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 24/7/365.

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, 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
In October 2021, TRQ confirmed that the expansion at the mine would cost $1.2-billion more than initially expected, with the project now estimated at about $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 will be no earlier than January 2023 (previously October 2022), subject to the timing of the start of the undercut.

Latest Developments
Mongolia’s Prime Minister Oyun-Erdene Luvsannamsrai reported in December 2021 that Rio Tinto had offered to write off Mongolia's outstanding $2.3-billion debt for its share in Oyu Tolgoi mine to advance the copper/gold project.

The offer could end the years-long tussle over the project which, when completed, will be the world's third-biggest copper mine and comes after Rio's chief executive flew to Mongolia in late November 2021, aiming for "a relationship reset".

The PM said his office had received a letter from Rio Tinto agreeing to cancel the debt, conduct an independent audit into the financing of the project's underground expansion and improve governance.

Government has previously said Rio should also be held liable for the delays.

In its offer, Rio also agreed to cover the costs of the much-delayed expanded underground section of the mine, which is expected to be completed by 2023.

Rio's relations with the Mongolian government have been increasingly fractious amid mounting concerns in government that the economic benefits of the expansion project, which is behind schedule and over budget, are being eroded.

Currently, Mongolia is paying for its stake in the project and its share of construction costs, which have been accumulating interest at 6.5% a year since 2009, by deferring dividends and it is not due to see any payout before 2041.

By cancelling the debt, Rio Tinto would bring back the payout for government.

The offer will be reviewed by the Mongolian Parliament for approval.

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.