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Mining Project Investment | Turquoise Hill Provides Update on Funding Plan for Oyu Tolgoi following the execution of the MOU with Rio Tinto.

I Mining Project Financing I

“Our funding process has confirmed our belief that multiple sources of competitively priced nonequity capital are available to fund partially and potentially entirely the completion of Oyu Tolgoi’s world-class underground development.”
Ulf Quellmann,
Chief Executive Officer,
Turquoise Hill Resources Ltd.

| Photo Credit: Oyu Tolgoi

Turquoise Hill Resources Ltd. this week announced that, as contemplated in its announcement on September 10, 2020, following the execution of the non-binding MOU with Rio Tinto, it has completed the first phase of its comprehensive funding review process, which involved the identification, market testing and evaluation of a range of funding options available to Oyu Tolgoi LLC. Based on this market testing, the most promising funding options for Oyu Tolgoi include a gold streaming transaction, a gold presale transaction, and an offering of global medium-term notes/bonds, with the potential to reduce the Company’s previously disclosed $3.0 billion projected base case funding requirement.
Moreover, each identified funding option is expected:
• to be capable of execution by Oyu Tolgoi LLC without the need for “completion support” from
Rio Tinto;
• to be achievable at a cost of capital that is lower than the Company’s estimated cost of equity
and is competitive with the terms of Oyu Tolgoi’s existing project loans (particularly when the
longer duration of the identified funding options is taken into account); and
• if successfully executed, to be accretive to the estimated net present value of equity returns
from Oyu Tolgoi LLC.
Turquoise Hill is providing the project’s co-owner, Erdenes Oyu Tolgoi LLC, and Rio
Tinto with information concerning the findings of its market testing exercise, and of the Company’s preliminary conclusions on funding priorities and strategy.

“Our funding process has confirmed our belief that multiple sources of competitively priced nonequity capital are available to fund partially and potentially entirely the completion of Oyu Tolgoi’s world-class underground development,” said Ulf Quellmann, Chief Executive Officer of Turquoise Hill. “The funding options we’ve developed may, individually or in combination, create significant value for Oyu Tolgoi’s shareholders, including Turquoise Hill, and seek to minimize or potentially eliminate the need for a dilutive rights offering by the Company. We look forward to continuing positive engagement with Erdenes, the Government, Rio Tinto, and other stakeholders on funding as well as on a number of related issues.”

“The results of our market testing are very encouraging, with the inflation-adjusted cost of capital indications being in the mid-to-high single digits across all identified funding options, and streaming being at the lower end of this range. We will now focus on finalizing terms for a streaming transaction as soon as possible, and on completing preparations necessary for a potential inaugural offering of GMTN later in 2021. At the same time, we will continue to work with Rio Tinto, as well as Erdenes and the Government of Mongolia to implement the previously announced Memorandum of
Understanding, including the proposed re-profiling of Oyu Tolgoi’s existing project debt and the
sourcing of an additional US$500 million of supplemental senior debt,” said Luke Colton, Chief
Financial Officer of Turquoise Hill.
Further Details on Financing Options
Based on indicative proposals from streamers and other market feedback, TRQ intends to continue
its pursuit of the potential funding options, including:
• a gold streaming transaction involving a significant up-front payment to Oyu Tolgoi, as well
as deferred payments based on gold “spot” prices, in consideration of deliveries to one or
more streamers of an agreed portion of gold produced from the Oyut deposit (which is
currently being mined through Oyu Tolgoi’s open-pit operations); and
• one or more offerings of GMTN by Oyu Tolgoi with a tenor of at least 10 years and “bullet”
principal repayment at maturity.
Conditions and Risks
Execution of the identified funding options (or any of them) by Oyu Tolgoi on the terms expected (or
at all) is or may be subject to certain risks and uncertainties relating to the following matters, many
of which are outside the Company’s control, including:
• the availability of support and required consents or waivers (if any) from key stakeholders
(including Erdenes, the Government of Mongolia, and Rio Tinto) none of which, if required,
can be assured and some of which may only be resolved following the outcome of the
Company’s pending arbitration with Rio Tinto, which was announced on November 4, 2020;
• commodity and bond market conditions;
• reaching an agreement with Oyu Tolgoi LLC’s existing project lenders on certain matters; and
• Oyu Tolgoi’s open-pit operations and underground development, including securing an
extension of the current power import arrangements and, prior to a GMTN offering,
commencement of the undercut.

About Turquoise Hill Resources
Turquoise Hill is an international mining company focused on the operation and continued
development of the Oyu Tolgoi copper-gold mine in Mongolia, which is the Company’s principal and
only material mineral resource property. Turquoise Hill’s ownership of the Oyu Tolgoi mine is held
through a 66% interest in Oyu Tolgoi LLC (Oyu Tolgoi); Erdenes Oyu Tolgoi LLC, a Mongolian stateowned entity, holds the remaining 34% interest.

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