Oyu Tolgoi announces performance results for third quarter 2020Economy
On November 20, today, Oyu Tolgoi, Mongolia's largest copper and gold mining company, released the latest edition of its performance scorecard, highlighting key performance metrics for the third quarter of 2020, and provided an update on underground development, and its continued prevention measures on COVID-19.
Oyu Tolgoi was awarded the Copper Mark, the copper industry’s new responsible production recognition programme. The Copper Mark requires the company to demonstrate that it meets over 30 criteria for responsible environmental, social and governance operating practices.
Oyu Tolgoi chief executive officer, Armando Torres, said, “We are pleased to be among the first in the copper industry to be awarded the Copper Mark, demonstrating our commitment to responsible mining and transparency. We achieved this together with all our stakeholders and communities in Mongolia. We will continue upholding the highest social and environmental standards and draw on the advice of environmental experts and the communities in which we operate.”
The company is continuing its close monitoring of the COVID-19 situation with its Business Resilience Team and is taking preventive measures throughout the operations. The preventive protocols are in full compliance with the guidance and decrees issued by the Government of Mongolia, State Emergency Committee, and the local authorities in Umnugovi province and Khanbogd soum, reports Oyu Tolgoi.
Q3 2020 Operational Update
• Open pit operations continued uninterrupted.
• Achieved an All Injury Frequency Rate (AIFR) of 0.17 per 200,000 people/hours worked.
• Maintained excellence in water saving, using 0.35 cubic metres of raw water per tonne of ore processed compared to its target of 0.55, and achieving an average water-recycling rate of 87.5 per cent, compared to its target of 80 per cent, at the end of the third quarter.
• Ninety-four per cent of Oyu Tolgoi’s workforce were Mongolian citizens.
• Paid US$201 million in the form of taxes, fees and other payments to the Government of Mongolia as of the end of the third quarter of 2020. Since 2010, Oyu Tolgoi has paid US$2.8 billion in taxes, fees and other payments including VAT to Mongolian suppliers.
• Collaborated with 703 suppliers by the end of the third quarter of 2020, of which 468 are national businesses, which accounts for 73 per cent of the total operations procurement spend.
Q3 2020 Production Update
• Mined copper production from the open pit was 28 per cent higher than the same quarter of 2019 and steady quarter-on-quarter reflective of the move to higher grade areas of the open pit in 2020, primarily due to accelerated mine development and production phasing. Access to higher copper and gold grades is expected to continue for the remainder of 2020, which was originally planned for the first half of 2021.
• Q3 2020 mill throughput was slightly higher than Q3 2019 due to slightly higher mill availability and an increased milling rate associated with softer ore.
• Copper and gold production guidance for 2020 remains within the ranges of 140,000 to 170,000 tonnes and 155,000 to 180,000 ounces respectively, with gold production trending towards the higher end of the range.
Underground Development Update
• Work on the project has continued to progress despite COVID-19 controls and ongoing international travel restrictions issued by the Government of Mongolia.
• Care and maintenance activities continue at Shafts 3 and 4; some commissioning activities have advanced in preparation for shaft sinking, including rope installation on Shaft 4. Further progress will require the remobilisation of international shaft sinking specialists and preparation is underway to mobilise some of these contractors before the end of 2020 (subject to change due to the current COVID-19 restrictions in the country).
• Overall, underground lateral development has now reached 45,858 equivalent metres, or around 90 per cent of the required development to support firing of the first drawbell.
• All surface infrastructure required for sustainable production is complete and the team is focused on progressing the critical underground Material Handling System 1 (MHS1) to the stage needed ahead of the first drawbell firing. The balance of project infrastructure to be delivered post completion of MHS1 is not needed for sustainable production, however, it is needed to support the production ramp-up profile.
• Preliminary indications from the definitive estimate process are that first sustainable production is trending towards the earlier months of the October 2022 to June 2023 range. The estimated development capital cost remains within the range of US$6.6 to US$7.1 billion. This assessment has now been updated to include known cost and schedule impacts from COVID-19 and assumes an easing of travel restrictions and COVID-19 related controls from the time of reporting. This remains subject to ongoing review as part of finalising the definitive estimate of cost and schedule for Panel 0, expected in the fourth quarter of 2020.
• On 3 July, Oyu Tolgoi announced the completion of an updated feasibility study (OTFS20) prepared in accordance with Mongolian regulations and standards. Registration of the Updated Reserve and Resource Report (RR19) has been delayed beyond the 150-day period of review since its submission in February 2020. Registration of RR19 is required before formal consideration and acceptance of the OTFS20. In accordance with the 2009 Investment Agreement and Mongolian regulation, the Government of Mongolia is required to consider each of the RR19 and OTFS20 within 150 days from submission. The OTFS20 also forms the basis for the uplift in the overall underground project cost that is required to be approved prior to the under-cut decision (decision to initiate caving) in 2021.
• Oyu Tolgoi has been working to progress power negotiations with the Government of Mongolia as required under the terms of the Power Source Framework Agreement Amendment signed in June 2020:
• An extension of power import arrangements with China’s Inner Mongolian Power Company is required by 1 March 2021 in order to ensure sufficient certainty on future supply of power before the under-cut decision is taken.
• A Power Purchase Agreement (PPA) for power supply to Oyu Tolgoi from a State Owned Power Plant at Tavan Tolgoi that will be funded by the Government of Mongolia is required to be executed by 31 March 2021.
• Following the agreement to purchase some power from the Mongolian national grid, on 3 September 2020, Oyu Tolgoi LLC and the Southern Region Electricity Distribution Network executed a PPA to supply power to the Oyu Tolgoi camps.
Oyu Tolgoi LLC is a strategic partnership between the Government of Mongolia, Turquoise Hill Resources and Rio Tinto. Located in the South Gobi, Oyu Tolgoi commenced shipment of product to customers in July 2013. Oyu Tolgoi is managed by Rio Tinto, which is investing global expertise and cutting-edge technology to help develop Mongolia’s mining industry and ensure Oyu Tolgoi is one of the world’s most advanced mines.