Oyu Tolgoi announces Q2’19 performance

• Oyu Tolgoi continues to lead in safety performance across Rio Tinto 
• Signed a Memorandum of Understanding on a voluntary code of practice for responsible mining
• Open pit named after late Garamjav Dondog, the Honored Industrial Worker of Mongolia
• The underground team achieves a record performance of over 1000 meters of lateral development in June by implementing productivity improvements
• In the first two quarters of 2019, Oyu Tolgoi spent US$222 million on national procurement. 

Oyu Tolgoi today announced an update on its performance for the quarter ended June 30, 2019.

Oyu Tolgoi and seven other mining companies joined a voluntary code of practice for responsible mining initiated by the Mongolian National Mining Association. Together the signatories will work to increase public understanding of responsible mining operations, improve the transparency, safety, environment protection and community development policies across the mining sector.

In the second quarter of 2019, Oyu Tolgoi achieved an All Injury Frequency Rate (AIFR) of 0.12 per 200,000 hours worked. Safety is a top priority as we maintain strong safety performance and culture across the workforce. Among safety training provided by the company, most notable was the occupational safety training organized for miners and residents of Zaamar soum, Tuv aimag.

Guided by the vision to create enduring value, knowledge and skills, Oyu Tolgoi worked continuously to expand partnership with institutes of higher education and vocational schools. Oyu Tolgoi signed a MoU with Geology and Mining School of the Mongolian University of Science and Technology to enhance the quality of the curricula and the study environment. In addition, Oyu Tolgoi was named Best Partner Organization by the National University of Mongolia. The company provided 341,919 man hours of training to nearly 13,266 employees and contractors in the second quarter of 2019.

Oyu Tolgoi LLC and Mobicom Corporation partnered with the National Police Agency to implement the “No need to speed” campaign, developed to reduce the number of deaths and injuries caused by traffic incidents in Mongolia. In addition to the MNT280 million campaign, speedometer cameras will be installed along the road to Sainshand, Dornogovi aimag, an area known for vehicles traveling at excess speed, causing high rates of car accidents resulting in serious injuries and deaths.

Oyu Tolgoi paid US$2.4 billion in taxes, fees and other payments to the Government of Mongolia between 2010 and the second quarter of 2019 including US$107 million in the first half of 2019.

 Oyu Tolgoi collaborated with 689 suppliers in the first half of 2019, 484 of which are national businesses that account for 76 percent of total operations procurement spent. Between 2010 and the second quarter of 2019, Oyu Tolgoi spent US$2.9 billion on national procurement of which US$488 million was spent on procurement from Umnugovi suppliers. “Made in Umnugovi” expo was organized in Dalanzadgad under the “Made in Mongolia” strategy to support small and medium-sized enterprises.

The Oyu Tolgoi Performance Scorecard for Q2 2019 is available here.

Underground Development Update

Turquoise Hill, in conjunction with Rio Tinto, continues to review mine design options for the completion of the underground development of the Oyu Tolgoi mine and assess the impact on overall cost and schedule for the underground development. Improved rock mass information and geotechnical data modeling has confirmed that there are stability risks associated with components of the existing mine design. Therefore, to address these risks, a number of mine design options are under consideration to complete the project. Studies to date indicate that these options may result in some of the critical underground infrastructure, such as the mid-access drive and the ore handling system, being relocated or removed. Given the further technical work that is needed, the definitive estimate review is now expected to be delivered in the second half of 2020, reflecting the preferred mine design approach.

Preliminary information now suggests that, depending on which mine design options are adopted, the first sustainable production could be achieved between May 2022 and June 2023, a delay of 16 to 30 months compared to the original feasibility study guidance in 2016. This range includes a contingency of up to eight months reflecting the unexpected and challenging geotechnical issues, complexities in the construction of shaft 2 and the detailed work still required to reach a more precise estimate.

Preliminary estimates for development capital spend for the Project, depending on the outcome of the work described above, is now $6.5 billion to $7.2 billion, an increase of $1.2 billion to $1.9 billion from the $5.3 billion previously disclosed.

Q2’19 Production report

Highlights:

• Copper production of 39,156 tonnes, a decrease of 0.6% vs Q2 2018
• Gold production of 71,825 ounces, an increase of 43.7% vs Q2 2018
• Mill throughput increased 2.3% year over year and 12.3% sequentially
• The transition from mining Phase 4A to Phase 4B and stockpiles resulted in:
• Lower copper head grade of 0.46% vs 0.57% Q1 2019
• Lower gold head grade of 0.31g/t vs 0.58g/t Q1 2019
• Concentrate production decreased 14% vs Q1 2019
• Copper production decreased 14.6% vs Q1 2019
• Gold production decreased 40% vs Q1 2019

Copper and gold grades are expected to decline over the remainder of the year as Oyu Tolgoi processes a higher proportion of Phase 4B and Phase 6 ore, but the company is well-positioned to meet its 2019 copper and gold production guidance.

The focus for the construction team remains completing Shaft 2, where works are progressing. Rope up preparation is well advanced and related work is expected to commence in July. The commissioning of Shaft 2 remains on track for October. Other critical infrastructure components such as the control room facility and the jaw crusher system are now complete and construction on shafts 3 and 4 is progressing well.

By implementing productivity improvements, the underground mining team achieved a record performance of over 1,000 meters of lateral development in June. Record monthly development was also achieved in June in the convey-to-surface decline as a result of excellent productivity in improved ground conditions.

Oyu Tolgoi Production Data

All data represents full production and sales on a 100% basis

Copper and gold grades are expected to decline over the remainder of the year as Oyu Tolgoi processes a higher proportion of Phase 4B and Phase 6 ore, but the company is well positioned to meet its 2019 copper and gold production guidance.

The focus for the construction team remains completing Shaft 2, where works are progressing. Rope up preparation is well advanced and related work is expected to commence in July. The commissioning of Shaft 2 remains on track for October. Other critical infrastructure components such as the control room facility and the jaw crusher system are now complete and construction on shafts 3 and 4 is progressing well.

By implementing productivity improvements, the underground mining team achieved a record performance of over 1,000 meters of lateral development in June. Record monthly development was also achieved in June in the convey-to-surface decline as a result of excellent productivity in improved ground conditions.