- Turquoise Hill Resources (TSX:TRQ) reported a 2019 net loss of C$693.7 million, over $1 billion less than 2018’s net earnings
- The loss was the result of taxes and charges occurred through expanding the Oyu Tolgoi project in Mongolia
- Turquoise Hill expects Oyu Tolgoi to be the world’s third-largest copper producer by 2025
- Despite COVID-19’s impact on the industry, the company has chosen not to adjust its 2020 outlook until a more predictable environment arises
- Turquoise Hill Resources Ltd (TRQ) is down 4.81 per cent, with shares trading for $0.50 and a market cap of $1.01 billion
Turquoise Hill Resources (TSX:TRQ) reported a 2019 net loss of C$693.7 million, over $1 billion less than 2018’s net earnings.
The company’s significant loss is the result of two large expenses. Firstly, the company suffered a $0.6 billion impairment charge regarding the Oyu Tolgoi underground project, currently under development.
The Oyu Tolgoi project in Mongolia is one of the largest new copper and gold mines in the world. Turquoise Hill began production onsite in 2013, and is currently developing the site’s underground facilities.
With the current development schedule, the company expects Oyu Tolgoi to be the world’s third-largest copper producer by 2025.
The increase in value associated with the development led to the large impairment charge. This increase in value also led to $0.3 billion more in taxes, when compared to 2018.
These extra charges resulted in the company’s extraordinary earning discrepancy. However, further tax costs could follow, if Turquoise Hill’s ongoing litigation with the Mongolian tax authority isn’t resolved.
Despite this large loss, the company believes these charges are an expected result of growing the Oyu Tolgoi mine.
Turning to COVID-19, Turquoise Hill was impacted earlier in the year by Mongolia’s decision to seal its border with China.
This has resulted in supply issues and slowdowns across the country. However, the company has chosen not to update its 2020 forecast.
Turquoise Hill’s CEO, Ulf Quellmann believes the company cannot accurately predict its likely performance, given the volatile environment.
“At this stage, the situation is very fluid and hence we are not in a position to specify the impact on cost and schedule. In the meantime, we continue to work closely with our customers, our suppliers and the Government of Mongolia,” he said.
Turquoise Hill Resources (TRQ) is down 4.81 per cent, with shares trading for $0.50 at 12:29pm EST.