Turquoise Hill's cash position, on a consolidated basis at June 30, 2013, was $103.3 million. As at August 12, 2013, Turquoise Hill's consolidated cash position was approximately $146.3 million.
OYU TOLGOI COPPER-GOLD MINE
Concentrator commissioning progresses and production ramp up continues during Q2'13
During Q2'13, commissioning of the concentrator progressed and concentrate production continued to ramp up. On July 9, 2013, Oyu Tolgoi commenced the shipping of concentrate to customers in China. The initial sale was for approximately 5,800 tonnes of concentrate. By the end of Q2'13, the concentrator had consistently achieved throughput above 70%. The concentrator is now consistently achieving throughput rates above 80% of design capacity. Recovery rates continue to improve (40 day averages as at August 9, 2013 were 80.7% for copper and 64.7% for gold) as operations at the concentrator stabilize. The production team is transitioning from a focus on achieving throughput rates and product quality to improvements in recovery rates. Concentrator production is now in a stabilization and optimization phase and is expected to reach design capacity in the second half of 2013.
As at September 1, 2013, the Oyu Tolgoi mine will have achieved the Commencement of Production, as defined in the October 2009 Investment Agreement between Turquoise Hill, Rio Tinto and the Government of Mongolia.
Oyu Tolgoi operational expectations for 2013
The Oyu Tolgoi mine will progressively ramp up during the second half of 2013 and is expected to produce between 75,000 and 85,000 tonnes of copper in concentrates for the year. The mine is expected to reach full capacity in the second half of 2013.
As of June 30, 2013, Oyu Tolgoi held 50,200 tonnes of concentrate in inventory. Concentrate inventory will build to the equivalent of four to eight weeks of production with shipments of finished product matching production rates by the end of 2013, when up to 36 truck convoys are expected to leave the mine site on a weekly basis.
In Q2'13, a total of approximately 14.6 million tonnes of material was moved from the open pit, approximately 3.2 million tonnes of ore was moved to the stockpile, approximately 3.7 million tonnes of ore was delivered to the crusher and approximately 3.9 million tonnes of ore was processed by the concentrator. Open-pit production rates were reduced during Q2'13 using stockpiled (2.4 million tonnes) and in-pit broken ore in order to preserve cash. Open pit mining activities are expected to ramp back up in Q3'13.
Construction of the open pit and concentrator complex were completed during Q1'13 and mine infrastructure is substantially complete. The building of the Oyu Tolgoi-Gashuun Sukhait road to an existing toll road continues and is expected to be complete in January 2014. The diversion of the Undai River is progressing and is substantially complete. The final cost for the initial development and construction will be approximately $6.2 billion, excluding foreign-exchange exposures.
Long-term sales contracts had been entered into for 75% of the Oyu Tolgoi mine's concentrate production over the first three to six years of production. A further contract was subsequently entered into for up to 25% of production. These contracts were conditional upon the Oyu Tolgoi mine achieving ore throughput of over 70% for 14 consecutive days. Oyu Tolgoi satisfied this production milestone in July 2013. Accordingly, contracts for up to 70% of total production are now enforceable, and sales under the terms of these contracts have commenced. However, for the remaining contract, the production condition was not met by the contracted deadline, and discussions are on-going with the customer about the future of this sales contract. Oyu Tolgoi is currently delivering concentrate under long-term sales contracts and spot market sales.
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