TORONTO (miningweekly.com) – Rio Tinto subsidiary Turquoise Hill Resources has declared 2015 net income attributable to shareholders of $313.3-million, or $0.16 a share, compared with net income of $26.9-million, or $0.01 a share, in 2014 – an increase of $286.4-million.

The Vancouver-based company advised that the increase was mainly attributable to a $210.2-million noncash impairment charge recorded in 2014 on the reclassification of its coal-focused subsidiary SouthGobi to assets held for sale, and a deferred tax asset of $165-million recognised in 2015, partially offset by adjustments for inventory write-down of $103.2-million.

Operating cash flow before interest and taxes in 2015 was $650.5-million, compared with $718.5-million in 2014, reflecting the impact of lower commodity prices on sales revenue, offset by the continued production and delivery cost improvements and effective working capital management.

Revenue of $1.6-billion in 2015 was down 5.8% year-on-year, reflecting lower copper and gold prices partially offset by higher volumes of copper-gold concentrate sales. Concentrate sold in 2015 of 819 800 t was 11.7% over 2014, reaching an all-time yearly high, the miner advised.

All-in sustaining costs in 2015 were $1.37/lb of copper, compared with $1.95/lb in 2014. The decrease was mainly owing to volume increases, cost optimisation and operational efficiencies, partly offset by reduced gold and silver credits per pound of copper produced, combined with the impact of nonrecurring and noncash items.

As at December 31, Turquoise Hill's cash and cash equivalents were about $1.3-billion.

Oyu Tolgoi was expected to produce 175 000 t to 195 000 t of copper and 210 000 oz to 260 000 oz of gold in concentrates for 2016.

Turquoise Hill advised that about 90% of Oyu Tolgoi's expected 2016 concentrate output had already been sold.

UNDERGROUND DEVELOPMENT
On December 14, Oyu Tolgoi signed a $4.4-billion project finance facility for the $6.8-billion underground expansion of its massive Oyu Tolgoi copper/gold mine, in Mongolia – one of the largest in the mining industry. The facility was provided by a syndicate of international financial institutions and export credit agencies representing the governments of Canada, the US and Australia, along with 15 commercial banks.

Turquoise Hill owned a 66% stake in the Oyu Tolgoi mine, with Mongolian government agency Erdenes Oyu Tolgoi holding the balance.

According to Turquoise Hill, underground prestart activities were under way in parallel with an update to the feasibility study capital estimate, which was expected to be complete before the end of the month.

Turquoise Hill, Rio Tinto and Oyu Tolgoi continued to work towards completing the 2016 feasibility study, including the updated capital estimate, and securing all necessary permits for the development of the underground mine. Once these steps had been completed, the full $4.4-billion facility would be drawn down by Oyu Tolgoi subject to satisfaction of certain conditions precedent typical for a financing of this nature. This was subject to the company boards' approval of a formal 'notice to proceed',

Net proceeds from the project finance facility, after fees and taxes, were expected to be about $4.1-billion and would be used by Oyu Tolgoi to pay down shareholder loans payable to Turquoise Hill. The net proceeds would then be available to be redrawn by Oyu Tolgoi for the development of the underground mine.

Turquoise Hill expected the notice-to-proceed decision for underground construction in the second quarter.

The long-stalled underground mine was expected to boost Mongolia's economy by a third when it reaches full capacity in 2021.

Before the project was suspended in August 2013, underground lateral development at the Hugo North deposit had advanced about 16 km off Shaft 1. The sinking of Shaft 2, the main operations access and the initial production hoisting shaft, had reached a depth of 1 168 m below surface, 91% of its final depth of 1 284 m.

The 96-m-high Shaft 2 concrete-head frame had been built and the sinking of Shaft 5, a dedicated exhaust ventilation shaft, had reached a depth of 208 m – 17% of its final depth of 1 174 m. Surface facilities, including offices and a workshop, were in place to support initial preproduction development and construction.

The Oyu Tolgoi mine had initially been developed as an openpit operation. A copper concentrator plant, with related facilities and necessary infrastructure to support a nominal throughput of 100 000 t/d of ore, had been built to process ore mined from the Southern Oyu openpit.

Long-term development plans for Oyu Tolgoi were based on a 95 000 t/d underground block-cave mine.