Turquoise Hill today announced second quarter 2019 production for Oyu Tolgoi and provided an update on underground development.
Highlights:
• Copper production of 39,156 tonnes, a decrease of 0.6% vs Q2 2018
• Gold production of 71,825 ounces, an increase of 43.7% vs Q2 2018
• Mill throughput increased 2.3% year over year and 12.3% sequentially
The transition from mining Phase 4A to Phase 4B and stockpiles resulted in:
o Lower copper head grade of 0.46% vs 0.57% Q1 2019
o Lower gold head grade of 0.31g/t vs 0.58g/t Q1 2019
o Concentrate production decreased 14% vs Q1 2019
o Copper production decreased 14.6% vs Q1 2019
o Gold production decreased 40% vs Q1 2019
Copper and gold grades are expected to decline over the remainder of the year as Oyu Tolgoi processes a higher proportion of Phase 4B and Phase 6 ore, but the company is well positioned to meet its 2019 copper and gold production guidance.
The focus for the construction team remains completing Shaft 2, where works are progressing. Rope up preparation is well advanced and related work is expected to commence in July. The commissioning of Shaft 2 remains on track for October. Other critical infrastructure components such as the control room facility and the jaw crusher system are now complete and construction on shafts 3 and 4 is progressing well.
By implementing productivity improvements, the underground mining team achieved a record performance of over 1,000 metres of lateral development in June. Record monthly development was also achieved in June in the convey-to-surface decline as a result of excellent productivity in improved ground conditions.
Ulf Quellmann, Chief Executive Officer of Turquoise Hill stated, “In addition to the solid second quarter operational performance, we have also made good progress towards the completion of the definitive estimate. Working with Rio Tinto, we have identified a number of mine designs to address the stability risks associated with the original design, and continue to assess the impact on the cost and schedule of the project. Oyu Tolgoi is a world-class ore body with a very long life of mine. Developing the right new mine plan is essential in delivering maximum value for Turquoise Hill’s shareholders.”

Underground Development Update
Turquoise Hill, in conjunction with Rio Tinto, continues to review mine design options for the completion of the underground development of the Oyu Tolgoi mine and assess the impact on overall cost and schedule for the underground development. As previously disclosed in connection with Turquoise Hill’s project development update on February 26, 2019, this review will result in a revised development plan reflecting appropriate risk reduction efforts.
Improved rock mass information and geotechnical data modelling has confirmed that there are stability risks associated with components of the existing mine design. Therefore, to address these risks, a number of mine design options are under consideration to complete the project. These options include assessment of the impact of the mid-access drives, location of the on-footprint components of the ore handling system, the sequence of crossing the panel boundaries during mining operations, and an option that alters the panel boundary approach and would leave temporary pillars in ore that would then be recovered later in the mine life, sub-blocking the previously planned three panels into five panels.
A number of options are being evaluated to determine the final design of “Panel 0,” and this work is anticipated to continue into early 2020. Given the further technical work that is needed, the definitive estimate review is now expected to be delivered in the second half of 2020, reflecting the preferred mine design approach.
All options under consideration present a clear pathway to sustainable first production, albeit with different cost and schedule implications. To date, these have been defined to a level of accuracy associated with a conceptual study or order of magnitude study; therefore, significantly more work is required to complete the final assessment.
Based on these options, preliminary estimates indicate that sustainable first production could be delayed by 16 to 30 months compared to the original feasibility study guidance in 2016. This range includes contingency of up to eight months1 reflecting the unexpected and challenging geotechnical issues, complexities in the construction of Shaft 2, and reflects the detailed work still required to reach a more precise estimate. The development capital spend for the project may increase by $1.2 to $1.9 billion over the $5.3 billion previously disclosed. This results in sustainable first production now being expected between May 2022 and June 2023. These ranges incorporate a range of productivity assumptions, with optimization work at site and technical review guiding the final inputs into the definitive estimate review. Although further work is necessary to reach definitive conclusions, Turquoise Hill is assessing the carrying value of its investment in the Project and will announce any changes, along with any adjustments to deferred tax, in its Q2 results at the end of July 2019.
In addition to working closely with Rio Tinto, Turquoise Hill has engaged independent third-party consultants to provide the company with insights into the planning and estimate process currently underway, as well as progress of key construction work at the mine site.
Current information indicates that Oyu Tolgoi mineral reserves will not be materially impacted by the Hugo North mine design options being considered; however, ongoing reviews will be considered as the work progresses.
The company will continue to focus on minimizing the impact to the project schedule and cost as it works through the detailed analysis and testing of each mine design option, and work continues concurrently to finalize the critical underground infrastructure and shaft construction.
Turquoise Hill will evaluate the impact of the estimated delays to sustainable first production as well as increases in underground capital expenditure on its cash flows, liquidity and financing projections, and will update the market in conjunction with the progression of the definitive estimate review.


1 As described above, the level of accuracy of these estimates is preliminary in nature and subject to a range of variables including the timing of commissioning of Shaft 2, which is currently on track for October 2019, in line with previous guidance. The confidence level of these estimates is at a level associated with a Conceptual or Order of Magnitude Study, and further work is required between now and the second half of 2020 to refine the mine design options and study them to a level of confidence and accuracy associated with Feasibility Study quality estimates.

Oyu Tolgoi Production Data
All data represents full production and sales on a 100% basis
2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 1H 2019 1H 2018 Full Year 2018
Open pit material mined (‘000 tonnes) 22,792 22,523 22,863 23,943 24,408 48,351 45,923 91,309
Ore treated (‘000 tonnes) 10,164 9,652 9,361 9,255 10,394 19,649 19,725 38,738
Average mill head grades:
Copper (%) 0.48 0.51 0.55 0.57 0.46 0.51 0.50 0.51
Gold (g/t) 0.26 0.38 0.56 0.58 0.31 0.44 0.25 0.36
Silver (g/t) 1.17 1.19 1.22 1.25 1.20 1.23 1.24 1.22
Concentrates produced (‘000 tonnes) 178.8 179.8 189.0 210.1 180.6 390.7 356.1 724.9
Average concentrate grade (% Cu) 22.0 21.9 21.9 21.8 21.7 21.8 22.0 21.9
Production of metals in concentrates:
Copper (‘000 tonnes) 39.4 39.4 41.5 45.8 39.2 85.0 78.2 159.1
Gold (‘000 ounces) 50 77 117 120 72 192 92 285
Silver (‘000 ounces) 225 230 238 247 238 486 446 914
Concentrate sold (‘000 tonnes) 220.0 171.9191.4 184.9 225.3 410.3 383.1 746.4
Sales of metals in concentrates:
Copper (‘000 tonnes)46.1 36.0 40.2 38.5 46.6 85.1 80.4 156.7
Gold (‘000 ounces) 51 55 111 98 116 213 82 248
Silver (‘000 ounces) 250 201 216 200 245 445 456 873
Metal recovery (%)
Copper 79.7 80.9 84.8 83.8 80.2 82.2 79.6 81.4
Gold 59.8 64.7 71.7 70.1 63.6 68.2 57.6 65.2
Silver 58.4 62.8 67.1 63.2 59.2 61.2 56.4 60.9
Turquoise Hill will host a conference call and webcast to discuss second quarter 2019 production and the underground update on Tuesday, July 16, 2019 at 8:00am EDT / 5:00am PDT. The conference call can be accessed through the following dial-in details:
North America: 416 764 8609 | 888 390 0605
International: +1 416 764 8609