Turquoise Hill Resources (Turquoise Hill or the Company) today announced third quarter 2018 production for Oyu Tolgoi and provided an update on underground development.
Ulf Quellmann, Chief Executive Officer of Turquoise Hill, said, “We continued to see the impact of higher gold grades during the third quarter as Oyu Tolgoi processed increasing amounts of Phase 4 ore. We are well positioned to meet the
upper-end of our 2018 production guidance.
“Rio Tinto has undertaken a second annual re-forecast of underground development schedule and costs and preliminary results have concluded that capital costs remain in line with the overall $5.3 billion budget and the project remains on schedule to complete in 2022. However, there are certain delays, most notably to the completion of Shaft 2, which includes
schedule contingency, that are ultimately expected to result in a revised sustainable production start from the first quarter
of 2021 to late in the third quarter 2021. We are undertaking a review of the cause and the impact of these delays and will announce the results as soon as possible.”
Third quarter mill throughput decreased 5.0% over Q2’18 due to increased processing of harder Phase 4 ore as well as a planned maintenance shutdown during the quarter. Copper production was flat over Q2’18 as higher grades and recoveries were partially offset by lower throughput. Gold production increased 54.0% over Q2’18 due to higher grades and recoveries. Third quarter sales volumes were impacted by torrential rain in July and August, which consequently affected Chinese road and rail availability. Additionally, Q3’18 sales volumes were generally lower than Q2’18, which benefited from the sales of deferred volumes related to the Q1’18 force majeure.
Turquoise Hill has updated Oyu Tolgoi’s expected copper production for 2018 from between 125,000 and 155,000 tonnes of copper to between 140,000 and 155,000 tonnes of copper in concentrates. The Company continues to expect production of gold in concentrates from between 240,000 and 280,000 ounces for 2018.

Underground development
Rio Tinto, in its role as manager of Oyu Tolgoi and underground construction contractor, has undertaken its second annual schedule and cost re-forecast for the project. According to this re-forecast, lateral development has progressed well, construction completion schedule remains on track for 2022 and the project is expected to be completed at the $5.3 billion budget estimate disclosed in the 2016 Oyu Tolgoi Feasibility Study and the 2016 Oyu Tolgoi Technical Report. Oyu Tolgoi has committed $2.1 billion to Mongolian vendors and contractors since the restart of project development. Additionally,
several key facilities have been completed, including Shaft 5, various underground infrastructure and a new camp to house 5,500 workers.
Despite significant progress in the development of the project, Rio Tinto has notified Turquoise Hill, based on preliminary results, of a delay to achievement of sustainable first production which is now expected to occur by the end of Q3‘21 instead of Q1’21. This is a result of certain delays including, but not limited to, the completion of Shaft 2, which includes
over four months of schedule contingency, and challenging ground conditions. First draw bell remains on track for mid2020, partly due to a change in the draw bell sequencing strategy.

Shaft 2 production capability is a key enabler of increased underground development as well as further construction of critical underground infrastructure, such as Primary Crusher One and the material handling systems, that support the start of production ramp-up. While the full effect of some critical path impacts, including the Shaft 2 delay, has been partly
mitigated, the net effect is sustainable first production has been forecast by Rio Tinto to be delayed by up to nine months, and is now anticipated to occur in late Q3’21.
Through the end of Q3’18, Oyu Tolgoi has maintained strong crew productivity and underground development. Until the completion of Shaft 2, Oyu Tolgoi is expected to experience similar, but not increased, development rates as seen in
Q3’18. The following table provides a breakdown of the various components of completed lateral development since project
restart:
Year Total Equivalent Kilometres Lateral Development (kilometres) Mass
Excavation (’000 metres3)
2016 1.6 1.5 3.0
Q1’17 1.0 0.8 5.2
Q2’17 1.4 0.9 9.2
Q3’17 1.4 1.2 8.3
Q4’17 2.2 1.9 8.9
2017 6.1 4.8 31.6
Q1’18 2.6 2.1 11.6
Q2’18 2.4 2.1 8.6
Q3’18 3.0 2.3 17.9
Total 15.7 12.8 72.7
Turquoise Hill has commenced its own review, with the assistance of the Company’s independent Qualified Person, of the
cost and schedule re-forecast and its impact on the project’s critical path as a result of the anticipated delay in sustainable
first production. The Company will assess the impact of this delay including, among other things, to the Company’s cash
flows and liquidity during the affected period, any potential increase in funding requirements and the timing of such funding
requirements, as well as investigate potential mitigation options relating to cash flow and longer-term project funding.
Turquoise Hill will update the market at the conclusion of that process.
Rio Tinto and Turquoise Hill will also commence a definitive estimate review in Q4’18. The definitive estimate review is
projected to conclude in early Q3’19 and will provide the next cost and schedule review of the project.

Oyu Tolgoi Production Data
All data represents full production and sales on a 100% basis
3Q 2017 4Q 2017 1Q 2018 2Q 2018 3Q 2018 9 months 2018 9 months 2017 Full Year 2017
Open pit material mined (‘000 tonnes) 27,466 28,929 23,131 22,792 22,523 68,446 76,992 105,921
Ore treated (‘000 tonnes) 10,615 10,838 9,561 10,164 9,652 29,377 30,339 41,177
Average mill head grades:
Copper (%) 0.48 0.53 0.51 0.48 0.51 0.50 0.50 0.51
Gold (g/t) 0.18 0.20 0.25 0.26 0.38 0.29 0.16 0.17
Silver (g/t) 1.34 1.54 1.32 1.17 1.19 1.22 1.34 1.39
Concentrates produced (‘000 tonnes) 170.0 205.4 177.3 178.8 179.8 535.9 517.0 722.5
Average concentrate grade (% Cu) 21.7 22.0 21.9 22.0 21.9 21.9 21.7 21.8
Production of metals in concentrates:
Copper (‘000 tonnes) 36.9 45.3 38.8 39.4 39.4 117.6 112.1 157.4
Gold (‘000 ounces) 31 35 42 50 77 169 80 114
Silver (‘000 ounces) 239 285 221 225 230 676 689 974
Concentrate sold (‘000 tonnes) 176.6 175.5 163.1 220.0 171.9 555.0 548.8 724.3
Sales of metals in concentrates:
Copper (‘000 tonnes) 36.9 35.7 34.3 46.1 36.0 116.4 113.6 149.3
Gold (‘000 ounces) 29 27 31 51 55 137 84 111
Silver (‘000 ounces) 229 205 206 250 201 657 656 860
Metal recovery (%)
Copper 73.5 78.0 79.5 79.7 80.9 80.1 74.3 75.4
Gold 51.2 50.5 55.0 59.8 64.7 61.2 49.4 49.7
Silver 52.8 53.0 54.6 58.4 62.8 58.4 51.8 52.9

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