OyuTolgoiPhase2:Plans,IssuesandRisksAnOverviewofOyuTolgoiPhase2MiningPlansandsomeoftheissuesandrisks

associatedwithblockcaveundergroundmining,internationalmetalpriceuncertainty,projectpowersupply,andimpactsonwaterresourcesusedbyherders

(SatelliteimageofOyuTolgoiMine,November2015,http://landsatlook.usgs.gov)

Preparedfor

CEEBankwatchNetworkPrague,CzechRepublicwww.bankwatch.org

andOTWatch

http://www.minewatch.mn/

January10,2016

PreparedbyPaulRobinsonsricpaul@earthlink.net

ResearchDirector,SouthwestResearchandInformationCenterAlbuquerque,NewMexico87107USA

www.sric.org

1

TablesofContents

Introduction 2WhoownstheOyuTolgoi(OT)Mine? 3WherearetheplansforOTPhase2described? 3WhatisplannedintheOTPhase2mineexpansion? 4Whatactionsareneededtocompleteapprovalofthe

OTPhase2expansion? 14WhatisBlockCaveMining? 16WhichBlockCavemineshasRioTintooperatedorplanned? 18WhataretheenvironmentalImpactsofBlockCaveMining? 19HowlargeistheSubsidenceZoneattheOTHugoNorthLift1 30 undergroundminepredictedtoextend? WhatareSomeoftheMajorImpactsofOTPhase1and2on WaterResourcesUsedbyHerders? 36HowdoInternationalMetalMarketPricesaffectOyuTolgoiPhase242 DevelopmentandFundingPlanandTechnicalReports?Howmuchhaveinternationalmetalmarketpricesfallensince 43

theOTPhase2TechnicalReport(OTTR2014)wasreleased?Whataresomeoftheplansandissuesassociatedwithdeveloping46 apowersupplyforOTPhase2?ArealternativesourcesofpowerpossibleforOTPhase2?49SourcesCited 51BriefBiographyoftheAuthor 55

2

IntroductionOyuTolgoi’sPhase2planstomine1.5billiontonsoforearedescribedasthe“ReserveCaseMine”intheOctober27,2014OyuTolgoiTechnicalReport(OTTR2014),themostdetaileddescriptionofOTPhase2publicallyavailable.OTTR2014waspreparedusingtheCanadianNationalInstrument43-101“StandardsofDisclosureforMineralProjects,”whichisrequiredforminingcompanieslistedonCanadianStockExchangessuchasTurquoiseHillResources(TRQ),66%ownerofOyuTolgoiLLC).(OTTR2014atP.i)The“ReserveCase”oretobeprocessedduringPhase2willcomefromtwosources:

1) theSouthernOyuTolgoi(SOT)openpitand2) ThedeeperHugoNorth“Lift1”ore,minedusingtheundergroundblockcaving

method.OthermineralresourcesidentifiedattheOyuTolgoisitebutnotproposedforthe“ReserveCase”mine-“Phase2”-aredescribedaspartofthelong-term“LifeofMineCase”(OTTR2014).“LifeofMineCase”depositsinclude:HugoNorth“Lift2”–anoredepositbeneath“Lift1”,theHugoSouth,andtheHerugadeposits.OTTR2014identifiesaseriesofdecisionoptionsrelatedtotheminingofthe“LifeofMineCase”depositsduringthenext10years,andbeyond,thatcouldleadtodevelopmentoftheseadditionaldeposits,includingextractionduringtheminingofthe“ReserveCase”oreintheopenpitandHugoNorthLift1in“Phase2”thatwouldbecompletedintheyear2055.DevelopmentandfinancingplansforminingtheOT“ReserveCase”oreisthesubjectoftheMay18,2015OyuTolgoiUndergroundMineDevelopmentandFinancingPlan(OTUMDFP2015)signedinDubaibyGovernmentofMongoliarepresentativesandOyuTolgoiLLC’scorporateowners.TheOTUMDFP2015addressesarangeofsubjectsincludingthecostofconstructionofOTPhase2,OTPhase2impactsontheMongolianeconomy,proposedschedulesforactionondevelopmentofafutureOTpowersupply,aninvestigationoftheeconomicviabilityofacoppersmeltertorefinethe30%copperconcentratecurrentlyproducedatOT,andtaxandfinancialaccountingconsiderations,amongothermatters.ThisreportsummarizestheminingactivityproposedbyOTinitsPhase2developmentplan,describestheblockcavingundergroundminingtechnologyplannedforthelargedeeporebodytobeminedinPhase2,environmentalimpactsandreclamationpotentialofblockcavemines,andissuesandrisksassociatedwithafutureOTpowersupply,internationalmetalmarketpriceuncertainties,andOTPhase1and2impactsonwaterresourcesandherdersandtheirlivelihoodintheregionsurroundingtheOTminelicensearea.

3

WhoownstheOyuTolgoi(OT)Mine?TheOyuTolgoicopperandgoldproject(OyuTolgoi)isbeingdevelopedbytheOyuTolgoiLimitedLiabilityCorporation(OTLLC).OTLLCis66%ownedbyTurquoiseHillResourcesLtd(TRQ)and34%ownedbyErdenesOTLLC.RioTintoplc(RioTinto)maintainsacontrollinginterestinthroughitsownershipof51%ofTRQandisthemanageroftheOTproject.TheGovernmentofMongolia(GOM),throughErdenesOTLLC,owns34%ofOT.(OTUMDFP2015)WherearetheplansforOTPhase2described?OTPhase2miningplansaredescribedintheOyuTolgoiTechnicalReportreleasedOctober27,2014(OTTR2014),a547-pagereportpreparedusingtheCanadianNationalInstrument43-101StandardsofDisclosureforMineralProjects,amineralresourceestimationandreportingregulation.OnAugust,27,2015,OTannouncedithadsubmittedrevisionsoftheschedulesinitsMarch2015FeasibilityStudytotheMongolianMiningCouncilthat“align”withtheMay18,2015OTUndergroundMineDevelopmentandFinancingPlan(OTUMDFP2015)andtheOTTR2014.(TRQ8-2015)OyuTolgoihasnotmadetheMarch2015OTFeasibilityStudyavailabletoinvestorsorthepublic.ItisnotlistedinSEDAR.comrecordsofCanadiancorporationpublicfilingforOTalongwithpreviousNI43-101complianttechnicalreports,orontheOTorTRQwebsites.AsOT’sMarch2015FeasibilityStudyisnotavailablefromtheOTsiteorotherpubliclyavailablesources,thisReportreliesontheOTTR2014asthemostcurrentavailableversionOT’splansforPhase2.OTTR2014isavailableathttp://www.turquoisehill.com/i/pdf/2014-10-27_OyuTolgoiTechReport.pdfandhttp://www.turquoisehill.com/s/oyu_tolgoi.asp?ReportID=379189CompletionofanupdatetotheMarch2015OTFeasibilityStudyisoneoftheobligationsrequiredundertheOTUMDFPrequiredbeforefinalapprovalbytheBoardsofDirectorsoftheOTowners.

4

WhatisplannedinOyuTolgoi’sPhase2mineexpansion?OTPhase2proposestheextractionandprocessingoforefromthecurrentlyoperatingSouthernOyuTolgoiopenpit(SOT)whilealsoconstructingandoperatinganundergroundmineusingtheblockcavingminingmethodtoextractorefromaportionoftheHugoNorthoredepositcalled“Lift1”throughtheyear2055.OTTR2014forecastsoverallmineproductionduringPhase2,calledthe“ReserveCase”inOTTR2014,continuingthrough2055.OTPhase2oreproductionisprojectedtobeaverageabout115,000tonsperday(tpd),equaltoabout40milliontonsperyear,duringthe2020–2039periodwhentheundergroundHugoNorthLift1blockcavemineisproposedtooperate.FutureOTexpansionthatarenotincludedinOTPhase2couldinvolveadditionalundergroundminingatHugoNorthLift2beneathLift1,andundergroundminingattheHugoSouthDepositandtheHerugaDeposits.OTopenpitoreproductionwouldfallfromthecurrent100,000tonsperdayto20,000tonsperdayduring2019–2039period,whentheHugoNorthLift1mineisprojectedtoproduce95,000tonsoreperday.ThisproposedmixofopenpitandundergroundoreiswouldkeepthecombinedtonnageofOToreprocessedtoabout115,000tonsperdaybetween2019whenNorthHugo“Lift1”undergroundorewouldbegintobeextracted,and2039whenoreextractionfromtheOTPhase2portionoftheHugoNorthundergroundminewouldbecompleted.OTPhase2plans,schedulesandresourceestimatesareshowninFigures1–9thatprovideFiguresfromOTTR2014andanAugust2015OTInvestorandAnalystSiteVisitPresentation(TRQ8-2015b)withannotationsandcommentarybytheauthor..

5

Figure1-OyuTolgoiandSurroundingLicenses–ProjectLocation

6

Figure2-LocationandDepthofOyuTolgoiDeposits

7

Figure3–OTPhase2RestartMilestones

8

Figure4–OTPhase2ProbableDevelopmentSchedule

9

Figure5–OTPhase2Medium-TermTimeline–2015–2026++

10

Figure6–OTPhase2OreDescriptionandProductionSequence

11

Figure7–OTMultipleDevelopmentOptionsbeyondPhase2

12

Figure8–LocationofOTPhase2andOT“LifeofMineCase”depositsthatmaybeminedinadditiontothePhase2oredepositsinthefuture

13

Figure9–“HugoNorthLift1MineDesignProject”and“Isometric[View]ofMineDesign”

14

WhatactionsareneededtocompleteapprovaloftheOTPhase2expansion?TheMay18,2015OTUMDFPAgreementbetweentheGovernmentofMongoliaanditspartnersinOTLLC(OTUMDFP2015)identifiesaseriesofstepsneededtocompleteapprovalofOTPhase2.Thesteps“requiredbeforetheaspirationslistedinthatagreementcanbegintoberealized,”atsection4.7onp.6,include:

“[The]PartieswishtoproceedexpeditiouslywiththeconstructionoftheUndergroundStage.However,thePartiesagreethatconstructionofUndergroundStagewillcommenceonlyafter:

(a)OTLLChassatisfiedtherequirementstoobtainthirdpartyprojectfinancetofundtheUndergroundStage(the“UGProjectFinance”);and

(b)TheUndergroundStageisapprovedbyeachoftheBoardsofRioTinto,TRQandOTLLC”

Atsection5.5.a.atp.6,theMay2015GOM-OTAgreementsays,

“UptoUSD$6billionofexternalfundingwillberaisedthroughthirdpartyprojectfinancing(includingUGProjectFinance)andotherbankfinance,productoff-takearrangementsorotherformsoffinancing.”

OnDecember14,2015,TurquoiseHillResources(TRQ)announcedthatthesigningofa,“USD4.4billionprojectfinancingfacility”.(TRQ12-2015).ThefacilityprovidesloansthroughagroupofinternationalfinancialinstitutionsandexportcreditagenciesrepresentingthegovernmentsofCanada,theUnitedStatesandAustralia,alongwith15commercialbanks.The$4.4billionprojectfinancefacilityOT’sownerssignedprovidesasetoffourloanswithpaybacktermsof12–15years.TheloansagreedtobyOTLLCandthelendershaveadebtcapacityof$6.0billionforOyuTolgoi,providingtheoptionforanadditional$1.6billion.

FuturestepstocompletetheloanprocesssummarizedbyTRQinitsDecember14,2015releaseare:

“TurquoiseHill,RioTintoandOyuTolgoiwillnowcontinuetoworktowardscompletingthe2015feasibilitystudy,includingtheupdatedcapitalestimateandsecuringallnecessarypermitsforthedevelopmentoftheundergroundmine.“OncethesestepshavebeencompletedandsubjecttotheboardsofTurquoiseHill,RioTintoandOyuTolgoiapprovingaformal‘noticetoproceed’,thefull$4.4billionfacilitywillbedrawndownbyOyuTolgoisubjecttosatisfactionofcertainconditionsprecedenttypicalforafinancingofthisnature.”

TheMay2015OTUMDFPAgreementatsection5.2acknowledgesthat,“ApprovalofUGProjectFinanceisadecisionfortheBoardsofRioTinto,TRQandOTLLCandtheShareholdersofOTLLC.OyuTolgoiBoardapprovalofUGProjectFinanceisrequiredbythelendersundertheProjectFinancetobeunanimous.”

15

TheOTUMDFPatP.3identifiestheCapitalCostofOTPhase2as$6.7billionUSD,including$4.7billioninundergrounddevelopmentcapital,$1.5billioninsustainingand$0.6billionUSDinValueAddedTax(VAT)andDutiesonCapital.TheOTUMDFP2015andOTTR2014donotincludeplansforeitherasupplementaloranewEnvironmentalandSocialImpactAssessment(ESIA)forOTPhase2.OTTR2014,atp.446says,“The[2012OT]ESIAaddressesaprojectwitha27-yeardesignlife.”OTPhase2isprojectedfora40-yeardesignlifefromfeasibilitystudiesandfinancialin2016through2055.OTTR2014,says,

“ItisanticipatedthattheProjectwillcontinueinoperationwellafterthatdate[of2055],possiblyathigherproductionrates.Suchplansarestillatanearlystage,sowhiletheyarereferredtointheESIA,theyarenotevaluatedintheESIAbecauseofthelimitedamountofinformationavailable.

“Similarly,anumberoffuturedevelopmentsofproject-associatedfacilitiesarestillunderevaluation,andnocleardecisionhasyetbeenmadeastothepreferredapproachtobeadoptedbytheProject,”includingarailroadlineandapowersupply.

OTPhase2plansprovidethat,

“certainotheractivitiesandfacilitiesareexpectedtobedevelopedovertime,eitheraspartoforinsupportoftheproject,whichdonotconstitutepartoftheProjectforthepurposesoftheESIA.Theseinclude:• Projectexpansiontosupportanincreaseinorethroughputfrom100–160ktpd.• Long-termProjectpowersupply.UnderthetermsoftheIA,OTLLCwillsource

electricityfromwithinMongoliawithinfouryearsofthecommencementofProjectoperations.OTLLCmaydevelopacoal-firedpowerplantwithintheOyuTolgoiMineLicenceAreatoprovidetherequiredpowerfromMongoliansources.

WhiletheimpactsandmanagementofthesefutureProjectelementsarenotdirectlyaddressedintheESIA,theyareconsideredinthecumulativeimpactassessment.”(OTTR2014,P.445)

16

WhatisBlockCaveMining?The2005OyuTolgoiIntegratedDevelopmentPlan(IDP)ExecutiveSummarydescribestheblockcaveundergroundminingmethodthatwillbeusedinOTPhase2toextractorefromtheHugoNorthLift1undergroundmineas:

“[A]safe,proven,andhighlyproductivemethodforextractingbulkoretonnagesfromundergroundmines.Itinvolvesundercuttingpartoftheorebodyacrossaplanarea,causingtheoverlyingrocktocollapse.Thecollapseoftheore,or“cave,”is“bydesign”andisaccomplishedinadeliberate,controlled,andpredictablemanner.Initially,theoreisundercutandinducedtocavebyblasting.Thereafter,theblastedorefallsintoanarrayofdrawpointsbeneaththeinitialcaveareaandisremovedbyload-haul-dump(LHD)equipment.Asbrokenoreisremoved,thepilewithinthecaveslumps,creatingavoid,whichinturnpromotesfurthercaving.”(IDPES2005)“Blockcavingisexpectedtoresultinsurfacesubsidence.Topreservetheintegrityofthemineshaftsandprincipalinfrastructure,theshaftsandinfrastructurewillbegroupedtogetherina“farm”approximately1,500mduewestofthecentrelineoftheresource.”(IDPES2005P.47)(Emphasisadded)

TheSMEMiningEngineeringHandbook2011(SME2011)describesBlockCavingas,

“[A]massminingsystemthatusestheactionofgravitytofractureablockofunsupportedore,allowingittobeextractedthroughpreconstructeddrawpoints.Byremovingarelativelythinhorizontallayeratthebaseoftheorecolumnsusingstandardminingmethods,theverticalsupportoftheorecolumnaboveisremovedandtheorethencavesbygravity.Asbrokenoreisremovedfromtheorecolumn,theoverlyingorecontinuestobreakandcavebygravity.”

“Althoughsomerelativelysmallerblockcaveorebodiesarecavedandminedasasingleproductionblock,mostexistingandplannedblockcaveminesuseeitherofthefollowing:

•Anextendedblockcavingsystemthatdividesthedepositintodiscreteproductionblocks;or•Asinglecavefront(orseriesoffronts,or“panels”)advancingforward

throughtheorebody,continuallyopeningupnewproductionareasastheearliercavedareasbecomeexhausted.

“Theblockcavingmethodtypicallyallowsforrelativelylargevolumesofproductionaftertheminehasbeendevelopedandproductionramp-uphasbeenachieved.Thepreproductiondevelopmentperiodcanbesignificant(typically5–10years,dependingonthelengthoftimetoachievetheinitialaccess).Theup-frontcapitalrequiredpriortoanyreturnoninvestmentisveryhighbecausemuchoftheproductionlevelsandinfrastructuremustbeinplacebeforecavingcanbegin.“Aftertheminehasreacheditssustainedmaximumproductionrate,theoperating

17

costtendstobeverylowwithminimaladditionalinfrastructurerequiredtomaintainthehighproductionvolumes.Blockcavingisgenerallytheleastexpensiveofallundergroundminingmethods,andcaninsomecasescompetewithopen-pitminingincost.”(SME2011atP.1356)

NorevisionofOyuTolgoi’s2012EnvironmentalandSocialImpactAssessment(ESIA2012)isproposedtoaddressOT“Phase2”asdefinedbythe“ReserveCase”inOTTR2014.TheProjectDescriptionportionoftheESIA2012providesan“OverviewofBlockCaving”thatsays,An“OverviewofBlockCaving”isprovidedintheOTESIA2012-ProjectDescription(A4),atP.21of77:

“Blockcavingisahigh-tonnageundergroundbulkminingmethodgenerallyappliedtolargehomogeneousoredeposits.Ideally,theoretobecavedshouldbestructurallyweak,andthewasteoverburdenshouldbeweakenoughtocollapseovertheorewithoutinducementastheoreisextracted.

“Blockcavinginvolvesexcavationofnaturalsupportfrombeneaththeore,causingthestructureoftheorebodytofailandcollapseintotheexcavatedvoidundertheforceofgravityandlocalgeo-mechanicalstresses.Thebrokenoreisthenpulledoutfromunderthecavedsectionthroughadrawpointarrangement,subsequentlyremovingsupportfromoreandoverburdenatincreasingheightabovetheinitialexcavation,andeventuallyextendingthecaveupwardtothesurface.“Theattractiveaspectofblockcavingisthatonlyarelativelysmallportionoftheoremustbedrilledandblastedpriortoextraction.Oncethecaveinitiates,productioncontinueswithoutfurtherprimarydrillingandblastinguntiltheorecolumnaboveisexhausted.“Theblockcaveminingsequencebeginswithaccessandinfrastructuredevelopment,followedbyexcavationoftheextractionlevel,andundercuttingtheore.Thesequenceculminatesinsteady-stateproductionfromindividualdrawpoints.“Oreinthecolumnisdilutedbymaterialinadjacentcolumnsandultimatelybyoverburdenandadjacentwasterock.Whenthecolumndrawdowniscompleteanddrawpointgradedropsbelowaminimumvalue,thedrawpointisabandoned.Greatcareistakeninestablishinguniformdrawpracticesthroughouttheminetomaximisedrawpointlifeandminimisedilutionandstressloadingfromundergroundworkings.“Blockcavingisacapital-intensiveminingmethod,requiringsignificantinvestmentearlyintheminelifeforinfrastructureandprimarydevelopment.Onceinplace,themethod’shighup-frontcostsareoffsetbyhighproductionratesandlowoperatingcosts(relativetootherundergroundmethods)overaconsiderablelengthoftime,resultinginalowoverallcostpertonne.Blockcaveminingisamongtheleastcostlyofallundergroundminingmethodspertonneoforeextracted.

18

“Blockcavinghasanumberofpositiveattributesincludingnowasterockstorageonthesurfaceandnolargeopenpits.Oneconsequenceofblockcavemining,however,isthepotentialforsurfacesubsidenceorsettling.Surfacesubsidenceiscausedasthematerialabovetheorebodygraduallymovesdownwardtoreplacetheorethathasbeenmined”.

WhichBlockCavemineshasRioTintooperatedorplanned? FiveexistingandproposedblockcaveminesareorhavebeenownedinwholeorinpartbyRioTinto,currentmajorityowneroftheOyuTolgoi,LLC.Theseinclude:Closed-Palaboracoppermine,LimpopoProvince,SouthAfrica–57%RioTinto,26%public,17%Anglo-American;currentlyclosed.See,forexample,“PalaboraMineClosureFactSheet”athttp://www.palabora.com/documents/factsheet_closure.pdfOperating-Northparkescopperandgoldmine,CentralNewSouthWales,Australia–formerly80%ChinaMolybdenumCo.,Ltd.(acquiredfromRioTintoin2013),20%Sumitomo;See,forexample,http://www.geovia.com/sites/default/files/Australian_Journal_Mining_Jan2008_LR.pdf-DeepOreZone(DOZ)blockcavemine,GrasbergMine,Papua,Indonesia–40%RioTinto,60%PTFreeportIndonesia;See,forexample,GrasbergBlockCave”,athttp://www.infomine.com/publications/docs/InternationalMining/Chadwick2010k.pdf)Planned-HugoDummettNorthandSouthdeposits,OyuTolgoigoldandcopperproject,SouthGobiRegion,Mongolia;and-ResolutionCopperproject,Superior,Arizona,US-55%RioTinto,45%BHPBilliton.See,forexample,“UndergroundMining”athttp://resolutioncopper.com/the-project/underground-mining/)

19

WhataretheenvironmentalImpactsofBlockCaveMining?Large-scalepermanentsurfacesubsidenceabovetheextractionzoneistheprimarylong-termenvironmentaldamageresultingfromblockcavemines. Thesurfacecollapse,subsidenceandfracturingofthelandsurfaceabovethemineresultingfromextractionoforeusingtheblockcaveminingmethodsleadstoenvironmentaldamagethatisnotamenabletotopographicorbiologicalreclamationtoestablishproductivepost-mininglandusesbecausethedamagedlandsurfaceaffectedbytheblockcave-inducedsubsidenceisphysicallyunstable.Asdescribedin“OreBodyAccess,”MiningMagazine,03May2011says:

“Oneoftheprimarydisadvantagesofblockcavingisthatitremovesmuchofthesupportingrockfromunderneaththeoverburden,whichoftenleadstosubsidenceofthesurface.Cavinginducedsubsidencemayendangermineinfrastructureandisamajorconcernforoperationalsafety.”Changestosurfacelandformsbroughtaboutbysubsidencecanbedramaticandmayleadtoapronouncedenvironmentalimpact.Therefore,theabilitytopredictsubsidencehasbecomeincreasinglyimportantforoperationalhazardandenvironmentalimpactassessments.”(emphasisadded)(MiningMag.2011)

Surfacesubsidencecratersareatypicalfeatureatblockcaveminesaroundtheworld.Thirtyoftheundergroundblockcavingminesaroundtheworldaresummarizedin“Characterizationandempiricalanalysisofblockcavinginducedsurfacesubsidenceandmacrodeformations,”Woo,K.,etal,ROCKENG09:Proceedingsofthe3rdCANUSRockMechanicsSymposium,Toronto,May2009,(Woo2009)at:http://www.geogroup.utoronto.ca/rockeng09/proceedings/innerFrames/PDF/Session19/4044%20PAPER.pdf.Woo2009identifiesthreezonesofsurfaceimpactfromblockcaving,aninner“CavedZone,”asurrounding“FracturedZone”anda“Subsidence”zonesurroundingtheinnerzoneofgreatersurfacedeformation.Figures10–17demonstrateblockcavingminingimpactstothelandsurfaceaboveandsurroundingtheoreextractionzone,including:

- a“cavedzone”directlyabovetheblockcavingminingarea,wherethesurfacecollapsesintothevoidbelowthesurfacefromwhichorehasbeenextracted;

- a“fracturedzone”overtheareaaroundthe“cavedzone”affectedbythecollapseovertheorebodywhere“tensioncracks”developatthesurfaceandbelowthesurface;and

- a“continuoussubsidencezone”affectedbysurfacedisruptionandinstability.

20

Figure10–(IncludedinFigure12)“Definitionofblockcavingsubsidencezonesandits

quantificationwithrespecttoanglesex-tendingfromtheundercut”(Woo2009)TheillustrationofblockcavingfromWoo2009issimilartotheillustrationofblockcavinginOyuTolgoi’sIDOP2012showninFigure11.

21

Figure11–(IncludedinFigure12)“DefinitionofSubsidenceZone(afterMMT–PermissionfromRioTinto)”fromOyuTolgoiIDOP2012,P.325,-Figure16.22

Figure12–22showtheblockcaveminingmethodproposedbyOTandtheassociatedcollapseandsubsidencezonesfromOTTR2014andothersourcesidentifiedintheFigureswithannotationsandcommentarybytheauthor.

22

Figure12–“DefinitionofSubsidenceZones”

23

Figure13–BlockCavingandSubsidence–“MostProbablePredictionofSubsidencefortheResolutionCopperMine,aRioTinto-BHPBillitonprojectinArizona,USA

24

Figure14–IllustrationsofOTPhase2“OreFlow”and“CaveMonitoring,”andSurfaceSubsidencepredictionatRT-BHPResolutionCopperMine.

25

Figure15–OTHugoNorthLift1SubsidenceZonepredictionsfrom2010and2012

26

Figure16–ComparisonofOTPhase2SubsidenceAreapredictedin2012andCentralUlaanbaatar.

27

Figure17–OverlayofOTPhase2SubsidenceZonepredictedin2012onCentralUlaanbaatar.

28

Thesurfacesubsidenceresultingfromblockcaveminingleavesapermanentholeinthegroundabovetheminewherethesurfacecollapsesintothemine,aringofcontinuoussubsidencearoundtheedgeofthecollapsezone,andringoffracturelandaroundtheedgeofthecontinuoussubsidencezone.Reclamationtoreestablishtopographicallystablelandscapewithsustainablevegetationisnotpossibleatblockcaveundergroundminesasthelandsurfaceabovetheblockcavemineisphysicallyunstableandunsafeforoperationofreclamationequipment,andforpeopleandanimalsenteringthefracturedrockorsubsidencezone.Theextentofthe“cavedzone”isdefinedbya“caveangle”or“angleofbreak”illustratedinFigures10,11and12.Theextentofthefracturezoneisdefinedbyan“angleoffractureinitiation,”andtheextentofthecontinuoussubsidencezoneisdefinedbyan“angleofsubsidence.”Woo2009includes,inadditiontoanoverviewoftheblockcavingminingmethod,descriptionsandillustrationsoftheopencavezoneandsurroundingsubsidencezoneatoperatingminesat30blockcaveminesaroundtheworld,includingimagesofcollapseandsubsidencezoneat18blockcavingmines.Figure18below(Woo2009,Figure5),showssatelliteimageryofsurfacesubsidenceatblockcavemineswheretopographicconditionshaveasmallimpactonthestructureofthecollapsezone.

29

Figure18–“Macrodeformationpatternsobservedinwhichtopographiceffectsareminor”

atblockcavemines(Woo2009)TheshapeofthesubsidencezonesintheFigureshow–the“macrodeformationpatterns”–asidentifiedinWoo2009are:TypeA=circular,TypeB=elliptical,TypeC1=irregularwithscarps,butwithoutadistinctcollapsezone,andTypeC2=irregularwithadistinctcollapse

structure/gloryhole“wheretopopographiceffectsareminor.”

NoscaleisprovidedfortheimagesinWoo2009.

30

HowlargeistheSubsidenceZoneattheOTHugoNorthLift1undergroundminepredictedtoextend?SurfacesubsidencezonepredictionmapsfortheHugoNorthLift1blockcaveminehavebeenincludedintheOTIntegratedDevelopmentPlansfrom2005,2010and2012.Theprojectedextentofthelandarealikelytobeaffectedbythecaved,fracturedandsubsidencezoneattheHugoNorthminesiteincreasedsubstantiallyintheIDOP2012fromthatprojectedinIDP2010.TheIDP2010projectionofthecaved,fractureandsubsidencezonesabovetheHugoNorthLift1undergroundminebelowshowsthe“shaftfarm”area–thesiteshaft2–outsidetheprojectedcontinuoussubsidencezone.

Figure19-(AlsoinFigure15)“ProjectedSubsidenceZone”(IDP2010,P.373(Figure

23.89.8)InthisFigure,thegridlinesarespaced500metersapart.TheprojectedHugoNorthminesubsidencezonepresentedinIDOP2012,showninFigure20below,hasexpandedmore500meterstothewestresultinginthe“CavedZone”includingthe“ShaftFarm”areatheShaft2siteandotherinfrastructurefeatureswellinsidetheinnerring–theprojected“cavedzone”ofthesubsidencezone–inadditiontoShaft1.

31

Figure20–(AlsoinFigures15-17)ProjectedSubsidenceZonefromIDOP2012:“TheprojectionshowninFigure16.33merelyillustratestheextentofsurfaceareathatthegeneralizedsubsidenceprojectionsencompass.Furtherstudyisrequiredtomore

accuratelypredictactualcavepropagation.”(IDOP2012,p.358).InthisFigure,thegridlinesarespaced1,000metersapart.

Propagationofthe“CavedZone”toincludetheShaftFarmArea–theShaft2,Shaft1andotherinfrastructurefeaturesisalsoillustratedintheProjectDescriptionportionoftheESIA2012,asshowninFigure21,below.

32

Figure21–“ProjectedBlockCaveSubsidenceZone,”(ESIA2012-ProjectDescriptionFigure4-10p.23of77)

OyuTolgoi’sIDP2010acknowledgedtheseverityoftheimpactofthecavedzoneonShaft1noting,

“Thesubsidencezonefromtheextractionleveltothesurfaceisprojectedat60o,perSRK’sRecommendation[Figure3inthisreport](Figure23.8.8).Allplannedinfrastructureisoutsidethiszone,exceptforShaftNo.1.ShaftNo.1islocatedinsidethe60osubsidenceareaattheedgeof65osubsidenceline.ItisassumedthatShaftNo.1willbestrippedofallconveyancesoncefullproductionisachievedandwillbeusedforventilationonly.”

OyuTolgoi’sIDOP2012illustrationoftheprojectcaved,fractured,andsubsidencezones(Figure20inthisReport),showsthattheextentofthe60osubsidenceareahasexpandedtoincludeShaftNo.2andmostoftheShaftFarmarea.The60osubsidencelineindicatedinIDOP2012isapproximately500meterswestofthelocationofthe60osubsidencelineinIDP2010,engulfingtheShaftNo.2site.NeithertheIDOP2012northeESIA2012addressconsequencesoftheprojectedcave,fractureandsubsidencezonesonshaftNo.2,ortheotherinfrastructureidentifiedaswithintheprojectedsubsidencezone.WhiletheIDP2010assertedthatallinfrastructureotherthanShaftNo.1weretobelocatedoutsidethe60oangleofsubsidencezonetopreventimpactsfromcaving,fracturingandsubsidence,manyOTminefacilitiesareshownwithinthe60oangleofsubsidenceshownforthemineintheIDOP2012.TheseminefeaturesincludeShaftNo.2,andthe“ShaftFarm,”amongotherinfrastructure.Thelackof

33

attentiontotheimpactsofsubsidenceonareaswithinthe60osubsidenceangleasprojectedinIDOP2012appearstobeasignificantdefectinESIA2012.WhileOTTR2014providesadiscussionofblockcaveminingontheHugoNorthLift1,itdoesnotprovideafigureorotherinformationthatillustratesthefullprojectedsubsidencezonefromtheOTPhase2,the“ReserveCase”mine.OTTR2014says,

“Thepredictedfracturelimits(determinedasthepointofhavinganotableimpactonkeyinfrastructuresuchashoistingshafts)bytheendofminingHugoNorthLift1areshownbytheredoutlineinFigure16.13.Afencewillbeconstructed100moutsidethisredoutlinetorestrictaccess.Thesubsidenceanglesarepredictedtobenearlyverticalatthenorthernandsouthernlimitsofthecave,whereconfinementishighest,andareapproximately55°intheeastandwest,whereconfinementislowest.Allshaftsandpermanentinfrastructureareplannedtobesituatedoutsidethepredictedfracturelimits.“Shaft1isclosesttothefracturelimits.Shaft1willbeusedasahoistingshaftuntiltheShaft2loadoutandprimarycrusherarecommissionedbyearly2019.ThereaftertheprimaryfunctionofShaft1isforintakeventilation.Thisprovidesadditionalcontingencyagainstanunexpectedlylargercavesubsidencedamagearea,asabaldconcretelinedshaftcanwithstandhighergroundmovementthanashaftreliantontheclosetolerancesofoperatinghoistinginfrastructure.”Constructingafence100metersoutsidethesubsidencezone–“theredline”inFigure22below–istheonlyreclamationmeasure,otherthanmonitoringtheextentofsubsidence,identifiedinOTTR2014.

Figure22belowisareproductionofFigure16.31inOTTR2014.NoscaleisprovidedfortheFigureinOTTR2014toallowcomparisonwiththeIDOP2012andESIA2012FiguresillustratingOT’sprojectedsubsidencezone.TheOTTR2014Figureappearstoprojectamuchsmallersubsidencezonethan2012IDOPbasedonthelocationofthe“ShaftFarm”inthelowerleftofFigure22.NoanalysisisprovidedorcitedfortherevisionoftheOTPhase2subsidencezoneinOTTR2014fromthatprojectedintheIDOP2012orESIA2012.

34

Figure22 – “Figure16.31SubsidencePredictionsfromModeling”OTTR2014,p.310

AsisclearfromacomparisonofthesubsidencezoneillustrationsfromIDOP2012andOTTR2014,thefullextentofthesubsidencezoneisnotshownineitherofthedocuments.As2014OTTRhassolittledetailaboutblockcavingmethodsorconsequencesandnoESIAupdateassociatedwithit,the2012ESIAandsupplementremainthesoleavailableenvironmentalimpactassessmentforOyuTolgoi’sopenandundergroundmineplans.IntheESIA2012,aneightsquarekilometer – 8km2 – caved,fracturedandsubsidencezoneispredictedtodevelopedaboveOyuTolgoi’sHugoNorthUndergroundBlockCavingMine.ESIA2012,initsdiscussionofthe“NatureoftheImpact”ofproposedOyuTolgoimine,in“SECTIONC:IMPACTASSESSMENTCHAPTERC4:TOPOGRAPHY,LANDSCAPE,GEOLOGY&TOPSOILS(“ESIA2012C4”,filename:ESIA_OT_C4_Topography_EN.pdf)projectsthefullareaoftheprojectedcaved,fracturedandsubsidencezoneabovetheHugoNorthmineisprojectedasmorethan8squarekilometers.ESIA2012–C4atP.10of18states,

“[T]heremovaloforethroughtheblockcavingislikelytoresultinasubsidence

35

zonelaterintheminelifeasthecavingpropagatestothesurface.Initialestimatesarethatthissubsidencezonewillcoveranareaofover8km2andbecharacterisedbyadepressionsurroundedbyacircularcliff-likefeaturewithanoverallcliffheightinexcessof20m,whichmightbemanifestasasingleclifformultiplesmallercliffs.Dependingonthenatureofthesurfacemanifestationofthisfeature,theimpactwillbeontopographyandlandscape;andalsoonhydrogeologyandhydrology(seeESIA2012SectionC5),andpotentiallypresentapotentialcommunitysafetyissueifcliffsareunstableonceherdersareallowedbackintotheareafollowingmineclosureandrestoration.”

TheESIA2012addsthat,

“thefullextentofthesubsidencezoneisprojectedtomorethanthreetimesthesizeoftheopenpitmineplannedatthesite,projectedtobetwosquarekilometers(2km2)”,atESIA2012,C4p.10.

Figure17showstheextentofOTPhase2undergroundblockcavingmineandassociatedcollapseandsubsidencezonebasedonthe2012IDOP“ProjectedSubsidenceArea,”byoverlayingtheprojectedOTPhase2subsidencezoneonanGoogleEarthimagesatelliteimageofcentralUlaanbaatar.OTTR2014doesnotidentifyspecificeffortstocontinueinvestigationstodelineatetheOTPhasecollapseandsubsidencezonethatwouldrespondtotherecognitioninIDOP2012atP.358that“furtherstudyisrequiredtomoreaccuratelypredictactualcavepropagation.”NosupplementalornewESIAisproposedbyOTtoaddresstheblockcavemineplannedinOTTR2014.

36

WhatareSomeoftheMajorImpactsofOTPhase1and2onWaterResourcesUsedbyHerders?IssuesrelatedtotheimpactsofOToperationsonwaterresourcesusedbytheherderfamiliessurroundingthemineareahavebeenidentifiedin“IndependentEnvironmentalPanel(IEP)Report–ExecutiveSummary”developedfromtheinvestigationofKhanbogdSoumherdcomplaintsfiledtotheInternationalFinanceCorporation(IFC)ComplianceAdvisor-Ombudsman(CAO)andinIndependentAuditReportsavailableathttp://ot.mn/esia-audit-reports/.TheIndependentExpertPanelReportsummarizedintheExecutiveSummaryhavebeenpreparedpursuanttotwoformalcomplaintsfiledbyherdersandherdersupportorganizationswiththeInternationalFinanceCorporation(IFC)ComplianceAdvisor/Ombudsman(CAO)in2012and2013.AsofJanuary2016,onlytheIEPReportExecutiveSummary,ratherthanthefullreport,ispublicallyavailable.IFCisoneofthelenderscommittingfundstoOTPhase2identifiedintheDecember14,2015announcementoftheOTPhase2multi-bankfundingfacility.TheherdercomplaintsfiledwiththeIFCCAOandassociateddocumentsareavailableat:

Mongolia/OyuTolgoi-01/SouthernGobi:http://www.cao-ombudsman.org/cases/document-links/links-191.aspx

andMongolia/OyuTolgoi-02/SouthernGobi:http://www.cao-ombudsman.org/cases/document-links/links-196.aspx

TheIndependentAuditReports(IARs),preparedperiodicallysinceOctober2013,identifyissuesassociatedwithcompanyperformancetoaddressofnon-conformancewithOTprojectcommitmentsfromtheESIA(SeeIARApril2015,P.18)OTTR2014doesnotacknowledgeordiscusstheissuesrelatedtonon-conformancewithOT’scommitmentsaddressedintheIARsortheIEPES2015.The“ENVIRONMENTALSTUDIES,PERMITTINGANDSOCIALORCOMMUNITYIMPACT”sectionofOTTR2014,beginningatP.441,summarizesthetypesofimpactsidentifiedinESIA2012andDraftESIAspreparedtoaddressOToperations.ThatsectionoftheOTTR2014doesnotprovideanassessmentofthenature,extentofseverityofimpactsofOToperationstodateoranychangestopreviousESIAsnecessarytoaddressimpactsthathaveoccurred. Similarly,OTTR2014doesnotincorporaterecentlycompiledinformationonwaterresourceimpactsofcurrentOToperationsorprojecthowtheimpactsidentifiedintheIARs,IEPES2015andthefullIEPReportwillbeaddressedinthefuture,suchasanESIAforOTPhase2.

37

Figure23–“WaterImpactsonHerderssurroundingOThavebeensignificantandaregrowing”

38

TheinformationgatheredintheIARandIEPreviewsarecriticaltothepublicandinvestorawarenessofOT’simpactsonandriskstolocalwaterresources,socio-economicandculturalheritageconditionssincethemineoperationsbegan.Updatingwaterresource,socio-economicandculturalheritageconditionsisnecessarytoaddressdeficienciesorinaccuraciesinbaselinedatacompiledpriortoOTstart-up.UpdatingtheassessmentofimpactstothesecriticallyimportantelementsofthelivesofherdersandtheirfamiliessurroundingOTisessentialtodeterminingarewhetherimpactshaveoccurredaspredictedoraremoreorlessseverethatthanpredictedintheESIA2012.TheIndependentExpertPanel(IEP)foundimpactsonherderwaterresourcesthataffectherdersocio-economicandculturalconditionssignificantlyandmoreseverelythanpreviouslyidentified.IEPES2015reportsthat:

“ThedirecteffectoftherelocationoftheBorOvoospringontheherders’accesstowaterandwaterqualityisthecompletelossofthespring.ThetemporaryreplacementwatersourceattheSouthernfencelineoftheMLAdeliverswater,howeveritdoesnotreplicatethefunctionsforlivestockherdingneithertheecologicalfunctionsofwildlifehabitatofBorOvoospring.“ThelossoftheoriginalBorOvoospringhascausedlongerdistancesforherderstoaccesswateratthecurrentwateroutletofthediversionpipe;withtheestablishmentofthelatestfencelinealongtheMLAborder,thishasbecomeevenmorepronounced.”

and“ThelossofaccesstosummerpastureandlossofwatersourcesduetowatershedwideimpactsbytheOTmineandinfrastructuredevelopment(includingcoalroad)hasresultedinfarreachingandirreversibledisturbancetotraditionalnomadiclivestockhusbandryinKhanbogdSoum,especiallyinJavkhalantBageffectingthewholeherdingcommunity.Thesearchforwaterandpastureandinabilitytoletwinterpasturesrest,isdegradingremainingpastures;withtheeffectsoffragmentation,mechanicaldisturbance,dustandlitteralonginfrastructurecorridors,thecumulativeimpactsaresevereandwillcontinuetoincreaseasminedevelopmentproceeds.”(IEPES2015)

OTTR2014assertsthatOThasnot,“seen…anyconnectionbetweenthedeepaquiferandtheshallowherders’wellsinnear-surfacestreambedaquifers,”atP.413,failingtoacknowledgeorignoringthe“interaquiferflow”betweenshallowherders’wellsandthedeepaquifercausedbypoorboreholeconstructionidentifiedintheIARs.TheApril2015IndependentAuditReportisdescribedbyitsauthorsasa“DesktopAudit”asitwas“conductedasadesk-topreviewofthedocumentationprovidedandteleconferenceswithOTsitepersonnel”withoutsupportingfieldobservations,orinterviewswithareaherdersandotherauthorities.(IAR4-2015,P.18)WaterandWasteManagementNon-ConformanceIssuesidentifiedintheApril2015IARaddresscontinuingproblemsassociatedwiththeUndaiRiverDiversion(IssueM1.1)and

39

InterconnectedHydrologicUnits(IssueM1.5)associatedwith“cascadingwells.”(SeeSchneider2013,Bale2014amongothersources)RegardingtheUndaiRiverDiversion,theIAR4-2015,atP.19,identifiesthecontinuingconcernthat,

“TheUndaiRiverDiversionhasnotbeencompletedinaccordancewiththeESIAduetoadelayinissuanceofaLandUsePermit.Atemporaryapproach(theUndaiRiverPartialAdjustmentandProtectionProject)hasbeencompletedtodivertsurfaceflowandtocaptureandre-routegroundwaterflowfromtheUndaiRiverandaroundthezoneofinfluenceoftheopenpit.ThecurrentUndaiRiverPartialAdjustmentandProtectionProjectdoesnotfullymeetthedesignrequirementsasspecifiedintheESIA.”

CommentsonthisissueintheIAP4-2015asaresultoftheDesktopAuditinclude,

“TheUndaiRiverDiversionhasnotbeencompletedinaccordancewiththeESIAduetoadelayinissuanceofaLandUsePermit.Atemporaryapproach(theUndaiRiverPartialAdjustmentandProtectionProject)hasbeencompletedtodivertsurfaceflowandtocaptureandre-routegroundwaterflowfromtheUndaiRiverandaroundthezoneofinfluenceoftheopenpit.ThecurrentUndaiRiverPartialAdjustmentandProtectionProjectdoesnotfullymeetthedesignrequirementsasspecifiedintheESIA.”

AtP.20,theIAP4-2015identifiesthecontinuingconcernthat,

“Mitigationsarerequiredintheeventofinterconnectionofhydrogeologicalunits.Thesemitigationshavenotyetbeenimplementedinallinstances.OTisprogressingeffortstoabandonorconverttoproductiveusetheseinterconnectingbores.”

CommentsonthisissueintheIAP4-2015asaresultoftheDesktopAuditinclude,

“EvidenceexistsofexplorationboresinterconnectinghydrogeologicalunitswithintheGuniiHooloiborefield,intheGalbynGobiregion,andwithintheMLA.FuturedispositionofthesewellsiscurrentlyunderevaluationbyaworkgroupestablishedwiththeKhanbogdsoum.Therearesomerequestsforconversionofthewellsforcommunityuse;thisrequesthasbeenforwardedtothecommunities’team.“BesteffortsarebeingmadebyOTtoprogressthesealingofinterconnectingboreswithinandoutsideoftheMLA,howevertheissueisoutstanding.PerrequestfromtheworkgroupOThasprovidedboringlogsforallinterconnectingbores.”

OTTR2014,atp.24,says,

“Althoughithasarequirementtomakeitsself-discoveredwaterresourcesavailabletobeusedforhouseholdpurposes,itisconfirmedinthe[OTInvestmentAgreement]IAthatOTLLCholdsthesolerightstousethesewaterresourcesfortheProject.OTLLChastherightundertheIAforawateruserightfortheperiodofitsmininglicence.”

40

OTTR2014,atP.52says,“OTLLCwillmakeitsself-discoveredwaterresourcesavailabletobeusedforhouseholdpurposes,herderfamilies,andagriculturalactivitiesofthelocalsoumcommunities.”

NeithertheIARorOTTR2014describethe“bestefforts”thatOTisreportedtobemakingtoaddresstheinterconnectedaquiferproblemsaffectingshallowwellsusedbyherdersresultingfromOTwellconstruction,orhowtheperformanceofthosebesteffortswithbeevaluated.OTTR2014doesnotidentifywhether,when,how,andinwhatamount,OTwould“makeitsself-discoveredwaterresourcesavailabletobeusedforhouseholdpurposes,herderfamilies,andagriculturalactivitiesofthelocalsoumcommunities”throughthelifeoftheOToperation,orhowOTself-discoveredwaterresourceswillbeusedtoaddressreplacementofandcompensationforlossestoherderwaterresourcesintheUndaiRiverwatershedorareasofaquiferinterconnectionresultingfromfaultyboreholeconstruction.

OThasnotyetproposedaplanforuseof“itsself-discoveredwaterresourcesavailabletobeusedforhouseholdpurposes,herderfamilies,andagriculturalactivitiesofthelocalsoumcommunities”throughthelifeoftheOToperation.Herdershavebeenimpactedbyboreholesconnectingshallowanddeepaquifers – “cascadingwells” – formanyyears.Cascadingwellswerefirstidentifiedbyherdersin2004.Herders’livestockmanagementandculturalpatternshavebeenseverelydisruptedbytheineffectivenessoftheUndaiRiverDiversionandtheReplacementBorOvoospringsince2013whenthecurrentUndaiDiversionconstructionworkswerecompleted.Developmentandimplementationofplansto“makeitsself-discoveredwaterresourcesavailabletobeusedforhouseholdpurposes,herderfamilies,andagriculturalactivitiesofthelocalsoumcommunities”throughthelifeoftheOToperationwouldbeappropriatetoaddress:

“OTLLC....obligationswithregardtowaterutilisation:[including]-Notreduc[ing]fromthecurrentlevelthequalityandquantityoftheexistingpotableandlivestockwatersuppliesusedbyexistingusersatthedateoftheIA[OTInvestmentAgreement2009]withinthewaterresourcesareadefinedintheDEIAReports.”(OTTR2014P.53)

BoththeIARconsultantsandIFCCAOOyuTolgoi-01andOyuTolgoi-02ComplaintfilesacknowledgethataJune8,2015MemorandumofUnderstandingtoformaTri-PartiteCounciltohasbeenagreedtobyKhanbogdSoumadministration,RepresentativesofHerdersofKhanbogdSoumandOTLLCtoaddresstheHerderComplaintsfiledwiththeIFCCAO.TheCouncilprovidesanimportantnewvenuewherethepartiescan,

“consider,address,resolve,exchangeinformationabout,makeproposalsandrecommendationsinrespectof,implementandrelaytotheappropriatelevels,any

41

issuesrelatingtoherders,pastureandwaterandanyotherrelevantissues…”associatedwiththeHerders’IFCCAOComplaints.”

MongolianandEnglishlanguageversionsoftheJune8,2015MoUareavailableontheIFCCAOpagesfortheOTComplaintsat:http://www.cao-ombudsman.org/cases/document-links/links-191.aspxandhttp://www.cao-ombudsman.org/cases/document-links/links-196.aspxThisrecentdevelopmentmayprovideaeffectivevenueforairingandresolvingherdersandSoumGovernmentcomplaintsregardingOTimpactsiffundedadequatelytoprovidesufficientsupportforsustainedparticipationbyherderandSoumrepresentativesincludingtheirtimeandtravelandsustainedprofessionaltechnicalsupport.

42

HowdoInternationalMetalMarketPricesaffectOyuTolgoiPhase2DevelopmentandFundingPlanandTechnicalReports?AllprojectionsofthefuturevalueandeconomicimpactsofOTPhase2presentedintheMay18,2015OyuTolgoiUndergroundMineDevelopmentandFinancingPlan(OTUMDFP2015)arebasedontheinternationalmarketpricesforthecopper,goldandsilverthatwouldbeextracted.December1,2015marketpricesforcopper,goldandsilveraresignificantlylowerthanthepricesusedinthedevelopmentofOTPhase2expansionplansforcopper,gold,andsilver,thethreemetalcommoditiesbeingproducedatOT.Aslongaslowermetalpriceslast,thevalueofOTcopper,goldandsilverproductionwillbereducedbelowtheestimatedOTPhase2incomeandvaluewhichwerebasedonhigherprojectedprices.IncomederivedfromthemineandgovernmentpaymentsassociatedwithCurrentOTPhase1operationsthatreflectthevalueofmineproductionwillalsobereducedduetolowermetalpricesthanthoseprojectedintheOTTR2014.ThecentralroleofinternationalmarketpricesintheassumptionsregardingthefuturevalueandeconomicimpactofOTPhase2asprojectedinOTUMDFP2015,signedbyOT’sownershiponMay18,2015inDubai,isshownatP.4inthetableof“ImpactsontheDomesticEconomy”thatare,“basedonanumberofassumptionsrelatingtoscope,costs,schedule,technicalaspectsandmarketconditions.”TheOTUMDFP2015isanagreementbetweenthe“GovernmentofMongoliathroughErdenesOyuTolgoiLLC”(“EOT”–thecorporateentitycreatedbytheGovernmentofMongoliatorepresentits34%shareintheOyuTolgoi)andOyuTolgoi’scorporateownersoftheremaining66%oftheOyuTolgoiMine:TurquoiseHillResourcesLimited,THROyuTolgoiLtdandOyuTolgoiNetherlandsB.V.,(together“TRQ”)andRioTintoInternationalHoldingsLimited(“RioTinto”)andOyuTolgoiLLC(“OTLLC”).RioTintocontrolsthemajorityofsharesinOyuTolgoithroughitsownershipof51%ofTurquoiseHillResourcesLimited.TheOTUMDFP2015listsagreements“inprinciple”amongOT’sownersandnotes,atP.5,thattheactualcost–usingtheword“quantum”fortheestimated“actualamount”–“offundingrequirementswillbedeterminedbyanumberoffactorsincludingthebusinessperformanceofOTLLCandvariancesinthecopperandgoldprices.”TheDubaiAgreementsaysatP.5,thatformal“Approvalof[OTPhase2financing]isadecisionfortheBoardsofRioTinto,TRQandOTLLCandtheShareholdersofOTLLC.OyuTolgoiBoardapprovalof[OTPhasefinancing]isrequiredbythelenders…tobeunanimous.”InadditiontooutliningagreementsinprincipleandtheactionsnecessaryforformalapprovalofprojectfinancingtostartOTPhase2,theOTUMDFP2015includes

43

commitmentsrelatedtoprogressonanOTpowersupply,researchonafutureOTcoppersmelter,andfinancialreportingandtaxconsiderationsandotheractivities.Uncertaintyregardingfuturepricesforcopper,goldandsilverandothercommoditiesreflectstheglobalmarketuncertaintyaboutwhetherthesteepfallinpricesforthosemetalssince2010willbealong-termorshort-termtrend.Ascopperisthesourceofmorethan75%ofthevalueofOyuTolgoiPhase2,thisuncertaintyfocusesonquestionsregardingfuturecopperprice.HowmuchhaveinternationalmetalmarketpricesfallensincetheOTPhase2TechnicalReport(OTTR2014)wasreleased?December2015internationalmarketpricesforcopper,goldandsilveraresignificantly:20–30%lowerthanthoseusedinOTTR2014resourceevaluationsandeconomicprojectsforOTPhase2.Copper,goldandsilverpriceshavebeendroppingsteadysincetheOctober2014releaseofOTTR2014,whichtheMay2015OTOTUMDFPand2015OTFeasibilityStudy(notdisclosedtothepublic)havebeen“aligned”with(THR2015).The“ReserveCase”isthetermintheOTTR2014fortheOTPhase2expansion.OT’s2014“ReserveCase”summary(OTTR2014atP.4)projectstheminingof1.5billiontonsoforeatcoppergrade(“content”)of0.83%,goldgradeof0.32gramspertonandsilvergradeof1.94gramspertons.OTPhase2oreisestimatedtocontain24.9billionpoundsofcopper,11.9millionouncesofgoldand78.0millionouncesofsilver.ThevalueofrecoveredmetalfromOTPhase2usedinOTTR2014are:

“[f]ormineplanning…themetalpricesused…werecopperat$3.01/lb,goldat$1,250/ozandsilverat$20.37/ozand….costfortheundergroundminearebasedon$15.32/t.”(OTTR2014atP.20).

Atthoseprices,thetotalvalueofthemetalrecoveredfromOTPhase2wouldbeabout$88.4billiondollars,ofwhichmorethan82%–$74.7billion–wouldcomefromcoppersales.SinceOTTR2014wasreleased,copper,goldandsilverprices(andothercommoditiesthatareimportanttotheMongolianeconomy)havefallensignificantly.IfDecember1,2015internationalmarketpricesforcopper-$2.11/lb,gold-$1,065/oz,andsilver-$14.21/oz,areusedtocalculatethevalueoftheoreproposedforminingatOTPhase2,thetotalvalueofthemetaltoberecoveredwouldfallmorethan$22billion,from$88.4billionto$66.1billion,withthecoppervaluefallingfrom$74.7billionto$52.4billion,alsomorethan$20billion.Figure24–“MarketPriceUncertainty”including“5YearCopperSpot”–included5-yeartrendincopperspotmarketpricesshowscoppersportmarketpricesbetweenNovember2010andDecember2015.

44

Source: The source for the “5 year Copper Spot Chart” www.kitco.com, is alsothesourceusedforcommoditymetalpricesontheTurquoiseHillResourceswebsiteathttp://www.turquoisehill.com/s/commodity_metal_prices.asp.TheDecember1,2015copperpriceof$2.11/poundis30%lessthantheOTTR2014planningpriceforcopperof$3.01.TheDecember1,2015goldpriceof$1,065/ozis15%lessthantheOTTR2014planningpriceforgoldof$1,250/oz.(seewww.kitco.com forgoldpricecharts)TheDecember1,2015silverpriceof$14.21/pzis30%lessthantheOTTR2014planningpriceforsilver.(seewww.kitco.com forsilverpricecharts)ThereductionintotalmetalvalueforOTPhase2usingDecember1,2015metalpricesinsteadofOTTR2014metalplanningpricesisabout25%,withthetotalvalueofthecoppertobeminedintheOTPhase2falling30%.Howlongthecurrentdepressioninmetalcommoditypricesrelativetopeakpricesin2010and2011willlastisnotpredictablewithanycertaintyandisthefocusofintensespeculationbycopperproducers,investors,banksandcopperconsumers.

MarketPriceUncertainty-Marketpricesforthecopper,goldandsilverhavefalleninvaluesinceOTPhase2mineplanswerereportedinOTTR2014where“metalpricesused…werecopperat$3.01/lb,goldat$1,250/ozandsilverat$20.37/oz”(OTTR2014P.20).Atthoseprices,thetotalvalueofthemetalrecoveredfromOTPhase2wouldbeabout$88.4billiondollars,ofwhichmorethan82%-$74.7billion-wouldcomefromcoppersales.

Copperprices,aswellasgoldandsilverprices,havefallensteadyformorethan5years.Current,December2015,marketpricesforcopper,goldandsilverarewellbelowthoseusedforOTPhase2mineplanninginOTTR2014.IfDecember1,2015interna4onalmarketpricesforcopper-$2.11/lb,gold-$1,065/oz,andsilver-$14.21/oz,wereusedtocalculatethevaluetoberecoveredfromOTPhase2ore,thevalueofOTPhase2produc4onwouldfallfrom$88.4billionto$66.1billion-adropofmorethan25%;withthecoppervaluefallingfrom$74.7billionto$52.4billion–adropof30% 19

Metalmarketpricesfromwww.kitco.com

45

Metalmarketpriceuncertaintymayinfluencetheultimatedesign,costandcorporateboardapprovalofOTPhase2,allofwhicharenecessarybeforeacceptanceofthemulti-bankloanfacilityofferedtoOTbyaconsortiumofbanksDecember14,2015.OTmanagementrecognizesthechangeinmetalpricesduringtherecentyearsaffecttheprojectedvalueofOT.TurquoiseHill,RioTintoandOTmanagementcontinuetobeoptimisticthatinvestmentinOTexpansionwillgeneratecopper,goldandsilverthatwillfindanimproved,higherprice,market,whentheOTPhase2expansioniscompleted.RioTintomanagement’sviewontheeffectsoftherecentfallinthecopperpriceonOTaresummarizedinaNovember26,2015articletitled,“CopperpricesmayweighonRioTinto’sloomingdecisiononOyuTolgoiexpansion,”thatreportsRioTinto’schiefexecutiveforcopperandcoalJean-SebastienJacques’sandRioTinto’sbeliefthat“thecoppermarketisfacingtwoorthreeyearsmoreofpain,itistheonecommoditytheyexpecttorecoverthefastest.”(Mining2015)Similarly,Mr.Jacqueswasreportedtohavesaidthat, “"Weareprettybullishaboutthecoppermarketinthelongtermandthereasonisweexpecta6to8milliontonneshortfall[ofcopper]inthenext10years,”hesaid.“OyuTolgoiwillbepartofthesolutiontoprovidethecopperthatisrequiredinChinaoranypartoftheworldatthatpointintime.”(INVEZZ2016).Forperspective,OTPhase2,the24.9billionpoundsofcopperOTPhase2isprojectedtoproduceisequalto1,250,000tonsofcopperallowingforanaverageof31,250tonsperyearfor40years.ThecopperproducedbyOTPhase2willbeintheformofcopperconcentrate,about100,000tonsperyearcontainingabout33%copper,unlessanduntilacoppersmelterorothercopperrefineryisconstructedtofurtherprocesstheOTcopperconcentrate.Whileavery,verylargemine,OT’sannualcopperproductionislessthan1%ofthe6-8millionton“shortfall”incoppersupplyprojectedbyMr.Jacques.OTPhase1producescopper,gold,andsilverfrom100,000tonsoforeperday.OTPhase2willproduce115,000tonsperdayofore–95,000tonsfromtheNorthHugoLift1UndergroundMineoncefullproductionisreached.FullproductionatNorthHugoLift1isprojectedtobeachievedintheearly2020s–about5-7yearsaway.OTmanagementprojectsthatthelowpriceconditionsinthecoppermarketwillendafteracouplemoreyears,beforeOTPhase2hasreachedfullproductionlevels.

46

WhataresomeoftheplansandissuesassociatedwithdevelopingapowersourceforOTPhase2?ApowersupplysourcetooperateOTPhase2atfullcapacityhasnotyetbeenbuilt.OTTR2014discussionofthepowersupplyneedsfocusondevelopmentofan“IndependentPowerProject”[IPP]includingacoal-firedpowerplantusingcoalfromtheTavanTolgoidepositwestofOT.PowersupplyneedsforOTareprojectedtogrowfrom145Megawattsatstart,to246MWwhenundergroundminedevelopmentiscompleted.DevelopmentofaTavanTolgoiIPPintimetomeetOTPhase2demandbythe2020-2022periodasprojectedinOTTR2014facesmanyobstaclesincludingfundingchallenges,mixedpoliticalsupportandoperatingissues.AlternativesourcessuchaswindpowermaybeabletobeconstructedintimetomeetOTPhase2powerdemandandatlowercost,asatleastfiveutilityscalewindprojectsareinvolvedinpermittingorconstructingmorethan350megawattsinSouthernorEasternMongolia.OTPhase2“OperatingAssumptions,”asprovidedinOTTR2014atp.24,include,

“ThesupplyofpowerhasbeenrecognisedasbeingcriticaltotheprojectexecutionofOyuTolgoiinthe2009InvestmentAgreement].OTLLChasbeengiventherighttoimportpowerinitiallybutmustsecurepowerfromsourceswithinMongoliafromthefourthyearofoperation.SigningofaPSCAwiththeGOMinAugust2014hasresetthefouryearsobligationwhiletheopportunityfortheestablishmentofanIPPatTavanTolgoiisstudied.OTLLChasretainedtherighttoconstructapowerstationatOyuTolgoi.“(OTTR2014,P.24)

OTTR2014recognizesthat,

“TheOyuTolgoiProjectisenergy-intensive,withrequirementsofapeakof145MWsincestart-up,increasingto246MWinthelongertermaftercompletionoftheundergrounddevelopment.Areliableandstablepowersupplyisessentialforoperationsandsafety.”(OTTR2014,P.383)

Initsdiscussionof“Power”atP30,OTTR2014says,

“OTLLChasaPowerPurchaseAgreementwiththeInnerMongoliaPowerCorporationtosupplypowertoOyuTolgoi.Thetermofthisagreementcoversthecommissioningofthebusinessplustheinitialfouryearsofcommercialoperations.“InAugust2014,OTLLCsignedaPowerSectorCooperationAgreement(PSCA)withtheGOMfortheexplorationofaTavanTolgoi-basedindependentpowerproducer(IPP).TheaimofthePSCAistolayoutaframeworkforlong-termstrategiccooperationbetweentheGOMandOTLLCforacomprehensiveenergyplanfortheSouthGobiregion.ParticipationinthePSCAmeetsOTLLC’sobligationintheIAtoestablishalong-termpowersupplywithinMongoliawithinfouryearsfromthecommencementofcommercialproduction.SigningofaPSCAhasresetthefour

47

yearsobligationwhiletheopportunityfortheestablishmentofanIPPatTavanTolgoiisstudied.

“ThePSCAprovidesaframeworkforabroadrangeofpower-relatedissues,includingtheestablishmentofapowergenerationsource,transmissionlines,andpowerimports.ThecentrepieceofthePSCAisanopen,internationaltenderprocesstoidentifyandselectanIPPtoprivatelyfund,construct,own,andoperateapowerplanttosupplyelectricity,withOyuTolgoiastheprimaryconsumer.“FullevaluationoftheIPPoptionisexpectedtotake9–12months.OTLLCplanstoactivelyparticipateintheprocessesofthePSCAtoensurethatthereisatimelyandreliablepowersupplysolutionforOyuTolgoiandthisapproachisendorsed.”

OTTR2014,atP.53recognizesthat,

“ThePowerPlantProjectwillimplementtheenvironmentalprotectionprovisionsoftheIAasdescribedintheESIA(July2012).ASupplementalESIAspecificallyforthePowerPlantProjectisforthcoming.”

TheOTTR2014discussionofaTavanTolgoiPowerPlantforOTPhase2donotacknowledgethemanychallengescurrentlythefacingdevelopmentoftheTavanTolgoiPowerPlantandtheoperationoftheassociatedcoalmineneededtofeedtheplant.SomeofthesechallengeshavebeenrecognizedbyErdenesMongolseniormanagement,theofficersoftheGovernmentofMongoliacorporationthatholdsa34%shareofOTLLC.InAugust,2015,threemonthsaftertheMay18,2015OTUMDFP,Mr.Ch.Otgochuluu,ErdenesMongolsenioreconomist,said,“TurquoiseHillhasissuedafinancialguaranteeworthonebillionUSdollarsfortheconstructionofTavantolgoiPowerPlant.TheGovernmenthasgivendirectionstoassociatedofficialstolaunchdevelopmentoftheplantfromspringof2016.”AsnofeasibilitystudyfortheTavanTolgoiPowerPlant,oranyalternativepowersupplyforOTPhasehasbeenreleased,itisuncleariftheUSDonebillionfinancialguaranteefromTurquoiseHillissufficientfortheconstructionof246-megawattpowersourceOTsaysitneedsfromTavanTolgoi.AtacostofUSDonebillion,the246-megawattplantwouldcostabout$4.06/watttoconstruct.Mr.OtgochuluunotedthatfullcostoftheOTPhase2projectislikelytorisesignificantly,notingthat“[t]hefirstestimationofrequiredinvestmentforundergrounddevelopmentislikelytoincreasefrom5.7billionto7-8billionUSdollars.”IfMr.Otgochuluuestimatesareaccurate,projectedOTPhase2costswouldriseto17–33%morethantheUSD6billionmaximumvalueofthemulti-bankloansforannouncedDecember18,2015.

48

Developmentoftheupdated2015OTPhase2feasibilitystudyandrevisedconstructioncostsarecriticalstepsthatarerequiredtobecompletedpriortotheconsiderationoffinalOTPhase2projectapprovaloftheBoardsofalloftheOTLCCpartnersasrequiredbytheOTUMDFP2015.SignificantadditionalpowerbeyondOTPhase2demandwillbenecessaryforoperatinganycopperrefiningsmelterconsideredbyOTLLCoranyfutureexpansionbeyondPhase2.AninvestigationoftheeconomicviabilityofaddingacoppersmeltertotheOTcomplexisrequiredbySeptember2016intheOTUMDFP2015.AcoppersmelterwouldbeusedtoupgradeconcentrategradecoppercurrentlyproducedatOTwithabout33%coppercontenttorefinedcoppermetalwith95–99%+coppercontent-dependingonthespecificsmelting,refiningand/orconvertingprocessesselected.CurrentlytheupgradingofOTconcentratestothemorevaluable99%+coppermetalproductisconductedatsmeltersinChina.DevelopmentofcoalproductioncapacityattheTavanTolgoidepositthatwouldfeedaTavanTolgoiPowerPlantisalsofacingsignificantdifficultiesandmaybestalledforanextendedperiod.InearlySeptember2015,Forbesmagazinereportedthat,

“MongolianMinisterMendsaikhanEnkhsaikhansaidthatthelong-delayed$4billionTavanTolgoicoalmineprojectwasunlikelytogoahead,accordingtotheBusinessMongolianewsite,partlyduetoChina’sslowinggrowth.“It’snotonlybecauseofparliament[wheretheprojecthasfacedopposition],butalsobecauseoftheChinesesituation,”Mendsaikhansaid.ThenewsletternotesthatMongoliareliesonChinatobuy“nearlyallofitsmineralsandpetroleum,”whichaccountedfor86percentofexportsinthefirsthalfof2015.”(FORBES2015)

Justweekslater,thefailuretosecureloanstooperatetheTavanTolgoicoalminewasconfirmed,castingashadowoverthelikelihoodofdevelopmentofTavanTolgoidepositonalargeenoughscaletopowerOTPhase2whenthatpowerisneeded.LaterinSeptember2015,www.mining.comreported,

“Mongoliastrugglestodevelopitslargestcoalminingproject,TavanTolgoi,withreservesof7.4billiontonnesofcoal,aftertheMongolianGovernmentfailedtosecure$4billioninfunds.Developmentofthemine,haltedbypoliticsandweakgovernmentinstitutions,reflectstheresourcecurseasMongolia’sParliamentfailedtotransferownershipofthecoalmine.ThetransferofownershiptoaconsortiumofChineseandJapanesecompanies,waspartofMongolia’splantoincreaseinvestors’stakeholdingsin2015and2016.

“Mongolia’scontinuouslydevelopingminingsectorandvastresourcescauseobstaclesinmanagingMongolia’sresources.ThedevelopmentofOyuTolgoiandTavanTolgoirepresentaminingboomthatcouldbeshort-lastingasthecountryexperiencesboom-bustcyclesinlinewithinternationaldemandandinternationalcommoditymarketprices.Mongolia’sdouble-digitgrowthofthelastfewyearsandin2014slowedto7.8%.In2011,therewas17.3%GDPgrowth.”(Mining9-2015)

49

ThecurrentdownturnincopperpricingisacauseofadownturninoperationsofmanycopperminesaroundtheworldthoughRioTintomanagementcontinuetoinvestmentinOTinanticipationofaupturnincopperpricesinthenext2-3years.(TRQ8-2015)ArealternativesourcesofpowerpossibleforOTPhase2?WhileOTTR2014atP.438notesthat,“Copperdemandwillalsobenefitfromagreaterlong-termfocusonrenewablesourcesofenergyandenergy-efficienttechnologiessuchaswindturbinesandelectric/hybridvehicles,whichareofcopper-intensivefabrication,”OTTR2014offersnorenewableenergyoptionsfortheOTpowersupply.AtthesametimethatForbes2015wasreportingonthelong-termobstaclesfacingTavanTolgoicoalproduction,itwasalsoreportingonenergyproductiontrendsinChinamovingawayfromcoaltorenewableenergyproduction.InSeptember2015Forbesalsoreportedthat,

“RenewableenergyisalsokeytoChina’stransitionawayfromcoal.Chinainvested$90billioninclean-techinvestmentslastyear,accordingtoBloombergNewEnergyFinance,farmorethantheU.S.Non-fossilfuelsources–solar,wind,hydroandnuclear–areexpectedtomakeup20%ofChina’senergymixin15years.Chinaalreadyhasmorewind-generatingcapacitythananycountryintheworldanditislikelythisyeartoovertakeGermanyastheworld’slargestsolarcountry,measuredbyinstalledcapacity.By2030,China’snon-fossil-fuelenergybasealonewillbealmostequivalenttothetotalelectricalcapacityoftheU.S.today.”(FORBES9-2015b)

OptionsforwindpowerproductioninMongoliaattheindustrialscaleneededbyOTareidentifiedinthe“ScalingUpRenewableEnergyinMongoliaInvestmentPlan”summarizedattheMongoliaNationalRenewableEnergyCenter’swebpageat:http://www.nrec.mn/web/data/main/main1441093417.pdf. TA-8757MONScalingUpRenewableEnergyinMongolia(InvestmentPlan),28August2015(NREC2015) The“ScalingUpRenewableEnergyinMongoliaInvestmentPlan”(NREC2015)identifiesfiveactivewindpowerdevelopmentprojects,withpotentialtogenerateatotalof350MW,asfollows:–OyuTolgoiWindPowerProjectbyQleantechLLC,102MW–SainshandWindPark,SainshandWindParkLLC,52MW–ChoirWindFarm,AydinerGlobalLLC,50.4MW–TsetsiiWindFarm,CleanEnergyAsiaLLC,50MWand-ABSolarWind,ABSolarWindLLC,100MWNREC2015saysthat,“Allhavegovernmentapprovalandtheirreadinessallowsconstructiontostartin2016.”

50

OT’sownershipshouldconsiderinvestmentinrenewableenergysourcesforthemine’sfuturepowersupply.ThewindprojectslistedhavepotentialtocomeonlinebeforeaTavanTolgoicoal–firedpowerplantfedbyTavanTolgoicoalandatpotentiallylowercost.ProgressontheSainshandWindProjectthroughMarch,2015,includedanannouncementbyFerrostaalIndustrialProjectsGmbHthatitwillbeginconstructionofitsSainshandWindFarminApril,slatedtobeMongolia’ssecondandlargestwhenitiscompletedin2016.The$115millionparkwillhave27towersandaninstalledcapacityof54megawatts.Itwilldeliver54megawattstoMongolia’selectricalgrid,OliverSchnorr,directorofSainshandWindParkLLC,saidinatextmessage.(BLOOMBERG3-2015)TheSainshandprojectwouldbethesecondutilityscalewindprojecttobeconstructedinMongolia.Thefirst,the50-MWSalkhitWindFarmbeganoperationsin2013.Ifthe$115millioncostfor54megawattSainshandwindprojectisaccurate,thecostperwattfortheprojectwillbe$2.12/watt.EuropeanBankforReconstructionandDevelopment(EBRD)reportsthatcostdesignandconstructionofthe50megawattSalkhitWindProject,theonlyoperatingindustrialscalefindfarminMongolia,was$123million,acostof$2.46/watt.(EBRD2013)TheprojectcostofSainshandwindprojectwouldbeonly53%perwattoftheprojectedcostofa246-megawattTavanTolgoiPowerPlantifitwouldcost$1billion,acostof$4.06/watt.IfthemoreconservativecostoftheSalkhitWindFarmwereusedforcomparison,thecostofwindpowerforOTPhase2wouldbe40%lessthatthecostperwhatforTavanTolgoipowerat$4.06/watt.InApril2015,NewcomLLC,developeroftheSalkhitwithfundingfromtheEuropeanbankforReconstructionandDevelopment(EBRD)amongothersourcesannounced“The$100millionTsetsiiplantreceiveditspermitfromtheNationalDispatchingCenter,whichmanagesMongolia’sgrid.”NewcomChiefExecutiveBolorJargalsaikhansaid,“ThewindfarmisthefirstprojectofCleanEnergyAsiaLLC,whichis51percentownedbyUlaanbaatar-basedNewcomand49percentbyJapan’sSBEnergy,whichisSoftBankCorp.’senergyarm.Theoperatorsplantoexpandpowercapacityfrom50to250megawattswithin10years.”(BLOOMBERG4-2015)

51

SOURCESCITEDBALE2014 “MassiveMongolianMineEndangersNomadsWater,WayofLife”,Rachel

Bale,September30,2014,https://www.revealnews.org/article-legacy/massive-mongolian-mine-endangers-nomads-water-way-of-life/

BLOOMBERG3-2015 “FerrostaalsettobeginworkonMongolia'sbiggestwind

farm”,MichaelKohn,BloombergNews,March17,2015,http://www.bloomberg.com/news/articles/2015-03-17/ferrostaal-set-to-begin-work-on-mongolia-s-biggest-wind-farm

BLOOMBERG4-2015 “Newcom,SBEnergyWinpermitfor50-MWWindFarmin

Mongolia”,MichaelKohn,BloombergNews,April,30,2015,http://www.bloomberg.com/news/articles/2015-04-30/newcom-sb-energy-win-permit-for-50-mw-wind-farm-in-mongolia

CAOIEP2015 Mongolia/OyuTolgoi-01/SouthernGobi–withdocumentsavailable

at:http://www.cao-ombudsman.org/cases/document-links/links-191.aspxandMongolia/OyuTolgoi-02/SouthernGobi-withdocumentsavailableat:http://www.cao-ombudsman.org/cases/document-links/links-196.aspx

EBRD2013 “DevelopmentImpactHonors:MongoliaSalkhitWindFarm”

http://www.ebrd.com/downloads/news/treasury-development-salkhit.pdfESIA2012 “EnvironmentalandSocialImpactAssessment”,2012,Allsectionsavailable

athttp://ot.mn/environmental-social-impact-assessment/FORBES9-2015b “China’sEconomicSlowdown:WeMayHaveSeenPeakCoal”,Mark

Clifford,ForbesMagazine,September3,2015,http://www.forbes.com/sites/mclifford/2015/09/03/chinas-economic-slowdown-we-may-have-seen-peak-coal/

IAR4-2015 ReportoftheIndependentEnvironmentandSocialConsultants–OyuTolgoi

Project;InterimReportApril2015,preparedbyD’Appolonia,S.p.A.,http://ot.mn/media/ot/content/esia-audits/OT_ESIA_Audit_report_Apr_2015_EN.pdf

IEPES2015 “IEPExecutiveSummary”–(CAOIndependentExpertPanelReport–

ExecutiveSummary),January30,2015,http://www.cao-ombudsman.org/cases/document-links/documents/ExecutiveSummary_edit_Jan_30_2015-ENG.pdf

52

INVEZZ2016 “RioTintoshareprice:Mineragrees$4.4bnMongoliaminefinancing”,VeselinValchevValchev,January4,2016athttp://invezz.com/news/equities/21694-Rio-Tinto-share-price-Miner-agrees-4-4bn-Mongolia-mine-financing

IDPES2005 “OyuTolgoiProject,Mongolia-IntegratedDevelopmentPlan-Executive

Summary”,preparedbyAMECAusencoJointVenture,August2005,Revision1,http://www.turquoisehill.com/i/pdf/IDP_ExecutiveSummary.pdf

IDP2010 “OyuTolgoiProjectJune2010TechnicalReport,preparedbyAMECMinproc,http://www.turquoisehill.com/i/pdf/IDP10_June062010.PDF

IDOP2012 OyuTolgoiProjectIDOP[IntegratedDevelopmentandOperatingPlan]

TechnicalReport,preparedbyAMCConsultants,March12,2012athttp://www.turquoisehill.com/i/pdf/IDOP_2012Mar29_Tech_Rpt.pdf

Mining11-2015 “CopperpricesweighonRioTinto’sloomingdecisiononOyuTolgoi

Expansion”,CeceliaJamasmie,November26,2015athttp://www.mining.com/copper-prices-weigh-on-rio-tintos-looming-decision-on-oyu-tolgoi-expansion/

MINING9-2015 “MongoliastrugglestodevelopTavanTolgoicoalmine”,Samantha

Brletich,www.mining.com,September21,2015,http://www.mining.com/web/mongolia-struggles-to-develop-tavan-tolgoi-coal-mine/

MININGMAG2011 “OreBodyAccess,”MiningMagazine,03May2011at

http://www.miningmagazine.com/equipment/orebody-access)MONTSAME2015 “OTUndergroundMinefundingtobesettlednextmonth,”B.

Amarsaikhan,MontsameNews,October27,2015,http://en.montsame.mn/mining/ot-underground-mine-development-funding-be-settled-next-month-0

NREC2015 “ScalingUpRenewableEnergyInvestmentPlan”summarizedattheMongolia

RenewableEnergyCenter’swebpageat:http://www.nrec.mn/web/data/main/main1441093417.pdf. TA-8757MONScalingUpRenewableEnergyinMongolia(InvestmentPlan),28August2015

OTTR2014 OyuTolgoi2014TechnicalReport,preparedforOTLLCbyOreWin

Consultants,October27,2014http://www.turquoisehill.com/i/pdf/2014-10-27_OyuTolgoiTechReport.pdf

OTUMDFP2015 May2015OyuTolgoiUndergroundMineDevelopmentandFinancing

53

Plan,http://www.turquoisehill.com/i/pdf/2015-05-18_OTUMDAFP.pdfTRQ8-2015 “OyuTolgoifilesrevisedschedulesfor2015feasibilitystudywith

MongolianMineralsCouncil,”TRQ,PressRelease,August27,2015,http://www.turquoisehill.com/s/news_releases.asp?ReportID=720655[submittalofrevisionstoaMarch2015Phase2FeasibilityStudyforapprovalbytheMongolianMiningCouncilthat“aligns”the2015FeasibilityStudywithboththeOTUMDFP2015andOTTR2014]

SCHNEIDER2013 “MongoliaCopperMineatOyuTolgoiTestsWaterSupplyandYoung

Democracy”,KeithSchneider,November5,2013,http://www.circleofblue.org/waternews/2013/world/mongolia-copper-mine-oyu-tolgoi-tests-water-supply-young-democracy/

SME2011 “SMEMiningEngineeringHandbookThirdEdition,SocietyforMining,

MetallurgyandExploration,2011,Darling,P.ed.,availableathttp://app.knovel.com/web/toc.v/cid:kpSMEMEHE5/viewerType:toc/root_slug:sme-mining-engineering

TRQ8-2015“OyuTolgoifilesrevisedschedulesfor2015FeasibilityStudywith

MongolianMineralsCouncil”,August27,2015corporatepressreleaseavailableat:http://www.turquoisehill.com/s/news_releases.asp?ReportID=720655. Includes:

“TurquoiseHillResourcestodayannouncedthatOyuTolgoihasfiledrevisedschedulesforthe2015OyuTolgoiFeasibilityStudy(OTFS2015)withtheMongolianMineralsCouncil(MMC).ThefilingalsoalignedOTFS2015withtheOyuTolgoiUndergroundMineDevelopmentandFinancingPlan(UndergroundPlan),whichwassignedinMay2015.TheMMChasalreadytentativelyacceptedOTFS2015,originallyfiledinMarch2015,pendingarevisionofschedulesandalignmentwiththeUndergroundPlan.OTFS2015isbasedonthesamefeasibilitystudyandalignswiththe2014OyuTolgoiTechnicalReport,whichwasdisclosedinOctober2014.”

TRQ8-2015b“AnalystandInvestorMineVisit”Presentation,August25-27,2015

http://www.turquoisehill.com/i/pdf/ppt/TRQ-SiteVisit-Aug2015.pdf TRQ12-2015“OyuTolgoisigns$4.4billionprojectfinancemarkinghistoricmilestone

towardrecommencementofundergrounddevelopment”,TRQPressRelease,December14,2015,http://www.turquoisehill.com/i/pdf/news/2015-12-14_NR_TRQ_YFb2vv.pdf

Woo2009 “Characterizationandempiricalanalysisofblockcavinginducedsurface

subsidenceandmacrodeformations,”Woo,K.,etal,ROCKENG09:Proceedingsofthe3rdCANUSRockMechanicsSymposium,Toronto,May

54

2009,(Woo2009)at:http://www.geogroup.utoronto.ca/rockeng09/proceedings/innerFrames/PDF/Session19/4044%20PAPER.pdf.

5YearCopperSpotMarketPriceChart

Informationoninternationalmarketpricesandtrendsiscompiledfrom:www.kitco.com,thesourceusedforcommoditymetalpricesontheTurquoiseHillResourceswebsiteathttp://www.turquoisehill.com/s/commodity_metal_prices.asp.

BriefBiographyofPaulRobinson

sricpaul@earthlink.netResearchDirector

SouthwestResearchandInformationCenterPOBox4524

Albuquerque,NewMexicoUSA87107www.sric.org

William“Paul”RobinsonworksasResearchDirectoratSouthwestResearchandInformationCenterinAlbuquerque,NewMexico,ascientificandeducationalorganizationworkingtopromotethehealthof people and communities, protect natural resources, ensure citizen participation, and secureenvironmentalandsocialjusticenowandforfuturegenerations,wherehehasemployedsince1976.Paulhaspreparedpeerreviewedtechnicalpapers,contractpublications,andeducationalmaterialsandexperttestimonyrelatedtomines,mills,andmineraldevelopmentpolicythroughouthis37-yearcareer.Hisconsultingclientshaveincludedlocalandinternationalnon-governmentalorganizations,law firms, industry trade associations, projectdevelopers,NativeAmericanTribes inTheUS, FirstNationsBandsinCanada,andgovernmentregulatoryandforeignassistanceagencies.PaulearnedhisMastersinCommunityandRegionalPlanning(aterminaldegree)withanemphasisonNaturalResourceManagementfromUniversityofNewMexico(UNM)in1992andaBAfromtheTechnology Assessment Program at Washington University, St. Louis, Missouri in 1974. TheprofessionalprojectforhisMastersaddressed“PlanningforReclamationoftheUraniumWasteSitesintheFormerEastGermany.”Paul’s peer reviewed professional papers have been published by; British Columbia Chamber ofMines, NM Bureau of Mining and Mineral Resources, CO School of Mines, Freiberg TechnicalInstitute–GermanyandEuropeanUnion–ScienceandTechnologyDirectorate..Paulhascoordinatedthree-country - Mongolia, Russia and US – educational and scientific exchanges addressing minereclamation,waterandrenewableenergyannuallysince2007.Paul’stechnicalreviewsofenvironmentalanalysesandmineoperatingplansinMongoliasupportofcivilsocietyorganizationsinvolvementinmulti-lateralbankloanapplicationshaveaddressedtheBigBend, Boroo andGatsuurt goldmines andOyu Tolgoi copper-goldmine. Paul provided an invitedpresentation on “Social and Environmental Responsibility inMining: International Experience andLessons Learned Regarding Accumulated Damage from Abandoned Mines, and Long-term RisksAssociated with Waste Management, and Renewable Energy Use” at Conference on Social andEnvironmental Responsibility in the Mineral Industry in Russia” in Moscow in October 2012available at http://www.wwf.ru/about/what_we_do/mining/conference. With co-author GalinaAnosova,Paulpreparedapeer-reviewpublicationon“MiningandMineralDevelopmentPolicyintheSelengeRiverWatershed”forScienceforWatershedConservation:MultidisciplinaryApproachesforNatural Resource Management Conference, Convened by United States Geological Survey (USGS),InstituteofGeneral andExperimentalBiology, SiberianDivision-RussianAcademyofSciences, andMongolian Academy of Sciences, September, 2004, available at:http://www.sric.org/mining/docs/USGS-siberia.pdf.HepreparedtechnicalreviewsaspartofPublicExpertizaCommitteereportsinRussiafortheDybycksagoldmine,AginskoeAutonomousOkrugandtheKhiagdauraniummine,BuryatRepublic.Afullresumeisavailableuponrequest.