Annual Oyu Tolgoi Mine Visit. November 8-10, 2016

Transcription

1 Annual Oyu Tolgoi Mine Visit November 8-10, 2016

2 Forward-looking statements This presentation includes certain forward-looking information within the meaning of applicable Canadian securities legislation and forward-looking statements within the meaning of the safe harbour provisions of the United States Private Securities Litigation Reform Act of All statements and information, other than statements of historical fact, are forward-looking statements and information that involve various risks and uncertainties. There can be no assurances that such statements or information will prove accurate and actual results and future events could differ materially from those expressed or implied in such statements. Such statements and information contained herein, which include, but are not limited to, statements respecting anticipated business activities, planned expenditures, corporate strategies and other statements that are not historical facts, represent the Company s best judgment as of the date hereof based on information currently available. The Company does not assume any obligation to update any forward-looking statements or information or to conform these forward-looking statements or information to actual results, except as required by law. For a more detailed list of specific forward-looking statements and information applicable to the Company, refer to the Forward-Looking Information and Forward-Looking Statements sections of the Annual Information Form dated as of March 15, 2016 in respect to the year ended December 31, All amounts are in U.S. dollars, unless otherwise stated. 2

3 Annual Oyu Tolgoi Mine Visit NOVEMBER 8-10, 2016 Oyu Tolgoi underground mine briefing

4 Hugo North and South Progression

5 Execution Hugo North Lift 1 (NHL1) Underground Mine Physical infrastructure Underground mine able to produce 95ktpd. Five shafts (personnel and equipment access and ventilation). Material handling system (crushers and underground conveyors to transport ore to the surface overland conveyor). Concentrator upgrade to handle higher copper content of underground ore. Associated surface infrastructure (underground mining offices, control room and associated facilities). + Operational capability Underground operations team (production + ongoing construction + maintenance + technical services). Mongolian workforce with appropriate expatriate support). Safety systems and supporting safe work procedures. Training systems and capability Cave management system, including appropriate technical oversight. Asset management systems Support and logistics (major supply contracts and contractors). 5

6 Expansion Scope Key aspects Development of HNL1, by panel cave mining method High grade ore body ~2km long and 280m wide, containing 499Mt ore at 1.66% copper, 0.34g/t gold >200km of underground lateral development Five vertical shafts and a decline incorporating conveyor to surface Concentrator upgrade to enable processing of higher-grade feed Associated surface infrastructure 6

7 Key underground components Shaft 1 (early development and ventilation) Shaft 2 (production and ventilation) Shaft 5 (ventilation) Shaft 3 (ventilation) Shaft 4 (ventilation) Total Depth 1,385 metres 1,284 metres 1,178 metres 1,148 metres 1,149 metres Diameter 6.7 metres 10 metres 6.7 metres 10 metres 11 metres Completion 2008 Expected 2016 Expected 2017 Expected 2021 Expected 2021 Remaining Complete ~100 metres ~1,000 metres Not started Not started Lateral Development (includes conveyor development) Underground Development km completed 65km to first draw bell ~200km over life of mine

8 Ore Flow 8

9 Geotechnical Hugo North orebody is Highly faulted Fair rock mass strength Relatively high insitu (horizontal) stresses and abutment stresses This is good for promoting caving and minimising secondary breaking The challenge and key focus for the Oyu Tolgoi design and operating plan is around Maintaining stability of orebody development drives Managing draw interaction and draw control 9 9

10 Cave support Ground Support Fair to good rockmass, static conditions High stress environment Major faults and weak rock mass Major faults and strain burst prone rockmass ground support regime Minimum 2.4m bolt and shotcrete Add mesh; cables and Add cables and Add yieldable support 10 10

11 Cave monitoring Cave growth and flow monitoring systems will be in place before start up of the undercut: Seismic system TDR and open holes Smart/network markers Cave Tracker Regular surface subsidence monitoring will be carried out 11

12 Cave management Single data repository Real-time hazard recognition Standardised cave management systems Reports CaveCad Collecting, validating, processing, analyzing and reporting data automatically Pillar stability 3D analysis and reporting HOD Convergence High Medium Low Integrated system; reduces the process of collecting, analysing and reporting significantly Rio Tinto Technology & Innovation

13 Undercut Undercut blasted in advance of drawpoint and drawbell excavation Undercut face length < 350m and retreats at > 80m per year Undercut lead/lag is 10m Undercut face orientation + drives favourable to stress and structure Undercut 13

14 Undercut APEX To Drill 28m Drilling 28m Blasting 17m UNDERCUT 17m EXTRACTION 28m The Wide W has significant benefits over traditional Small W Improved stability Improved operability 14

15 Extraction Drawbell Ore Pass Steel Set Drawpoint Extraction Drift 28m Drawbell blast 12 m 15m IDZ 10 m Vent Raise Mine Spacing Fragmentation Andina 26m x 13m Very Fine New Afton 28m x 15m Fine Oyu Tolgoi 28m x 15m DOZ 30m x 18m Mid Palabora 34m x 17m Coarse Fine (Expected) 15

16 Ore Handling Shaft #2 10m dia service and production shaft 2 x 60t skips 1,630tphr (~19hr/d) 30kt/d 16

17 Ore Handling Conveyor to Surface 3 x 2.2km legs 1,600mm wide 6m/s 6,500 tphr 2 x 6 MW gearless drives each leg Commission six months before 30kt/d 30kt/d 95kt/d 17

18 Annual Oyu Tolgoi Mine Visit NOVEMBER 8-10, 2016 Oyu Tolgoi open-pit operations Steve Jones Acting CEO, Oyu Tolgoi

19 Production achievements All injury frequency rate (per 200,000 hours worked) Total material mined ('000 tonnes) % 2016 YTD vs ,032 27% 2015 vs ,919 91,771 71, YTD Industry-leading safety performance YTD Strong haul truck utilization instrumental in material mined growth Concentrator throughput ('000 tonnes) Concentrate production ( 000 tonnes) 20,317 70% 2015 vs ,872 34,537 28, % 2015 vs YTD Multiple productivity initiatives have led to improved throughput YTD Operational improvements key to increased concentrate production 19

20 Oyu Tolgoi s Q3 16 cost curve position C/lb, 2016$ copper mine C1+royalties+sustaining normal cost curve 300 Oyu Tolgoi Other Mines Q1 Q2 Q3 Q ,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 kt Cumulative production ( 000 tonnes) -100 Source: Wood Mackenzie (Q3 16 Cost Service). Oyu Tolgoi production in line with full-year guidance released November 3, Oyu Tolgoi costs calculated as C1 costs + royalty expenses + sustaining cash capital including deferred strip presented in the release of November 3,2016. Wood Mackenzie costs are Normal C1 cost + royalties + sustaining capex, range capped at -100/lb & 400/lb for base, highly probable and probable mines only. 20

21 Managing current ore grade challenges Open pit Phase 1 finished and Phases 2 and 3 nearly complete Lower-grade Phase 6 and stockpile ore processed from mid-2016 to mid-2018 Waste movement from Phase 4 critical to uncover medium-grade ore in 2017, then higher-grade ore beginning in mid Ore (Phase 6, Stockpiles) Primary Crusher Waste Dumps Tailings Facility Final Open Pit Ore (Phase 4/5) Current Ore (Phase 2/3) 21

22 Continued focus on reducing cash costs Business improvement programs have been in place since 2014 delivering value across productivity, operating costs, sustaining capex and working capital. The program values one-off savings, sustaining capital reductions and net working capital (NWC) reductions at 10% of face value. Source: Oyu Tolgoi Program is key platform for ensuring Oyu Tolgoi open-pit operations remain free cash flow positive. 22

23 Annual Oyu Tolgoi Mine Visit NOVEMBER 8-10, 2016 Oyu Tolgoi underground development Marco Pires Chief Development Officer Oyu Tolgoi Underground

24 Unlocking value through underground project First drawbell production expected in mid-2020 with full ramp-up by 2027 Average of 560,000 tonnes of copper from open pit and underground First quartile, low-cost operation Oyu Tolgoi Technical Report 24

25 Oyu Tolgoi underground a Tier 1 asset C/lb, 2016$ copper mine C1+royalties+sustaining normal cost curve Q1 Q2 Q3 Q4 300 Oyu Tolgoi Other Mines ,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 kt Cumulative production ( 000 tonnes) -100 Source: Wood Mackenzie (Q3 16 Cost Service) Oyu Tolgoi Technical Report. Turquoise Hill Resources. Normal C1 cost + sustaining capex, range capped at -100/lb & 400/lb for base, highly probable and probable mines only. Oyu Tolgoi costs and volumes for

26 Panel block cave development Highly productive mass mining method with low operating costs. Substantial upfront investment and lower operating costs make block caving suitable for larger deposits. Resource recovery is effective as the low operating costs support economic extraction of a lower shutoff grade. Primary blasting is only required on a small percentage of the orebody, on the undercut level. Following this, ore is broken by gravity and flows into drawbells beneath. Ore is extracted by load-haul-dump machines. Oversize rocks that block drawbells are removed by secondary breaking. 26

27 Robust mine design Footprint size 2,000m x 280m and 1,300m below surface 203km tunnel, 137,000m 3 mass excavation Five shafts (three air intake and two exhaust) Advance undercut, wide W profile with anti-socket drive, 567,000m 2 2,231 drawpoints (El Teniente layout), 28m x 15m spacing, central LHD tip Steel-lined ore-passes to truck haulage levels, trucks dump into one or two crushing systems Ore handling by conveyor-tosurface, Shaft 2 hoisting as contingency 27

28 Complete ramp-up expected by 2027 Sustainable underground production Complete convey to surface Project re-start 1st draw bell firing Complete concentrator upgrade Complete ramp-up Pre-start Excavation (lateral / mass / vertical) Excavation (lateral) Undercutting Extraction level access Extraction level access Material handling (conveyto surface + crushers + shafts) Surface infrastructure Concentrator upgrade Expansion capital Sustaining capital Timeline is illustrative only and subject to change 28

29 Key underground components Shaft 1 (early development and ventilation) Shaft 2 (production and ventilation) Shaft 5 (ventilation) Shaft 3 (ventilation) Shaft 4 (ventilation) Total Depth 1,385 metres 1,284 metres 1,178 metres 1,148 metres 1,149 metres Diameter 6.7 metres 10 metres 6.7 metres 10 metres 11 metres Completion 2008 Expected 2016 Expected 2017 Expected 2021 Expected 2021 Remaining Complete ~100 metres ~1,000 metres Not started Not started Lateral Development (includes conveyor development) Underground Development km completed 65km to first draw bell ~200km over life of mine

30 Processing plant upgrade Concentrate from Hugo North Lift 1 ore Higher copper grade Higher recovery Chalcopyrite/bornite Plant upgrade Addition of 5 th ball mill Additional flotation line Additional concentrate filtering and bagging capacity Plant capacity of 40 million tonnes per year Capex = ~$145 million (direct cost) Expected to be complete in

31 Approved underground CAPEX $1.2 $1.2 $1.3 $1.0 $0.8 $0.5 $0.5 $0.3 $0.4 $0.3 $0.4 $0.4 Underground expansion capital, VAT and escalation of $5.3 billion Underground sustaining capital, VAT and escalation of $2.8 billion to full ramp-up expected in

32 Underground contracts awarded to date Key Contracts Awarded Description Supplier Group Contractor EPCM Onshore National Jacobs Key contracts split EPCM Offshore International Jacobs Boxcut and Decline (C2S) Explosives Supply and Services Shafts 2 and 5 Execution Underground Development Services National National National National Theiss Khishig Arvin JV Maxam Explosives DCM DCM Mine Support Services National DCM International 60% National 40% Construction Camp Modules Supply Critical Facilities Execution International National MCC MCS 32

33 Strong project momentum Currently Workforce ~1,600 Major contracts fully mobilized Lateral development occurring as planned Boxcut well advanced Steady progress of sinking Shafts 2 and 5 Expected by 2017 Workforce of ~2,400 Dual decline commenced Decline box cut Left: belt conveyor ramp Right: service ramp 33

34 Annual Oyu Tolgoi Mine Visit NOVEMBER 8-10, 2016 Oyu Tolgoi s long-term potential Jeff Tygesen, Chief Executive Officer Steeve Thibeault, Chief Financial Officer Brendan Lane, Vice President Operations and Development

35 Achievements May 2015 Underground Development Plan approved August 2015 Underground pre-start activities begin December 2015 Project finance facility signed May 2016 Notice to proceed and 2016 Feasibility Study approved June 2016 Drawdown of project finance facility August 2016 First underground blast October Oyu Tolgoi Technical Report published 35

36 Long-term copper fundamentals strong Copper mine supply/demand outlook (Mt) Copper market likely to be in balance in Base Highly Probable Primary Demand Forecast Ongoing attrition at existing mines driven by declining grade Continued demand growth requires new capacity in the medium-term 10 5 Market anticipates surplus in before moving into deficit from Source: Wood Mackenzie (Q3 16 Long-Term Outlook) China now largest buyer of gold and continues to be largest consumer of copper 36

37 2016 Reserves Case 2016 Reserves Case Mining Areas Concentrator capacity 40mtpa, 10% above nameplate capacity Open pit utilized to top-up concentrator Underground ramp-up to full production (~33mtpa) expected Highest grade ore mined first initial underground copper grades expected at 2.5% Plant After 2039, open-pit head grades average ~ 0.45% copper Opportunities to reduce construction time, faster rampup and increase underground production >95ktpd 37

38 Alternative Production Cases Plant 38

39 2016 Resources Case 2016 Resources Case Processing Production Assumes concentrator capacity of 40mtpa for life Base Case NPV 8% $8.37 billion 1 Expansion capital costs $9.73 billion 2 Plant 1. Base case NPV8% assumes $3.00/lb copper and $1,300/oz gold 2. Expansion capital costs inclusive of 2016 Reserves Case expansion capital. Expansion capital costs include only direct project costs and exclude interest expense, capitalized interest, debt repayments, tax pre-payments and forex adjustments. In all cases, total capital cost excludes capital costs for the year Expansion capital for 2016 excluded is $0.46 billion. 39

40 Resources 50 Case Resources 50 Case Processing Production Concentrator creep from 40mtpa to 50mtpa with little capital Assumes 5% improvement in concentrator capacity per year for five years Base case NPV 8% $9.32 billion 1 Expansion capital costs $9.73 billion 2 Plant 1. Base case NPV8% assumes $3.00/lb copper and $1,300/oz gold 2. Expansion capital costs inclusive of 2016 Reserves Case expansion capital. Expansion capital costs include only direct project costs and exclude interest expense, capitalized interest, debt repayments, tax pre-payments and forex adjustments. In all cases, total capital cost excludes capital costs for the year Expansion capital for 2016 excluded is $0.46 billion. 40

41 Resources 100 Case Resources 100 Case Processing Production Assumes ~Year 20, concentrator expanded to 100mtpa Base Case NPV 8% $8.88 billion 1 Expansion capital costs $13.47 billion 2 Plant 1. Base case NPV8% assumes $3.00/lb copper and $1,300/oz gold 2. Expansion capital costs inclusive of 2016 Reserves Case expansion capital. Expansion capital costs include only direct project costs and exclude interest expense, capitalized interest, debt repayments, tax pre-payments and forex adjustments. In all cases, total capital cost excludes capital costs for the year Expansion capital for 2016 excluded is $0.46 billion. 41

42 Resources 120 Case Resources 120 Case Processing Production Assumes ~Year 20, concentrator expanded to 120mtpa Base Case NPV 8% $8.80 billion 1 Expansion capital costs $14.86 billion 2 Plant 1. Base case NPV8% assumes $3.00/lb copper and $1,300/oz gold 2. Expansion capital costs inclusive of 2016 Reserves Case expansion capital. Expansion capital costs include only direct project costs and exclude interest expense, capitalized interest, debt repayments, tax pre-payments and forex adjustments. In all cases, total capital cost excludes capital costs for the year Expansion capital for 2016 excluded is $0.46 billion. 42

43 Cost sensitivity options 1 Underground construction capital reduced by 30% 2 Operating costs reduced by 15% 3 G&A costs assumed to reach long-term average cost of $50 million from Year 7 4 Rail freight available to project after 2020 and concentrate freight cost is reduced to $25 per tonne 43

44 Oyu Tolgoi a long-term growth opportunity Open pit performing as expected in low gold areas Demonstrated productivity and cost improvements Underground development progressing Long-term development optionality and plant expansion opportunities Oyu Tolgoi best copper asset in development today 44