Turquoise Hill announces financial results and review of operations for 2019Economy
Ulaanbaatar /MONTSAME/. On March 21, Turquoise Hill Resources, an international mining company who owns 66 percent of the Oyu Tolgoi copper-gold mine in Mongolia and focuses on the operation and development of the mine, announced its financial results for the year ended December 31, 2019.
“For 2019, the Oyu Tolgoi mine recorded another year of excellent operational results, and record industry leading safety performance,” stated Ulf Quellmann, Turquoise Hill’s Chief Executive Officer. “Our team at Oyu Tolgoi continues to maximize our production efficiencies, which resulted in our full year copper production to fall within our original guidance, and our gold production exceeding our original targets. In addition, the mill throughput achieved its fourth year in a row of operating at above name-plate capacity.”
“2019 was also a pivotal year for the underground development with the completion of the above-ground infrastructure and Shaft 2. Shaft 2 is a critical piece of infrastructure that allows the team to accelerate the underground development. Productivity gains in the underground development over the last five months of 2019 have shown steady improvements with December achieving a new record of over 1,800 meters of lateral equivalent meters.”
“Today, COVID-19 presents a pandemic on a global scale that is affecting everyone and certainly also our business. We have got measures in place including a business resilience team at Oyu Tolgoi to monitor, manage and mitigate the effects of COVID-19. At this stage, the situation is very fluid and hence we are not in a position to specify the impact on cost and schedule. In the meantime, we continue to work closely with our customers, our suppliers and the Government of Mongolia”.
Some highlights of 2019
• The Oyu Tolgoi mine achieved another strong all injury frequency rate of 0.16 per 200,000 hours worked for the year ended December 31, 2019. AIFR steadily declined since 2013, dropping 64% from 2013 through 2019.
• Full year copper production of 146,346 tonnes vs original guidance range of 125,000 – 155,000 tonnes.
• Full year gold production of 241,840 ounces vs original guidance range of 180,000 – 220,000 ounces.
• Full year mill throughput of 40,777,225 tonnes, an increase of 5% over 2018.
• Revenue of $1.2 billion in 2019 decreased 1.2% over 2018, impacted by lower copper production partly offset by higher gold revenue driven by a higher average annual gold price in 2019.
• Cash used in operating activities before interest and taxes was $341.7 million, a decrease from $363.0 million generated in 2018, primarily reflecting the impact of reduced revenue.
• Total operating cash costs of $774.5 million for 2019 came in under the Company’s revised guidance and decreased 5.2% over 2018. This decrease was due to lower freight and royalty costs driven by lower volumes of concentrate sold and lower sales revenue respectively, and lower milling costs due to lower maintenance costs.
• Underground expansion capital for 2019 was $1.2 billion, meeting the upper-end of the Company’s revised guidance.
• Shaft 2 construction was completed in October 2019, and was fully commissioned in February 2020. Construction is progressing on Shafts 3 and 4 with both collars now installed. Final preparations are now underway to enable commencement of main sinking operations for both shafts during the second quarter of 2020.
• The Tavan Tolgoi Power Plant (TTPP) Feasibility Study was submitted to the Government of Mongolia on February 17, 2020 by Oyu Tolgoi LLC. The study is based on a 300 MW coal fired power plant to be located at the Tavan Tolgoi coal fields approximately 150 kilometres from Oyu Tolgoi.
• In February 2020, the Company announced that Oyu Tolgoi LLC has been unable to reach a resolution of its dispute with the Mongolian Tax Authority with respect to its tax assessment, and will be proceeding with the initiation of a formal international arbitration proceeding in accordance with the dispute resolution provisions of the Investment Agreement and the Underground Plan.
In 2020, Oyu Tolgoi is expected to produce 140,000 to 170,000 tonnes of copper and 120,000 to 150,000 ounces of gold in concentrates in 2020 from both the open pit and the beginning of the underground development material being processed. Operating cash costs for 2020 are expected to be $800 million to $850 million.