These are exciting days for Vancouver-based Turquoise Hill Resources (TSX:TRQ).
By the end of this month, the company’s massive Mongolian copper-gold mine, Oyu Tolgoi, which means Turquoise Hill in Mongolian, will begin commercial production and start shipping concentrate.
The mine, located in the southern Gobi region of Mongolia, is believed to be one of the 10 best copper-gold producing sites in the world.
Verified estimates peg the development at containing 46 billion pounds of copper and 25 million ounces of gold. An additional 55 billion pounds of copper and 37 million ounces of gold are recorded in inferred resources.
“It’s an amazing project, the size and scale of it,” said Kay Priestly, Turquoise Hill CEO.
“It’s a brand-new project in the Gobi desert. To be at the front end of this project is exciting.”
Thus far, Turquoise Hill has spent $6.5 billion (all values in U.S. currency) creating the soon-to-be producing open-pit mine.
The company plans to spend another $5.1 billion building an underground development on the site, scheduled for completion in 2016. Of the expected deposits, Priestly said about 80% of the value is located underground. A feasibility study illustrating more operating data on the underground mine is expected in the first half of next year.
To launch the project, Turquoise Hill entered into a landmark agreement with the Mongolian government in 2009. Conditions of the agreement gave the Mongolian government a 34% stake in the project. Turquoise Hill owns the remaining 66%.
The deal also included a significant employment mandate – 90% of the staff working on the mine must be native Mongolians. At the end of April, 89% of the 11,750 employees working on Oyu Tolgoi were Mongolian nationals. During peak construction periods in 2010 and 2011, about 18,000 people worked on the site.
But Oyu Tolgoi hasn’t just meant jobs for the Asian country – it’s fostered education opportunities and generated significant tax revenue as well.
To date, Turquoise Hill has committed $126 million to education and training programs in the country and Oyu Tolgoi has produced about $900 million in tax revenue.
“The impact on the people of Mongolia is significant,” said Priestly.
The company has, however, has had some difficulty working with its government partner. Recently, Mongolian president Tsakhia Elbegdorj expressed his anger over ballooning capital costs – original estimates had the open-pit mine costing just over $4 billion, not more than $6 billion – and the lack of Mongolian residents working in management positions at the mine.
But despite the recent political pushback, Priestly said she believes that Oyu Tolgoi will be a project that Turquoise Hill, investors and Mongolia will benefit from for decades.
“We published a technical report that found the mine had a 43-year life. This is a multi, multi decade project,” said Priestly.
Turquoise Hill currently ranks 63rd on BIV’s Top 100 public companies list. Last year, the company was 47th. BIV’s Top 100 list ranks companies based on revenue.
