Name and Location
Oyu Tolgoi copper/silver/gold complex, Southern Gobi region, Mongolia.

Client
Turquoise Hill/Rio Tinto (66%) and Erdenes Oyu Tolgoi (34%).

Project Description
Oyu Tolgoi has the mineral resources to become one of the world’s top three copper/gold producers. The project entails the construction and operation of an initial concentrator facility that will process 100 000 t/d of ore (36.5-million tons a year). By the end of the fifth year of operation, the concentrator ‘s capacity will be expanded to 160 000 t/d (58-million tons a year).

Under the common start-up plan, ore will initially be sourced from the openpit mine on the Southern Oyu deposits, while the adjacent higher-grade underground mine on the Hugo North deposit will be developed to full production of 85 000 t/d.

The mine is expected to produce more than 1.2-billion pounds (544 000 t) of copper, three-million ounces of silver and 650 000 oz/y of gold in the first ten years of operation. Seven years later, at its peak, it is expected to produce about 1.7-billion pounds of copper and one-million ounces of gold.

Value
The final cost of the Phase 1 capital project is expected to be about $6.6-billion, within 3% of the initial budget, excluding foreign-exchange exposures.

Duration
Commercial production from the openpit operation is planned for the first half of 2013, while initial production from the underground mine is expected in 2016.

First ore was processed through the concentrator on January 2, 2013, and the production of first copper/gold concentrate followed on January 31, 2013.

Latest Developments
Mongolian officials have tried to allay fears that disagreements between the Mongolian government and miner Rio Tinto will delay a planned June start of commercial production at the Oyu Tolgoi copper and gold mine.

Rio and Mongolia are at loggerheads over the future of one of the world's largest untapped copper deposits just as the mine ramps up output and the Rio subsidiary that owns it tries to line up $4-billion for the next stage of development.

The mine is operating under a temporary budget, after the two parties failed to agree on a deal in February, having disagreed over taxes and rising costs that Mongolia fears will erode prospective earnings.

The high-stakes tussle is a major test not only for Mongolia's ambitions to become a destination for mining investment, but also for Rio and its new boss, pushing to diversify earnings away from steelmaking ingredient iron-ore.

Rio Tinto and Oyu Tolgoi owner Ivanhoe Mines - now called Turquoise Hill Resources - signed an investment agreement with Mongolia in 2009. The government stood by the deal last year, despite calls from politicians to amend it.

That agreement gave Mongolia a 34% stake in the project and allows the government to increase that to 50% after the first 30 years of operation. The State’s receiving a 5% royalty on sales and set the company's effective corporate tax rate at 25%.

The government has, however, raised concerns about rising costs that will delay the State receiving its share of profits from the mine and is looking for ways to increase the benefits for the country's impoverished population.

Nationalist politicians believe Rio is taking advantage of the country and want independent experts to ensure operating and capital costs are properly controlled.

The initial investment amount - which has risen from $4.7-billion to $7.1-billion - is key to the discussion. Oyu Tolgoi puts total capital required for the project's first phase at $6.6-billion.

Rio Tinto has already delayed a feasibility study on the project's second stage, which could cost about $7-billion, according to analyst estimates.

Key Contracts and Suppliers
Fluor Corporation (project management), Amec (feasibility study for Lift 1 of the Hugo North underground block-cave operation), RSV Enco Consulting (shaft engineering); AC-Tek (dynamic simulation of underground conveyors) and Analytical Laboratory Consultants (laboratory service design on the project).

On Budget and on Time?
The project is on track to begin commercial production in the first half of 2013.

Contact Details for Project Information
Oyu Tolgoi, tel +976 11 331880, fax +976 11 331890 or email OTLLCinfo@ot.mn.
Turquoise Hill Resources media contact Tony Shaffer, tel +1 604 648 3934 or email tony.shaffer@turquoisehill.com.
SGS manager on-site laboratories Pierrette Prince, tel +1 416 445 5755, fax +1 416 445 4152 or email pierrette.prince@sgs.