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Oyu Tolgoi Finalizes Underground Feasibility Study

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Oyu Tolgoi Finalizes Underground Feasibility Study

 

 

 

 

 

Turquoise Hill Resources (NYSE: TRQ) (NASDAQ: TRQ) (TSX: TRQ) today announced that the 2014 Oyu Tolgoi Feasibility Study has been finalized and presented to the board of directors of Oyu Tolgoi LLC. The Feasibility Study includes analysis of two production cases – the 2014 Reserve Case and the 2014 Life of Mine Case.

 

 

The 2014 Reserve Case includes mineral reserves from the Southern Oyu Tolgoi open pit and the Hugo North Lift 1 block cave. The LOM Case reflects the development flexibility that exists with respect to later phases of the Oyu Tolgoi deposits (Heruga, Hugo South, and the second lift of Hugo North), which will require separate development decisions in the future based on then prevailing conditions and the development experience obtained from developing and operating the initial phases of the Oyu Tolgoi Project. Accordingly, the 2014 LOM Case is effectively a preliminary economic assessment under National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) and therefore does not have as high a level of certainty as the 2014 Reserve Case. The 2014 LOM Case is preliminary in nature and includes Inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the 2014 LOM Case will be realized.

 

 

In August 2013, development of the underground mine was delayed to allow matters with the Government of Mongolia to be resolved. Further underground development is subject to resolution of shareholder issues, approval of the Feasibility Study by Oyu Tolgoi’s shareholders and the Mongolian Minerals Council, agreement of a comprehensive funding plan including project finance, and receipt of all necessary permits.

 

 

An updated NI 43-101 compliant independent technical report relating to the Project, prepared by OreWin Pty Ltd, will be filed by Turquoise Hill within 45 days of this announcement. The technical report will update the Project’s mineral resources and mineral reserves and will be available under Turquoise Hill’s profile on SEDAR at www.sedar.com. Highlights of the technical report to be filed, based on data contained in the Feasibility Study, are as follows:

 

  • An updated mineral resource model and estimate for the Hugo North deposit. The updated mineral resource estimate is similar to and confirms the previous estimates contained in the Oyu Tolgoi Technical Report dated as of March 25, 2013 (the “2013 OT Technical Report”). Mineral resource models for the other Oyu Tolgoi deposits have remained the same.
  • Updated mineral reserve estimates are broadly in line with previous estimates. The open pit allows for depletion from 2013 and modified underground dilution and mining loss assumptions resulting in lower grades and mining recovery.
  • Underground ore handling will be conveyed to surface via decline, which opens the Project to additional production flexibility and future optionality. The new mine plan will make use of the existing shafts and the planned shafts that were defined in the 2013 OT Technical Report.
  • The reduced Project NPV was the result of delay (NPV8% US$0.8 billion) and a reduction due to more cautious cave performance assumptions, which led to a reduction in recovered metal and a slowing of ramp-up of the cave (NPV8% US$1.5 billion).
  • Underground block cave mine production remains at 95,000 tonnes per day.
  • The plant rate for both cases is the current nominal 100,000 tonnes per day.
  • Expansion capital of US$4.9 billion for the underground project, which is in line with the US$5.1 billion estimate contained in the 2013 OT Technical Report (excludes US$0.5 billion of capital spent in 2013 and 2014).

 

 

2014 Reserve Case Summary Production and Financial Results

 

 

Description

Units

2014 Reserve Case
Mineral Reserves

Total Processed

Bt

1.5

Cu Grade

%

0.85

Au Grade

g/t

0.32

Ag Grade

g/t

1.94

Copper Recoverable

Billion lb

24.9

Gold Recoverable

Moz

11.9

Silver Recoverable

Moz

78.0

Life

Years

41

Expansion Capital

US$B

4.9

NPV (8%) After Tax

US$B

7.43

IRR After Tax

%

29%

Payback Period

Years

9

 

 

Notes:

 

  • Metal prices used for calculating the financial analysis are as follows: long term copper at $3.08/lb; gold at $1,304/oz; and silver at $21.46/oz. The analysis has been calculated with assumptions for smelter refining and treatment charges, deductions and payment terms, concentrate transport, metallurgical recoveries and royalties.
  • For mine planning the metal prices used to calculate block model Net Smelter Returns were copper at $3.01/lb; gold at $1,250/oz; and silver at $20.37/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.
  • For the underground block cave, all mineral resources within the shell have been converted to mineral reserves. This includes low grade Indicated mineral resources and Inferred mineral resources, which has been assigned a zero grade and treated as dilution. The Southern Oyu Tolgoi open pit mineral reserve is the mineral reserve in the pit at January 1, 2014. It does not include stockpiles.
  • Only Measured mineral resources were used to report Proven mineral reserves and only Indicated mineral resources were used to report Probable mineral reserves.
  • EJV is the Entrée Joint Venture. The Shivee Tolgoi Licence and the Javkhlant Licence are held by Entrée. The Shivee Tolgoi Licence and the Javkhlant Licence are planned to be operated by OT LLC. OT LLC will receive 80% of cash flows after capital and operating costs for material originating below 560m, and 70% above this depth.
  • The mineral reserves reported above are not additive to the mineral resources.
  • Economic analysis has been calculated from the start of 2015 and exclude 2014. Costs are shown are real costs not nominal costs. Expansion capital includes only direct project costs and does not include non-cash shareholder interest, management fees, tax pre-payments, forex adjustments, T Bill purchases or exploration phase expenditure.

 

 

2014 LOM Case Summary Production and Financial Results

 

 

Description

Units

2014 LOM Case

Total Processed

Bt

3.5

Cu Grade

%

0.83

Au Grade

g/t

0.32

Ag Grade

g/t

2.08

Copper Recoverable

Billion lb

56.5

Gold Recoverable

Moz

27.9

Silver Recoverable

Moz

195.2

Life

Years

94

NPV (8%) After Tax

US$B

8.6

IRR After Tax

%

28%

Payback Period

Years

9

 

Notes:

 

  • The 2014 LOM Case reflects the development flexibility that exists with respect to later phases of the Oyu Tolgoi deposits (Heruga, Hugo South and the second lift of Hugo North), which will require separate development decisions in the future based on then prevailing conditions and the development experience obtained from developing and operating the initial phases of the Project. Accordingly, the 2014 LOM Case is effectively a preliminary economic assessment under NI 43-101.
  • Insofar as the 2014 LOM Case includes an economic analysis that is based, in part, on Inferred Mineral Resources, the 2014 LOM Case does not have as high a level of certainty as the 2014 Reserve Case. The 2014 LOM Case is preliminary in nature and includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the 2014 LOM Case will be realized.
  • Metal prices used for calculating the financial analysis are as follows: long term copper at $3.08/lb; gold at $1,304/oz; and silver at $21.46/oz. The analysis has been calculated with assumptions for smelter refining and treatment charges, deductions and payment terms, concentrate transport, metallurgical recoveries and royalties.
  • For mine planning the metal prices used to calculate block model Net Smelter Returns were copper at $3.01/lb; gold at $1,250/oz; and silver at $20.37/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 (including some mining costs) costs are based on $15.34/t.
  • For the underground block cave, all mineral resources within the shell have been converted to mineral reserves. This includes low grade Indicated mineral resources and Inferred mineral resources, which have been assigned a zero grade and treated as dilution.
  • Economic analysis has been calculated from the start of 2015 and excludes 2014. Costs are shown are real costs not nominal costs. Expansion capital includes only direct project costs and does not include non-cash shareholder interest, management fees, tax pre-payments, forex adjustments, T Bill purchases or exploration phase expenditure.

 

 

2014 Mineral Reserves

 

 

Deposit Ore
(Mt)
Cu
(%)
Au
(g/t)
Ag
(g/t)

Recovered Metal

Copper
(Mlb)
Gold
(koz)
Silver
(koz)
Southern Oyu Tolgoi
Proven

410

0.54

0.42

1.38

3,829

3,952

13,768

Probable

621

0.40

0.24

1.13

4,363

3,233

17,122

Mineral Reserve (Proven + Probable)

1,031

0.45

0.31

1.23

8,192

7,186

30,890

Hugo Dummett
Probable (Hugo North – OT LLC)

464

1.66

0.34

3.37

15,592

4,199

43,479

Probable (Hugo North – EJV Shivee Tolgoi)

35

1.59

0.55

3.72

1,121

519

3,591

Mineral Reserve (Probable) (All Hugo North)

499

1.66

0.35

3.40

16,713

4,717

47,070

Oyu Tolgoi Project Mineral Reserve
Proven

410

0.54

0.42

1.38

3,829

3,952

13,768

Probable

1,120

0.96

0.29

2.14

21,075

7,951

64,192

Mineral Reserve (Proven + Probable)

1,530

0.85

0.32

1.94

24,905

11,903

77,960

 

Notes:

 

  • Metal prices used for calculating the financial analysis are as follows: long term copper at $3.08/lb; gold at $1,304/oz; and silver at $21.46/oz. The analysis has been calculated with assumptions for smelter refining and treatment charges, deductions and payment terms, concentrate transport, metallurgical recoveries and royalties.
  • For mine planning the metal prices used to calculate block model Net Smelter Returns were copper at $3.01/lb; gold at $1,250/oz; and silver at $20.37/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 (including some mining costs) costs are based on $15.34/t.
  • For the underground block cave, all mineral resources within the shell have been converted to mineral reserves. This includes low grade Indicated mineral resources and Inferred mineral resources, which have been assigned a zero grade and treated as dilution.
  • The Southern Oyu Tolgoi open pit mineral reserve is the mineral reserve in the pit at January 1, 2014. It does not include stockpiles.
  • Only Measured mineral resources were used to report Proven mineral reserves and only Indicated mineral resources were used to report Probable mineral reserves.
  • EJV is the Entrée Joint Venture. The Shivee Tolgoi Licence and the Javkhlant Licence are held by Entrée. The Shivee Tolgoi Licence and the Javkhlant Licence are planned to be operated by OT LLC. OT LLC will receive 80% of cash flows after capital and operating costs for material originating below 560m, and 70% above this depth.
  • The mineral reserves reported above are not additive to the mineral resources.

 

Hugo North Mineral Reserve Comparison 2013/2014

Ore
(Mt)

 

Cu
(%)

 

Au
(g/t)

 

Ag
(g/t)

 

 Recovered Metal

 

 Copper (M lb)

 Gold (koz)

 Silver (koz)

2014 OTTR
Probable

  OT LLC

464

 

1.66

 

0.34

 

3.37

 

15,592

4,199

43,479

EJV Shivee Tolgoi

35

 

1.59

 

0.55

 

3.72

 

1,121

519

3,591

All Hugo North

499

 

1.66

 

0.35

 

3.40

 

16,713

4,717

47,070

2013   OTTR Probable

  OT LLC

460

 

1.80

 

0.37

 

3.74

 

16,759

4,602

47,647

EJV Shivee Tolgoi

31

 

1.73

 

0.62

 

3.74

 

1,090

521

3,229

All Hugo North

491

 

1.80

 

0.39

 

3.74

 

17,849

5,123

50,877

Difference

  OT LLC

5

 

-0.14

 

-0.04

 

-0.36

 

-1,167

-404

-4,168

  EJV Shivee Tolgoi

4

 

-0.14

 

-0.07

 

-0.02

 

31

-2

361

  All Hugo North

8

 

-0.14

 

-0.04

 

-0.34

 

-1,136

-406

-3,807

% Difference

  OT LLC

1.0%

 

-8.0%

 

-9.6%

 

-9.7%

 

-7.0%

-8.8%

-8.7%

  EJV Shivee Tolgoi

11.7%

 

-8.1%

 

-11.3%

 

-0.6%

 

2.8%

-0.4%

11.2%

    All Hugo North

1.7%

 

-8.0%

 

-9.4%

 

-9.1%

 

-6.4%

-7.9%

-7.5%

 

Notes:

 

  • Metal prices used for calculating the financial analysis are as follows: long term copper at $3.08/lb; gold at $1,304/oz; and silver at $21.46/oz. The analysis has been calculated with assumptions for smelter refining and treatment charges, deductions and payment terms, concentrate transport, metallurgical recoveries and royalties.
  • For mine planning the metal prices used to calculate block model Net Smelter Returns were copper at $3.01/lb; gold at $1,250/oz; and silver at $20.37/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 (including some mining costs) costs are based on $15.34/t.
  • For the underground block cave, all mineral resources within the shell have been converted to mineral reserves. This includes low grade Indicated mineral resources and Inferred mineral resources, which has been assigned a zero grade and treated as dilution.
  • Only Measured mineral resources were used to report Proven mineral reserves and only Indicated mineral resources were used to report Probable mineral reserves.
  • EJV is the Entrée Joint Venture. The Shivee Tolgoi Licence and the Javkhlant Licence are held by Entrée. The Shivee Tolgoi Licence and the Javkhlant Licence are planned to be operated by OT LLC. OT LLC will receive 80% of cash flows after capital and operating costs for material originating below 560m, and 70% above this depth.
  • The mineral reserves reported above are not additive to the mineral resources.

 

 

Disclosure of a scientific or technical nature in this press release was prepared under the supervision of the following persons: Bernard Peters, B. Eng. (Mining), FAusIMM, employed by OreWin Pty Ltd (OreWin) as Technical Director – Mining, and Sharron Sylvester, B.Sc Geology, MAIG (RPGeo), employed by OreWin as Technical Director – Geology, both of whom are “qualified persons” for the purposes of NI 43-101.

 

 

About Turquoise Hill Resources

 

 

Turquoise Hill Resources is an international mining company focused on copper- gold and coal mines in Mongolia. The Company’s primary operation is its 66% interest in the Oyu Tolgoi copper-gold-silver mine in southern Mongolia. Turquoise Hill also holds a 56% interest in Mongolian coal miner SouthGobi Resources (TSX: SGQ) (HK: 1878) and is in the process of divesting a majority of its stake.

 

Posted September 22, 2014

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