JOHANNESBURG (miningweekly.com) – Rio Tinto subsidiary Turquoise Hill Resources has recorded a lower net income attributable to shareholders of $23.8-million in the quarter ended June 30, compared with $29.8-million during the corresponding quarter in 2016.

In a trading statement released on Monday, the company attributed its $6-million loss in net income to lower copper prices and lower gold sales, which were partly offset by adjustments made in recognition of additional deferred tax assets.

The sales for the quarter amounted to $188.9-million compared with $237.1-million in the second quarter of 2016, reflecting lower volumes of concentrates sold. This was partly offset by an increased cost of production owing to grade reductions.

Cash generated from operating activities before interest and taxes in the period under review was $51.5-million, compared with $161.6-million in the same period in 2016, mainly reflecting the impact of lower production and lower volumes of gold in concentrates sold.

The company noted that capital expenditure on property, plant and equipment was $205.2-million on a cash basis during the quarter, compared with $53.3-million in the corresponding period in 2016. Turquoise Hill attributed this principally to underground operations, with a lesser amount attributed to openpit capital activities.

Turquoise Hill’s cash and cash equivalents at June 30, 2017 amounted to about $1.4-billion.

OYU TOLGOI
Rio Tinto operates the Oyu Tolgoi copper-gold mine, in Mongolia, which is 66% owned by the diversified miner’s Turquoise Hill arm and 34% owned by the Mongolian government.

The company commented that mineralisation on the property consists of porphyry-style copper, gold, silver and molybdenum contained in a linear structural trend of deposits throughout this trend. They include, from south to north, the Heruga deposit, the Oyut deposit and the Hugo Dummett deposits.

Oyu Tolgoi is expected to be the world's third-largest copper mine at peak production in 2025. Copper production is expected to increase by more than 300% between 2017 and 2025 when Hugo North Lift 1 reaches peak production. Average production from 2025 to 2030 is expected to be more than 550 000 t/y of copper.

UNDERGROUND DEVELOPMENT PROGRESS
The main focus of underground development programmes during the quarter continued to be underground lateral development, the sinking of shafts 2 and 5, support infrastructure and the convey-to-surface system, which all progressed during the quarter. The company continues to expect production from the first draw bell in mid-2020 and sustainable first production in 2021.

Oyu Tolgoi spent $184.7-million on underground expansion during the period under review. As of June 30, 2017, total underground project spend since January 1, 2016 was $547.9-million. In addition, Oyu Tolgoi had further capital commitments of $1.1- billion as of June 30, 2017.

During the quarter, underground lateral development made “good progress”, with about 1.4 equivalent kilometres completed. Since the restart of development, a total of four equivalent kilometres of lateral development has been completed.

During the quarter under review, work at the 1 202 m level of Shaft 2 was completed. At the end of the period, sinking of the shaft was at 1 220 m; this will continue until the next level at 1 256 m. Shaft 2 sinking is expected to be complete in 2017 at a final depth of 1 284 m with fit out occurring over 2018.

Shaft 5 sinking progressed about 190 m during the second quarter. Turquoise Hill noted that the sinking of Shaft 5 began slower than expected owing to an extended construction restart period and lower productivity, with completion now likely in early 2018.

During the second quarter, sinking rates increased significantly beyond those seen in the first quarter of the year. The company stated that it expected consistent sinking rates for the balance of 2017.

When completed, Shaft 5 will be dedicated to ventilation, thereby increasing the capacity for underground activities. However, Turquoise Hill noted that, with “good early progress” and continued on-plan lateral development, the completion of Shaft 5 sinking in early 2018 was not expected to materially impact the lateral development plan.