Oyu Tolgoi announces Q2 2020 performance results

• Globally competitive safety performance continues
• On track to achieve 2020 copper production guidance, while increasing guidance for gold production
• US$134 million taxes, fees and other payments were paid to the Government of Mongolia in H1 2020
• US$180 million was spent on national procurement in H1 2020
• Marked the fifth anniversaries of the Cooperation Agreement and Tripartite Council

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

The second quarter of 2020 has continued to be
challenging due to the COVID-19 global pandemic. Oyu Tolgoi chief
executive officer, Armando Torres, said, “Despite unprecedented
challenges, I am proud of the team for maintaining business continuity
while prioritising the health and safety of our people and communities
during this period. Work is progressing well at Oyu Tolgoi”.

The
company is closely monitoring the COVID-19 situation with its Business
Resilience Team and taking risk-based preventative measures throughout
our operations. All our preventive protocols are in full compliance with
the guidance and decrees issued by the Government of Mongolia, State
Emergency Committee, and the local authorities in Umnugovi province and
Khanbogd soum.

Partnership Highlights and Other Updates

• Oyu
  Tolgoi, National Police Agency and Mobicom extended its joint road
  safety partnership for the second year to implement evidence-based
  interventions that have proven to reduce road traffic fatalities and
  injuries, with a focus on rural intercity roads. After last year’s
  campaign, we saw a year-on-year 14.2 per cent reduction in the number of
  traffic accidents across the country, according to the National Police
  Agency statistics. This year, the campaign focuses on passengers,
  specifically on the role passengers must play in reinforcing safe
  driving.
• We have observed the fifth anniversary of our
  “Cooperation Agreement” with the Umnugovi province, Khanbogd soum and
  other partner soums. In the past five years, we have provided a total of
  US$27 million funding to 187 projects and programmes addressing various
  socio-economic challenges of the local community, including the
  much-needed social infrastructure facilities such as medical centres,
  schools, kindergartens, meat processing plant, museum and heating
  plants. Throughout these five years, nearly 390,000 community members
  benefitted from the projects.
• Oyu
  Tolgoi completed an updated feasibility study (OTFS20), subject to the
  Government of Mongolia’s review and acceptance. The OTFS20 has been
  prepared in accordance with Mongolian regulations which require mining
  companies to update their feasibility studies every five years. The
  updated study incorporates a new mine design for Panel 0 of the Hugo
  North underground mine at Oyu Tolgoi. The new design also confirms the
  caving method of mining remains valid and that the underground schedule
  and costs remain within the ranges previously disclosed. These estimates
  are subject to any scheduling delays or increases in capital costs
  arising from the impacts of the ongoing COVID-19 pandemic. Please find
  the full release here.
• On
  29 June 2020, Oyu Tolgoi shareholders (Rio Tinto, Turquoise Hill)
  announced that the Government of Mongolia and Oyu Tolgoi LLC reached an
  agreement to prioritise a state-owned power plant (SOPP) as a domestic
  power solution for the Oyu Tolgoi mine. The agreement envisages the
  Government of Mongolia will fund and construct a SOPP at Tavan Tolgoi.
  The existing Power Source Framework Agreement (PSFA), between Oyu Tolgoi
  and the Government of Mongolia, has been amended to reflect joint
  prioritisation and progression of SOPP in accordance with agreed
  milestones. Please find the full release here.

Operational Update

• Achieved an All Injury Frequency Rate (AIFR) of 0.22 per 200,000 people/hours worked.
• Oyu Tolgoi open pit continued its operation uninterrupted.
• Sales recovered in the second quarter with the easing of COVID-19 restrictions within China and improved border access.
• Performed
  within the water usage target, using 0.37 cubic metres of raw water per
  tonne of ore processed, and achieving an average water-recycling rate
  of 87 per cent in the first half of the year.

• Ninety-four per cent of Oyu Tolgoi’s workforce remained Mongolian.
• Paid
  US$134 million in the form of taxes, fees and other payments in the
  second quarter to the Government of Mongolia. Since 2010, Oyu Tolgoi has
  paid US$2.7 billion in taxes, fees and other payments including VAT to
  Mongolian suppliers.
• Collaborated with 615 suppliers in the
  first half of 2020, of which 417 are national businesses, which accounts
  for 72 per cent of total operations procurement spend.
• The updated 2020 Performance Scorecard can be viewed here.

Production Update

• Copper
  production of 36,495 tonnes was seven per cent lower than the same
  quarter of 2019, primarily due to a scheduled maintenance shutdown in
  the mill.
• Gold production decreased by 57 per cent compared to
  the same quarter in 2019 to 31,150 ounces due to processing of lower
  head grade ore and lower milled tonnes.
• Mine development and
  production phasing have successfully accelerated, with access to higher
  copper and gold grades now expected in the second half of 2020, instead
  of the originally planned first half of 2021.
• Gold production
  guidance for 2020 has increased to a range of 155,000 – 180,000 ounces
  from 120,000 – 150,000 ounces, while Copper production remains on track
  to achieve guidance of 140,000 to 170,000 tonnes.

Oyu Tolgoi Production Data

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

Underground Development Update

• Work
  continues to progress despite international travel restrictions issued
  by the Government of Mongolia to manage the risk of COVID-19
  transmission.
• Underground lateral development continues to
  achieve high productivity with average monthly rates above 1,800
  equivalent metres (eqm) in April, May and June.
• Shafts 3 and 4
  remain on care and maintenance with no effective progress for the
  quarter. Non-critical surface construction work areas have also been
  placed on care and maintenance. Limited night shift work has recommenced
  on critical underground handling infrastructure, with the material
  handling system currently progressing at approximately 40 per cent of
  planned rates.
• The updated feasibility study (OTFS20) confirms
  the caving method of mining remains valid and that the underground
  schedule and costs currently remain within the ranges previously
  disclosed. We are targeting first sustainable production between October
  2022 to June 2023, with development capital of $6.6 to $7.1 billion
  based on the updated mine design of Panel 0. These estimates are also
  subject to any additional scheduling delays or increases in capital
  costs arising from the impacts of the ongoing COVID-19 pandemic.
• Material
  contained in pillars retained on either side of Panel 0 have been
  reclassified from Ore Reserves to Mineral Resources. Part of the
  material contained in these pillars is expected to be recoverable at a
  later stage following additional studies, which are currently underway.
• The definitive estimate of cost and schedule for Panel 0 is still expected in the second half of 2020.