Oyu Tolgoi announces Q1 2020 performance results

• Continued its globally competitive safety performance
• On track to achieve 2020 copper and gold production guidance
• US$73 million taxes, fees and other payments paid
• US$105 million spent on national procurement
• Donated over MNT455 million for the community support against COVID-19

Oyu
Tolgoi released the latest edition of its Scorecard, highlighting key
performance metrics for the first quarter of 2020, and provided an
update on underground development, and prevention measures on COVID-19.

The
first quarter of 2020 has been challenging due to the COVID-19 global
pandemic. Since the COVID-19 situation escalated in January, the health
and safety of our workforce, suppliers and communities remains our top
priority.

We are closely monitoring the situation and taking
all necessary measures both on site and in our UB offices. All our
preventive measures are in full compliance with, and strictly aligned
to, guidance and decrees issued by the Government of Mongolia, State
Emergency Committee, and the local authorities in Umnugovi province and
Khanbogd soum.

Oyu Tolgoi chief executive officer, Armando
Torres, said, “We would like to express our gratitude to the Government
of Mongolia, the State Emergency Committee at all levels, the Ministry
of Health, the Ministry of Mining and Heavy Industry, and all other
relevant agencies and frontline personnel working hard to keep us safe
during this unprecedented time”.

The company and employees
donated MNT455 million to support the outbreak prevention efforts of
COVID-19, including MNT100 million to the Government of Mongolia through
the Mongolian National Mining Association, MNT200 million to the
Umnugovi Emergency Committee, and MNT10 million to the Khanbogd
Emergency Committee through the Gobi Oyu Development Support Fund. Oyu
Tolgoi miners also launched a “Miners’ donation campaign in the fight
against COVID-19” and raised over MNT145 million and donated it to the
Ministry of Health. Thirty-eight contractor companies’ employees joined
the campaign as #WeAreAllInThisTogether.

Despite these
challenges, Oyu Tolgoi has done its best to maintain its business
continuity while protecting its people and communities. However, limited
movements of goods and people, and border crossing restrictions, due to
COVID-19 restrictions, have affected the business overall, including
underground development and copper concentrate shipment.

Q1 2020 Operational update

• Protecting
  the health of our employees and communities, through rapid
  implementation of health and hygiene controls in response to COVID-19,
  remains the top priority. We have also strengthened our focus on safety
  programmes to ensure the safety of our employees during a period of the
  significant change.
• Although sales in January and February were
  impacted by curtailed operations in China during peak COVID-19
  restrictions, strong collections occurred in March and sales exceeded
  expectations at the end of the quarter. Concentrate transportation
  remains a challenge in the current environment and engagement with both
  the Mongolian and the Chinese governments continues to minimise the
  impact on future sales.
• Achieved an All Injury Frequency Rate (AIFR) of 0.20 per 200,000 hours worked.
• Performed
  within the water target, using 0.38 cubic metres of raw water per
  tonne of ore processed, achieving an average water recycling rate of 87
  per cent during the period.
• Ninety-four per cent of Oyu Tolgoi’s workforce were Mongolian.
• Paid
  US$73 million in the form of taxes, fees and other payments. Between
  2010 and the first quarter of 2020, Oyu Tolgoi paid US$2.7 billion in
  taxes, fees and other payments, including VAT, paid to Mongolian
  suppliers.
• Collaborated with 516 suppliers in 2020, of which 361
  are national businesses that account for 75 per cent of total
  operations procurement spend. Between 2010 and the first quarter of
  2020, Oyu Tolgoi spent US$3.3 billion on national procurement.
• Q1 2020 Performance Scorecard can be viewed here.

Q1 2020 Production update

• Mined copper production from the open pit was 23 per cent lower than the same quarter of 2019 due to decreased head grade.
• Grades were 26 per cent lower than the same quarter in 2019 due to sequencing and blending of lowgrade stockpiles.
• First
  quarter sales have been affected by slower collections of product from
  the warehouse by customers due to curtailed operations in China during
  peak COVID-19 restrictions and reduced flow of traffic at the border.
• Copper production of 35,203 tonnes, a decrease of 23 per cent vs Q1 2019.
• Gold production of 26,154 ounces, a decrease of 78 per cent vs Q1 2019.
• Mill
  throughput increased by 17 per cent vs Q1 2019 due to lower overall
  feed hardness as well as good availability and effective utilisation
  performance.
• On track to achieve 2020 copper and gold production guidance.

Oyu Tolgoi Production Data
All data represents full production and sales on a 100% basis

Underground development update

• As
  our shareholders announced on 16 March 2020, work on the Oyu Tolgoi
  underground project continues, and we are achieving strong productivity
  in underground development (1,939 equivalent metres in March, average
  monthly 1,815 equivalent metres).
• Despite these gains, progress
  has slowed as a result of restrictions placed on the movement of people
  to contain the spread of COVID-19, including specialist commissioning
  personnel as well as goods.
• Shafts 3 and 4 have been placed on
  care and maintenance until expert service providers can return to site
  to complete technical commissioning of specialised equipment and
  commence sinking activities. Work has also slowed on some critical
  underground material handling infrastructure, in particular the
  construction of primary crusher one, which has been reduced to day shift
  activity only.
• Ordinary course elongation of newly
  commissioned ropes may impact Shaft 2 ore hoisting and consequently
  underground development progress may be impacted by 30 per cent as a
  result of travel restrictions due to COVID-19 preventing experts from
  travelling to the Oyu Tolgoi site. Payload and speed have been reduced
  to prolong the ability to use the hoist until specialised personnel are
  able to reach the site to perform rectification work. Mine management
  believes the situation is manageable; however, development progress
  could be impacted should experts not be able to get to site by the end
  of Q2. People and materials movement via the service hoist continue to
  operate normally.
• Work continues on the mine design and we still
  expect this to be completed in the first half of 2020 with the
  Definitive Estimate of cost and schedule in the second half of 2020.
  This will include the estimate of development capital costs and schedule
  for the underground project based on the updated design of Panel 0.
• Based
  on current information, the underground project remains within the
  range announced in July 2019 of a 16 to 30 month delay in schedule and
  an increase of $1.2 to $1.9 billion in development capital costs.
  Depending on how long they are in place, COVID-19 restrictions may
  impact the schedule range.