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 first copper/gold concentrate was produced on January 31.

Initial production from the underground mine is expected in 2016.

Latest Developments
Turquoise Hill and Rio Tinto expect to sign a $4-billion project-financing plan and term sheet at the end of June, which will allow for future financial flexibility to develop the second phase of the Oyu Tolgoi mine.

Turquoise Hill is actively engaged with lenders to finalise the financing deal. By February, it had secured debt approval from the European Bank of Reconstruction and Development and the International Finance Corporation.

During April, Rio also signed commitment letters with 15 global banks that locked in pricing and terms for financing. The boards of Export Development Canada, Australian Export Finance and Insurance Corporation, and Export-Import Bank of the US also conditionally approved the project’s financing.

Project financing is still subject to board approval, which includes representatives from the Mongolian government.

Meanwhile, the Mongolian government, Turquoise Hill and Rio remain in disagreement on taxes and rising costs at the project, which Mongolia fears will erode prospective earnings.

The parties continue with “productive discussions” on a range of issues related to implementing the investment accord governing the public–private partnership, including project development and costs, the operating budget, project financing, management fees and governance.

While the issues between stakeholders are being resolved, the Oyu Tolgoi board has approved a temporary budget for the mine, which is ramping up to commercial production.

The approval from the Mongolian government to ship copper concentrate from the mine is imminent.

At the end of the first quarter, construction of the Oyu Tolgoi concentrator complex and openpit mine was complete and mine infrastructure was substantially complete.

As at March 31, the total capital invested in Oyu Tolgoi was about $6-billion of the final cost of $6.2-billion, excluding foreign-exchange exposures.

Long-term sales contracts have been signed for about 75% of the Oyu Tolgo mine's concentrate production in the first three years and half of the total concentrate production is contracted for ten years, subject to renewals.

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.