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
The government of Mongolia has dismissed the head of the company that owns its stake in the Oyu Tolgoi copper and gold mine, to appease global miner Rio Tinto and its partner in the operation.

Davaadorj Ganbold will replace Tserenbat Sedvanchig as chief, who had been occupying the position only since December.

Sedvanchig's departure comes after a damaging confusion over necessary approvals at Oyu Tolgoi that led Rio to temporarily halt plans for a $5-billion underground expansion at the project in July this year, after it had been informed that the Mongolian Parliament would first have to approve financing for the project, which has led to shaken confidence in Mongolia and 1 700 job cuts.

Sedvanchig has been blamed for triggering the misunderstanding after he sent a letter to Rio in July, stating the financing of that project could go to Parliament for approval.

Rio warned at the time that Parliamentary approval would be a complex and time consuming process.

Government later clarified that Parliamentary approval was not needed, although it did have questions about the financing for the project, which is expected to boost the country's economy by 35% by 2020.

Sedvanchig has said that government is disputing 22 points with Rio, including what he calls the violation of the Mongolian legislation and the investment agreement.

Meanwhile, mining major Rio Tinto has agreed to provide Turquoise Hill Resources with a $600-million bridge-funding facility to fund the continuing development of Phase 1 of the Oyu Tolgoi project.

The facility will mature on December 31, subject to certain conditions being met.

Under the terms of the new facility should Oyu Tolgoi project financing funds not be available to repay Rio the $600-million and a $1.8-billion interim funding facility, Turquoise Hill will be obligated to launch a rights offering to repay both facilities.

Rio has agreed to provide a firm stand-by commitment for a fully underwritten rights offering by Turquoise Hill.

Further, Rio remains committed to putting in place a significant project-financing package to fund the development of the Oyu Tolgoi underground mine.

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.