Oyu Tolgoi had spent 4.5 billion USD on underground expansion at end2020

Oyu Tolgoi LLC published its “Year in Review 2020” report on Wednesday, revealing decreases in sales revenue, mill throughput, payment of taxes, and capital expenditure...

Oyu Tolgoi LLC published its “Year in Review 2020” report on Wednesday, revealing decreases in sales revenue, mill throughput, payment of taxes, and capital expenditure.

In 2020, the mining company earned sales revenue of 1.08 billion USD (down by 88 million USD year-on-year) from sales of 670,000 dry metric tons of concentrate with metal content of 138,000 tons of copper (2019: 150,000 tons), 150,000 ounces of gold (2019: 274,000 ounces), and 760,000 ounces of silver (2019: 896,000 ounces).

Open pit material mined diminished to 97.7 million tons in 2020 from 101.3 million tons in 2019 as mining advanced to the deeper benches of Phase 4B and Phase 6B resulting in longer haulage cycle times. Mill throughput dropped by 1 percent to 40.2 million tons due to slightly lower mill availability, according to the report.

Sustaining capital expenditure was 76 million USD lower in 2020 compared to 2019. This is mostly due to 43 million USD lower deferred stripping asset costs due to lower waste mined in 2020 as a result of change in mine sequencing prioritizing Phase 4B ore mining, 26 million USD lower sustaining capital projects, and 8 million USD lower maintenance componentization due to timing.

Underground capital expenditure was 1.01 billion USD in 2020, down by 184 million USD year-on-year due to lower spend resulting from COVID-19 related restrictions of incountry expatriate rotations. Total development capital expenditure on the underground project reached 4.5 billion USD since January 2016.

“Project to date commitments of 5 billion USD include the award of over 3.7 billion USD to national suppliers, exceeding the original target of 1.4 billion USD set in 2016 and the revised target 2 billion USD in 2018. Of direct contract awards, 1 billion USD was awarded to international suppliers. Contributions to local vendors through procurement and contract packages represent 78 percent of total project procurement commitments,” the new report read.

Taxes, fees and other payments made directly to the government of Mongolia amounted to 200 million USD in 2020, showing annual decline of 9 million USD. Oyu Tolgoi says this was resulted by a 6 million USD decrease in withholding tax payments (2020: 8 million; 2019: 14 million USD) due to a decreased onshore service driven by COVID-19 restrictions and 4 million USD reduction in employee related taxes due to lower social health insurance and personal income taxes paid from a decreased number of expatriates.

Last year, Oyu Tolgoi received 982 million USD (down by nearly 400 million USD from previous year) from related parties to finance underground construction, project finance interest payments and project finance principal repayments. Funds of 405 million USD were drawn as equity and 577 million USD as shareholder debt as compared to 645 million USD equity and 730 million USD debt in 2019. The amount called from related parties was lower than would otherwise have been required because cash flow generated from operations exceeded amounts spent on sustaining capital at existing operations, the report revealed. Total borrowings at year end were 11.45 billion USD.

Between 2010 and 2020, Oyu Tolgoi spent 24.1 trillion MNT (11.6 billion USD) in-country in the form of salaries, payments to Mongolian suppliers, taxes and other payments to the government of Mongolia. Total of 84 local suppliers provided goods and services to the miner in 2020. Between 2010 and 2020, Oyu Tolgoi spent 1.67 trillion MNT (672 million USD) on procurement from Umnugovi Province and 7.57 trillion MNT (3.54 billion USD) on national procurement.

Chairman of the Board of Directors of Oyu Tolgoi LLC, Ambassador G.Batsukh notes that the total 24.1 trillion MNT in-country spend to date demonstrates the project’s contribution to the economic and social development of the country.

Chief Development Officer Jacques van Tonder noted, “For the underground project, the new mine design was concluded, providing a clear pathway towards future development and ultimately, sustainable production. We also successfully transitioned the underground mining and functional teams from the underground project into existing operations. This transition is an important validation in the confidence we have as a leadership group that Oyu Tolgoi is ready to become an underground producer.”