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 or 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 or 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 95 000 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.

The Phase 2 capital estimate is $5.1-billion.

Duration
Commercial production from the openpit operation is planned for the first half of 2013.

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

Initial production from the underground mine is expected in 2016.

Latest Developments
An updated independent technical report on the Oyu Tolgoi project was released on March 25.

The 2013 Oyu Tolgoi Technical Report (OTTR) is based on a review of the latest technical, production and cost information prepared by Oyu Tolgoi.

The cost estimates will be refined in the feasibility study, which Oyu Tolgoi expects to complete in the first half of 2014.

The OTTR has revised the Phase 2 capital estimate to $5.1-billion based on the concentrator operating at its initial capacity of 100 000 t/d and includes an expansion to the back end of the concentrator to process the high-grade underground ore.

Ore will initially be fed from the Southern Oyu openpit mine, which will subsequently be displaced with the more valuable Hugo North Lift 1 underground ore.

The peak production rate from the under-ground mine has increased from 85 000 t/d to 95 000 t/d.

The 2013 OTTR excludes the power plant and concentrator expansion to 160 000 t/d, which was outlined in the 2012 Integrated Development and Operations Plan Technical Report (IDOP).

A decision on the expansion of the concentrator to also process full production from the openpit mine is not needed until 2015.

Prior to this, the company will continue to evaluate and optimise options for resource development.

The 100 000 t reserve case does not include construction of a power station and capital and operating costs have been adjusted to reflect purchases from a third-party Mongolia-based power provider.

The case supporting the mineral reserve has extended from 27 years to 43 years, as concentrator production is forecast to remain at 100 000 t/d.

The average cash cost after gold and silver credits for the first ten years of production is $0.89/lb of copper.

The increase relative to the 2012 IDOP ten-year average cash cost was primarily a result of incorporating higher third-party power costs, compared with incorporating a dedicated power station.

This increase in power costs resulted in a large increase in processing costs and a smaller increase in mining costs. Higher general and administration costs have also contributed to the increase in average cash cost.

Overall, Turquoise Hill estimates that there has been a 30% increase in the direct capital cost to construct the underground mine.

The remainder of the increase in the Phase 2 capital estimate, after adjustment for scope changes, is primarily driven by an increase in contingencies, contractor costs and owner-execution costs.

The OTTR states that the ongoing work being undertaken on the feasibility study may result in opportunities to improve the economics through cost reductions and optimisations of the mine plan.

Oyu Tolgoi plans to complete a focused and structured review of the feasibility-study work to support future capital approvals.

Further, the OTTR reserves and resources show an increase from previous years. The report states that the deposits contain a currently identified resource of 45.8-billion pounds of contained copper and 24.9-million ounces of contained gold in the measured and indicated mineral resource categories and 54.6-billion pounds of contained copper and 36.8-million ounces of contained gold in the inferred category.

Mineral resources are inclusive of mineral reserves.

The increase in reserves is a result of re-optimisation of the mine designs.

Meanwhile, the feasibility study for the expansion of operations at the Oyu Tolgoi mine is ongoing. It is now expected to be completed in the first half of 2014 as Oyu Tolgoi continues to pursue value engineering and optimisation. Actual operating data, as it becomes available, is expected to be incorporated into the feasibility study.

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.