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http://zgm.mn/post/4585/

OT underground development expenses to total USD USD 1.3 billion

OT underground development expenses to total USD USD 1.3 billion
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http://zgm.mn/post/4585/
  • Shaft II, III development may slow down due to the virus preventing restrictions
  • Total operating cash costs USD 744.5 million, deteriorated by 5.2 percent compared with the same period of the previous year. This decrease was due to lower freight and royalty costs

Turquoise Hill Resources (TRQ) announced its financial result of 2019 last week. The company informed that the underground mining development plan has been changed in line with government measurements related to COVID-2019. In addition, TRQ noted that there would be a slowdown on the underground project, the full impact of which is unknown at this time. Also, the company assumes Shaft II and III development may go downwards due to the restrictions. Even though Oyu Tolgoi (OT) copper concentrate export has been continuing normally despite the border bans, the volume may be reduced due to disinfection and sanitizing activities. In 2019, copper production of the company reached 146,346 tons and gold production stood at 241,840 ounces. OT’s revenue has decreased by 1.2 percent to USD 1.2 billion in the same period. Total operating cash costs USD 744.5 million, deteriorated by 5.2 percent compared with the same period of the previous year. This decrease was mainly due to lower freight and royalty costs driven by lower volumes of concentrate sold and lower sales revenue respectively, and lower milling costs due to lower maintenance costs. Underground expansion capital for 2019 was USD 1.2 billion. TRQ reported, remaining project finance proceeds of USD 0.5 billion and USD 1.7 billion of cash and cash equivalents at the end of December 2019. TRQ presumes that completion of shaft construction was the most significant activity in 2019. Oyu Tolgoi is expected to produce 140,000 to 170,000 tonnes of copper and 120,000 to 150,000 ounces of gold in concentrates in 2020. Moreover, OT estimates its capital expenditure for 2020 on a cashbasis to be approximately USD 80 million to USD 120 million for open-pit operations and USD1.2 billion to USD1.3 billion for underground development. In February 2020, Oyu Tolgoi LLC submitted the Tavan Tolgoi Power Plant (TTPP) feasibility study to the Government of Mongolia. The project cost estimate of around USD 924 million. Therefore, underground mining development is likely to require extra funds between USD 1.2 billion to USD 1.9 billion regarding mining conditions.

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CGA: Coal export fell by 59.8 percent in Q1

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  • Mongolia exported 306,600 tons of copper concentrate as of March
  • Mongolia exported 2.05 million tons of iron ore in the first quarter, down 0.7 percent from a year earlier

In the first quarter, Mongolia exported 3.1 million tons of coal, a decrease of 59.8 percent compared to the same period of 2019. It lowered by 39 percent to USD 250.6 million in sales revenue. Currently, coal exports are recovering and coal is being exported through Gashuunsukhait, Shiveekhuren, Zamiin-Uud, and Khangii ports. However, the volume of coal export is less than usual. As of March, the country exported 306,600 tons of copper concentrate, decreased by 15.2 percent year on year. In terms of sales revenue, it dropped by 68 percent to USD 351.2 million. Although copper exports have not been disrupted due to the new restrictions followed by the coronavirus, declining copper prices at the global market have had a direct impact on Mongolia’s exports. During the reporting period, oil exports totaled 322,300 barrels, reaching USD 17.7 million, which is 80 percent less than the previous year. Oil exports are scheduled to begin on April 4, according to the Mineral Resources and Petroleum Authority of Mongolia (MRPAM). However, it plans to export about 20 cars of oil a day. In terms of its share in total exports, coal has decreased to 22 percent this year. Copper concentrate rose from 28 percent of total exports to 30.8 percent this year. As for other mineral products, exports of zinc concentrate fell by 16 percent to 36,900 tons in the first quarter. In total sales revenue, it decreased by 23 percent to USD 48.3 million. Tsairt Mineral LLC, one of the main exporters, was not affected by the new coronavirus infection, but the company said zinc prices were worse than expected this year. Mongolia exported 2.05 million tons of iron ore in the first quarter, down 0.7 percent from a year earlier. In terms of total sales revenue, it increased by 32 percent to USD 140.7 million. Iron ore prices are relatively favorable compared to the same period last year. 

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Xanadu Mines: Exploration at the Kharmagtai deposit was suspended in February

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On Tuesday, Xanadu Mines Ltd., copper and gold exploration company with several advanced exploration projects in Mongolia’s highly mineralised and vastly underexplored south Gobi region, made a statement related to the COVID-19 impact on its operation. The company’s main project, diamond drilling at the Kharmagtai deposit in Umnugovi province, temporarily halted in February. “We have not seen a significant impact on our business to date. However, although there are currently no restrictions on transportation locally, any further deterioration of the situation may result in quarantines and affect Xanadu’s ability to undertake exploration activities in the South Gobi,” the company said in a report. “It is not possible to estimate the impact of the outbreak’s near-term and longer effects or Governments’ varying efforts to combat the out-break and support businesses. This being the case, we do not consider it practicable to provide a quantitative or qualitative estimate of the potential impact of this outbreak on the Group at this time.” Subsequent to end of the financial year, the COVID-19 outbreak was declared a pandemic by the World Health Organization in March 2020. In March 2020, Mongolia reported its first transported case of COVID-19. As a response, the country closed its borders and halted all international flights. As of today, Mongolia had reported 14 cases of COVID-19. Xanadu also revised its 2020 action plan and canceled or postponed activities it considered unimportant. In 2020, the company aims to cut management spending by AUD 1.3 million, or 35 percent, from 2019. On March 24, 2020, the company announced that it entered into an earn-in agreement with Japan Oil, Gas and Metals National Corporation (JOGMEC) to sole fund up to USD 7.2 million in exploration expenditure at the Company’s Red Mountain copper-gold Project in Mongolia.

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Two more imported cases of COVID-19 registered

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The Ministry of Health and the National Center for Communicable Diseases on Wednesday reported that two more imported cases of COVID-19 have been detected in Mongolia. On March 28, the Republic of Korea sent a charter flight to repatriate its citizens in Mongolia and three family members of the staff of the Turkish Embassy in Mongolia arrived by the flight to Ulaanbaatar. “On March 28, three family members of the staff of the Turkish Embassy arrived by a flight of South Korea, but the two of them have been confirmed with COVID-19. Just after landing, they were immediately isolated and tested three days later. 10 people who had close contact with them as well as the others who served them have been also isolated for medical supervision and tests,” said General Director of the National Center for Communicable Diseases. 

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Gold purchase rises fourfold in Q1

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  • 3.6 tons of precious metals is gold and 1.7 tons is silver
  • As of february, foreign exchange reserves amounted to USD 4.3 billion. This is an increase of 0.22 percent from the previous month and 21 percent from the same period of the previous year 

In the first three months of this year, the central bank purchased 5.3 tons of precious metals, increasing fourfold from 1.2 tons in the same period last year. 3.6 tons of precious metals are gold and 1.7 tons is white silver. The dramatic decline in gold purchases in the first quarter of 2019 was mainly due to the uncertainty of the legal environment in royalties. It may have resulted in this year’s rise as well, according to the officials. In the first months of 2020, increase gold prices dominated. For example, in March, the average purchase price of gold was MNT 141,500 per ounce, which is about 30 percent higher than the same period of the previous year. In addition, the closure of passenger traffic may have restricted the smuggling of gold. Purchasing gold is one of the key instruments for the Mongolian central bank to increase its official foreign exchange reserves. As of February, foreign exchange reserves amounted to USD 4.3 billion. This is an increase of 0.22 percent from the previous month and 21 percent from the same period of the previous year. The central bank aims to increase the reserves to at least USD 6.5 billion in the medium term.