Turquoise Hill Resources today announced its financial results for
the quarter ended September 30, 2012. All figures are in US dollars
unless otherwise stated.
HIGHLIGHTS
-- Overall phase-one construction at Oyu Tolgoi reached 96% completion at
the end of Q3'12.
-- In early November 2012, Oyu Tolgoi signed a binding power purchase
agreement with the Inner Mongolia Power Corporation to supply power to
the Oyu Tolgoi mine.
-- Oyu Tolgoi has begun a seven week commissioning of ore-processing
equipment with first concentrate production expected to follow within
one month and the start of commercial production expected three to five
months thereafter.
-- A total of 5.2 million tonnes of ore from the Oyu Tolgoi mine was
stockpiled and 56,000 tonnes of ore were sent through the primary
crusher to the coarse ore storage building during Q3'12.
-- Turquoise Hill completed a highly successful rights offering in Q3'12
yielding $1.8 billion in gross proceeds.
-- In October 2012, Turquoise Hill, Rio Tinto and Oyu Tolgoi LLC rejected a
request from the Government of Mongolia to renegotiate the Oyu Tolgoi
Investment Agreement.
-- During Q3'12, SouthGobi announced changes to its Board of Directors,
accepting the resignations of Edward Flood, the Honourable Robert
Hanson, Chairman Peter Meredith and Alexander Molyneux and subsequently
appointed Lindsay Dove, Sean Hinton, Kay Priestly, Brett Salt and Kelly
Sanders. Kay Priestly was appointed Chairman of the Board.
-- SouthGobi announced senior management changes during Q3'12 and early
Q4'12, including the appointment of Ross Tromans as President and Chief
Executive Officer following the departure of Alexander Molyneux, former
President and Chief Executive Officer, and the departures of Curtis
Church, former Chief Operating Officer, and Matthew O'Kane, former Chief
Financial Officer.
-- In September 2012, Turquoise Hill and Chalco terminated the SouthGobi
lock-up agreement and proportional takeover offer due to the regulatory
approvals timeframe.
-- Ivanhoe Australia's Osborne copper-gold mine is on target to achieve
mill throughput at the upper end of the 700,000 to 800,000 tonnes of ore
range for 2012.
-- Turquoise Hill's consolidated cash position was $1.7 billion at
September 30, 2012 and approximately $1.5 billion at November 14, 2012.
FINANCIAL RESULTS
In Q3'12, Turquoise Hill recorded net income of $114.3 million
($0.12 per share), compared to net income of $7.3 million ($0.01
per share) in Q3'11, which was a change of $107.0 million. Results
for Q3'12 included $55.3 million in exploration expenses; $57.2
million in cost of sales; $18.3 million in general and
administrative expenses; $12.5 million write-down of current
assets; $4.3 million in interest expense; a $6.1 million share of
loss of significantly influenced investees; and a $16.1 million
write-down of carrying value of long-term investments. These
amounts were offset by $23.8 million in revenue; a $12.9 million
change in the fair value of SouthGobi's embedded derivatives;
$176.2 million change in the fair value of the derivative on the
2012 rights offering; $4.7 million in interest income; $13.9
million in foreign exchange gains and $36.6 million of net loss
attributable to non-controlling interests.
Turquoise Hill's cash position, on a consolidated basis at
September 30, 2012, was $1.7 billion. As at November 14, 2012,
Turquoise Hill's consolidated cash position was approximately $1.5
billion.
OYU TOLGOI COPPER-GOLD MINE (66% owned)
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).
During Q3'12, additions to property, plant and equipment for the
Oyu Tolgoi mine totalled $600.2 million, which included development
costs. In Q3'12, Oyu Tolgoi incurred exploration expenses of $17.0
million, compared to $6.4 million incurred in Q3'11.
The Oyu Tolgoi mine initially is being developed as an open-pit
operation. A copper concentrator plant, with related facilities and
necessary infrastructure to support an initial throughput of
100,000 tonnes of ore per day, is being constructed to process ore
mined from the Southern Oyu open pit. In conjunction with the
surface activities, an 85,000-tonne-per-day underground block-cave
mine also is being developed at the Hugo North Deposit which is
expected to commence operations in 2016.
Oyu Tolgoi concludes power purchase agreement
Turquoise Hill announced on November 5, 2012, that Oyu Tolgoi
LLC had signed a binding power purchase agreement with the Inner
Mongolia Power Corporation to supply power to the Oyu Tolgoi mine.
With the conclusion of the power agreement, Oyu Tolgoi has begun a
seven-week commissioning of the ore-processing equipment. First
concentrate production is expected to follow within one month and
the commencement of commercial production is expected three to five
months thereafter.
The Oyu Tolgoi Investment Agreement recognized that the reliable
supply of electrical power is critical to the mine. The agreement
also confirmed that Turquoise Hill has the right to obtain
electrical power from inside or outside Mongolia, including China,
to meet its initial electrical power requirements for up to four
years after Oyu Tolgoi begins commercial production. The agreement
established that a) Turquoise Hill has the right to build or
sub-contract construction of a coal-fired power plant at an
appropriate site in Mongolia's South Gobi Region to supply Oyu
Tolgoi and b) all of the mine's power requirements would be sourced
from within Mongolia no later than four years after the start of
commercial production. Turquoise Hill continues to evaluate the
development of a dedicated power plant.
Phase-one construction of the Oyu Tolgoi mine 96% complete at
the end of Q3'12
Construction of the Oyu Tolgoi mine's first phase of development
reached 96% completion at the end of Q3'12. Total capital invested
in the construction of the first phase of the Oyu Tolgoi mine to
the end of Q3'12 was approximately $5.6 billion. The final cost for
the phase-one capital project is expected to be approximately $6.2
billion, or 3% over the initial budget, excluding foreign-exchange
exposures.
Among major updates for Q3'12 and plans for Q4'12:
-- Since the commencement of mining ore in late Q2'12, a total of 5.2
million tonnes of ore has been stockpiled at the end of Q3'12. Also
56,000 tonnes have been sent through the primary crusher to the coarse
ore storage building in Q3'12.
-- The construction and stringing of the electrical transmission lines for
initial power to Oyu Tolgoi were completed in both Mongolia and China.
The lines were successfully tested with full power loads in Q3'12 and
following the signing of the binding power purchase agreement in early
November 2012 are now energized.
-- Pre-commissioning of the primary crusher, overland conveyor and coarse-
ore stockpile circuits was completed in Q3'12 with the first ore
delivered to the crusher in July 2012.
-- Construction of the concentrator was 99% complete at the end of Q3'12.
-- Line #1 of the concentrator was substantially completed in Q3'12, and
Line #2 is on track to be completed in Q4'12.
-- Underground lateral development at the Hugo North Deposit was restarted
during Q3'12 as planned following the completion of the hoisting
equipment upgrade at Shaft #1.
-- Construction of Shaft #2 at the Hugo North Deposit is progressing well
with the headframe reaching its final height of 96 metres in Q2'12. The
headframe and ancillary buildings were 99% complete at the end of Q3'12.
Shaft-sinking activities began in December 2011, and the depth of the
shaft is now approximately 720 metres below surface.
-- Construction of off-site facilities and infrastructure reached 92%
completion at the end of Q3'12 and was slightly behind schedule. This
was due to delays during the building of the Oyu Tolgoi-Gashuun Sukhait
road to the Mongolia-China border and the Khanbumbat permanent airport,
near the Oyu Tolgoi mine. The road and airport contractors remobilized
in March 2012 and work is progressing. Facilities required for the
production of first ore are on schedule.
-- Long-term sales contracts have been signed for 75% of the Oyu Tolgoi
mine's concentrate production in the first three years, while 50% of
concentrate production is contracted for ten years (subject to
renewals). In addition to the signed contracts, in early November 2012,
Oyu Tolgoi committed in principle, subject to the conclusion of detailed
sales contracts, up to 25% of concentrate available for export would be
made available at international terms to smelters in Inner Mongolia for
the first ten years.
Underground feasibility study
The underground feasibility study is ongoing and is now expected
to be released in the first half of 2013. The study team is
currently evaluating the optimum development plan and updating
various sensitivity cases. Capital approvals for underground
development will likely be approved in distinct stages.
Rio Tinto and Turquoise Hill working to complete international
project finance package
Both Turquoise Hill and Rio Tinto have been actively engaged
with lenders to refine the overall financing plan and term sheet
with the aim of raising $3 billion to $4 billion. Work is ongoing
with the majority of terms agreed with the lenders, and Turquoise
Hill anticipates funding in the first half of 2013.
The Environmental and Social Impact Assessment undertaken as
part of the project finance process was publically disclosed in
August 2012. Public disclosure of this assessment is a precondition
to lenders submitting the funding proposal to their respective
boards.
Skills training programs preparing Mongolians for jobs
The Oyu Tolgoi mine's staffing strategy continues to focus on
the utilization of Mongolian men and women whose skills are being
developed, and who are receiving training throughout the
construction phase. As of the end of September 2012, the Oyu Tolgoi
mine had a workforce of approximately 15,150, which included about
12,000 Mongolians.
Oyu Tolgoi LLC has committed more than $126 million in funding
over five years for education and training programs in Mongolia.
The majority of the projects and initiatives under this funding are
targeting the building of a Mongolian talent pipeline for the
future.
Request to renegotiate Investment Agreement rejected
In October 2012, the Company, Rio Tinto and Oyu Tolgoi LLC,
rejected a request from the Government of Mongolia to renegotiate
the Oyu Tolgoi Investment Agreement. The rejection followed the
receipt of a letter from the Minister of Mining requesting the
parties renegotiate the landmark agreement that was signed in
October 2009 and became fully effective in March 2010.
In its proposed 2013 budget, the Government of Mongolia has
included revenue from the application of a progressive royalty
scheme to Oyu Tolgoi. However, the Investment Agreement provides a
stabilized royalty rate of 5% over the life of the agreement and
specifies that new laws made after its signing will not apply to
Oyu Tolgoi. Any change to Oyu Tolgoi's royalty rate would require
the agreement of all parties to the Investment Agreement.
As recently as October 2011, the Mongolian Government reaffirmed
that the Investment Agreement was signed in full compliance with
all laws and regulations of Mongolia.
Development drilling continued in Q3'12
During Q3'12, Oyu Tolgoi LLC completed a total of 5,949 metres
of development drilling and 1,937 metres of Shaft #4
characterisation drilling. Surface-resource definition infill
drilling in the Hugo North initial cave area continued with 4,012
metres completed. There was no underground drilling in Q3'12 due to
the upgrading of hoisting equipment at Shaft #1. Underground
drilling is expected to resume in late October 2012.
Exploration drilling continued in Q3'12
Oyu Tolgoi LLC continued its exploration drilling program during
Q3'12, completing 6,462 metres of surface exploration drilling.
This included 1,532 metres of diamond drilling on the Oyu Tolgoi
mining licence, 2,212 metres of diamond drilling on Entree Gold's
Javkhlant mining licence and 2,718 metres of polycrystalline
compact diamond (PCD) drilling on Entree Gold's Shivee mining
licence. At the end of Q3'12, there were two exploration drill rigs
in operation. One rig was drilling a conceptual target located east
of the Heruga North Deposit while the other was drilling a
geophysical target 1.3 kilometres northeast of the northern end of
the Hugo North Deposit.
During Q3'12, drilling at the Heruga North Deposit was
completed. Data is now being compiled in preparation for a resource
estimate.
SOUTHGOBI RESOURCES (57.6% owned)
Turquoise Hill and Chalco terminate SouthGobi lock-up agreement
and proportional takeover bid due to approvals timeframe
On September 3, 2012, Turquoise Hill announced the termination
of the lock-up agreement entered into with Aluminum Corporation of
China Limited (Chalco) on April 1, 2012, pursuant to which
Turquoise Hill agreed to tender its shares in SouthGobi into a
proportional takeover offer to be made by Chalco for up to 60%, but
not less than 56%, of the shares in SouthGobi. After careful
consideration, both Turquoise Hill and Chalco concluded that the
proposed transaction had minimal prospect of obtaining the
necessary regulatory approvals within an acceptable timeframe. As a
result, Turquoise Hill and Chalco agreed to terminate the lock-up
agreement, including Chalco's obligation to make a proportional
offer.
Following termination of the lock-up agreement, Turquoise Hill
is working with SouthGobi to improve performance of SouthGobi's
business and more fully recognize SouthGobi's operating
potential.
Sales and operations at SouthGobi's Ovoot Tolgoi coal mine
SouthGobi's Ovoot Tolgoi mine is in Mongolia's South Gobi
Region, approximately 40 kilometres north of the Shivee Khuren-Ceke
crossing at the Mongolia-China border.
SouthGobi's mining activities at Ovoot Tolgoi remained fully
curtailed throughout Q3'12 to manage coal inventories and to
maintain efficient working capital levels. As a result, SouthGobi
did not commit any new capital expenditures and curtailed
exploration activities to preserve its financial resources.
SouthGobi's operations continue to be impacted by the softening of
inland China coking coal markets and customers were reluctant to
enter into new sales contracts. SouthGobi anticipates that its
operations will most likely remain fully curtailed in Q4'12;
however, it continues to seek opportunities through cost reductions
to be able to respond to any improvement in demand and prices.
Due to these events, Turquoise Hill conducted an impairment
analysis whereby the carrying values of its property, plant and
equipment related to the Ovoot Tolgoi mine were assessed. The
analysis did not result in the identification of an impairment. The
estimates and assumptions incorporated in the impairment analysis
are subject to certain risks and uncertainties which may materially
affect the future net cash flows expected to be generated.
Revenue decreased to $3.3 million for Q3'12 from $60.5 million
for Q3'11. During Q3'12, SouthGobi sold 0.31 million tonnes of coal
at an average realized selling price of $15.79 per tonne compared
to sales of 1.37 million tonnes of coal at an average realized
selling price of $54.01 per tonne in Q3'11. In Q3'12, SouthGobi
sold higher-ash stockpiles to satisfy existing sales contracts. The
decrease in the average realized selling price in the Q3'12 is
primarily related to SouthGobi's sales mix -- only higher-ash coals
were sold in Q3'12 -- and the significant reduction in SouthGobi's
selling prices for higher-ash coals.
On April 16, 2012, SouthGobi announced that Mineral Resources
Authority of Mongolia (MRAM) held a news conference announcing a
request to suspend exploration and mining activity on certain
licences owned by SouthGobi Sands LLC, a wholly-owned subsidiary of
SouthGobi Resources Ltd. The request for suspension included the
mining licence pertaining to the Ovoot Tolgoi mine. SouthGobi never
received any formal notification of license suspension from MRAM.
On September 6, 2012, SouthGobi received official notification from
MRAM confirming that as of September 4, 2012 all exploration and
mining licences held by SouthGobi were in good standing.
Subsequent to Q3'12, SouthGobi noted several articles in
Mongolian and international media regarding allegations against
SouthGobi and some of its employees. To date, neither SouthGobi nor
any of its employees have been charged with any wrongdoing.
SouthGobi and its employees continue to cooperate with the
Mongolian government agencies, including the Independent Authority
Against Corruption, in their ongoing investigations.
Notice of Investment Dispute
On July 11, 2012, SouthGobi announced that SGQ Coal Investment
Pte. Ltd., a wholly-owned subsidiary of SouthGobi Resources Ltd.
that owns 100% of SouthGobi's Mongolian operating subsidiary
SouthGobi Sands LLC, filed a Notice of Investment Dispute on the
Government of Mongolia pursuant to the Bilateral Investment Treaty
between Singapore and Mongolia. SouthGobi has filed the Notice of
Investment Dispute following a determination by management that
they have exhausted all other possible means to resolve an ongoing
investment dispute between SouthGobi Sands LLC and the Mongolian
authorities.
The Notice of Investment Dispute consists of, but is not limited
to, the failure by MRAM to execute pre-mining agreements (PMA),
associated with certain exploration licences held by SouthGobi
pursuant to which valid PMA applications had been lodged in 2011.
The areas covered by the valid PMA applications include the Zag
Suuj Deposit and certain areas associated with the Soumber Deposit
outside the existing mining licence.
The Notice of Investment Dispute triggers the dispute resolution
process under the Bilateral Investment Treaty whereby the Mongolian
Government has a six-month cure period from the date of receipt of
the notice to satisfactorily resolve the dispute through
negotiations. If the negotiations are not successful, SouthGobi
will be entitled to commence conciliation/arbitration proceedings
under the auspices of the International Centre for Settlement of
Investment Disputes (ICSID) pursuant to the Bilateral Investment
Treaty. However, in the event that the Government of Mongolia fails
to negotiate, ICSID arbitration proceedings may be accelerated
before the six months have expired. Discussions between SouthGobi
and the Government of Mongolia are ongoing.
Activities historically carried out on the exploration licences
with valid PMA applications include drilling, trenching and
geological reconnaissance. SouthGobi has no immovable assets
located on these licences and the loss of any or all of these
licences would not materially and adversely affect the existing
operations.
Board of Directors and Management changes
On September 4, 2012, SouthGobi announced changes to its Board
of Directors, accepting the resignations of Edward Flood, the
Honourable Robert Hanson and Chairman Peter Meredith and
subsequently appointed Lindsay Dove, Sean Hinton, Kay Priestly,
Brett Salt and Kelly Sanders. Kay Priestly also was appointed
Chairman of the Board. On September 17, 2012, Alexander Molyneux
tendered his resignation as a director of SouthGobi. Further, on
November 8, 2012, Ross Tromans was appointed an Executive
Director.
SouthGobi also announced senior management changes during Q3'12
and early Q4'12, with the departures of Alexander Molyneux, former
President and Chief Executive Officer, and Curtis Church, former
Chief Operating Officer. Ross Tromans was appointed as President
and Chief Executive Officer and will also assume the duties
formerly handled by the Chief Operating Officer. On November 5,
2012, Matthew O'Kane resigned as SouthGobi's Chief Financial
Officer.
Sale of Tsagaan Tolgoi cancelled
On August 29, 2012, SouthGobi announced that the proposed sale
of the Tsagaan Tolgoi Deposit to Modun Resources Limited had been
cancelled by mutual agreement of both parties.
IVANHOE AUSTRALIA (58.7% owned)
Ivanhoe Australia commenced copper and gold production in late
February 2012 at the Osborne processing complex in northwestern
Queensland. Two other projects - the Merlin molybdenum and rhenium
project and the Mount Elliott copper-gold project - are in various
stages of development and study. All the projects are on granted
mining leases.
In late May 2012, Ivanhoe Australia announced it was undertaking
a strategic and business review focused on identifying and
implementing the actions required to position the business for
future growth and improve shareholder value. In August 2012,
Ivanhoe Australia released the results of the strategic and
business review. The review confirmed Ivanhoe Australia's goal to
build a profitable mid-tier mining company.
The review identified approximately A$70 million of capital
expenditure savings over the next two years and approximately A$45
million of annual operating and overhead costs savings.
Ivanhoe Australia incurred exploration expenses of $26.2 million
in Q3'12, compared to $47.1 million in Q3'11.
Osborne Copper-Gold Mine
The Osborne Copper-Gold operation is performing well with
production on target to achieve guidance and mine development work
ahead of schedule. The performance of the processing plant has
improved further during Q3'12 due to a combination of consistent
ore feed, uniform blending and higher grades. Recovery rates during
Q3'12 averaged 95.3% for copper and 77.9% for gold. Higher grades
have allowed the targeting of a further (fifth) shipment in 2012.
Metal production during Q3'12 was 4,187 tonnes of copper and 4,704
ounces of gold.
Ivanhoe Australia recognized revenue of $20.4 million in Q3'12
(Q3'11: $nil) largely as a result of completing its second shipment
of copper concentrate. Ivanhoe Australia also completed three gold
dore sales.
Ivanhoe Australia's second shipment consisted of 10,491 wet
metric tonnes of copper-gold concentrate and departed Townsville,
Queensland in early-September 2012. A third shipment was completed
in October 2012. The target is for two further shipments during
Q4'12, to target a total of five shipments for 2012. At September
30, 2012, Ivanhoe Australia had 13,122 dry metric tonnes of
copper-gold concentrate in inventory.
Production is on target to achieve mill throughput for 2012 at
the upper end of the 700,000 to 800,000 tonnes of ore range.
A tender for the consolidation of the underground mining and
maintenance activities of Kulthor, Osborne and Starra commenced
during Q3'12. The contract is expected to be awarded in November
2012, with transition commencing immediately thereafter and full
implementation anticipated by the end of Q1'13.
Merlin Molybdenum and Rhenium Project
The independent technical review of the Merlin project,
conducted as part of the strategic and business review reaffirmed
the outcomes of the feasibility study and the technical and
commercial viability of the project. It has also identified that
there are potential opportunities to further enhance the technical
and commercial aspects of the project. These include metallurgical
testwork, which has the potential to reduce the capital cost and
improve returns. A program of testwork has commenced with the
objective to increase the molybdenum-rhenium concentrate grade.
A sales and marketing study has also been commissioned through a
leading international molybdenum and rhenium consultancy
company.
This technical and commercial work is expected to be completed
in Q1'13.
Mount Elliott
Drilling to further define the high-grade portions of the SWAN
zone within the Mount Elliott project commenced in early October
2012. In addition, during Q3'12 quality assurance and quality
control work was undertaken on previous Mount Elliott/SWAN
drilling.
Regional exploration
Ivanhoe Australia has 49 granted Exploration Permits for
Minerals (EPMs) with a total area of 5,787 square kilometres
including joint ventures, and 4 EPM applications with a total area
of 833 square kilometres. The granted EPMs include 12 EPMs in the
Ivanhoe / Exco joint venture (525 square kilometres) and two EPMs
in the Ivanhoe /Goldminco joint venture (70 square kilometres).
Ivanhoe Australia secures working capital facility
In Q3'12, the Company provided a secured, twelve-month working
capital facility to Ivanhoe Australia of up to $50 million. The
line of credit is intended to provide additional funding for
working capital. In August 2012, Ivanhoe Australia drew down $20
million from the facility and a further $11 million was drawn in
October 2012.
Sale of Exco Resources shares
On August 23, 2012, Ivanhoe Australia announced the sale of
approximately 24.3 million shares of its holding in Exco Resources
Ltd (Exco) to Washington H. Soul Pattinson & Company Limited
(WHSP) for cash consideration of approximately A$4.6 million
(A$0.19 per share).
Ivanhoe Australia had also advised WHSP that it intended to
accept WHSP's revised takeover offer of A$0.265 per share for its
remaining 55.0 million Exco shares, in the absence of a superior
offer.
On November 12, 2012, WHSP advised Exco shareholders that it had
accumulated a 90% interest in the company and would proceed with a
compulsory acquisition of the remaining shares in Exco. Ivanhoe
Australia expects to receive cash consideration of A$14.6 million
from the sale of its remaining 55.0 million shares in Exco within
the next seven days.
KYZYL GOLD PROJECT (50% owned)
Altynalmas Gold, a private company, holds 100% ownership of the
Kyzyl Gold Project in northeastern Kazakhstan. The Kyzyl Gold
Project contains the Bakyrchik and Bolshevik gold deposits, as well
as a number of satellite deposits.
Drilling program completed
The drilling activities at the Kyzyl Gold Project were completed
on July 29, 2012. A total of 2,272 metres were drilled during
Q3'12, all on Bakyrchik Exploration Licence No. 27 (22,330 metres
year to date). For the remainder of the year, the geology team will
be working on upgrading the resources on the licence to meet the
Kazakhstan State Commission for Mineral Reserves reserve
definitions, with the objective of converting the resources found
on the exploration licence to a mining license.
CORPORATE ACTIVITIES
Fully subscribed rights offering yielding $1.8 billion in gross
proceeds completed
In July 2012, the Company closed its rights offering in which
all existing shareholders, subject to applicable law, were able to
participate on an equal, proportional basis in purchasing
additional common shares of the Company. The offering generated
approximately $1.8 billion in gross proceeds, which will be used to
advance the construction and development of the Oyu Tolgoi
mine.
Upon the closing of the rights offering, the Company issued
approximately 259.6 million new common shares, which represents
100% of the maximum number of common shares that were available
under the rights offering.
Approximately 99.2% of the shares were taken up in the initial
subscription of the rights offering with the balance taken up in
the secondary subscription. Rio Tinto exercised all of its rights
and participated in the secondary subscription provision available
to all shareholders. Because the rights offering was
over-subscribed, Rio Tinto did not purchase any shares under its
standby commitment. On July 27, 2012, upon the closing of the
rights offering, Rio Tinto's stake in the Company increased from
50.9% to 51.0%. At September 30, 2012, Rio Tinto owned 50.9% of the
Company.
QUALIFIED PERSON
Disclosure of a scientific or technical nature in this MD&A
in respect of the Oyu Tolgoi mine was prepared under the
supervision of Mr. Richard Gosse, P.Geo., an employee of Turquoise
Hill and a "qualified person" as that term is defined in NI
43-101.
SELECTED QUARTERLY DATA
($ in millions of dollars, except per share
information) Quarter Ended
--------------------------------
Sep-30 Jun-30 Mar-31 Dec-31
2012 2012 2012 2011
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Revenue $23.8 $28.2 $40.2 $51.0
Cost of sales (57.2) (49.7) (30.4) (44.2)
Exploration expenses (55.3) (65.1) (76.8) (88.2)
General and administrative (18.3) (81.0) (31.5) (34.6)
Financing costs - (168.7) - -
Foreign exchange gains (losses) 13.9 (8.7) 9.9 13.3
Change in fair value of derivative 176.2 18.5 - -
Change in fair value of embedded derivatives 12.9 26.8 (0.8) 10.8
Net income (loss) from continuing operations
to parent 114.3 (285.9) (80.6) (85.8)
Income (loss) from discontinued operations
to parent - - - -
Net income (loss) attributable to parent 114.3 (285.9) (80.6) (85.8)
Net income (loss) per share - basic
Continuing operations $0.12 ($0.35) ($0.10) ($0.04)
Discontinued operations $0.00 $0.00 $0.00 $0.00
Total $0.12 ($0.35) ($0.10) ($0.04)
Net income (loss) per share - diluted
Continuing operations $0.12 ($0.35) ($0.10) ($0.04)
Discontinued operations $0.00 $0.00 $0.00 $0.00
Total $0.12 ($0.35) ($0.10) ($0.04)
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Sep-30 Jun-30 Mar-31 Dec-31
2011 2011 2011 2010
----------------------------------------------------------------------------
Revenue $60.5 $47.3 $20.2 $41.6
Cost of sales (54.0) (49.7) (20.3) (46.4)
Exploration expenses (79.6) (68.6) (46.2) (59.6)
General and administrative (21.4) (19.5) (25.3) (46.4)
Foreign exchange gains (losses) (35.6) 2.3 3.2 6.6
Change in fair value of derivative - - (432.5) 135.7
Change in fair value of embedded derivatives 62.1 70.4 (36.8) (20.0)
Gain on settlement of note receivable 103.0 - - -
Net income (loss) from continuing operations
to parent 16.4 0.6 (492.5) 37.3
Income (loss) from discontinued operations
to parent (9.1) - - -
Net (loss) income attributable to parent 7.3 0.6 (492.5) 37.3
Net income (loss) per share - basic
Continuing operations $0.02 $0.00 ($0.73) $0.06
Discontinued operations ($0.01) $0.00 $0.00 $0.00
Total $0.01 $0.00 ($0.73) $0.06
Net income (loss) per share - diluted
Continuing operations $0.02 $0.00 ($0.73) $0.06
Discontinued operations ($0.01) $0.00 $0.00 $0.00
Total $0.01 $0.00 ($0.73) $0.06
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About Turquoise Hill Resources
Turquoise Hill Resources (NYSE:TRQ)(NASDAQ:TRQ)(TSX:TRQ),
formerly Ivanhoe Mines, is an international mining company focused
on copper, gold and coal mines in the Asia Pacific region. The
company's primary operation is its 66% interest in the Oyu Tolgoi
copper-gold-silver mine in southern Mongolia, which is expected to
begin commercial production in the first half of 2013. Other assets
include a 58% interest in Mongolian coal miner SouthGobi Resources
(TSX:SGQ)(HK:1878); a 59% interest in copper-gold miner Ivanhoe
Australia (ASX:IVA)(TSX:IVA); and a 50% interest in Altynalmas
Gold, a private company developing the Kyzyl Gold Project in
Kazakhstan.
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Forward-looking statements
Certain statements made herein, including statements relating to
matters that are not historical facts and statements of Turquoise
Hill'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 United States Private Securities Litigation Reform Act of 1995.
Forward-looking information and statements 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; proposed acquisitions and
dispositions of assets; discussions with third parties respecting
material agreements; statements concerning the schedule for
carrying out and completing construction of the Oyu Tolgoi mine;
the statement that first concentrate production at Oyu Tolgoi will
follow within one month of the commissioning of the ore-processing
equipment and the commencement of commercial production is expected
three to five months thereafter; the statements concerning the
expected timing of initial production from the Hugo North
block-cave mine; statements regarding the timing of completion of
Lines #1 and #2 of the concentrator; statements concerning the
expected markets and contracts for concentrate produced at the Oyu
Tolgoi mine; statements concerning the underground feasibility
study expected release date in the first half of 2013;
statements concerning capital approvals for underground
development likely being approved in distinct stages; statements
related to the expected final phase-one capital costs of the Oyu
Tolgoi mine; initial production estimates; the Oyu Tolgoi mine's
anticipated yearly production of copper and gold; statements
regarding the aim of raising $3 billion to $4 billion in project
financing and the anticipation that the funding will occur in first
half of 2013; statements concerning the use of proceeds from the
rights offering; target milling rates, mining plans and production
forecasts for the coal mine at Ovoot Tolgoi; the statement that
SouthGobi's operations will likely remain curtailed in Q4'12; the
statements concerning the cost savings expected as a result of
Ivanhoe Australia's strategic review; the statements concerning the
Ivanhoe Australia's need for additional funds to develop its
projects; the statements that Ivanhoe Australia is expecting two
further concentrate sales in Q4'12; statements concerning expected
2012 production throughput at the Osborne processing plant;
statements concerning the awarding of an underground and mining and
maintenance contract in November 2012 and full implementation in
Q1'13; statements concerning the expectation of receiving A$14.6
million within the next seven days in cash consideration for the
sale of 55.0 million Exco shares; statements concerning the
objective of upgrading the resources on the Kyzyl Gold Project
exploration licence to a mining licence; the statement that the
memorandum of agreement is expected to cover the project capital
requirements for the Oyu Tolgoi mine for the next several years;
the impact of amendments to the laws of Mongolia and other
countries in which Turquoise Hill carries on business, particularly
with respect to taxation; statements concerning foreign-exchange
rate volatility; statements concerning global economic expectations
and future demand for commodities; and the anticipated timing, cost
and outcome of plans to continue the development of non-core
projects, and other statements that are not historical facts.
All such forward-looking information and statements are based on
certain assumptions and analyses made by Turquoise Hill's
management in light of their experience and perception of
historical trends, current conditions and expected future
developments, as well as other factors management believes are
appropriate in the circumstances. These statements, however, are
subject to a variety of risks and uncertainties and other factors
that could cause actual events or results to differ materially from
those projected in the forward-looking information or statements.
Important factors that could cause actual results to differ from
these forward-looking statements include those described under the
heading "Risks and Uncertainties" elsewhere in the Company's
MD&A. The reader is cautioned not to place undue reliance on
forward-looking information or statements.
The MD&A also contains references to estimates of mineral
reserves and mineral resources. The estimation of reserves and
resources is inherently uncertain and involves subjective judgments
about many relevant factors. The accuracy of any such estimates is
a function of the quantity and quality of available data, and of
the assumptions made and judgments used in engineering and
geological interpretation, which may prove to be unreliable. There
can be no assurance that these estimates will be accurate or that
such mineral reserves and mineral resources can be mined or
processed profitably. Mineral resources that are not mineral
reserves do not have demonstrated economic viability. Except as
required by law, the Company does not assume the obligation to
revise or update these forward-looking statements after the date of
this document or to revise them to reflect the occurrence of future
unanticipated events.
Contacts: Turquoise Hill Resources Investors Jason Combes +1 604
648 3920jason.combes@turquoisehill.com Turquoise Hill Resources
Media Tony Shaffer +1 604 648 3934tony.shaffer@turquoisehill.com
www.turquoisehill.com
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