oyu tolgoi site visit, august 2015
TRANSCRIPT
Oyu Tolgoi – a world-class copper and gold mine
Analyst and Investor Mine Visit
AUGUST 25-27, 2015
Forward-looking statements
This presentation includes certain “forward-looking information” within the meaning of applicable Canadian securities legislation and “forward-looking statements” within the meaning of the “safe harbour” provisions of the United States Private Securities Litigation Reform Act of 1995. All statements and information, other than statements of historical fact, are forward-looking statements and information that involve various risks and uncertainties. There can be no assurances that such statements or information, including any statements relating to the status of the Company’s relationship and interaction with the Government of Mongolia on the continued development of the Oyu Tolgoi project and Oyu Tolgoi LLC internal governance, will prove accurate and actual results and future events could differ materially from those expressed or implied in such statements. Such statements and information contained herein represent the Company’s best judgment as of the date hereof based on information currently available. The Company does not assume any obligation to update any forward-looking statements or information or to conform these forward-looking statements or information to actual results, except as required by law. For a more detailed list of specific forward-looking statements and information applicable to the Company, refer to the “Forward-Looking Information and Forward-Looking Statements” section of the Annual Information Form dated as of March 20, 2015 in respect of the year ended December 31, 2014 and in the forward-looking statements contained in the Company’s press release dated May 18, 2015 announcing the agreement to develop the underground mine. All amounts are in U.S. dollars, unless otherwise stated.
2
Strong Q2’15 production; record concentrate production and throughput
Maintaining 2015 guidance
Robust operating cash flow in Q2’15; large cash position and debt-free balance sheet
Signing of underground agreement; progressing project finance and updating underground feasibility study
Oyu Tolgoi expected to be third largest copper mine globally at full production
Low-cost copper producer well positioned for long-term
Turquoise Hill overview
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4
Production highlights
5,560
7,778 7,029
7,505 7,512
9,025
Q1'14 Q2'14 Q3'14 Q4'15 Q1'15 Q2'15
Concentrator throughput ('000 tonnes)
Throughput in 2H’15 expected to benefit from July shutdown
102.9
140.0 134.1
186.7
130.9
215.5
Q1'14 Q2'14 Q3'14 Q4'15 Q1'15 Q2'15
Concentrates produced ('000 tonnes)
Q2’15 production impacted by strong throughput and higher grades
Copper production in 2H’15 expected to be higher than 1H’15
25.3
36.2 36.6
50.3
33.6
55.3
0.52
0.53 0.59
0.74
0.52
0.69
0
0.2
0.4
0.6
0.8
0
20
40
60
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15
% Grade ‘000 tonnes Cu in concentrates ('000 tonnes) and grades
Gold production in 2H’15 expected to moderate as grades decline beginning late in Q3’15
66
113 132
278
86
238
0.49
0.60 0.80
1.46
0.48
1.09
0.00
0.40
0.80
1.20
1.60
0
50
100
150
200
250
300
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15
% Grade ‘000 oz Au in concentrates ('000 ounces) and grades
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Financial highlights
$140.7 $201.2
$345.2
$862.8 $954.2
$1,166.9
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15
Cash position ($'000,000)
$(111.9)
$153.8
$259.2
$417.5
$105.3
$239.2
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15
Operating cash flow ($'000,000)
Cu: $2.97* Au: $1,292*
Cu: $3.06 Au: $1,289
Cu: $3.16 Au: $1,284
Cu: $2.97 Au: $1,200
Cu: $2.66 Au: $1,218
Cu: $2.74 Au: $1,205
$200.1
$245.5 $220.3
$292.4
$218.9
$284.6
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15
Cash operating costs ($'000,000)
39.5 30.6 31.6
20.0 27.0
33.9
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15
Expansion Capex Sustaining activities
$10.4
$14.2 $6.7
$8.1
$3.4
$2.5
Capital Expenditures ($’000,000)
$49.9
$44.8
$38.3
$28.1 $30.4
$36.4
Source: Average quarterly Comex copper price and average quarterly LME gold price.
Growing cash position, debt-free balance sheet Five consecutive quarters of positive operating cash flow
2015 CAPEX guidance: ~$230 million, ~$185 million sustaining 2015 cash operating cost guidance: ~$1 billion
Concludes outstanding shareholder matters
Resolves initial development costs
Maintains Investment Agreement tax stability principles
Tax settlement of $30 million
Clarifies sales royalty calculation
Eliminates 2% net smelter royalty
Provides path forward for restarting underground development
Acknowledges definition of feasibility study as an estimate
Management Services Payment: 3% for underground construction
Outlines comprehensive funding plan
Overall NPV impact to Turquoise Hill is ~2% of total reserve case value
Summary of Underground Development Plan
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Unlocking the next phase of development
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• Completed with signing of agreement • Tax matters, 2% NSR, sales royalty calculation, MSP
Resolution of shareholder
matters
• Advancing discussions with IFIs and IMLAs • Expect to sign project financing by end of 2015 • Drawdown expected Q1’16/Q2’16 following approval of the updated
feasibility study by the Turquoise Hill, Rio Tinto and Oyu Tolgoi boards
Project financing
• 2015 feasibility study tentatively approved by MMC pending update of schedules and alignment with underground agreement
• Updated feasibility study to be resubmitted to MMC in September 2015 • Ahead of final board approvals, capital estimate completed
Underground feasibility study
• Work on-going to secure all necessary permits Permits
Restart milestones
Q3’15 Q4’15 Q1’16 Q2’16
Project Readiness
Project Approval
(Turquoise Hill, Rio Tinto, Oyu Tolgoi boards)
• Update CAPEX estimate • Complete critical and remedial works • Enable schedule to de-risk and financing
processes • Minimize cost and exposure without unduly
delaying project
Estimate update, readiness works, early mobilization July under- ground restart
1
Feasibility Study (Mongolian Minerals Council)
Submitted
• Legally required – to update planned schedule and for underground agreement
• OTFS 2015 approved and registered with order to update
• Comply with law/underground agreement • Reschedule of 2014/2015 • Now final checks and translation
To confirm
Turquoise Hill Technical
Report Feasibility study update
Re-submit As approved for
notice to proceed
Project Financing
Sign Drawdown (incur fees) (~$4B, repay shareholders)
• Complete financing • Enable Mongolian Government to action security • Avoid drawdown until project approved
Preparation, project financing approvals
Conditions precedent , security, project approvals
Readiness execution plan
• Mobilize and ramp up Owner’s and EPCM’s respective teams
• Complete full project re-estimate, re-schedule and update project scope for OTFS 2015
• Develop project systems, procedures, processes and finalize the PEP
• Deliver the detailed engineering and early procurement for plant, equipment and materials critical to project restart
• Execute necessary critical works that are key enablers for recommencement of lateral development mining activity
• Obtain necessary project permits for commencing project execution
The aim is to ramp-up project team and project readiness to restart without delay, while not committing to any long-term obligations
Project financing – flow of funds
Today1
Receivable from Oyu Tolgoi*
Shareholder loan: $6.8 billion
Payable to Turquoise Hill*
Shareholder loan: $6.8 billion
1. In accordance with the ARSHA, Turquoise Hill funded the common share investments in Oyu Tolgoi on behalf of Erdenes Oyu Tolgoi LLC; at June 30, 2015 the balance is approximately $950 million * Balances as of June 30, 2015 | Interest rate LIBOR + 6.5%
At project financing drawdown
Proceeds: $4.2 billion2 $4.2 billion $4.2 billion
Payable to Turquoise Hill*
Shareholder loan: $6.8 billion to $3.0 billion3
2. Project finance facility made directly with Oyu Tolgoi 3. At drawdown, Turquoise Hill will provide Oyu Tolgoi with $400 million for fees and taxes * Calculated on balances as of June 30, 2015 | Interest rate LIBOR + 6.5% ** When guarantee fee paid, Oyu Tolgoi pays 1.9% and Turquoise Hill pays 0.6%
Receivable from Oyu Tolgoi*
Shareholder loan: $6.8 billion to $3.0 billion
Deposit from Turquoise Hill
Investment: $4.2 billion Waive 2.5%** guarantee fee while $4.2 billion on deposit
Priority of funding used for development
Oyu Tolgoi operating cash flow Project financing funds Turquoise Hill cash
Oyu Tolgoi cash call
Funding
Reduction in deposit from Turquoise Hill* Deposit: ↓
* Indicative, does not show the withholding tax implications | original shareholder loan interest rate LIBOR + 6.5% | new amounts subject to interest rate no more than LIBOR + 6.5% ** Guarantee fee - Oyu Tolgoi pays 1.9% and Turquoise Hill pays 0.6%
Funding
Receivable from Oyu Tolgoi*
Shareholder loan: ↑ Equity loan: ↑
Funding
Payable to Turquoise Hill (2.5%** guarantee fee on funds used) Shareholder loan: ↑ Equity loan: ↑
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Medium-term timeline
2015 – 2016 2016 – 2021 2021 – 2026 2026 ++
• Sign project finance
• Complete feasibility study
• Board approvals
• Drawdown project finance
• Hugo North Lift 1 Construction
• First draw bell production
• Ramp-up to full production
• Hugo North Lift 2 drilling
• Hugo North Lift 2
• Hugo South
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Additional Exploration
Evaluate Concentrator Options
2014 Technical Report
12
Plant
Open Pit and Hugo North (L1) Open Pit, Hugo N (L1, L2), Hugo S, Heruga
Reserve Case (Feasibility Study):
Life of Mine Case:
*Life of Mine Case includes inferred, so not included in economic evaluation
Proposes next sensible step in development, delivering significant value and initiating access to future development
Economics based on Reserve case production
Large Resource base provides optionality (long life and expansion)
Mine and processing design considers expansion probability
Highly attractive project economics
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Notes: US$ amounts presented in real 2015 terms (1) Expansion capital includes only direct project costs
Units 2014 Reserve Case
Total Processed Bt 1.5
Cu Grade % 0.85
Au Grade g/t 0.32
Ag Grade g/t 1.94 Copper Recoverable B lb 24.9 Gold Recoverable Moz 11.9
Silver Recoverable Moz 78.0
Life Years 41
Expansion Capital US$B 4.9
NPV (8.0%) After Tax US$B 7.43
IRR After Tax % 29%
Payback Period Years 9
Multiple development options
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Production creep targeted along with expansion
Actual operating performance will inform choice of expansion path
A decision to expand the concentrator is not required for a couple years
Copper industry overview
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Source: Wood Mackenzie (Q1 2015 update) Normal C1 cost + sustaining capex, range capped at -100/lb & 400/lb 2020 base, highly probable and probable mines only 1. Oyu Tolgoi’s 10-year average peak production including underground 2. Metals Economics Group and 2014 Oyu Tolgoi Technical Report (2020-2024 average costs)
Post-2020 copper mine C1+sustaining cost curve (c/lb, 2015$)
300
200
100
0
-100
20,000 18,000 16,000 8,000 6,000 4,000 2,000
400
0 12,000 10,000 14,000
kt
Other Mines
Oyu Tolgoi
Cumulative production (kt)
Third largest copper mine after planned expansion1
Top 10 copper deposit by contained reserves and resource2
One of the largest gold deposits by contained reserves and resources2
Long-term copper fundamentals strong
16
0
5
10
15
20
25
30
2000 2005 2010 2015 2020 2025
Base Highly Probable Primary Demand
Forecast
Copper supply/demand outlook (mt)
Small surplus likely over
next few years
Ongoing attrition at existing mines driven by declining grade
Continued demand growth requires new capacity in the medium-term
Market anticipates deficit towards end of decade
China now largest buyer of gold and continues to be largest consumer of copper
Source: Wood Mackenzie (Q1 2015 update)
Turquoise Hill – a long-term growth opportunity
Pure copper and gold exposure
Positive operating cash flow and focusing on asset optimization
Agreed path forward for development of the high-grade underground mine
Significant growth, development and expansion opportunities
Resources located near China with further prospectivity
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Appendix
Probable Development Schedule
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Processing
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Project Start 1st Draw Bell Firing
Sustainable Underground Production
Complete Convey to Surface
Complete Ramp-up
Excavation (Lateral / Mass / Vertical)
Undercutting
Material Handling (CTS + Crushers + Shafts)
Concentrator Upgrade
Extraction Level Access
Set-Up
Surface Infrastructure
Complete Concentrator Upgrade
Underground Ore Production
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Oyu Tolgoi at China’s doorstep
Mongolians now occupy 95% of Oyu Tolgoi roles
Since 2010, in-country spend of $4.6 billion (Mongolian suppliers, salaries, taxes and other Government payments)
Partnered with nearly 800 local suppliers in 2014, accounting for over 50% of procurement spend
In April 2015, Oyu Tolgoi signed a Cooperation Agreement with local governments for community development
Oyu Tolgoi recognized by Mongolian National Chamber of Trade and Industry as leading jobs creator for 2013
Mongolian Mining Journal awarded ‘Oyu Tolgoi Best Responsible Mine of the Year’ in 2014
Oyu Tolgoi expected to represent about 30% of country’s GDP when fully developed
Made in Mongolia
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Oyu Tolgoi Operations Update
2 БҮХ ЭРХ ХУУЛИАР ХАМГААЛАГДСАН © 2014, ОЮУ ТОЛГОЙ ХХК COPYRIGHT © 2014 OYU TOLGOI , ALL RIGHTS RESERVED
Forward Looking Statements This presentation includes certain “forward-looking information” within the meaning of applicable Canadian securities legislation and “forward-looking statements” within the meaning of the “safe harbour” provisions of the United States Private Securities Litigation Reform Act of 1995. All statements and information, other than statements of historical fact, are forward-looking statements and information that involve various risks and uncertainties. There can be no assurances that such statements or information, including any statements relating to the status of Turquoise Hill’s relationship and interaction with the Government of Mongolia on the continued development of the Oyu Tolgoi project and Oyu Tolgoi LLC internal governance, will prove accurate and actual results and future events could differ materially from those expressed or implied in such statements. Such statements and information contained herein represent Turquoise Hill’s best judgment as of the date hereof based on information currently available. Turquoise Hill does not assume any obligation to update any forward-looking statements or information or to conform these forward-looking statements or information to actual results, except as required by law. For a more detailed list of specific forward-looking statements and information applicable to Turquoise Hill, refer to the “Forward-Looking Information and Forward-Looking Statements” section of the Annual Information Form dated as of March 20, 2015 in respect of the year ended December 31, 2014 and in the forward-looking statements contained in Turquoise Hill’s press release dated May 18, 2015 announcing the agreement to develop the underground mine. All amounts are in U.S. dollars, unless otherwise stated.
3 БҮХ ЭРХ ХУУЛИАР ХАМГААЛАГДСАН © 2014, ОЮУ ТОЛГОЙ ХХК COPYRIGHT © 2014 OYU TOLGOI , ALL RIGHTS RESERVED
Summary
Significant number of improvement initiatives across all aspects of business HSE (Critical risk management, leaders toolkit, water recycling) Production (Value chain throughput improvements) Maintenance (Tactics, condition monitoring, critical spares, rotables process) Production planning (Geomet, sequence optimization) Costs (National/Chinese procurement, contractor/expat reductions)
Bulk of the work on base systems and processes Low hanging fruit, adopt/adapt from other businesses
Some limited examples of leading practice Value chain throughput initiatives Mine operations equipment utilization Mine operations training
Key challenge is not identifying opportunities, it’s prioritization
4 БҮХ ЭРХ ХУУЛИАР ХАМГААЛАГДСАН © 2014, ОЮУ ТОЛГОЙ ХХК COPYRIGHT © 2014 OYU TOLGOI , ALL RIGHTS RESERVED
Our Vision – Our Future
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Safety
• Significant focus on safety in business
• Injury rates reducing
• A continuing significant exposure to critical risks with inexperienced workforce
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Lifting Operations
Confined Spaces
Contact with
Electricity
Entanglement and Crushing
Exposure to Hazardous Substances
Fall from Height
Falling Objects
Underground Fire
Underground Inrush
Slope Failure
Uncontrolled Release of
Energy
Underground Rock Fall
Unplanned Initiation of Explosives
Vehicle Collision or
Rollover
Vehicle Impact on
Person
Exposure to Thermal
Extremes
Underground Hoisting
Critical Risk Management Our first priority
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Productivity Improvement Program
• 24 month program – transitioning to ongoing improvement
• Stabilizing current processes through process control
• Mine-to-market process integration and optimization methodology (including debottlenecking)
• Combine leading practices across Rio Tinto and external partners
• Strategic production planning by optimizing mine planning /sequencing for faster milling and higher grades)
Increase free cash flow
Operational excellence
Increased labour productivity
Improved utilization of the assets
Increased and optimized payable metal from resource to customer
Maximized value from operations while optimizing free cash flows
Increase free cash flow over the next five years
Optimized supply chain and integration with customers
Objective: step change in productivity (Aspiration - 25% increase from current demonstrated performance)
Outcomes Key projects/activities
8 БҮХ ЭРХ ХУУЛИАР ХАМГААЛАГДСАН © 2014, ОЮУ ТОЛГОЙ ХХК COPYRIGHT © 2014 OYU TOLGOI , ALL RIGHTS RESERVED
Concentrator Throughput Improvements
9 БҮХ ЭРХ ХУУЛИАР ХАМГААЛАГДСАН © 2014, ОЮУ ТОЛГОЙ ХХК COPYRIGHT © 2014 OYU TOLGOI , ALL RIGHTS RESERVED
Process Control Improvements 1. SAG Circuit
• Load Control & Constraint √ • Maximum Speed Control √ • Auto Direction balance √ • Acoustic Retrofit (Audiomill & Hydrophone) In progress - 80% • Auto Grind Out, Controlled Stop/Start √
2. Ball Mill Circuit • Regulatory Control √ • Feed Density Control √ • Constraint back to SAG √
3. Pebble Circuit • PLC – DCS Migration √ • Cavity Level Control √ • Crusher Inventory Balancing √ • Auto Gap Adjustment √
4. Auxiliary Circuit • Tailing Thickener Constraint Control √
5. Monitoring Tool • Process Control Online KPI √ • Processbook Trend & Control Monitoring √ • Constraint Tool √ • Online documentation In progress – 70%
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Additional Concentrator Magnets
SAG Throughput Increase - Pebble Crusher Utilization
11 БҮХ ЭРХ ХУУЛИАР ХАМГААЛАГДСАН © 2014, ОЮУ ТОЛГОЙ ХХК COPYRIGHT © 2014 OYU TOLGOI , ALL RIGHTS RESERVED
SAG Grinding Media Improvements
Jan 2014: S-Series 0.85%C, Surface 60-63HRC 1% round balls
SAG Throughput Increase – SAG Grinding Media • Changed from S-Series to T-Series to P60 series, lowering hardness. • Modified SAG operating philosophy to reduce ball impacts on liners
Jan 2015: T-Series 0.74%C, Surface 58-60 HRC 60% round balls
July 2015: P60 Series 0.55%C, Surface 55-56HRC 100% round balls
12 БҮХ ЭРХ ХУУЛИАР ХАМГААЛАГДСАН © 2014, ОЮУ ТОЛГОЙ ХХК COPYRIGHT © 2014 OYU TOLGOI , ALL RIGHTS RESERVED
Thickener Distribution Improvements Tailings Throughput Increase
BEFORE
AFTER
13БҮХ ЭРХ ХУУЛИАР ХАМГААЛАГДСАН © 2014, ОЮУ ТОЛГОЙ ХХКCOPYRIGHT © 2014 OYU TOLGOI , ALL RIGHTS RESERVED
Phase1
Phase2
Phase3
Phase4
Phase5
Phase6
Phase7
Phase8
Phase9
Phase10
B
A
Phase Ore (Mt)
Waste (Mt)
Cu(%)
Au(g/t)
As in Con(ppm)
Tput(t/hr)
Phase 01 10 0 0.72 1.71 40 4080Phase 02 40 10 0.55 0.81 80 4290Phase 03 40 50 0.56 0.16 490 4860Phase 04 100 150 0.42 0.42 190 4070Phase 05 150 260 0.38 0.27 380 4090Phase 06 50 70 0.60 0.08 5550 7420Phase 07 90 90 0.54 0.12 5700 6260Phase 08 60 230 0.45 0.05 2110 4660Phase 09 30 200 0.33 0.30 220 3350Phase 10 420 800 0.44 0.33 1630 4400
Phase 6a 40 40 0.66 0.07 7210 7370Hugo West 30 70 0.33 0.25 ‐ 4,290
Overspill risks from outer phases
Includes revised TSF strategy to simplify design and balance mine and mill requirements
Medium‐Term Production Plan Optimization
14 БҮХ ЭРХ ХУУЛИАР ХАМГААЛАГДСАН © 2014, ОЮУ ТОЛГОЙ ХХК COPYRIGHT © 2014 OYU TOLGOI , ALL RIGHTS RESERVED
Cost Reduction Improvements
Contractor reductions Maintenance labour insourcing
Maintenance labour efficiency
Reduced site services
Procurement savings Logistics, Fuel, Grinding Media
National and Chinese supply
Expat reductions Development of Mongolian leaders
More than 50% expat reduction target to end 2016
15 БҮХ ЭРХ ХУУЛИАР ХАМГААЛАГДСАН © 2014, ОЮУ ТОЛГОЙ ХХК COPYRIGHT © 2014 OYU TOLGOI , ALL RIGHTS RESERVED
• Mine design risks • Mining rate – in particular vertical
development – Hydraulic shovel reliability, wall control, D&B performance
• Major component maintenance risks (some plant moving out of component honeymoon period)
• Potential catastrophic failure of critical piece of equipment (thickener rakes, crusher motor, etc.)
• Inexperienced workforce (safety culture, peak maintenance challenges, increased operating demands). Continued expat reductions (350 in 2013 to 175 current)
• Revised mining sequence on track
• Improvement projects in place, mining rates are tracking to plan and pit slope issues are being managed
• Truck engine replacement program is ongoing
• Reliability issues and forward planning in the concentrator are receiving significant focus
• All critical roles are filled, with ongoing leadership toolkit rollout.
• Continued reduction in expat support and promotion of national employees to leadership roles
Other Key Risks
Oyu Tolgoi Site Visit AUGUST, 2015
Oyu Tolgoi – Underground Mine Discussion
Forward-Looking Statements
2
This presentation includes certain “forward-looking information” within the meaning of applicable Canadian securities legislation and “forward-looking statements” within the meaning of the “safe harbour” provisions of the United States Private Securities Litigation Reform Act of 1995. All statements and information, other than statements of historical fact, are forward-looking statements and information that involve various risks and uncertainties. There can be no assurances that such statements or information, including any statements relating to the status of Turquoise Hill’s relationship and interaction with the Government of Mongolia on the continued development of the Oyu Tolgoi project and Oyu Tolgoi LLC internal governance, will prove accurate and actual results and future events could differ materially from those expressed or implied in such statements. Such statements and information contained herein represent Turquoise Hill’s best judgment as of the date hereof based on information currently available. Turquoise Hill does not assume any obligation to update any forward-looking statements or information or to conform these forward-looking statements or information to actual results, except as required by law. For a more detailed list of specific forward-looking statements and information applicable to Turquoise Hill, refer to the “Forward-Looking Information and Forward-Looking Statements” section of the Annual Information Form dated as of March 20, 2015 in respect of the year ended December 31, 2014 and in the forward-looking statements contained in Turquoise Hill’s press release dated May 18, 2015 announcing the agreement to develop the underground mine. All amounts are in U.S. dollars, unless otherwise stated.
Execution
3
Hugo North - Underground Mine
Physical Infrastructure • Underground mine able to
produce 95ktpd. • 5 shafts (personnel & equipment
access and ventilation). • Material handling system
(crushers and underground conveyors to transport ore to the surface overland conveyor).
• Concentrator upgrade to handle higher copper content of underground ore.
• Associated surface infrastructure (Underground Mining offices, control room & associated facilities).
Operational Capability • Underground Operations team
(production + ongoing construction + maintenance + technical services).
• Mongolian workforce with appropriate expatriate support).
• Safety systems and supporting safe work procedures.
• Training systems and capability • Cave Management system,
including appropriate technical oversight.
• Asset Management systems • Support & logistics (major supply
contracts and contractors).
+
Expansion Scope
4
Key Aspects
• Development of HNL1, by panel cave mining method
• A high grade ore body ~2km long and 280m wide, containing 499Mt ore at 1.66% Cu, 0.34g/t Au
• >200km of underground lateral development
• Five vertical shafts and a decline incorporating conveyor to surface
• Concentrator throughput of 100ktpd is not expanded, but there is an upgrade to enable processing of higher grade feed
• Associated surface infrastructure
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COPYRIGHT © 2012 OYU TOLGOI , ALL RIGHTS RESERVED
Site Actuals
• Shaft 1 sink to 1385m in 2008
• 16km off-shaft lateral development 2008 – Aug 2013
• Shaft 2 sink to 1167m and has ~100m to go
• Shaft 5 sink to 208m and has ~ 1,000m to go
• Extensive geotechnical data collection program
• Demonstrated performance and quality
Oyu Tolgoi Underground
5
Ore Flow
6
Probable Development Schedule
7
Processing
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Project Start 1st Draw Bell Firing
Sustainable Underground Production
Complete Convey to Surface
Complete Ramp-up
Excavation (Lateral / Mass / Vertical)
Undercutting
Material Handling (CTS + Crushers + Shafts)
Concentrator Upgrade
Extraction Level Access
Set-Up
Surface Infrastructure
Complete Concentrator Upgrade
Underground Ore Production
8 БҮХ ЭРХ ХУУЛИАР ХАМГААЛАГДСАН © 2012, ОЮУ ТОЛГОЙ ХХК
COPYRIGHT © 2012 OYU TOLGOI , ALL RIGHTS RESERVED
Reserve Case: Southern Oyu Open Pit / Hugo North Lift 1 Panels 0 to 2
Final year of processing in 2055
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2013201420152016201720182019202020212022202320242025202620272028202920302031203220332034203520362037203820392040204120422043204420452046204720482049205020512052205320542055
Co
nce
ntr
ato
r fe
ed (
kt/y
)
Hugo North
Central Chalcopyrite
Central Covellite
Central Chalcocite
South West
Production – Reserve Case
Note: Based on 2014 Oyu Tolgoi Technical Report
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Geotechnical
9
• Hugo North orebody is
– Highly faulted
– Fair rock mass strength
– Relatively high insitu (horizontal) stresses and abutment stresses
• This is good for promoting caving and minimising secondary breaking
• The challenge and key focus for the Oyu Tolgoi design and operating plan is around
– Maintaining stability of orebody development drives
– Managing draw interaction and draw control
9
Cave Support
10
Ground Support
Major faults and weak rock mass support pressure
>180kN/m2
A high stress environment, support resistance =
100kN/m2
Fair to good rockmass, static conditions ,support resistance
=80kN/m2
Major faults and strain burst prone rockmass ground support regime
Minimum 2.4m bolt and shotcrete
Add mesh. Cables and strapping @ 2m
Add Cables and strapping @ 1m
Add yieldable support
10
Cave Monitoring
11
• Cave Growth & Flow monitoring systems will be in place before start up of the undercut:
– Seismic system
– TDR & open holes
– Smart/network markers
– Cave Tracker
• Regular surface subsidence monitoring will be carried out
Cave Management
12
Single data repository
Real-time hazard recognition
Pillar stability
Integrated system; reduces the process of collecting, analysing and reporting significantly
CaveCad
Collecting, Validating, Processing, Analysing and Reporting data
automatically
Standardised cave management systems
Convergence High
Medium Low
HO
D
3D analysis and reporting Reports
© 2011 Rio Tinto Technology & Innovation
Undercut
13
• Undercut blasted in advance of drawpoint and drawbell excavation • Undercut face length < 350m and retreats at > 80m per year • Undercut lead / lag is 10m • Undercut face orientation + drives favourable to stress and structure
Undercut
Undercut
14
28m 28m
28m
17m
17m
To Drill
Drilling Blasting APEX
UNDERCUT
EXTRACTION
The ‘Wide W’ has significant benefits over traditional ‘Small W’ • Improved stability • Improved operability
14
Extraction
Vent Raise
Ore Pass
Drawbell blast 12 m
IDZ 10 m
28m
15m
Mine Spacing Fragmentation
Andina 26m x 13m Very Fine
New Afton 28m x 15m Fine
Oyu Tolgoi
28m x 15m Fine (Expected)
DOZ 30m x 18m Mid
Palabora 34m x 17m Coarse
Extraction Drift
Drawbell
Steel Set
Drawpoint
15
Drawbell Construction
16
Production
At full production:
Production LHD • 23 x 14 tonne LHD
machines
Secondary Breaking: Hang-ups • 2 water cannons • 3 “medium reach” drill and
blast rigs
Secondary Breaking: Oversize • 6 “oversize” drill and blast • 2 mobile rockbreakers
Smaller extraction drives are under review as risk reduction measure
17
Production
Trucking • 9 x 160 tonne haul trucks • One way flat haul loop • Engineered roadbase • Requires same profile as 80t
truck Crushing • 2 of 1,600mm x 2,400mm
gyratory • 4,000tphr each • Direct truck tip • 650t fine ore bin
18
Ore Handling
Ore Handling
30kt/d
Shaft #2 • 10m dia service and production
shaft • 2 x 60t skips • 1,630tphr (~19hr/d)
19
Ore Handling
30kt/d
95kt/d
Ore Handling Conveyor to Surface • 3 x 2.2km legs • 1,600mm wide belt @ 6m/s • 6,500 tphr • 2 x 6 MW Gearless drives each leg • Commission 6 mths before 30kt/d
20
Exploration Update August 27, 2015
Petroglyph from Javkhlant Mountain
Oyu Tolgoi Mine Site from Javkhlant Mountain
^ _ ^ _ ^ _ ^ _ ^ _ ̂ _ ^ _ ^ _
Exploration Service Agreement Oyu Tolgoi Orbit
2014 TRQ-RTX Service Agreement executed in Dec. Integration of TRQ, RTX & public domain data
& transfer into managed systems Rock and stream geochemistry interpretations
2015 Litho-structural & tectonic mapping 3D petro-physical data modelling Prioritise areas for tenement application Definitive test of Teregt licence targets
2016 • Continued Target Generation & Target Testing
pending successful tenement acquisition
2014
2015
2017
2016
Target Generation, securing tenement &
definitive test of the Teregt Licence
TRQ – RTX data compilation & integration Target Testing
Litho-structural & tectonic map of the service agreement area
2
Integration of data and exploration knowledge Geology/Remote sensing • Field observation data points, • Structural and tectonic interpretations. • Landsat, SPOT and Aster imagery with
geological and alteration interpretation/analysis. • Validated geochronology and mineral occurrence
database Geochemistry • Surface Rock – 4,800 samples/ 8 elements. • Stream – 210 samples, 36 elements. • Litho-chemistry ->150 samples, >45 elements. Geophysics • FALCON gravity and magnetics – ~16,000 line
km @800m line spacing / 80m elevation. • GETECH gravity and magnetic compilation • Ground magnetics ~10,000lkm • Ground gravity – >10,000 data points. • IP – Zeus gradient array, VIP, DDIP Drilling • 71,816m / 297 drill holes including 285 with
geology logs, 193 holes with 12,712 analyses (Au, Cu, Mo only)
3
Regional 3D data modelling and interpretation
Interpreted Palaeozoic Basement topography using magnetic and gravity depth to source modelling, constrained by 311 drill holes
Interpolation of 3D petro-physical data model based on inversion of FALCON and ground gravity and airborne magnetics, constrained by the basement topography
4
Service Agreement - Oyu Tolgoi Orbit
Released for Application (4335 km2)
Released for Tender (3750 km2)
Mining Licenses
Exploration Licenses
Reserved Area
Protected Area
Cu Deposit ^ _ ^ _ ^ _ ^ _ ^ _ ̂ _ ^ _ ^ _
Teregt
Ulaan Khud
Oyu Tolgoi Mine Licences
• Eastern Mongolia including the agreement area open for direct application of exploration licences as of August 24, 2015.
• Turquoise Hill local subsidiaries will apply for licenses following the MRAM process and guidelines.
• New exploration licences issued via online direct application system for Western Mongolia initiated on 26th Jan 2015. 900+ companies registered to apply, 54% of applied licences granted.
5
6
Mineralized trend of ~26km
Teregt Licence – Exploration
IVN gradient array IP survey - chargeability
Teregt
Javkhlant South
TRQ-RTX exploration: •geochemical interpretation, •mapping, •zircon geochronology & fertility, •Greenrock fertility •DDIP & MT geophysical surveys
10 km
Oyu Tolgoi
Teregt
Histogram of single zircon ages from the three Teregt U-Pb dating samples 7
Teregt : Zircon and Greenrock Analysis
Teregt SE (Cu-Zn geochem)
! ( ! (
! (
! (
! ( ! ( ! ( ! (
327
254 306
321.9
344.1
318.7
321.1
353.4
311.9
350.9
Green rock Age dating
Kharmagtai Oyu Tolgoi
Teregt Zircon U/Pb ages
8
• Epidote, chlorite and zircon chemistries suggest sampled propylitic alteration not to be porphyry associated and intrusive phases to have low Cu fertility potential