Q3 2021 Turquoise Hill Resources Ltd Earnings Call
Good morning, ladies and gentlemen, and welcome to the Turquoise Hill third quarter financial results Conference call.
At this time all lines are in a listen only mode and following the presentation. We will conduct a question and answer session. If at any time. During this call you require immediate assistance. Please press star zero for the operator.
This call is being recorded today Wednesday November 3rd 2021, and I would now like to turn the conference over to Mr. Roy Mcdowall. Please go ahead Sir.
Thank you Michele good morning, I'm Roy Mcdowall head of Investor Relations and communications welcome to our third quarter 2021 financial results Conference call on Tuesday, We released our third quarter 2021 results press release, MD&A and financial statements. These items are available on our website and SEDAR.
With me today on the call it's used to both our interim CEO, Luke Colton, our CFO and Jo Anne Dudley Our C. O O. This call and presentation includes certain forward looking statements and information we refer you to the forward looking statements section of the annual information form dated March eight 2021.
Lamented by your MD&A, the three and nine months ended September 30th 2021.
Now I'd like to turn the call over to Steve.
Thank you Roy and good morning to everyone.
Thank you for joining us for our third quarter 2021 earnings call.
It was the one Luke and I will be available for Q&A following our presentation.
Please note slide two and three contains our cautionary statements and I will encourage you to read through them.
Turning to slide five.
The only two open pit and underground workforce posted an all injury frequency rate of 0.13 for the nine months ending September 32021, an improvement over the rate from the six months ended June 32021. This isn't impressed.
Achievement, considering the challenges posed by COVID-19.
The open pit operations continue uninterrupted through the quarter and produced 41 9000 tons of copper and over 130000 ounces of gold we are maintaining our 2021 production guidance of 150 to 180000 tonnes of copper.
And 400 to 480000 ounces of gold.
Although decided operated at less than 50% of its planned personnel levels in the third quarter due to the Covid personnel restrictions.
Team was able to make progress on the underground project.
The sinking of shaft four was restarted during the quarter and in October we began the commissioning of the material handling systems number one.
While the volume of content suite shipments to customers improved during Q3 versus Q2 Cy convinced we remained above target levels and consequently, we will maintain our force measure until that imbalance is corrected.
I'll stick Nicole undercut readiness activities have been completed in order to guide from a technical perspective.
<unk> ratings in July 'twenty, 'twenty, one to comments beyond the Cup.
On the commencement remains delayed by a number of factors, including the pending resolution of certain non technical criteria essential for the start of the <unk> operations.
Obtaining the approval of all Ot LLC board of directors.
Our additional investment to progress the underground development to.
To Green light the negotiations with the project finance lenders on debt re profiling.
Painting outstanding required regulatory approvals and securing an agreement on a path way to meet all of you to guide long term power requirements.
All of these issue are the subject of ongoing discussion between the company Rio Tinto and the government of Mongolia.
Having just returned from six weeks in Mongolia, where I was involved in negotiation I can't say that I was encouraged by the good effort of all parties to reach a solution. So that the underground development can achieve success through a process a.
Really beneficial cooperation.
I can also attest that all parties are aware of the urgent need to remove the obstacles to the start of the undercut prevent further delays and to preserve the economic value of the project.
To further that process Tru and Rio Tinto recently table, a comprehensive proposal with the government that we believe address the government T concerns and issues that the project remains a compelling value proposition for all partners.
From a financial perspective, our base case incremental funding requirement as increased to $3 6 billion at September 30th from two four at the end of Q2.
The increase reflects preliminary information provided by all of you to guide regarding the impact of the daily to the initiation of the undercut as well to add additional underground development capital of $140 million and known cost and known Covid cost impacts.
Our available liquidity of 0.8 billion is expected to be sufficient to fund the company's requirements.
Tuning funding of underground capital expenditure into Q3 2022.
Slide six.
Showcased both the excellence of the <unk> team and the contribution gold provides to our C. One cash costs.
During Q3, <unk> produced approximately 42000 tonnes of copper and over 130000 ounces of gold.
This was an increase over Q2 and was driven by the scheduled move to the are great areas of phase a phase four b <unk>.
Mill throughput remained above nameplate capacity, but was slightly lower than Q2 due to the processing of harder ore as well as lower Sag mill availability due to maintenance.
For the remainder of 2021, we expect that the mill feed will continue to be comprised of our agreed phase four b and lower grade stockpile and we remain on track to meet our updated 2021 production guidance of 150 to 180.
Tons and tons of copper and 400 to 480 ounces of gold.
With that I will turn the call to Luke.
Thanks, Steve and good morning to everyone.
If you could please turn to slide seven I'll provide a summary of our key financial metrics.
Revenue for Q3, 2020, one increased by 135, 6% from Q3 of 2020.
The old revenue increased by 193 million.
That's driven by a 338% increase in the volume of gold in concentrates sold.
And that's due to mining higher grade areas of phase four b.
Partially offset by a 6% lower gold price.
Popular revenue increased by $164 million from Q3 'twenty 'twenty.
That's due to a 44% higher copper price and a 35% increase in copper volumes due to higher grades.
Cash generated from operating activities before interest and tax was 355 million in Q3, 2021 and that's $262 million higher than Q3 2020.
Q3 21.
Gross margin was $324 million higher due mainly to the increase in revenues.
This was partially offset by unfavorable movements in working capital and deferred revenue.
As contingency measures put in place during Q2 2021 to improve O T short term liquidity unwound during Q3, 2020 one.
Income per share attributable to owners of T. R. Q decreased from 64 cents per share in Q3 2020 to 17 cents per share in Q3 2021.
This decrease mainly reflects the impact of a 300 million deferred tax asset directing dish them in Q3 2021.
Rethought arose as a result of an overall weakening in taxable income forecast due to the underground delays.
The impact was partially offset by the increase in gross margin previously mentioned.
Q1 cash cost and all in sustaining costs in Q3 2021 bulk benefited from 100 at $93 million increase in gold revenue credits versus Q3 'twenty 'twenty.
For all in sustaining cost of this benefit is partially offset by the higher royalties that O T paid on the higher revenue.
Capital expenditure in Q3, 2021 versus $217 million and that's comprised of 201 billion underground and 16 million open pets cap.
Capital expenditure for the same period last year was $255 million.
The ongoing impacts of COVID-19 restrictions and controls drove the lower than expected capital expenditure and are expected to continue into Q4 of 2020 one.
As a result, <unk> full year capital guidance has been reduced 80 million to 100 million for the open pits as the revised guidance and for the underground at <unk> 8 billion to <unk> 9 billion.
I could get you to turn to slide eight.
You'll see that turquoise Hill had liquidity of $1 8 billion at the end of Q3, 2021, which it expects will be sufficient to meet the company's requirements into Q3 2022.
As disclosed in the company's Q3, 2021 production update its base case incremental funding requirement increased to $3 6 billion.
Primarily as a result of the forecast delay to sustainable production for panel zero.
Which is now expected to be an H, one and 2023.
Which is broadly in line with the forecast six month delay to undercut commencement.
Additionally, <unk> base case incremental funding requirement incorporate other assumptions, including updates to metal price assumptions.
The definitive estimate, which estimated a development capital cost of $6 75 billion.
And then COVID-19 restrictions through the end of Q3, 2021, which have resulted in accumulative increase of $140 million to the estimates included in the day.
Not through the end of September 2021.
The impact of the open pit mine Redesigns in response to previously reported geotechnical events.
Re sequencing of open pit ore phases due to the delayed commitment of the undercut and of course the impact of COVID-19 research engine controls on the open pit waste movements.
Further information on all of that is provided in the company's Q3, 2021 M DNA.
The company's estimated incremental funding requirement as well as its liquidity outlook will continue to be impacted either positively or negatively.
These factors in addition to the aforementioned.
And many of those are outside the company's control.
To address its forecast funding and liquidity requirements. The company's funding plan includes the head of agreements reached with Rio Tinto on April 2020 one.
And of course, that's a bit.
Implementation is subject to achieving alignment with the relevant stakeholders, including Rio tinto existing lenders potential new lenders and the government of Mongolia, as well as market conditions and other factors.
And those factors would include resolution of the remaining outstanding Nontechnical undercut criteria and other items that form part of the ongoing negotiations with the government of Mongolia.
Any significant further delays to the initiation of the undercuts or not.
Non fulfilled film that of any of the other C. P. As identified in the heads of agreement.
It could adversely affect the ability of the company I know TLC to obtain additional funding or re profile existing debt as contemplated within the timeframe set out in the heads of agreement.
However, the company is currently in discussions with Rio Tinto to consider potential adjustment to the time frame and other aspects of the heads of agreement, which would help to address the company's forecast funding and liquidity requirements.
And with that I'll hand over the call to Jo Anne Dudley, our cheap Chief operating officer.
Thank you very much like.
Let's turn to slide nine for the underground development and exploration opportunities.
Yeah.
COVID-19 continued to significantly impact the Oyu Tolgoi mine in Q3 21.
Constraints on personnel numbers on size and domestic and international travel exactly impacted sites.
Pete operations and the underground project.
The additional 2021 development cost impact to the nine causes COVID-19 to life uptake at 10% in 2021 is estimated to be approximately $140 million.
As COVID-19 remains ongoing the company will continue to monitor impacts and update the market as appropriate.
Despite COVID-19 challenges commissioning of materials handling system, one cadence during the quarter.
Well I'm not the clubs on the Commencements are fully commissioned materials handling system, one is required for sustainable production.
Well chefs rainfall did not progress during Q3 shaft sinking recommence Tiger, which is a great step forward for the project.
Great. His quick sharp pricing King continues to progress.
Although michelle's strain for Clos.
Hard to support the commencement of penalty right. They are required to support production from panels, one and two during the ramp up to 95000 tonnes per day.
The commencement of the undercut as it came off time and it is critical to ensure that my comments.
And the cops and drill point construction companies unimpeded.
From a technical perspective, all lateral development and production drilling to initiate beyond the east can place.
And supporting infrastructure to panel production is on track for completion under current conditions.
Exact timing at the end of the couch is dependent on the satisfaction of remaining outstanding non technical criteria.
I'll now cover exploration progress in the quarter.
Turquoise Hill's through its wholly owned subsidiaries Izod golf Mongolia LLC.
Exploration LLC and CLS LLC upright and exploration program in Mongolia, entree licenses that are not part of how you totally.
Despite restrictions on people movement in the omni IV and Doner Guy he provinces and key to the exploration team is able to fully complete our planned 2021 feels like here in Q3.
Thank you you remind our first priority and appropriate measures will be nine time to protect our exploration team contractors and the communities in which we book.
Resuming our commitment to local communities. The exploration team made COVID-19, I donations to the Monday and Holbox films during the quarter.
With that I'll now hand, the call back to Steve.
Thank you everyone.
Turning to slide 10, I would like to focus on the key milestones to take us to sustaining production a panel zero.
As we have stated before from a technical perspective, <unk> has been really to initiate the undercuts in July 2021.
Despite the COVID-19 related constraint Q3 saw the breakthrough of the conveyor decline shaft <unk>, we come in and preparatory work for the shops, we sinking has continued.
The breakthrough of the service decline is forecast for this month and completion of the material handling system one.
And the first on footprint truck chute are broadly in line with the definitive estimate.
The only trigger team from my point of view have done an amazing job.
The key outstanding issue facing earlier to go it is resulting to non technical criteria to initiate down to cup.
Primary among these is obtaining the approval of all the directors of <unk> Board.
The necessary additional investment to advance the underground development.
The longer the delay in approving the budget uplifts the greater the risk that told you to go we will have to slow down the work on the underground.
We continue to angry engaged with the Mongolian government and Rio Tinto to resolve all of the outstanding non technical issue that must be resolved before caving operation can comment.
To further that process Tru and the Rio Tinto as table with the government a comprehensive proposal that we believe addresses the government key concerns while maintaining the economy value of the project for all stakeholders.
Before I open the line for Q&A.
I want to express my accuracy issues for the effort of the early to go team did.
<unk> delivered a solid performance in Q3 under what continued to be challenging so consensus.
Thanks to them, we had good production from the open pit and we're able to advent elements of the underground with less than half of the number of worker plan.
Then we're able to do this while maintaining oyu tolgoi safety performance is noteworthy income interval.
And with that we'll begin the Q&A.
Thank you.
Ladies and gentlemen, we will now begin the question and answer session.
If you would like to ask a question. Please press the star followed by the one on your telephone keypad. If you would like to withdraw your question. Please press the star followed by the two.
If you are using a speaker phone please lift the handset before pressing any keys. Please.
Please standby for your first question.
Your first question comes from Jackie Press Molesky of BMO. Please go ahead.
Thanks very much.
My first question I know in the release that you gave some some.
Some guidance in terms of delays.
Sure.
Shafts three and four.
The panel, one and two and you've given those and number of months of delay.
From the previous disclosure in the definitive estimate I can't find in the definitive estimate where those timelines were previously disclosed so could you did.
Could you either.
Yeah.
When you're expecting now shafts, three and four and panels, one and two or at least what the definitive estimate.
That's envisioning for those two that I, just I can't see it. Thank you.
Okay, John you want to take that question.
Yes sure. Thanks, Stephen Thanks, Jackie.
In the definitive estimate I'm sorry in the.
Even with this investment we haven't given the exact died suddenly in the technical report, we gave some indications but ultimately.
What's important about those shops is set by our supporting infrastructure for the ongoing development of panel IL, two which is the next panel level demand.
Following panels and panel one and Si.
You know as pets, a disclosure in the MD&A.
We have highlighted the important time frames that drive impact to the ramp up in.
Inside <unk> Suisse.
<unk> focused on on what was what's important when it comes to.
The ramp up of demand to 95000 tonnes a day hopefully.
That's helpful.
Yeah, I guess I mean.
Hope you can appreciate it's a little difficult for US you've said so for example shafts three and four have a nine month delay, but we don't really know from from what to.
What.
It's just a little bit difficult for us to.
To model that but.
I mean, if there's any other oh.
The other kind of color you can give but I guess, we can work with them.
Okay.
So that you get that's all that we can have.
Yes.
Okay. Okay anyways, maybe I'll just ask a different question.
We saw it yesterday.
Your one of your shareholders put out an open letter and <unk>.
He was asking for some clarity on.
On what your response to the independent review.
Geotechnical issues or.
Delays and cost overruns would be.
Is there any information or a response or color that you can give in terms of what turquoise Hill.
Do you have that independent report is or what your response to that might be.
Yes Jackie.
What we're doing where we're conducting a detailed review of that particular report okay.
That reports of confidential report at the Ot Board when we were conducting a detailed review.
We're seeking a number of different of clarification and supporting detail.
Explanation for certain broad conclusion that Lauren to report and one of them will have concluded. This this this detailed review we'll update the market as appropriate.
Okay. Thank you very much that's all my questions.
Thank you David.
Your next question comes from Oren <unk> of Scotiabank. Please go ahead.
Hi, Good morning, I've got a couple of questions too.
First of all can you walk us through the increase to the funding gap from $2 4 billion to $3 six and a couple of angles to this like your liquidity estimated liquidity runway of Q3 'twenty. Two is unchanged right. So to me that would suggest that really the funding gap is beyond.
What we from a timeline perspective is further out but maybe you know would be really helpful for us to get some color as well.
What kind of commodity assumptions are baked into this what kind of production assumptions from the open pit are baked into this for 'twenty two 'twenty three 'twenty four.
Maybe we could start there if possible.
Okay very good Luke you want to take that.
<unk>.
Yeah sure Steve happy to do that and thanks for the question. There there are actually a few questions in there. So I'll do my best to answer them and if I Miss anything please do let me know.
At a high level.
We did have a sort of $1 $2 billion increase to the funding gap in the quarter.
Youll remember from our Q2 2021 M DNA that the funding I finally got that that time increase from two three to $2 4 billion.
That was primarily due to a re sequencing of ore phases of the open pit mine.
And that was largely offset by improved commodity price forecast and in terms of commodity price forecast. We you know what what what what we use effectively a consensus pricing at the balance sheet date.
So that's that would be the assumptions that we use.
For Q3 2021, the primary cause of the increase from $2 4 billion $3 6 billion.
The deferral of revenue caused by the delay to the start of the undercut and sustainable production.
There's also additional COVID-19 related costs of $40 million in the quarter and not bringing the total.
Out of the 31st of September 2000, $21 million to $140 million.
You know.
Okay.
The company has repeatedly and consistently more than that you know a significant delay to the start of the end of cut would have a material impact on project schedule, including the timing of sustainable sustainable production per panel thereof.
And that could adversely impact the timing of expected cash flows from the underground, thereby increasing the amount of the incremental funding requirements.
And obviously when that became apparent in Q3 2021, we felt it was important to update the market and that's what we've done.
So let me stop there and hopefully I've answered most of your questions, but let me know if you've got any follow up there.
I guess, what kind of production assumptions are baked in to this estimate over the next few years.
Yeah, So we haven't actually issued production guidance beyond.
<unk> 2021, we are still working to be able to.
Issue our production guidance for 2022, so I'm, probably not going to be able to answer your question.
Super specifically, but obviously the impact of the six month delay to sustainable production.
It is having the impact of.
Some of the anticipated underground production out into into later periods or not.
What what causing.
The main reason anyway that causes them to funding over the sort of critical period, which is kind of 2022 through 2024.
Okay, and then in the release two weeks ago. It is disclosed your estimate for pedal zero sustainable production was January 23 in.
In the release today. It says just each 123 and I realized January is in each one but are we to interpret that that flipped well beyond January at this point.
Jonathan would you like to give some color to that that changed since we did.
Yes, no problem. Thank you Steve Thank you Laurie.
Yes.
We've had more time with our information since they became a law release.
And and if we.
If we look at if we look back at the technical report I T. T. R 20 that broadly the timeframe between that came all signs are laid out in the I T. T. F. 'twenty remained consistent with the current plan.
And and size.
We have had a six month delay to the commencement around cost and it's similar to lie.
Consequently to sustainable production say Ah.
But we need to remember we actually haven't started.
Beyond the top guess insight it it does remind some uncertainty here and the disclosure reflects reflects that.
It is important that the remaining items, preventing the commencement of the avocado resolved as quickly as possible and the team is very focused on working with stakeholders to chase that.
Okay, and maybe final question for me.
At this point do you see any opportunity to improve that funding gap through.
Re sequencing of the open pit or perhaps should we seek would think something in the underground is there any opportunities to reduce that that $3 6 billion number at this point.
One do you have a bit.
All are around the optimization.
Yes. Thank you thank you Steve.
Yes.
The team are working on on developing and investigating.
My session opportunities.
To try to bring metal forward into that the funding gap period.
And we're in the preliminary stages of that analysis.
And it's important Tonight that.
Well, we will do everything we can to accelerate the work. We believe our current forecast is realistic and achievable. It is a normal process for oyu tolgoi to look for these opportunities to bring metal food and there is some time for that to happen. So I think optimization work will continue and we.
We will come back and announce any results of the work.
When we are able to see.
Okay, and sorry, one more if I could just Steve you talked about that you are reviewing the results of the independent consulting group.
Report was submitted three months ago when could we realistically anticipate that your review of your questions or clarification is completed and the market's kind of update there what's the timing.
No specific timing, but I could say that we're getting we're getting close to be finalized.
For us it's important to have a good.
Good review and have the supporting details for this position.
And that's what we're working on that so it shouldn't be it it will come it will come I can tell you.
So it will come this year or is it likely now with 22 of that.
Alright.
Michael would be that it would come this year. Okay. Okay. Thank you I mean, it's not the review is not finished and that could change, but my my wish would be that it would be completed this year okay.
Thanks, Laura.
Your next question comes from Craig Hutchison TD Securities. Please go ahead.
Hey, good morning, everyone.
I'm just wondering a question of finding the.
As a follow up question on the financing shortfall of $3 6 billion are you guys able to tell us what what time frame that is that shortfall occurs is that like a late 2022 early 2023 like when do you consider the.
So low in terms of your cash flow.
Requires.
Okay.
Do you want to handle that.
Yeah sure. So at the moment, we have liquidity that takes us through it takes us into Q3 of 2022 next year.
So obviously post that absent any other sort of.
<unk> measures the funding gap, what would start to build up and you know beginning in Q3 2022.
And then the.
The sort of critical funding gap period, Craig is that at about funding got sort of builds up to the $3 6 billion is during that 2022 to 2024 period.
Okay.
And then in terms of I guess, the you know the.
The cost overruns and $1 2 billion in any way you can kind of break it down roughly in terms of what was attributed to the open pit.
And what was attributed to the delay to the underground.
Yeah, So again Craig.
For Q3, the majority of the increase was really related to that that the delay to.
First sustainable production and but that was caused by the delay to the undercut in Q2, we had some some.
It's meant for things like re sequencing of the open pets, and obviously pricing assumption, but the main the main change in Q3 is really the the impact of the six month delay to the undercut and the impact of that on sustainable production.
Okay.
And maybe just like Greg for me sure Alright.
I'm just curious you mentioned cost, but there is no I mean, the only cost increase so I just wanted to make sure maybe I misunderstood, but theres no cost increase the cost increase theres one related to the.
Covid, the COVID-19, but really what it is.
The shift in the revenue and the production. So that's what we're when we talked to $1 2 billion dollar increase in the in.
And the funding is mostly related to revenue.
Our revenue was shipped and the revenue maybe I missed that question.
No fair enough.
Right.
And then maybe lastly for me I mean.
I guess a couple of months back there were some articles in the media talking about pretty specific numbers around some of the concessions.
Cells and Rio Tinto are willing to offer the Mongolian government and they quoted a number of $350 million.
Additional revenue over the next three years in addition to existing royalties and taxes I was just wondering does the $3 6 billion dollar financing shortfall does that account for any concessions from ongoing government or should we think of that as something on top of that number.
Yes, I will I will end on that no.
No. It doesn't it doesn't include that and the reason it Greg is that these were.
Negotiation theres a lot of detail to go through the final.
The final outcome of that negotiation is not known yet so I would say nothing has been included in the current funding that we've communicated.
Okay. Thanks, guys.
Okay. Thank you Greg.
Your next question comes from Ralph <unk> City.
Capital. Please go ahead.
Good morning, Thanks for good morning, Thank you for taking my questions Steve.
The first one is on.
I'm wondering what the significance is of the $5 $3 billion, which is the original feasibility study from 2016 Capex right that is a number that we're gonna be reaching very very soon and is the only thing that's actually been approved by all parties in the Ot LLC is there anything that prevents.
<unk>.
Oh T from continuing to spend their budget say in 2022 without.
The approval of the incremental budget from the government of Mongolia.
Yes.
It's a good point as well because the five three is pretty much committed at the moment.
We cannot we cannot spend more than that okay.
That's the reported.
We need to understand that this is.
This is a very very large project. This is a project that is extremely complex okay.
And what we need to do we need to we need to move that project.
With the support of all shareholders. We cannot run this project route from a month to month basis, because you have long term debt in order to make a decision you need to have a long term commitment and what we are reaching right. Now we have we're reaching the end of the budget and definitely what needs to happen.
Now is we need to have the.
Additional investment the one $4 billion. The one that we've talked to you in the definitive estimate can be additional investment is required to complete the underground the underground mine and we need to do that from all with all of these all shareholders, including including the <unk> All flash the government.
And Rio Tinto <unk>, Okay. That's a very point and the reason why is that we need to we need to proceed with the other we need to resolve the <unk>.
Regulatory approval, we need also to get support for the discussion for financing. So there's a lot of things that must be done and we cannot continue managing on a monthly basis or neither to be to go above budget.
Okay.
Makes sense okay.
Okay. My second question is on something you talked about in your commentary, Steve about and there wasn't a previous question about debt forgiveness in the accelerated returns to the government of Mongolia with within that proposal that you. Just presented can you maybe outline what is the process for review and when are you hoping to get some type of an answer.
Sure.
Okay.
As I said I mean not yet.
Well <unk> been in Mongolia for six weeks came back for debt for the quarter in depth with you here.
This Friday I'm going back.
I was quite encouraged by the tone of the discussion the discussion with the government and also more importantly, the commitments.
Everyone is it's.
It's having FTE and having the right now so there's a lot of a lot of discussion even this week I was involved in in discussion and discussion Watson.
What's important and Ralph is that we're all have become an objective the objective as it relate to.
To make sure that the underground and that share buy tru.
Rio Tinto and also the government the government of Mongolia, Okay, and if the objective or.
Innovation of the underground development, the commencement of the undercut and the sustainable production. So we're committed.
And in terms of proposal the proposal from our point of view.
Really address the key concerns that the government had okay, which were mostly around the depth and Wendy would get dividend, but it's always change and Ralph you wouldn't know.
Negotiation is not finished until it's finished and we're still having discussions on the forms and in different elements on that so I cannot commit I cannot give you the detail, but what I can tell you is that where we are and also the government. We're all focusing to move forward.
And we are working very hard to make it happen.
Great understood. Thank you Steve.
Okay. Thanks Ross.
Your next question comes from Dalton Barreto Canaccord. Please go ahead.
Thanks, Good morning, good morning, Steve and team.
Most of my questions have been answered, but I am hoping I can follow up on a couple of rounds of questions. There.
So first of all just on the $5 3 billion versus the $6 75 is there an option at all to maybe approved a small portion of the acreage. So you don't have to go two weeks down in November 30th.
Yeah.
Is it is it is a good question Dalton.
But I can say, yes, that's a pump that's a possibility okay. We could we could do that in the government and.
And the company could decide that for in order to continue and in on.
On the discussion on the negotiation to do that so yes, that's not an however is not something that we can do on a perpetual basis. Okay.
<unk>.
Okay.
It's like building your house and you're just approving a weekly budget.
Have called them to eventually to coordinate all the activities.
In other words, yes, it can be done, but isn't the best and favorable solution and what were looking eventually is to really to get the support for the entire budget and be able to with the undercut as well.
Understood and then just maybe in terms of what you have disclosed around the negotiations that Ralph mentioned the debt reduction and then there's also some there's some talk about accelerated returns on the debt reduction so with the 2016 agreement part of that was knocking down the shareholder loans from 7 billion to.
$2 8 billion.
Are we talking kind of the same order of magnitude here.
Now I'll turn I'm not commenting on negotiation, all I'll be able to I hope I'm gonna be able I wish I'll be able to tell you in a couple of weeks and I will give you all the detail there, but I mean time things are changing things are going so.
I'm not commenting on the detail okay. Okay, that's understandable and maybe I'll move on that.
This consultant's report that you guys are reviewing.
How much of a role does the resolution of some of these inconsistency is that were identified play in terms of the government actually agreeing to a deal.
I mean, it's really on the Ot board that is being is there something that needs to be resolved.
Yes.
But without going through the detailed this is something that is is being is being handled by the Ot board in depth.
So the board to decide on the details there.
Okay, and then just maybe one last one and I'll ask you. The same thing I asked you last time, if you do come to a deal with the negotiating committee does that proposal has to be ratified by parliament.
And I'll have the same answer as I did last time.
The thing that I'll leave that to the government exactly how they want to do that.
I would say that that's a possibility.
We will do that.
I'm sure that if they do they will there are confident that the process will be quite fast, but I cannot comment on how they will do it.
Okay. Thanks, Steve Thats, all from me and good luck.
Thank you very much very preceded.
Your next question comes from Rs will cut off with Scotiabank. Please go ahead.
Oh, Thanks for taking my follow up just following up again on <unk>.
Yeah. Thank you.
But just following on the line of questions that that Delta and then and Ralph where we're asking you.
Like from an outsider perspective.
It feels like there was little progress in terms of these negotiations with the government.
Two two to deal with the non technical criteria here and.
What I'm trying to get a better understanding of I mean, how long can this limbo continue for.
Rio Tinto and Turquoise Hill decide that you can't keep the project in this holding pattern.
And we need to do our tools down type of statesmen like we saw in 2015 like is that is that a real possibility.
Okay two things.
You mentioned, a little progress I would say that.
I hope my message is clear that there.
There is definitely a strong commitment and also a lot of work that is being done at the moment. So.
If I take the government is very generous with his time, they're taking a lot of time on that and you have different committees. So.
This is a difficult negotiation and <unk> would definitely agree with me on that one.
<unk>.
I would not say that it will progress. It is I mean, it's an intense negotiations at the moment okay.
How long can we stand up that process I mean, my answer is I cannot be clear enough that we are we are at the.
We are on the inflection point here. This is we are at the time, where we spend the money that we had.
Ben I would say committed the money that we had the approval was approved.
We tend to continue that project that project and I would say in decision unless there is.
Partial or full budget uplift.
We cannot continue managing that.
Just like that and we don't have we won't have the mic so decision needs to be made it needs to be made now okay. That's where we're at the we're at the point, where we need to make a decision and move on.
And.
If there is no perfect.
So what are your restaurant wasn't it.
We need to do we need to have an agreement not a decision we need to agree.
Agreement and we're working extremely hard to make it happen that's what I wanted to stay exactly okay.
Has there been any agreement on any of the major issues. So far that you can comment on.
But all in all or nothing type of agreement.
Alright.
No that's in negotiation you're.
You started different points you were giving on points you Youll go further you come back.
I cannot come in until it's finished.
Okay.
Just Steve just to clarify what you're saying.
You say you are at an inflection point here.
Does that imply that if there is no agreement.
You know in any kind of timely manner that we could see.
A tool of downtime event ahead or or am I misinterpreting, what you're saying.
No.
I would say that if we if we cannot reach an agreement in in.
In the near future.
We'll be forced.
Need to consider very on that proactive auction and does include the risk of having to start to suspend some of work because we won't have the bunch at harvest.
Okay. Okay.
Thank you very much I appreciate the color.
Okay very good.
Yes.
Your next question comes from Jackie Press below ski.
BMO. Please go ahead.
Thank you.
Try not to.
Hi.
A dead horse here, but I think Dalton.
Good point.
How about the whether this needs to be ratified in parliament and to go back to your response to orders that you'd need to see it and agreement.
Fairly soon in order to keep progress.
On construction.
What do you define an agreement does and the Mongolian government decided they didn't need to be ratified by Parliament would you need that whole process to be finished before you've considered.
That you've reached an agreement.
No.
How do I answer that Jackie.
There is this is the key point that needs to be resolved, okay. When we need to we need to agree to proceed with the additional investment of $1 4 billion dollar okay that so going from that five four to six six point something $6 seven.
We've talked before so there is a decision made to me on that one so.
Project team can start to come in the money, we need also to support financing because we will need money and so that's.
That's pretty clear there is still some regulatory approval that needs to be done okay.
But it's all depends I mean, it's we want we are in that situation right now and we need to Theres, a theres a pressing moment to make it happen, okay and differently.
I'm, hoping that the government will be in a position to improve quickly to improve quickly and now and Yankee will depending on circumstances will adjust but.
The up the uplift of the investment will be additional investment is a key to be able to move to support Sony Alumina. I mentioned are very important that we see the government moving on those things.
And and I can say I would hope that they're going to be able to approve quickly.
So I mean, that's a formal.
Legally binding approval not an informal handshake sort of approval.
Right.
That's what we want and that's what we want but there's always shades of gray in this.
These things and I think that's when we'll get there will have to we have been debated, but definitely a formal agreement because the key point here, we want to be able to make that investment and it start and have the regulatory the elements out there we need those one okay to be able to move.
If a question the rectification or approval I mean, it will depends what form and what.
We send them at that time, but this is what we want is ensuring that we can we can move.
Safely would that project once we make when we make the additional investment.
Okay. Okay. Thanks Keith.
Okay. Thanks.
Okay.
Your next question comes from Richard Hatch Barren Burke. Please go ahead.
Yeah, Thanks very much.
And thanks for taking my questions.
Good morning.
I've got a couple of questions. The first one.
I Wonder if you might be able to give us any kind of order of magnitude on the impacts of the medium term production profile based on kind of the previous technical report that we've got to kind of.
Just off the back of these delays.
Whether you were unable to give us that and then just on that as you kind of bringing nice those next panels into production into the medium term Joanne.
Joanne how comfortable are you with the <unk> you happy going to have to think any move kind of.
Mine plan revisions.
With regards to support and then secondly, sorry, I'm flogging the dead horse on this one but just so I get it right.
In my head.
Is the.
Very basic order of play.
Three fiscal terms strike you.
Create a budget treat it with the various stakeholders in the project you can then take that to the board of ICL I will say that gets approved.
That you can kind of take the project forward.
And we can kind of.
<unk> is that the kind of the basic weight.
Looking at it get the agreement signed and agreed with the government then agree on the Ot LLC level, and then and okay.
Thanks.
Yes, Richard I'll answer the second one Andrew and we won't do it.
Definitely.
The increase in the investment of one four that we need at the moment is DCP annuity LLC approval, that's where it is and the EBIT directors need support from Needham support all directions from the government. So you can understand what would happen.
So thats, what with what happened.
To answer the production.
The reduction.
Yes, yes, no problem safe.
Tim for the question.
So just.
Just in terms of the impact on the ramp up sorry.
<unk>.
We would do so.
You'd be familiar with it in the technical report and chip to sustain this up as a production profile.
And so we would say.
The disclosures announcing and alteration to that profile.
Ramping up to the 95000 tons of die penalty.
Panels here I ramp up.
And.
So, we're saying that Ivo ramp up is taking longer in the order of.
The the July to that has some to the commute synthesized panels.
There's ongoing work in nascent Si.
It is something that.
As we understand the situation more as shafts rainfall progress.
They are.
A better understanding of where we're hitting them.
A better degree.
But that's probably the best I can provide at the moment there will be ongoing.
<unk> is its too to try to do more with the same ventilation constraints.
And we'll provide any updates we can as as they materialize.
Intensive GTECH and further revisions with respect to support.
Diagnose it supports he's is where we would see at Nigeria adhesions and suddenly we've.
Continue to drill and collect small ore body knowledge S. As as is appropriate with a project of this size.
And the drilling in penalty Norfolk is complete and it's showing a real lift structure than we saw in panel Cri.
But this is still a deep dive and we need to try to minimize risk as we head into production and say, they're all mine design refinements that are going on as noted in our MD&A.
And and and that Blake I will we'll advise of any.
Material updates to that.
As I crystallize site. So we do expect some mine design refinements, but it's all about minimizing risk as we head into production.
So hopefully that's a useful Richard.
Thank you very much for your time.
Okay great.
Ladies and gentlemen, as there are no further questions on the phone lines. We will conclude today's conference call. We thank you all for participating and ask that you. Please disconnect your lines have a wonderful day.
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