Present Value at a discount rate of 8%, valued as of January 1,
2021.
|
2.
|
All values are
presented on a $US, real 2020 basis.
|
3.
|
Base case copper
price is based on consensus estimates with a long-term forecast of
$3.03/lb.
|
4.
|
Base case gold price
is based on consensus estimates with a long-term forecast of
$1,474/oz.
|
Oyu Tolgoi Reserve
Case Sensitivities
|
Impact on
NPV8 ($m)
|
|
Cu Price
|
Au Price
|
Opex
|
CAPEX
|
+/- 1% Discount
Rate
|
+10%
|
1,990
|
466
|
663
|
186
|
1,016
|
-10%
|
(2,096)
|
(434)
|
(657)
|
(186)
|
(912)
|
Notes:
|
1.
|
NPV8 is
Net Present Value at a discount rate of 8%, valued as of January 1,
2021.
|
2.
|
All values are
presented on a $US, real 2020 basis.
|
3.
|
Base case copper
price is based on consensus estimates with a long-term forecast of
$3.03/lb.
|
4.
|
Base case gold price
is based on consensus estimates with a long-term forecast of
$1,474/oz.
|
5.
|
Costs considered are
forward as of January 1, 2021.
|
Updated Mineral Resources and Mineral Reserves
OTFS20 incorporates updated Mineral Resource and Mineral Reserve
estimates for Hugo North Lift 1 and there has been no change to the
Oyut open pit Mineral Reserves relative to those set forth in the
2019 AIF. Mineral Resource estimates for Hugo North have been
updated since the 2019 AIF, while the Mineral Resources for
Hugo South, Oyut open pit and Heruga
remain unchanged.
2020 Oyu Tolgoi Mineral Reserves
Oyut Deposit Open
Pit Mineral Reserves as of December 31st, 2019
|
Classification
|
Ownership
|
Mineral
Reserves
|
Contained
Metal
|
Ore
|
Cu
|
Au
|
Ag
|
Copper
|
Gold
|
Silver
|
(Mt)
|
(%)
|
(g/t)
|
(g/t)
|
(Mt)
|
(Moz)
|
(Moz)
|
Proven
|
Oyu Tolgoi
LLC
|
307
|
0.52
|
0.39
|
1.32
|
1.6
|
3.8
|
13.0
|
Probable
|
Oyu Tolgoi
LLC
|
477
|
0.39
|
0.23
|
1.14
|
1.9
|
3.5
|
17.4
|
Total (Proven +
Probable)
|
Oyu Tolgoi
LLC
|
783
|
0.44
|
0.29
|
1.21
|
3.5
|
7.2
|
30.5
|
|
Oyut Stockpile
Mineral Reserves as of December 31st, 2019
|
Classification
|
Ownership
|
Mineral
Reserves
|
Contained
Metal
|
Ore
|
Cu
|
Au
|
Ag
|
Copper
|
Gold
|
Silver
|
(Mt)
|
(%)
|
(g/t)
|
(g/t)
|
(Mt)
|
(Moz)
|
(Moz)
|
Proven
|
Oyu Tolgoi
LLC
|
48
|
0.33
|
0.12
|
0.93
|
0.2
|
0.2
|
1.4
|
|
Hugo North Deposit
Underground Mineral Reserves as of December 31st, 2019 (updated
June 30th, 2020)
|
Classification
|
Ownership
|
Mineral
Reserves
|
Contained
Metal
|
Ore
|
Cu
|
Au
|
Ag
|
Copper
|
Gold
|
Silver
|
(Mt)
|
(%)
|
(g/t)
|
(g/t)
|
(Mt)
|
(Moz)
|
(Moz)
|
Probable
|
Oyu Tolgoi
LLC
|
400
|
1.51
|
0.29
|
3.11
|
6.0
|
3.8
|
40.0
|
Probable
|
EJV
|
40
|
1.54
|
0.53
|
3.63
|
0.6
|
0.7
|
4.6
|
Total
Probable
|
|
440
|
1.51
|
0.32
|
3.16
|
6.7
|
4.5
|
44.7
|
|
Oyu Tolgoi Project
Mineral Reserves as of December 31st, 2019 (updated June 30th,
2020)
|
Classification
|
Mineral
Reserves
|
Contained
Metal
|
Ore
|
Cu
|
Au
|
Ag
|
Copper
|
Gold
|
Silver
|
(Mt)
|
(%)
|
(g/t)
|
(g/t)
|
(Mt)
|
(Moz)
|
(Moz)
|
Proven
|
355
|
0.49
|
0.35
|
1.27
|
1.7
|
4.0
|
14.5
|
Probable
|
917
|
0.93
|
0.27
|
2.11
|
8.5
|
7.9
|
62.1
|
Total (Proven +
Probable)
|
1272
|
0.81
|
0.29
|
1.87
|
10.3
|
11.9
|
76.6
|
Notes:
|
|
1.
|
CIM Definition
Standards for Mineral Resources and Mineral Reserves (2014) were
used for reporting of Mineral Reserves.
|
2.
|
NSR values used for
Mineral Reserves estimation are based on forecast long-term copper,
gold, and silver prices of $3.08/lb; $1,292/oz; and $19.00/oz
respectively.
|
3.
|
Assumptions for
smelting refining and treatment charges, deductions and payment
terms, concentrate transport, metallurgical recoveries and
royalties are included in the NSR values.
|
4.
|
Processing and
general administration costs used to determine cut-off NSR values
vary between $7.18/t and $10.87/t depending on the ore type
processed.
|
5.
|
For the Hugo North
Mineral Reserves, a NSR shut off grade of $17.84/t is used to
determine the point at which each underground drawpoint is closed.
This NSR value is based on estimated mining, processing and G&A
costs ranging from $17.27/t to $17.90/t across five independent ore
types.
|
6.
|
For the Oyut Mineral
Reserves, only measured Mineral Resources were used to report
proven Mineral Reserves, and only indicated Mineral Resources were
used to report Probable Mineral Reserves.
|
7.
|
For the Hugo North
Mineral Reserves, Measured and Indicated Mineral Resources were
used to report probable Mineral Reserves.
|
8.
|
The effective date of
the Mineral Reserve estimates is December 31, 2019.
|
9.
|
EJV is the Entrée
Joint Venture. The Shivee Tolgoi License and the Javkhlant License
are held by Entrée. The Shivee Tolgoi License and the Javkhlant
License are planned to be operated by Oyu Tolgoi LLC. Oyu Tolgoi
LLC will receive 80% of cash flows after capital and operating
costs for material originating below 560 m, and 70% above this
depth. The Company holds a 7.9% interest in Entrée Resources
Ltd.
|
10.
|
The estimate of
Mineral Reserves may be materially affected by environmental,
permitting, legal, title, socio-political, marketing, or other
relevant issues including risks set forth in the 2019 AIF and other
filings made with Canadian securities regulatory authorities and
available at www.sedar.com. These updated estimates differ from
those reported in the 2019 AIF and reflect changes in the
Hugo North Panel 0 design.
|
11.
|
Totals may not add
due to rounding.
|
Hugo North Lift 1 Mineral Reserve Comparison 2019 AIF to
OTFS20
The Hugo North Lift 1 Mineral Reserves have been updated to
reflect the new Panel 0 design. The new design resulted in the
conversion of the material contained in the structural pillars from
mineral reserves to mineral resources. Principally as a result of
the conversion, the estimated probable Mineral Reserves at
December 31, 2019 at Hugo North are
approximately 6.7 million tonnes of copper and 4.5 million ounces
of gold, compared with the previously disclosed 7.9 million tonnes
of copper and 5.4 million ounces of gold.
While this update reflects the current Panel 0 mine status, it
does not reflect any opportunities that may arise from the recovery
of the structural pillars or Panel 1 and Panel 2 optimisation
studies, expected to continue into 2021.
Hugo North Deposit
Underground Mineral Reserves Comparison
|
Classification
& Report
|
Ownership
|
Mineral
Reserves
|
Contained
Metal
|
Ore
|
Cu
|
Au
|
Ag
|
Copper
|
Gold
|
Silver
|
(Mt)
|
(%)
|
(g/t)
|
(g/t)
|
(Mt)
|
(Moz)
|
(Moz)
|
OTFS20
Probable
|
Oyu Tolgoi
LLC
|
400
|
1.51
|
0.29
|
3.11
|
6.0
|
3.8
|
40.0
|
EJV
|
40
|
1.54
|
0.53
|
3.63
|
0.6
|
0.7
|
4.6
|
Total
|
440
|
1.51
|
0.32
|
3.16
|
6.7
|
4.5
|
44.7
|
2019 AIF
Probable
|
Oyu Tolgoi
LLC
|
447
|
1.64
|
0.34
|
3.35
|
7.3
|
4.8
|
48.1
|
EJV
|
32
|
1.64
|
0.57
|
3.84
|
0.5
|
0.6
|
4.0
|
Total
|
479
|
1.64
|
0.35
|
3.38
|
7.9
|
5.4
|
52.1
|
Difference
Probable
|
Oyu Tolgoi
LLC
|
-47
|
-0.13
|
-0.04
|
-0.24
|
-1.3
|
-1.0
|
-8.1
|
EJV
|
8
|
-0.10
|
-0.04
|
-0.21
|
0.1
|
0.1
|
0.7
|
Total
|
-39
|
-0.13
|
-0.04
|
-0.22
|
-1.2
|
-0.9
|
-7.4
|
% Difference
Probable
|
Oyu Tolgoi
LLC
|
-11%
|
-8%
|
-12%
|
-7%
|
-18%
|
-21%
|
-17%
|
EJV
|
24%
|
-6%
|
-6%
|
-5%
|
16%
|
16%
|
17%
|
Total
|
-8%
|
-8%
|
-10%
|
-7%
|
-15%
|
-17%
|
-14%
|
Notes:
|
|
1.
|
CIM Definition
Standards for Mineral Resources and Mineral Reserves (2014) were
used for reporting of Mineral Reserves.
|
2.
|
NSR values used for
OTFS20 and 2019 AIF Mineral Reserves estimation are based on
forecast long-term copper, gold, and silver prices of $3.08/lb;
$1,292/oz; and $19.00/oz respectively.
|
3.
|
Assumptions for
smelting refining and treatment charges, deductions and payment
terms, concentrate transport, metallurgical recoveries and
royalties are included in the NSR values.
|
4.
|
Processing and
general administration costs used for both OTFS20 and the 2019 AIF
to determine cut-off NSR values vary between $7.18/t and $10.87/t
depending on the ore type processed.
|
5.
|
For the Hugo North
Mineral Reserves in both OTFS20 and the 2019 AIF, a NSR shut off
grade of $17.84/t is used to determine the point at which each
underground drawpoint is closed. This NSR value is based on an
estimated mining, processing and G&A costs ranging from
$17.27/t to $17.90/t across five independent ore types.
|
6.
|
For the Hugo North
Mineral Reserves in both OTFS20 and 2019 AIF, Measured and
Indicated Mineral Resources were used to report Probable Mineral
Reserves.
|
7.
|
The effective date of
the Mineral Reserve estimates is December 31, 2019 (updated on June
30, 2020 for OTFS20 estimates).
|
8.
|
EJV is the Entrée
Joint Venture. The Shivee Tolgoi License and the Javkhlant License
are held by Entrée. The Shivee Tolgoi License and the Javkhlant
License are planned to be operated by Oyu Tolgoi LLC. Oyu Tolgoi
LLC will receive 80% of cash flows after capital and operating
costs for material originating below 560 m, and 70% above this
depth. The Company holds a 7.9% interest in Entrée Resources
Ltd.
|
9.
|
The estimate of
Mineral Reserves may be materially affected by environmental,
permitting, legal, title, socio-political, marketing, or other
relevant issues including risks set forth in the Company's Annual
Information Form for the year ended December 31, 2019 AIF and other
filings made with Canadian securities regulatory authorities and
available at www.sedar.com. These updated estimates differ from
those reported in the 2019 AIF and reflect changes in the Hugo
North Panel 0 design.
|
10.
|
Totals may not add
due to rounding.
|
2020 Oyu Tolgoi Mineral Resources
Oyut Deposit Open
Pit Mineral Resources as of December 31st, 2019
|
Classification
|
Ownership
|
Mineral
Resources
|
Contained
Metal
|
Ore
|
Cu
|
Au
|
Ag
|
Copper
|
Gold
|
Silver
|
(Mt)
|
(%)
|
(g/t)
|
(g/t)
|
(Mt)
|
(Moz)
|
(Moz)
|
Measured
|
Oyu Tolgoi
LLC
|
16
|
0.39
|
0.41
|
1.21
|
0.1
|
0.2
|
0.6
|
Indicated
|
Oyu Tolgoi
LLC
|
80
|
0.34
|
0.29
|
1.17
|
0.3
|
0.8
|
3.0
|
Total (Measured +
Indicated)
|
Oyu Tolgoi
LLC
|
95
|
0.35
|
0.31
|
1.17
|
0.3
|
1.0
|
3.6
|
Inferred
|
Oyu Tolgoi
LLC
|
318
|
0.29
|
0.17
|
1.03
|
0.9
|
1.8
|
10.5
|
|
Oyut Deposit
Underground Mineral Resources as of December 31st,
2019
|
Classification
|
Ownership
|
Mineral
Resources
|
Contained
Metal
|
Ore
|
Cu
|
Au
|
Ag
|
Copper
|
Gold
|
Silver
|
(Mt)
|
(%)
|
(g/t)
|
(g/t)
|
(Mt)
|
(Moz)
|
(Moz)
|
Measured
|
Oyu Tolgoi
LLC
|
14
|
0.47
|
0.88
|
1.27
|
0.1
|
0.4
|
0.6
|
Indicated
|
Oyu Tolgoi
LLC
|
69
|
0.38
|
0.59
|
1.11
|
0.3
|
1.3
|
2.5
|
Total (Measured +
Indicated)
|
Oyu Tolgoi
LLC
|
83
|
0.39
|
0.64
|
1.14
|
0.3
|
1.7
|
3.0
|
Inferred
|
Oyu Tolgoi
LLC
|
175
|
0.39
|
0.40
|
1.21
|
0.7
|
2.2
|
6.8
|
|
Hugo North Mineral
Resources as of December 31st, 2019 (updated June 30th,
2020)
|
Classification
|
Ownership
|
Mineral
Resources
|
Contained
Metal
|
Ore
|
Cu
|
Au
|
Ag
|
Copper
|
Gold
|
Silver
|
(Mt)
|
(%)
|
(g/t)
|
(g/t)
|
(Mt)
|
(Moz)
|
(Moz)
|
Measured
|
Oyu Tolgoi
LLC
|
58
|
1.86
|
0.48
|
4.21
|
1.1
|
0.9
|
7.8
|
EJV
|
0
|
0.00
|
0.00
|
0.00
|
0.0
|
0.0
|
0.0
|
All Hugo
North
|
58
|
1.86
|
0.48
|
4.21
|
1.1
|
0.9
|
7.8
|
Indicated
|
Oyu Tolgoi
LLC
|
401
|
1.34
|
0.34
|
3.14
|
5.4
|
4.4
|
40.6
|
EJV
|
87
|
1.59
|
0.54
|
4.13
|
1.4
|
1.5
|
11.5
|
All Hugo
North
|
488
|
1.39
|
0.38
|
3.32
|
6.8
|
5.9
|
52.1
|
Total (Measured +
Indicated)
|
Oyu Tolgoi
LLC
|
459
|
1.41
|
0.36
|
3.28
|
6.5
|
5.3
|
48.4
|
EJV
|
87
|
1.59
|
0.54
|
4.13
|
1.4
|
1.5
|
11.5
|
All Hugo
North
|
546
|
1.44
|
0.39
|
3.41
|
7.8
|
6.8
|
59.9
|
Inferred
|
Oyu Tolgoi
LLC
|
765
|
0.80
|
0.28
|
2.40
|
6.1
|
6.9
|
59.1
|
EJV
|
167
|
1.02
|
0.36
|
2.78
|
1.7
|
1.9
|
14.9
|
All Hugo
North
|
932
|
0.84
|
0.29
|
2.47
|
7.8
|
8.8
|
74.0
|
|
Hugo South Mineral
Resources as of December 31st, 2019
|
Classification
|
Ownership
|
Mineral
Resources
|
Contained
Metal
|
Ore
|
Cu
|
Au
|
Ag
|
Copper
|
Gold
|
Silver
|
(Mt)
|
(%)
|
(g/t)
|
(g/t)
|
(Mt)
|
(Moz)
|
(Moz)
|
Inferred
|
Oyu Tolgoi
LLC
|
724
|
0.84
|
0.07
|
1.88
|
6.1
|
1.7
|
43.7
|
|
Heruga Mineral
Resources as of December 31st, 2019
|
Classification
|
Ownership
|
Mineral
Resources
|
Contained
Metal
|
Ore
|
Cu
|
Au
|
Ag
|
Copper
|
Gold
|
Silver
|
(Mt)
|
(%)
|
(g/t)
|
(g/t)
|
(Mt)
|
(Moz)
|
(Moz)
|
Inferred
|
Oyu Tolgoi
LLC
|
105
|
0.42
|
0.30
|
1.58
|
0.4
|
1.0
|
5.3
|
Javkhlant
EJV
|
1448
|
0.41
|
0.40
|
1.46
|
6.0
|
18.7
|
67.7
|
All Heruga
|
1552
|
0.42
|
0.39
|
1.46
|
6.5
|
19.7
|
73.1
|
|
Oyu Tolgoi Project
Mineral Resources as of December 31st, 2019 (updated June 30th,
2020)
|
Classification
|
Mineral
Resources
|
Contained
Metal
|
Ore
|
Cu
|
Au
|
Ag
|
Copper
|
Gold
|
Silver
|
(Mt)
|
(%)
|
(g/t)
|
(g/t)
|
(Mt)
|
(Moz)
|
(Moz)
|
Measured
|
87
|
1.38
|
0.53
|
3.22
|
1.2
|
1.5
|
9.0
|
Indicated
|
637
|
1.15
|
0.39
|
2.81
|
7.3
|
8.0
|
57.6
|
Total (Measured +
Indicated)
|
724
|
1.17
|
0.41
|
2.86
|
8.5
|
9.4
|
66.6
|
Inferred
|
3701
|
0.59
|
0.29
|
1.75
|
21.9
|
34.2
|
208.1
|
Notes:
|
|
1.
|
CIM Definition
Standards for Mineral Resources and Mineral Reserves (2014) are
used for reporting of Mineral Resources.
|
2.
|
The Mineral Resources
exclude Mineral Reserves.
|
3.
|
The following copper
equivalent (CuEq) formulae have been used for cut-off grade
determination in each deposit.
|
|
Oyut CuEq = Cu + ((Au
x 35.4938) + (Ag x 0.4101)) / 67.9023
|
|
Hugo North CuEq = Cu +
((Au x 35.7175) + (Ag x 0.5353)) / 67.9023
|
|
Hugo South CuEq = Cu +
((Au x 37.7785) + (Ag x 0.5773)) / 67.9023
|
|
Heruga CuEq = Cu +
((Au x 37.0952) + (Ag x 0.5810) + (Mo x 0.0161)) /
67.9023
|
4.
|
The metal prices used
in determining the CuEq formulae are as follows: $3.08/lb for
copper, $1,292/oz for gold, $19.00/oz for silver, and $10.00/lb for
molybdenum.
|
5.
|
The metallurgical
recoveries used in determining the CuEq formulae for each deposit:
Oyut deposit: Copper 78%, Gold 67%, Silver 52%. Hugo North deposit:
Copper 93%, Gold 80%, Silver 81%. Hugo South deposit: Copper 89%,
Gold 81%, Silver 84% Heruga: Copper 82%, Gold 73%, Silver 78%,
Molybdenum 60%.
|
6.
|
For the Oyut deposit,
a cut-off grade of 0.24% CuEq has been used for Mineral Resources
with open pit potential. A cut-off 0.41% CuEq has been used for
Mineral Resources with underground mining potential.
|
7.
|
For the Hugo North,
Hugo South, and Heruga deposits a cut-off grade of 0.41% CuEq grade
used based on the assumption that the deposits will be mined using
underground mass mining methods.
|
8.
|
The effective date of
the mineral resource estimates is December 31, 2019 (updated on
June 30, 2020).
|
9.
|
EJV is the Entrée
Joint Venture. The Shivee Tolgoi and Javkhlant licenses are held by
Entrée. The Shivee Tolgoi and EJV Javkhlant Licenses are planned to
be operated by Oyu Tolgoi LLC. Oyu Tolgoi LLC will receive 80% of
cash flows after capital and operating costs for material
originating below 560 m, and 70% above this depth. The Company
holds a 7.9% interest in Entrée Resources Ltd.
|
10.
|
Mineral Resources
that are not Mineral Reserves do not have demonstrated economic
viability.
|
11.
|
The Oyut deposit was
formerly known as SOT.
|
12.
|
The contained copper,
gold and silver estimates in the tables have not been adjusted for
metallurgical recoveries.
|
13.
|
The estimate of
Mineral Resources may be materially affected by environmental,
permitting, legal, title, socio-political, marketing, or other
relevant issues including risks set forth in the 2019 AIF and other
filings made with Canadian securities regulatory authorities and
available at www.sedar.com. These updated estimates differ from
those reported in the 2019 AIF and reflect changes in the
Hugo North Panel 0 design.
|
14.
|
Molybdenum Mineral
Resources are unchanged from the 2019 AIF and have not been
provided in the above table.
|
15.
|
Totals may not add
due to rounding.
|
Hugo North Measured & Indicated Mineral Resource
Comparison for 2019 AIF to OTFS20
The estimated Measured and Indicated Mineral Resources at
December 31, 2019 at Hugo North are
7.8 million tonnes of copper and 6.8 million ounces of gold
compared with the previously disclosed 6.2 million tonnes of copper
and 5.5 million ounces of gold. This represents an increase
of 27% in copper and 23% in gold, largely representing the
reclassification of pillar material from Mineral Reserves to
Mineral Resources. Inferred Mineral Resources are unchanged
from the disclosure in the 2019 AIF.
Hugo North Deposit
Underground Mineral Resources Comparison
|
Classification
& Report
|
Ownership
|
Mineral
Resources
|
Contained
Metal
|
Ore
|
Cu
|
Au
|
Ag
|
Copper
|
Gold
|
Silver
|
(Mt)
|
(%)
|
(g/t)
|
(g/t)
|
(Mt)
|
(Moz)
|
(Moz)
|
OTFS20
Measured & Indicated
|
Oyu Tolgoi
LLC
|
459
|
1.41
|
0.36
|
3.28
|
6.5
|
5.3
|
48.4
|
EJV
|
87
|
1.59
|
0.54
|
4.13
|
1.4
|
1.5
|
11.5
|
Total
|
546
|
1.44
|
0.39
|
3.41
|
7.8
|
6.8
|
59.9
|
2019 AIF
Measured & Indicated
|
Oyu Tolgoi
LLC
|
390
|
1.23
|
0.32
|
3.01
|
4.8
|
4.0
|
37.7
|
EJV
|
87
|
1.59
|
0.54
|
4.11
|
1.4
|
1.5
|
11.5
|
Total
|
477
|
1.29
|
0.36
|
3.21
|
6.2
|
5.5
|
49.3
|
Difference
Measured & Indicated
|
Oyu Tolgoi
LLC
|
69
|
0.18
|
0.04
|
0.27
|
1.7
|
1.3
|
10.7
|
EJV
|
-1
|
0.01
|
0.00
|
0.02
|
0.0
|
0.0
|
0.0
|
Total
|
69
|
0.14
|
0.03
|
0.20
|
1.7
|
1.3
|
10.7
|
% Difference
Measured & Indicated
|
Oyu Tolgoi
LLC
|
18%
|
15%
|
12%
|
9%
|
35%
|
32%
|
28%
|
EJV
|
-1%
|
0%
|
1%
|
0%
|
0%
|
0%
|
0%
|
Total
|
14%
|
11%
|
7%
|
6%
|
27%
|
23%
|
22%
|
Notes:
|
|
1.
|
CIM Definition
Standards for Mineral Resources and Mineral Reserves (2014) are
used for reporting of Mineral Resources.
|
2.
|
The Mineral Resources
exclude Mineral Reserves
|
3.
|
The following copper
equivalent (CuEq) formulae have been used for cut-off grade
determination in each deposit.
|
|
Oyut CuEq = Cu + ((Au
x 35.4938) + (Ag x 0.4101)) / 67.9023
|
|
Hugo North CuEq = Cu +
((Au x 35.7175) + (Ag x 0.5353)) / 67.9023
|
|
Hugo South CuEq = Cu +
((Au x 37.7785) + (Ag x 0.5773)) / 67.9023
|
|
Heruga CuEq = Cu +
((Au x 37.0952) + (Ag x 0.5810) + (Mo x 0.0161)) /
67.9023
|
4.
|
The metal prices used
in determining the CuEq formulae are as follows: $3.08/lb for
copper, $1,292/oz for gold, $19.00/oz for silver, and $10.00/lb for
molybdenum.
|
5.
|
The metallurgical
recoveries used in determining the CuEq formulae for each deposit:
Oyut deposit: Copper 78%, Gold 67%, Silver 52%. Hugo North deposit:
Copper 93%, Gold 80%, Silver 81%. Hugo South deposit: Copper 89%,
Gold 81%, Silver 84% Heruga: Copper 82%, Gold 73%, Silver 78%,
Molybdenum 60%.
|
6.
|
For the Oyut deposit,
a cut-off grade of 0.24% CuEq has been used for Mineral Resources
with open pit potential. A cut-off 0.41% CuEq has been used for
Mineral Resources with underground mining potential.
|
7.
|
For the Hugo North,
Hugo South, and Heruga deposits a cut-off grade of 0.41% CuEq grade
used based on the assumption that the deposits will be mined using
underground mass mining methods.
|
8.
|
The effective date of
the mineral resource estimates is December 31,
2019.
|
9.
|
EJV is the Entrée
Joint Venture. The Shivee Tolgoi and Javkhlant licenses are held by
Entrée. The Shivee Tolgoi and EJV Javkhlant Licenses are planned to
be operated by Oyu Tolgoi LLC. Oyu Tolgoi LLC will receive 80% of
cash flows after capital and operating costs for material
originating below 560 m, and 70% above this depth. The Company
holds a 7.9% interest in Entrée Resources Ltd.
|
10.
|
Mineral Resources
that are not Mineral Reserves do not have demonstrated economic
viability.
|
11.
|
The Oyut deposit was
formerly known as SOT.
|
12.
|
The contained copper,
gold and silver estimates in the tables have not been adjusted for
metallurgical recoveries.
|
13.
|
The estimate of
Mineral Resources may be materially affected by environmental,
permitting, legal, title, socio-political, marketing, or other
relevant issues including risks set forth in the 2019 AIF and other
filings made with Canadian securities regulatory authorities and
available at www.sedar.com. These updated estimates differ from
those reported in the 2019 AIF and reflect changes in the Hugo
North Panel 0 design.
|
14.
|
Totals may not match
due to rounding.
|
Disclosure of a scientific or technical nature in this news
release was approved by Jo-Anne
Dudley (FAusIMM(CP)), Chief Operating Officer of the
Company, who is a "qualified person" as set forth in NI 43-101. The
updated mineral resource and mineral reserve estimates were
prepared by Michael Thomas
(FAusIMM(CP)) (for the Mineral Reserves) and Roderick Carlson (MAusIMM, MAIG(RPGeo)) (for the
Mineral Resources), each of AMC Consultants Pty Ltd. and each of
whom is a "qualified person" and independent of the Company as set
forth in NI 43-101. The qualified persons have verified the data
disclosed including sampling, analytical and test data underlying
the information contained in this news release. This included
review of Mineral Resources and Mineral Reserves reports for the
historical Mineral Resources and review of the current Mineral
Resources and Mineral Reserves documentation for the updated
Mineral Resources and Mineral Reserves.
Update on Liquidity and Funding Requirements
Turquoise Hill continues to monitor its liquidity outlook and
its longer-term funding requirements. Based on updated
cashflow projections, which incorporate expected near-term COVID-19
impacts, the recent signing of an amendment to the Power Source
Framework Agreement ("PSFA") and other developments,
Turquoise Hill now expects to have liquidity available to fund
operations and underground development beyond Q3 2021. Based
on this improved liquidity outlook, Turquoise Hill has, for the
time being, decided to defer further discussions with Rio Tinto
regarding possible interim funding arrangements. If it
becomes prudent to do so, the Company may re-engage with Rio Tinto
and / or third parties regarding possible interim funding.
Further information regarding the Company's liquidity outlook
will be provided as part of the Company's Q2, 2020 earnings
release.
Turquoise Hill remains focused on developing, aligning with key
stakeholders on, and implementing a plan to address the longer-term
funding requirements of Oyu Tolgoi LLC, which will be based on the
updated Panel 0 mine design and supported by information set out in
OTFS20 and the Company's planned technical report. Under the
PSFA amendment, Oyu Tolgoi LLC has agreed to prioritise development
of a State Owned Power Plant at Tavan Tolgoi ("SOPP"), which would
be developed and financed by the Government of Mongolia.
Incorporation of SOPP as the base case power solution for the Oyu
Tolgoi mine impacts positively on the Company's expected
incremental funding requirement (i.e., over and above its currently
available liquidity). Further information regarding the Company's
incremental funding requirement will be provided as part of the
Company's Q2 2020 earnings release.
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 expectations set out in
the Oyu Tolgoi 2020 Feasibility Study ("OTFS20"); timing and amount
of 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; liquidity, funding sources,
funding requirements and planning; timing and status of underground
development; the mine design for 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
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 the SOPP and related
amendments to the PSFA as well as power purchase agreements;
the timing of construction and commissioning of the potential SOPP;
source of interim power; the potential impact of COVID-19 on the
Company's business, operations and financial condition; capital and
operating cost estimates, timing of completion of the definitive
estimate review and the scope thereof; 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 and
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
and 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 status 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.
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; the outcome of the Definitive Estimate review; 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; 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 specific 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; 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 OTFS20); 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 2019 AIF, as supplemented by the Company's Q1 2020
MD&A.
Readers are further cautioned that the list of factors
enumerated in the "Risk Factors" section of the 2019 AIF and in the
"Risks and Uncertainties" section of the Q1 2020 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