Annual Oyu Tolgoi Mine Visit

Annual Oyu Tolgoi Mine Visit
November 8-10, 2016

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 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, which include, but are not limited to, statements respecting anticipated business activities,
planned expenditures, corporate strategies and other statements that are not historical facts, 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 sections of the
Annual Information Form dated as of March 15, 2016 in respect to the year ended December 31, 2015.
All amounts are in U.S. dollars, unless otherwise stated.
2

Annual Oyu Tolgoi Mine Visit
NOVEMBER 8-10, 2016
Oyu Tolgoi underground mine briefing

Hugo North and South Progression

Execution
Hugo North Lift 1 (NHL1) Underground Mine
Physical infrastructure
• Underground mine able to
produce 95ktpd.
• Five shafts (personnel and
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 and 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 and logistics (major
supply contracts and contractors).
5

Expansion Scope
Key aspects
• Development of HNL1, by panel cave mining method
• High grade ore body ~2km long and 280m wide, containing
499Mt ore at 1.66% copper, 0.34g/t gold
• >200km of underground lateral development
• Five vertical shafts and a decline incorporating conveyor to
surface
• Concentrator upgrade to enable processing of higher-grade
feed
• Associated surface infrastructure
6

Key underground components
Shaft 1
(early development
and ventilation)
Shaft 2
(production and
ventilation)
Shaft 5
(ventilation)
Shaft 3
(ventilation)
Shaft 4
(ventilation)
Total Depth
1,385 metres
1,284 metres
1,178 metres
1,148 metres
1,149 metres
Diameter
6.7 metres
10 metres
6.7 metres
10 metres
11 metres
Completion
2008
Expected 2016
Expected 2017
Expected 2021
Expected 2021
Remaining
Complete
~100 metres
~1,000 metres
Not started
Not started
Lateral Development
(includes conveyor development)
Underground Development
2008-2013
16km
completed
65km
to first
draw bell
~200km
over life
of mine
2013 2020 2035
7

Ore Flow
8

Geotechnical
• 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
9

Cave support
Ground Support
Fair to good rockmass,
static conditions
High stress
environment
Major faults and weak
rock mass
Major faults and strain
burst prone rockmass
ground support regime
Minimum 2.4m bolt and
shotcrete
Add mesh; cables and
strapping @1m
Add cables and
strapping @1m
Add yieldable support
10
10

Cave monitoring
• Cave growth and flow monitoring
systems will be in place before start up
of the undercut:
– Seismic system
– TDR and open holes
– Smart/network markers
– Cave Tracker
• Regular surface subsidence
monitoring will be carried out
11

Cave management
Single data repository
Real-time hazard recognition
Standardised cave
management systems
Reports
CaveCad
Collecting, validating,
processing, analyzing
and reporting data
automatically
Pillar stability
3D analysis and reporting
HOD
Convergence
High
Medium
Low
Integrated system; reduces the process of collecting, analysing and reporting significantly
12
© 2011 Rio Tinto Technology & Innovation

Undercut
• 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
13

Undercut
APEX
To
Drill
28m
Drilling
28m
Blasting
17m
UNDERCUT
17m
EXTRACTION
28m
The ‘Wide W’ has significant benefits over
traditional ‘Small W’
• Improved stability
• Improved operability
14

Extraction
Drawbell
Ore
Pass
Steel Set
Drawpoint
Extraction Drift
28m
Drawbell
blast
12 m
15m
IDZ
10 m
Vent
Raise
Mine Spacing Fragmentation
Andina 26m x 13m Very Fine
New Afton 28m x 15m Fine
Oyu
Tolgoi
28m x 15m
DOZ 30m x 18m Mid
Palabora 34m x 17m Coarse
Fine (Expected)
15

Ore Handling
Shaft #2
• 10m dia service and production
shaft
• 2 x 60t skips
• 1,630tphr (~19hr/d)
30kt/d
16

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 six months before
30kt/d
30kt/d
95kt/d
17

Annual Oyu Tolgoi Mine Visit
NOVEMBER 8-10, 2016
Oyu Tolgoi open-pit operations
Steve Jones
Acting CEO, Oyu Tolgoi

Production achievements
All injury frequency rate
(per 200,000 hours worked)
Total material mined
('000 tonnes)
0.43
0.47
0.33
72%
2016 YTD vs. 2013
72,032
27%
2015 vs. 2013
76,919
91,771
71,322
0.12
2013 2014 2015 2016 YTD
Industry-leading safety performance
2013 2014 2015 2016 YTD
Strong haul truck utilization instrumental in material mined growth
Concentrator throughput
('000 tonnes)
Concentrate production
(‘000 tonnes)
20,317
70%
2015 vs. 2013
27,872
34,537
28,333
172%
2015 vs. 2013
564
789
640
290
2013 2014 2015 2016 YTD
Multiple productivity initiatives have led to improved throughput
2013 2014 2015 2016 YTD
Operational improvements key to increased concentrate production
19

Oyu Tolgoi’s Q3’16 cost curve position
C/lb, 2016$
400
2016 copper mine C1+royalties+sustaining normal cost curve
300
Oyu Tolgoi
Other Mines
Q1 Q2 Q3 Q4
200
100
0
0
2,000
4,000
6,000 8,000 10,000 12,000 14,000 16,000
18,000
kt
Cumulative production (‘000 tonnes)
-100
Source: Wood Mackenzie (Q3’16 Cost Service). Oyu Tolgoi production in line with full-year guidance released November 3, 2016. Oyu Tolgoi costs calculated as C1
costs + royalty expenses + sustaining cash capital including deferred strip presented in the release of November 3,2016. Wood Mackenzie costs are Normal C1 cost +
royalties + sustaining capex, range capped at -100/lb & 400/lb for base, highly probable and probable mines only.
20

Managing current ore grade challenges
Open pit Phase 1 finished and Phases 2 and 3 nearly complete
Lower-grade Phase 6 and stockpile ore processed from mid-2016 to mid-2018
Waste movement from Phase 4 critical to uncover medium-grade ore in 2017, then higher-grade
ore beginning in mid-2018
2016-18 Ore
(Phase 6, Stockpiles)
Primary
Crusher
Waste
Dumps
Tailings
Facility
Final Open
Pit
2018-22 Ore
(Phase 4/5)
Current Ore
(Phase 2/3)
21

Continued focus on reducing cash costs
• Business improvement programs
have been in place since 2014
delivering value across
productivity, operating costs,
sustaining capex and working
capital.
• The program values one-off
savings, sustaining capital
reductions and net working
capital (NWC) reductions at 10%
of face value.
Source: Oyu Tolgoi
• Program is key platform for
ensuring Oyu Tolgoi open-pit
operations remain free cash flow
positive.
22

Annual Oyu Tolgoi Mine Visit
NOVEMBER 8-10, 2016
Oyu Tolgoi underground development
Marco Pires
Chief Development Officer
Oyu Tolgoi Underground

Unlocking value through underground project
First drawbell production
expected in mid-2020 with
full ramp-up by 2027
Average of 560,000 tonnes
of copper from open pit
and underground 2025-
2030 1
First quartile, low-cost
operation
1. 2016 Oyu Tolgoi Technical Report
24

Oyu Tolgoi underground a Tier 1 asset
C/lb, 2016$
400
2025 copper mine C1+royalties+sustaining normal cost curve
Q1 Q2 Q3 Q4
300
Oyu Tolgoi
Other Mines
200
100
0
0
2,000
4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000
kt
Cumulative production (‘000 tonnes)
-100
Source: Wood Mackenzie (Q3’16 Cost Service). 2016 Oyu Tolgoi Technical Report. Turquoise Hill Resources.
Normal C1 cost + sustaining capex, range capped at -100/lb & 400/lb for base, highly probable and probable mines only. Oyu Tolgoi costs and volumes for 2025-30.
25

Panel block cave development
Highly productive mass mining method
with low operating costs. Substantial
upfront investment and lower operating
costs make block caving suitable for
larger deposits.
Resource recovery is effective as the
low operating costs support economic
extraction of a lower shutoff grade.
Primary blasting is only required on a
small percentage of the orebody, on the
undercut level. Following this, ore is
broken by gravity and flows into
drawbells beneath.
Ore is extracted by load-haul-dump
machines. Oversize rocks that block
drawbells are removed by secondary
breaking.
26

Robust mine design
Footprint size 2,000m x 280m
and 1,300m below surface
203km tunnel, 137,000m 3 mass
excavation
Five shafts (three air intake and
two exhaust)
Advance undercut, wide “W”
profile with anti-socket drive,
567,000m 2
2,231 drawpoints (El Teniente
layout), 28m x 15m spacing,
central LHD tip
Steel-lined ore-passes to truck
haulage levels, trucks dump into
one or two crushing systems
Ore handling by conveyor-tosurface,
Shaft 2 hoisting as
contingency
27

Complete ramp-up expected by 2027
Sustainable underground production
Complete convey to surface
Project
re-start
1st draw
bell firing
Complete concentrator
upgrade
Complete
ramp-up
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Pre-start
Excavation (lateral / mass / vertical)
Excavation (lateral)
Undercutting
Extraction level access
Extraction level access
Material handling (conveyto surface + crushers + shafts)
Surface infrastructure
Concentrator upgrade
Expansion capital
Sustaining capital
Timeline is illustrative only and subject to change
28

Key underground components
Shaft 1
(early development
and ventilation)
Shaft 2
(production and
ventilation)
Shaft 5
(ventilation)
Shaft 3
(ventilation)
Shaft 4
(ventilation)
Total Depth
1,385 metres
1,284 metres
1,178 metres
1,148 metres
1,149 metres
Diameter
6.7 metres
10 metres
6.7 metres
10 metres
11 metres
Completion
2008
Expected 2016
Expected 2017
Expected 2021
Expected 2021
Remaining
Complete
~100 metres
~1,000 metres
Not started
Not started
Lateral Development
(includes conveyor development)
Underground Development
2008-2013
16km
completed
65km
to first
draw bell
~200km
over life
of mine
2013 2020 2035
29

Processing plant upgrade
Concentrate from Hugo North Lift 1 ore
Higher copper grade
Higher recovery
Chalcopyrite/bornite
Plant upgrade
Addition of 5 th ball mill
Additional flotation line
Additional concentrate filtering and
bagging capacity
Plant capacity of 40 million tonnes per
year
Capex = ~$145 million (direct cost)
Expected to be complete in 2022
30

Approved underground CAPEX
$1.2 $1.2
$1.3
$1.0
$0.8
$0.5
$0.5
$0.3 $0.4
$0.3
$0.4 $0.4
Underground expansion capital, VAT and escalation of $5.3 billion
Underground sustaining capital, VAT and escalation of $2.8 billion to full ramp-up expected in 2027
31

Underground contracts awarded to date
Key Contracts Awarded
Description
Supplier
Group
Contractor
EPCM Onshore National Jacobs
Key contracts split
EPCM Offshore International Jacobs
Boxcut and Decline
(C2S)
Explosives Supply and
Services
Shafts 2 and 5
Execution
Underground
Development Services
National
National
National
National
Theiss Khishig
Arvin JV
Maxam
Explosives
DCM
DCM
Mine Support Services National DCM
International
60%
National
40%
Construction Camp
Modules Supply
Critical Facilities
Execution
International
National
MCC
MCS
32

Strong project momentum
Currently
Workforce ~1,600
Major contracts fully mobilized
Lateral development occurring
as planned
Boxcut well advanced
Steady progress of sinking
Shafts 2 and 5
Expected by 2017
Workforce of ~2,400
Dual decline commenced
Decline box cut Left: belt conveyor ramp Right: service ramp
33

Annual Oyu Tolgoi Mine Visit
NOVEMBER 8-10, 2016
Oyu Tolgoi’s long-term potential
Jeff Tygesen, Chief Executive Officer
Steeve Thibeault, Chief Financial Officer
Brendan Lane, Vice President Operations and Development

Achievements 2015-2016
1
2
3
4
5
6
7
May 2015 – Underground Development Plan approved
August 2015 – Underground pre-start activities begin
December 2015 – Project finance facility signed
May 2016 – Notice to proceed and 2016 Feasibility Study approved
June 2016 – Drawdown of project finance facility
August 2016 – First underground blast
October 2016 – 2016 Oyu Tolgoi Technical Report published
35

Long-term copper fundamentals strong
Copper mine supply/demand outlook (Mt) Copper market likely to be in
balance in 2017.
30
25
Base Highly Probable Primary Demand
Forecast
Ongoing attrition at existing
mines driven by declining
grade
20
15
Continued demand growth
requires new capacity in the
medium-term
10
5
Market anticipates surplus in
2018-19 before moving into
deficit from 2020
0
2000 2005 2010 2015 2020 2025
Source: Wood Mackenzie (Q3’16 Long-Term Outlook)
China now largest buyer of
gold and continues to be
largest consumer of copper
36

2016 Reserves Case
2016 Reserves Case Mining Areas
Concentrator capacity 40mtpa,
10% above nameplate capacity
Open pit utilized to top-up
concentrator
Underground ramp-up to full
production (~33mtpa) expected
2020-2027
Highest grade ore mined first –
initial underground copper
grades expected at 2.5%
Plant
After 2039, open-pit head
grades average ~ 0.45% copper
Opportunities to reduce
construction time, faster rampup
and increase underground
production >95ktpd
37

Alternative Production Cases
Plant
38

2016 Resources Case
2016 Resources Case Processing Production
Assumes concentrator
capacity of 40mtpa for life
Base Case NPV 8% $8.37
billion 1
Expansion capital costs
$9.73 billion 2
Plant
1. Base case NPV8% assumes $3.00/lb copper and $1,300/oz gold
2. Expansion capital costs inclusive of 2016 Reserves Case expansion capital. Expansion capital costs include only direct project costs and
exclude interest expense, capitalized interest, debt repayments, tax pre-payments and forex adjustments. In all cases, total capital cost
excludes capital costs for the year 2016. Expansion capital for 2016 excluded is $0.46 billion.
39

Resources 50 Case
Resources 50 Case Processing Production
Concentrator creep from
40mtpa to 50mtpa with little
capital
Assumes 5% improvement in
concentrator capacity per year
for five years
Base case NPV 8% $9.32 billion 1
Expansion capital costs $9.73
billion 2
Plant
1. Base case NPV8% assumes $3.00/lb copper and $1,300/oz gold
2. Expansion capital costs inclusive of 2016 Reserves Case expansion capital. Expansion capital costs include only direct project costs and
exclude interest expense, capitalized interest, debt repayments, tax pre-payments and forex adjustments. In all cases, total capital cost
excludes capital costs for the year 2016. Expansion capital for 2016 excluded is $0.46 billion.
40

Resources 100 Case
Resources 100 Case Processing Production
Assumes ~Year 20,
concentrator expanded to
100mtpa
Base Case NPV 8% $8.88
billion 1
Expansion capital costs
$13.47 billion 2
Plant
1. Base case NPV8% assumes $3.00/lb copper and $1,300/oz gold
2. Expansion capital costs inclusive of 2016 Reserves Case expansion capital. Expansion capital costs include only direct project costs and
exclude interest expense, capitalized interest, debt repayments, tax pre-payments and forex adjustments. In all cases, total capital cost
excludes capital costs for the year 2016. Expansion capital for 2016 excluded is $0.46 billion.
41

Resources 120 Case
Resources 120 Case Processing Production
Assumes ~Year 20,
concentrator expanded to
120mtpa
Base Case NPV 8% $8.80
billion 1
Expansion capital costs
$14.86 billion 2
Plant
1. Base case NPV8% assumes $3.00/lb copper and $1,300/oz gold
2. Expansion capital costs inclusive of 2016 Reserves Case expansion capital. Expansion capital costs include only direct project costs and
exclude interest expense, capitalized interest, debt repayments, tax pre-payments and forex adjustments. In all cases, total capital cost
excludes capital costs for the year 2016. Expansion capital for 2016 excluded is $0.46 billion.
42

Cost sensitivity options
1 Underground construction capital reduced by 30%
2 Operating costs reduced by 15%
3 G&A costs assumed to reach long-term average cost of
$50 million from Year 7
4 Rail freight available to project after 2020 and
concentrate freight cost is reduced to $25 per tonne
43

Oyu Tolgoi– a long-term growth opportunity
Open pit performing as expected in low gold areas
Demonstrated productivity and cost improvements
Underground development progressing
Long-term development optionality and plant expansion opportunities
Oyu Tolgoi best copper asset in development today
44