Each one in plain English, with the numbers worked through for a shareholder.
31 Aug 2020resource reserve update● NeutralMajor
Turquoise Hill filed the 2020 Oyu Tolgoi Technical Report (prepared with AMC Consultants), which was due after the July 2020 feasibility study and updates the October 2016 report. It also raised 2021 gold production outlook to 500,000-550,000 ounces from 450,000-500,000. The report does not reflect COVID-19 impacts (Shafts 3 and 4 on care and maintenance since April 2020); a COVID cost and schedule update is expected in Q4 2020, and the definitive estimate remains due in Q4 2020. The filing cites a disclosed incremental funding requirement of US$3.6 billion.
Turquoise Hill reported Q2 2020 results: Oyu Tolgoi produced 36,495 tonnes of copper and 31,150 ounces of gold, revenue was US$278.0 million (down 27.4% from Q2 2019), and income was US$72.3 million versus a US$736.7 million loss a year earlier, which the filing attributes mainly to a 2019 impairment charge and deferred tax movements. 2020 gold guidance was raised to 155,000-180,000 ounces and C1 cost guidance lowered to US$1.60-2.00 per pound. Available liquidity was US$1.5 billion at June 30, 2020, which the company expects to be sufficient into early 2022, and the company said the 2020 technical report would come in the third quarter. This follows the July 2020 feasibility study and the May 2020 Panel 0 redesign (base case development capital US$6.8 billion, first sustainable production target February 2023). Shafts 3 and 4 remain on care and maintenance due to COVID-19.
Turquoise Hill announced the 2020 Oyu Tolgoi feasibility study and updated reserves. The new Hugo North Lift 1 Panel 0 design adds two structural pillars, so ore in them moved from reserves to resources pending 2021 studies. Expansion capital is in line with the previously disclosed US$1.3-1.8 billion above the 2016 estimate, and the study shows NPV8 of US$10.0 billion after tax, a 31-year mine life and a 6-year payback. The study does not reflect COVID-19 impacts (Shafts 3 and 4 on care and maintenance), and the detailed cost and schedule update is expected by year-end. This follows the May 13, 2020 announcement of about a 25-month delay and an increase of about US$1.5 billion, and replaces the earlier 'no change to cost estimates' stance. The headline also mentions an improved liquidity outlook and deferral of interim financing talks, but the visible text gives no details.
This is the formal SEDAR filing of the full 2016 Oyu Tolgoi technical report, prepared by OreWin, with its cover letter, qualified-person certificates and consents. It is filed voluntarily to provide updated technical information, and it carries the same content announced in the October 21 press release rather than new developments.
Turquoise Hill filed the updated independent 2016 Oyu Tolgoi technical report (by OreWin), which follows the May 2016 feasibility study. Reserves and resources changed only by open-pit mining depletion; the Reserves Case shows expansion capital of US$4.63 billion, NPV8% of US$6.94 billion after tax and a 21% IRR, at long-term prices of US$3.00 per pound copper and US$1,300 per ounce gold. The higher NPV than May's US$4.6 billion is attributed in the filing to metal prices (US$0.9 billion), the discounting start date (US$0.5 billion), operating costs (US$0.5 billion) and other changes (US$0.4 billion). It also adds preliminary, more speculative expansion cases, which carry no assurance of being realised.
Oyu Tolgoi received the formal notice to proceed from the boards of Turquoise Hill, Rio Tinto and Oyu Tolgoi LLC, the final requirement to restart underground development, with construction expected to begin in mid-2016, as the August 2015 filing had targeted. The 2016 feasibility study shows expansion capital of US$5.3 billion nominal (US$5.1 billion in 2016 real terms), an 18% after-tax return and NPV8% of US$4.6 billion, with first underground production around 2021. The US$4.4 billion project finance facility, signed December 2015, is to be drawn by June 2016, with expected net proceeds of about US$4.1 billion first used to pay down shareholder loans owed to Turquoise Hill. This resolves the long-running underground approval and financing threads.
Oyu Tolgoi filed revised schedules for the 2015 feasibility study with the Mongolian Minerals Council and aligned it with the Underground Mine Development and Financing Plan signed in May 2015; the Council had already tentatively accepted the study. Funding for pre-start activities has been approved, with the official notice to proceed expected in early 2016 and lateral mining development targeted to restart in mid-2016, after a capital estimate update and final board approvals. This moves the long-stalled underground thread forward, since the May 2015 plan appears to address the shareholder matters (an inference; the filing does not list the terms), though full project approval is still pending.
Oyu Tolgoi filed the statutory 2015 feasibility study with the Mongolian Minerals Council, as Mongolian law requires an update at least every five years (the 2009 study was accepted in March 2010). It is consistent with the 2014 technical report but shows the underground with no start date because that depends on resolving shareholder matters; an updated study will replace it once those are resolved. Turquoise Hill, Rio Tinto and the Government of Mongolia are still working to resolve shareholder matters and finalize project finance, so the open thread continues.
Turquoise Hill filed the full independent NI 43-101 technical report (by OreWin) for Oyu Tolgoi that was due after the September 22 feasibility study. It reports Reserve Case expansion capital of US$4.9 billion (versus US$5.1 billion in 2013), proven and probable reserves of 1,530 million tonnes at 0.85% copper, and a project value cut by US$0.8 billion from delay and US$1.5 billion from more cautious cave assumptions. At the regulator's request it does not show economics for the Life of Mine case. This completes the technical report thread; underground restart is still subject to the Mongolia shareholder matters.
Turquoise Hill said the 2014 Oyu Tolgoi underground feasibility study was finalized and presented to the Oyu Tolgoi LLC board. The Reserve Case shows expansion capital of US$4.9 billion (versus US$5.1 billion in the 2013 report), after-tax NPV (8%) of US$7.43 billion, 29% IRR and a 41-year life; the project value was reduced by delay (US$0.8 billion) and more cautious cave performance assumptions (US$1.5 billion). Underground development still needs resolution of shareholder issues, approval of the study by shareholders and the Mongolian Minerals Council, a funding plan including project finance, and permits. A full technical report is due within 45 days. This completes the feasibility study thread but leaves the Mongolia and financing conditions open.
