Turquoise Hill Announces Financial Results and Review of Operations for the Second Quarter 2016
/EINPresswire.com/ -- VANCOUVER, BC--(Marketwired - August 02, 2016) - Turquoise Hill Resources today announced its financial results for the quarter ended June 30, 2016. All figures are in U.S. dollars unless otherwise stated.
HIGHLIGHTS
- Oyu Tolgoi achieved an excellent safety performance with an All Injury Frequency Rate of 0.13 per 200,000 hours worked for the six months ended June 30, 2016.
- On May 5, 2016, Oyu Tolgoi received the formal notice to proceed for underground development by the boards of Turquoise Hill, Rio Tinto and Oyu Tolgoi LLC.
- As part of the notice to proceed process, the 2016 Oyu Tolgoi Feasibility Study was approved.
- In June 2016, Oyu Tolgoi signed a critical contract with Jacobs Engineering Group to provide engineering, procurement and construction management services for underground development.
- Major contractor mobilization for the sinking of Shafts #2 and #5, underground development, critical construction works and maintenance are all progressing.
- As of June 30, 2016, Oyu Tolgoi had drawn down approximately $4.3 billion of the project finance facility and used all net proceeds to pay down shareholder loans payable to Turquoise Hill.
- Turquoise Hill deposited net project finance funds of approximately $4.2 billion with Rio Tinto in Q2'16.
- Oyu Tolgoi recorded revenue of $329.7 million in Q2'16, a decrease of 22.0% over Q1'16, reflecting mainly lower gold sales volumes.
- Turquoise Hill generated operating cash flow before interest and taxes of $161.6 million during Q2'16.
- For Q2'16, Turquoise Hill reported income from continuing operations attributable to shareholders of $29.8 million.
- In Q2'16, concentrator throughput was broadly consistent with Q1'16; resulting in average throughput of approximately 105,000 tonnes per day for the quarter.
- Copper production in Q2'16 declined 10.3% over Q1'16 reflecting lower grades from reduced mining in Phase 2 and relative lower recovery from Phase 6 ore.
- As expected, gold production in Q2'16 declined approximately 52% over Q1'16, due to lower grades from reduced mining in Phase 2.
- Concentrate volumes sold in Q2'16 increased 6.7% over Q1'16.
- For Q2'16, Oyu Tolgoi's C1 costs were $1.12 per pound of copper and all-in sustaining costs were $1.55 per pound of copper.
- Sales contracts have been signed for essentially all of Oyu Tolgoi's expected 2016 concentrate production.
- Open pit, cash-basis capital expenditure for 2016 (excluding underground expenditure) is now expected to be approximately $200 million.
- Operating cash costs for 2016 are now expected to be $840 million.
- Turquoise Hill's cash and cash equivalents at June 30, 2016 were approximately $1.5 billion.
FINANCIAL RESULTS
In Q2'16, the Company recorded net income attributable to owners of Turquoise Hill of $29.8 million ($0.01 per share) compared with net income of $24.9 million ($0.01 per share) in Q2'15, an increase of $4.9 million. Operating cash flows before interest and taxes in Q2'16 were $161.6 million compared with $239.2 million in Q2'15, reflecting the impact of reduced gold production and sales in concentrates. Capital expenditure on property, plant and equipment was $53.3 million on a cash basis in Q2'16, attributed to both underground pre-start and sustaining capital activities.
Turquoise Hill's cash and cash equivalents at June 30, 2016 were approximately $1.5 billion.
OYU TOLGOI
The Oyu Tolgoi mine is approximately 550 kilometres south of Ulaanbaatar, Mongolia's capital city, and 80 kilometres north of the Mongolia-China border. Mineralization on the property consists of porphyry-style copper, gold, silver and molybdenum contained in a linear structural trend (the Oyu Tolgoi Trend) that has a strike length extending over 26 kilometres. Mineral resources have been identified in a series of deposits throughout this trend. They include, from south to north, the Heruga Deposit, the Southern Oyu deposits (Southwest Oyu, South Oyu, Wedge and Central Oyu) and the Hugo Dummett deposits (Hugo South, Hugo North and Hugo North Extension).
The Oyu Tolgoi mine has initially been developed as an open-pit operation. A copper concentrator plant, with related facilities and necessary infrastructure to support a nominal throughput of 100,000 tonnes of ore per day, has been constructed to process ore mined from the Southern Oyu open pit. Long-term development plans for Oyu Tolgoi are based on a 95,000-tonne-per-day underground block-cave mine. In August 2013, development of the underground mine was suspended pending resolution of matters with the Government of Mongolia. Following signing of the Oyu Tolgoi Underground Mine Development and Financing Plan (Underground Plan) in May 2015 and the signing of a $4.4 billion project finance facility in December 2015, Oyu Tolgoi received the formal notice to proceed approval by the boards of Turquoise Hill, Rio Tinto and Oyu Tolgoi LLC on May 5, 2016.
Preparation for underground development
Prior to suspending underground construction in August 2013, underground lateral development at Hugo North Lift 1 had advanced approximately 16 kilometres off Shaft #1. Approximately 65 kilometres of lateral development is expected to be complete by the first draw bell. A total of approximately 200 kilometres of lateral development are planned over the life of Hugo North Lift 1. The following table outlines the shafts planned for underground development.
Shaft# 1 Shaft# 2
(early (production
development and
and ventilation)
ventilation)
----------------------------------------------------------------
Total Depth 1,385 metres 1,284 metres
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Diameter 6.7 metres 10 metres
----------------------------------------------------------------
Completion 2008 Expected 2016
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Remaining Complete ~100 metres
----------------------------------------------------------------
Shaft# 5 Shaft# 3 Shaft# 4
(ventilation) (ventilation) (ventilation)
----------------------------------------------------------------------------
Total Depth 1,195 metres 1,148 metres 1,220 metres
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Diameter 6.7 metres 10 metres 11 metres
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Completion Expected 2017 Expected 2021 Expected 2021
----------------------------------------------------------------------------
Remaining ~1,000 metres Not started Not started
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Following the approval of the Underground Plan in May 2015 and the filing of the revised schedules for the statutory feasibility study with the Mongolian Minerals Council in August 2015, pre-start activities began. Pre-start activities included ramp-up of the owners' and engineering, procurement and construction management (EPCM) teams, detailed engineering and procurement for equipment and materials required for necessary critical works that are key enablers for recommencement of underground development mining activity. In June 2016, Oyu Tolgoi signed a critical contract with Jacobs Engineering Group to provide EPCM services for underground development. Major contractor mobilization for the sinking for Shafts #2 and #5, underground development, critical construction works and maintenance are all progressing. A site infrastructure office has been established as well as project personnel being mobilized. In July 2016, Oyu Tolgoi signed a contract with mining services provider Thiess and Mongolian contractor Khishig Arvin for development of twin declines, incorporating both a service and a conveyor tunnel.
Project finance and funding of Oyu Tolgoi by Turquoise Hill
In December 2015, Oyu Tolgoi signed a $4.4 billion project finance facility for underground development provided by a syndicate of international financial institutions, export credit agencies representing the governments of Canada, the United States and Australia and 15 commercial banks. As of June 30, 2016, Oyu Tolgoi had drawn down approximately $4.3 billion of the project finance facility. Since the December 2015 signing, Oyu Tolgoi has used cash reserves to pay bank fees of approximately $0.2 billion. Steps are being taken to finalize the drawdown of the remaining amount. As part of the project finance facility, a debt cap of $6.0 billion for Oyu Tolgoi was agreed, which provides the possibility for an additional $1.6 billion of supplemental debt in the future.
Net funding received by Oyu Tolgoi of approximately $4.3 billion was used to pay down shareholder loans payable to the Company. Oyu Tolgoi's proceeds from project finance funds were reduced by bank fees and withholding taxes of approximately $0.1 billion in line with contractual obligations. Approximately $4.2 billion was placed on deposit with Rio Tinto, in accordance with the cash management services agreement. The amount on deposit with Rio Tinto will be available for drawdown by Oyu Tolgoi as required for the development of the underground mine.
In accordance with the Amended and Restated Shareholders' Agreement (ARSHA) dated June 8, 2011, Turquoise Hill has funded Oyu Tolgoi's cash requirements beyond internally generated cash flows by a combination of equity investment and shareholder debt.
For amounts funded by debt, Oyu Tolgoi must repay such amounts, including accrued interest, before it can pay common share dividends. At June 30, 2016 after the project finance drawdown, the aggregate outstanding balance of shareholder loans extended by subsidiaries of the Company to Oyu Tolgoi was $2.8 billion, including accrued interest of $0.5 million. These loans bear interest at an effective annual rate of LIBOR plus 6.5%.
In accordance with the ARSHA, a subsidiary of the Company has funded the common share investments in Oyu Tolgoi on behalf of Erdenes. These funded amounts earn interest at an effective annual rate of LIBOR plus 6.5% and are repayable, by Erdenes to a subsidiary of the Company, via a pledge over Erdenes' share of Oyu Tolgoi common share dividends. Erdenes also has the right to reduce the outstanding balance by making cash payments at any time. As of June 30, 2016, the cumulative amount of such funding was $751.1 million, representing 34% of invested common share equity; unrecognized interest on the funding amounted to $265.9 million.
Feasibility study completion
The 2016 Oyu Tolgoi Feasibility Study (2016 Feasibility Study) was approved in May 2016. The 2016 Feasibility Study is based on Oyu Tolgoi reserves. The 2016 Reserve Case includes mineral reserves from the Southern Oyu Tolgoi open pit and the Hugo North Lift 1 block cave. Turquoise Hill expects to publish an updated National Instrument 43-101 compliant independent technical report relating to the project in the second half of 2016.
Highlights of the 2016 Feasibility Study are as follows.
- After-tax internal rate of return of 18% (NPV
8% of $4.6 billion) assuming long-term copper and gold prices of $2.86 per pound and $1,201 per ounce respectively. - With the exception of depletion from ongoing operations, there have been no material changes to the mineral reserve and resource estimates included in the 2014 Oyu Tolgoi Technical Report ("2014 Technical Report").
- Nominal expansion capital of $5.3 billion ($5.1 billion 2016 real costs) for the underground project, which is broadly in-line with the $4.9 billion estimate (2014 real costs) contained in the 2014 Technical Report.
- Project assumes a five-year construction period, first sustainable underground production around 2021 and five to seven-year ramp up period.
- Underground mine targeted full production remains at 95,000 tonnes per day.
- The concentrator rate is planned at 40 million tonnes per annum.
Additional details on capital expenditure for the total project capital costs between 2016 and 2054 in the Reserve Case are outlined below. Production from the first draw bell is expected in 2020. Underground operations are expected to begin with first sustainable production in 2021.
($ in billions)
Item Expansion Sustaining Total
----------------------------------------------------------------------------
Direct Costs
Open Pit - 1.6 1.6
Underground 2.4 3.1 5.5
Concentrator 0.2 0.2 0.4
Infrastructure 0.4 0.2 0.6
Tailings Storage Facility - 0.9 0.9
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Subtotal 3.0 6.0 9.0
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Construction Indirect 0.9 - 0.9
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Subtotal 3.9 6.0 9.9
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Contractor Execution
EPCM 0.4 - 0.4
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Subtotal 4.3 6.0 10.3
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Owner Execution
O&M, Commissioning, Owners Team 0.5 0.2 0.7
----------------------------------------------------------------------------
Subtotal 4.8 6.2 11.0
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GOM Fees and Charges
Mongolian VAT and Duties 0.3 0.7 1.0
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Total Development Program 5.1 6.9 12.0
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Escalation to Nominal 0.2
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Nominal Project Cost 5.3
============================================================================
The 2016 Feasibility Study estimate classifies separately indirect costs that were previously included in the 2014 Technical Report as construction allowances, such as camp accommodation, food services and domestic air travel from Ulaanbaatar to Oyu Tolgoi.
Q2'16 performance
Safety continues to be a major focus throughout Oyu Tolgoi's operations and the mine's management is committed to reducing risk and injury. Oyu Tolgoi achieved an excellent safety performance with an All Injury Frequency Rate of 0.13 per 200,000 hours worked for the six months ended June 30, 2016.
Key financial metrics for Q2'16 are as follows:
Oyu Tolgoi Key Financial Metrics*
1Q 2Q 3Q 4Q 1Q*** 2Q 1H 1H Full Year
2015 2015 2015 2015 2016 2016 2015 2016 2015
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Revenue ($ in
millions of
dollars) 426.2 421.3 431.7 355.6 422.7 329.7 847.5 752.4 1,634.8
Concentrates sold
('000 tonnes) 167.7 189.8 226.0 236.2 213.1 227.4 357.5 440.5 819.8
Revenue by metals
in concentrates
($ in millions of
dollars)
Copper 190.2 220.3 224.5 194.6 202.0 207.9 410.5 409.9 829.6
Gold 232.3 197.4 202.8 156.4 216.2 115.1 429.7 331.3 788.9
Silver 3.6 3.6 4.4 4.6 4.5 6.7 7.2 11.2 16.2
Cost of sales ($
in millions of
dollars) 257.9 225.7 252.2 239.2 207.9 237.1 483.6 445.0 975.0
Production and
delivery costs 173.9 147.4 159.4 149.7 125.9 141.2 321.3 267.1 630.4
Depreciation and
depletion 83.9 78.2 92.8 89.6 82.0 95.9 162.1 177.9 344.5
Capital
expenditure on
cash basis ($ in
millions of
dollars) 24.3 35.1 29.3 27.5 55.9 53.3 59.4 109.2 116.2
Royalties 21.9 49.8 24.1 25.0 22.7 18.5 71.7 41.2 120.8
Operating cash
costs ($ in
millions of
dollars)** 218.9 284.6 222.5 236.6 196.6 215.5 503.5 412.1 962.6
Unit costs ($ per
pound of
copper)**
C1 0.09 0.73 0.40 0.88 0.06 1.12 0.49 0.56 0.57
All-in
sustaining 0.96 1.26 1.52 1.56 0.66 1.55 1.15 1.08 1.37
* Any financial information in this press release should be reviewed in
consultation with the Company's unaudited condensed interim consolidated
financial statements.
** Please refer to NON-GAAP MEASURES in this press release for
reconciliation of these metrics, including total operating cash costs, to
the financial statements.
*** Operating cash costs, C1 and all-in sustaining unit costs for the three
months ended March 31, 2016 have been revised to correctly reflect the
change in inventory as reported in the Company's reconciliation of net
income (loss) to net cash flow generated from operating activities.
Revenue of $329.7 million in Q2'16 decreased 22% over Q1'16 mainly reflecting significantly reduced sales of gold in concentrates driven by lower gold head grades.
Production and delivery costs include primarily the cash costs in inventory sold as well as allocated mine administration costs. Depreciation and depletion includes the depreciation and depletion in inventory sold as well as any depreciation of assets used in the selling and delivery process, including the depreciation of capitalized production phase stripping costs. Q2'16 cost of sales were $237.1 million (Q2'15: $225.7 million) reflecting higher unit cost of production due to lower feed grade and lower recovery.
Capital expenditure, on a cash basis, for Q2'16 was $53.3 million (Q2'15: $35.1 million) including amounts attributed to both underground (including pre-start) and sustaining activities of $36.5 million and $14.1 million respectively. Sustaining capital expenditure includes the tailings storage facility and deferred stripping.
Total operating cash costs at Oyu Tolgoi in Q2'16 were $215.5 million. The 5% royalty payable to the Government of Mongolia is reflected as a cash operating expense; deferred stripping costs are not included in operating cash costs. Oyu Tolgoi administrative costs were $49.5 million reflecting increased management service fees incurred as a result of project finance drawdown during the quarter.
Oyu Tolgoi's C1 costs in Q2'16 were $1.12 per pound, compared with $0.06 per pound in Q1'16. The increase was mainly due to lower gold sales, combined with lower copper production reflecting lower grades from reduced mining in Phase 2, and relative lower recovery from Phase 6 ore.
All-in sustaining costs in Q2'16 were $1.55 per pound, compared with $0.66 per pound in Q1'16. The increase was mainly due to lower gold revenues and the impact of reduced copper production.
Key operational metrics for Q2'16 are as follows:
Oyu Tolgoi Production Data
All data represents full production and sales on a 100% basis
Full
1Q 2Q 3Q 4Q 1Q 2Q 1H 1H Year
2015 2015 2015 2015 2016 2016 2015 2016 2015
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Open pit
material
mined ('000
tonnes) 21,999 22,094 23,969 23,708 22,867 22,716 44,093 45,582 91,771
Ore treated
('000
tonnes) 7,512 9,025 8,632 9,369 9,662 9,525 16,536 19,187 34,537
Average mill
head grades:
Copper (%) 0.52 0.69 0.75 0.69 0.70 0.64 0.61 0.67 0.67
Gold (g/t) 0.48 1.09 0.56 0.92 0.63 0.33 0.82 0.48 0.78
Silver
(g/t) 1.16 1.46 1.90 1.67 1.92 1.92 1.33 1.92 1.56
Concentrates
produced
('000
tonnes) 130.9 215.5 210.3 231.8 229.5 207.1 346.4 436.6 788.5
Average
concentrat
e grade (%
Cu) 25.7 25.6 26.6 24.7 25.1 24.9 25.7 25.0 25.6
Production of
metals in
concentrates
:
Copper
('000
tonnes) 33.6 55.3 56.0 57.3 57.6 51.7 88.9 109.2 202.2
Gold ('000
ounces) 86 238 123 207 144 70 324 213 653
Silver
('000
ounces) 184 297 388 355 395 391 481 786 1,223
Sales of
metals in
concentrates
:
Copper
('000
tonnes) 42.1 46.3 58.2 54.7 51.2 54.4 88.4 105.7 201.3
Gold ('000
ounces) 200 177 200 160 175 95 377 270 737
Silver
('000
ounces) 219 245 334 360 305 395 464 700 1,158
Metal
recovery (%)
Copper 86.8 88.6 86.4 88.4 85.6 83.3 87.9 84.5 87.6
Gold 71.6 75.6 76.4 74.2 72.2 69.3 74.6 71.2 74.4
Silver 65.4 70.6 73.0 70.8 66.4 65.9 68.5 66.2 69.9
Oyu Tolgoi's second quarter production reflected reduced mining in Phase 2 of the open pit. In Q2'16, concentrator throughput was consistent with Q1'16; resulting in average throughput of approximately 105,000 tonnes per day for the quarter. Copper production in Q2'16 declined 10.3% over Q1'16 reflecting lower grades from reduced mining in Phase 2 and relative lower recovery from Phase 6 ore. As expected, gold production in Q2'16 declined approximately 52% over Q1'16, due to lower grades from reduced mining in Phase 2. Concentrate sold in Q2'16 increased 6.7% over Q1'16.
Operational outlook
Open pit cash-basis capital expenditure (excluding underground expenditure) in 2016 is expected to be approximately $200 million, compared with previous guidance of approximately $300 million. The reduction primarily reflects lower capitalization of deferred stripping following open-pit optimization to reduce waste.
Operating cash costs in 2016 are now expected to be approximately $840 million, compared to the previous estimate of $800 million. The change reflects the impact of: deferred stripping reclassification as part of open-pit optimization and additional management service fees incurred in relation to project finance, offset by further cost rationalization and lower royalties due to lower gold sales in the second half of 2016.
Sales contracts have been signed for essentially all of Oyu Tolgoi's expected 2016 concentrate production.
CORPORATE ACTIVITIES
Election of directors
The nominees set forth in the Company's management proxy circular dated March 15, 2016 were elected as directors of Turquoise Hill at the Annual Meeting of Shareholders, which took place on May 3, 2016.
NON-GAAP MEASURES
The Company presents and refers to the following measures (non-GAAP measures) which are not defined in IFRS. A description and calculation of these measures is given below, and may differ from equivalent measures provided by other issuers. These measures are presented in order to provide investors and other stakeholders with a greater understanding of performance and operations at Oyu Tolgoi.
Operating cash costs
The measure of operating cash costs excludes: depreciation and depletion; exploration and evaluation; charges for asset write-down (including write-down of materials and supplies inventory), and includes management services payments to Rio Tinto, and management services payments to Turquoise Hill which are eliminated in the consolidated financial statements of the Company.
C1 cash costs
C1 cash costs is a metric representing the cash cost per unit of extracting and processing the Company's principal metal product to a condition in which it may be delivered to customers, net of gold and silver credits from concentrates sold. It is provided in order to support peer group comparability and to provide investors and other stakeholders with useful information about the underlying cash costs of Oyu Tolgoi and the impact of gold and silver credits on the operations' cost structure. C1 cash costs are relevant to understanding the Company's operating profitability and ability to generate cash flow. When calculating costs associated with producing a pound of copper, the Company includes gold and silver revenue credits as the production cost is reduced as a result of selling these products.
Turquoise Hill's principal metal product is copper and C1 cash costs are reported for Oyu Tolgoi only.
All-in sustaining costs
All-in sustaining costs (AISC) is an extended cash based cost metric, providing further information on the aggregate cash, capital and overhead outlay per unit, and is intended to reflect the costs of producing the Company's principal metal product in both the short term and over the life-cycle of its operations; as a result, sustaining capital expenditure on a cash basis is included rather than depreciation. As the measure seeks to present a full cost of copper production associated with sustaining current operations, development project capital is not included. AISC allows Turquoise Hill to assess the ability of Oyu Tolgoi to support sustaining capital expenditures for future production from the generation of operating cash flows.
A reconciliation of total operating cash costs, C1 cash costs and all-in sustaining costs is provided below.
Operating and unit costs
-------------------------------------------
(Three Months Ended) (Six Months Ended)
--------------------- ---------------------
C1 costs (Stated in $000's of June 30, March 31, June 30, June 30,
dollars) 2016 2016(2) 2016 2015
--------------------------------
Production and delivery 141,231 125,956 267,187 321,390
Change in inventory (20,680) 2,373 (18,307) (19,551)
Other operating expenses 90,454 76,877 167,331 187,609
Less:
- Impairment / write-down of
inventory (8,431) (13,477) (21,908) 9,245
- Depreciation (1,104) (2,697) (3,801) (6,308)
Management services payment to
Turquoise Hill 14,047 7,512 21,559 11,155
---------- ---------- ---------- ----------
Operating cash costs 215,517 196,544 412,061 503,540(3)
Operating cash costs: $/lb of
copper produced 1.89 1.55 1.71 2.57
Adjustments to operating cash
costs(1) 33,491 32,041 65,531 28,879
Less: Gold and silver revenues (121,819) (220,701) (342,520) (436,914)
---------- ---------- ---------- ----------
C1 costs ($'000) 127,189 7,884 135,072 95,505
---------- ---------- ---------- ----------
C1 costs: $/lb of copper
produced 1.12 0.06 0.56 0.49
All-in sustaining costs (Stated
in $000's of dollars)
--------------------------------
Corporate administration 4,095 4,564 8,659 9,299
Asset retirement expense 1,429 1,491 2,920 2,457
Royalty expenses 18,493 22,703 41,196 71,655
Non-current stockpile and stores
write-down (reversal) 8,431 13,477 21,908 (9,245)
Other expenses 2,531 353 2,884 2,887
Sustaining cash capital
including deferred stripping 14,060 33,378 47,438 52,781
---------- ---------- ---------- ----------
All-in sustaining costs ($'000) 176,229 83,850 260,078 225,340
========== ========== ========== ==========
All-in sustaining costs: $/lb of
copper produced 1.55 0.66 1.08 1.15
1. Adjustments to operating cash costs include: treatment, refining and
freight differential charges less the 5% Government of Mongolia royalty and
other expenses not applicable to the definition of C1 cost.
2. Non-GAAP measures for the three months ended March 31, 2016 have been
revised to correctly reflect the change in inventory as reported in the
Company's reconciliation of net income (loss) to net cash flow generated
from operating activities.
3. Operating cash costs for 2015 include non-recurring charges of $36.6
million, following agreement of the Underground Plan (tax settlement: $22.1
million; recalculation of royalties: $14.5 million).
Disclosure of a scientific or technical nature in the MD&A in respect of the Oyu Tolgoi mine was prepared under the supervision of Bernard Peters Technical Director -- Mining OreWin Pty Ltd, B. Eng. (Mining), FAusIMM (201743), and Sharron Sylvester, Technical Director -- Geology, OreWin Pty Ltd, BSc (Geol.), RPGeo AIG (10125). Each of these individuals is a "qualified person" as that term is defined in National Instrument Standards of Disclosure for Mineral Projects (NI 43-101).
SELECTED QUARTERLY DATA
($ in millions of dollars,
except per share information) Quarter Ended
-------------------------------------------
Jun-30 Mar-31 Dec-31 Sep-30
2016 2016 2015 2015
----------------------------------------------------------------------------
Revenue
Copper-gold concentrate $ 329.7 $ 422.7 $ 355.6 $ 431.7
----------------------------------------------------------------------------
Total revenue $ 329.7 $ 422.7 $ 355.6 $ 431.7
----------------------------------------------------------------------------
Net income from continuing
operations attributable to
owners $ 29.8 $ 118.9 $ 179.7 $ 44.0
Loss from discontinued
operations attributable to
owners - - (8.7) (22.8)
----------------------------------------------------------------------------
Net income attributable to
owners of Turquoise Hill $ 29.8 $ 118.9 $ 171.0 $ 21.2
----------------------------------------------------------------------------
Basic income (loss) per share
attributable to owners of
Turquoise Hill
Continuing operations $ 0.01 $ 0.06 $ 0.09 $ 0.02
Discontinued operations - - - (0.01)
----------------------------------------------------------------------------
Total $ 0.01 $ 0.06 $ 0.09 $ 0.01
----------------------------------------------------------------------------
Diluted income (loss) per share
attributable to owners of
Turquoise Hill
Continuing operations $ 0.01 $ 0.06 $ 0.09 $ 0.02
Discontinued operations - - - (0.01)
----------------------------------------------------------------------------
Total $ 0.01 $ 0.06 $ 0.09 $ 0.01
----------------------------------------------------------------------------
Jun-30 Mar-31 Dec-31 Sep-30
2015 2015 2014 2014
----------------------------------------------------------------------------
Revenue
Copper-gold concentrate $ 421.3 $ 426.2 $ 670.6 $ 491.6
----------------------------------------------------------------------------
Total revenue $ 421.3 $ 426.2 $ 670.6 $ 491.6
----------------------------------------------------------------------------
Net income from continuing
operations attributable to
owners $ 49.9 $ 67.1 $ 144.2 $ 43.9
Income (loss) from discontinued
operations attributable to
owners (25.0) 29.1 (9.6) (137.9)
----------------------------------------------------------------------------
Net income (loss) attributable
to owners of Turquoise Hill $ 24.9 $ 96.2 $ 134.6 $ (94.0)
----------------------------------------------------------------------------
Basic income (loss) per share
attributable to owners of
Turquoise Hill
Continuing operations $ 0.02 $ 0.03 $ 0.07 $ 0.02
Discontinued operations (0.01) 0.01 - (0.07)
----------------------------------------------------------------------------
Total $ 0.01 $ 0.04 $ 0.07 $ (0.05)
----------------------------------------------------------------------------
Diluted income (loss) per share
attributable to owners of
Turquoise Hill
Continuing operations $ 0.02 $ 0.03 $ 0.07 $ 0.02
Discontinued operations (0.01) 0.01 - (0.07)
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Total $ 0.01 $ 0.04 $ 0.07 $ (0.05)
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KEY STATISTICS
1Q 2Q 3Q 4Q 1Q
2015 2015 2015 2015 2016
----------------------------------------------------------------------------
Operating results
Open pit material mined ('000
tonnes) 21,999 22,094 23,969 23,708 22,867
Ore treated ('000 tonnes) 7,512 9,025 8,632 9,369 9,662
Average mill head grades:
Copper (%) 0.52 0.69 0.75 0.69 0.70
Gold (g/t) 0.48 1.09 0.56 0.92 0.63
Silver (g/t) 1.16 1.46 1.90 1.67 1.92
Concentrates produced ('000 tonnes) 130.9 215.5 210.3 231.8 229.5
Average concentrate grade (% Cu) 25.7 25.6 26.6 24.7 25.1
Production of metals in
concentrates:
Copper ('000 tonnes) 33.6 55.3 56.0 57.3 57.6
Gold ('000 ounces) 86 238 123 207 144
Silver ('000 ounces) 184 297 388 355 395
Sales of metals in concentrates:
Copper ('000 tonnes) 42.1 46.3 58.2 54.7 51.2
Gold ('000 ounces) 200 177 200 160 175
Silver ('000 ounces) 219 250 334 360 305
Metal recovery (%)
Copper 86.8 88.6 86.4 88.4 85.6
Gold 71.6 75.6 76.4 74.2 72.2
Silver 65.4 70.6 73.0 70.8 66.4
Financial results*
Revenue ($'000,000) 426.2 421.3 431.7 355.6 422.7
Concentrates sold ('000 tonnes) 167.7 189.8 226.0 235.7 213.1
Revenue by metals in concentrates
($'000,000)
Copper 190.2 220.3 224.5 194.6 202.0
Gold 232.3 197.4 202.8 156.4 216.2
Silver 3.6 3.6 4.4 4.6 4.5
Operating cash flow ($'000,000) 105.3 239.2 171.7 134.9 195.4
Cost of sales ($'000,000) 257.9 225.7 252.2 239.3 207.9
Production and delivery costs 173.9 147.4 159.4 149.7 125.9
Depreciation and depletion 83.9 78.2 92.8 89.6 82.0
Capital expenditure on cash basis
($'000,000) 24.3 35.1 29.3 27.5 55.9
Royalties 21.9 49.8 24.1 25.0 22.7
Operating cash costs ($'000,000)** 218.9 284.6 222.5 236.7 196.6
Unit costs ($ per pound copper)**, ^
C1 0.09 0.73 0.40 0.88 0.06
All-in sustaining 0.96 1.26 1.52 1.56 0.66
Financial position
Cash and cash equivalents
($'000,000) 954.2 1,166.9 1,310.4 1,343.9 1,482.2
KEY STATISTICS
Full
2Q 1H 1H Year
2016 2015 2016 2015
-----------------------------------------------------------------
Operating results
Open pit material mined ('000
tonnes) 22,716 44,093 45,582 91,771
Ore treated ('000 tonnes) 9,525 16,536 19,187 34,537
Average mill head grades:
Copper (%) 0.64 0.61 0.67 0.67
Gold (g/t) 0.33 0.82 0.48 0.78
Silver (g/t) 1.92 1.33 1.92 1.56
Concentrates produced ('000 tonnes) 207.1 346.4 436.6 788.5
Average concentrate grade (% Cu) 24.9 25.7 25.0 25.6
Production of metals in
concentrates:
Copper ('000 tonnes) 51.7 88.9 109.2 202.2
Gold ('000 ounces) 70 324 213 653
Silver ('000 ounces) 391 481 786 1,223
Sales of metals in concentrates:
Copper ('000 tonnes) 54.4 88.4 105.7 201.3
Gold ('000 ounces) 95 377 270 737
Silver ('000 ounces) 395 464 700 1,158
Metal recovery (%)
Copper 83.3 87.9 84.5 87.6
Gold 69.3 74.6 71.2 74.4
Silver 65.9 68.5 66.2 69.9
Financial results*
Revenue ($'000,000) 329.7 847.5 752.4 1,634.8
Concentrates sold ('000 tonnes) 227.4 357.5 440.5 819.8
Revenue by metals in concentrates
($'000,000)
Copper 207.9 410.5 409.9 829.6
Gold 115.1 429.7 331.3 788.9
Silver 6.7 7.2 11.2 16.2
Operating cash flow ($'000,000) 161.6 344.5 357.1 650.5
Cost of sales ($'000,000) 237.1 483.6 445.0 975.1
Production and delivery costs 141.2 321.3 267.1 630.4
Depreciation and depletion 95.9 162.1 177.9 344.5
Capital expenditure on cash basis
($'000,000) 53.3 59.4 109.2 116.2
Royalties 18.5 71.7 41.2 120.8
Operating cash costs ($'000,000)** 215.5 503.5 412.1 962.6
Unit costs ($ per pound copper)**, ^
C1 1.12 0.49 0.56 0.57
All-in sustaining 1.55 1.15 1.08 1.37
Financial position
Cash and cash equivalents
($'000,000) 1,478.5 1,343.9
* Any financial information in the press release should be reviewed in consultation with the Company's condensed interim consolidated financial statements.
** Please refer to NON-GAAP MEASURES in this press release for reconciliation of these metrics, including total cash operating costs, to the financial statements.
^ Non-GAAP measures for the three months ended March 31, 2016 have been revised to correctly reflect the change in inventory as reported in the Company's reconciliation of net income (loss) to net cash flow generated from operating activities.
TURQUOISE HILL RESOURCES LTD.
Consolidated Statements of Income (Loss)
(Stated in thousands of U.S. dollars)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
Note 2016 2015 2016 2015
-----------------------------------------------------
Continuing operations
Revenue 4 $ 329,744 $ 421,261 $ 752,398 $ 847,418
Cost of sales 5 (237,127) (225,662) (445,043) (483,529)
----------------------------------------------------------------------------
Gross margin 92,617 195,599 307,355 363,889
Operating expenses 6 (90,454) (94,066) (167,331) (187,609)
Corporate
administration
expenses (4,095) (5,797) (8,659) (9,299)
Other expenses 7 (5,408) (38,628) (6,765) (44,549)
----------------------------------------------------------------------------
Income (loss) before
finance items and
taxes (7,340) 57,108 124,600 122,432
Finance items
Finance income 8 15,388 613 16,774 1,211
Finance costs 8 (25,500) (629) (27,343) (2,360)
----------------------------------------------------------------------------
(10,112) (16) (10,569) (1,149)
----------------------------------------------------------------------------
Income (loss) from
continuing operations
before taxes (17,452) 57,092 114,031 121,283
----------------------------------------------------------------------------
Provision for income
and other taxes (6,589) (12,888) (16,441) (24,651)
----------------------------------------------------------------------------
Income (loss) from
continuing operations (24,041) 44,204 97,590 96,632
----------------------------------------------------------------------------
Discontinued
operations
Income (loss) after
tax from discontinued
operations - (26,954) - 33,650
----------------------------------------------------------------------------
Income (loss) for the
period $ (24,041) $ 17,250 $ 97,590 $ 130,282
----------------------------------------------------------------------------
Attributable to owners
of Turquoise Hill
Resources Ltd. 29,767 24,875 148,694 121,045
Attributable to owners
of non-controlling
interests (53,808) (7,625) (51,104) 9,237
----------------------------------------------------------------------------
Income (loss) for the
period $ (24,041) $ 17,250 $ 97,590 $ 130,282
----------------------------------------------------------------------------
Income attributable to
owners of Turquoise
Hill Resources Ltd.
Continuing operations $ 29,767 $ 49,889 $ 148,694 $ 117,030
Discontinued
operations - (25,014) - 4,015
----------------------------------------------------------------------------
$ 29,767 $ 24,875 $ 148,694 $ 121,045
----------------------------------------------------------------------------
Basic and diluted
earnings per share
attributable to
Turquoise Hill
Resources Ltd.
Continuing operations 22 $ 0.01 $ 0.02 $ 0.07 $ 0.06
Discontinued
operations - (0.01) - -
----------------------------------------------------------------------------
Income for the period $ 0.01 $ 0.01 $ 0.07 $ 0.06
----------------------------------------------------------------------------
Basic weighted average
number of shares
outstanding (000's) 2,012,314 2,012,309 2,012,314 2,012,306
----------------------------------------------------------------------------
The notes to these financial statements, which are available on our website,
are an integral part of the consolidated financial statements.
TURQUOISE HILL RESOURCES LTD.
Consolidated Statements of Comprehensive Income (Loss)
(Stated in thousands of U.S. dollars)
----------------------------------------------------------------------------
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
-------------------------------------------
Income (loss) for the period $ (24,041) $ 17,250 $ 97,590 $ 130,282
Other comprehensive income
(loss):
Items that have been / may be
classified subsequently to
income or loss:
Fair value movements:
Gains (losses) on revaluation
of available for sale
investments (Note 19) (1,078) 2,152 (3,715) (6,818)
Losses on revaluation of
available for sale
investments transferred to
the statement of income (Note
19) 379 921 2,112 8,996
----------------------------------------------------------------------------
Other comprehensive income
(loss) for the period $ (699) $ 3,073 $ (1,603) $ 2,178
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total comprehensive income
(loss) for the period $ (24,740) $ 20,323 $ 95,987 $ 132,460
----------------------------------------------------------------------------
Attributable to owners of
Turquoise Hill $ 29,068 $ 27,948 $ 147,091 $ 123,223
Attributable to owners of non-
controlling interests (53,808) (7,625) (51,104) 9,237
----------------------------------------------------------------------------
Total comprehensive income
(loss) for the period $ (24,740) $ 20,323 $ 95,987 $ 132,460
----------------------------------------------------------------------------
The notes to these financial statements, which are available on our website,
are an integral part of the consolidated financial statements.
TURQUOISE HILL RESOURCES LTD.
Consolidated Statements of Cash Flows
(Stated in thousands of U.S. dollars)
----------------------------------------------------------------------------
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
Note 2016 2015 2016 2015
--------------------------------------------------------
Cash generated from
operating
activities before
interest and tax 21 $ 161,644 $ 239,182 $ 357,056 $ 340,653
Interest received 2,052 362 3,394 645
Interest paid (15,548) - (16,161) -
Income and other
taxes paid (67,463) (4,995) (67,726) (9,468)
----------------------------------------------------------------------------
Net cash generated
from operating
activities 80,685 234,549 276,563 331,830
Cash flows from
investing
activities
Loans to related
party 13 (4,156,284) - (4,156,284) -
Expenditures on
property, plant
and equipment (53,275) (35,164) (109,222) (59,447)
Proceeds from sale
of discontinued
operations - 5,353 - 5,353
Proceeds from sale
and redemption of
financial assets 1,623 3,907 4,056 16,782
Proceeds from sales
of mineral
property rights
andother assets 1,000 - 2,800 1,237
Other investing
cash flows 49 86 73 989
----------------------------------------------------------------------------
Cash used in
investing
activities of
continuing
operations (4,206,887) (25,818) (4,258,577) (35,086)
Cash used in
investing
activities of
discontinued
operations - - - (114)
----------------------------------------------------------------------------
Cash used in
investing
activities (4,206,887) (25,818) (4,258,577) (35,200)
----------------------------------------------------------------------------
Cash flows from
financing
activities
Net proceeds from
project finance
facility 16 4,274,321 - 4,274,321 -
Payment of project
finance fees (152,253) - (158,999) -
Issue of share
capital 18 - - - 20
----------------------------------------------------------------------------
Cash from financing
activities of
continuing
operations 4,122,068 - 4,115,322 20
Cash from financing
activities of
discontinued
operations - - - 3,500
----------------------------------------------------------------------------
Cash from financing
activities 4,122,068 - 4,115,322 3,520
----------------------------------------------------------------------------
Effects of exchange
rates on cash and
cash equivalents 409 269 1,284 174
----------------------------------------------------------------------------
Net increase
(decrease) in cash
and cash
equivalents (3,725) 209,000 134,592 300,324
----------------------------------------------------------------------------
Cash and cash
equivalents -
beginning of
period $ 1,482,195 $ 957,867 $ 1,343,878 $ 866,543
Cash and cash
equivalents - end
of period 1,478,470 1,166,867 1,478,470 1,166,867
----------------------------------------------------------------------------
Cash and cash
equivalents as
presented on the
statement of
financial position $ 1,478,470 $ 1,166,867 $ 1,478,470 $ 1,166,867
----------------------------------------------------------------------------
The notes to these financial statements, which are available on our website,
are an integral part of the consolidated financial statements.
TURQUOISE HILL RESOURCES LTD.
Consolidated Statements of Financial Position
(Stated in thousands of U.S. dollars)
----------------------------------------------------------------------------
(Unaudited)
June 30, December 31,
Note 2016 2015
---------------------------
Current assets
Cash and cash equivalents 9 $ 1,478,470 $ 1,343,878
Inventories 10 287,409 321,409
Trade and other receivables 11 20,090 15,833
Prepaid expenses and other assets 12 12,628 53,375
Loans due from related party 13 666,452 -
----------------------------------------------------------------------------
2,465,049 1,734,495
Non-current assets
Property, plant and equipment 14 6,254,464 6,319,983
Inventories 10 - 539
Deferred income tax assets 165,000 165,000
Loans due from related party, and other
financial assets 13 3,501,935 20,078
----------------------------------------------------------------------------
9,921,399 6,505,600
----------------------------------------------------------------------------
Total assets $ 12,386,448 $ 8,240,095
----------------------------------------------------------------------------
Current liabilities
Trade and other payables 15 $ 238,724 $ 201,567
Deferred revenue 50,781 72,004
----------------------------------------------------------------------------
289,505 273,571
Non-current liabilities
Borrowings and other financial liabilities 16 4,104,477 13,574
Deferred income tax liabilities 36 52,916
Decommissioning obligations 17 100,830 104,421
----------------------------------------------------------------------------
4,205,343 170,911
----------------------------------------------------------------------------
Total liabilities $ 4,494,848 $ 444,482
----------------------------------------------------------------------------
Equity
Share capital 18 11,432,122 11,432,122
Contributed surplus 1,555,774 1,555,774
Accumulated other comprehensive loss 19 (1,617) (14)
Deficit (4,324,666) (4,473,360)
----------------------------------------------------------------------------
Equity attributable to owners of Turquoise
Hill 8,661,613 8,514,522
Attributable to non-controlling interests 20 (770,013) (718,909)
----------------------------------------------------------------------------
Total equity 7,891,600 7,795,613
----------------------------------------------------------------------------
Total liabilities and equity $ 12,386,448 $ 8,240,095
----------------------------------------------------------------------------
The notes to these financial statements, which are available on our website, are an integral part of the consolidated financial statements.
TURQUOISE HILL RESOURCES LTD.
Consolidated Statements of Equity
(Stated in thousands of U.S. dollars, except for share amounts)
----------------------------------------------------------------------------
(Unaudited)
----------------------------------------------------------------------------
Six Months Ended June
30, 2016 Attributable to owners of Turquoise Hill
----------------------------------------------------------------------------
Accumulated
other
Share comprehensive
capital Contributed loss (Note
(Note 18) surplus 19) Deficit
---------------------------------------------------
Opening balance $11,432,122 $ 1,555,774 $ (14) $(4,473,360)
Income (loss) for the
period - - - 148,694
Other comprehensive loss
for theperiod - - (1,603) -
----------------------------------------------------------------------------
Closing balance $11,432,122 $ 1,555,774 $ (1,617) $(4,324,666)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Six Months Ended June
30, 2015 Attributable to owners of Turquoise Hill
----------------------------------------------------------------------------
Accumulated
other
Share comprehensive
capital Contributed loss (Note
(Note 18) surplus 19) Deficit
---------------------------------------------------
Opening balance $11,432,060 $ 1,555,721 $ (4,505) $(4,788,340)
Income for the period - - - 121,045
Other comprehensive
income for theperiod - - 2,178 -
Equity issued to holders
ofnon-controlling
interests - - - 1,677
Employee share options 24 52 - -
Other increase
(decrease) in non-
controlling interests
(Note 20) - - - -
----------------------------------------------------------------------------
Closing balance $11,432,084 $ 1,555,773 $ (2,327) $(4,665,618)
----------------------------------------------------------------------------
TURQUOISE HILL RESOURCES LTD.
Consolidated Statements of Equity
(Stated in thousands of U.S. dollars, except for share
amounts)
--------------------------------------------------------------
(Unaudited)
--------------------------------------------------------------
Attributable
to owners of
Six Months Ended June Turquoise
30, 2016 Hill
------------------------------------- ------------------------
Non-
controlling
Interests Total
Total (Note 20) equity
------------- ------------------------
Opening balance $ 8,514,522 $ (718,909) $7,795,613
Income (loss) for the
period 148,694 (51,104) 97,590
Other comprehensive loss
for theperiod (1,603) - (1,603)
------------------------------------- ------------------------
Closing balance $ 8,661,613 $ (770,013) $7,891,600
------------------------------------- ------------------------
------------------------------------- ------------------------
Attributable
to owners of
Six Months Ended June Turquoise
30, 2015 Hill
------------------------------------- ------------------------
Non-
controlling
Interests Total
Total (Note 20) equity
------------- ------------------------
Opening balance $ 8,194,936 $ (626,471) $7,568,465
Income for the period 121,045 9,237 130,282
Other comprehensive
income for theperiod 2,178 - 2,178
Equity issued to holders
ofnon-controlling
interests 1,677 1,823 3,500
Employee share options 76 - 76
Other increase
(decrease) in non-
controlling interests
(Note 20) - (88,048) (88,048)
------------------------------------- ------------------------
Closing balance $ 8,319,912 $ (703,459) $7,616,453
------------------------------------- ------------------------
The notes to these financial statements, which are available on our website, are an integral part of the consolidated financial statements.
About Turquoise Hill Resources
Turquoise Hill Resources (NYSE: TRQ) (NASDAQ: TRQ) (TSX: TRQ) is an international mining company whose primary operation is its 66% interest in the Oyu Tolgoi copper-gold-silver mine in southern Mongolia.
Forward-looking statements
Certain statements made herein, including statements relating to matters that are not historical facts and statements of the Company's beliefs, intentions and expectations about developments, results and events which will or may occur in the future, constitute "forward-looking information" within the meaning of applicable Canadian securities legislation and "forward-looking statements" within the meaning of the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking information and statements relate to future events or future performance, reflect current expectations or beliefs regarding future events and are typically identified by words such as "anticipate", "could", "should", "expect", "seek", "may", "intend", "likely", "plan", "estimate", "will", "believe" and similar expressions suggesting future outcomes or statements regarding an outlook. These include, but are not limited to, statements respecting anticipated business activities, planned expenditures, corporate strategies and other statements that are not historical facts.
Forward-looking statements and information are made based upon certain assumptions and other important factors that, if untrue, could cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such statements or information. There can be no assurances that such statements or information will prove accurate. Such statements and information contained herein represent the Company's best judgment as of the date hereof based on information currently available. The Company does not assume any obligation to update any forward-looking statements or information or to conform these forward-looking statements or information to actual results, except as required by law.
Important factors that could cause actual results to differ from these forward-looking statements and information are included in the "Risk Factors" section of the Annual Information Form dated as of March 15, 2016 in respect of the year ended December 31, 2015.
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Contact
Investors and Media
Tony Shaffer Office:
+1 604 648 3934
Email: tony.shaffer@turquoisehill.com
