Hugo North Extension
The Hugo North Extension is a rich copper-gold porphyry deposit. It lies within the Palaeozoic Gurvansayhan Terrane in southern Mongolia, approximately 570 km south of the capital city of Ulaanbaatar and 80 km north of the border with China. The Hugo North Extension forms the northern-most part of the Oyu Tolgoi mining complex and is managed by Oyu Tolgoi LLC, a subsidiary of Turquoise Hill Resources and the Government of Mongolia, and its project manager Rio Tinto plc.
Four deposits have been identified in the Mineral Resources at Oyu Tolgoi (Oyut, Hugo North, Hugo South, and Heruga). In the initial years of production the main source of ore has been from the Oyut open pit and while the pit is being mined, underground infrastructure and block cave mine development is ongoing at Hugo North. Production from Hugo North is expected to ramp up to deliver an average of 95,000 tpd to the process plant during its peak production period from 2027 to 2035, ramping down to completion in 2039. The Hugo North Extension will be mined as part of the lift 2 block cave. Conventional crushing, grinding, and flotation circuits process the ore and the concentrates produced are sent to smelters in China. Recoveries are expected to average 92% for copper, 91% for gold and 85% for silver.
The Hugo North Extension has a Probable Mineral Reserve of 35 Mt at grades of 1.59% copper, 0.55 g/t gold and 3.72 g/t silver and a Measured and Indicated Mineral Resource (inclusive of Reserves) of 129 Mt grading 1.65% copper, 0.55 g/t gold and 4.11 g/t silver. The reserves and resources are effective as at Dec. 31, 2015 and use a 0.37% copper equivalent cut-off grade.
Heruga is a copper-gold porphyry deposit that is located at the southern end of the Oyu Tolgoi mining complex. Heruga differs from the three other Oyu Tolgoi deposits (Oyut, Hugo North, and Hugo South) in that it is slightly enriched in molybdenum. This forms a molybdenum-rich cap at higher levels overlying gold-copper mineralization at depth. Underground development is underway at Hugo North. The Heruga deposit is currently outside of the mine plan but is included in the Alternative Production Cases in the 2016 Technical Report. It is expected to be mined in later phases by underground panel caving methods.
Heruga has an Inferred Mineral Resource of 1,816 MT @ 0.39% Cu, 0.37 g.t Au, 1.40 g/t Ag, and 113 ppm Mo. The Resources are effective as at Dec. 31, 2015 and use a 0.37% CuEq cut-off.
Sandstorm has agreed to purchase an amount equal to 5.62% and 4.26% of the gold and silver by-products produced from the Hugo North Extension and Heruga deposits, respectively and an amount equal to 0.42% of the copper produced. Sandstorm will make ongoing payments equal to US$220 per ounce of gold, US$5 per ounce of silver and US$0.50 per pound of copper (subject to inflationary adjustments) until approximately 8.6 million ounces of gold, 40.3 million ounces of silver and 9.1 billion pounds of copper have been produced from the joint venture property. Thereafter, the purchase price will increase to US$500 per ounce of gold, US$10 per ounce of silver and US$1.10 per pound of copper (subject to inflationary adjustments).