MONTREAL--(BUSINESS WIRE)-- Turquoise Hill Resources Ltd. (TSX: TRQ) (NYSE: TRQ) (“Turquoise Hill” or the “Company”) today announced second quarter 2022 production and provided an Oyu Tolgoi mine and corporate update.

Q2 2022 Highlights

Copper production guidance for 2022 remains within the range of 110,000 to 150,000 tonnes while 2022 gold production guidance has been revised from a range of 135,000 – 165,000 ounces to 150,000 – 170,000 ounces.
Q2’22 Copper production of 30.6 thousand tonnes of copper in concentrate, a decrease of 17% vs Q2’21 and a slight increase of 1% vs Q1’22
Q2’22 Gold production of 47.6 thousand ounces of gold in concentrate, a decrease of 58% vs Q2’21 and a decrease of 20% vs Q1’22
Expenditures on property, plant and equipment for 2022 are now expected to be approximately $140 million to $170 million for open-pit operations due to further schedule changes impacting the timing of spend and lower deferred stripping as a result of mine plan changes resulting in a higher proportion of ore mining compared to waste removal. This is compared to the Company’s previous guidance of $155 million to $185 million.
Capital expenditures on the underground project1 are now expected to be $1.1 billion to $1.3 billion for 2022 compared to original guidance of $1.2 billion to $1.4 billion due to slower than expected workforce ramp-up following commencement of the undercut in January.
Total Operating Cash Costs2 for 2022 are now expected to be in the range of $850 million to $925 million compared to original guidance of $800 million to $875 million due to higher royalties and price inflation for key raw materials, especially fuel and the lower deferred stripping.
Mill throughput of 9.69 million tonnes in Q2 2022 was 1% higher than Q1 2022 and 3% higher than Q2 2021 in line with expectations due to higher mill availability.
We continued to build on our relationship reset in Mongolia, with the Oyu Tolgoi Board approving a $50 million five-year funding programme to support the long-term, sustainable development of Khanbogd town - our neighbouring host community in the South Gobi region.
Updated Underground Cost and Schedule

The 2022 cost and schedule update for the underground project has been completed resulting in an increase of the total expected development capital from $6.75 billion to $7.06 billion, in line with preliminary guidance. The $7.06 billion incorporates the known and forecast future incremental COVID-19 cost impacts, escalation, associated taxes and minor impacts relating to changes to labour laws. Shaft 3 headframe was commissioned and sinking commenced on March 31 with the cumulative sinking level now at 1743 metres below ground level. Shaft 4 advancement is now 2763 metres below ground level. The rate of progress in shafts improved during the quarter due to the optimisation program of work which commenced in Q1’22 and progress continues to be closely monitored against the 2022 schedule update. Aligned with the Company’s previous disclosure Shafts 3 and 4 are expected to be commissioned in H1’24.

Open Pit Operations and Underground Development

During Q2’22, the combined open pit and underground operations produced 30.6 thousand tonnes of copper in concentrate and 47.6 thousand ounces of gold in concentrate. Copper production was aligned with the previous quarter and gold production was lower due to lower head grades aligned with the 2022 Plan. The mill feed for Q2’22 included approximately 453 thousand tonnes @ 0.66% Cu and 0.28g/t Au of underground development material. The remaining 9.23 million tonnes of mill feed was sourced from open pit low grade stockpiles and Phase 5. Mill head grades will remain low through to the end of the year as direct mill feed will continue to be supplemented by low grade stockpiles.

During Q2’22, the underground project achieved several significant milestones including the blasting of the first two drawbells in Panel 0, with the first drawbell fired earlier than anticipated on June 17. The timing of sustainable production is trending earlier in H1’23 and the undercut blasting and on-footprint construction work, including roadways and steel set construction, continues to progress well. For the quarter, underground material hoisted from Shafts 1 and 2 was above plan.

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1 Capital expenditures on the underground project is a supplementary financial measure. Refer to the section “Non-GAAP Financial Measures and Other Financial Measures” of this press release.

2 Total operating cash costs is a non-GAAP financial measure and is not a standardized financial measure. It is not intended to replace measures prepared in accordance with IFRS and might not be comparable to similar financial measures disclosed by other issuers. Refer to the section “Non-GAAP Financial Measures and Other Financial Measures” of this press release

3 As at June 23, 2022.

COVID-19

Safety continues to be the Company’s top priority and COVID-19 controls remain in place at site to protect our people. During Q2’22, COVID-19 cases identified at Oyu Tolgoi have continued at low levels and the testing regime has been eased. Following the recent relaxation of COVID-19 government-initiated restrictions in Mongolia, Oyu Tolgoi (“OT LLC”) has progressively restarted work on project facilities with workforce numbers approaching full capacity and onsite concentrate inventory levels have returned to target levels.

The Force Majeure declared by OT LLC to project lenders in March 2020 and the Force Majeure declared by OT LLC to customers in March 2021 have been lifted.

Oyu Tolgoi Production Data
All data represents full production and sales on a 100% basis

2Q 3Q 4Q 1Q 2Q 1H 1H Full Year
2021 2021 2021 2022 2022 2022 2021 2021

Open pit material mined (‘000 tonnes) 15,829 22,588 23,979 24,386 25,550
49,936 38,417 84,983
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*Metal recovery is a function of head grade and reflects grades delivered in the quarter.

Non-GAAP Financial Measures and Other Financial Measures

This press release contains certain non-GAAP (Generally Accepted Accounting Principles) financial measures such as total operating cash costs and supplementary financial measures such as capital expenditures on the underground project. Non-GAAP financial measures have non-standardized meaning under International Financial Reporting Standards (“IFRS”). As such, these financial measures may not be comparable to similar measures used by other issuers. These financial measures are presented in order to provide investors and other stakeholders with additional understanding of performance and operations at the Oyu Tolgoi mine and are not intended to be used in isolation from, or as a replacement for, measures prepared in accordance with IFRS. Management believes that, in addition to conventional measures prepared in accordance with IFRS, these non-GAAP financial measures and supplementary financial measures provide additional insight into the Company’s operating performance and financial position and certain investors may use this information to evaluate the Company’s performance from period to period. However, these non-GAAP financial measures and supplementary financial measures have limitations and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Additional details and information for this non-GAAP financial measure and these financial measures can be found in the section titled “Non-GAAP and Other Financial Measures” between pages 28 and 31 of Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three months ended March 31, 2022 (the “MD&A”) filed with the securities regulatory authorities in Canada, which section and pages are incorporated by reference into this press release. The MD&A is available under the Company’s profile on SEDAR at www.sedar.com.

Technical Information included in this Press Release

Disclosure of information of a scientific or technical nature in this press release in respect of the Oyu Tolgoi mine was approved by Jo-Anne Dudley (FAusIMM(CP)), Chief Operating Officer of the Company. Ms. Dudley is a “qualified person” as that term is defined in National Instrument 43-101—Standards of Disclosure for Mineral Projects.

Forward-looking statements and forward-looking information