Oyu Tolgoi announces Q4 2020 performance results

• Continued its globally competitive safety performance
• Paid US$294 million in taxes, fees and other payments
• Achieved 2020 full-year production guidance
• Achieved its highest performance record for the underground lateral development
• Achieved its highest water use efficiency per tonne of ore production
• Spent US$360 million on national procurement

Oyu
Tolgoi released its latest performance scorecard, highlighting key 2020
performance metrics, providing an update on the underground
development, and its ongoing COVID-19 mitigation measures.

In
2020, Oyu Tolgoi continued to progress and deliver important milestones
related to the underground mine development. This is in addition to its
significant contribution to the Mongolian economy, while effectively
managing challenges related to the COVID-19 pandemic. Oyu Tolgoi has
contributed US$11.6 billion of in-country spend between 2010 and 2020,
and paid US$294 million in taxes, fees and other payments in 2020.

Oyu
Tolgoi chief executive officer, Armando Torres, said, “Oyu Tolgoi has
delivered strong results in 2020, building on a solid safety,
environmental, and operational performance. We have also advanced the
underground mine development, and exceeded our copper and gold
production guidance. All these results were achieved while managing the
challenging market conditions and COVID-19 pandemic. Oyu Tolgoi is proud
to deliver these achievements together with our employees, communities,
contractors, suppliers and shareholders”.

The company is
continuing to closely monitor the COVID-19 situation and is taking
preventive measures across its operations to ensure the safety and
wellbeing of our people and communities, and to continue to deliver on
our business priorities. Our preventive protocols are in full compliance
with the guidance and decrees issued by the Government of Mongolia, the
State Emergency Commission, and the local authorities in Umnugovi
province and Khanbogd soum.

Operational Update

• Open pit operations continued uninterrupted.
• Prioritised the safety and achieved an All Injury Frequency Rate (AIFR) of 0.15 per 200,000 people/hours worked.
• 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 compared to our target of 0.55
  cubic meters. Achieved an average water-recycling rate of 87.7 per cent,
  compared to a target of 80 per cent.
• 95.4 per cent of Oyu Tolgoi’s workforce are Mongolian citizens.
• Paid
  US$294 million in the form of taxes, fees and other payments to the
  Government of Mongolia in 2020. Since 2010, Oyu Tolgoi has paid US$2.9
  billion in taxes, fees and other payments, including VAT to Mongolian
  suppliers.
• Partnered with 770 suppliers in 2020, including 499
  national businesses, accounting for 72 per cent of the total operations
  procurement spend.
• The updated 2020 Performance Scorecard can be viewed here.

Production Update

• Mined
  copper production from the open pit was two per cent higher than 2019,
  reflecting the scheduled move to higher grade areas of the open pit, and
  primarily due to accelerated mine development and production phasing.
  In the fourth quarter, pit phasing delivered higher gold production
  (+139 per cent) compared to the prior quarter. Access to higher copper
  and gold grades is expected to continue throughout 2021. Shipments
  across the Chinese border continued while maintaining COVID-19
  preventative measures.

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 in tandem with COVID-19 safety
  controls and protocols, and ongoing international travel restrictions.
  In November 2020, the State Emergency Commission declared an “all-out
  readiness state” after Mongolia recorded its first community
  transmission of COVID-19. All movements in and out of Ulaanbaatar, and
  all domestic flights, were halted. Critical commissioning vendors and
  sinking crew were in-country, however, timing was impacted by the
  nationwide lockdown and quarantine duration.
• The project has
  deployed a number of mitigations that include extended on-site rosters,
  securing commitments from critical vendors to remain on site for
  extended periods, and layered screening of personnel.
• Overall,
  the underground lateral development has now reached 53,000 equivalent
  metres (eqm), with development for the first drawbell substantially
  complete.
• The project has now exceeded one million tonnes of
  material moved through Shaft 2 since commissioning. Scheduled annual
  maintenance of the shaft was successfully completed in October using
  remote technology.
• Shaft 4 is now out of care and maintenance
  and the focus is on completing all construction and commissioning
  activities for load testing and verification, and for sinking to
  commence in early 2021. Shaft 3 remains on care and maintenance, with
  some minor construction.
• On 16 December, Rio Tinto confirmed the
  definitive cost and schedule estimate for Panel 0 with first
  sustainable production expected to commence in October 2022, and
  development capital of US$6.75 billion, in line with previously
  announced ranges. These estimates now include the known impacts of
  COVID-19.
• At peak production, Oyu Tolgoi is expected to operate
  in the first quartile of the copper cash cost curve and, by 2030, is
  expected to be the fourth largest copper mine in the world. It is
  expected to produce 480,000 tonnes of copper per year on average, from
  2028 to 2036, from the open pit and underground. The underground Ore
  Reserve has an average copper grade of 1.52 per cent, which is more than
  three times higher than the open pit Ore Reserve, and contains 0.31
  grammes of gold per tonne.

Other Updates

• Rio
  Tinto reported it has been engaging with the Government and Turquoise
  Hill Resources (TRQ) in good faith on items raised in Resolution 92
  passed by the Mongolian Parliament in December 2019, and remains open to
  improving the UDP to increase the benefits of Oyu Tolgoi for all
  shareholders.
• Additional milestones need to be met in order to
  ensure that the project can commence caving operations in 2021,
  including outstanding government approvals; funding; and a power
  solution.
• In accordance with Mongolian regulation, the
  Government of Mongolia is required to review and register the updated
  Resources and Reserves submitted in February 2020, and accept the
  updated feasibility study (OTFS20) completed in July 2020. The OTFS20,
  together with the updated definitive estimate, forms the basis for the
  uplift in the overall project budget that requires approval from all
  shareholder representatives on the Oyu Tolgoi Board prior to the
  depletion of the previous budget and the under-cut decision.
• Rio
  Tinto reported it remains committed to implementation of the funding
  plan in the Memorandum of Understanding (MOU) agreed with TRQ in
  September 2020. We are in discussions with our partners on how best to
  progress the funding plan.
• All parties continue to work together
  to achieve key power milestones including an extension of existing
  power supply arrangements by 1 March 2021, and the signing of a power
  purchase agreement (PPA) with the state-owned power company for domestic
  power supply by 31 March 2021. In October 2020, the Mongolian Ministry
  of Energy (MoE) established a Working Group to negotiate the PPA with
  Oyu Tolgoi, who will continue to work with the government and the MoE
  Working Group to agree on an outcome that will ensure secure, stable and
  reliable long-term power supply to the mine.
• On 22 December,
  Oyu Tolgoi received a Tax Assessment claim for MNT649 billion
  (approximately US$228 million) from the Mongolian Tax Authority (MTA),
  relating to an audit of taxes paid by Oyu Tolgoi between 2016 and 2018.
  Oyu Tolgoi paid US$797 million in taxes, royalties and fees in Mongolia
  during the same three-year period. The MTA has also sought to reduce Oyu
  Tolgoi’s carried-forward tax losses by approximately US$1.5 billion.
• The
  matters raised by this new tax assessment are predominantly a
  continuation of the matters raised by the previous tax assessment in
  2018 covering the period 2013 to 2015, which were previously referred to
  international arbitration in 2020 by joint agreement with the
  Government of Mongolia. Oyu Tolgoi has therefore filed an application
  (with the agreement of Rio Tinto and TRQ) to include the matters from
  the latest tax assessment to the existing international arbitration. We
  remain of the opinion that Oyu Tolgoi has paid all taxes, and charges
  and royalties required under Mongolian Law and the stabilised tax
  environment created by the Investment Agreement, the Amended and
  Restated Shareholder Agreement, and the UDP.