The significant increase in Covid-19 cases in Mongolia during the second quarter has had an adverse impact on the openpit operations and underground development progress of the Oyu Tolgoi mine.
Turquoise Hill Resources, which is majority owned by Rio Tinto, says that a series of lockdowns have limited the ability of Oyu Tolgoi to maintain normal roster changes for its workers. At certain points during the quarter, personnel numbers were below a quarter of planned requirements.
The additional 2021 development cost impact of the known Covid-19 delays up to June 30, is estimated to be about $100-million, the Canada-listed junior cautions.
Covid-19 restrictions impacted on the movement of international expertise, with no significant development progress reported on Shaft 3 and Shaft 4 during the quarter. Turquoise Hill says that further delays could impact the production ramp-up after Panel 0, which is the first panel for mining at the underground project.
Further, the engagements between Turquoise Hill, Rio Tinto and Mongolian authorities to resolve outstanding nontechnical undercut issues continue, although discussions were slowed as a result of the Covid-19 situation. A delayed resolution, Turquoise Hill says, will delay the expected timing for the initiation of the undercut, which would have a “material impact” on the project schedule, including the timing of sustainable production for Panel 0.
Any delay to the expected cash flows from the underground project will increase Turquoise Hill’s incremental funding requirement, the company cautioned.
Oyu Tolgoi is already at the centre of a protracted dispute between Turquoise Hill and Rio Tinto, over funding for the underground expansion of the mine. The companies in April reached a binding agreement over the funding disagreement.
Rio Tinto owns 51% of Turquoise Hill, which in turn owns 66% of the Oyu mine. The rest of the mine is owned by the Mongolia government.