Oyu Tolgoi announces Q1 2021 performance results

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Algemeen advies 26/05/2021 11:30
•Continued its globally competitive safety performance
•Strengthened our COVID-19 response and mitigation measures
•Maintained its highest water use efficiency per tonne of ore production
•In-country spend reaches US$12.3 billion
•Spent US$98 million on national procurement

Oyu Tolgoi released its latest performance scorecard, highlighting key performance metrics for the first quarter of 2021, providing an update on the underground development, and its ongoing COVID-19 mitigation measures.

The first quarter of 2021 has been challenging due to the COVID-19 global pandemic and increase of community cases in Mongolia. We are constantly adapting to the changing circumstances to prioritize the health and safety of our workforce, suppliers and communities.

A site-wide lockdown was implemented in March for two weeks to mitigate the potential COVID-19 transmission risks on site. Self-isolation controls were quickly mobilized at camp. Currently, site-wide COVID-19 testing is in place and preparations to rollout a vaccination programme are progressing.

Oyu Tolgoi chief executive officer, Armando Torres, said, “We would like to express our gratitude to the Government of Mongolia, all levels of the State Emergency Commission, the Ministry of Health, the Ministry of Mining and Heavy Industry, and all other relevant agencies and frontline personnel working hard to keep us safe during this unprecedented time. I would especially like to thank our employees, communities, contractors, and suppliers for their hard work, perseverance, unwavering commitment and ability to quickly adapt to rapidly evolving situations.”

Despite the challenges, Oyu Tolgoi has maintained its business continuity while protecting its people and communities. COVID-19-related limitations around the movement of goods and people, border crossing restrictions, and enhancing our on-site controls, however, have impacted operations including the underground development, and copper concentrate shipments. First-quarter shipments have been affected by Chinese border restrictions due to increased cases of COVID-19. We declared force majeure on shipments from 30 March and continue to work closely with authorities and our customers to manage the risk of supply chain disruptions. Oyu Tolgoi vaccinated all its copper concentrate shipment drivers and logistics support teams on site, and has a number of controls in place related to disinfecting vehicles and testing to mitigate transmission risk. We partially resumed cross-border concentrate shipments into China on 15 April, however, the situation continues to be fluid with the COVID-19 resurgence in Mongolia.

Operational Update
•Prioritised the safety and achieved an All Injury Frequency Rate (AIFR) of 0.20 per 200,000 people/hours worked. This still indicates Oyu Tolgoi’s strong safety performance among other operations of Rio Tinto where the average AIFR stood at 0.35 for the same quarter.

•Maintained excellent water-conservation practices, achieving the highest water use efficiency rates per tonne of ore production, using 0.37 cubic meters of raw water per tonne of ore processed - three times less than similar operations worldwide. Achieved an average water-recycling rate of 88.7 per cent, compared to a target of 80 per cent.


•96 per cent of Oyu Tolgoi’s workforce are Mongolian citizens.

•Paid US$417 million in the form of taxes, fees and other payments to the Government of Mongolia in the first quarter of 2021. Since 2010, Oyu Tolgoi has paid US$3.3 billion in taxes, fees and other payments, including VAT to Mongolian suppliers.
•Partnered with 494 suppliers in the first quarter of 2021, including 431 national businesses, accounting for 77 per cent of the total operations procurement spend.
•Q1 2021 Performance Scorecard can be viewed here.

Production Update

•Mined copper production from the open pit was 29 per cent higher than the same quarter of 2020 with the anticipated move to higher grade from the open pit, leading to higher head grade and copper recovery. In the first quarter, pit phasing delivered higher gold production (+457%) compared to the same period in 2020. Access to higher copper and gold grades is expected to continue throughout 2021. However, the open pit wall failure experienced in the fourth quarter of 2020, combined with the cumulative effects of COVID-19 mitigation measures, have resulted in a downward revision in gold production guidance for 2021, from 500,000 – 550,000 ounces to 400,000 to 480,000 ounces, while the copper guidance range has expanded from 160,000 – 180,000 tonnes to 150,000 – 180,000 tonnes.

Oyu Tolgoi Production Data

All data represents full production and sales on a 100% basis
1Q 2020 2Q 2020 3Q 2020 4Q 2020 1Q 2021 Full-year 2020
Open pit material mined (‘000 tonnes) 26,834 23,218 23,979 23,663 22,588 97,694
Ore treated (‘000 tonnes) 10,889 9,645 10,072 9,594 9813 40,200

Average mill head grades:
Copper (%) 0.42 0.47 0.45 0.50 0.56 0.46
Gold (g/t) 0.15 0.19 0.21 0.41 0.68 0.24
Silver (g/t) 1.14 1.22 1.22 1.16 1.29 1.18

Concentrates produced (‘000 tonnes) 164.5 169.9 168.5 190.2 201.9 693.1
Average concentrate grade (% Cu) 21.4 21.5 21.5 21.9 22.5 21.6

Production of metals in concentrates:
Copper in concentrates (‘000 tonnes) 35.2 36.5 36.3 41.6 45.4 149.6
Gold in concentrates (‘000 ounces) 26 31 37 88 146 182
Silver in concentrates (‘000 ounces) 214 212 219 231 255 876
Concentrate sold (‘000 tonnes) 125.9 194.3 167.9 181.5 186.3 669.6

Sales of metals in concentrates:
Copper (‘000 tonnes) 25.8 39.7 34.4 37.9 39.0 137.8
Gold (‘000 ounces) 20 31 34 66 111 150
Silver (‘000 ounces) 146 220 201 194 207 760

Metal recovery (%)
Copper 74.3 79.1 78.9 85.9 86.3 79.6
Gold 46.0 52.0 53.7 68.8 72.2 58.6
Silver 51.5 55.8 54.6 64.3 65.3 56.4

Underground Development Update
•Work on the underground Material Handling System 1 advanced in line with the definitive estimate[1] outlined in December, with sustainable production expected in October 2022 and development capital of $6.75 billion. Progress on shafts 3 and 4, and other planned works, have been significantly affected by COVID-19 restrictions around people movements. We are currently reviewing the implications on panels 1 and 2 ramp-up, which shafts 3 and 4 support, and will provide an update in due course.
•In addition to ongoing flight restrictions and government-imposed lockdowns - including an “all-out readiness state” declared by the Mongolian State Emergency Commission in November 2020 and again in April 2021 - Oyu Tolgoi imposed a site-wide quarantine period and all underground construction was temporarily halted for two weeks in March to mitigate potential transmission risk onsite. The impact of these additional restrictions is ongoing and still being assessed.

Other Updates
•On 9 April, Rio Tinto and Turquoise Hill Resources (TRQ) announced they had entered into a binding Heads of Agreement for an updated funding plan for the completion of the Oyu Tolgoi underground project. The funding plan addresses the estimated remaining funding requirement of approximately $2.3 billion, building on and replacing the arrangements established in the Memorandum of Understanding that Rio Tinto and TRQ previously entered into on 9 September 2020.
•The Mongolian Tax Authority required payment from Oyu Tolgoi for the full amount of the 2018 assessment (2013-2015 years) and 2020 assessment (2016-2018 years) - a total of approximately $356m. In line with Mongolian legislation, Oyu Tolgoi has paid these amounts in full, however, the amounts are subject to an ongoing arbitration process.

[1] The level of accuracy of the remaining capital and schedule within the definitive estimate is at a better level than feasibility study. The 2020 estimate assumed COVID-19 restrictions in 2021 that were no more stringent than those experienced in September 2020 and noted that should COVID-19 constraints continue beyond 2021 or should the COVID-19 situation escalate further in 2021 leading to tougher restrictions, additional costs and schedule impacts will arise. Since the definitive estimate, Mongolia has implemented additional restrictions in response to community transmission cases, and in March 2021 the first cases of COVID-19 were identified at Oyu Tolgoi resulting in temporary site shutdown, quarantine measures and further travel and movement restrictions. The impact of these additional restrictions, which are beyond those experienced in September 2020, is ongoing and still to be determined.

About Oyu Tolgoi LLC (www.ot.mn)

Oyu Tolgoi LLC, Mongolia's largest copper and gold mining company, 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. For Oyu Tolgoi, nothing matters more than safety. The business operates under the principle that if a job cannot be done safely, it will not be done at all.

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https://www.ot.mn/oyu-tolgoi-announces-q1-2021-performance-results/



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