Turquoise Hill reveals new Mongolia gold target

Turquoise Hill Resources Ltd. [TRQ-TSX] has raised its 2022 gold production guidance for the Oyu Tolgoi mine in Mongolia.

The company said copper production guidance for this year remains within the range of 110,000 to 150,000 tonnes. However, the gold production target has been raised to new range of 150,000 to 170,000 ounces. The previous target was 135,000 to 165,000 ounces.

One of the world’s largest known copper-gold deposits, Oyu Tolgoi is held 34% by Mongolia, with the other 66% owned by Rio Tinto Rio Tinto Plc [RIO-NYSE] through its interest in Turquoise Hill. Rio is the mine operator.

Back in March, Rio Tinto announced that it has made an on-binding proposal to acquire the 49% stake in Turquoise Hill it does not already own for US$2.7 billion.

Rio said the acquisition of the remaining 49% stake in Turquoise Hill would simplify Oyu Tolgoi’s ownership structure, strengthen Rio Tinto’s copper portfolio and reinforce its long-term commitment to Mongolia.

Meanwhile, the new gold production target is contained in Turquoise Hill’s second quarter financial results, which were released after the close of trading on July 14, 2022.

The company has reported second quarter copper production of 30,600 tonnes of copper in concentrate, a decrease of 17% versus the same period last year. Gold production of 47,600 ounces in concentrate was down 58% from the second quarter of 2021.

Gold production was lower due to lower head grades aligned with the 2022 plan.

The company said the mill feed for the second quarter included approximately 453,000 tonnes at 0.66% copper and 0.28 g/t gold of underground development material. The remaining 9.23 million tonnes of mill feed was sourced from open-pit low-grade stockpiles.

At peak production, Oyu Tolgoi is expected to operate in the first quartile of the copper cash cost curve, producing around 500,000 tonnes of copper annually on average from 2028 to 2036 from the open pit and underground, plus an average of 350,000 tonnes for a further five years.

That compares with 163,000 tonnes in 2021, according to a Rio Tinto fourth quarter operations review, published on January 17, 2022.

Turquoise Hill said the 2022 cost and schedule update for the underground project has been completed, resulting in an increase in the total expected development capital from $6.75 billion to $7.06 billion, in line with preliminary guidance.

Capital expenditures on the underground project are expected to be $1.1 billion to $1.3 billion for 2022, down from the original target of $1.2 to $1.4 billion.

In its second quarter report, Turquoise Hill said the company has continued to build on its relationship reset with Mongolia, with the Oyu Tolgoi board approving a $50 million five-year funding program to support the long-term, sustainable development of Khanbogd town – the company’s neighbouring host community in the South Gobi region.

On July 14, 2022, Turquoise Hill shares eased 1.7% or 55 cents to close at $32.04 on volume of 511,520. The shares are currently trading in a 52-week range of $38.92 and $12.15.

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