[BREAKING: OT presents underground FS to board, to seek further clarification on $30m tax ruling]

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Monday, September 22, 2014

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Turquoise Hill Provides Update on Mongolian Tax Authority Ruling and Tailings Thickener Rake Repair

VANCOUVER, BC--(Marketwired - September 22, 2014) - Turquoise Hill Resources (NYSE:TRQ) (NASDAQ:TRQ) (TSX:TRQ) today announced that it has completed a detailed review of the tax ruling of the Tax Dispute Resolution Council of the Mongolian General Taxation Department issued on September 10, 2014. The ruling has reduced the amount of tax, interest and penalties claimed to be payable by Oyu Tolgoi LLC, from approximately USD $127 million to approximately USD $30 million.

While this significant reduction is welcome, there are aspects of the ruling that require further clarification. Oyu Tolgoi LLC will continue to work with the Mongolian Tax Authority to obtain further clarity on some of the findings in the ruling.

Turquoise Hill, Rio Tinto and the Government of Mongolia continue to engage in order to resolve outstanding shareholder issues.

Tailings Thickener Rake Repair

The repair of the rake and re-commissioning of the Oyu Tolgoi tailings thickener are progressing well with work scheduled to be complete by September 30, 2014. The investigation found that operational issues combined with fabrication-quality problems led to the failure of the rakes. Relevant operational controls and protections have been reviewed and changes implemented on both thickeners.

During the repair period, the concentrator has continued to run at approximately 60% throughput.

Link to release

 

Oyu Tolgoi Finalizes Underground Feasibility Study

VANCOUVER, BC--(Marketwired - September 22, 2014) - Turquoise Hill Resources (NYSE:TRQ) (NASDAQ:TRQ) (TSX:TRQ) today announced that the 2014 Oyu Tolgoi Feasibility Study (the "Feasibility Study") has been finalized and presented to the board of directors of Oyu Tolgoi LLC. The Feasibility Study includes analysis of two production cases - the 2014 Reserve Case and the 2014 Life of Mine (LOM) Case.

The 2014 Reserve Case includes mineral reserves from the Southern Oyu Tolgoi open pit and the Hugo North Lift 1 block cave. The LOM Case reflects the development flexibility that exists with respect to later phases of the Oyu Tolgoi deposits (Heruga, Hugo South, and the second lift of Hugo North), which will require separate development decisions in the future based on then prevailing conditions and the development experience obtained from developing and operating the initial phases of the Oyu Tolgoi Project (the "Project"). Accordingly, the 2014 LOM Case is effectively a preliminary economic assessment under National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101") and therefore does not have as high a level of certainty as the 2014 Reserve Case. The 2014 LOM Case is preliminary in nature and includes Inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the 2014 LOM Case will be realized.

In August 2013, development of the underground mine was delayed to allow matters with the Government of Mongolia to be resolved. Further underground development is subject to resolution of shareholder issues, approval of the Feasibility Study by Oyu Tolgoi's shareholders and the Mongolian Minerals Council, agreement of a comprehensive funding plan including project finance, and receipt of all necessary permits.

An updated NI 43-101 compliant independent technical report relating to the Project, prepared by OreWin Pty Ltd, will be filed by Turquoise Hill within 45 days of this announcement. The technical report will update the Project's mineral resources and mineral reserves and will be available under Turquoise Hill's profile on SEDAR at www.sedar.com. Highlights of the technical report to be filed, based on data contained in the Feasibility Study, are as follows:

·         An updated mineral resource model and estimate for the Hugo North deposit. The updated mineral resource estimate is similar to and confirms the previous estimates contained in the Oyu Tolgoi Technical Report dated as of March 25, 2013 (the "2013 OT Technical Report"). Mineral resource models for the other Oyu Tolgoi deposits have remained the same.

·         Updated mineral reserve estimates are broadly in line with previous estimates. The open pit allows for depletion from 2013 and modified underground dilution and mining loss assumptions resulting in lower grades and mining recovery.

·         Underground ore handling will be conveyed to surface via decline, which opens the Project to additional production flexibility and future optionality. The new mine plan will make use of the existing shafts and the planned shafts that were defined in the 2013 OT Technical Report.

·         The reduced Project NPV was the result of delay (NPV8% US$0.8 billion) and a reduction due to more cautious cave performance assumptions, which led to a reduction in recovered metal and a slowing of ramp-up of the cave (NPV8% US$1.5 billion).

·         Underground block cave mine production remains at 95,000 tonnes per day.

·         The plant rate for both cases is the current nominal 100,000 tonnes per day.

·         Expansion capital of US$4.9 billion for the underground project, which is in line with the US$5.1 billion estimate contained in the 2013 OT Technical Report (excludes US$0.5 billion of capital spent in 2013 and 2014).

2014 Reserve Case Summary Production and Financial Results

Description	Units	2014 Reserve Case Mineral Reserves
Total Processed	Bt	1.5
Cu Grade	%	0.85
Au Grade	g/t	0.32
Ag Grade	g/t	1.94
Copper Recoverable	Billion lb	24.9
Gold Recoverable	Moz	11.9
Silver Recoverable	Moz	78.0
Life	Years	41
Expansion Capital	US$B	4.9
NPV (8%) After Tax	US$B	7.43
IRR After Tax	%	29%
Payback Period	Years	9

Notes:

…

2014 LOM Case Summary Production and Financial Results

Description	Units	2014 LOM Case
Total Processed	Bt	3.5
Cu Grade	%	0.83
Au Grade	g/t	0.32
Ag Grade	g/t	2.08
Copper Recoverable	Billion lb	56.5
Gold Recoverable	Moz	27.9
Silver Recoverable	Moz	195.2
Life	Years	94
NPV (8%) After Tax	US$B	8.6
IRR After Tax	%	28%
Payback Period	Years	9

Notes:

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2014 Mineral Reserves

Deposit	Ore (Mt)	Cu (%)	Au (g/t)	Ag (g/t)	Recovered Metal
					Copper (Mlb)	Gold (koz)	Silver (koz)
Southern Oyu Tolgoi
Proven	410	0.54	0.42	1.38	3,829	3,952	13,768
Probable	621	0.40	0.24	1.13	4,363	3,233	17,122
Mineral Reserve (Proven + Probable)	1,031	0.45	0.31	1.23	8,192	7,186	30,890
Hugo Dummett
Probable (Hugo North - OT LLC)	464	1.66	0.34	3.37	15,592	4,199	43,479
Probable (Hugo North - EJV Shivee Tolgoi)	35	1.59	0.55	3.72	1,121	519	3,591
Mineral Reserve (Probable) (All Hugo North)	499	1.66	0.35	3.40	16,713	4,717	47,070
Oyu Tolgoi Project Mineral Reserve
Proven	410	0.54	0.42	1.38	3,829	3,952	13,768
Probable	1,120	0.96	0.29	2.14	21,075	7,951	64,192
Mineral Reserve (Proven + Probable)	1,530	0.85	0.32	1.94	24,905	11,903	77,960

Notes:

…

Hugo North Mineral Reserve Comparison 2013/2014			Ore  (Mt)		Cu  (%)		Au  (g/t)		Ag  (g/t)		Recovered Metal
											Copper (M lb)	Gold (koz)	Silver (koz)
2014 OTTR  Probable		OT LLC	464		1.66		0.34		3.37		15,592	4,199	43,479
		EJV Shivee Tolgoi	35		1.59		0.55		3.72		1,121	519	3,591
		All Hugo North	499		1.66		0.35		3.40		16,713	4,717	47,070
2013   OTTR Probable		OT LLC	460		1.80		0.37		3.74		16,759	4,602	47,647
		EJV Shivee Tolgoi	31		1.73		0.62		3.74		1,090	521	3,229
		All Hugo North	491		1.80		0.39		3.74		17,849	5,123	50,877
Difference		OT LLC	5		-0.14		-0.04		-0.36		-1,167	-404	-4,168
		EJV Shivee Tolgoi	4		-0.14		-0.07		-0.02		31	-2	361
		All Hugo North	8		-0.14		-0.04		-0.34		-1,136	-406	-3,807
% Difference		OT LLC	1.0%		-8.0%		-9.6%		-9.7%		-7.0%	-8.8%	-8.7%
		EJV Shivee Tolgoi	11.7%		-8.1%		-11.3%		-0.6%		2.8%	-0.4%	11.2%
		All Hugo North	1.7%		-8.0%		-9.4%		-9.1%		-6.4%	-7.9%	-7.5%

Notes:

…

Link to release

 

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