Name of the Project
Oyu Tolgoi underground mine project.

Location
Mongolia.

Project Owner/s
Turquoise Hill Resources (TRQ) holds a 66% interest in Oyu Tolgoi LLC. The remaining 34% interest is held by the Mongolia government through Erdenes Oyu Tolgoi.

Rio Tinto, with other Rio Tinto affiliates, holds a 50.8% majority interest in TRQ, and provides strategic and operational management services and support for Oyu Tolgoi LLC in respect of its operations and activities.

Project Description
The Oyu Tolgoi underground mine is expected to produce more than 500 000 t/y of copper, compared with current openpit production of 175 000 t/y to 200 000 t/y.

The project has mineral reserves of 1.27-billion tonnes grading 0.81% copper, 0.29 g/t gold and 1.9 g/t silver as at June 30, 2020.

The mineral deposits at Oyu Tolgoi are situated in a structural corridor where mineralisation has been discovered over a 26 km strike length. Four deposits hosting mineral resources have been identified – Oyut, Hugo North, Hugo South and Heruga.

The Oyut openpit is a low-grade copper/gold openpit operation, with a current production rate of about 40-million tonnes a year and a planned remaining overall waste-to-ore strip ratio of 2.3:1. Mining is conducted using conventional drill, blast, load and haul methods, and is conducted 24/7, all year round.

Underground production will come from the Hugo North deposit, including the North Extension, which contains probable ore reserves of 499-million tonnes with an average grade of 1.66% copper and 0.35 g/t gold.

Access at the Hugo North deposit is planned through five shafts, three of which have been completed. Construction of the final two ventilation shafts (Shaft 3 intake ventilation and Shaft 4 exhaust ventilation) is under way. A decline conveyor system, from surface to the underground crushing system, is being developed. Two underground crushers are planned to crush ore from Lift 1.

Production operations are planned to start in Panel 0, then progress into Panel 2 and later into Panel 1. The pillars between the three panels provide the opportunity to optimise the design of Panels 1 and 2 to best suit the geology, geotechnical characteristics and economic return of each panel.

The material from this brownfield expansion will use the existing concentrator and infrastructure.

The size and quality of this Tier-1 resource provide additional expansion options, which could sustain production for many decades.

Potential Job Creation
Not stated.

Net Present Value/Internal Rate of Return
The project has an expected internal rate of return of more than 20%.

Capital Expenditure
$7.75-billion.

Rio Tinto has said the full impact on the cost of the integrated project is subject to further analysis once it has clarity on the timeline for the completion of the undercut criteria and ongoing Covid-19 restrictions.

Planned Start/End Date
First sustainable production from the underground operation is expected in the first half of 2023.

Latest Developments
Rio Tinto has announced the restart of underground operations at the Oyu Tolgoi project after reaching an agreement with the Mongolia government.

The agreement will advance the project, resetting the relationship between the partners and increasing the value the project delivers for Mongolia.

As part of the comprehensive package agreed between the project owners and government, TRQ will waive the $2.4-billion Erdenes Oyu Tolgoi (EOT) carry account loan in full. The loan comprises the amount of common share investments in Oyu Tolgoi, and is funded by TRQ on behalf of EOT to build the project to date, plus accrued interest.

The Parliament of Mongolia has, meanwhile, approved a resolution that resolves the outstanding issues that have been subject to negotiations with the Mongolia government over the past two years. With this approval, the Parliament of Mongolia has required that certain measures be completed for resolution, and to be considered as formally implemented.

To date, a number of conditions have been addressed, including the waiving of the carry account loan, the improved cooperation with EOT, the implementation of measures to monitor the Oyu Tolgoi underground development financing mechanisms and enhance environmental and social governance matters, the approval of the electricity supply agreement, and the establishment of a funding structure at Oyu Tolgoi that does not incur additional loan financing prior to sustainable production for Panel 0.

Rio continues to work with the government of Mongolia and TRQ to finalise the remaining outstanding measures of resolution comprising the formal termination of the Oyu Tolgoi mine development and financing plan, as well as the resolution of the outstanding Oyu Tolgoi tax arbitration.

An updated funding plan has been agreed to address TRQ’s current estimated remaining funding requirement for the Oyu Tolgoi underground project. Until sustainable underground production is achieved, Oyu Tolgoi will be funded by cash on hand and the rescheduling of existing debt repayments, together with a prepaid copper concentrate sales agreement with TRQ.

Meanwhile, Rio and TRQ have amended the heads of agreement signed in April 2021 to ensure they appropriately fund Oyu Tolgoi. The capital forecast for the project is $6.925-billion, including $175-million of known Covid-19 impacts to the end of 2022.

Forecasted remaining underground capital expenditure is estimated at $1.8-billion. A reforecast will be undertaken during the first half of 2022 to determine a revised cost and schedule estimate that will reflect any further Covid-19 impacts, any additional time-based impacts and market price escalation arising from resequencing, owing to 2021 budget constraints, and updated risk ranging reflecting the latest project execution risks.

Rio Tinto CEO Jakob Stausholm has said the agreement will result in one of the world’s biggest copper growth projects progressing and firmly establishing Mongolia as a global investment destination.

TRQ interim CEO Steve Thibeault has said the company is very excited to be starting work on the undercut, which is critical to unlocking the immense potential of the high-grade deposit.

Key Contracts, Suppliers and Consultants
Jacobs Engineering (engineering, procurement and construction management); and Cimic Group’s Thiess (underground decline contractor).

Contact Details for Project Information
Rio Tinto media relations: Australia/Asia Ben Mitchell, tel +61 3 9283 3620 or email media.enquiries@riotinto.com.
Turquoise Hill Resources investors and media Tony Shaffer, tel +1 604 648 3934 or email tony.shaffer@turquoisehill.com.