Oyu Tolgoi announces Q1 2021 performance results

• Continued its globally competitive safety performance
• Strengthened our COVID-19 response and mitigation measures
• Maintained its highest water use efficiency per tonne of ore production
• In-country spend reaches US$12.3 billion
• Spent US$98 million on national procurement

Oyu
Tolgoi released its latest performance scorecard, highlighting key
performance metrics for the first quarter of 2021, providing an update
on the underground development, and its ongoing COVID-19 mitigation
measures.

The first quarter of 2021 has been challenging due to
the COVID-19 global pandemic and increase of community cases in
Mongolia. We are constantly adapting to the changing circumstances to
prioritize the health and safety of our workforce, suppliers and
communities.

A site-wide lockdown was implemented in March for
two weeks to mitigate the potential COVID-19 transmission risks on site.
Self-isolation controls were quickly mobilized at camp. Currently,
site-wide COVID-19 testing is in place and preparations to rollout a
vaccination programme are progressing.

Oyu Tolgoi chief executive
officer, Armando Torres, said, “We would like to express our gratitude
to the Government of Mongolia, all levels of the State Emergency
Commission, 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. I would
especially like to thank our employees, communities, contractors, and
suppliers for their hard work, perseverance, unwavering commitment and
ability to quickly adapt to rapidly evolving situations.”

Despite
the challenges, Oyu Tolgoi has maintained its business continuity while
protecting its people and communities. COVID-19-related limitations
around the movement of goods and people, border crossing restrictions,
and enhancing our on-site controls, however, have impacted operations
including the underground development, and copper concentrate shipments.
First-quarter shipments have been affected by Chinese border
restrictions due to increased cases of COVID-19. We declared force
majeure on shipments from 30 March and continue to work closely with
authorities and our customers to manage the risk of supply chain
disruptions. Oyu Tolgoi vaccinated all its copper concentrate shipment
drivers and logistics support teams on site, and has a number of
controls in place related to disinfecting vehicles and testing to
mitigate transmission risk. We partially resumed cross-border
concentrate shipments into China on 15 April, however, the situation
continues to be fluid with the COVID-19 resurgence in Mongolia.

Operational Update

• Prioritised
  the safety and achieved an All Injury Frequency Rate (AIFR) of 0.20 per
  200,000 people/hours worked. This still indicates Oyu Tolgoi’s strong
  safety performance among other operations of Rio Tinto where the average
  AIFR stood at 0.35 for the same quarter.
• Maintained
  excellent water-conservation practices, achieving the highest water use
  efficiency rates per tonne of ore production, using 0.37 cubic meters of
  raw water per tonne of ore processed – three times less than similar
  operations worldwide. Achieved an average water-recycling rate of 88.7
  per cent, compared to a target of 80 per cent.
• 96 per cent of Oyu Tolgoi’s workforce are Mongolian citizens.
• Paid
  US$417 million in the form of taxes, fees and other payments to the
  Government of Mongolia in the first quarter of 2021. Since 2010, Oyu
  Tolgoi has paid US$3.3 billion in taxes, fees and other payments,
  including VAT to Mongolian suppliers.
• Partnered with 494
  suppliers in the first quarter of 2021, including 431 national
  businesses, accounting for 77 per cent of the total operations
  procurement spend.
• Q1 2021 Performance Scorecard can be viewed here.

Production Update

• Mined
  copper production from the open pit was 29 per cent higher than the
  same quarter of 2020 with the anticipated move to higher grade from the
  open pit, leading to higher head grade and copper recovery. In the first
  quarter, pit phasing delivered higher gold production (+457%) compared
  to the same period in 2020. Access to higher copper and gold grades is
  expected to continue throughout 2021. However, the open pit wall failure
  experienced in the fourth quarter of 2020, combined with the cumulative
  effects of COVID-19 mitigation measures, have resulted in a downward
  revision in gold production guidance for 2021, from 500,000 – 550,000
  ounces to 400,000 to 480,000 ounces, while the copper guidance range has
  expanded from 160,000 – 180,000 tonnes to 150,000 – 180,000 tonnes.

Oyu Tolgoi Production Data

All data represents full production and sales on a 100% basis

Underground Development Update

• Work on the underground Material Handling System 1 advanced in line with the definitive estimate[1]
  outlined in December, with sustainable production expected in October
  2022 and development capital of $6.75 billion. Progress on shafts 3 and
  4, and other planned works, have been significantly affected by COVID-19
  restrictions around people movements. We are currently reviewing the
  implications on panels 1 and 2 ramp-up, which shafts 3 and 4 support,
  and will provide an update in due course.
• In addition to ongoing
  flight restrictions and government-imposed lockdowns – including an
  “all-out readiness state” declared by the Mongolian State Emergency
  Commission in November 2020 and again in April 2021 – Oyu Tolgoi imposed
  a site-wide quarantine period and all underground construction was
  temporarily halted for two weeks in March to mitigate potential
  transmission risk onsite. The impact of these additional restrictions is
  ongoing and still being assessed.

Other Updates

• On
  9 April, Rio Tinto and Turquoise Hill Resources (TRQ) announced they
  had entered into a binding Heads of Agreement for an updated funding
  plan for the completion of the Oyu Tolgoi underground project. The
  funding plan addresses the estimated remaining funding requirement of
  approximately $2.3 billion, building on and replacing the arrangements
  established in the Memorandum of Understanding that Rio Tinto and TRQ
  previously entered into on 9 September 2020.
• The Mongolian Tax
  Authority required payment from Oyu Tolgoi for the full amount of the
  2018 assessment (2013-2015 years) and 2020 assessment (2016-2018 years) –
  a total of approximately $356m. In line with Mongolian legislation, Oyu
  Tolgoi has paid these amounts in full, however, the amounts are subject
  to an ongoing arbitration process.