Development of the Oyu Tolgoi underground during Q2'13
Underground lateral development at the Hugo North Deposit continued with approximately 1,400 metres achieved during Q2'13. At June 30, 2013, the total distance excavated was approximately 14.9 kilometres.
Sinking of Shaft #2 continued during Q2'13. The depth of the shaft was approximately 1,160 metres below surface, 91% of its final depth, at August 9, 2013. Development of the first of the shaft stations commenced during Q2'13. Sinking activity for Shaft #5, the primary ventilation shaft for underground operations, progressed during Q2'13 and was at a depth of approximately 200 metres below surface, 17% of its final depth, at August 9, 2013.
The feasibility study for the expansion of the Oyu Tolgoi mine is on-going and expected to be complete in the first half of 2014. The feasibility study is assessing value engineering and optimization for the mine and will incorporate actual operating data as it becomes available.
Discussions with the Government of Mongolia
Turquoise Hill and its majority shareholder Rio Tinto plc (Rio Tinto) continue to have constructive discussions with the Government of Mongolia on a range of issues related to the implementation of the Investment Agreement. The Company and Rio Tinto continue to work with the Government of Mongolia to reach a common understanding and satisfactorily resolve the outstanding issues.
On April 17, 2013, Rio Tinto signed commitment letters with 15 global banks that locked in pricing and terms. These commitments will expire on December 12, 2013. In addition to the approval of the European Bank of Reconstruction and Development (EBRD) and the International Finance Corporation (IFC), the Oyu Tolgoi project financing has been conditionally approved by the boards of Export Development Canada, Australian Export Finance and Insurance Corporation, and Export-Import Bank of the United States. Turquoise Hill and Rio Tinto continue to be actively engaged with lenders to finalize project financing.
Discussions with the Government of Mongolia about project financing continue. The Company remains committed to project financing and is engaging with the Government of Mongolia with a goal of completing the transaction and beginning to draw from the facility by the end of 2013. However, funding and development of the Oyu Tolgoi mine's underground will be delayed until matters with the Government of Mongolia can be resolved. Operations of the open-pit mine, commissioning of the concentrator and the on-going export of concentrate from the Oyu Tolgoi mine will continue.
Oyu Tolgoi workforce
Employment at Oyu Tolgoi continues to focus on utilizing Mongolian men and women whose skills are being developed, and who are receiving training. Currently, approximately 89% of Oyu Tolgoi's employees are Mongolian nationals. Additionally, the number of Mongolians in senior leadership roles is increasing with the recent appointment of a number of individuals to the Oyu Tolgoi executive management team. Mongolians now occupy nearly 50% of all superintendent and specialist-level positions and over 35% of manager/principal roles.
Development and exploration drilling continued in Q2'13
At Hugo North Lift #1, 3,381 metres of infill drilling were completed during Q2'13. The drilling program has been reduced to one drill rig as it nears completion. The drilling is designed to bring the first seven years of production into the measured resource confidence category and is continuing into Q3'13. Optimization of the 2012 Hugo Dummett North resource model is being undertaken and is expected to be completed in Q3'13.
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