Investor Presentation DECEMBER 2016 Oyu Tolgoi: Long-term value World’s best developing copper project
Turquoise Hill’s investment thesis Oyu Tolgoi will be the 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 CAPEX. 2
Analysis of potential full production upside 1 Indicative valuation (US$B) EV/Reserves EV/M+I Resources 5 Price/NAV TRQ EV/Reserves ($/lb.) TRQ EV/M+I Resources ($/lb.) TRQ P/NAV $0.156 $0.061 0.825x Trading comps 2 Average EV/Reserves ($/lb.) Average EV/M+I Resources ($/lb.) Average P/NAV $0.321 $0.124 0.961x Current EV 3 : $5.7B $0.289 $0.353 $0.111 $0.136 0.865x 1.058x Range +/- 10% Range +/- 10% Range +/- 10% Reserves 4 : 36.8B lb. Resources 5 : 94.5B lb. Implied TRQ EV ($B) Implied TRQ EV ($B) Implied TRQ NAV ($B) NAV: $6.9B $11.8B $11.7B $6.7B $10.6B $13.0B $10.5B $12.9B $6.0B $7.3B Range +/- 10% Range +/- 10% Range +/- 10% EV/Reserves EV/M+I Resources 5 Price/NAV TRQ EV/Reserves ($/lb.) TRQ EV/M+I Resources ($/lb.) TRQ P/NAV Transaction comps 2 $0.156 $0.061 0.825x Average EV/Reserves ($/lb.) Average EV/M+I Resources ($/lb.) Average P/NAV $0.361 $0.164 1.107x Current EV 3 : $5.7B $0.325 $0.397 $0.148 $0.181 0.996x 1.217x Range +/- 10% Range +/- 10% Range +/- 10% Reserves 4 : 36.8B lb. Resources 5 : 94.5B lb. Implied TRQ EV ($B) Implied TRQ EV ($B) Implied TRQ NAV ($B) NAV: $6.9B $13.3B $15.5B $7.7B $12.0B $14.6B $14.0B $17.1B $6.9B $8.5B Range +/- 10% Range +/- 10% Range +/- 10% Source: Brokers, Capital IQ, Mergermarket, company technical reports, annual reports and press articles as of November 25, 2016 | Note: Full production comparables analysis shows Turquoise Hill valuation in five years 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 3 5. Resources includes reserves
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 Ongoing attrition at existing 30 $4 Forecast mines driven by declining Annual average LME copper price (US$/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) 4
2016 Reserves Case mining areas Underground Open Pit Plant Ramp-up (2020-2027), full production (~33mtpa) Open-pit mine tops-up concentrator Highest grade ore mined first – copper ~2.5% After 2039, open-pit head grades average ~ 0.45% copper Opportunities to reduce construction time, faster ramp-up and increase underground production >95ktpd Concentrator 40mtpa, 10% above nameplate 5
Complete ramp-up expected by 2027 Sustainable underground production Complete convey to surface Project 1st 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 6
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 2016 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 7
Approved underground CAPEX $1.3 $1.2 $1.2 $1.0 $0.8 $0.5 $0.5 $0.4 $0.4 $0.4 $0.3 $0.3 Underground expansion capital, VAT and escalation of $5.3 billion Underground sustaining capital, VAT and escalation of $2.8 billion to full ramp-up expected in 2027 8
2016 Resources Case Oyut Open Pit ~950Mt (reserve) 0.45% copper; 0.31 g/t gold Hugo North Lift 1 ~500Mt (reserve) 1.66% copper; 0.35 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 Plant Hugo North Lift 2 ~700Mt (resource) 1.13% copper; 0.36 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 $9.73 billion 3 expense, capitalized interest, debt repayments, tax pre-payments and forex adjustments. In all cases, total capital cost excludes capital costs for the year 10 2016.
Production highlights All injury frequency rate (AIFR) Concentrator throughput (per 200,000 hours worked) ('000 tonnes) ↑70% 2015 vs. 2013 34,537 0.47 0.43 28,333 27,872 0.33 20,317 ↓72% 2016 YTD vs. 2013 0.12 2013 2014 2015 Q3'16 YTD 2013 2014 2015 Q3'16 YTD Industry-leading safety performance Multiple productivity initiatives have led to improved throughput Copper in concentrates Gold in concentrates ('000 tonnes) ('000 ounces) ↑316% 653 2015 vs. 2013 ↑162% 202 589 2015 vs. 2013 156 148 251 77 157 2013 2014 2015 Q3'16 YTD 2013 2014 2015 Q3'16 YTD Expect to achieve higher end of 2016 production guidance: 2016 YTD gold production reflects lower grades due 175,000–195,000 tonnes of Cu and 255,000–285,000 ounces of Au to completion of mining in Phase 2 11
Financial highlights Cash position Operating cash flow ($'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 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
Open Pit - managing ore grade challenges Phase 2 finished and Phase 3 nearly complete (2017) Phase 6 and lower-grade stockpile ore processed mid-2016 to mid-2018 Phase 4 waste mining critical, uncovers 2017 medium-grade ore, then 2018 high-grade ore 2017-18 Ore Primary Crusher (Phase 4a & 6, stockpiles) Tailings Waste Facility Dumps Final Open Pit 2018-22 Ore Current Ore (Phase 4/5) (Phase 3 & 6) 13
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