Ulaanbaatar /MONTSAME/ The Oyu Tolgoi LLC Monday announced an update on its performance for the third quarter of the fiscal, ending 30 September, 2015.

Safety continues to be a major focus throughout OT’s operations and the mine’s management is committed to reducing risk and injury. OT achieved a solid safety performance with an All Injury Frequency Rate of 0.31 per 200,000 hours worked for the nine months ended 30 September, 2015.

Revenue in Q3’15 increased 2.5 per cent over Q2’15. Higher revenues reflect higher volumes of copper-gold concentrate sales, partially offset by a fall in copper prices. The Q3’15 mix of revenue by metals is the result of inventory with higher contained copper and gold drawn down during the quarter from concentrate produced in Q2’15. Gross margin at 41.6 per cent for the quarter reduced from 46.4 per cent in Q2’15 due to the effect of lower copper prices.

President and CEO of OT Mr Andrew Woodley said: “Our foremost priorities remain safety and productivity, and we have delivered real progress with a strong safety performance and record production over the quarter. More recently, the success of the Underground Development Supplier Forum, held in Ulaanbaatar on 4 November, underscored OT’s potential – and our commitment to deliver a world class sustainable and competitive copper business.”

OT’s Q3’15 mine production was at record levels while concentrate produced and contained copper was on par with Q2’15 even considering the planned concentrator shutdown in July. During Q3’15, mined production increased 8.5 per cent over Q2’15 due to shorter hauling routes and ongoing productivity initiatives. Copper in concentrates for Q3’15 increased 1.3 per cent due to higher head grades. Gold in concentrates for the quarter decreased 48.3 per cent over Q2’15 due to slower than anticipated access to gold-rich ore.

Preparation for underground development

Following the filing of revised schedules for the 2015 OT Feasibility Study with the Mongolian Minerals Council in August 2015, pre-start activities are underway in parallel with an update to the capital estimate, which is expected to be completed in Q1’16. Pre-start activities include ramp-up of the owners and EPCM team, re-estimate activities, detailed engineering and early procurement for equipment and materials required for necessary critical works that are key enablers for recommencement of underground lateral development mining activity. Care and maintenance activities have continued for Shaft #1, facilities and mobile equipment. Turquoise Hill expects the decision for underground construction in early Q2’16.

Project financing is expected to be signed by the end of 2015. In September 2015, the Government of Mongolia signed the request of the Multilateral Investment Guarantee Agency (MIGA) for host country approval (HCA) with respect to guarantees to be issued by MIGA in connection with the OT project financing. The signing of the HCA was a significant milestone in the project financing timeline. In October 2015, the project financing information circular was provided to the banking syndicate allowing for each institution’s respective internal consideration and approval.

Operational outlook

Increased copper and gold production is expected in Q4’15 when compared to Q3’15 as higher-grade ore is anticipated to be accessed in the open pit.

Turquoise Hill continues to expect OT to produce 175,000 to 195,000 tons of copper and 600,000 to 700,000 ounces of gold in concentrates in 2015. The Company expects copper production to be at the top of the range while gold production is expected to be in the middle of the range.

Capital expenditure for 2015 is now expected to be approximately US$120 million, of which approximately US$115 million relates to sustaining capital. The Company previously expected capital expenditure of approximately US$230 million, of which approximately US$185 million related to sustaining capital. The reduction is the result of operational efficiencies, changes to the mine plan during the year and capital optimization.

Operating cash costs for 2015 are now expected to be approximately US$900 million. The Company previously expected operating cash costs of approximately US$1 billion. The reduction reflects changes from operational improvements throughout the year and excludes one-time costs related to the May 2015 underground agreement as well as pre-start costs for underground development.

Sales contracts have been signed for more than 80 per cent of OT’s expected 2016 concentrate production.