Oyu Tolgoi announces Q3 2020 performance results

• Globally competitive safety performance continues
• Awarded the Copper Mark for responsible production
• On track to achieve 2020 copper and gold production guidance
• Paid US$201 million in taxes, fees and other payments to the Government of Mongolia
• Spent US$273 million on national procurement

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

Oyu Tolgoi is proud to be
awarded the Copper Mark, the copper industry’s new responsible
production recognition programme. The Copper Mark requires the company
to demonstrate that it meets over 30 criteria for responsible
environmental, social and governance operating practices. Oyu Tolgoi
chief executive officer, Armando Torres, said, “We are pleased to be
among the first in the copper industry to be awarded the Copper Mark,
demonstrating our commitment to responsible mining and transparency. We
achieved this together with all our stakeholders and communities in
Mongolia. We will continue upholding the highest social and
environmental standards and draw on the advice of environmental experts
and the communities in which we operate.”

The company is
continuing its close monitoring of the COVID-19 situation with its
Business Resilience Team and is taking preventive measures throughout
the operations. 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.

Q3 2020 Operational Update

• Open pit operations continued uninterrupted.
• Achieved an All Injury Frequency Rate (AIFR) of 0.17 per 200,000 people/hours worked.
• Maintained
  excellence in water saving, using 0.35 cubic metres of raw water per
  tonne of ore processed compared to our target of 0.55, and achieving an
  average water-recycling rate of 87.5 per cent, compared to our target of
  80 per cent, at the end of the third quarter.
• Ninety-four per cent of Oyu Tolgoi’s workforce were Mongolian citizens.
• Paid
  US$201 million in the form of taxes, fees and other payments to the
  Government of Mongolia as of the end of the third quarter of 2020. Since
  2010, Oyu Tolgoi has paid US$2.8 billion in taxes, fees and other
  payments including VAT to Mongolian suppliers.
• Collaborated with
  703 suppliers by the end of the third quarter of 2020, of which 468 are
  national businesses, which accounts for 73 per cent of the total
  operations procurement spend.
• The updated 2020 Performance Scorecard can be viewed here .

Q3 2020 Production Update

• Mined
  copper production from the open pit was 28 per cent higher than the
  same quarter of 2019 and steady quarter-on-quarter reflective of the
  move to higher grade areas of the open pit in 2020, primarily due to
  accelerated mine development and production phasing. Access to higher
  copper and gold grades is expected to continue for the remainder of
  2020, which was originally planned for the first half of 2021.
• Q3
  2020 mill throughput was slightly higher than Q3 2019 due to slightly
  higher mill availability and an increased milling rate associated with
  softer ore.
• Copper and gold production guidance for 2020 remains
  within the ranges of 140,000 to 170,000 tonnes and 155,000 to 180,000
  ounces respectively, with gold production trending towards the higher
  end of the range.

Oyu Tolgoi Production Data

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

Underground Development Update

• Work
  on the project has continued to progress despite COVID-19 controls and
  ongoing international travel restrictions issued by the Government of
  Mongolia.
• Care and maintenance activities continue at Shafts 3
  and 4; some commissioning activities have advanced in preparation for
  shaft sinking, including rope installation on Shaft 4. Further progress
  will require the remobilisation of international shaft sinking
  specialists and preparation is underway to mobilise some of these
  contractors before the end of 2020 (subject to change due to the current
  COVID-19 restrictions in the country).
• Overall, underground
  lateral development has now reached 45,858 equivalent metres, or around
  90 per cent of the required development to support firing of the first
  drawbell.
• All surface infrastructure required for sustainable
  production is complete and the team is focused on progressing the
  critical underground Material Handling System 1 (MHS1) to the stage
  needed ahead of the first drawbell firing. The balance of project
  infrastructure to be delivered post completion of MHS1 is not needed for
  sustainable production, however, it is needed to support the production
  ramp-up profile.
• Preliminary indications from the definitive
  estimate process are that first sustainable production is trending
  towards the earlier months of the October 2022 to June 2023 range. The
  estimated development capital cost remains within the range of US$6.6 to
  US$7.1 billion. This assessment has now been updated to include known
  cost and schedule impacts from COVID-19 and assumes an easing of travel
  restrictions and COVID-19 related controls from the time of reporting.
  This remains subject to ongoing review as part of finalising the
  definitive estimate of cost and schedule for Panel 0, expected in the
  fourth quarter of 2020.
• On 3 July, we announced the completion
  of an updated feasibility study (OTFS20) prepared in accordance with
  Mongolian regulations and standards. Registration of the Updated Reserve
  and Resource Report (RR19) has been delayed beyond the 150 day period
  of review since its submission in February 2020. Registration of RR19
  is required before formal consideration and acceptance of the OTFS20. In
  accordance with the 2009 Investment Agreement and Mongolian regulation,
  the Government of Mongolia is required to consider each of the RR19 and
  OTFS20 within 150 days from submission. The OTFS20 also forms the
  basis for the uplift in the overall underground project cost that is
  required to be approved prior to the under-cut decision (decision to
  initiate caving) in 2021.

Other Updates

• Oyu
  Tolgoi has been working to progress power negotiations with the
  Government of Mongolia as required under the terms of the Power Source
  Framework Agreement Amendment signed in June 2020:
  • An extension
    of power import arrangements with China’s Inner Mongolian Power Company
    is required by 1 March 2021 in order to ensure sufficient certainty on
    future supply of power before the under-cut decision is taken.
  • A
    Power Purchase Agreement (PPA) for power supply to Oyu Tolgoi from a
    State Owned Power Plant at Tavan Tolgoi that will be funded by the
    Government of Mongolia is required to be executed by 31 March 2021.
  • Following
    the agreement to purchase some power from the Mongolian national grid,
    on 3 September 2020, Oyu Tolgoi LLC and the Southern Region Electricity
    Distribution Network executed a PPA to supply power to the Oyu Tolgoi
    camps.