MONTREAL, Dec. 18, 2020 /CNW/ - Turquoise Hill Resources
Ltd. ("Turquoise Hill" or the "Company") announced the completion
and delivery by Rio Tinto of the Definitive Estimate, which refines
the analysis contained in the feasibility study underlying the
Company's Oyu Tolgoi Technical Report ("OTTR20") dated and filed on
August 28, 2020. The results of
the Definitive Estimate include:
- a revised base case project development capital cost estimate
of $6.75 billion1
- confirmation that sustainable first production is forecast to
occur in October
20221
- verification that all surface infrastructure required for
sustainable first production is now complete
- an increase in Hugo North Mineral Reserves of 10Mt, 0.18Mt
contained copper and 0.07Moz contained gold
The level of work and scope of the review were completed to an
accuracy range of -5% to +10%, but given the uncertainty of
COVID-19-related risks and other business case risks the go-forward
capital expenditure estimate and schedule set out in the Definitive
Estimate, as approved by the Company's board, are at a -10% to +15%
level of accuracy. The Definitive Estimate assumes COVID-19 related
restrictions in 2021 that are no more stringent than those
experienced in September 2020. Should
COVID-19 constraints continue beyond 2021, or should the COVID-19
situation escalate further in 2021 leading to tougher restrictions,
additional costs and schedule impacts may arise. TRQ understands
that the business case risks identified by Rio Tinto relate to:
Government approvals of the Oyu Tolgoi feasibility study (OTFS20)
and supporting documents; achievement of certain milestones
identified in the amended Power Source Framework Agreement
("PSFA"); and implementation of the Memorandum of Understanding
("MOU") between Turquoise Hill and Rio Tinto relating to
funding.
The Definitive Estimate is yet to be considered and approved by
the board of directors of Oyu Tolgoi LLC. In the interim, Turquoise
Hill is committed, over the coming months, to working closely with
Erdenes Oyu Tolgoi LLC ("Erdenes"), the Government of Mongolia, Rio Tinto and Oyu Tolgoi LLC:
- to address the concerns of Erdenes and the Government of
Mongolia with respect to the
reasons for the cost overruns and delays to the underground
development announced in 2019, including through the independent
review being overseen by a Special Committee of the Oyu Tolgoi LLC
board as announced on December 1,
2020;
- to support the achievement by Oyu Tolgoi LLC and the Government
of Mongolia of their joint PSFA
milestones, including reaching agreement on a power purchase
agreement for a state-owned power plant by March 31, 2021 and securing agreement on an
extension of Oyu Tolgoi LLC's existing power import arrangements by
March 1, 2021;
- to seek clarity and stakeholder alignment on the criteria to be
satisfied prior to commencement of the "undercut"2 (such
as confidence in commissioning dates for the materials handling
system and the extension of power import arrangements), and ensure
that such criteria are met in a timely manner; and
- to secure stakeholder alignment on, and timely implementation
of the proposed re-profiling of Oyu Tolgoi LLC's existing project
loans and the raising of supplemental senior debt (as contemplated
by the MOU), as well as Turquoise Hill's preferred strategy of
prioritising debt and/or hybrid financing to meet Oyu Tolgoi's
funding requirements.
"The Definitive Estimate confirms the economics detailed in the
OTTR20 we announced in August," stated Ulf Quellmann, Chief
Executive Officer of Turquoise Hill. "TRQ continues to work closely
with our valued partners, Erdenes and the Government of
Mongolia, as well as Oyu Tolgoi
and Rio Tinto to deliver the underground development and realise
the full potential of Oyu Tolgoi for the benefit of all
stakeholders."
|
|
|
1
|
Key assumptions
underlying this information remain materially aligned with
OTTR20.
|
2
|
The commencement of
the "undercut," currently scheduled for mid-2021, is a key
milestone, signifying the point at which caving operations and
drawpoint construction activities must continue
uninterrupted.
|
Operational Update
The schedule optimisation and design updates contained within
the Definitive Estimate revise the development capital to
$6.75 billion and confirm sustainable
production by October 2022, which are
broadly in line with Turquoise Hill's previous disclosures. The
Definitive Estimate includes a contingency on the to-go capital of
approximately 13% as well as a four-month schedule contingency to
sustainable first production. These estimates now include the known
and forecast impacts of COVID-19. As part of the Definitive
Estimate, open pit optimisation work has been updated with an
updated phase sequence that accelerates copper production,
improving value for the overall operation.
Further mine design analysis undertaken as part of the Panel 0
update has modified and finalised the pillar location to the South
of Panel 0. This update minimises production exposure to stability
risks associated with the lower fault, increases the overall
mineral reserves and consequently decreases mineral resources due
to the reclassification, as follows:
Hugo North Deposit
Underground Mineral Reserves as at December 14th,
2020
|
Classification
|
Ownership
|
Mineral
Reserves
|
Contained
Metal
|
Tonnage
|
Cu
|
Au
|
Ag
|
Copper
|
Gold
|
Silver
|
(Mt)
|
(%)
|
(g/t)
|
(g/t)
|
(Mt)
|
(Moz)
|
(Moz)
|
Probable
|
Oyu Tolgoi
LLC
|
412
|
1.5
|
0.29
|
3.1
|
6.2
|
3.9
|
41
|
Probable
|
Entrée LLC
|
38
|
1.6
|
0.54
|
3.7
|
0.6
|
0.7
|
4.5
|
Total
Probable
|
|
450
|
1.5
|
0.32
|
3.2
|
6.8
|
4.5
|
46
|
Notes to the Mineral Reserves:
- CIM Definition Standards (2014) are used for reporting of
Mineral Reserves.
- Totals may not match due to rounding to two significant figures
in line with industry best practice.
- Net Smelter Return (NSR) values used for estimating Mineral
Reserves are based on forecast long-term copper, gold, and silver
prices of 3.08 US$/lb, 1,292 US$/oz, and 19.00
US$/oz, respectively.
- Assumptions for smelting refining and treatment, charges,
deductions, and payment terms, concentrate transport, metallurgical
recoveries and royalties are included in the NSR values.
- For the Hugo North Mineral Reserves, an NSR shut off value of
17.84 US$/t is used to determine the
point at which each underground drawpoint is closed. This NSR value
is based on estimated mining, processing and G&A costs which
range from 17.27 US$/t to
17.90 US$/t across the five different
ore types.
- The Hugo North Probable Mineral Reserves are derived from a
combination of Measured and Indicated Mineral Resources.
- The effective date of the Hugo North Mineral Reserves is
December 14, 2020.
- The Shivee Tolgoi and Javkhlant licenses are held by Entrée
LLC. The Shivee Tolgoi and 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. TRQ holds a 7.9% interest in Entrée LLC.
- The term Entrée LLC refers to ownership by the proposed joint
venture arrangement between Oyu Tolgoi LLC and Entrée LLC.
Hugo North Mineral
Resources as at December 14th, 2020
|
Classification
|
Ownership
|
Mineral
Resources
|
Contained
Metal
|
Tonnage
|
Cu
|
Au
|
Ag
|
Copper
|
Gold
|
Silver
|
(Mt)
|
(%)
|
(g/t)
|
(g/t)
|
(Mt)
|
(Moz)
|
(Moz)
|
Measured
|
Oyu Tolgoi
LLC
|
58
|
1.9
|
0.49
|
4.2
|
1.1
|
0.9
|
7.8
|
Entrée LLC
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
All Hugo
North
|
58
|
1.9
|
0.49
|
4.2
|
1.1
|
0.9
|
7.8
|
Indicated
|
Oyu Tolgoi
LLC
|
398
|
1.3
|
0.34
|
3.1
|
5.3
|
4.3
|
40
|
Entrée LLC
|
87
|
1.6
|
0.54
|
4.1
|
1.4
|
1.5
|
11
|
All Hugo
North
|
484
|
1.4
|
0.38
|
3.3
|
6.7
|
5.8
|
52
|
Total
Measured +
Indicated
|
Oyu Tolgoi
LLC
|
455
|
1.4
|
0.36
|
3.3
|
6.4
|
5.2
|
48
|
Entrée LLC
|
87
|
1.6
|
0.54
|
4.1
|
1.4
|
1.5
|
11
|
All Hugo
North
|
542
|
1.4
|
0.39
|
3.4
|
7.8
|
6.7
|
59
|
Inferred
|
Oyu Tolgoi
LLC
|
765
|
0.8
|
0.28
|
2.4
|
6.1
|
6.9
|
59
|
Entrée LLC
|
167
|
1.0
|
0.36
|
2.8
|
1.7
|
1.9
|
15
|
All Hugo
North
|
932
|
0.8
|
0.29
|
2.5
|
7.8
|
8.8
|
74
|
Notes to the Mineral Resources:
- CIM Definition Standards (2014) are used for reporting of
Mineral Resources.
- The Mineral Resources exclude Mineral Reserves.
- Totals may not match due to rounding to two significant
figures. This results in differences to previously reported figures
but is in line with industry best practice.
- The Hugo North deposit is reported using a cut-off grade of
0.41% copper equivalent (CuEq) which is based on the assumption
that the deposit will be mined via an underground caving mining
method.
- The CuEq formula is: CuEq = Cu + ((Au x 35.7175) + (Ag x
0.5353)) / 67.9023.
- The metal prices used in determining the CuEq formula are: 3.08
$/lb for copper, 1,292 $/oz for gold and 19.00 $/oz for
silver.
- The metallurgical recoveries used in determining the CuEq
formulae are: Copper 93%, Gold 80%, Silver 81%.
- The effective date of the Hugo North Mineral Resources is
December 14, 2020.
- The Shivee Tolgoi and Javkhlant licenses are held by Entrée
LLC. The Shivee Tolgoi and 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. TRQ holds a 7.9% interest in Entrée LLC.
- The term Entrée LLC refers to ownership by the proposed joint
venture arrangement between Oyu Tolgoi LLC and Entrée LLC.
- Mineral Resources that are not Mineral Reserves do not have
demonstrated economic viability.
Turquoise Hill confirms that all material assumptions and
technical parameters underpinning the mineral resource and mineral
reserve estimates in OTTR20 continue to apply and have not
materially changed.
Drilling, data collection and analysis is complete for Panel 0
and near completion for the northern area of Panel 2. The focus is
now on Panel 1 and the southern portion of Panel 2 and this work is
planned to continue through 2021 and into 2022. A design
update for the north and central areas of Panel 2 is expected in
H2'21. In addition, broader studies for the remaining areas
of Lift 1 and assessments of pillar recoverability are
progressing.
Panel 1 and Panel 2 (which are required to support the ramp-up
to 95,000 tonnes of ore per day) are currently subject to further
studies, with initial recommendations expected by mid-2021.
These studies will also consider options and associated costs to
recover the copper contained within the pillars added to the mine
design of Panel 0.
Preparatory activities for the resumption of sinking of Shaft 3
and Shaft 4 are underway. In the first week of December, shaft
sinkers completed quarantine and travelled to site. Vendor
representatives to support the commissioning of sinking equipment
have also arrived on site. Progress at the site remains materially
consistent with assumptions made in the Definitive Estimate.
On November 11, two cases of
COVID-19 were reported in Ulaanbaatar. As a consequence, the local
authorities took steps to minimise transmission, implementing
curfew restrictions that included a temporary halt on domestic
flights impacting travel to and from the Oyu Tolgoi mine site.
Limited flights resumed to Oyu Tolgoi on December 9 and in-country case numbers are easing
significantly. Although Oyu Tolgoi's open-pit operations and
underground project continue, with no cases recorded at site,
additional COVID-19 restrictions are in place and COVID-19 tests
are being conducted to allow personnel to travel to site.
Disclosure of information of a scientific or technical nature in
this press release in respect of the Oyu Tolgoi mine was approved
by Jo-Anne Dudley (FAusIMM(CP)),
Chief Operating Officer of the Company. Jo-Anne Dudley is a "qualified person" as that
term is defined in NI 43-101.
About Turquoise Hill Resources
Turquoise Hill is an international mining company focused on the
operation and continued development of the Oyu Tolgoi copper-gold
mine in Mongolia, which is the
Company's principal and only material mineral resource property.
Turquoise Hill's ownership of the Oyu Tolgoi mine is held through a
66% interest in Oyu Tolgoi LLC (Oyu Tolgoi); Erdenes Oyu Tolgoi
LLC, a Mongolian state-owned entity, holds the remaining 34%
interest.
Follow us on Twitter @TurquoiseHillRe
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 arbitration proceedings,
including the potential benefits, timing and outcome of the
arbitration proceedings; the expectations set out in the OTTR20;
the timing and amount of future production and potential production
delays; the timing of commencement of the undercut, as well as the
timing and achievement of other key milestones; 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
complaint 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 and its subsidiaries
with respect to future funding plans and requirements (including as
contemplated by the MOU); the amount of any funding gap to complete
the Oyu Tolgoi 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 prioritise 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 SOPP and related amendments to the 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; the
content of the definitive estimate; 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
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;
the status and nature of the Company's ongoing discussions with Rio
Tinto and its subsidiaries 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; the accuracy 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, including the outcome of the class action complaint 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 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 as well as the status and nature of the Company's ongoing
discussions with Rio Tinto and its subsidiaries with respect to
future funding plans and requirements (including as contemplated by
the MOU); 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 and
the definitive estimate); 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 the Company's AIF, as supplemented by the "Risks and
Uncertainties" section of the Q3 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 Q3 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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