Oyu Tolgoi:Creating long-term value at worlds best developing copper - PowerPoint PPT Presentation

TD Securities Mining Conference JANUARY 18-19, 2017 Oyu Tolgoi:Creating long-term value at world’s best developing copper project

Turquoise Hill’s investment thesis � Oyu Tolgoi expected to be world’s third-largest copper mine with underground � Hugo North Lift 1 financing in place 1 � Timing of underground benefits from expected drop in copper supply (~2020) � Oyu Tolgoi’s resources provide long-term development optionality 1. Financing sources includes project finance facility, supplemental debt (in progress), operating cash flow from Oyu Tolgoi and Turquoise Hill’s cash; excludes power plant CAPEX. 2

Long-term copper fundamentals strong Copper supply/demand outlook � Copper market likely to be in balance in 2017 Base Highly Probable Primary Demand Annual avg cu price � 30 $4 Ongoing attrition at existing Forecast mines driven by declining Annual average LME copper price (US$/lb) grade 25 $3 Copper supply/demand (Mt) � Continued demand growth requires new capacity in the 20 medium-term $2 15 � Market anticipates surplus in 2018-19 before moving into $1 deficit from 2020 10 � China now largest buyer of 5 $- gold and continues to be 2000 2005 2010 2015 2020 2025 largest consumer of copper Source: Wood Mackenzie (Q3’16 Long-Term Outlook) 3

Oyu Tolgoi underground a Tier 1 asset 2025 copper mine C1+royalties+sustaining normal cost curve C/lb, 2016$ 400 Q1 Q2 Q3 Q4 300 Oyu Tolgoi Other Mines 200 100 0 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 Cumulative production (‘000 tonnes) -100 Source: Wood Mackenzie (Q3’16 Cost Service), 2016 Oyu Tolgoi Technical Report and Turquoise Hill Resources. Normal C1 cost + sustaining capex, range capped at -100/lb & 400/lb for base, highly probable and probable mines only. Oyu Tolgoi costs and volumes for 2025-30 . 4

Potential full-production valuation upside Indicative valuation 1 (US$B) EV/M+I+I Resources 5,6 EV/Reserves Price/NAV TRQ EV/Reserves ($/lb.) TRQ EV/M+I+I Resources ($/lb.) TRQ P/NAV $0.17 $0.06 0.82x Trading comps 2 Average EV/Reserves ($/lb.) Average EV/M+I Resources ($/lb.) Average P/NAV $0.33 $0.13 1.01x Current EV 3 : $5.7B $0.30 $0.37 $0.12 $0.14 0.91x 1.11x Range +/- 10% Range +/- 10% Range +/- 10% Reserves 4 : 33.9B lb. Resources 5,6 : 95.7B lb. Implied TRQ EV ($B) Implied TRQ EV ($B) Implied TRQ NAV ($B) NAV 7 : $6.9B $11.3B $12.2B $7.0B+ $10.2B $12.4B $11.0B $13.5B $6.3B+ $7.7B+ Range +/- 10% Range +/- 10% Range +/- 10% EV/M+I+I Resources 5,6 EV/Reserves Price/NAV TRQ EV/Reserves ($/lb.) TRQ EV/M+I+I Resources ($/lb.) TRQ P/NAV Transaction comps 2 $0.17 $0.06 0.82x Average EV/Reserves ($/lb.) Average EV/M+I Resources ($/lb.) Average P/NAV $0.36 $0.17 1.10x Current EV 3 : $5.7B $0.33 Range +/- 10% $0.40 $0.15 Range +/- 10% $0.19 0.99x Range +/- 10% 1.21x Reserves 4 : 33.9B lb. Resources 5,6 : 95.7B lb. NAV 7 : $6.9B Implied TRQ EV ($B) Implied TRQ EV ($B) Implied TRQ NAV ($B) $12.3B $16.1B $7.6B $11.1B Range +/- 10% $13.5B $14.5B Range +/- 10% $17.7B $6.8B+ Range +/- 10% $8.4B+ 1. Valuation is based on the current trading multiples in $2.60 per pound copper price environment; current long term (2-3 years) copper price assumption varies between $2.75 - $3.00 per pound; transaction comps based mostly on deals done in $2.18 - $2.51 per pound copper price ranges; does not include valuation uplift from the expected copper price increase ~ 2020; 2. Valuation based on range derived for companies with projects with similar characteristics and in full production; 3. Adjusted for project finance drawdown cash; 4. Reserves and resources are based on equivalent units of production; 5. Resources includes reserves; 6. TRQ reserves and resources figures includes 80% of EJV. Resources figure assumes conversion of inferred resources into M+I category (with the exception of Heruga) around the time of achieving full production; 7. The NAV would be higher closer to production. Source: Brokers, Capital IQ, Mergermarket, company technical reports, annual reports and press articles. Share prices as of 09/12/16. Note: Full production comparables analysis shows Turquoise Hill 5 valuation

2016 Reserves Case mining areas Oyut Open Pit ~950Mt (reserve) 0.45% copper; 0.28 g/t gold Hugo North Lift 1, panels 0,1,2 ~500Mt (reserve) 1.66% copper; 0.35 g/t gold Hugo North Lift 1 Underground Open Pit Plant � Ramp-up (2020-2027), full production (~33mtpa) � Open-pit mine tops-up concentrator when Hugo North Lift 1 begins production � Highest grade ore mined first (copper ~2.5%) � After 2039, open-pit head grades average � Opportunities to reduce construction time, faster ~ 0.45% copper ramp-up and increase underground production � First production in January 2013; ~2.5 million >95ktpd tonnes of concentrate produced by year-end � Concentrator 40mtpa, 10% above nameplate 2016 6

Complete ramp-up expected by 2027 Sustainable underground production Complete convey to surface Project First draw Complete concentrator Complete re-start bell firing upgrade ramp-up 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Pre-start Excavation (lateral / mass / vertical) Excavation (lateral) Undercutting Extraction level access Extraction level access Material handling (conveyto surface + crushers + shafts) Surface infrastructure Concentrator upgrade Expansion capital Sustaining capital Timeline is illustrative only and subject to change 7

Key underground components Shaft 1 Shaft 2 Shaft 5 Shaft 3 Shaft 4 (early development (production and (ventilation) (ventilation) (ventilation) and ventilation) ventilation) Total Depth 1,385 metres 1,284 metres 1,178 metres 1,148 metres 1,149 metres Diameter 6.7 metres 10 metres 6.7 metres 10 metres 11 metres Completion 2008 Expected 2017 Expected 2017 Expected 2021 Expected 2021 Remaining Complete ~100 metres ~1,000 metres Not started Not started Underground Development Lateral Development 2008-2013 (includes conveyor development) 16km 65km ~200km completed to first over life draw bell of mine 2013 2020 2035 8

2016 Resources Case Oyut Open Pit ~950Mt (reserve) 0.45% copper; 0.28 g/t gold Hugo South ~300Mt (resource) Heruga 1.07% copper ~700Mt (resource) 0.06 g/t gold 0.42% copper 0.43 g/t gold; >100Mlb moly Hugo North Lift 1, panels 0,1,2 ~500Mt (reserve) 1.66% copper; 0.35 g/t gold Hugo North Lift 2 Hugo North Lift 1, panels 3,4,5 ~700Mt (resource) ~250Mt (resource) 1.13% copper; 0.36 g/t gold 0.70% copper; 0.20 g/t gold 9

Alternative Production Cases Resources 120 Case • Assumes ~Year 20, concentrator expanded to 120mtpa • NPV 8% $8.80 billion 1 • Expansion capital costs of $14.86 billion 3 Resources 100 Case • Assumes ~Year 20, concentrator expanded to 100mtpa • NPV 8% $8.88 billion 1 Resources 50 Case • Expansion capital costs of • Assumes concentrator creep from $13.47 billion 3 40mtpa to 50mtpa with little capital • NPV 8% $9.32 billion 1 • Expansion capital costs of $9.73 billion 3 2016 Reserves Case • Assumes concentrator capacity of 40mtpa • NPV 8% $6.94 billion 1 • Expansion capital costs of $4.63 billion 2 Plant 2016 Resources Case 1. NPV8% assumes $3.00/lb copper and $1,300/oz gold 2. Expansion capital costs include only direct project costs and exclude interest expense, capitalized interest, debt repayments, tax pre-payments and forex • Assumes concentrator capacity of 40mtpa for life adjustments. In all cases, total capital cost excludes capital costs for the year 2016. Expansion capital for 2016 excluded is $0.46 billion. • Base Case NPV 8% $8.37 billion 1 3. Expansion capital costs inclusive of 2016 Reserves Case expansion capital. Expansion capital costs include only direct project costs and exclude interest • Expansion capital costs of $9.73 billion 3 expense, capitalized interest, debt repayments, tax pre-payments and forex adjustments. In all cases, total capital cost excludes capital costs for the year 10 2016.

Production highlights Open-pit All Injury Frequency Rate Concentrator throughput (per 200,000 hours worked) ('000 tonnes) 0.47 38,152 0.43 34,537 27,872 0.33 20,317 0.11 2013 2014 2015 2016 2013 2014 2015 2016 Industry-leading safety performance Multiple productivity initiatives have led to improved throughput Copper in concentrates Gold in concentrates ('000 tonnes) ('000 ounces) 653 202 589 201 148 300 77 157 2013 2014 2015 2016 2013 2014 2015 2016 Exceeded 2016 guidance of 175,000–195,000 tonnes of cooper 2016 gold production reflects lower grades due and 255,000 – 285,000 ounces of gold to completion of mining in Phase 2 11

Financial highlights Cash position Operating cash flow ($'000,000) ($'000,000) $1,437 $719 $651 $1,344 $381 $863 Cu:$3.10 Cu:$2.49 Cu:$2.15 Au:$1,266 Au:$1,160 Au:$1,259 2013 2014 2015 Q3'16 YTD 2013 Cu:$3.33* Au:$1,411* $78 ($631) 2013 2014 2015 Q3'16 Strong cash position Consecutive periods of positive operating cash flow *Source: Average quarterly Comex copper price and average quarterly LBMA gold price. Open-pit capital expenditures C1 and All-in sustaining costs (AISC) ($'000,000) C1 AISC $1,075 $1.95 $1.37 $1.36 $1.14 $242 $0.86 $116 $0.57 $75 2013 2014 2015 Q3'16 YTD 2014 2015 Q3'16 YTD 2016 YTD open-pit CAPEX reflects completion of Phase 2, near- Competitive unit costs surface capital for Phase 3 and 6 as well as Phase 4 stripping Note: C1 and AISC not meaningful in 2013. 12