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

Client
Turquoise Hill, a Rio Tinto subsidiary (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 startup 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 $5.4-billion.

Duration
First ore was processed through the concentrator on January 2, 2014, 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 has reported that negotiations to resolve tax issues with the Mongolian government regarding the massive Oyu Tolgoi copper/gold mine could be delayed. This is after Prime Minister Norov Altankhuyag was removed when members of Parliament voted to dismiss him earlier this month. He had been accused of economic mismanagement, corruption and nepotism.

The $5.4-billion underground project could be delayed as a result of the political situation.

The political changeover came at a time when Rio Tinto and Turquoise Hill were pursuing negotiations regarding investment terms with the government and to resolve a tax dispute.

Turquoise Hill had presented the Oyu Tolgoi board and government representatives with an offer before the Prime Minister was ousted, aimed at resolving the negotiations deadlock.

Turquoise Hill reported in September that it had completed a detailed review of a tax ruling by the Tax Dispute Resolution Council of the Mongolian General Taxation Department issued on September 10.
The ruling had reduced the amount of tax, interest and penalties claimed to be payable by Oyu Tolgoi from about $127-million to about $30-million.

The company, which is 50.8% owned by Rio Tinto, noted that despite this significant reduction being welcomed, there were aspects of the ruling that required further clarification. Priestly said while the reduction was welcome, the company was appealing the ruling.

Project finance lender commitments for the suspended underground development of Oyu Tolgoi expired in October as a result of the stalled negotiations.

Turquoise Hill remains in contact with the group of lenders, as they remain supportive of the project.

On Budget and on Time?
Yes.

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.