40-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 40-F

☐ Registration Statement pursuant to Section 12 of the Securities Exchange Act of 1934

or

☒ Annual Report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2021

Commission File Number: 001-32403

TURQUOISE HILL RESOURCES LTD.

(Exact name of Registrant as specified in its charter)

Yukon, Canada	1000	Not Applicable
(Province or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

Suite 3680 – 1 Place Ville Marie, Montreal, Quebec H3B 3P2, Canada, (514) 848-1567

(Address and telephone number of Registrant’s principal executive offices)

CT Corporation System

28 Liberty St 42nd Floor

New York, New York

10005

(212) 894-8700

(Name, address (including zip code) and telephone number (including area code) of agent for service in the United States)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares without par value	TRQ	New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

For annual reports, indicate by check mark the information filed with this Form:

☒  Annual Information Form ☒  Audited Annual Financial Statements

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

201,231,446 Common Shares outstanding as of December 31, 2021

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒    No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).

Yes ☒    No ☐

Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act.

Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.  ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☒

Auditor Firm Id: 85 Auditor Name: KPMG LLP Auditor Location: Vancouver, British Columbia, Canada

PRINCIPAL DOCUMENTS

The following documents have been filed as part of this Annual Report on Form 40-F:

A. Annual Information Form

For the Annual Information Form (“AIF”) of Turquoise Hill Resources Ltd. (the “Corporation”) for the year ended December 31, 2021, see Exhibit 99.1 of this Annual Report on Form 40-F. The AIF included as Exhibit 99.1 is incorporated by reference into this Annual Report on Form 40-F.

B. Audited Annual Financial Statements

For the Corporation’s Audited Consolidated Financial Statements for the years ended December 31, 2021 and 2020, including the report of the independent auditors with respect thereto, see Exhibit 99.2 of this Annual Report on Form 40-F. The Audited Consolidated Financial Statements included as Exhibit 99.2 are incorporated by reference into this Annual Report on Form 40-F.

C. Management’s Discussion and Analysis

For the Corporation’s Management’s Discussion and Analysis for the year ended December 31, 2021 (the “MD&A”), see Exhibit 99.3 of this Annual Report on Form 40-F. The MD&A included as Exhibit 99.3 is incorporated by reference into this Annual Report on Form 40-F.

FORWARD-LOOKING STATEMENTS

Certain statements made herein, including statements relating to matters that are not historical facts and statements of the Corporation’s beliefs, intentions and expectations about developments, results and events which will or may occur in the future, constitute “forward-looking information” within the meaning of applicable Canadian securities legislation and “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements and information relate to future events or future performance, reflect current expectations or beliefs regarding future events and are typically identified by words such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “likely”, “may”, “plan”, “seek”, “should”, “will” and similar expressions suggesting future outcomes or statements regarding an outlook. These include, but are not limited to, statements and information regarding: the nature of the Corporation’s ongoing relationship and interaction with, the Government of Mongolia with respect to the continued operation and development of Oyu Tolgoi (as defined in the section entitled “Definitions” in the AIF) as and when the key agreements with the Government of Mongolia (the “GoM Agreements”) are implemented along with implementation of Resolution 103 (as defined in the section entitled “Definitions” in the AIF); the continuation of undercutting in accordance with the mine plan and design; the actual timing of first sustainable production as well as the lifting of restrictions by the Government of Mongolia on the ability of Oyu Tolgoi LLC to incur any additional indebtedness; the implementation and successful execution of the updated funding plan that is the subject of the Amended and Restated Heads of Agreement dated as of January 24, 2022 between the Corporation and Rio Tinto International Holdings Limited (the “A&R HoA”), as such agreement may be further amended or restated, and the amount of any additional future funding gap to complete the Oyu Tolgoi project and the availability and amount of potential sources of additional funding required therefor, all as contemplated by the A&R HoA, as well as potential delays in the ability of the Corporation and Oyu Tolgoi LLC to proceed with the funding elements contemplated by the A&R

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HoA; liquidity, funding sources and funding requirements in general, in particular until sustainable first production is achieved, including the Corporation’s ability to reach agreement with project finance lenders on the re-profiling of existing debt payments in line with current cash flow projections, as well as the Corporation (or a wholly-owned subsidiary) and Oyu Tolgoi LLC entering into a pre-paid copper concentrate sale arrangement; the availability and amount of potential sources of additional funding, including the short-term secured advance to be provided by Rio Tinto plc (“Rio Tinto”) to the Corporation under the A&R HoA; the amount by which a successful re-profiling of the Corporation’s existing debt would reduce the Corporation’s currently projected funding requirements; the Corporation’s ability to conduct one or more equity offerings as contemplated by the A&R HoA in light of future and then prevailing market conditions; the expectations set out in the 2020 OTTR (as defined in the section entitled “Definitions” in the AIF); the timing and amount of future production and potential production delays; statements in respect of the impacts of any delays on achieving first sustainable production and on the Corporation’s cash flows; expected copper and gold grades; the merits of the class action complaints filed against the Corporation in October 2020 and January 2021, respectively; the merits of the defence and counterclaim filed by the Government of Mongolia in the international tax arbitration brought by Oyu Tolgoi LLC and the likelihood of the parties being able to amicably resolve the ongoing tax issues; the timing of studies, announcements and analyses; the status of underground development, including any slowdown of work; the causes of the increase in costs and schedule extension of the underground development; the mine design for Panel 0 of Hugo North Lift 1 and the related cost and production schedule implications; the re-design studies for Panels 1 and 2 of Hugo North Lift 1 and the possible outcomes, content and timing thereof; expectations regarding the possible recovery of ore in the two structural pillars, to the north and south of Panel 0; the possible progression of a state-owned power plant (“SOPP”) and related amendments to the PSFA (as defined in the section entitled “Definitions” in the AIF), as amended, as well as power purchase agreements and extensions thereto; finalization of an agreement with the Inner Mongolia Power International Corporation (“IMPIC”) on extension of the current power import arrangements; the timing of construction and commissioning of the potential SOPP; sources of interim power; the continuing impact of COVID-19, including any restrictions imposed by health or governmental authorities relating thereto on the Corporation’s business, operations and financial condition, as well as delays and the development cost impacts of delays caused by the COVID-19 pandemic; the Corporation’s ability to operate sustainably, its community relations and its social licence to operate in Mongolia; capital and operating cost estimates; mill and concentrator throughput; anticipated business activities, planned expenditures, corporate strategies, and other statements that are not historical facts.

Forward-looking statements and information are made based upon certain assumptions and other important factors that, if untrue, could cause the actual results, performance or achievements of the Corporation to be materially different from future results, performance or achievements expressed or implied by such statements or information. There can be no assurance that such statements or information will prove to be accurate. Such statements and information are based on numerous assumptions regarding present and future business strategies, local and global economic conditions, and the environment in which the Corporation will operate in the future, including the price of copper, gold and silver; projected gold, copper and silver grades; anticipated capital and operating costs; anticipated future production and cash flows; the anticipated location of certain infrastructure in Hugo North Lift 1 and sequence of mining within and across panel boundaries; the nature of the Corporation’s ongoing relationship and interaction with the Government of Mongolia with respect to the continued operation and development of Oyu Tolgoi as and when the GoM Agreements are implemented along with the implementation of Resolution 103; the continuation of undercutting in accordance with the mine plan and design; the actual timing of first sustainable production as well as the lifting of restrictions by the Government of Mongolia on the ability of Oyu Tolgoi LLC to incur any additional indebtedness; the availability and timing of required governmental and other approvals for the construction of the SOPP; the ability of the Government of Mongolia to finance and procure the SOPP within the timeframes anticipated in the PSFA, as amended, subject to ongoing discussions relating to a standstill period; finalization of an agreement with IMPIC on an extension of the current power import arrangements; the eventual pre-payment arrangement between the Corporation (or a wholly-owned subsidiary) and

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Oyu Tolgoi LLC; the implementation and successful execution of the updated funding plan that is the subject of the A&R HoA, as such agreement may be further amended and restated; the Corporation’s ability to operate sustainably, its community relations and its social licence to operate in Mongolia; and the amount of any additional future funding gap to complete the Oyu Tolgoi project and the availability and amount of potential sources of additional funding required therefor. Certain important factors that could cause actual results, performance or achievements to differ materially from those in the forward-looking statements and information include, among others: copper, gold and silver price volatility; discrepancies between actual and estimated production; mineral reserves and resources and metallurgical recoveries; development plans for processing resources; public health crises such as COVID-19; matters relating to proposed exploration or expansion; mining operational and development risks, including geotechnical risks and ground conditions; litigation risks, including the outcome of the class action complaints filed against the Corporation; the outcome of the international arbitration proceedings including the likelihood of the parties being able to amicably resolve the ongoing tax issues; regulatory restrictions (including environmental regulatory restrictions and liability); Oyu Tolgoi LLC or the Government of Mongolia’s ability to deliver a domestic power source for the Oyu Tolgoi project within the required contractual time frame; the Corporation’s ability to operate sustainably, its community relations, and its social licence to operate in Mongolia; activities, actions or assessments, including tax assessments, by governmental authorities; events or circumstances (including public health crises strikes, blockades or similar events outside of the Corporation’s control) that may affect the Corporation’s ability to deliver its products in a timely manner; currency fluctuations; the speculative nature of mineral exploration; the global economic climate; global climate change; dilution; share price volatility; competition; loss of key employees; cyber security incidents; additional funding requirements, including in respect of the development or construction of a long-term domestic power supply for the Oyu Tolgoi project; capital and operating costs, including with respect to the development of additional deposits and processing facilities; defective title to mineral claims or property; and human rights requirements. Although the Corporation has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements and information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. All such forward-looking statements and information are based on certain assumptions and analyses made by the Corporation’s management in light of their experience and perception of historical trends, current conditions and expected future developments, as well as other factors management believes are reasonable and appropriate in the circumstances. These statements, however, are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements or information.

With respect to specific forward-looking information concerning the continued operation and development of the Oyu Tolgoi project, the Corporation has based its assumptions and analyses on certain factors which are inherently uncertain. Uncertainties and assumptions include, among others: the nature of the Corporation’s ongoing relationship and interaction with the Government of Mongolia with respect to the continued operation and development of Oyu Tolgoi as and when the GoM Agreements are implemented along with the implementation of Resolution 103; the continuation of undercutting in accordance with the mine plan and design; the approval or non-approval by the Oyu Tolgoi LLC board of directors of any future necessary additional investment, and the likely consequences on the timing and overall economic value of the Oyu Tolgoi project, including slowdown on the underground development and significant delays to first sustainable production; the timing and cost of the construction and expansion of mining and processing facilities; the timing and availability of a long-term domestic power source (or the availability of financing for the Corporation or the Government of Mongolia to construct such a source) for Oyu Tolgoi; the implementation and successful execution of the updated funding plan that is the subject of the A&R HoA, as such agreement may be further amended or restated, and the amount of any additional future funding gap to complete the Oyu Tolgoi project and the availability and amount of potential sources of additional funding required therefor; the eventual pre-payment arrangement between the Corporation (or a wholly-owned subsidiary) and Oyu Tolgoi LLC; the potential impact of COVID-19, including any restrictions imposed by health and governmental authorities relating thereto, as well as the development cost impacts of delays caused by the COVID-19 pandemic; the Corporation’s ability to operate sustainably, its community relations and its social licence to operate in Mongolia; the impact of changes in, changes in interpretation to or changes in enforcement of, laws, regulations and government practices in Mongolia; the availability and cost of skilled labour and transportation; the obtaining of (and the terms and timing of obtaining) necessary environmental and other government approvals, consents and permits; delays and the costs which would result from delays, including delays caused by COVID-19 restrictions and impacts and related factors, in the development of the underground mine (which could significantly exceed the costs projected in the 2020 OTTR); projected copper, gold and silver prices and their market demand; and production estimates and the anticipated yearly production of copper, gold and silver at Oyu Tolgoi.

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The cost, timing and complexities of mine construction and development are increased by the remote location of a property such as Oyu Tolgoi. It is common in mining operations and in the development or expansion of existing facilities to experience unexpected problems and delays during development, construction and mine start-up. Additionally, although Oyu Tolgoi has achieved Commercial Production (as defined in the section entitled “Definitions” in the AIF), there is no assurance that future development activities will result in profitable mining operations.

This Annual Report on Form 40-F also contains references to estimates of mineral reserves and mineral resources. The estimation of reserves and resources is inherently uncertain and involves subjective judgments about many relevant factors. The mineral resource estimates contained in this Annual Report on Form 40-F are exclusive of mineral reserves. Further, mineral resources that are not mineral reserves do not have demonstrated economic viability. The accuracy of any such estimates is a function of the quantity and quality of available data, and of the assumptions made and judgments used in engineering and geological interpretation (including future production from Oyu Tolgoi, the anticipated tonnages and grades that will be achieved or the indicated level of recovery that will be realised), which may prove to be unreliable. There can be no assurance that these estimates will be accurate or that such mineral reserves and mineral resources can be mined or processed profitably. Such estimates are, in large part, based on the following:

• Interpretations of geological data obtained from drill holes and other sampling techniques. Large scale mineral continuity and character of the deposits can be improved with additional drilling and sampling; actual mineralization or formations may be different from those predicted. It may also take many years from the initial phase of drilling before production is possible, and during that time the economic feasibility of exploiting a deposit may change. Reserve and resource estimates are materially dependent on prevailing metal prices and the cost of recovering and processing minerals at the individual mine sites. Market fluctuations in the price of metals or increases in the costs to recover metals or the actual recovery percentage of the metal(s) from the Corporation’s mining projects may render mining of mineral reserves uneconomic and affect the Corporation’s operations in a materially adverse manner. Moreover, various short-term operating factors may cause a mining operation to be unprofitable in any particular accounting period;

• Assumptions relating to commodity prices and exchange rates during the expected life of production, mineralization of the area to be mined, the projected cost of mining, and the results of additional planned development work. Actual future production rates and amounts, revenues, taxes, operating expenses, environmental and regulatory compliance expenditures, development expenditures, and recovery rates may vary substantially from those assumed in the estimates. Any significant change in these assumptions, including changes that result from variances between projected and actual results, could result in material downward revision to current estimates;

• Assumptions relating to projected future metal prices. The Corporation uses prices reflecting market pricing projections in the financial modelling for Oyu Tolgoi which are subjective in nature. It should be expected that actual prices will be different than the prices used for such modelling (either higher or lower), and the differences could be significant; and

• Assumptions relating to the costs and availability of treatment and refining services for the metals mined from Oyu Tolgoi, which require arrangements with third parties and involve the potential for fluctuating costs to transport the metals and fluctuating costs and availability of refining services. These costs can be significantly impacted by a variety of industry-specific as well as regional and global economic factors (including, among others, those which affect commodity prices). Many of these factors are beyond the Corporation’s control.

In addition, see “Cautionary Note to United States Investors” in this respect.

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Readers are cautioned not to place undue reliance on forward-looking information or statements. By their nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, which contribute to the possibility that the predicted outcomes will not occur. Events or circumstances could cause the Corporation’s actual results to differ materially from those estimated or projected and expressed in, or implied by, these forward-looking statements. Important factors that could cause actual results to differ from these forward-looking statements are included in the “Risk Factors” section of the AIF.

Readers are further cautioned that the list of factors enumerated in the “Risk Factors” section of the AIF that may affect future results is not exhaustive. When relying on the Corporation’s forward-looking statements and information to make decisions with respect to the Corporation, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Furthermore, the forward-looking statements and information contained in this Annual Report on Form 40-F are made as of the date of this document and the Corporation does not undertake any obligation to update or to revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, except as required by applicable law. The forward-looking statements and information contained in this Annual Report on Form 40-F are expressly qualified by this cautionary statement.

CAUTIONARY NOTE TO UNITED STATES INVESTORS

The documents filed as part of this Annual Report on Form 40-F have been prepared in accordance with the requirements of Canadian securities laws, which differ from the requirements of U.S. securities laws. Unless otherwise indicated, all reserve and resource estimates included in this Annual Report on Form 40-F have been prepared in accordance with Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”), and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) Definition Standards for Mineral Resources and Mineral Reserves adopted by the CIM Council of May 19, 2014. NI 43-101 is a rule developed by the Canadian Securities Authorities that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. NI 43-101 differs significantly from the disclosure requirements of the U.S. Securities and Exchange Commission (the “SEC”) generally applicable to U.S. companies. For example, the terms “mineral reserve”, “proven mineral reserve”, “probable mineral reserve”, “mineral resource”, “measured mineral resource”, “indicated mineral resource”, and “inferred mineral resource” are defined in NI 43-101. These definitions differ from the definitions in the disclosure requirements promulgated by the SEC. Accordingly, information concerning mineral deposits set forth herein may not be comparable with information made public by companies that report in accordance with SEC disclosure requirements.

ADDITIONAL DISCLOSURE

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by the Corporation under applicable securities legislation is gathered and reported to senior management, including the Corporation’s principal executive officer and principal financial officer, on a timely basis so that appropriate decisions can be made regarding public disclosures.

As of the end of the Corporation’s fiscal year ended December 31, 2021, an evaluation of the effectiveness of the Corporation’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) was carried out by the Corporation’s management with the participation of the principal executive officer and principal financial officer. Based upon that evaluation, the Corporation’s principal executive officer and principal financial officer have concluded that as of the end of the fiscal year, the Corporation’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Corporation in reports that it files or submits under the Exchange Act is: (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms; and (ii) accumulated and communicated to the Corporation’s management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

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The Corporation’s management, including the principal executive officer and principal financial officer, believe that any disclosure controls and procedures or internal control over financial reporting, no matter how well conceived and operated, can provide only a reasonable and not absolute assurance that the objectives of the control system are met. Further, the design of a control system reflects the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Corporation have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control. The design of any systems of controls is also based in part on certain assumptions about the likelihood of certain events, and there can be no assurance that any design can achieve its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Management’s Report on Internal Control over Financial Reporting

The required disclosure is included in the MD&A, contained in Exhibit 99.3 of this Annual Report on Form 40-F and incorporated by reference herein.

Changes in Internal Control over Financial Reporting

There were no changes in the Corporation’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the year ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

ATTESTATION REPORT OF THE REGISTERED PUBLIC ACCOUNTING FIRM

KPMG LLP (“KPMG”) has issued an unqualified opinion on the Corporation’s internal control over financial reporting which accompanies the Corporation’s Audited Consolidated Financial Statements as at December 31, 2021 included as Exhibit 99.2 of this Annual Report on Form 40-F.

NOTICES PURSUANT TO REGULATION BTR

None.

AUDIT COMMITTEE

The Corporation’s board of directors (the “Board”) has a separately-designated standing Audit Committee as defined by Section 3(a)(58)(A) of the Exchange Act for the purpose of overseeing the accounting and financial reporting processes of the Corporation and audits of the Corporation’s annual consolidated financial statements. As of the date of this Annual Report on Form 40-F, the members of the Audit Committee are Mr. Russel C. Robertson, Mr. George R. Burns, and Ms. Maryse Saint-Laurent. Mr. Robertson has been Chair of the Audit Committee since January 1, 2015.

Each of the directors serving on the Audit Committee has also been determined by the Board to be independent within the criteria established by the SEC and the New York Stock Exchange (the “NYSE”) for audit committee membership.

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AUDIT COMMITTEE FINANCIAL EXPERT

In accordance with the Sarbanes-Oxley Act, the Board has determined that Mr. Robertson is an “audit committee financial expert” (as defined in paragraph 8(b) of General Instruction B to Form 40-F). Mr. Robertson is a Chartered Professional Accountant and a Fellow of the Institute of Chartered Professional Accountants (Ontario) and has worked as an accounting professional for over 35 years.

CODE OF BUSINESS CONDUCT AND ETHICS

The Corporation has adopted a written “code of ethics” (defined in paragraph 9(b) of General Instruction B to Form 40-F), entitled “The way we work” (the “Code of Ethics”), which applies to all of the Corporation’s employees, executive officers and directors, including the Corporation’s principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. The Code of Ethics includes, among other things, written standards for the Corporation’s principal executive officer, principal financial officer and principal accounting officer that are required by the SEC for a code of ethics applicable to such officers. To review or obtain a copy of the Code of Ethics, see “Sustainability – Citizenship – The way we work and Ethics Point” posted on the Corporation’s website, www.turquoisehill.com. The Code of Ethics is also available in print to any shareholder who requests it. Requests for copies of the Code of Ethics should be made by contacting: Turquoise Hill Resources Ltd., Suite 3680 – 1 Place Ville Marie, Montreal, Quebec H3B 3P2, Canada.

Since the adoption of the Code of Ethics, there have not been any amendments to the Code of Ethics or waivers, including implicit waivers, from any provision of the Code of Ethics.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

KPMG has been the Corporations’ independent auditor since March 20, 2020. PwC was the Corporation’s independent auditor from April 2, 2012 to March 2020. Deloitte LLP was the Corporation’s auditor from January 1995 to April 2012.

The aggregate fees billed by KPMG and its affiliates in fiscal 2021 and 2020 are detailed below (rounded).

(Cdn$)	2021		2020
Audit Fees (a)	$	2,338,625	$	2,094,422
Audit Related Fees (b)	$	78,765	$	60,990
Tax Fees	$	Nil	$	Nil
Other Fees	$	Nil	$	Nil
Total	$	2,417,390	$	2,155,412

(a) Fees for audit services billed relating to fiscal 2021 and 2020 consist of:

• audit of the Corporation’s annual consolidated financial statements;

• audit of the Corporation’s subsidiaries in Mongolia, Singapore, Australia and the Netherlands;

• reviews of the Corporation’s interim financial statements; and

• auditor involvement in the prospectus and other securities filings

(b) Audit related fees billed relating to fiscal 2021 and 2020 consist of :

• translation services

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In addition, in 2021 and 2020 fees were paid for services provided pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), applicable Canadian securities laws and the required attestations relating to the effectiveness of the Corporation’s internal controls on financial reporting.

The Audit Committee’s Charter requires the pre-approval by the Audit Committee of all services provided by the external auditor. Pre-approval from the Audit Committee can be sought for planned engagements based on budgeted or committed fees. The Audit Committee has adopted a procedure whereby the chair of the Audit Committee shall pre-approve any non-audit services totaling segments of $50,000 or less per occurrence, up to a total of $100,000 per year, and shall be required to report on this at the first scheduled Audit Committee meeting following such pre-approval. Any amounts exceeding the $100,000 threshold must be pre-approved by the Audit Committee, according to that procedure. No further approval is required to pay pre-approved fees. Additional pre-approval is required for any increase in scope or in final fees.

Pursuant to these procedures, all of the services provided by the Corporation’s external auditor requiring pre-approval relating to the fees reported as audit, audit-related, tax and other fees were pre-approved by the Audit Committee.

OFF-BALANCE SHEET ARRANGEMENTS

With the exception of the Corporation’s power commitments disclosed within the section “Contractual Obligations” and “Oyu Tolgoi Mine Power Supply” in the MD&A, during the year ended December 31, 2021, the Corporation was not a party to any off-balance-sheet arrangements that have, or are reasonably likely to have, a current or future effect on the financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements or capital resources of the Corporation.

CORPORATE GOVERNANCE PRACTICES

Corporate Governance Practices Compared to NYSE Listing Standards

The Corporation has reviewed its corporate governance practices against the requirements of the NYSE, and determined that, except for the composition of the Corporation’s Nominating, Corporate Governance and Sustainability Committee (the “NCGS Committee”), as discussed below, its corporate governance practices do not differ in any significant way from those followed by U.S. companies under the NYSE listing standards. This includes the composition of the Board because in excess of one-half of the Corporation’s directors (four of seven directors) have been determined by the Board to be independent for purposes of the NYSE corporate governance rules. The Board has determined the following four directors to be independent under the NYSE corporate governance rules: R. Peter Gillin, Russel Robertson, Maryse Saint-Laurent and George Burns.

The composition of the NCGS Committee, however, includes one director that is not independent, which differs from the NYSE corporate governance standards that require a listed company to maintain a nominating/corporate governance committee composed entirely of independent directors. The NCGS Committee is composed of three voting members, a majority of whom are independent directors. Canadian securities legislation does not require a listed company to maintain a certain level of independence within the nominating/corporate governance committee. As a foreign private issuer, the Corporation is permitted under NYSE listing standards to follow Canadian corporate governance practices on certain matters, including the composition of the nominating/corporate governance committee.

Presiding Director at Meetings of Independent Directors

The Board holds regular annual and quarterly meetings. Between the quarterly meetings, the Board meets as required, generally by means of telephone conferencing facilities. As part of the quarterly meetings, the Corporation’s “independent directors” (as that term is defined in the rules of the NYSE) also have the opportunity to meet separate from management. If required, between regularly scheduled board meetings, a meeting of independent directors is held by teleconference to update the directors on corporate or other developments since the last Board meeting. Management also communicates informally with members of the Board on a regular basis, and solicits the advice of Board members on matters falling within their special knowledge or experience. Mr. Gillin was appointed the Corporation’s Chairman in January 2017 and served as the presiding director at such meetings of independent directors during the year ended December 31, 2021.

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Communication with Independent Directors

Shareholders may send communications to the Corporation’s independent directors by writing to the Chairman, c/o Turquoise Hill Resources Ltd., Suite 3680 – 1 Place Ville Marie, Montreal, Quebec H3B 3P2, Canada. Communications will be referred to the Chairman for appropriate action. The status of all outstanding concerns addressed to the Chairman will be reported to the Board as appropriate.

Corporate Governance Guidelines

According to Rule 303A.09 of the NYSE Listed Company Manual, a listed company must adopt and disclose a set of corporate governance guidelines with respect to specified topics. Such guidelines are required to be posted on the listed company’s website. The Corporation has adopted the required guidelines and has posted them on its website at www.turquoisehill.com. The required guidelines are available in print to any shareholder who requests them. Requests for copies of these documents should be made by contacting: Turquoise Hill Resources Ltd., Suite 3680 – 1 Place Ville Marie, Montreal, Quebec H3B 3P2, Canada.

Board Committee Mandates

The mandates of the Corporation’s Audit Committee, Compensation and Benefits Committee, NCGS Committee and Health, Safety, Environment, and Communities and Operations Committee are each available for viewing on the Corporation’s website at www.turquoisehill.com, and are available in print to any shareholder who requests them. Requests for copies of these documents should be made by contacting: Turquoise Hill Resources Ltd., Suite 3680 – 1 Place Ville Marie, Montreal, Quebec H3B 3P2, Canada.

UNDERTAKING AND CONSENT TO SERVICE OF PROCESS

Undertaking

The Corporation undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.

Consent to Service of Process

The Corporation has previously filed an Appointment of Agent for Service of Process on Form F-X with respect to the class of securities in relation to which the obligation to file this Form 40-F arises.

Any change to the name or address of the agent for service of process of the registrant shall be communicated promptly to the SEC by an amendment to the Form F-X referencing the file number of the Corporation.

DISCLOSURE PURSUANT TO SECTION 13(r) OF THE EXCHANGE ACT

Pursuant to the Iran Threat Reduction and Syria Human Rights Act of 2012 and Section 13(r) of the Exchange Act, the Corporation is required to disclose certain activities of the Corporation and any of the Corporation’s affiliates (as defined in Rule 12b-2 of the Exchange Act) related to the Islamic Republic of Iran. On December 31, 2021, Rio Tinto International Holdings Limited, together with other Rio Tinto affiliates, beneficially owned approximately 50.8% of our Common Shares and therefore is considered the Corporation’s affiliate as defined in Rule 12b-2 of the Exchange Act. As a result, we are including in this Annual Report on Form 40-F the information relating to Rio Tinto set forth below, which is contained in the Annual Report on Form 20-F for the year ended December 31, 2021 filed by Rio Tinto plc and Rio Tinto Limited with the SEC on February 25, 2022.

10

“Rio Tinto acquired its interest in Namibia-based Rössing Uranium Limited (“Rössing”) in 1970. The Iran Foreign Investments Company (“IFIC”) acquired its original minority shareholding in Rössing in 1975. IFIC’s interest predates the establishment of the Islamic Republic of Iran and the U.S. economic sanctions targeting Iran’s nuclear, energy and ballistic missile programs. IFIC acquired a minority shareholding in Rössing in accordance with Namibian law. The Treasury Department’s Office of Foreign Assets Control designated IFIC as a Specially Designated National on 5 November 2018.

On 16 July 2019, the Company completed the sale of its entire interest 68.62 per cent stake in Rössing to China National Uranium Corporation Limited (“CNUC”) for an initial cash payment of $6.5 million and a contingent payment of up to $100 million. The contingent payment is linked to uranium spot prices and Rössing’s net income until calendar year 2026. In addition, the Company will receive a cash payment if CNUC sells the Zelda 20 Mineral Deposit during a restricted period following completion. The total consideration is subject to a maximum cap of $106.5 million. Since the sale, Rio Tinto Marketing Pte Ltd has continued to purchase a quantity of uranium produced by Rössing pursuant to ongoing marketing arrangements which will cease on 26 December 2026, in order to satisfy existing contractual commitments with customers.

Rössing was neither a business partnership nor joint venture between the Company and IFIC. Rössing is a Namibian limited liability company with a number of shareholders which included Rio Tinto.

When the Company was a shareholder, IFIC had no uranium product off-take rights. Neither IFIC nor other Government of Iran entities had any supply contracts in place with Rössing and none received any uranium from Rössing. IFIC also did not have access to any technology through its investment in Rössing or rights to such technology.

Rio Tinto had no power or authority to divest IFIC’s holding in Rössing. The Rössing board took steps in 2012 to terminate IFIC’s involvement in the governance of Rössing. When Rio Tinto was a shareholder in Rössing, IFIC was entitled under Namibian law to attend annual general meetings of Rössing, which they did attend. IFIC was represented on the board of Rössing by two directors. While this level of board representation did not provide IFIC with the ability to influence the conduct of Rössing’s business on its own, the Rössing board nonetheless determined that, in light of international economic sanctions, it would be in the best interest of Rössing to terminate IFIC’s involvement in board activity. Therefore, on 4 June 2012, at the annual general meeting of Rössing, the shareholders, including the Company, voted not to re-elect the two IFIC board members. This ended IFIC’s participation in Rössing board activities.

While IFIC was entitled to its pro rata share of any dividend that the majority of the board declared for all shareholders in Rössing, IFIC had not received such monies since early 2008. Simply by maintaining its own shareholding in Rössing, the Company was not engaging in any activity intended or designed to confer any direct or indirect financial support for IFIC.

While the Company does not view itself as actively transacting or entering into business dealings with an instrumentality of the Government of Iran or a Specially Designated National, this information has been provided to ensure transparency regarding the passive, minority shareholding in Rössing held by IFIC while the Company was a shareholder.”

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EXHIBIT INDEX

Exhibit Number	Document
99.1	Annual Information Form for the year ended December 31, 2021.
99.2	Audited Consolidated Financial Statements of Turquoise Hill Resources Ltd., including the notes thereto, as of and for the years ended December 31, 2021 and 2020, together with the report thereon of the Independent Auditors.
99.3	Management’s Discussion and Analysis of Financial Condition and Results of Operations.
99.4	Consent of KPMG LLP, Independent Auditors.
99.5	Consent of Michael Thomas.
99.6	Consent of Roderick Carlson.
99.7	Consent of Jo-Anne Dudley.
99.8	Consent of Racquel Kolkert.
99.9	Certification of the Interim Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.
99.10	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.
99.11	Certification of the Interim Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
99.12	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
101	Interactive Data File (formatted as Inline XBRL).
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

SIGNATURE

Pursuant to the requirements of the Exchange Act, the Corporation certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereto duly authorized.

Dated: March 2, 2022

TURQUOISE HILL RESOURCES LTD.
By:	/s/ Luke Colton
	Name:	Luke Colton
	Title:	Chief Financial Officer

EX-99.1

Exhibit 99.1

TURQUOISE HILL RESOURCES LTD.

Annual Information Form

For the year ended

December 31, 2021

Dated March 2, 2022

TABLE OF CONTENTS

PRESENTATION OF INFORMATION	3
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	3
CAUTIONARY NOTE TO U.S. INVESTORS	7
INTERPRETATION INFORMATION	8
CURRENCY AND EXCHANGE RATES	8
DEFINITIONS	9
CONVERSION FACTORS	12
GLOSSARY OF TECHNICAL TERMS AND ABBREVIATIONS	12
CORPORATE STRUCTURE	13
NAME, ADDRESS AND INCORPORATION	13
INTER-CORPORATE RELATIONSHIPS	13
GENERAL DEVELOPMENT OF THE BUSINESS	14
OVERVIEW	14
THREE YEAR HISTORY	14
AGREEMENTS WITH RIO TINTO	22
AGREEMENTS WITH THE GOVERNMENT OF MONGOLIA	26
SUSTAINABILITY	33
HEALTH	34
SAFETY	37
ENVIRONMENT	39
COMMUNITIES AND PEOPLE	47
CORPORATE GOVERNANCE	50
RISK FACTORS	51
DESCRIPTION OF THE BUSINESS	74
CURRENT TECHNICAL REPORT AND QUALIFIED PERSONS	74
OYU TOLGOI PROJECT	74
OTHER PROJECTS	119
OTHER INFORMATION	122
DIVIDENDS	123
DESCRIPTION OF CAPITAL STRUCTURE	123
COMMON SHARES	123
PREFERRED SHARES	123
MARKET FOR SECURITIES	125
DIRECTORS AND OFFICERS	126
NAME AND OCCUPATION	126
SHAREHOLDINGS OF DIRECTORS AND EXECUTIVE OFFICERS	128
COMMITTEES OF THE BOARD OF DIRECTORS	128
LEGAL PROCEEDINGS	129
CONFLICTS OF INTEREST	130
AUDIT COMMITTEE INFORMATION	131
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS	131

TRANSFER AGENT AND REGISTRAR	131
MATERIAL CONTRACTS	131
INTERESTS OF EXPERTS	132
ADDITIONAL INFORMATION	133
SCHEDULE A AUDIT COMMITTEE INFORMATION	A - I
SCHEDULE B GLOSSARY OF TECHNICAL TERMS AND ABBREVIATIONS	B - I
SCHEDULE C CHANGE IN MINERAL RESERVES FROM DECEMBER 31, 2020 TO DECEMBER 31, 2021	C - I
SCHEDULE D DETAILED MINERAL RESOURCES AS AT DECEMBER 31, 2021	D - I

PRESENTATION OF INFORMATION

Unless otherwise noted, the information contained in this annual information form (“AIF”) is given as at or for the year ended December 31, 2021. All references to the “Corporation” and to “Turquoise Hill” herein refer to Turquoise Hill Resources Ltd. and, where the context so requires, includes its subsidiaries.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements made in this AIF, including statements relating to matters that are not historical facts and statements of the Corporation’s beliefs, intentions and expectations about developments, results and events which will or may occur in the future, constitute “forward-looking information” within the meaning of applicable Canadian securities legislation and “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States (“U.S.”) Private Securities Litigation Reform Act of 1995. Forward-looking statements and information relate to future events or future performance, reflect current expectations or beliefs regarding future events and are typically identified by words such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “likely”, “may”, “plan”, “seek”, “should”, “will” and similar expressions suggesting future outcomes or statements regarding an outlook. These include, but are not limited to, statements and information regarding: the nature of the Corporation’s ongoing relationship and interaction with, the Government of Mongolia with respect to the continued operation and development of Oyu Tolgoi as and when the GoM Agreements (as hereinafter defined) are implemented along with the implementation of Resolution 103 (as hereinafter defined); the continuation of undercutting in accordance with the mine plan and design; the actual timing of first sustainable production as well as the lifting of restrictions by the Government of Mongolia on the ability of Oyu Tolgoi LLC to incur any additional indebtedness; the implementation and successful execution of the updated funding plan that is the subject of the A&R HoA (as hereinafter defined), as such agreement may be further amended or restated, and the amount of any additional future funding gap to complete the Oyu Tolgoi project and the availability and amount of potential sources of additional funding required therefor, all as contemplated by the A&R HoA, as well as potential delays in the ability of the Corporation and Oyu Tolgoi LLC to proceed with the funding elements contemplated by the A&R HoA ; liquidity, funding sources and funding requirements in general, in particular until sustainable first production is achieved, including the Corporation’s ability to reach agreement with project finance lenders on the re-profiling of existing debt payments in line with current cash flow projections, as well as the Corporation (or a wholly-owned subsidiary) and Oyu Tolgoi LLC entering into a pre-paid copper concentrate sale arrangement; the availability and amount of potential sources of additional funding, including the short-term secured advance to be provided by Rio Tinto to the Corporation under the A&R HoA; the amount by which a successful re-profiling of the Corporation’s existing debt would reduce the Corporation’s currently projected funding requirements; the Corporation’s ability to conduct one or more equity offerings as contemplated by the A&R HoA in light of future and then prevailing market conditions; the expectations set out in the 2020 OTTR (as hereinafter defined); the timing and amount of future production and potential production delays; statements in respect of the impacts of any delays on achieving first sustainable production and on the Corporation’s cash flows; expected copper and gold grades; the merits of the class action complaints filed against the Corporation in October 2020 and January 2021, respectively; the merits of the defence and counterclaim filed by the Government of Mongolia in the international tax arbitration brought by Oyu Tolgoi LLC and the likelihood of the parties being able to amicably resolve the ongoing tax issues; the timing of studies, announcements and analyses; the status of underground development, including any slowdown of work; the causes of the increase in costs and schedule extension of the underground development; the mine design for Panel 0 of Hugo North Lift 1 and the related cost and production schedule

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implications; the re-design studies for Panels 1 and 2 of Hugo North Lift 1 and the possible outcomes, content and timing thereof; expectations regarding the possible recovery of ore in the two structural pillars, to the north and south of Panel 0; the possible progression of a SOPP (as hereinafter defined) and related amendments to the PSFA (as hereinafter defined), as amended, as well as power purchase agreements and extensions thereto; finalization of an agreement with IMPIC on extension of the current power import arrangements; the timing of construction and commissioning of the potential SOPP; sources of interim power; the continuing impact of COVID-19, including any restrictions imposed by health or governmental authorities relating thereto on the Corporation’s business, operations and financial condition, as well as delays and the development cost impacts of delays caused by the COVID-19 pandemic; the Corporation’s ability to operate sustainably, its community relations and its social licence to operate in Mongolia; capital and operating cost estimates; mill and concentrator throughput; anticipated business activities, planned expenditures, corporate strategies, and other statements that are not historical facts.

Forward-looking statements and information are made based upon certain assumptions and other important factors that, if untrue, could cause the actual results, performance or achievements of the Corporation to be materially different from future results, performance or achievements expressed or implied by such statements or information. There can be no assurance that such statements or information will prove to be accurate. Such statements and information are based on numerous assumptions regarding present and future business strategies, local and global economic conditions, and the environment in which the Corporation will operate in the future, including the price of copper, gold and silver; projected gold, copper and silver grades; anticipated capital and operating costs; anticipated future production and cash flows; the anticipated location of certain infrastructure in Hugo North Lift 1 and sequence of mining within and across panel boundaries; the nature of the Corporation’s ongoing relationship and interaction with the Government of Mongolia with respect to the continued operation and development of Oyu Tolgoi as and when the GoM Agreements are implemented along with the implementation of Resolution 103; the continuation of undercutting in accordance with the mine plan and design; the actual timing of first sustainable production as well as the lifting of restrictions by the Government of Mongolia on the ability of Oyu Tolgoi LLC to incur any additional indebtedness; the availability and timing of required governmental and other approvals for the construction of the SOPP; the ability of the Government of Mongolia to finance and procure the SOPP within the timeframes anticipated in the PSFA, as amended, subject to ongoing discussions relating to a standstill period; finalization of an agreement with IMPIC on an extension of the current power import arrangements; the eventual pre-payment arrangement between the Corporation (or a wholly-owned subsidiary) and Oyu Tolgoi LLC; the implementation and successful execution of the updated funding plan that is the subject of the A&R HoA, as such agreement may be further amended and restated; the Corporation’s ability to operate sustainably, its community relations and its social licence to operate in Mongolia; and the amount of any additional future funding gap to complete the Oyu Tolgoi project and the availability and amount of potential sources of additional funding required therefor.

Certain important factors that could cause actual results, performance or achievements to differ materially from those in the forward-looking statements and information include, among others: copper, gold and silver price volatility; discrepancies between actual and estimated production; mineral reserves and resources and metallurgical recoveries; development plans for processing resources; public health crises such as COVID-19; matters relating to proposed exploration or expansion; mining operational and development risks, including geotechnical risks and ground conditions; litigation risks, including the outcome of the class action complaints filed against the Corporation; the outcome of the international arbitration proceedings,

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including the likelihood of the parties being able to amicably resolve the ongoing tax issues; regulatory restrictions (including environmental regulatory restrictions and liability); Oyu Tolgoi LLC or the Government of Mongolia’s ability to deliver a domestic power source for the Oyu Tolgoi project within the required contractual time frame; the Corporation’s ability to operate sustainably, its community relations, and its social licence to operate in Mongolia; activities, actions or assessments, including tax assessments, by governmental authorities; events or circumstances (including public health crises strikes, blockades or similar events outside of the Corporation’s control) that may affect the Corporation’s ability to deliver its products in a timely manner; currency fluctuations; the speculative nature of mineral exploration; the global economic climate; global climate change; dilution; share price volatility; competition; loss of key employees; cyber security incidents; additional funding requirements, including in respect of the development or construction of a long-term domestic power supply for the Oyu Tolgoi project; capital and operating costs, including with respect to the development of additional deposits and processing facilities; defective title to mineral claims or property; and human rights requirements. Although the Corporation has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements and information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. All such forward-looking statements and information are based on certain assumptions and analyses made by the Corporation’s management in light of their experience and perception of historical trends, current conditions and expected future developments, as well as other factors management believes are reasonable and appropriate in the circumstances. These statements, however, are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements or information.

With respect to specific forward-looking information concerning the continued operation and development of the Oyu Tolgoi project, the Corporation has based its assumptions and analyses on certain factors which are inherently uncertain. Uncertainties and assumptions include, among others: the nature of the Corporation’s ongoing relationship and interaction with the Government of Mongolia with respect to the continued operation and development of Oyu Tolgoi as and when the GoM Agreements are implemented along with the implementation of Resolution 103; the continuation of undercutting in accordance with the mine plan and design; the approval or non-approval by the Oyu Tolgoi LLC board of directors of any future necessary additional investment, and the likely consequences on the timing and overall economic value of the Oyu Tolgoi project, including slowdown on the underground development and significant delays to first sustainable production; the timing and cost of the construction and expansion of mining and processing facilities; the timing and availability of a long-term domestic power source (or the availability of financing for the Corporation or the Government of Mongolia to construct such a source) for Oyu Tolgoi; the implementation and successful execution of the updated funding plan that is the subject of the A&R HoA, as such agreement may be further amended or restated, and the amount of any additional future funding gap to complete the Oyu Tolgoi project and the availability and amount of potential sources of additional funding required therefor; the eventual pre-payment arrangement between the Corporation (or a wholly-owned subsidiary) and Oyu Tolgoi LLC; the potential impact of COVID-19, including any restrictions imposed by health and governmental authorities relating thereto, as well as the development cost impacts of delays caused by the COVID-19 pandemic; the Corporation’s ability to operate sustainably, its community relations and its social licence to operate in Mongolia; the impact of changes in, changes in interpretation to or changes in enforcement of, laws, regulations and government practices in Mongolia; the availability and cost of skilled labour and transportation; the obtaining of (and the terms and timing of obtaining) necessary environmental and

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other government approvals, consents and permits; delays and the costs which would result from delays, including delays caused by COVID-19 restrictions and impacts and related factors, in the development of the underground mine (which could significantly exceed the costs projected in the 2020 OTTR); projected copper, gold and silver prices and their market demand; and production estimates and the anticipated yearly production of copper, gold and silver at Oyu Tolgoi.

The cost, timing and complexities of mine construction and development are increased by the remote location of a property such as Oyu Tolgoi. It is common in mining operations and in the development or expansion of existing facilities to experience unexpected problems and delays during development, construction and mine start-up. Additionally, although Oyu Tolgoi has achieved commercial production, there is no assurance that future development activities will result in profitable mining operations.

This AIF also contains references to estimates of mineral reserves and mineral resources. The estimation of reserves and resources is inherently uncertain and involves subjective judgments about many relevant factors. The mineral resource estimates contained in this AIF are exclusive of mineral reserves. Further, mineral resources that are not mineral reserves do not have demonstrated economic viability. The accuracy of any such estimates is a function of the quantity and quality of available data, and of the assumptions made and judgments used in engineering and geological interpretation (including future production from Oyu Tolgoi, the anticipated tonnages and grades that will be achieved or the indicated level of recovery that will be realised), which may prove to be unreliable. There can be no assurance that these estimates will be accurate or that such mineral reserves and mineral resources can be mined or processed profitably. Such estimates are, in large part, based on the following:

· Interpretations of geological data obtained from drill holes and other sampling techniques. Large scale mineral continuity and character of the deposits can be improved with additional drilling and sampling; actual mineralization or formations may be different from those predicted. It may also take many years from the initial phase of drilling before production is possible, and during that time the economic feasibility of exploiting a deposit may change. Reserve and resource estimates are materially dependent on prevailing metal prices and the cost of recovering and processing minerals at the individual mine sites. Market fluctuations in the price of metals or increases in the costs to recover metals or the actual recovery percentage of the metal(s) from the Corporation’s mining projects may render mining of mineral reserves uneconomic and affect the Corporation’s operations in a materially adverse manner. Moreover, various short-term operating factors may cause a mining operation to be unprofitable in any particular accounting period;

· Assumptions relating to commodity prices and exchange rates during the expected life of production, mineralization of the area to be mined, the projected cost of mining, and the results of additional planned development work. Actual future production rates and amounts, revenues, taxes, operating expenses, environmental and regulatory compliance expenditures, development expenditures, and recovery rates may vary substantially from those assumed in the estimates. Any significant change in these assumptions, including changes that result from variances between projected and actual results, could result in material downward revision to current estimates;

· Assumptions relating to projected future metal prices. The Corporation uses prices reflecting market pricing projections in the financial modelling for Oyu Tolgoi which are subjective in nature. It should be expected that actual prices will be different than the prices used for such modelling (either higher or lower), and the differences could be significant; and

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· Assumptions relating to the costs and availability of treatment and refining services for the metals mined from Oyu Tolgoi, which require arrangements with third parties and involve the potential for fluctuating costs to transport the metals and fluctuating costs and availability of refining services. These costs can be significantly impacted by a variety of industry-specific as well as regional and global economic factors (including, among others, those which affect commodity prices). Many of these factors are beyond the Corporation’s control.

In addition, see “Cautionary Note to U.S. Investors” in this respect.

Readers are cautioned not to place undue reliance on forward-looking information or statements. By their nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, which contribute to the possibility that the predicted outcomes will not occur. Events or circumstances could cause the Corporation’s actual results to differ materially from those estimated or projected and expressed in, or implied by, these forward-looking statements. Important factors that could cause actual results to differ from these forward-looking statements are included in the “Risk Factors” section of this AIF.

Readers are further cautioned that the list of factors enumerated in the “Risk Factors” section of this AIF that may affect future results is not exhaustive. When relying on the Corporation’s forward-looking statements and information to make decisions with respect to the Corporation, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Furthermore, the forward-looking statements and information contained in this AIF are made as of the date of this document and the Corporation does not undertake any obligation to update or to revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, except as required by applicable law. The forward-looking statements and information contained in this AIF are expressly qualified by this cautionary statement.

CAUTIONARY NOTE TO U.S. INVESTORS

This AIF has been prepared in accordance with the requirements of Canadian securities laws, which differ from the requirements of U.S. securities laws. Unless otherwise indicated, all reserve and resource estimates included in this AIF have been prepared in accordance with Canadian NI 43-101, and the CIM (Canadian Institute of Mining, Metallurgy and Petroleum) Definition Standards for Mineral Resources and Mineral Reserves adopted by CIM Council on May 19, 2014 (the “CIM Definition Standards”). NI 43-101 is a rule developed by the Canadian Securities Authorities that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. NI 43-101 differs significantly from the disclosure requirements of the SEC generally applicable to U.S. companies. For example, the terms “mineral reserve”, “proven mineral reserve”, “probable mineral reserve”, “mineral resource”, “measured mineral resource”, “indicated mineral resource”, and “inferred mineral resource” are defined in NI 43-101. These definitions differ from the definitions in the disclosure requirements promulgated by the SEC. Accordingly, information concerning mineral deposits set forth herein may not be comparable with information made public by companies that report in accordance with SEC disclosure requirements.

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INTERPRETATION INFORMATION

Currency and Exchange Rates

In this AIF, all dollar amounts are quoted in U.S. dollars unless otherwise indicated. References to “$” and “US$” are to U.S. dollars and, references to “C$” are to Canadian dollars and references to “A$” are to Australian dollars.

The Bank of Canada daily exchange rates for the conversion of one U.S. dollar into Canadian dollars were as follows during the indicated periods:

(Stated in C$)

	Year Ended December 31,
	2021	2020
End of period	1.2678	1.2732
High for the period	1.2942	1.4496
Low for the period	1.2040	1.2718
Average for the period	1.2535	1.3415

The Bank of Canada daily exchange rate on March 1, 2022 for the conversion of U.S. dollars into Canadian dollars was $1.00 equals C$1.2708 (one Canadian dollar on that date equalled $0.7869).

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Definitions

In this AIF, unless there is something in the subject matter or context inconsistent therewith, the following terms have the meanings assigned to them below. Other capitalised terms used in this AIF and defined elsewhere in the text of this AIF shall have the definitions assigned to such terms elsewhere in this AIF and, unless otherwise indicated, shall have such meaning throughout this AIF. Certain other scientific and technical terms and abbreviations used in this AIF are defined under the section heading “Interpretation Information – Glossary of Technical Terms and Abbreviations”.

“2020 OTTR”	means the technical report titled “Oyu Tolgoi 2020 Technical Report” prepared in accordance with the requirements of NI 43-101 by M. Thomas (FAusIMM) and R. Carlson (MAIG RPGeo) of AMC Consultants Pty Ltd and J. Dudley (FAusIMM) (Chief Operating Officer, Turquoise Hill) and R. Kolkert (FAusIMM) (Director, Resources & Exploration of Turquoise Hill) with an effective date of June 30, 2020.
“A&R HoA”	means the Amended and Restated Heads of Agreement dated as of January 24, 2022 between the Corporation and RTIH.
“ARSHA”	means the Amended and Restated Shareholders’ Agreement dated June 8, 2011 among Oyu Tolgoi LLC, THR Oyu Tolgoi Ltd. (formerly Ivanhoe Oyu Tolgoi (BVI) Ltd.), Oyu Tolgoi Netherlands B.V. and Erdenes MGL LLC.
“Board of Directors”	means the board of directors of the Corporation, as constituted from time to time.
“Canadian Securities Authorities”	means the securities commissions or similar securities regulatory authorities in the various provinces and territories of Canada.
“Commercial Production”	means the first day of the month following the month in which regular shipments to customers first occurred after achievement of 70% of planned concentrator throughput for a continuous period of 30 days, based on design capacity at that stage of construction for Oyu Tolgoi, and was achieved in September 2013.
“Common Shares”	means common shares in the capital of the Corporation.
“Definitive Estimate”	means the confirmatory analysis of the underground project costs and schedule contained in MSS20.
“Entrée Earn-in Agreement”	means the equity participation and earn-in agreement dated October 15, 2004, as amended on November 9, 2004, between Entrée and the Corporation.
“Entrée”	means Entrée Resources Ltd., formerly known as Entrée Gold Inc.
“Entrée Joint Venture”	means the joint venture between Oyu Tolgoi LLC and Entrée contemplated by the Entrée Earn-in Agreement in respect of a portion of the Hugo North Extension in which (i) Oyu Tolgoi LLC holds an 80% interest and Entrée holds a 20% interest in minerals below 560 m, and (ii) Oyu Tolgoi LLC holds a 70% interest and Entrée holds a 30% interest in minerals above 560 m.

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“Erdenes”	means either Erdenes MGL LLC or Erdenes Oyu Tolgoi LLC, as the context requires, each a company owned by the Government of Mongolia.
“Government of Mongolia”	means the political apparatus of Mongolia at the local, regional and/or national levels, as the context requires.
“Heruga”	means the Heruga mineral deposit of Oyu Tolgoi.
“Hugo Dummett Deposits”	means collectively, the Hugo North and the Hugo South mineral deposits of Oyu Tolgoi, including the Hugo North Extension zone.
“Hugo North”	means the Hugo North mineral deposit of Oyu Tolgoi.
“Hugo North Extension”	means the Hugo North Extension zone of Oyu Tolgoi, representing the extension of the Hugo Dummett Deposits into the area that is the subject of the Entrée Joint Venture.
“Hugo South”	means the Hugo South mineral deposit of Oyu Tolgoi.
“IMPIC”	means the Inner Mongolia Power International Corporation.
“Investment Agreement”	means the Investment Agreement dated October 6, 2009 among the Government of Mongolia, Oyu Tolgoi LLC, the Corporation and RTIH in respect of Oyu Tolgoi.
“LIBOR”	means the London Interbank Offered Rate, the rate charged by one bank to another for lending money.
“MD&A”	means the Corporation’s Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2021.
“MSS16”1	means the statutory study prepared by Oyu Tolgoi LLC in accordance with Mongolian laws in March 2015, as subsequently updated by Oyu Tolgoi LLC with the Mongolian Minerals Council in August 2015 and completed in May 2016.
“MSS20”2	means the 2020 statutory study required pursuant to, and prepared by Oyu Tolgoi LLC in accordance with Mongolian laws and filed with the Mongolian Minerals Council in 2021.
“NI 43-101”	means National Instrument 43-101 – Standards of Disclosure for Mineral Projects.
“NPTG”	means the National Power Transmission Grid of Mongolia.
“NSR”	means net smelter return.
“NYSE”	means the New York Stock Exchange.

¹ Note to readers: This was previously referred to as the 2016 Feasibility Study. MSS16 is neither a “feasibility study” within the meaning of NI 43-101 nor as defined under the CIM Definition Standards.

² Note to readers: This was previously referred to as OTFS20. MSS20 is neither a “feasibility study” within the meaning of NI 43-101 nor as defined under the CIM Definition Standards.

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“Oyu Tolgoi LLC”	means Oyu Tolgoi LLC, formerly Ivanhoe Mines Mongolia Inc. LLC.
“Oyu Tolgoi”	means the Corporation’s copper and gold project located in the Southern Gobi region of Mongolia, which is being developed by Oyu Tolgoi LLC, and consists of a series of deposits containing copper, gold, silver and molybdenum, including the Oyut open pit mine and/or underground development, as the context requires.
“Oyu Tolgoi Project Financing”	means project financing for the development of Oyu Tolgoi.
“Oyu Tolgoi Shareholder Holdcos”	means THR Oyu Tolgoi Ltd. (formerly Ivanhoe Oyu Tolgoi (BVI) Ltd.) and Oyu Tolgoi Netherlands B.V., the two indirect, wholly-owned subsidiaries through which the Corporation holds its interest in Oyu Tolgoi LLC.
“Oyut”	means the open pit mineral deposit at Oyu Tolgoi.
“Preferred Shares”	means preferred shares in the capital of the Corporation.
“Project Finance Facility”	means the $4.4 billion project signed by Oyu Tolgoi LLC in December 2015 to support the underground development programme. The Project Finance Facility was provided by a syndicate of international financial institutions and export credit agencies representing the governments of Canada, the U.S. and Australia, along with fifteen commercial banks.
“PSCA”	means the Power Sector Cooperation Agreement entered into by Oyu Tolgoi LLC and the Government of Mongolia in August 2014 for the exploration of a Tavan Tolgoi-based independent power producer.
“PSFA”	means the Power Source Framework Agreement entered into in December 2018 between Oyu Tolgoi LLC and the Government of Mongolia which initially provided a binding framework and pathway forward for the construction of the TTPP Project, as amended on June 18, 2020, to prioritise at such time progression of a SOPP.
“Resolution 92”	means a resolution passed by the Parliament of Mongolia in November 2019 mandating the Government of Mongolia to take necessary measures to ensure the benefits to Mongolia of Oyu Tolgoi, including comprehensive measures to improve the implementation of the Investment Agreement.
“Resolution 103”	means a resolution passed by the Parliament of Mongolia in December 2021 to resolve the outstanding issues among the Corporation, Rio Tinto and the Government of Mongolia in relation to the implementation of Resolution 92.
“Rio Tinto”	means, collectively, Rio Tinto plc and its affiliates or, where appropriate, one of its affiliates, excluding the Turquoise Hill Group.
“RTIH”	means Rio Tinto International Holdings Limited, a corporation incorporated under the laws of England and Wales and a member of Rio Tinto, and where the context requires, also refers to its subsidiaries, 46117 Yukon Inc. and 535630 Yukon Inc.
“RTSEA”	means Rio Tinto South East Asia Limited, an affiliate of RTIH.
“SEC”	means the United States Securities and Exchange Commission.

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“SOPP”	means a state-owned power plant.
“TTPP Project”	means the Tavan Tolgoi Power Plant project.
“Turquoise Hill Group”	means, collectively, Turquoise Hill and its subsidiaries or a group of subsidiaries, as the context requires.
“TSX”	means the Toronto Stock Exchange.
“UDP”	means the Oyu Tolgoi Underground Mine Development and Financing Plan dated May 18, 2015 among the Government of Mongolia, Erdenes, Turquoise Hill, THR Oyu Tolgoi Ltd., Oyu Tolgoi Netherlands B.V., RTIH and Oyu Tolgoi LLC.
“YBCA”	means the Business Corporations Act (Yukon).

Conversion Factors

For ease of reference, the following conversion factors are provided:

Imperial Measure     =	Metric Unit	Metric Unit     =	Imperial Measure
2.471 acres	1 ha	0.405 ha	1 acre
3.280 feet	1 m	0.305 m	1 foot
0.621 miles	1 km	1.609 km	1 mile
0.032 ounces (troy)	1 gram	31.104 grams	1 ounce (troy)
2.205 pounds	1 kilogram	0.454 kilograms	1 pound
1.102 tons (short)	1 tonne	0.907 tonnes	1 ton (short)
0.029 ounces (troy)/ton	1 gram/tonne	34.286 grams/tonne	1 ounce (troy)/ton

Glossary of Technical Terms and Abbreviations

Certain scientific and technical terms and abbreviations used in this AIF are defined in the glossary of technical terms and abbreviations attached as Schedule B to this AIF.

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CORPORATE STRUCTURE

Name, Address and Incorporation

The Corporation was incorporated under the Company Act (British Columbia) on January 25, 1994 under the name 463212 B.C. Ltd. In February 1994, the Corporation changed its name to Indochina Goldfields Ltd. In March 1994, the Corporation increased its authorised capital from 10,000 Common Shares to 100,000,000 Common Shares and created 100,000,000 Preferred Shares. In February 1995, the Corporation was continued under the YBCA. In July 1997, the Corporation increased its authorised capital to an unlimited number of Common Shares and an unlimited number of Preferred Shares. In June 1999, the Corporation changed its name to “Ivanhoe Mines Ltd.”. In August 2012, the Corporation changed its name to “Turquoise Hill Resources Ltd.”.

The Corporation’s head office is located at 1 Place Ville-Marie, Suite 3680, Montréal, Québec, H3B 3P2. The Corporation’s registered office is located at 300 - 204 Black Street, Whitehorse, Yukon, Canada, Y1A 2M9.

Inter-Corporate Relationships

The following sets forth, as of the date of this AIF, the name, jurisdiction of incorporation and the voting equity ownership interest of the Corporation in each of the subsidiaries through which the Corporation ultimately owns its interest in Oyu Tolgoi LLC. These subsidiaries are presented in descending order according to the chain of voting equity ownership. Accordingly, the first subsidiary presented in each group is owned directly by the Corporation and the voting equity ownership interest of the Corporation in that subsidiary is shown in the right hand column opposite its name and jurisdiction of incorporation. The voting equity ownership interest shown in respect of each other subsidiary is, except as otherwise indicated, that of the subsidiary listed immediately above it. The Corporation’s 66% voting equity ownership in Oyu Tolgoi LLC, which owns Oyu Tolgoi, the Corporation’s only material property as of the date of this AIF, is held between two groups of subsidiaries.

Oyu Tolgoi LLC Group One Subsidiaries

Name of Subsidiary	Jurisdiction of Incorporation	Voting Equity     Ownership Interest
THR Delaware Holdings, LLC	Delaware	100%
THR Aruba Holdings LLC A.V.V. (formerly Ivanhoe Mines Aruba Holdings LLC A.V.V.)	Aruba	100%
THR Oyu Tolgoi Ltd. (formerly Ivanhoe Oyu Tolgoi (BVI) Ltd.)	British Virgin Islands	100%
Oyu Tolgoi LLC	Mongolia	0.1%

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Oyu Tolgoi LLC Group Two Subsidiaries

Name of Subsidiary	Jurisdiction of Incorporation	Voting Equity Ownership Interest
THR Mines (BC) Ltd. (formerly Ivanhoe OT Mines Ltd.)	British Columbia		100	%
Turquoise Hill Netherlands Coöperatief U.A.	Netherlands		100	%
Oyu Tolgoi Netherlands B.V.	Netherlands		100	%
Oyu Tolgoi LLC	Mongolia		65.9	%

Additional direct and indirect subsidiaries of the Corporation (i) holding, individually, 10% or less, and in the aggregate, 20% or less of the Corporation’s consolidated assets, and (ii) generating, individually, 10% or less, and in the aggregate, 20% or less of the Corporation’s consolidated sales and operating revenues, in each case, as at and for the year ended December 31, 2021, have been omitted.

GENERAL DEVELOPMENT OF THE BUSINESS

Overview

Turquoise Hill is an international mining company focused on the operation and further development of the Oyu Tolgoi copper-gold mine in southern Mongolia, which is the Corporation’s principal and only material mineral resource property. Oyu Tolgoi is held through a 66% interest in Oyu Tolgoi LLC; the remaining 34% interest is held by Erdenes.

Three Year History

2019

During the fourth quarter of 2018, the Corporation announced that it had carried out its own review of the previously announced Rio Tinto schedule and cost re-forecast for the project that had concluded a delay to sustainable first production was expected from the first quarter of 2021 to the end of the third quarter of 2021. The Corporation’s review, with the assistance of the Corporation’s independent Qualified Person and mining consultant, OreWin Pty Ltd, found that project cost was expected to remain within the $5.3 billion budget but that it was likely there would be further delays to individual activities and that this would result in additional delays to sustainable first production.

In March 2019, the Corporation announced that the Corporation’s independent review found that the following key risks were developing:

· Shaft 2 equipping delays were due to lower than expected productivity in steel and electrical installation as well as increased quality assurance measures. It was likely the completion date would move beyond the first quarter of 2019 and impact overall underground development rate increases.

· There had been delays to development progress and productivities in key areas. Even though lateral development had experienced consistent overall progress, development of some critical areas, such as the footprint, Primary Crusher 1 system, Shaft 2 and Shaft 5, had been impacted by delays and, with the exception of Shaft 5, were critical path items for the project schedule.

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· The Corporation’s review indicated that in some areas there was a delay to the critical path from scope growth in mass excavation and additional ground support due to unexpectedly adverse geotechnical conditions. Although the ground support quantities and installation times were less (but not materially less) than planned in MSS16, and ground support quantities were reported as lower than planned, some types of ground support had reduced installation times.

At that time, the Corporation announced that further delays on the Shaft 2 fit-out were expected to contribute to an overall schedule delay to sustainable first production beyond the end of the third quarter of 2021 and that Rio Tinto was studying relocating the ore passes on the footprint and this may modify the initiation sequence within Panel 0.

In March 2019, the Parliamentary press office announced that the report of the Parliamentary Working Group, consisting of 13 Members of Parliament and which was appointed in March 2018 to review the implementation of the Investment Agreement (the “Working Group”), had been submitted to the National Security Council (President, Prime Minister and Speaker of the Parliament).

In April 2019, the Corporation announced that Rio Tinto, as project manager, had advised that the fit-out and commissioning work on Shaft 2 (the main production and services shaft) was expected to be completed by the end of October 2019 and that the Corporation would review the cause and impact of this further delay to Shaft 2.

In May 2019, the Corporation provided an update on the Working Group report. On May 3, 2019, a summary of the Working Group report was received by Oyu Tolgoi and on May 6, 2019, Oyu Tolgoi provided the Economic Standing Committee of the Parliament with a written response to the summary of the Working Group report. As an outcome of the hearing, a new working group of nine Members of Parliament was established to take the Working Group report and draft resolutions directing the Cabinet on recommendations related to Oyu Tolgoi.

In June 2019, the Corporation announced the appointment of Jo-Anne Dudley as Chief Operating Officer, effective June 3, 2019.

In July 2019, the Corporation provided an update on underground development and announced that Turquoise Hill, in conjunction with Rio Tinto, was continuing to review mine design options for the completion of the underground development of the Oyu Tolgoi mine and assess the impact on overall cost and schedule for the underground development. To address stability risks associated with components of the existing mine design, a number of mine design options were under consideration to determine the final design of Panel 0, and this work was then anticipated to continue into early 2020. Based on these options, preliminary estimates indicated that the MSS16 key project milestone of sustainable production could be delayed by 16 to 30 months. This range included contingency of up to eight months reflecting the unexpected and challenging geotechnical issues, complexities in the construction of Shaft 2, and reflected the detailed work still required to reach a more precise estimate. Additionally, the development capital spend for Oyu Tolgoi was expected to increase by $1.2 to $1.9 billion over the $5.3 billion previously disclosed.

In July 2019, the Corporation announced that it expected to need incremental financing to sustain its underground development beyond 2020. Important variables impacting the ultimate amount of additional financing required included: the amount of incremental underground development capital needed, timing of sustainable first production and its resulting cash flows, timing of principal repayments drawn on the project finance facility and the amount of cash flow that can be generated from open-pit operations.

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In November 2019, the Corporation announced that a decision had been made to retain a mid-access drive only on the apex level of the mine design of Panel 0. The Corporation also announced that it had put forward a proposal to Rio Tinto as to how best to source the incremental funding necessary to progress underground development over and above its available liquidity which would provide the necessary funds into the first quarter of 2021.

In November 2019, the Corporation announced the completion of the construction of Shaft 2 and that it had entered the final stages of commissioning.

In November 2019, the Corporation provided an update on the Administrative Court proceedings in Mongolia. Early reports suggested that the Administrative Court of first instance had upheld claims by the Darkhan Mongol Nogoon Negdel Non-Governmental Organization that due process was not followed by the Government of Mongolia in finalising the UDP, although the Court’s formal written ruling had yet to be released. The Corporation strongly refutes any suggestion that the UDP or any of the foundational Oyu Tolgoi agreements are illegal. Adherence to the principles of the Investment Agreement, ARSHA and the UDP has allowed for the development of the Oyu Tolgoi mine in a manner that has given rise to significant long-term benefits to the people of Mongolia.

Following receipt of the Working Group report by Oyu Tolgoi on May 3, 2019, and provision by Oyu Tolgoi LLC of a written response thereto to the Economic Standing Committee of Parliament on May 6, 2019, a new working group of nine Members of Parliament was established to take the Working Group report and draft resolutions directing the Cabinet on recommendations related to Oyu Tolgoi. Upon completion of such review, a resolution was submitted to the Economic Standing Committee, and subsequently passed in a plenary session of the Parliament of Mongolia on November 21, 2019, as Resolution 92. Resolution 92 was published on December 6, 2019 and included resolutions to take comprehensive measures to improve the implementation of the Investment Agreement and the ARSHA, to improve the UDP and to explore and resolve options to have a product sharing arrangement or swap Mongolia’s equity holding of 34 per cent for a special royalty.

2020

In February 2020, the Corporation announced the submission of the Mongolian statutory study for the TTPP Project to the Government of Mongolia by Oyu Tolgoi LLC. See “Agreements with the Government of Mongolia – Investment Agreement – Power Supply”.

In February 2020, the Corporation announced that Oyu Tolgoi LLC was unable to reach a resolution of its dispute with the Mongolian Tax Authority with respect to its tax assessment, and was proceeding with the initiation of a formal international arbitration proceeding in accordance with the dispute resolution provisions of the Investment Agreement and the UDP. See “Legal Proceedings”.

In February 2020, Shaft 2 was fully commissioned.

In March 2020, the Corporation announced that following the first positive test for COVID-19 in Mongolia, and increasing restrictions imposed by the Government of Mongolia on flights in and out of the country and on the movement of goods and people within and across its borders, it had established the Oyu Tolgoi Business Resiliency Team to take a considered and risk-based approach to managing the Corporation’s response to the COVID-19 pandemic, but that there would nonetheless be a slowdown on the underground project, the full impact of which was unknown.

In April 2020, the Corporation announced that the unprecedented circumstances of COVID-19 had impacted underground development of Oyu Tolgoi by restricting access for teams from Oyu Tolgoi LLC, Rio Tinto and construction partners from reaching the project. As a result, Shafts 3 and 4 of Oyu Tolgoi

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were placed on care and maintenance until expert service providers could return to site to complete technical commissioning of specialised equipment and commence sinking activities. Work had also slowed on some critical underground material handling infrastructure, in particular the construction of primary crusher one, which had been reduced to day shift activity only, and payload and speed of Shaft 2 were reduced to prolong the ability to use the hoist until specialised personnel could reach Oyu Tolgoi to perform rectification work. Additionally, Oyu Tolgoi LLC notified its project lenders that the COVID-19 pandemic constituted a force majeure event under its project finance facilities, which had the effect of extending the June 30, 2028 project longstop date under those facilities for the duration of the force majeure, and certain suppliers of Oyu Tolgoi declared force majeure on their contracts, although this did not have a material adverse impact on the business.

In June 2020, the Corporation announced that the Government of Mongolia and Oyu Tolgoi LLC reached an agreement to amend the PSFA to reflect joint prioritisation and progression of a SOPP funded and constructed by the Government of Mongolia, in accordance with agreed milestones. See “General Development of the Business – Agreements with the Government of Mongolia – Investment Agreement – Power Supply”.

In May 2020, the Corporation announced that the updated Panel 0 mine design was approved. The approved design was based on a block cave method and includes two pillars, one to the north and one to the south of Panel 0. As a result of the updated design, the anticipated delay to the MSS16 key project milestone of sustainable production previously announced in July 2019 was at the time updated to 25 months (with a range of 21 to 29 months) and the anticipated cost overruns were updated to an increase in development capital cost of $1.5 billion (with a range of $1.3 to $1.8 billion), subject to any additional scheduling delays or increases in capital costs arising from the impacts of the COVID-19 pandemic, which could also reduce the available contingency in the estimates.

In July 2020, the Corporation announced that the MSS20 incorporating the new mine design for Hugo North Lift 1 Panel 0 was delivered to the Government of Mongolia. The new design reduces the Mineral Reserve estimate for the Hugo North underground mine due to the inclusion of the two structural pillars, one to the north and one to the south of Panel 0, to protect ore handling infrastructure. The manager of Oyu Tolgoi advised that part of the ore contained in these pillars may be recoverable at a later stage following additional studies which are currently underway, but that pending the completion of this work in 2021, the material contained in the pillars has been converted from Mineral Reserves to Mineral Resources. MSS20 was submitted to the Government of Mongolia to comply with local regulatory requirements and the 2020 OTTR was filed in August 2020, updating the Oyu Tolgoi Technical Report dated October 14, 2016 to reflect the changes arising from MSS20. The 2020 OTTR does not reflect the impacts of the COVID-19 pandemic.

In July 2020, the Corporation announced that Oyu Tolgoi LLC had advised the Corporation that the Mongolian Anti-Corruption Authority investigation had been concluded and the first instance criminal court had sentenced certain former government officials.

In September 2020, the Corporation announced that it had signed a non-binding Memorandum of Understanding (“MOU”) with Rio Tinto plc concerning the funding of Oyu Tolgoi.

In October 2020, the Corporation announced that it had received an independent consultant’s report with respect to the delay and cost overruns at Oyu Tolgoi announced in July 2019, which the Corporation’s management and the independent members of the Board of Directors were reviewing with their advisors. The Corporation subsequently announced that it supported Oyu Tolgoi LLC’s decision to

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establish a special board committee (the “OT Special Committee”) mandated to conduct an independent review of the causes of the cost overruns and schedule delays to Oyu Tolgoi underground development.

In December 2020, the Corporation announced the completion and delivery by Rio Tinto of the Definitive Estimate review, which refined the analysis contained in MSS20. The Definitive Estimate confirmed a revised base case project development capital cost estimate of $6.75 billion, forecast sustainable first production to occur in October 2022, and increased the Hugo North Mineral Reserves by 10Mt, 0.18Mt contained copper and 0.07Moz contained gold. There was ongoing engagement with Erdenes regarding the Definitive Estimate to enable its further consideration by the board of directors of Oyu Tolgoi LLC, which engagement included investigation of the causes in the increase in cost and schedule extension to the underground development of Oyu Tolgoi during the period between MSS16 and the Definitive Estimate by the OT Special Committee comprised of two representatives of Erdenes and two representatives of the Corporation. A group of consultants called “The Independent Consulting Group” (“ICG”) was hired to conduct the review on behalf of the OT Special Committee. See “Description of the Business – Oyu Tolgoi Project – Mineral Reserves”.

In December 2020, the Corporation announced that Oyu Tolgoi LLC had received and was evaluating a tax assessment for approximately $228 million cash tax from the Mongolian Tax Authority relating to an audit on taxes imposed and paid by Oyu Tolgoi LLC between 2016 and 2018. Most of the matters raised in respect of the $228 million cash tax assessment for the 2016 to 2018 years are of a similar nature to the matters that, in February 2020, were referred to international arbitration for the 2013 to 2015 years, as described above. The Mongolian Tax Authority also made a $1.5 billion adjustment to the balance of Oyu Tolgoi LLC’s carried forward tax losses. The adjustments were to disallow or defer certain tax deductions claimed in the 2016 to 2018 years. The relevant losses are not currently scheduled to be utilised in the near term. See “Legal Proceedings”.

2021

In January 2021, the Corporation announced that the Government of Mongolia had advised Rio Tinto that it was dissatisfied with the results of the Definitive Estimate announced in December 2020 and was concerned that the significant increase in the development costs of Oyu Tolgoi had eroded the economic benefits anticipated therefrom. The Government of Mongolia expressed its intention to initiate discussions with respect to the termination and replacement of the UDP. The Corporation expressed its commitment to engaging with the Government of Mongolia and Rio Tinto to address the UDP and revisit the sharing of economic benefits arising from Oyu Tolgoi in the context of agreeing on a comprehensive financing plan and addressing the other issues raised.

In January 2021, the Corporation announced that Rio Tinto had publicly announced criteria it considered needed to be met before Oyu Tolgoi could begin caving operations by commencement of the undercutting process, then scheduled for June 2021. Turquoise Hill engaged with Rio Tinto and Erdenes to address and agree on the undercut milestones, with the joint objective of preserving the timeline for project completion.

In January 2021, the Corporation announced that Oyu Tolgoi LLC had completed its evaluation of the claim received for approximately $228 million from the Mongolian Tax Authority as announced in December 2020, including a reduction of Oyu Tolgoi LLC’s carried-forward tax losses by approximately $1.5 billion. As many of the matters raised in the tax assessment of the Mongolian Tax Authority for the 2016 to 2018 years are of a similar nature to those raised in the tax assessment for the 2013 to 2015 years which had been referred for international arbitration, Oyu Tolgoi LLC gave notice of its intention to apply to the UNCITRAL tribunal to amend its statement of claim to include the issues raised in the tax

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assessment for the 2016 to 2018 years. In February 2021, Oyu Tolgoi LLC’s application to include these matters was accepted. See “Legal Proceedings”.

In February 2021, a new parliamentary working group was established to monitor the implementation of Resolution 92. The parliamentary working group monitored and provided support to the government working group in discussions with Turquoise Hill and Rio Tinto.

In February 2021, Oyu Tolgoi LLC received notices of payment totalling US$230 million relating to amounts disputed under an audit on taxes imposed and paid by Oyu Tolgoi LLC between 2016 and 2018. In March 2021, Oyu Tolgoi LLC received notices of payment totalling US$126 million relating to amounts disputed under an audit on taxes imposed and paid between 2013 and 2015. Under article 43.3 of the Mongolian General Tax Law, the amounts were due and paid by Oyu Tolgoi LLC within 10 business days from the date of the notices of payment. Under the same legislation, the Corporation is entitled to a refund in the event of a favorable decision from the relevant dispute resolution authorities. See “Legal Proceedings”.

In March 2021, the Corporation announced the resignation of its Chief Executive Officer, Ulf Quellmann, effective March 3, 2021, and the appointment of Steve Thibeault as Interim Chief Executive Officer. Mr. Quellmann also resigned as a director of the Corporation.

In March 2021, the Corporation announced that Oyu Tolgoi LLC had declared force majeure in connection with customer contracts for concentrate as a result of Oyu Tolgoi shipments of concentrate to its Chinese customers being suspended due to COVID-19 health and safety precautions related to Chinese-Mongolian border crossings. In April 2021, the Corporation announced Oyu Tolgoi had partially resumed its cross-border concentrate shipments into China and was evaluating multiple contingencies to address the force majeure situation, including an alternative shipping route via Ulaanbaatar. In July 2021, the Corporation announced the force majeure would remain in place until sufficiently sustained volumes of convoys crossing the border would become possible again so as to ensure Oyu Tolgoi’s ability to meet its ongoing commitments to customers and to return on-site concentrate inventory to target levels.

Effective April 9, 2021, the Corporation and Rio Tinto entered into a binding Heads of Agreement (the “2021 HoA”) to provide an updated funding plan for the completion of the Oyu Tolgoi project designed to address the then estimated remaining funding requirement of approximately $2.3 billion. The 2021 HoA replaced the MOU that Rio Tinto and Turquoise Hill previously entered into in September 2020.

In May 2021, the Corporation announced that the Government of Mongolia had filed its statement of defence together with a counterclaim (“Defence and Counterclaim”) in relation to the previously- disclosed international tax arbitration proceeding brought by Oyu Tolgoi LLC against the Government of Mongolia in February 2020. See “General Development of the Business – Three Year History – 2020”. Although not a party to that arbitration, the Defence and Counterclaim included a request that the arbitral tribunal add both the Corporation and a member of Rio Tinto as parties to the tax arbitration. As part of the counterclaim, the Government of Mongolia made assertions surrounding previously-reported allegations of historical improper payments made to Mongolian officials and sought unquantified damages. Also, in the event Oyu Tolgoi LLC’s tax claims are not dismissed in their entirety, the Government of Mongolia was seeking in the counterclaim an alternative declaration that the Investment Agreement is void. In January 2022, the Corporation announced that following a hearing, the arbitral tribunal issued a ruling deciding that the Corporation would not be added as a party to the arbitration. On February 11, 2022, at the request of the parties to the tax arbitration, the arbitral tribunal issued an

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order suspending the tax arbitration for six months (until August 11, 2022) or until the tribunal receives notice from Oyu Tolgoi LLC or the Government of Mongolia to terminate the order. See “Legal Proceedings”.

In July 2021, the Corporation announced that the underground development progress was significantly impacted during the second quarter of 2021 by the COVID-19 constraints on site and in Mongolia, including restrictions on movement of international expertise. Despite such constraints, the Corporation announced that Material Handling System 1 was greater than 90% complete and that all development and technical readiness activities pertaining to the initiation of the undercut were met or were on track to being met. However, the Corporation announced that it, along with Rio Tinto, was continuing to engage with various Mongolian governmental bodies with a view to resolving outstanding non-technical undercut issues. The Corporation warned that any significant delay to the initiation of the undercut would have a material impact on project schedule, including the timing of sustainable production for Panel 0, as well as the timing and quantum of underground capital expenditure, which would materially adversely impact the timing of expected cash flows from the Oyu Tolgoi underground project thereby increasing the amount of the Corporation’s incremental funding requirement.

In July 2021, the Corporation announced that, in light of the cumulative and ongoing impacts of COVID-19, delayed commitments resulting from non-approval of the Definitive Estimate budget by the Oyu Tolgoi LLC board of directors and outstanding non-technical issues relating to the undercut decision, it expected that there would be further impacts on overall project cost and schedule.

In August 2021, the Corporation announced that ICG had submitted its report to the OT Special Committee, which report raised certain questions in relation to the project management process and suggested that changes in geotechnical parameters did not contribute significantly to the increase in cost and schedule extension. The Corporation announced that it was conducting a detailed review of the report in collaboration with the board of directors of Oyu Tolgoi LLC and would seek a number of clarifications and supporting detailed explanations for certain of the broad conclusions the report contained.

In October 2021, the Corporation announced that, given the cumulative and ongoing impacts of COVID-19, continued delayed commitments resulting from the Definitive Estimate not yet having received the support of all directors of the board of directors of Oyu Tolgoi LLC, as well as the outstanding unresolved non-technical undercut issues, including the support of all Oyu Tolgoi LLC board directors to increase the underground development capital investment and to commence discussions with the project finance lenders, obtaining outstanding required regulatory approvals and agreeing on a pathway to meet Oyu Tolgoi LLC’s long-term power requirements, it expected sustainable production for Panel 0 to be delayed until at least January 2023. The Corporation also announced that Oyu Tolgoi had advised that a 9-month delay on Shafts 3 and 4 was forecast which, in combination with the reduced underground development progress, would result in delays to the start of Panel 2.

In October 2021, the Corporation announced that COVID-19 restrictions had adversely impacted both open pit operations and underground development progress, which, through the end of the third quarter of 2021, had resulted in a cumulative increase of $140 million to the estimate of underground development capital included in the Definitive Estimate.

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In October 2021, the Corporation announced that previously disclosed underground delays and open-pit metal deferrals had caused an increase in the Corporation’s base case estimated incremental funding requirement to $3.6 billion.

In October 2021, the Corporation announced that the updated Resources and Reserves was approved by the Minerals Council of Mongolia in September 2021, and the updated MSS20 would be submitted for assessment once the Resources and Reserves registration process progressed further.

In November 2021, and as part of its third quarter 2021 financial disclosures and filings, the Corporation elaborated that it then expected sustainable production for Panel 0 to be delayed to the first half of 2023, broadly in line with the then forecast 6-month delay to undercut commencement, and that the previously announced 9-month delay on Shafts 3 and 4, in combination with the COVID-related reduced underground development progress and expected changes to mining scope, would result in delays to the start of Panel 2 by approximately 14-16 months compared to the Definitive Estimate, and to the start of Panel 1 by approximately 11 months compared to the Definitive Estimate.

In November 2021, the Corporation announced that in light of the progress made in the ongoing negotiations between the Government of Mongolia, Rio Tinto and the Corporation, the board of directors of Oyu Tolgoi LLC had approved a bridging budget of $75 million to continue to progress critical activities in the Oyu Tolgoi underground mine development project. At the time, the Corporation anticipated that the approved increase would be sufficient to sustain work on the development of the Oyu Tolgoi underground mine up to mid January 2022.

In December 2021, the Corporation announced that the Corporation and Rio Tinto made a joint offer to the Government of Mongolia which aimed to reset the relationship and allow all parties to move forward together. The offer included, among other elements, a proposal to forgive and write-off the entirety of the approximately $2.3 billion carry account owing by Erdenes to the Corporation and termination of the UDP on a go-forward basis.

2022 to Date

On January 24, 2022, the Corporation announced that it had reached a mutual understanding for a renewed partnership with the Government of Mongolia, and that the board of directors of Oyu Tolgoi LLC had unanimously approved the commencement of the undercut in the ensuing days. As part of the resolution of outstanding issues relating to the development of the Oyu Tolgoi underground project and the entering into of key agreements with the Government of Mongolia (the “GoM Agreements”), the Corporation agreed to waive in full the $2.4 billion carry account loan of Erdenes. The parties also agreed to improve cooperation with Erdenes in monitoring the Oyu Tolgoi underground development and enhancing environmental, social and governance (“ESG”) matters. The Corporation also announced that it had entered into the A&R HoA, a binding agreement which delineates a comprehensive funding arrangement to address the Corporation’s estimated base case incremental funding requirement which, prior to giving effect to the funding elements contemplated by the A&R HoA, was estimated to be $3.4 billion as at December 31, 2021. The GoM Agreements relate to the write-off of the carry account loan, the improved cooperation with Erdenes in monitoring the Oyu Tolgoi underground development and enhancing ESG matters, the approval of an electricity supply agreement (“ESA”) to provide Oyu Tolgoi with a long-term source of power from the Mongolian grid on terms fully agreed with the Government of Mongolia, and the establishment of a funding structure at Oyu Tolgoi that does not incur additional

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loan financing prior to sustainable production for Panel 0 (expected in the first half of 2023). The GoM Agreements are considered to address and satisfy, pursuant to Resolution 103, the implementation of a majority of the measures set out in Resolution 92. The Corporation stated that it was continuing to work with the Government of Mongolia and Rio Tinto to finalise the remaining outstanding measures of Resolution 103, namely the formal termination of the UDP and resolution of the outstanding Oyu Tolgoi LLC tax arbitration. See “General Development of the Business – Agreements with the Rio Tinto – A&R HoA”.

Following progress in negotiations with the Government of Mongolia, all undercut readiness criteria were achieved on January 24, 2022, and undercutting began on January 25, 2022.

On March 1, 2022, Oyu Tolgoi LLC notified the Corporation that it received a letter from the Mongolian Anti-Corruption Authority requesting certain documents and information relating to an investigation regarding the underground construction work.

Agreements with Rio Tinto

In 2006, the Corporation identified RTIH as a strategic investor to support the development of Oyu Tolgoi. The parties have entered into a series of agreements since 2006 pursuant to which RTIH has provided equity and debt financing to fund the ongoing development of Oyu Tolgoi and operations of the Corporation. Since 2006, RTIH, together with other Rio Tinto affiliates, has acquired Common Shares representing a 50.8% majority ownership interest in Turquoise Hill, and is responsible for the day-to-day operational management and development of Oyu Tolgoi.

Private Placement Agreement

In October 2006, Turquoise Hill and RTIH entered into a private placement agreement (as amended, the “Private Placement Agreement”), which provided for the initial equity investment by RTIH in the Corporation, by way of two tranches, the first of which closed in October 2006 and the second of which closed in October 2009. RTIH was also granted pre-emptive rights entitling it to participate, subject to certain specific exceptions, in future issuances of Common Shares on a basis sufficient to maintain its percentage shareholding interest in the Corporation on economic terms equivalent to those upon which any such Common Shares are issued to third parties. RTIH’s pre-emptive rights remain in effect. RTIH and the Corporation also agreed to establish a committee through which RTIH and the Corporation consult with one another in good faith and use reasonable efforts to reach a consensus with respect to the objectives, procedures, methods and actions to be taken in furtherance of the development, operation and management of Oyu Tolgoi (the “Technical Committee”). The Technical Committee consists of two members appointed by RTIH, two members appointed by the Corporation and a chair appointed by RTIH. The foregoing is a summary only and is qualified in its entirety by reference to the Private Placement Agreement, a copy of which has been filed with the Canadian Securities Authorities on SEDAR at www.sedar.com.

2010 HoA

In December 2010, Turquoise Hill and RTIH entered into a heads of agreement (as amended, the “2010 HoA”), whereby Turquoise Hill and RTIH agreed to, among other things, RTIH’s support and full participation in a rights offering which was completed by the Corporation in February 2011, the financing and management of Oyu Tolgoi, replacing or amending certain contractual obligations under the Private Placement Agreement and acting together diligently and in good faith to negotiate the Oyu Tolgoi

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Project Financing. The Corporation and RTIH further agreed to cause three nominees from each of the Corporation and RTIH to be appointed as directors of Oyu Tolgoi LLC reserved for the Oyu Tolgoi Shareholder Holdcos under the ARSHA. These nominees must exercise their voting rights under the ARSHA in accordance with instructions given by an operating committee (the “Operating Committee”) which is comprised of two nominees from each of the Corporation and RTIH, with a RTIH nominee serving as chairman. All decisions of the Operating Committee, other than decisions in respect of certain defined special matters, require a majority vote of the members with a casting vote of the chair in the case of a tie. Decisions in respect of “special matters”, such “special matters” being set out in the 2010 HoA, require a unanimous vote of the members of the Operating Committee. RTIH was also granted the right to appoint an affiliate to manage Oyu Tolgoi pursuant to the terms of a management agreement. The foregoing is a summary of certain terms of such agreement only and is qualified in its entirety by reference to the 2010 HoA, a copy of which has been filed with the Canadian Securities Authorities on SEDAR at www.sedar.com.

2012 MoA

In April 2012, the Corporation, RTIH and RTSEA entered into a memorandum of agreement, which was subsequently amended in May 2012 (as amended, the “2012 MoA”). The 2012 MoA contemplated, among other things, RTIH’s support and full participation in a rights offering which was completed by the Corporation in July 2012, a comprehensive financing plan intended to address the total funding needs of the Corporation, with a primary focus on Oyu Tolgoi Project Financing, certain matters relating to the management of the Corporation, and certain amendments to the 2010 HoA.

In accordance with the terms of the 2010 HoA, under the 2012 MoA, RTIH and the Corporation agreed to continue to act together diligently and in good faith to negotiate Oyu Tolgoi Project Financing, on terms acceptable to the Corporation, RTIH, and the board of directors of Oyu Tolgoi LLC, each acting reasonably. It was further agreed that designated RTIH personnel, as determined by the Rio Tinto Treasurer, would act as lead negotiator in connection with Oyu Tolgoi Project Financing and have the exclusive authority to direct all aspects of the negotiation of the day-to-day management of Oyu Tolgoi Project Financing. Provided that Oyu Tolgoi Project Financing was made available on terms reasonably satisfactory to RTIH and RTIH was reasonably satisfied at the Oyu Tolgoi Project Financing closing date that Oyu Tolgoi (including a power plant) was fully financed (including a reasonable provision for contingencies), it was agreed that a RTIH affiliate would enter into a completion support agreement with the Corporation, pursuant to which such affiliate would agree to provide a completion support guarantee to the lenders of Oyu Tolgoi Project Financing.

In consideration for providing completion support, an annual fee equal to 2.5% of the amounts drawn under the Project Finance Facility is payable to Rio Tinto by the Turquoise Hill Group (the “Completion Support Undertaking”). The annual completion support fee will apply to funding used for facility fees and taxes at the initial drawdown, as well as amounts used to fund development of Oyu Tolgoi. The obligation to pay the completion support fee will terminate on the date Rio Tinto’s completion support obligations to the Oyu Tolgoi Project Financing lenders terminate.

The foregoing is a summary of certain terms of such agreement only and is qualified in its entirety by reference to the 2012 MoA, a copy of which has been filed with the Canadian Securities Authorities on SEDAR at www.sedar.com.

2013 MoA

In August 2013, the Corporation, RTIH and RTSEA entered into a memorandum of agreement, which was subsequently amended in November 2013 (as amended, the “2013 MoA”). Under the 2013 MoA, the

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Corporation, RTIH and RTSEA agreed to the key terms and conditions of a rights offering, which was completed by the Corporation in January 2014 (the “2013 Rights Offering”). They also reaffirmed their agreement to act together diligently and in good faith to negotiate Oyu Tolgoi Project Financing. The foregoing is a summary of certain terms of such agreement only and is qualified in its entirety by reference to the 2013 MoA, a copy of which has been filed with the Canadian Securities Authorities on SEDAR at www.sedar.com.

A&R HoA

On January 24, 2022, the Corporation and Rio Tinto announced that, in connection with the GoM Agreements, they had amended and restated the 2021 HoA to provide a further updated funding plan for the completion of the Oyu Tolgoi underground project in Mongolia. The A&R HoA replaces and supersedes the 2021 HoA, is binding, and delineates a comprehensive funding arrangement to address the Corporation’s estimated incremental funding requirements. Key elements of the A&R HoA include: pursuing the rescheduling of principal repayments of existing debt (“Re-profiling”) to potentially reduce the base case funding requirement by up to $1.7 billion; seeking to raise up to $500 million of Senior Supplemental Debt (“SSD”); Rio Tinto committing to provide a co-lending facility, incremental to the Re-profiling and the SSD, of up to $750 million to be made available once sustainable production is achieved (the “Co-Lending Facility”); Rio Tinto committing to provide a short-term bridge financing directly to the Corporation by way of one or more secured advances up to a maximum of $300 million, which would be available during the debt funding restriction period identified in Resolution 103 and would be indirectly repaid out of the proceeds of the Co-Lending Facility; and the Corporation agreeing to conduct an equity offering in a form of its choosing of at least $650 million (including a Rio Tinto pro rata participation) by no later than August 31, 2022. Further, the A&R HoA provides that, if necessary, the Corporation could be required to raise up to a total of $1.5 billion (less the amount raised in the initial equity offering) via equity in a form of its choosing.

In addition, in connection with the Corporation’s negotiations with Rio Tinto with respect to the GoM Agreements and the A&R HoA, a special committee of the Board comprised solely of independent directors of the Corporation (the “Special Committee (Operations)”) sought to achieve a comprehensive solution that would allow all parties to move forward in a manner that advances the development of the project for the benefit of all stakeholders, including the Mongolian people and Turquoise Hill’s shareholders.

In assessing whether the terms of the GoM Agreements and the A&R HoA should be recommended for approval by the Board, the Special Committee (Operations) with the advice of external advisors, considered the following non-exhaustive list of considerations: the proposed GoM Agreements and the A&R HoA; views expressed by the Government of Mongolia and various minority shareholders with respect to the performance of Rio Tinto OT Management Limited, a subsidiary of Rio Tinto and manager of Oyu Tolgoi (“Rio Tinto Manager”); Rio Tinto’s position with respect to Rio Tinto Manager’s performance; inherent risks in large underground project development; and the terms of the agreements between the Corporation, Oyu Tolgoi LLC, and Rio Tinto, including those which establish a “gross fault” standard for liability for Rio Tinto Manager and the absence of guarantees with respect to project cost or time for completion.

The Special Committee (Operations) further considered the significant benefits of resolving all matters amongst the parties, including enabling the parties to proceed with the undercut, avoiding further delays that would likely arise if the parties were unable to resolve outstanding issues and the additional costs

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and potential value destruction of such delays as well as the value of the concessions offered by Rio Tinto in amending the terms of the 2021 HoA. After weighing these and other considerations, the Special Committee (Operations) determined that it would be in the best interests of the Corporation to obtain a comprehensive resolution of outstanding issues between all parties involved in the Oyu Tolgoi underground project that enables the project to move forward.

Therefore, the Special Committee (Operations) recommended to the Board that the Corporation accept the terms in the A&R HoA, including a provision whereby the Corporation has agreed not to assert any claims of breach of any obligation of Rio Tinto or its affiliates under any agreement between the Corporation or any of its subsidiaries and Rio Tinto or any of its affiliates based on facts available to and known by the Corporation as of the date of the A&R HoA.

The foregoing is a summary of certain terms of such agreement only and is qualified in its entirety by reference to the A&R HoA, a copy of which has been filed with the Canadian Securities Authorities on SEDAR at www.sedar.com.

Agreements in Connection with Oyu Tolgoi Project Financing

The Corporation has entered into a number of agreements in connection with, and/or in consideration for, the Project Finance Facility and the Completion Support Undertaking, including: a financing support agreement with Rio Tinto dated December 15, 2015 (the “Turquoise Hill Financing Support Agreement”); and a financing support agreement with Oyu Tolgoi LLC and Rio Tinto dated December 15, 2015 (the “Oyu Tolgoi Financing Support Agreement”).

Turquoise Hill Financing Support Agreement

The provisions contained in the Turquoise Hill Financing Support Agreement are broadly in line with the principles, provisions and restrictive covenants established under the 2012 MoA. Under the Turquoise Hill Financing Support Agreement, Rio Tinto has the right to require that the Corporation effect an equity contribution by way of private placement of Turquoise Hill shares to Rio Tinto or a rights offering similar in form and structure to the 2013 Rights Offering in the event a fact or circumstance occurs which (i) affects or could reasonably be expected to affect the Corporation’s ability to meet its obligations under the sponsor debt service undertaking that the Corporation entered into with Rio Tinto, the project lenders and agents representing such lenders in May 2016 (the “Sponsor Debt Service Undertaking”) in order to guarantee to the finance parties the payment of principal, interest and fees owed by Oyu Tolgoi LLC to the senior lenders under the Oyu Tolgoi Project Financing, or (ii) gives rise to an event of default or completion default under the agreements entered into in connection with the Project Finance Facility. Under the Turquoise Hill Financing Support Agreement, the Corporation also has the right to propose an alternative financing proposal to Rio Tinto which, depending on the nature of such proposal, may require Rio Tinto’s consent. The parties have agreed that the aggregate amount of any such funding mechanisms shall not exceed 25% of Turquoise Hill’s market capitalisation as of the date of signing. Any such transaction shall also be subject to applicable securities laws.

The Turquoise Hill Financing Support Agreement also contains certain restrictions relating to the conduct of the Corporation’s business and operations and to the implementation of certain corporate transactions until the later of (i) the date the Completion Support Undertaking terminates, (ii) the date that all senior loan advances under the agreements entered into in connection with the Project Finance Facility are repaid in full, and (iii) the date that all subordinated debt advances by Rio Tinto have been repaid in full, which shall be deemed to be the date on which the Completion Support Undertaking

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terminates if, as of such date, the aggregate amount of subordinated debt advances by Rio Tinto has not exceeded $500 million.

Oyu Tolgoi Financing Support Agreement

Under the Oyu Tolgoi Financing Support Agreement, in the event a fact or circumstance occurs which affects or could reasonably be expected to affect Oyu Tolgoi LLC’s ability to meet its obligations under the agreements entered into in connection with the Project Finance Facility or give rise to an event of default thereunder, Rio Tinto shall have the right to require that Oyu Tolgoi LLC borrow funds from Rio Tinto (or an affiliate thereof) by way of a senior debt advance or a subordinated debt advance, or borrow funds from a third party senior lender. The proceeds of any such advances shall be used to repay amounts due and owing to the Oyu Tolgoi Project Financing lenders.

The foregoing is a summary of certain terms of such agreements only and is qualified in its entirety by reference to the Turquoise Hill Financing Support Agreement and the Oyu Tolgoi Financing Support Agreement, a copy of each of which has been filed with the Canadian Securities Authorities on SEDAR at www.sedar.com.

Additional Agreements

There are also various agreements in place between the Corporation and Rio Tinto relating to the provision of services to Turquoise Hill, including but not limited to finance, accounting, tax, treasury and exploration services.

In addition, the Corporation and Rio Tinto have entered into a Non-Disclosure Agreement to consolidate the pre-existing confidentiality provisions in certain agreements.

Agreements with the Government of Mongolia

Investment Agreement

The Investment Agreement provides for, among other things, a framework for maintaining a stable tax and operational environment for Oyu Tolgoi, protection of the parties’ investment in Oyu Tolgoi, the term of the parties’ investment in Oyu Tolgoi, the right to realise the benefits of such investment, the undertaking of mining activities with minimum damage to the environment and human health, the rehabilitation of the environment, the social and economic development of the Southern Gobi region and the creation of new jobs in Mongolia.

Effective Date

The Investment Agreement became effective as of March 31, 2010 (the “Effective Date”), following the satisfaction of all conditions precedent to its effectiveness. These conditions included the completion of a number of corporate transactions intended to establish an efficient foundation for the operation of Oyu Tolgoi and the respective interests of the parties, such as the restructuring of Oyu Tolgoi LLC and the conversion of certain exploration licences to mining licences.

Term

The Investment Agreement has an initial term of 30 years from the Effective Date (the “Initial Term”). Oyu Tolgoi LLC has the right, exercisable by notice given not less than 12 months prior to the expiry of the

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Initial Term and subject to the fulfillment of certain conditions, to extend the Initial Term of the Investment Agreement for an additional term of 20 years (the “Renewal Term”).

In order to exercise its right to obtain the Renewal Term, Oyu Tolgoi LLC must have performed certain obligations during the Initial Term, including, among others:

· having demonstrated that Oyu Tolgoi has been operated to industry best practice in terms of national and community benefits, environment and health and safety practices;

· having made capital expenditures in respect of Oyu Tolgoi of at least $9 billion;

· having complied in all material respects with its obligations to pay taxes under the laws of Mongolia, as stabilised under the terms of the Investment Agreement;

· if, as part of the development of Oyu Tolgoi, Oyu Tolgoi LLC has constructed, or is constructing, a copper smelter, Oyu Tolgoi LLC must have constructed or be constructing such smelter in Mongolia;

· if the development and operation of Oyu Tolgoi has caused any unanticipated and irreversible ecological damage to natural resources in Mongolia, Oyu Tolgoi LLC must have paid compensation based on the value of any such permanently damaged natural resources in accordance with the applicable laws of Mongolia; and

· having secured the total power requirements for Oyu Tolgoi from sources within the territory of Mongolia within four years of Commercial Production.

Investment Protection

The Investment Agreement confirms Oyu Tolgoi LLC’s rights to market, sell and export mineral products from Oyu Tolgoi at international market prices and to freely expend and repatriate its sale proceeds in Mongolian togrogs and foreign currencies. It also conveys legal protection on capital, property and assets of Oyu Tolgoi LLC and its affiliates, and the requirement that any expropriation action must be in accordance with due process of law on a non-discriminatory basis and with the condition of full compensation by the Government of Mongolia to the affected party.

Taxes, Royalties and Fees

Throughout the Initial Term and the Renewal Term, if any, all taxes payable by Oyu Tolgoi LLC will remain stabilised. The annual corporate income tax rate is stabilised. In addition to corporate income tax, the following taxes have been stabilised: customs duties; value-added tax; excise tax (except on gasoline and diesel fuel purchases); royalties; mineral exploration and mining licence payments; and immovable property tax and/or real estate tax.

Taxation on dividends and other forms of income have also been stabilised. Non-stabilised taxes shall apply to Oyu Tolgoi LLC on a non-discriminatory basis.

Infrastructure

All roads, pipelines and other transportation infrastructure funded or constructed by Oyu Tolgoi LLC or its affiliates in connection with the development of Oyu Tolgoi are required to be constructed to a standard necessary to meet the specific requirements of Oyu Tolgoi only. Oyu Tolgoi LLC may provide the public, the Government of Mongolia and third parties with access to certain infrastructure and/or services, provided such access does not interfere with the operation of Oyu Tolgoi. In addition, Oyu

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Tolgoi LLC may recover costs by way of payments or collection of tolls from those persons or entities using such infrastructure and/or services.

Oyu Tolgoi LLC is permitted to construct a road between the Oyu Tolgoi site and the Gashuun Sukhait border crossing with China. Oyu Tolgoi LLC may deduct the road construction expenses from its annual taxable income. The Government of Mongolia is responsible for the maintenance of the road and the collection of road use fees from any third party users. Oyu Tolgoi LLC and its contractors/sub-contractors are exempt from any such road use fees.

Oyu Tolgoi LLC has the right to access, and to use, self-discovered water resources for any purpose connected with Oyu Tolgoi during the life of Oyu Tolgoi, including construction, commission, operation and rehabilitation of Oyu Tolgoi. Oyu Tolgoi LLC is required to pay fees for its water use but such fees must be no less favourable than those payable from time to time by other domestic and international users, must take into account the quantity and quality of the water removed and consumed, and are treated as a deductible expense from Oyu Tolgoi LLC’s taxable income.

Power Supply

During the construction period of Oyu Tolgoi and until the four year anniversary of Commercial Production, Oyu Tolgoi LLC has the right to import electric power from sources outside Mongolia, including China. Within four years of Commercial Production, Oyu Tolgoi LLC is required to secure all of its power requirements for Oyu Tolgoi from a domestic Mongolian source.

In August 2014, Oyu Tolgoi LLC entered into the PSCA with the Government of Mongolia for the exploration of a Tavan Tolgoi-based independent power producer. The PSCA laid out a framework for long-term strategic cooperation between the Government of Mongolia and Oyu Tolgoi LLC to deliver a comprehensive energy plan for the South Gobi region. In February 2018, Oyu Tolgoi received notification that the Government of Mongolia had cancelled the PSCA. The cancellation, under Section 1.3 of the PSCA, indicated that the TTPP Project was no longer a viable option. As a result of the Government of Mongolia’s cancellation, effective February 15, 2018, long-term power for Oyu Tolgoi was required to be domestically sourced within four years of such date.

In May 2015, the Corporation entered into the UDP with the Government of Mongolia, Erdenes, THR Oyu Tolgoi Ltd., Oyu Tolgoi Netherlands B.V., RTIH and Oyu Tolgoi LLC, which addresses, among other things, the sourcing of power for Oyu Tolgoi from within Mongolia. For more information on the UDP, see “General Development of the Business – Agreements with the Government of Mongolia – UDP”.

In May 2017, Oyu Tolgoi LLC entered into the Power Agreement with NPTG. The Power Agreement was executed in connection with the power import arrangement between NPTG and the IMPIC, which took effect on July 4, 2017. The Power Agreement has a term of up to six years.

In December 2018, Oyu Tolgoi LLC entered into the PSFA with the Government of Mongolia, which initially provided a binding framework and pathway forward for the construction of a Tavan-Tolgoi-based power solution for the Oyu Tolgoi Mine by June 30, 2023. The power plant would have been majority owned by Oyu Tolgoi LLC and situated close to the Tavan Tolgoi coal mining district located approximately 150 kilometres from the Oyu Tolgoi mine. The PSFA required the construction of a coal-fired power plant in conjunction with other sources of power including imported or back-up power, power from the Mongolian national grid, renewables power and diesel power.

In June 2020, Oyu Tolgoi LLC and the Government of Mongolia amended the PSFA to reflect their agreement to jointly prioritise and progress a SOPP at Tavan Tolgoi as the domestic source of power for Oyu Tolgoi, in accordance with and subject to agreed milestones. The agreed milestones include signing

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a Power Purchase Agreement for the supply of power to Oyu Tolgoi by March 31, 2021, commencing construction of a SOPP by no later than July 1, 2021, commissioning of the SOPP within four years thereafter, and reaching an agreement with IMPIC on an extension to the existing power import agreement by March 1, 2021 in order to ensure that there is no disruption to the power supply required to safeguard Oyu Tolgoi’s ongoing operations and development.

The amended PSFA provides that if the agreed milestones are not met in a timely manner, then Oyu Tolgoi LLC will be entitled to select from, and implement, the alternative power solutions specified in the amended PSFA, including a coal-fired power plant at Oyu Tolgoi, the Mongolian grid or a primary renewables solution, and the Government of Mongolia would be obliged to support such a decision. The milestones in the amended PSFA have not been met.

On February 25, 2021, the Government of Mongolia formally notified Oyu Tolgoi LLC and Rio Tinto that the Tavan Tolgoi thermal power station project will be implemented, connected to the Central Energy System and operated under a unified load dispatch control. The letter also stated that agreement on the long-term power supply to Oyu Tolgoi LLC is related to the extension of the power import arrangements with IMPIC. In recognising the linkage of the extension of the IMPIC supply arrangements with the progress on resolving the issue of domestic power supply, the Government of Mongolia suggested that all milestone dates under the amended PSFA be extended. On January 24, 2022, the Corporation announced that, in connection with the GoM Agreements, the Oyu Tolgoi LLC board of directors had approved the signing of the ESA to provide Oyu Tolgoi with a long-term source of power from the Mongolian grid on terms fully agreed with the Government of Mongolia. On January 26, 2022, Oyu Tolgoi LLC entered into the ESA with, amongst others, Southern Region Electricity Distribution Network. Power will be delivered pursuant to the ESA once certain technical conditions are satisfied. Those conditions require that either (i) an updated grid study is prepared which demonstrates that the Mongolian grid is able to deliver stable, reliable, secure and uninterrupted supply of electricity to Oyu Tolgoi LLC’s facility, or (ii) that a high-voltage, direct current (HVDC) converter has begun construction, and associated agreements are in place, providing the technical ability to connect with the Chinese grid when supplying electricity to Oyu Tolgoi from the Mongolian grid.

The ESA has a term of 20 years from the date on which supply commences and provides a pathway to meeting Oyu Tolgoi LLC’s long-term power requirements from domestic power sources.

While the Mongolian national grid undergoes an upgrade to be in a position to provide stable and reliable power to the Oyu Tolgoi mine, Oyu Tolgoi LLC will continue to import its power from Inner Mongolia, China. An agreement-in-principle has been reached between NPTG and IMPIC for a three-year fixed term extension to 2026, potentially followed by an extension to up to 2030, if required (the current agreement expires in July 2023). The outstanding commercial terms are in the process of being finalised.

Local Communities

Oyu Tolgoi LLC conducts, implements, and, from time to time, updates, socio-economic impact assessments, socio-economic risk analyses, multi-year community plans, community relations management systems, policies, procedures and guidelines, and mine closure plans, all of which shall be produced with community participation and input and be consistent with international best practices. Oyu Tolgoi LLC will also conduct community development and education programmes.

Oyu Tolgoi LLC prioritises the training, recruiting and employment of citizens from local communities for Oyu Tolgoi, giving specific preference to the citizens of Umnugobi Aimag. Given that Commercial

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Production has been achieved, 90% of the employees at Oyu Tolgoi must be Mongolian nationals. Oyu Tolgoi LLC must also use its best endeavours to ensure that 50% of its engineers are Mongolian nationals within five years of achieving Commercial Production (i.e. by September 2018), which target is achieved, and increasing to 70% after ten years of achieving Commercial Production (i.e. after September 2023). Oyu Tolgoi LLC must use its best efforts to ensure that not less than 60% of its contractors’ employees are Mongolian nationals for construction work and 75% of its contractors’ employees are Mongolian nationals for mining and mining related work. See also “Sustainability” for further information.

Environment

The Investment Agreement also includes environmental protection provisions, in accordance with which Oyu Tolgoi LLC will implement an environmental protection plan and provide to the Government of Mongolia an independent report on progress every three years. In 2012, the Corporation completed the Environmental and Social Impact Assessment (“ESIA”) and shortly thereafter such plan was submitted to the Government of Mongolia. Independent reports on progress were subsequently submitted in 2014, 2016, 2018 and 2020.

The Mongolian Detailed Environmental Assessments (“DEIA”) are subject to periodic review on 5-year cycles or when there are significant changes to the project description.

Disputes

Any dispute that is not resolved through negotiation will be resolved by binding arbitration in accordance with the procedures under the Arbitration Rules of the United Nations Commission on International Trade Law in force at the time of the dispute.

ARSHA

Concurrently with the execution of the Investment Agreement, Oyu Tolgoi LLC and the Oyu Tolgoi Shareholder Holdcos entered into the ARSHA with Erdenes. Erdenes MGL LLC transferred its shares in Oyu Tolgoi LLC and its rights and obligations under the ARSHA to its subsidiary, Erdenes. The ARSHA contemplates the basis upon which the Government of Mongolia, through Erdenes, acquired an initial 34% equity interest in Oyu Tolgoi through a shareholding in Oyu Tolgoi LLC and provides for the respective rights and obligations of the parties as shareholders of Oyu Tolgoi LLC.

On June 8, 2011, the parties to the ARSHA amended the interest payable terms under such agreement. Specifically, the interest rate to be applied to Existing Shareholder Loans, Shareholder Debt and Government Debt (each as defined and discussed further below) on and from January 31, 2011, was reduced to LIBOR plus 6.5%.

Ownership of Oyu Tolgoi LLC

Under the terms of the ARSHA, within 21 business days after the Effective Date, Oyu Tolgoi LLC issued to Erdenes that number of common shares of Oyu Tolgoi LLC (“Oyu Tolgoi Shares”) that, upon issuance, represented 34% of the then issued and outstanding Oyu Tolgoi Shares. If Oyu Tolgoi LLC exercises its right under the Investment Agreement to obtain the Renewal Term, Erdenes shall have the option to acquire additional Oyu Tolgoi Shares on terms to be agreed upon between Erdenes and the Oyu Tolgoi Shareholder Holdcos, to increase its shareholding in Oyu Tolgoi LLC to 50%. Erdenes’ shareholding of Oyu Tolgoi LLC may not be diluted by the issuance of new Oyu Tolgoi Shares without its consent.

Management of Oyu Tolgoi

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Oyu Tolgoi LLC’s board of directors must appoint a management team for Oyu Tolgoi as nominated by the Oyu Tolgoi Shareholder Holdcos to provide management services to Oyu Tolgoi LLC. The management team engaged by Oyu Tolgoi LLC is responsible for providing management services to Oyu Tolgoi LLC for Oyu Tolgoi and is required to report to Oyu Tolgoi LLC’s board of directors on a quarterly basis. For more information on the management of Oyu Tolgoi, see “General Development of the Business – Agreements with Rio Tinto – 2010 HoA”.

Management Services Payment

The ARSHA provides that a management services payment is payable to the management team in the amount of 3% of Oyu Tolgoi’s operating and capital costs incurred prior to Commercial Production and 6% thereafter. The management team can direct Oyu Tolgoi LLC to pay part or all of this management services payment to the Corporation, RTIH or their respective affiliates. This management services payment is shared, as to 50%, by the Corporation and its affiliates and, as to 50%, by RTIH and its affiliates, as agreed separately by the Corporation and RTIH. Notwithstanding the foregoing, it was agreed in the UDP that in calculating the management services payment, the rate applied to capital costs of the underground development is to be 3% instead of 6%, as provided by the ARSHA. The management services payment rate on operating costs and capital related to current operations remains at 6%. For more information see “General Development of the Business – Agreements with the Government of Mongolia – UDP”. Election of Directors

Appointment of directors as between the Oyu Tolgoi Shareholder Holdcos and Erdenes is divided pro rata based on their respective shareholdings. The Oyu Tolgoi Shareholder Holdcos have the right to nominate six directors and Erdenes has the right to nominate three directors. Under the 2010 HoA, the Corporation and RTIH have agreed that the six directors nominated by the Oyu Tolgoi Shareholder Holdcos will be comprised of three nominees from each of the Corporation and RTIH. See “General Development of the Business – Agreements with Rio Tinto – 2010 HoA”.

Existing Shareholder Loans and Cash Calls

All funds advanced to Oyu Tolgoi LLC prior to the Effective Date by the Corporation, RTIH or any of their respective affiliates in relation to Oyu Tolgoi (the quantum of which has been agreed to by Oyu Tolgoi LLC and the Government of Mongolia), including interest thereon (collectively, the “Existing Shareholder Loans”), are repayable prior to any dividends or distributions being made to the shareholders of Oyu Tolgoi LLC, as further discussed below.

Oyu Tolgoi LLC may request that the shareholders of Oyu Tolgoi LLC contribute funds (“Called Sums”) in proportion to their respective share ownership interests in Oyu Tolgoi LLC to meet the projected cash requirements of Oyu Tolgoi LLC under Oyu Tolgoi programmes and budgets approved by Oyu Tolgoi LLC’s board of directors.

During the period commencing on the date Erdenes acquired its 34% interest in Oyu Tolgoi LLC and ending in September 2021 (the “Funding Period”), the Oyu Tolgoi Shareholder Holdcos agreed to fund all contributions of Called Sums, including those otherwise payable by Erdenes, unless Erdenes elected to contribute to any Called Sum. Such contributions on Erdenes’ behalf (“Government Debt”) are subject to interest as set out below. All dividends payable to Erdenes must be paid by Oyu Tolgoi LLC to the Oyu Tolgoi Shareholder Holdcos (or nominated Turquoise Hill Group or Rio Tinto companies) in repayment of the principal and interest outstanding on Government Debt, but otherwise the Oyu Tolgoi Shareholder

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Holdcos have no recourse to Erdenes. In addition, Erdenes may elect to repay outstanding Government Debt at any time.

Since the expiry of the Funding Period, Erdenes has the option of contributing to any required funding, but is not obligated to do so. Regardless of whether or not Erdenes contributes funding, its shareholding in Oyu Tolgoi LLC cannot be diluted. If Erdenes elects not to fund its proportionate share, the Oyu Tolgoi Shareholder Holdcos have the right to meet the full funding requirement in a manner similar to that during the Funding Period (but are not obligated to do so).

Each of the Government Debt, the Existing Shareholder Loans and shareholder debt provided after the Effective Date (“Shareholder Debt”) accrues interest at a rate of LIBOR plus 6.5%.

On January 24, 2022, the Corporation announced that as part of the GoM Agreements, it had agreed to waive in full the $2.4 billion of Government Debt, comprising the amount of Called Sums invested in Oyu Tolgoi LLC by the Corporation on behalf of Erdenes ($1.4 billion), plus $1.0 billion of accrued interest.

Payment of Dividends

All principal and interest outstanding on Shareholder Debt, Government Debt and the Existing Shareholder Loans must be paid in full to the Corporation prior to the payment of any dividends to the shareholders of Oyu Tolgoi LLC. Subject to the foregoing, if Oyu Tolgoi LLC has profits available for distribution in respect of any completed financial year, Oyu Tolgoi LLC’s board of directors will declare that all of those profits must be distributed by way of cash dividends within three months after the end of that financial year, subject to the retention of reasonable and proper reserves for Oyu Tolgoi LLC’s future cash requirements (including potential expansions, working capital, and the maintenance of funds for capital costs and other actual or contingent liabilities).

Transfer of Shares of Oyu Tolgoi LLC to Third Parties

No shareholder of Oyu Tolgoi LLC may dispose of or transfer any of its shares to a third party without first offering such shares to the other shareholders of Oyu Tolgoi LLC on equivalent commercial terms as those offered by the relevant third party.

UDP

The signing of the UDP provided a pathway forward in addressing outstanding shareholder matters to restart underground development at Oyu Tolgoi. The UDP confirmed the project cost for Oyu Tolgoi’s initial construction and development and reinforced the principles set out in the Investment Agreement and the ARSHA. The UDP and certain related agreements addressed key outstanding matters including the following specific items: tax matters, entitlement to payments of a 2% NSR royalty, sales royalty calculation, management services payments and principles of a comprehensive financing plan, including project financing for development of the underground at Oyu Tolgoi. Such agreements also addressed the sourcing of power for Oyu Tolgoi from within Mongolia.

The Parliament of Mongolia approved Resolution 103 to resolve the outstanding issues that the Corporation and Rio Tinto had been negotiating with the Government of Mongolia in relation to Resolution 92. While a number of outstanding issues were resolved as part of the GoM Agreements announced by the Corporation on January 24, 2022, Turquoise Hill continues to work with the Government of Mongolia and Rio Tinto to finalise the remaining outstanding measures of Resolution 92, including the formal termination of the UDP and resolution of the outstanding tax arbitration.

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The foregoing is a summary of certain terms of such agreements only and is qualified in its entirety by reference to the Investment Agreement, the PSFA, the ARSHA and the UDP, a copy of each of which has been filed with the Canadian Securities Authorities on SEDAR at www.sedar.com.

SUSTAINABILITY

The Corporation has a Health, Safety, Environment and Communities (“HSEC”) Policy that affirms its commitment to protecting the environment and to safeguarding the health, safety and welfare of people affected by the Corporation or its subsidiaries including employees, contractors and communities in which Turquoise Hill operates. The Corporation is dedicated to performing its duties in a safe, sustainable and environmentally responsible manner.

Underground development by its nature increases specific levels of safety risk and reinforces why safety is Oyu Tolgoi’s main priority. The mine’s management is committed to reducing risk and injury. Oyu Tolgoi achieved an industry-leading All Injury Frequency Rate (“AIFR”) of 0.14 per 200,000 hours worked for the year ended December 31, 2021. In addition, there are additional safety metrics that are common in the mining industry, utilised by Oyu Tolgoi to continuously monitor safety performance.

The Corporation’s Code of Business Conduct reflects the Corporation’s strong commitment to undertaking its business with integrity and requires that all employees, consultants, officers and directors adhere to rigorous standards of corporate governance and contribute to sustainable development. The Code of Business Conduct specifically addresses questions of health, safety and environmental protection.

The Corporation’s commitment to health, safety and environment also extends to communities that can be affected by the Corporation’s activities. The Corporation supports and respects human rights consistent with the Universal Declaration of Human Rights and seeks to ensure that it is not complicit in human rights abuses committed by others. The Corporation respects and supports the dignity, well-being and rights of its employees, their families and the communities in which it operates. The Corporation also sets out to build enduring relationships with its neighbours that demonstrate mutual respect, active partnership, and long-term commitment. The Corporation respects the diversity of Indigenous peoples acknowledging the unique and important interests that they have in the land, waters and environment as well as their history, culture and traditional ways.

Environmental and Social Impact Assessment Management

In 2012, as part of project finance requirements, Oyu Tolgoi LLC undertook a comprehensive ESIA, which was performed independently. The process involved consultations with local and regional authorities, local businesses, community organisations and local community representatives.

The study provided an evaluation of both the direct and indirect impacts of Oyu Tolgoi’s operations and project on the society, economy and environment in Mongolia. It described how Oyu Tolgoi LLC expects to minimise and manage the mine’s environmental and social impact while maximising positive benefits over the mine’s life. It also demonstrated a process to ensure local communities are consulted in decisions to be made throughout the life of Oyu Tolgoi’s operation.

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The first ESIA, which provides the project baseline, was published in 2013 showing a 91% compliance rate and 26 non-conformances. Subsequent audits have shown improved compliance rates with only 2 non-material non-conformances of the lowest category outstanding in the latest 2021 audit. In 2021, a water audit was completed as per agreement requirements. The last bi-annual Mongolian environmental law and regulation audit was completed in 2020 with all environmental activities of Oyu Tolgoi LLC found to be in compliance with relevant national legislation. Oyu Tolgoi LLC continues to engage with various stakeholders regarding areas that are of heightened community concern.

Health

The Corporation complies with the Rio Tinto-wide occupational health standards and Mongolian occupational health regulations to improve identification and management of health risks. Rio Tinto performance standards are integrated with HSEC management systems to ensure consistent application across the Project.

COVID-19 Response

Turquoise Hill continues to remain vigilant in the fight against COVID-19, monitoring the evolving situation and taking the necessary steps to ensure that, globally, its employees are protected while adhering with local governmental guidelines.

Due to the unprecedented and ongoing nature of the COVID-19 pandemic and the fact that response to the pandemic is evolving in real time, estimates of the overall economic impact remain uncertain at this time.

Effects of COVID-19 were felt significantly from the end of the first quarter of 2021 to the beginning of the fourth quarter of 2021. The reduced site workforce in 2021 led to reduced progress in the stripping of the next open pit work area, Phase 5, as well as reduced progress on underground development construction work fronts, particularly those reliant on a higher proportion of out of country workers, such as shaft sinking activities.

COVID-19 related restrictions continued to impact availability of personnel on site during 2021.

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Oyu Tolgoi LLC continues to comply with the Government of Mongolia directives and is working closely with the Mongolian authorities to prioritise the health and safety of its employees and the community in which it operates. Since the onset of the pandemic, Oyu Tolgoi LLC put in place strict controls to minimise the COVID-19 risks at site and to manage cases as they arise. Onsite COVID-19 controls include social distancing practices, mandatory wearing of masks, hand washing and temperature measurements in high traffic areas. Four rapid testing screening hubs have been implemented to monitor the exposure of the workforce to COVID-19.

Turquoise Hill and Oyu Tolgoi are focused on the health, safety and well-being of its employees and contractors amid the restrictions on domestic and international travel and will continue to rotate employees when safe to do so.

Occupational health

The Corporation’s approach to managing occupational illness is focused on taking proactive measures and implementing strong occupational surveillance programmes coupled with controls to minimise occurrences of illnesses that may develop as a result of conditions and exposures in the workplace, and is demonstrated through:

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· Understanding and assessing employees’ workplace exposure hazards;

· Identifying individuals and work tasks with highest occupational illness risks;

· Implementing occupational hygiene surveillance programmes; and

· Using surveillance data as the foundation for implementing best prevention and mitigation strategies.

These control procedures may include the substitution of harmful or toxic materials with less dangerous ones, changing of work processes to minimise work exposure, installation of exhaust ventilation systems, good housekeeping, and the provision of proper personal protective equipment.

Health awareness and wellbeing programmes

In collaboration with its health service provider, International SOS, HR and Training Department (“International SOS”), Oyu Tolgoi LLC conducts health and hygiene awareness trainings and programmes. In addition, campaigns addressing various health related matters are ran by Oyu Tolgoi LLC, including programs directed at mental health, wellbeing, and infectious disease, the Employee Assistance Program and seasonal flu vaccination and COVID-19 booster campaigns. These programmes are developed based on public health risks in Mongolia and the results of studies of the Oyu Tolgoi population. These initiatives greatly increase knowledge of health issues at Oyu Tolgoi.

Individuals with underlying health conditions are identified and provided with support. Health topics share the spotlight in the monthly HSEC themes, and healthy meal choices are provided on site.

Other activities typically provided by the Corporation for the health and wellbeing of those on site, such as the accessible gym and cinema, have been impacted by the ongoing global pandemic.

Medical preparedness and response

Due to the remoteness of the Oyu Tolgoi site, it is important to ensure the Corporation’s employees and contractors have access to timely emergency medical services.

In addition to Oyu Tolgoi LLC’s dedicated Emergency Response Team, it also maintains an onsite medical clinic facility managed by International SOS that provides a range of services, including:

· 24/7 medical clinic access and services;

· Internationally trained expatriate and local doctors;

· A fully equipped emergency room with resuscitation and monitoring areas;

· Adherence to Advanced Cardiac Life Support standards;

· In-house diagnostics;

· Medical evacuation services; and

· COVID-19 treatment services.

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Safety

At Oyu Tolgoi, the Corporation’s first priority is the safety and health of those on site. With risk identification and control at its core, safety systems extend from inductions and training to major facility engineering audits. Some types of mining environments increase the complexity of managing safety, which reinforces the need for a comprehensive safety management system.

¹ Note: The AIFR is an indicator of workplace health and safety and provides insight into an organisation’s efforts to protect its workforce from work-related hazards

The integrated safety system at Oyu Tolgoi LLC leverages comprehensive safety standards covering the Corporation’s specific workplaces and is supported by assurance programmes. There is a strong focus on risk assessment and controls to prevent accidents. Systems are designed to prevent low-probability but high-consequence events that can cause fatalities as well as reducing and preventing injuries. Oyu Tolgoi’s safety performance is underpinned by a rigorous approach to safety consisting of the following areas:

· Leadership – Oyu Tolgoi LLC’s leadership team creates and promotes a safe work environment by being present in the field and highly engaged with their teams. A number of tools are utilised to help leaders integrate safety into their activities and to become champions of safety improvements. Employees are encouraged to become safety leaders within their own teams and to take personal responsibility for their own safety and that of their colleagues.

· Culture – Oyu Tolgoi LLC aligns organisational and employee values to create a positive culture that drives consistent behaviour. All individuals at Oyu Tolgoi should feel comfortable to stop work if they feel it is unsafe to continue. Every meeting at Oyu Tolgoi starts with a “safety share”, a chance for employees to describe any safety-related issue and to listen to constructive advice from colleagues. Risk-based task planning has been normalised as well as in the field assessments by team members and leaders to identify hazards that need to be addressed.

· Systems and processes – Oyu Tolgoi LLC seeks to adopt best practice safety management systems to deliver world-class safety performance. Oyu Tolgoi’s safety standards are aligned with broader corporate and enterprise-wide safety standards providing a framework to measure, monitor and continuously drive improvement in safety performance. Oyu Tolgoi LLC has successfully

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embedded the Kaizen process into business improvement activities to enable teams to identify and eliminate elements of work that do not add value or are obstacles to efficiency or safety. Examples of Kaizen process initiatives include elimination of root causes that may trigger failures of critical controls and identification of opportunities to improve the concentrate bagging process and border procedures.

· Risk management – Given the scale and complexity of Oyu Tolgoi, the workforce faces a range of risks that must be managed carefully. Proactive measures are taken to control risks at a range of levels in the organisation, from a strategic to daily workplace level, by identifying hazards, assessing the risks they pose and using controls to prevent damage and harm. Oyu Tolgoi LLC’s systems use risk assessments and controls for all tasks and utilise a variety of different tools to help manage risks in their workplace. An example of risk management innovation is the integration of the geographic information mapping system with high-risk work activities to provide the Emergency Response Team live location and work status. Oyu Tolgoi LLC has a strong focus on critical risk management, controlling the risks that are the most serious, i.e., those that could lead to fatality or permanent injury.

Over 122,800 critical risk management verifications were completed during 2021 as part of Oyu Tolgoi’s proactive fatality prevention programme.

· Training and awareness – Oyu Tolgoi LLC gives each employee relevant classroom courses and on-the-job training to provide them with the skillsets, tools and knowledge needed to succeed safely. In 2013, Oyu Tolgoi LLC opened a risk demonstration centre, the first of its kind in Mongolia, which uses interactive demonstrations and activities to show the potential consequences of the risks faced. Safety campaigns run continuously throughout the year to highlight key operational risks including working at heights, hand safety, electrical safety, and others.

· Employee and contractor engagement – Oyu Tolgoi LLC actively encourages employee and contractor participation in all aspects of safety management. Contractors are required to adhere to the same safety standards as Oyu Tolgoi LLC employees with a team dedicated to managing contractor safety performance. Regular contractor engagement conferences provide an additional forum to share safety approaches with contractors.

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Environment

At the heart of the mine’s operations and future development strategies is respect for the environment.

All partners including Oyu Tolgoi LLC, Rio Tinto and Turquoise Hill are committed to preventing and mitigating environmental impacts from the mine’s operations.

The Gobi Desert has unique natural formations that need to be protected. The overall goal is to minimise impacts on the environment and, where possible, implement measures that benefit the environment.

To achieve this goal, Oyu Tolgoi implements a variety of activities and monitoring programmes in the areas of water, air, biodiversity, waste management, and land management and complies with the following laws and requirements including:

· Environmental requirements and standards of project lenders - International Finance Corporation (IFC), European Bank for Reconstruction and Development (EBRD);

· Applicable environmental laws, regulations and standards of Mongolia;

· Internationally recognised standards (ISO14001);

· Rio Tinto’s environmental policies, strategies and standards; and

· Regular monitoring of environmental performance and adherence to internal environmental monitoring programmes.

Water

In the South Gobi Desert, water is a precious natural resource. To ensure ongoing availability of surface water, Oyu Tolgoi LLC is committed to using water carefully, balancing the mine’s operational needs while ensuring water is fully available for local residents and future generations.

Oyu Tolgoi was designed as one of the most water-efficient mines in the world and operates to a demonstrated high standard of water conservation. The water used by Oyu Tolgoi comes from a deep saline aquifer and is not suitable for consumption by humans and livestock. Hydrogeological modelling indicates that even after 40 years of extraction, the deep aquifer system will remain confined and is unlikely to impact the streambed aquifers. Drawdown will be continuously monitored, and the aquifer model will be updated and refined as more data becomes available. As necessary, abstraction from the boreholes will be adjusted to optimise drawdown characteristics and protect the shallow groundwater resources.

Consumption rate of 0.38 cubic metres of water per tonne of ore processed is below the global average and demonstrates Oyu Tolgoi’s commitment to water efficiency and sustainability.

An independent water audit is undertaken every five years, with the last audit completed in 2021. A diverse process including inspections from the Government of Mongolia as well as local community field monitoring ensures Oyu Tolgoi’s continued compliance with water management and conservation policies, standards, and legislation.

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This audit found that Oyu Tolgoi LLC continues to comply with the requirements under Mongolian law on water and other relevant laws and procedures during the period covering 2016-2020, inclusively. Further, it concluded that Oyu Tolgoi LLC is fulfilling its water-related commitments under the Investment Agreement.

Since 2014, Oyu Tolgoi has consistently achieved annual water recycling rates above the mine’s targeted recycling rate of 80%. In 2021, water used by Oyu Tolgoi has been continuously recycled at an average rate of 88.3%.

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From 2014 to 2020, 149 exploration wells had been sealed, rehabilitated and handed over to the local government and the Galba Oosh Dolood Gobi Basin Administration. Unfortunately, in 2021, monitoring bores drilling and exploration boreholes could not be sealed due to the unprecedented circumstances of COVID-19.

Oyu Tolgoi LLC undertook various activities in 2021, including:

◾ Two clean-up initiatives for local water sources;

◾ Building industry coordination and information sharing on water management through the development of a Voluntary Code of Practice (VCP); and

◾ Water monitoring review.

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Waste management

The mining process produces mineralised waste which is pumped into storage areas for long-term storage. Every effort is made to minimise the footprint of these facilities to reduce non-productive land area as much as possible. One way to minimise the footprint is to maximise density of the tailings through thickening, or reduction in water content, and by designing storage facilities to maximise water drainage and collection for re-use. Minimising the footprint not only positively reduces environmental impact on land area and water use, but also minimises costs for the operations.

Tailing Storage Facility

Oyu Tolgoi LLC stores mineralised waste in tailings storage facilities, which are engineered structures designed to minimise the impact on the local environment. Tailings Storage Facility 1 has been in use since 2013 and is currently 56.2 metres high. In 2021, 38 million dry metric tonnes were pumped to the tailings’ storage facility, meeting the anticipated level rise of 6.5 metres. The Oyu Tolgoi tailings facility uses the downstream method of wall construction and the latest independent review of the facility was carried out in November 2020.

Oyu Tolgoi LLC’s tailings risk is managed in a structured way with three levels of assurance used to monitor and reduce risk.

The first level of assurance is based on the work of site teams and processes. The second level of assurance is provided by the project manager, Rio Tinto, with in-house specialists providing technical reviews and monitoring the application of Rio Tinto’s Global Standard. The third level of assurance is provided by regular external reviews of the facility. The facility has been risk-reviewed against the Australian National Committee on Large Dams framework and actions have been taken to reduce risk.

Non-Mineralised Waste Management

As a result of the development of the underground portion of the mine, the amount of waste generated at Oyu Tolgoi has significantly increased. Oyu Tolgoi LLC has focused on continuous improvement of non-mineral waste management through the development of the long-term non-mineral waste management strategy and the reduction of the waste that goes to the waste management centre by improving the ability to reuse and recycle waste materials and segregating waste in the work areas.

Oyu Tolgoi LLC has successfully established relationships with national recycling contractors and a memorandum of understanding was signed with the local Red Cross to allow Oyu Tolgoi LLC to send the re-usable items, such as wood, to local communities.

In 2018, Oyu Tolgoi LLC also started a programme to prepare organic compost using food waste and, since 2020, operations of the composting facility have been managed by the Oyu Tolgoi infrastructure team. In 2021, Oyu Tolgoi LLC purchased a composter machine which has the capacity to compost 5 tons of food waste daily.

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19.7% of total waste was diverted from the Waste Management Centre through reuse and recycling.	The amount of waste landfilled per person per day has decreased from 6.7 kg to 2.3 kg of 2021
1531 tons of food waste, wood scraps, cardboard were used for composting and 7.7 tons of prepared compost was used for the first time in rehabilitation	Over 2025 tons of wood was reused in cooperation with the local Red Cross Primary Committee

Over the last two years, Oyu Tolgoi implemented a number of improvement works for hazardous substance and dangerous goods management and for reducing hazardous waste generation from hazardous materials. Notably, Oyu Tolgoi:

· Clarified the role and responsibility of teams involved in hazardous substance and dangerous goods management processes;

· Added the planning stage on the process flow;

· Started considering the hazardous substance and dangerous goods management from the procurement stage, and the procurement process only after the ChemAlert approval;

· Improved the hazardous substance and dangerous goods registration and control;

· Included the “Waste Management Plan” submission requirement on Oyu Tolgoi Supplier Database registration and proposed management is considered in tender evaluation process; and

· Updated the relevant management plan and procedures.

OT non-mineral waste data	2020		2021
Generated waste	Amount/tn	Percentage,%	Amount/tn	Percentage,%
Hazardous and controlled waste	1,628	3.90%	1,396	3.10%
Non-hazardous waste	40,658	96.10%	43,218	96.90%
Total	42,286	100%	44,614	100%
Re-used and recycled waste
Hazardous and controlled waste	1,469	3.50%	1,222	2.70%
Non-hazardous waste	9,083	21.50%	7,559	16.90%
Total	10,552	25.00%	8,781	19.70%
Landfilled waste
Landfilled in WMC	6,564	15.50%	4,430	9.90%
Landfilled in Inert waste pit	24,703	58.40%	30,612	68.60%
Total	31,267	73.90%	35,041	78.50%
Stored hazardous waste	378	0.80%	395	0.90%

Biodiversity

Oyu Tolgoi is committed to minimising the mine’s operational impact and contributing to biodiversity conservation to ensure that the region will benefit from the mine’s presence.

Oyu Tolgoi LLC supports landscaping and greening of Khanbogd and has donated over 11,700 individual saplings to the local community and neighbouring soums and aimags.

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Oyu Tolgoi LLC works with international non-government organisations (“NGOs”), including Global Biodiversity Conservation, Wildlife Conservation Society, consultants and university researchers to ensure a net positive impact on biodiversity (habitat, wildlife and paster land) in the mine area. The annual biodiversity monitoring programmes provide information to assess the effectiveness of the mitigation strategies that have been incorporated into the Oyu Tolgoi LLC operational management plans.

In 2020, the Core Biodiversity Monitoring Program (“CBMP”) contract was renewed for an additional five years to 2024. Despite the COVID-19 pandemic, overall CBMP activities have progressed well in 2021 although travel restrictions have impacted the Khulan collaring programme and priority plants survey on site; however, all 2021 planned field works were completed successfully.

Oyu Tolgoi LLC has implemented several biodiversity offsetting projects that contribute to making a net positive impact on biodiversity and ecosystem services in the region.

Anti-poaching offsetting project

Since 2015, Oyu Tolgoi LLC has been collaborating with local government agencies on this successful initiative. A Multi-Agency Team and a Mobile Anti-Poaching Unit were formed to improve and solve the difficulties that patrols face. The Anti-Poaching Unit consists of East, Central and West teams and patrol the Omnogobi and Dornogobi aimags. In addition, the rangers of the Small Gobi Strictly Protected Area A and B also carry out patrols in the protected areas close to Oyu Tolgoi.

Spatial Monitoring and Reporting Tool (“SMART”)

An important component of the anti-poaching project, this software package is used to plan patrol efforts, monitor patrols and document the location of carcasses found by the patrols. The information collected is used to assess patrol efficacy. The effectiveness of the SMART system has led the Government of Mongolia to develop a working group to examine the expansion of SMART into other protected areas in Mongolia.

Poaching rate research

In order to further support the anti-poaching programmes and the overall management of endangered species in the region, Oyu Tolgoi also conducts research on poaching in Sothern Gobi using acoustic devices. Acoustics recording devices are placed near watering points with the highest poaching rate probability. The devices record gun shots to evaluate the poaching rate and determine locations being used by the poachers.

Other offsetting projects include powerline insulation in order to reduce bird mortality, development of sustainable cashmere, and modification of railroad fencing to promote khulan movement and extend their habitat. Additionally, Oyu Tolgoi LLC organises scientific symposiums (i.e. Gobi Gracious 6) and alternate nature conservation activities (i.e. celebrating international nature conservation days such as International Migratory Bird Day, etc.) to raise awareness among the public and to share information.

Greenhouse gas emissions

Oyu Tolgoi has implemented an Atmospheric Emissions Management Plan that outlines the applicable national, Rio Tinto and international standards and defines Oyu Tolgoi’s key management atmospheric emissions controls. The plan also includes monitoring and reporting procedures. One of the key management controls is reporting on Oyu Tolgoi’s greenhouse gas emission performance against the estimated emission targets. Oyu Tolgoi has a comprehensive greenhouse gas inventory and reporting

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process and continues to explore energy-saving opportunities through a registry focused on energy saving and greenhouse gas reduction initiatives.

Oyu Tolgoi LLC has been measuring monthly greenhouse gas (“GHG”) emissions since 2012 and completes an annual GHG workbook. Greenhouse gas emission control is constantly monitored and performance for the year ended December 31, 2021, was 2.31 tonnes CO²/unit product against an annual forecasted intensity of 2.69 tonnes CO²/unit product. These emissions include Scope 1 (direct emissions from owned and controlled sources) and Scope 2 (indirect emissions from the generation of purchased energy).

Moreover, in October 2021, Rio Tinto announced that they will bring forward their target of reducing their Scope 1 and 2 emissions by 15% to 2025. Oyu Tolgoi LLC is collaborating with the Rio Tinto Copper Group Energy Development team to support the GHG reduction pathways.

	2017a2		2018a2		2019a2		2020a2		2021a3
Total emissions (tonnes CO2-e)		1,572,355		1,514,205		1,596,287		1,604,224		1,738,426
Emissions intensity (tonnes CO2-e per tonne of concentrate)1		2.18		2.06		2.38		2.32		2.31
Emissions intensity (kg CO2-e per tonne of ore milled)		38.2		39.1		39.1		39.9		44.4

Notes:

(1) The emissions intensity per tonne concentrate produced is impacted by variability of the grade of the ore mined, which is a function of the orebody.

(2) The figures for 2014-2020, inclusively, exclude the underground development project emissions.

(3) The figures for 2021 represent the sum of both operations and underground emissions as underground material begins to be processed as Oyu Tolgoi moves towards sustainable production. Over 1 million tons of underground material was processed in 2021.

Since 2015, Oyu Tolgoi LLC has been implementing programmes and activities to support the reduction of its GHG emissions and to save energy. Such activities include:

· Ending the use of diesel generators for remote infrastructure by providing permanent power supply at:

- Training center, Khanbogd soum, Umnugobi province (2015);

- Marshall yard, Oyu Tolgoi mine site (2017);

- Power camp, Oyu Tolgoi mine site (2018);

- Emulsion plant, Oyu Tolgoi mine site (2018); and

- Khanbumbat permanent airport (2018);

· Installing solar energy powered walkway lighting for the Oyut Camp to the Bagging Plant and the Northgate, which resulted in thirty-four sections of walkway lightings being installed in 2019;

· Installing runtime management equipment on air conditioners in various facilities, which resulted in reducing over 7,000 units’ runtime thereby decreasing 30% in energy use for these units;

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· Installing LED lights in numerous buildings at site, thereby saving 688.8 mWh/year electricity and 728.75 tCO2-e emissions; and

· Reducing testing period on 20 standby diesel generators each with a capacity of 2 MW from weekly to twice weekly, which saved 105.68t of diesel in this year and resulted in annual abatement of 284.27t CO2-e.

Land Management

As part of Oyu Tolgoi’s sustainable land management policy, the mine’s closure and rehabilitation plans have been developed in accordance with Mongolian laws and standards, in an effort to keep land degradation to a minimum.

Land Disturbance Management

In order to ensure minimal land disturbance, Oyu Tolgoi requires an environmental inspection and assessment before any land disturbance occurs. A permit for work is only approved after protective actions identified in the assessment are completed. This process eliminates or minimises potential impact on local water, biodiversity, the community, cultural heritage and many other areas. It also ensures compliance with environmental and other relevant legislation. This procedure also applies to Oyu Tolgoi-sponsored projects.

Topsoil Management

The Oyu Tolgoi topsoil management plan is one of the most important elements in rehabilitating land affected by the mine’s operations and infrastructure development, helping to restore vegetation and biodiversity. Before the start of any land disturbance activity, Oyu Tolgoi strips and stores the topsoil so it can be used to rehabilitate the land after the work is complete.

Environment Rehabilitation

Areas that were disturbed during exploration, development and operations are rehabilitated during and after the project, including through the development of a mine closure plan at the start of the construction phase. Making disturbed areas safe for people, animals and the environment is one of the main reasons for proper rehabilitation. To make an area safe, technical rehabilitation must be completed to high standards. Oyu Tolgoi has a dedicated team to work with contractors to monitor rehabilitation.

Oyu Tolgoi continued its comprehensive environmental monitoring programme and maintained compliance with key environmental programmes. In 2021, planned biological rehabilitation was completed on 35.64 ha of land associated with off-site construction works, such as road construction and including the planting of almost 48,018 individual saplings from 18 species grown by the Native Plant Propagation Centre in Khanbogd. In 2020, over 52 ha of biologically rehabilitated land were handed back to local government.

Technical rehabilitation was completed on 27.26 ha in 2021, bringing the total to 1706.17 ha between 2010 and 2021.

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Communities and People

Community Engagement

Oyu Tolgoi has reached $13.4 billion in total in-country spend since 2010, marking the largest foreign investment in the country to date. The total in-country spend has substantially contributed to the country’s economic development through taxes, fees, national and local procurement, salaries and other contributions provided to communities and the society over the past 11 years.

Oyu Tolgoi LLC continues to work collaboratively with national and local suppliers to increase capability to ensure the highest international standards. The purchase of goods and services from Mongolian suppliers represents 74% of the total spend.

Oyu Tolgoi LLC has also made a significant investment in people through not only employment but also the development of the workforce. Over 96% of Oyu Tolgoi’s workforce are Mongolian nationals, exceeding the commitment made under longstanding agreements with the Government of Mongolia of 90% during operations. Many employees have been given the opportunity to work at Rio Tinto operations in Australia, the United States, United Kingdom, Canada and Singapore through a development programme designed to build comprehensive mining industry skills in the Oyu Tolgoi workforce.

Oyu Tolgoi contracts expatriate professionals and experts in rotating specialised roles; however, the development of skills for local Mongolian nationals is a high priority – structured professional

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development programmes are offered to ensure high potential personnel are ready for leadership and subject matter expert roles.

Surrounding Communities

The Cooperation Agreement signed in 2015 by the Umnugobi aimag, Khanbogd soum and Oyu Tolgoi LLC supports Oyu Tolgoi’s continued relationship building and nurturing of communities surrounding the mine, as well as partner communities, Khanbogd, Manlai, Bayan-Ovoo and Dalanzadgad soums.

In Khanbogd, the partnership with Oyu Tolgoi LLC led to:

· The connection of the town to a permanent power supply;

· Construction of a new water supply system with the capacity to support 13,000 residents;

· Sealing of local roads (the Oyu Tolgoi LLC funded construction of a 35.1 kilometres sealed road between Oyu Tolgoi and Khanbogd which opened in 2019);

· Funding of new educational and healthcare facilities; and

· Programmes to help improve social conditions.

Moreover, Oyu Tolgoi LLC makes an annual contribution of $5 million to the Gobi Oyu Development Support Fund (“DSF”), an independent fund that supports sustainable community development. Since its creation in September 2015, the DSF has invested $32.9 million, including $5.7 million in 2021, in 304 sustainable development projects and programmes, which have resulted in the creation of over 480 permanent jobs, and scholarships for 324 students, among many other achievements.

Examples of projects implemented through the DSF include:

· Construction of a 1200-student capacity school and 200-student capacity kindergarten in Dalanzadgad;

· Construction of a health care center in Tsogt-Ovoo soum to provide better health service to local community;

· A micro loan provided to 51 small businesses of Umnugovi to support their growth and sustainable development;

· Construction of a health-care centre in Mandal-Oyoo soum to provide easier access to health services;

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· Construction of a new museum in Umnugobi aimag, as well as the provision of required equipment;

· Co-funding of an integrated health care programme to provide health-related support to Umnugobi aimag women and youth; and

· Maintaining a strong partnership with local stakeholders and working together to protect communities during the unprecedented COVID-19 pandemic, as well as coordinating a series of contributions to improve local emergency response capacity while enabling uninterrupted business operations.

Since 2019, Oyu Tolgoi has partnered with the National Police Agency on road safety projects focusing on reducing deaths and injuries on the local roads.

In 2019 and 2020, Oyu Tolgoi co-organised the No need to rush and Do not be a mule, play by the rules campaigns with the National Police Agency to promote road safety and responsible driving on rural intercity roads. Oyu Tolgoi worked closely with police departments in all aimags and soums to raise public awareness through media campaigns and installed speedometers on roads where accidents caused by speeding were prevalent.

In 2021, Oyu Tolgoi continued the partnership, launching the Let’s protect our future – a two-month campaign focused on preventing traffic accidents and child passenger safety. As a result of the campaign, the total number of traffic accidents decreased by 5%, injuries by 25.2% and deaths by 33.3%. Child deaths decreased 33.3%.

Oyu Tolgoi also supports several other community programmes, including:

· The Khanbogd Development Strategy which OT developed to maximise shared values and lasting benefits for employees and communities to a catalyst for Khanbogd development in coming decades, and to provide funding to update Khanbogd Master Plan as approved by local parties;

· Livelihood and economic diversification initiatives for communities in Khanbogd through the Local Agribusiness Support Strategy and collaborating on initiatives with herders’ cooperatives and local government to improve livestock health services, increase productivity of livestock, vegetable and dairy production, strengthen market linkages, and nurture entrepreneurial mindsets amongst local communities;

· Sustainable livelihood pilot projects in Khanbogd including a partnership to create a new local brand of camel milk, angus cattle breading, Gaviluud sheep breading, vegetable growing and sewing business;

· Hay and fodder donation provided to help local herder households to survive harsh winters;

· Herder support programme to help herders access water and which repaired and constructed wells and connecting to solar power sources;

· Partnerships with local herders to monitor hand wells since 2012 under the Participatory Environmental Monitoring programme administered by a local NGO established by Khanbogd community members involving 86 local herders and monitoring 87 hand wells; and

· Continued constructive community engagement with local stakeholders through the Khanbogd Tripartite Council and implementing 74% of agreed actions under the Herder Complaint Resolution Agreements as of the end of 2021.

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Corporate Governance

The table below outlines various initiatives undertaken by the Corporation in the management and disclosure of environmental and social matters affecting the Corporation’s activities:

Best practices	Corporate initiatives
Corporate culture	The Corporation adopted a HSEC Policy on March 14, 2018, demonstrating its commitment to HSEC matters. Fulsome HSEC updates are provided to the Board of Directors on a quarterly basis along with a monthly overview included as part of the CEO reports to the Board of Directors. In addition, safety shares are part of all Board of Directors and management meetings which the Corporation believes foster a strong culture of HSEC consciousness throughout the Corporation.
Risk management	The Corporation’s disclosure of risk factors in this AIF includes information on key HSEC risks. Risks of significance are monitored by management. Management is able to influence the inclusion of additional HSEC risks, or elevation of existing risks in the Corporation’s principal risk register. HSEC risks are also tracked by Oyu Tolgoi LLC management on a continuous basis.
Corporate strategy	Material risks are taken into account in the Corporation’s strategy. At this time, other than the risks related to COVID-19 and to the social licence to operate, as disclosed in the Corporation’s risk factors in this AIF, no other material environmental and social risks that would have an impact on the overall strategy of the Corporation have been identified and highlighted in the strategy outside of the broader risks which could have an impact on environmental and social matters.
Board composition	The Nominating, Corporate Governance and Sustainability Committee reviews the Board of Directors’ skills matrix every year to ensure that the Board of Directors is composed of the right mix of skills, knowledge and experience. The skills matrix includes a HSEC component to ensure the Board of Directors is able to meet its oversight responsibilities on all HSEC matters.
Board structure	The Board of Directors has the ultimate oversight on HSEC matters and created the Health, Safety, Environment, Communities and Operations (“HSECO”) Committee to help discharge its duties on these matters. The HSECO Committee meets as often as necessary, but no less than four times per year.
Board practices	The HSECO Committee meets a minimum of four times a year. All meetings of the HSECO Committee follow an established agenda and are minuted. Safety shares are part of all Board meetings which the Corporation believes foster a strong culture of HSEC consciousness.
Performance evaluation and incentives	All short-term incentive awards paid to the Corporation’s executives contain an HSEC component.
Disclosure to shareholders	This AIF contains a dedicated section on the importance of HSEC matters for the Corporation and on HSEC matters at Oyu Tolgoi. This section is reviewed and recommended by the HSECO Committee and approved by the Board of Directors before the documents are filed.

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RISK FACTORS

The Corporation is subject to a number of risks due to the nature of the industry in which it operates, the present state of development of its business and the foreign jurisdictions in which it carries on business. The following is a summary description of the material risks and uncertainties to which the Corporation is subject. Some of the following statements are forward-looking and actual results may differ materially from the results anticipated in these forward-looking statements. Please refer to the section titled “Special Note Regarding Forward-Looking Statements” in this AIF. If any of such risks or risks not currently known to the Corporation actually occurs or materialises, the Corporation’s business, financial condition or results of operations could be adversely affected, even materially adversely affected.

The Corporation’s ability to carry out its activities in multiple jurisdictions, including Mongolia, is subject to various legal and political risks.

Although the Corporation expects that the Investment Agreement and the UDP (to the extent such agreement remains enforceable) should continue to bring significant stability and clarity to the legal, political and operating environment in which the Corporation will develop and operate Oyu Tolgoi, the Corporation remains subject to various legal and political risks in Mongolia. In addition, the Government of Mongolia also owns a significant stake in Oyu Tolgoi LLC which holds the Oyu Tolgoi property.

There can be no assurance that the Corporation’s assets will not be subject to nationalisation, requisition, expropriation or confiscation, whether legitimate or not, by any authority or body. In addition, there can be no assurance that the political and economic policies of neighbouring countries, including China, in relation to Mongolia will not have adverse economic effects on the development of the Corporation’s mining projects, including its ability to access power, transport (including across borders) and sell its products and access construction labour, supplies and materials. There is no assurance that provisions under Mongolian law for compensation and reimbursement of losses to investors under such circumstances would be effective to restore the full value of the Corporation’s original investment or to compensate for the loss of the current value of the Mongolian projects. Insofar as the Government of Mongolia is a sovereign entity against which the terms of the Investment Agreement (and the UDP, to the extent such agreement remains enforceable) may take considerable time to enforce (if enforceable at all), this risk applies to Oyu Tolgoi despite the provisions of the Investment Agreement respecting nationalisation and expropriation. There can be no assurance that Mongolian laws protecting foreign investments will not be amended or abolished or that existing laws will be enforced or interpreted to provide adequate protection against any or all of the risks described herein, or that the principles agreed to under the GoM Agreements will be adhered to, including the principle that debt financing at the Oyu Tolgoi LLC level would be permitted after achievement of sustainable production for Panel 0 (currently expected in the first half of 2023). There can be no assurance that there would not be disputes resulting from multiple levels of corporate and/or governmental approvals and differing sophistication in relevant business and technical matters, inequality of bargaining power and incompatible strategic and economic objectives (both in the short term and the longer term) among the shareholders of Oyu Tolgoi LLC which could have a material adverse impact on the Corporation’s business prospects, results of operations and financial condition.

The Corporation carries out its activities in countries which may be affected in varying degrees by political stability, government regulations (including but not restricted to those related to the mining industry) and domestic or foreign investment therein, and by the policies of other nations in respect of these countries. Any changes in regulations, shifts in political conditions, outbreak of war or other hostilities are beyond the control of the Corporation and may adversely affect its business. The Corporation’s

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mining, exploration and financing activities may be affected to varying degrees by government regulations, or other political and administrative undertakings, including those with respect to restrictions on production, price controls, export controls, income and other taxes, expropriation of property, employment, land use, water use, environmental legislation and mine safety. The Corporation may be subject to disputes or issues with customs officials or border crossings affecting the shipment of the Corporation’s products in jurisdictions in which it operates, and the ability of its customers to collect such products may arise and could have an adverse effect on the Corporation’s ability to collect and/or recognise revenue. In addition, in the various jurisdictions where the Corporation operates and finances its business activities (including Mongolia, China, U.S., Canada and Europe), the Corporation is subject to taxes (including income taxes and mining taxes) and it may from time to time be subject to disputes with tax authorities over the interpretation and application of existing tax legislation and/or computation of taxes owing to such jurisdictions. The Corporation also faces risks regarding future changes in the tax laws of such jurisdictions (and future changes in the way such tax authorities interpret and apply existing tax legislation) that could increase the amount of taxes owing. In this regard, in October 2021, members of the OECD/G20 Inclusive Framework on BEPS endorsed a “Two-Pillar Solution” designed to ensure that in-scope multinational enterprises are subject to a minimum tax rate of 15% and targeting certain “base-eroding” payments made in respect of developing countries. These proposals are not yet fully developed and their potential impact on the Corporation cannot be determined at this time. The Corporation’s activities may also be affected to varying degrees by terrorism, military repression, crime, extreme fluctuations in currency exchange rates and high inflation.

Moreover, the legal framework in Mongolia is, in many instances, based on recent political reforms or newly enacted legislation, which may not be consistent with long-standing conventions and customs. Although legal title risks in respect of Oyu Tolgoi are believed to be significantly mitigated by the terms of the Investment Agreement, there may still be ambiguities, inconsistencies and anomalies in the other agreements, licences and title documents through which the Corporation holds its direct or indirect interests in other mineral resource properties in Mongolia, or the underlying legislation upon which those interests are based, which are atypical of more developed legal systems and which may affect the interpretation and enforcement of the Corporation’s rights and obligations. Many laws of certain of the countries in which the Corporation carries out its activities have been enacted, but in many instances they are neither understood nor enforced and may be applied in an inconsistent, arbitrary and unfair manner due to the substantial administrative discretion granted to the responsible government officials or agencies, while legal remedies may be uncertain, delayed or unavailable. These laws or their enforcement by national, regional or local authorities can adversely affect, among other things, water access rights, operating costs resulting from unanticipated increases in tariff rates and overall assessment of risk. These uncertainties could limit the legal protections available to the Corporation. Even the Corporation’s best efforts to comply with applicable laws and regulations may not result in effective compliance in the determination of government representatives, which may have a material adverse impact on the Corporation and its share price. Accordingly, while the Corporation believes that it has taken the legal steps necessary to obtain and hold its property and other interests in Mongolia, there can be no guarantee that such steps will be sufficient to preserve those interests.

The Corporation may be limited in its ability to enforce the Investment Agreement and the ARSHA against Mongolia, a sovereign government.

The Investment Agreement imposes numerous obligations and commitments upon the Government of Mongolia that provide clarity and certainty in respect of the development and operation of Oyu Tolgoi, while the ARSHA sets out, among other things, certain rights and obligations of Erdenes and the

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Shareholder Holdcos, with respect to their ownership in, and the management of, Oyu Tolgoi LLC. Each of the Investment Agreement and the ARSHA include a dispute resolution clause that requires the parties to resolve disputes through international commercial arbitration procedures. Nevertheless, if and to the extent that the Government of Mongolia does not observe the terms and conditions of the Investment Agreement and the ARSHA, there may be limitations on the Corporation’s ability to enforce the terms of the Investment Agreement and the ARSHA against the Government of Mongolia, which is a sovereign nation, regardless of the outcome of any arbitration proceeding.

Resolution 92, approved by the Mongolian Parliament in November 2019, mandated the Government of Mongolia to take necessary measures to ensure the benefits to Mongolia of Oyu Tolgoi, including comprehensive measures to improve the implementation of the Investment Agreement. Resolution 103 was approved by the Mongolian Parliament in December 2021 to resolve outstanding issues between the Corporation, Rio Tinto and the Government of Mongolia in connection with the implementation of Resolution 92. On January 24, 2022, the Corporation announced that it had successfully reached a mutual understanding of a renewed partnership with the Government of Mongolia and that the board of directors of Oyu Tolgoi LLC had unanimously approved commencement of the undercut. The Corporation further announced the entering into of the GoM Agreements, which address the majority of the measures contemplated by Resolution 92.

If the terms of the Investment Agreement and/or the ARSHA cannot be enforced, Turquoise Hill would be limited in its ability to enforce its contractual rights and could be deprived of substantial rights and benefits arising from its investment in Oyu Tolgoi with little or no recourse against the Government of Mongolia for fair and reasonable compensation. Similarly, if the arrangements concluded pursuant to the GoM Agreements cannot be effectively enforced or if the Government of Mongolia does not abide by the terms of the GoM Agreements or wishes to revise their terms in a manner that is not in the best interests of the Corporation, it would be limited in its ability to enforce its contractual rights. Irrespective of the ultimate outcome of any potential dispute, any requirement to engage in discussions or proceedings with the Government of Mongolia, whether or not formal, would result in significant delays, expense and diversion of management’s attention. Such an outcome would have a material adverse impact on the Corporation and its share price.

Resolution 103 may not be considered by the Government of Mongolia as resolving all outstanding issues in a manner and on terms that are satisfactory to the Corporation.

Resolution 103 was approved by the Mongolian Parliament in December 2021 to resolve outstanding issues between the Corporation, Rio Tinto and the Government of Mongolia in connection with the implementation of Resolution 92. Resolution 92 was approved by the Mongolian Parliament in November 2019 and mandated the Government of Mongolia to take necessary measures to ensure the benefits to Mongolia of Oyu Tolgoi.

On January 24, 2022, the Corporation announced the entering into of the GoM Agreements, which address the majority of the measures to be completed for Resolution 92 to be considered formally implemented, including the write off of the carry account loan, improved cooperation with Erdenes in monitoring underground development and enhancing ESG matters, the approval of the ESA, and the establishment of a funding at Oyu Tolgoi LLC that does not incur additional loan financing prior to sustainable production for Panel 0. The Corporation stated that it continues to work with the Government of Mongolia and Rio Tinto to finalise the remaining outstanding measures of Resolution 103, including the formal termination of the UDP and the resolution of the outstanding tax arbitration. As of the date hereof, the UDP has not been formally terminated and remains in effect.

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If Resolution 103 is not deemed by the Government of Mongolia to resolve outstanding issues in a manner and/or on terms that are satisfactory to the Corporation, the Corporation could be limited in its ability to enforce its contractual rights. For example, if the UDP remains in effect (because it is not terminated in a manner and on terms that are satisfactory to the Corporation, or otherwise) but is not capable of being enforced, Turquoise Hill would be limited in its ability to enforce its contractual rights and could be deprived of substantial rights and benefits arising from its investment in Oyu Tolgoi with little or no recourse against the Government of Mongolia for fair and reasonable compensation. Similarly, the Corporation or Oyu Tolgoi LLC may not agree with the manner in which the Government of Mongolia may propose to enhance monitoring of underground development or ESG considerations. The Corporation’s ability to influence such outcomes may be limited. Further, any requirement to engage in discussions or proceedings with the Government of Mongolia, whether or not formal, including the continuation of the ongoing tax arbitration, would result in significant delays, expense and diversion of management’s attention. Such an outcome would have a material adverse impact on the Corporation and its share price.

There can be no assurance that the Corporation will be able to secure the funding that it needs, whether under the A&R HoA or otherwise, to continue development of the Oyu Tolgoi underground mine.

Additional funding will be required to complete the development of the underground mine, which could potentially include securing and funding alternative power options pursuant to the amended PSFA. While the A&R HoA is a binding agreement which sets out a comprehensive funding arrangement to address the Corporation’s base case incremental funding requirements, there can be no assurance that all key elements of the A&R HoA, including the re-profiling of existing senior debt or obtaining senior supplemental debt, can be secured within the timeframes set out in the A&R HoA or on terms acceptable to Rio Tinto and the Corporation, or at all. In addition, there can be no assurance that the conditions precedent to the obligation of RTIH under the A&R HoA to provide the Co-Lending Facility and make the US$300 million short-term bridge financing available will be satisfied, which could all result in delays to the project development schedule.

As part of the GoM Agreements, Oyu Tolgoi LLC entered into the ESA to provide Oyu Tolgoi with a long-term source of power from the Mongolian grid, once certain technical conditions are satisfied. While the Mongolian grid prepares to connect to Oyu Tolgoi, Oyu Tolgoi LLC will continue to import its power from Inner Mongolia, China, under an agreement between NPTG and IMPIC. However, there can be no assurance that the conditions to the implementation of the ESA will be satisfied in a timely manner, or that the required extensions to the power import agreements will be obtained, which could result in delays in securing a reliable domestic power source for Oyu Tolgoi and additional funding costs. Any such additional funding may not be available or available on reasonable commercial terms.

If the full amount of funding under the funding elements set out in the A&R HoA is not available or obtainable on reasonable commercial terms, or if the Corporation’s base case incremental funding requirement increases beyond the scope of the funding contemplated by the A&R HoA, the Corporation may be required to issue Common Shares or instruments convertible into equity, including through future rights offerings, which issuances could result in dilution to the holders of Common Shares and have a material adverse effect upon the market price of Common Shares. Under the terms of the covenants forming part of the Turquoise Hill Financing Support Agreement, the Corporation is prohibited from creating, incurring or permitting to remain outstanding any indebtedness, other than certain permitted indebtedness, and from amending its constating documents to create and issue Preferred Shares. As a result of these restrictions, in seeking to raise additional capital, the Corporation may not

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incur indebtedness for borrowed money or issue debt securities, other securities convertible into debt securities or Preferred Shares while the covenants forming part of the Turquoise Hill Financing Support Agreement are in force and effect unless it obtains a waiver or consent from RTIH permitting the incurrence of such indebtedness or the issuance of such securities. In addition, the GoM Agreements include a principle that debt financing at the Oyu Tolgoi LLC level would be permitted only after achievement of sustainable production for Panel 0 (expected in the first half of 2023). The ability of the Corporation to implement all of the funding elements contemplated by the A&R HoA depends in part upon the adherence to that principle by the Government of Mongolia.

RTIH, as the holder of a majority of the Common Shares and as manager of Oyu Tolgoi, has the ability to exert a significant degree of control over the Corporation, Oyu Tolgoi LLC and Oyu Tolgoi.

RTIH, a wholly-owned subsidiary of Rio Tinto, together with other Rio Tinto affiliates, owns a majority of the outstanding Common Shares and can exercise its voting power to elect all of the members of the Board of Directors, subject to applicable securities legislation. RTIH can also exercise its majority voting power to unilaterally pass any ordinary resolution submitted to a vote of the Corporation’s shareholders, except for resolutions in respect of which RTIH is an interested party and for which disinterested shareholder approval is required, and RTIH also effectively has the power to block or vote down any other matter proposed by the Corporation or any minority shareholder. In addition, under the 2010 HoA and a management agreement between an affiliate of RTIH and Oyu Tolgoi LLC entered into in June 2015, such affiliate of RTIH was appointed as manager of Oyu Tolgoi which provides such affiliate of RTIH with responsibility for the management of Oyu Tolgoi.

RTIH is also able to exert a significant degree of control over the management, development and operation of Oyu Tolgoi, as well as the Corporation, through a series of governance mechanisms and restrictive covenants established under the Private Placement Agreement, the 2010 HoA and other agreements entered into with Rio Tinto. These include the Technical Committee established under the Private Placement Agreement and the Operating Committee established under the 2010 HoA, through which RTIH is able to control decisions respecting the business of Oyu Tolgoi LLC subject to a veto of the Corporation in respect of certain special matters. The Operating Committee is comprised of two nominees from each of the Corporation and RTIH, with an RTIH nominee serving as chairman. All decisions of the Operating Committee, other than decisions in respect of certain defined special matters, require a majority vote of the members with a casting vote of the chair in the case of a tie. Decisions in respect of “special matters”, such “special matters” being set out in the 2010 HoA, require a unanimous vote of the members of the Operating Committee, giving the Corporation a veto in such matters. The Operating Committee meets in advance of each meeting of the board of directors of Oyu Tolgoi LLC to make decisions with respect to all matters to be adopted by resolution at such meetings, and the nominees of RTIH and the Corporation to the Oyu Tolgoi LLC board of directors must exercise their voting rights under the ARSHA in accordance with the instructions given by the Operating Committee. The 2010 HoA contains provisions regarding the calling of meetings of the Operating Committee, the establishment of quorum and related procedural matters.

The interests of RTIH and the interests of the Corporation’s other shareholders may not necessarily be aligned in all respects and there can be no assurance that RTIH, together with other Rio Tinto affiliates, will exercise its rights as the Corporation’s majority shareholder and its other contractual rights under the Private Placement Agreement, the 2010 HoA and other agreements entered into with Rio Tinto in a manner that is consistent with the best interests of either the Corporation or the Corporation’s other shareholders.

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The actual cost of developing Oyu Tolgoi may differ materially from the Corporation’s estimates, and development may involve unexpected problems or delays.

The Corporation’s estimates regarding the cost of development and operation of Oyu Tolgoi are estimates only and are based on many assumptions and analyses made by the Corporation’s management in light of their experience and perception of historical trends, current conditions and expected future developments, as well as other factors management believes are appropriate in the circumstances. These estimates and the assumptions upon which they are based are subject to a variety of risks and uncertainties and other factors that could cause actual expenditures to differ materially from those estimated. If these estimates prove incorrect, the total capital expenditures required to complete development of the underground components of Oyu Tolgoi may increase, which may have a material adverse impact on the Corporation, its results of operations, financial condition and share price. Specifically, the estimated schedule and cost for the completion of the underground development, including in respect of timing of sustainable first production and the development capital spend for the project, may differ materially from what was announced following completion of the Definitive Estimate review and further technical work to be conducted in connection therewith.

In October 2021, the Corporation announced that previously disclosed underground delays and open-pit metal deferrals had caused an increase in the Corporation’s base case estimated incremental funding requirement to $3.6 billion. In October 2021, the Corporation also announced that COVID-19 restrictions had adversely impacted both open pit operations and underground development, which, through the end of the third quarter of 2021, had resulted in a cumulative increase of $140 million to the estimate of underground development capital included in the Definitive Estimate.

Further, in November 2021, the Corporation elaborated that it then expected sustainable production for Panel 0 to be delayed to the first half of 2023, broadly in line with the then forecast 6-month delay to undercut commencement, and that the previously announced 9-month delay on Shafts 3 and 4, in combination with the COVID-related reduced underground development progress and expected changes to mining scope, would result in delays to the start of Panel 2 by approximately 14-16 months compared to the Definitive Estimate, and to the start of Panel 1 by approximately 11 months compared to the Definitive Estimate.

On January 24, 2022 in connection with the announcement of the GoM Agreements and the entering into of the A&R HoA, the Corporation announced that its estimated base case incremental funding requirement was US$3.4 billion as of December 31, 2021, prior to giving effect to the funding elements in the A&R HoA. The Corporation further announced that the board of directors of Oyu Tolgoi LLC had unanimously approved the commencement of the undercut and that, as a result of that decision, Turquoise Hill continued to expect that sustainable production for Panel 0 would be achieved in the first half of 2023. However, there can be no assurance that all key elements of the A&R HoA, including the Re-profiling of existing senior debt or obtaining SSD can be secured within the timeframes set out in the A&R HoA or on terms acceptable to Rio Tinto and the Corporation, or at all. In addition, there can be no assurance that the conditions precedent to the obligation of RTIH under the A&R HoA to provide the Co-Lending Facility and make the US$300 million short-term bridge financing available will be satisfied, which could all result in delays to the project development schedule. Further, in such circumstances, the Corporation could be required to issue significant amounts of additional equity.

In addition to the requirements of the Investment Agreement, there are also a number of uncertainties inherent in the development and construction of any new or existing mine, including Oyu Tolgoi. These uncertainties include the timing and cost, which can be considerable, of the construction of mining and processing facilities; the availability and cost of skilled labour; the ongoing impacts of COVID-19 on both

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open pit operations and underground development; ground and rock mass conditions and stability, the impact of fluctuations in commodity prices, process water, power and transportation, including costs of transport for the supply chain for Oyu Tolgoi, which requires routing approaches which have not been fully tested; the annual usage fees payable to the local province for sand, aggregate and water; the availability and cost of appropriate smelting and refining arrangements; and the need to obtain necessary environmental and other government permits, such permits being on reasonable terms, and the timing of those permits. The cost, timing and complexities of mine construction and development are increased by the remote location of a property such as Oyu Tolgoi.

It is common in mining operations and in the development, construction or expansion of existing facilities to experience unexpected problems and delays during such activities, which may cause delays in the commencement or expansion of mineral production or sustainable production. Such delays could have unforeseen impacts on disclosed project economics. Accordingly, there is no assurance that the current or future development, construction or expansion activities will be successfully completed within cost estimates, on schedule or at all and, if completed, there is no assurance that such activities will result in profitable mining operations.

The mineral resource and mineral reserve estimates are estimates only and are subject to change based on a variety of factors, some of which are beyond the Corporation’s control.

The estimates of mineral reserves and mineral resources in this AIF, including the anticipated tonnages and grades that are expected to be achieved or the indicated level of recovery that will be realised, are estimates and no assurances can be given as to their accuracy. Such estimates are, in large part, based on interpretations of geological data obtained from drill holes and other sampling techniques and modelling assumptions and parameters. Large-scale continuity and character of the Corporation’s deposits will only be determined once significant additional drilling and sampling have been completed and analysed. Actual mineralisation or formations may be different from those predicted. Reserve and resource estimates are materially dependent on prevailing metal prices and the cost of recovering and processing minerals at the individual mine sites.

The estimated mineral resources and mineral reserves described in this AIF should not be interpreted as assurances of commercial viability or potential or of the profitability of any future operations. Investors are cautioned not to place undue reliance on these estimates.

In addition, inferred mineral resources are quoted in this AIF. Inferred mineral resources have a great amount of uncertainty as to their existence, and economic and legal feasibility. Accordingly, there is no assurance that inferred mineral resources will ever be upgraded to a higher category. Investors are cautioned not to assume that part or all of an inferred mineral resource exists, or is economically or legally mineable.

There are numerous uncertainties inherent in estimating quantities of mineral reserves and resources. The estimates referenced in this AIF are based on various assumptions relating to commodity prices and exchange rates during the expected life of production, mineralisation of the area to be mined and the sequencing of mining of various areas, changes or updates to the mine design or mine plan for underground development, the projected cost of mining, and the results of additional planned development work. Actual future production rates and amounts, revenues, taxes, operating expenses, environmental and regulatory compliance expenditures, development expenditures, and recovery rates may vary substantially from those assumed in the estimates. Many of the projections and estimates are based on subjective views and assumptions. Any significant change in these assumptions, including changes that result from variances between projected and actual results, could result in material

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downward revision to current estimates, which may have a material adverse impact on the Corporation and its share price.

The Corporation’s actual production, revenues and capital expenditures may differ materially from mineral reserve estimates.

Market fluctuations in the price of metals or increases in the costs to recover metals from the Corporation’s mining projects may render mining of ore reserves uneconomical and affect the Corporation’s operations in a materially adverse manner. Moreover, various short-term operating factors, or changes, revisions or updates to the mine design or mine plan, may cause a mining operation to be unprofitable in any particular accounting period or to be worth less over the long term on a net present value (NPV) basis.

Prolonged declines in the market price of metals may render reserves containing relatively lower grades of mineralisation uneconomic to exploit and could materially reduce the Corporation’s reserves and resources. Should such reductions occur, material write-downs of the Corporation’s investments in mining properties or the discontinuation of development or production might be required, and there could be cancellations of or material delays in the development of new projects, increased net losses and reduced cash flow. The estimates of mineral reserves and resources attributable to a specific property are based on internationally accepted engineering and evaluation principles. The estimated amount of contained metals in proven mineral reserves and probable mineral reserves does not necessarily represent an estimate of a fair market value of the evaluated properties.

The Corporation uses prices reflecting market pricing projections in the financial modelling for Oyu Tolgoi which are subjective in nature. It should be expected that actual prices will be different than the prices used for such modelling (either higher or lower), and the differences could be significant.

A number of the uncertainties relate to the costs and availability of smelting services for the metals mined from Oyu Tolgoi, which require arrangements with third parties and involve the potential for fluctuating costs to transport the metals and fluctuating costs and availability of such services. These costs can be significantly impacted by a variety of industry-specific and also regional and global economic factors (including, among others, those which affect commodity prices). Many of these factors are beyond the Corporation’s control.

While Mineral Reserves remain stable, ongoing studies designed to optimise grade while minimising production risk in response to geotechnical conditions and other constraints on Hugo North Lift 1 may impact, either negatively or positively, the timing of metal production over the mine life.

Recent and future amendments to Mongolian laws and regulations, whether actual or the interpretation thereof, could adversely affect the Corporation’s activities, its mining rights in Oyu Tolgoi, or make it more difficult or expensive to develop such project and carry out mining in Mongolia.

The Government of Mongolia has put in place a legislative framework and environment for foreign direct investment, including constitutional amendments, laws and policies specific to the resource sector. However, there are political constituencies within Mongolia that have espoused ideas that would not be regarded by the international mining industry as conducive to foreign investment if they were to become law or official government policy, such as amendments relating to the purpose and principles surrounding the use of Mongolian natural resources, which could impact the distribution and allocation of social and economic benefits from mineral deposits of strategic importance in Mongolia, including the deposits of Oyu Tolgoi.

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As such, it is not possible to know when, if ever, and in what form these amendments could be adopted and there can be no assurance that the present or future Parliament will refrain from enacting legislation, including constitutional amendments, that undermines the Investment Agreement or otherwise adversely impacts Oyu Tolgoi or the interests held by the Corporation in its mining, development and exploration properties. There can also be no assurance that the present or a future government will refrain from adopting government policies or seeking to renegotiate the terms of the Investment Agreement in ways that are adverse to the Corporation’s interests or that impair the Corporation’s ability to develop and operate Oyu Tolgoi or other projects on the basis presently contemplated, which may have a material adverse impact on the Corporation and its share price.

In addition, mining operations, exploration and related financing activities are subject to extensive laws and regulations. These relate to production, development, exploration, exports, imports, taxes and royalties, labour standards, occupational health, waste disposal, protection and remediation of the environment, access to water, mine decommissioning and reclamation, mine safety, toxic substances, transportation safety and emergency response and other matters.

Compliance with these laws and regulations increases the costs of exploring, drilling, financing, developing, constructing, operating and closing mines and other facilities. It is possible that the costs, delays and other effects associated with these laws and regulations may impact the Corporation’s decision as to whether to continue to operate in a particular jurisdiction or whether to proceed with exploration or development of properties and the nature of related investing and financing arrangements. Since legal requirements change frequently, are subject to interpretation and may be enforced to varying degrees in practice, the Corporation is unable to predict the ultimate cost of compliance with these changes and their effect on operations or other business activities. Furthermore, changes in governments, regulations, interpretations, policies or practices could have an adverse impact on the Corporation’s future cash flows, earnings or results of operations and financial condition, which may have a material adverse impact on the Corporation and its share price.

The Investment Agreement commits Oyu Tolgoi LLC to eventually utilise only Mongolian power sources.

The Investment Agreement commits Oyu Tolgoi LLC to eventually utilise only Mongolian power sources. In June 2020, Oyu Tolgoi LLC entered into an amendment to the PSFA with the Government of Mongolia, which reflected a joint prioritisation and progression of a SOPP in accordance with various agreed milestones, and which envisages that the Government of Mongolia would fund and construct a SOPP at Tavan Tolgoi. None of the milestones under the amended PSFA have been met. The Ministry of Energy formally notified Rio Tinto and Oyu Tolgoi LLC on February 25, 2021 that the Government of Mongolia’s preference is to supply power to the Oyu Tolgoi mine from the Central Energy System through a Mongolian grid electricity supply agreement.

On January 24, 2022, the Corporation announced that, in connection with the GoM Agreements, the Oyu Tolgoi LLC board of directors had approved the signing of the ESA to provide Oyu Tolgoi with a long-term source of power from the Mongolian grid on terms fully agreed with the Government of Mongolia, and on January 26, 2022, Oyu Tolgoi LLC entered into the ESA with, among others, Southern Region Electricity Distribution Network, pursuant to which power will be delivered to the Oyu Tolgoi mine subject to the fulfilment of certain technical conditions. While the Mongolian grid prepares to connect to Oyu Tolgoi, Oyu Tolgoi LLC will continue to import its power from Inner Mongolia, China under an agreement between NPTG and IMPIC.

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However, there is no certainty that technical conditions underlying the ESA will be satisfied, that the required extensions to the power import agreements between NPTG and IMPIC will be obtained, or that any alternative power plant or arrangement for power under the amended PSFA will be sufficient to meet the Corporation’s future needs or be available in a timely manner. Despite the Corporation’s best efforts, the ability to meet its obligations under the Investment Agreement, the amended PSFA or any future agreement committing the Corporation to use Mongolian power sources is an obligation not necessarily within the Corporation’s control and non-fulfilment of this requirement may result in a default under the Investment Agreement. Such default could result in termination of the Investment Agreement or damages accruing, which may have a material adverse impact on the Corporation and its share price.

The Investment Agreement and the UDP (to the extent enforceable) include a number of future covenants that may be outside of the control of the Corporation to perform, a breach of which could have a material adverse effect on the Corporation and its business.

The Investment Agreement and the UDP, to the extent it remains enforceable, commit the Corporation to perform many obligations in respect of the development and operation of Oyu Tolgoi. While performance of many of these obligations is within the effective control of the Corporation, the scope of certain obligations may be open to interpretation. Further, the performance of other obligations may require cooperation from third parties or may be dependent upon circumstances that are not necessarily within the control of the Corporation. For example:

· Mongolian nationals must represent at least 90% of Oyu Tolgoi employees now that Commercial Production has been attained, and 50% of Oyu Tolgoi’s engineers must be Mongolian nationals within five years of achieving Commercial Production (i.e. by September 2018), which targets are achieved, and increasing to 70% after ten years of achieving Commercial Production (i.e. expected after September 2023). Achieving or maintaining these targets is contingent upon the availability of a sufficient number of qualified personnel, which is not wholly within the Corporation’s control.

· Although Oyu Tolgoi LLC has achieved Commercial Production, there is a risk that unforeseen mining or processing difficulties may be encountered that could prevent Oyu Tolgoi LLC from maintaining the required Commercial Production levels.

· Oyu Tolgoi LLC is obligated, on a priority basis, to purchase and utilise services supplied by Mongolian citizens and/or legal entities, and equipment, raw materials, other materials and spare parts manufactured in Mongolia, to the extent such services and materials are available on a competitive time, cost, quantity and quality basis, and to give preference to Mongolian suppliers of freight and transportation services required for Oyu Tolgoi. Such services, materials and suppliers may not be available to the extent required or may be available upon commercial terms that are less advantageous than those available from other sources.

· Oyu Tolgoi LLC has community development commitments and social responsibility obligations. There is a risk that Oyu Tolgoi LLC will be unable to meet the expectations or demands of relevant community stakeholders to the extent contemplated to allow Oyu Tolgoi LLC to meet its commitments under the Investment Agreement.

· The extension of the term of the Investment Agreement is subject to a number of conditions, including the Corporation having demonstrated that Oyu Tolgoi has been operated in accordance with industry best practices in terms of national and community benefits, environment and health and safety practices. The inherently subjective nature of these criteria creates the risk that the

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Corporation and the Government of Mongolia may disagree as to whether the conditions for extending the term of the Investment Agreement have been met.

Despite the Corporation’s best efforts, such provisions are not necessarily within its control and non-fulfilment of any such provision may result in a default or breach under the Investment Agreement (and the UDP, to the extent it remains enforceable). Such a default or breach could result in termination of the Investment Agreement (and the UDP) or damages accruing, which may have a material adverse impact on the Corporation and its share price.

In addition to the Investment Agreement (and the UDP), the Corporation is party to a number of other material contractual agreements with a number of third parties, including the Government of Mongolia and Rio Tinto. Should the Corporation breach any of these agreements, it could face consequences that could have an adverse effect on its share price and/or on the operations of Oyu Tolgoi, the Corporation’s main asset. Rio Tinto, as the Corporation’s majority shareholder and as manager of Oyu Tolgoi, could materially affect the business of the Corporation if it were to claim damages for a breach of an agreement against the Corporation or require specific performance of an obligation that the Corporation is unable to comply with.

There are risks associated with mining companies operating sustainably, their community relations and their social licence to operate.

Mining companies are increasingly required to operate in a sustainable manner and to provide benefits to affected communities, including as described in greater detail in the preceding risk factor, and there are risks associated with the Corporation failing to maintain a “social licence” to operate Oyu Tolgoi. “Social licence” does not refer to a specific permit or licence, but rather is a broad term used to describe community and even governmental acceptance of a company’s plans and activities related to exploration, development or operations on its mineral projects.

The Corporation places a high priority on its community relationships and responsibilities. Despite its best efforts, there are factors that may affect the Corporation’s efforts to maintain social licence for Oyu Tolgoi, including national or local changes in sentiment toward mining, evolving social concerns, changing economic conditions and challenges, and the influence of opposition toward mining on local support. There can be no guarantee that social licence can be maintained by the Corporation, and without strong community support, the ability to secure necessary permits, obtain project financing, and/or move a project into development or operation may be compromised or precluded. Delays attributable to a lack of community support or other community-related disruptions or delays can translate directly into a decrease in the value of a project or into an inability to bring the project to, or maintain, production. The cost of measures and other issues relating to the sustainable development of mining operations may result in additional operating costs, higher capital expenditures, reputational damage, active community opposition and other unforeseeable consequences.

Public health crises, including the ongoing COVID-19 pandemic, have adversely affected the Corporation’s business, and may continue to do so in the future.

The Corporation’s business, operations and financial condition have been, and may continue to be in the future adversely, and possibly materially adversely, affected by the outbreak of epidemics or pandemics or other health crises.

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The COVID-19 pandemic has significantly disrupted, and continues to significantly disrupt, global health, economic and market conditions, which have already and may again trigger an indeterminate period of slowdown in the global economy and recessions. Despite differing levels of business and commercial re-openings throughout the world, the availability of vaccines and ongoing vaccination programmes in some geographies, the pandemic has had and continues to have adverse (and potentially material adverse) repercussions in the jurisdictions where the Corporation operates. This is especially the case given the emergence of new variants of the SARS-CoV-2 virus which raise uncertainties regarding the efficacy of existing vaccines. As such, the full impact of the ongoing COVID-19 pandemic, including the impact of the sweeping preventative and mitigating measures that the Corporation, other businesses and governments, including the Government of Mongolia, have taken and continue to take to combat the spread of the disease, continues to rapidly evolve, creating significant volatility and negative pressure on virtually all national economies as well as financial and commodity markets. Although from time to time there has been an easing of restrictions in certain jurisdictions, some of these restrictions have been reinstated in other jurisdictions, or could be reinstated in the future, to manage a resurgence or new outbreak of COVID-19, including in connection with new variants or mutations of the virus. As such, at the present time, it is not possible to predict the duration, severity or scope of the pandemic, and it is extremely challenging for the Corporation to accurately predict or quantify the extent to which COVID-19 will impact its business, including its operations, the market for its securities and the ability of the Oyu Tolgoi team to advance the project, or the businesses of its vendors, suppliers, construction companies and other counterparties that the Corporation relies on. The COVID-19 pandemic has adversely affected the ability of the Oyu Tolgoi team to advance the project and it is possible that it may affect, even materially, the Corporation’s financial condition, liquidity, and future results of operations and outlook due to, among other factors:

· Action taken by governmental and non-governmental bodies, including the Government of Mongolia, to curtail activity in an effort to help slow the spread of COVID-19, including restrictions on both travel and the movement of goods and people within and across borders, and restrictions on the types of businesses that may continue to operate, have caused and are likely to continue to cause significant business interruptions. While work on the underground project continues, the Corporation’s operations have been and will likely continue in the near and medium terms (and possibly longer) to be disrupted in varying degrees, including as a result of (i) access restrictions, which are preventing teams from Oyu Tolgoi LLC, Rio Tinto and the Corporation’s construction partners, who are required to oversee development and provide essential specialist technical services at Oyu Tolgoi, from accessing the site; although some expatriates returned to Mongolia in 2021, and further flights are planned in order to return the required specialists to site continued interruptions to flights are possible as the authorities endeavour to minimise COVID-19 case numbers in Mongolia; and (ii) delays resulting from various measures implemented to slow the spread of COVID-19, including restrictions on the movement of goods within and across borders and curtailed operations in certain jurisdictions, including Mongolia and China, which may, in each case, cause schedule and cost delays, slowdown or temporary suspensions in operations, decreased sales and may expose the Corporation to penalties or sanctions for breach of contracts or customer agreements, business interruption claims, or even the cancellation or termination of contracts altogether. Since the initial confirmation of COVID-19 cases in Ulaanbaatar and on site and in response to the spread of new COVID-19 variants in Mongolia, local authorities have implemented and continue to implement additional steps to minimise the risk of transmission, which may amplify the aforementioned impacts.

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· The spread of COVID-19 has caused and may continue to cause delays to the Corporation’s announced key project milestones and increases in development capital costs. A number of work fronts have been and continue to be directly impacted by quarantine requirements and international travel restrictions related to COVID-19, including the delay of expected sustainable production for Panel 0 announced by the Corporation in November 2021 until the first half of 2023, and the 9-month delay to Shafts 3 and 4, which in turn will result in delays to the start of Panels 1 and 2. There were significant COVID-19 related challenges at Oyu Tolgoi in 2021 and into 2022, causing the site to operate at less than 50% of its planned personnel for all of 2021, although 2021 production targets were met and there was progress on underground development. Ongoing impacts to domestic and international movement have and could continue to impact key project milestones.

· Effects of the COVID-19 pandemic, including ongoing restrictions in place to curtail its spread, may adversely impact the Corporation’s ability to secure on a timely basis a long-term domestic source of power for the mine as required under the Investment Agreement.

· Suppliers have declared and may continue to declare force majeure on their contracts with the Corporation. In addition, the continued impacts of the COVID-19 pandemic may force the Corporation to declare force majeure on contracts, due to the inability to meet contractual obligations. As an example, Oyu Tolgoi has notified its project lenders that the COVID-19 pandemic constitutes a force majeure event under its project finance facilities, which will have the effect of extending the June 30, 2028 project longstop date under those facilities for the duration of the force majeure. Additionally, in March 2021, the Corporation announced that Oyu Tolgoi LLC had declared force majeure in connection with customer contracts for concentrate as a result of Oyu Tolgoi shipments of concentrate to its Chinese customers being suspended due to COVID-19 health and safety precautions related to Chinese-Mongolian border crossings. While these shipments resumed in April 2021, the transport team is continually adapting to the changing precautionary measures against COVID-19 transmission risks and the force majeure will remain in place until sustained volumes of convoys are crossing the border to ensure Oyu Tolgoi’s ability to meet its ongoing commitments to customers and to return onsite concentrate inventory to target levels.

· The ongoing pandemic has, and likely will continue to, adversely affect global economies and financial markets resulting in an economic downturn that has had, and likely will continue to have, an adverse effect on the demand for base metals and Turquoise Hill’s future prospects, including significant fluctuations in copper prices and the concentrate market. Financial difficulties for smelters as a result of the COVID-19 pandemic and logistics disruptions in China have prevented, and may continue to prevent, smelters from taking feed and shipping acid out. Unstable market conditions have led market participants to flee to cash, causing significant fluctuations in gold prices.

· The continued spread of COVID-19, including the emergence of variants and further resurgences of the SARS-CoV-2 virus, has impacted, and may continue to impact, the health of the Corporation’s personnel, partners and contractors, including members of its management team and the availability of industry experts and personnel crucial to the continued operation and development of Oyu Tolgoi. The ongoing pandemic may also make it difficult to recruit, attract and retain skilled personnel, reducing the availability of its workforce, as well as its productivity,

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and causing human impact that may, in turn, negatively affect its business. These impacts may be compounded by other seasonal illnesses, such as the seasonal flu.

· Increased health risks associated with continued operations during the ongoing COVID-19 pandemic may result in the Corporation incurring increased medical costs for its personnel that continue to work during this time, and may result in increases in insurance premiums payable by the Corporation.

· Unstable market conditions have caused, and the resurgence or continued spread of the pandemic in various countries across the world may once again cause, significant volatility or decline in the trading price of the Corporation’s securities. The Corporation may have difficulty accessing debt and equity capital on attractive terms, or at all, given severe disruption or instability in the global financial markets and deteriorations in credit and financing conditions. Further, this could adversely impact the Corporation’s ability to secure the significant incremental funding it will require to sustain its underground development over and above its available liquidity.

· The emergence and spread of new COVID-19 variants including, but not limited to, the Omicron variant, may contribute to and worsen the above-listed factors if the mutations underlying such variants adversely impact the virus’s properties, such as how easily it spreads, the associated disease severity and the performance of vaccines, therapeutic medicines and diagnostic tools, and by resulting in the prolonging of, or imposition of additional, restrictive public health and social measures.

Due to the unprecedented and ongoing nature of the COVID-19 pandemic and the fact that the response to the pandemic is evolving in real time, estimates of the economic impacts of the COVID-19 pandemic remain inherently highly uncertain and speculative. While the open pit at Oyu Tolgoi has continued to operate despite the ongoing COVID-19 pandemic, and the Corporation has made efforts to manage and mitigate the aforementioned risks, such efforts may not sufficiently mitigate the negative impacts of COVID-19 on the business and the effectiveness of these efforts and the extent to which the COVID-19 pandemic affects the Corporation’s business will depend on factors beyond its control, including the duration, severity and scope of the pandemic and current resurgences of the virus, the likelihood, timing, duration and scope of further resurgences or accelerating spread of COVID-19, the measures taken or necessary to contain the spread of such outbreaks, the timing, development and distribution of effective vaccines and/or effective therapeutic treatments for COVID-19, and the prolonged effects on different members of the Corporation’s supply chain. Even after the COVID-19 pandemic is over, the Corporation may continue to experience material adverse effects to its business, financial condition and prospects as a result of the continued disruption in the global economy and any resulting recession, the effects of which may persist beyond that time.

The Corporation may be subject to public allegations, regulatory investigations or litigation that could materially and adversely affect the Corporation’s business.

The Corporation at one time conducted exploration and mining operations in a number of jurisdictions and, as a result of such activities and operations or current or future activities and operations, including, without limitation, jurisdictions subject to various sanctions regimes, may be subject to governmental or regulatory investigations and claims in or regarding those jurisdictions, including jurisdictions in which

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it is not currently active. A serious allegation, formal investigation by regulatory authorities or other legal claim (in each case, regardless of the ultimate decision) could have a material adverse impact on the Corporation, its reputation and its share price.

All industries, including the mining industry, are subject to legal claims, with and without merit. The Corporation may be required to defend against any such public allegations, regulatory investigations or other claims that are asserted against it, or may deem it necessary or advisable to initiate legal proceedings to protect its rights. The expense and distraction of any such public allegations, regulatory investigations or other claims or proceedings, even with respect to claims that have no merit and whether or not resolved in the Corporation’s favour, could materially and adversely affect its business, operating results, and financial condition. There may also be considerable cost and disruption in responding to allegations, investigations or claims and taking any remedial action. Further, if an investigation, claim or proceeding were resolved against the Corporation or if it were to settle any such dispute, the Corporation may be required to pay damages and costs or refrain from certain activities, any of which could have a material adverse impact on the Corporation’s business, operating results, and financial condition.

Securities class action litigation is also becoming more prevalent and is often brought against companies following periods of volatility in the market price of their securities. In October 2020, a class action complaint was filed in the U.S. District Court, Southern District of New York against the Corporation, certain of its current and former officers as well as Rio Tinto and certain of its officers, which complaint was first amended on March 16, 2021 and again on September 16, 2021. Further, in January 2021, a proposed class action was initiated in the Superior Court in the District of Montréal against the Corporation and certain of its current and former officers, which complaint was first amended on July 27, 2021 and again on January 7, 2022. See “Legal Proceedings”.

A successful class action lawsuit, by its nature, could result in a sizable damage award that could negatively affect the Corporation’s financial or operating results. The Corporation cannot predict the outcome of pending or threatened proceedings or actions or any other litigation, which proceedings could result in substantial costs and diversion of management’s attention and resources. If the Corporation cannot resolve disputes favourably, or if there is significant reputational damage as a result of any real or frivolous claim, the Corporation may face increased costs or liabilities to third parties, impairment of assets, lost revenues and the Corporation’s activities and operations, financial condition, results of operations, future prospects and share price may be adversely affected.

The Corporation is subject to anti-corruption legislation.

The Corporation is subject to the United States’ Foreign Corrupt Practices Act and other similar legislation, such as, but not necessarily limited to, Canada’s Corruption of Foreign Public Officials Act (collectively, “Anti-Corruption Legislation”), which prohibits the Corporation or any director, officer, employee, consultant or agent of the Corporation or any shareholder of the Corporation acting on its behalf from giving, paying, offering to give or pay, or authorising the giving or payment of any reward, advantage, benefit or anything of value to any foreign government or public official, government staff member, government employee, employee of any international public organisation, political party, or political candidate in an attempt to obtain or retain business, obtain an advantage in the course of business, or to otherwise induce or influence a person working in an official capacity. The Anti-Corruption Legislation also requires public companies to make and keep books and records that accurately and fairly reflect their transactions and to devise and maintain an adequate system of internal accounting controls. The Corporation’s international activities create the risk of unauthorised payments or offers of payments by its directors, officers, employees, consultants or agents, even though they may not always be subject to its control. The Corporation strictly prohibits these practices by its directors, officers, employees,

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consultants and agents. However, the Corporation’s existing safeguards and any future improvements may prove to be less than effective, and its directors, officers, employees, consultants or agents may engage, or may previously have engaged, in conduct for which the Corporation might be held responsible. Any failure by the Corporation to adopt appropriate compliance procedures and ensure that its directors, officers, employees, consultants and agents comply with the Anti-Corruption Legislation and applicable laws and regulations in foreign jurisdictions could result in substantial penalties or restrictions on its ability to conduct its business, which may have a material adverse impact on the Corporation and its share price.

Mining projects are sensitive to the volatility of metal prices.

The long-term viability of Oyu Tolgoi depends in large part on the world market prices of copper, gold and silver. The market prices for these metals are volatile and are affected by numerous factors beyond the Corporation’s control. These factors include international economic and political trends, expectations of inflation, global and regional demand, currency exchange fluctuations, interest rates and global or regional consumption patterns, speculative activities, increased production due to improved mining and production methods and optimisation of existing mine designs or mine plans, and economic events, including the performance of Asia’s economies. Ongoing worldwide economic uncertainty could lead to prolonged recessions in many markets which may, in turn, result in reduced demand for commodities, including base and precious metals. It is anticipated that there will be continued volatility in metal prices.

The aggregate effect of these factors on metal prices in the medium or long term is impossible to predict. Should prevailing metal prices be depressed or below variable production costs of the Corporation’s current and planned mining operations for an extended period, losses may be sustained and, under certain circumstances, there may be a curtailment or suspension of some or all of the Corporation’s mining, development and exploration activities. The Corporation would also have to assess the economic impact of any sustained lower metal prices on recoverability and, therefore, the cut-off grade and level of the Corporation’s reserves and resources. These factors could have an adverse impact on the Corporation’s future cash flows, earnings, results of operations, stated reserves and financial condition, which may have a material adverse impact on the Corporation and its share price.

There is no guarantee that any exploration or development activity will result in additional commercial production.

Development of a mineral property is contingent upon obtaining satisfactory exploration results. Mineral exploration and development involves substantial expenses and a high degree of risk, which even a combination of experience, knowledge and careful evaluation may not be able to adequately mitigate. There is no assurance that additional commercial quantities of ore will be discovered on any of the Corporation’s properties, including Hugo North Lift 2, Hugo South and Heruga. There is also no assurance that, even if commercial quantities of ore are discovered, a mineral property will be brought into commercial production. The discovery of mineral deposits is dependent upon a number of factors, not the least of which is the technical skill of the exploration personnel involved. The commercial viability of a mineral deposit, once discovered, is also dependent upon a number of factors, some of which are the particular attributes of the deposit, such as size, grade and proximity to infrastructure, metal prices and government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection. In addition, assuming discovery of a commercial ore body, depending on the type of mining operation involved, several years can elapse from the initial phase of drilling until commercial operations are commenced. Most of the above factors are beyond the control of the Corporation.

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Under Mongolia’s Resolution No. 175, the Government of Mongolia may seek contribution or reimbursement from Oyu Tolgoi LLC for compensation it provides to third parties adversely affected by Resolution No. 175.

On June 8, 2011, the Government of Mongolia passed Resolution No. 175, the purpose of which is to authorise the designation of certain land areas for “State special needs” with certain defined areas in proximity to Oyu Tolgoi. These State special needs areas are to be used for infrastructure facilities for the development of Oyu Tolgoi.

Most of the areas designated for State special needs are subject to existing mineral exploration and mining licences issued by the Government of Mongolia to third parties and, in certain cases, a mineral resource has been declared and registered with the applicable governmental authorities in respect of such licences.

In accordance with the terms of Resolution No. 175 and the Minerals Law (2006), the Government of Mongolia will be responsible for compensating third parties whose right to use and access the subject land area is adversely affected by the application of Resolution No. 175. The Minerals Law specifically encourages non-monetary compensation where the Government of Mongolia issues to such third parties a mineral exploration or mining licence in land areas of which mineral resources are identified by a geological study or exploration works with state funding, if it reaches agreement with the third parties.

To the extent that agreement for non-monetary compensation are not reached with affected third parties, it is not clear at this time whether the Government of Mongolia will expect any compensation that may be payable to such third parties to be borne by Oyu Tolgoi LLC. If the Government of Mongolia seeks contribution or reimbursement from Oyu Tolgoi LLC for compensation it provides such third parties, the amount of such contribution or reimbursement is not presently quantifiable but may be significant. The description of Resolution No. 175 has been provided by Oyu Tolgoi LLC and has been relied on under Item 3 of NI 43-101 Reliance on Other Experts.

In April 2015, the Standing Committee of the Parliament of Mongolia requested the Government of Mongolia to modify Resolution No. 175 due to an alleged inconsistency between Resolution No. 175 and the Minerals Law and Land Law. Oyu Tolgoi LLC understands that the Government of Mongolia supports the validity and justification for Resolution No. 175 and that Resolution No. 175 will not be modified or revoked.

In September 2016, one of the affected third parties challenged the validity of Resolution No. 175 before an administrative court of Mongolia, and claimed that Resolution No. 175 be resolved to be “obviously illegal”. The Government of Mongolia, as a defendant, attended the litigation. In June 2017, the Supreme Court of Mongolia resolved that there is no legal ground under which Resolution No. 175 may be deemed to be “obviously illegal.” Resolution 92 resolved nonetheless to revise Resolution No. 175 to reflect consideration of the groundwater usage conditions in the Gobi region. Resolution 103 does not make reference to the revision of Resolution No. 175 as one of the required steps to implement Resolution 92 and instead includes a general reference to cooperating on the improvement of water usage.

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There can be no assurance that the interests held by the Corporation in its mining, development and exploration properties are free from defects or that material contractual arrangements between the Corporation and entities owned or controlled by foreign governments will not be unilaterally altered or revoked.

The Corporation has investigated its rights to exploit and explore its various properties and, to the best of its knowledge, those rights are in good standing, but no assurance can be given that such rights will not be revoked, or significantly altered, to the detriment of the Corporation. There can also be no assurance that the Corporation’s rights will not be challenged or impugned by third parties. The Corporation has also applied for rights to explore various properties, but there is no certainty that such rights, or any additional rights applied for, will be granted on terms satisfactory to the Corporation or at all, which may have a material adverse impact on the Corporation and its share price.

The Corporation is subject to substantial environmental and other regulatory requirements and such regulations are becoming more stringent. Non-compliance with such regulations, either through current or future operations or a pre-existing condition, could materially adversely affect the Corporation.

All phases of the Corporation’s operations are subject to environmental regulations in the various jurisdictions in which it operates and has operated. For example, Oyu Tolgoi is subject to a requirement to meet environmental protection obligations. The Corporation must complete an environmental protection plan for approval by the Government of Mongolia and complete a report prepared by an independent expert on environmental compliance every three years.

Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.

Environmental legislation is evolving in a manner which will likely require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their directors, officers and employees. There is no assurance that future changes in environmental regulation, if any, will not adversely affect the Corporation’s operations. Environmental hazards may exist on the properties in which the Corporation holds interests which are presently unknown to the Corporation and which have been caused by previous or existing third-party owners or operators of the properties. Government approvals and permits are also often required in connection with various aspects of the Corporation’s operations. To the extent such approvals are required and not obtained, the Corporation may be delayed or prevented from proceeding with planned development or exploration of its mineral properties, which may have a material adverse impact on the Corporation and its share price.

Amendments to current laws, regulations and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have a material adverse impact on the Corporation and cause increases in capital expenditures or production costs or reductions in levels of production at producing properties or require abandonment or delays in development of new mining properties, which may have a material adverse impact on the Corporation and its share price.

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Previous mining operations may have caused environmental damage at former mining projects of the Corporation, and if the Corporation cannot prove that such damage was caused by other operators, its indemnities and exemptions from liability may not be effective.

The Corporation has received exemptions from liability from relevant governmental authorities for environmental damage caused by previous mining operations at former mining projects. There is a risk, however, that, if an environmental accident occurred at those sites, including with respect to tailings or water contamination, it may be difficult or impossible to assess the extent to which environmental damage was caused by the Corporation’s activities or the activities of other operators. In that event, the liability exemptions could be ineffective and possibly worthless, which may have a material adverse impact on the Corporation and its share price.

The Corporation cannot insure against all of the risks associated with mining.

Production, development and exploration operations on mineral properties involve numerous risks and hazards, including rock bursts, slides, fires, earthquakes or other adverse environmental occurrences; industrial accidents; labour disputes; political and social instability; technical difficulties due to unusual or unexpected geological formations; failures of pit walls, shafts, head frames, and/or underground workings; and flooding and periodic interruptions due to inclement or hazardous weather conditions.

These risks can result in, among other things, damage to, and destruction of, mineral properties or production facilities; personal injury (and even loss of life); environmental damage including resulting from the presence of tailings or water contamination; delays in mining; monetary losses; and legal liability.

It is not always possible to obtain insurance (or to fully insure) against all such risks and the Corporation may not be insured against certain or any of these risks as a result of high premiums or other reasons. The occurrence of an event that is not fully covered or covered at all, by insurance, could have a material adverse effect on the Corporation’s financial condition, results of operations and cash flows and could lead to a decline in the value of the securities of the Corporation. The Corporation does not maintain general insurance against political or environmental risks, which may have a material adverse impact on the Corporation and its share price.

Global climate change

Global climate change could exacerbate certain of the threats facing the Corporation’s business, including the frequency and severity of weather-related events, resource shortages, changes in rainfall and storm patterns and intensities, water shortages, rising water levels and changing temperatures which can disrupt the Corporation’s operations, damage its infrastructure or properties, create financial risk to the business of the Corporation or otherwise have a material adverse effect on the Corporation’s results of operations, financial position or liquidity. These may result in substantial costs to respond during the event, to recover from the event and possibly to modify existing or future infrastructure requirements to prevent recurrence. Climate change could also disrupt the operations of the Corporation by impacting the availability and cost of materials needed for mining operations and could increase insurance and other operating costs.

Global climate change also results in regulatory risks which vary according to the national and local requirements implemented by each jurisdiction where the Corporation is present. There continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty. Increased public awareness and concern regarding global climate change may result in more legislative and/or regulatory requirements to reduce or mitigate the effects of greenhouse gas emissions.

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The Corporation does not expect to pay dividends for the foreseeable future.

The Corporation has not paid any dividends on its Common Shares to date, nor does it contemplate a declaration of payment of dividends until its operations generate sufficient excess cash flow for distribution as it anticipates that it will reinvest the majority of, if not all, future earnings, if any, in the development and growth of Oyu Tolgoi and its business generally. Therefore, investors may not receive any funds unless they sell their Common Shares, and investors may be unable to sell their Common Shares on favourable terms or at all. The Corporation cannot give any assurance of a positive return on investment or that investors will not lose the entire amount of their investment in Common Shares. Prospective investors seeking or needing dividend income or liquidity are discouraged from purchasing Common Shares.

The Corporation’s ability to obtain dividends or other distributions from its subsidiaries may be subject to restrictions imposed by law, foreign currency exchange regulations and financing arrangements.

The Corporation conducts its operations through subsidiaries. Its ability to obtain dividends or other distributions from its subsidiaries may be subject to restrictions or costs on dividends or repatriation of earnings under applicable local law, including any tax obligations, monetary transfer restrictions and foreign currency exchange regulations in the jurisdictions in which the subsidiaries operate or are incorporated. The ability of the Corporation’s subsidiaries to pay dividends or to make other distributions to the Corporation is also subject to their having sufficient funds to do so. If its subsidiaries are unable to pay dividends or to make other distributions, the Corporation’s growth may be inhibited unless it is able to obtain additional equity or debt financing on acceptable terms. In the event of a subsidiary’s liquidation, the Corporation may lose all or a portion of its investment in that subsidiary. The Corporation expects to be able to rely on the terms of the Investment Agreement to pay dividends out of Mongolia, subject to certain restrictions contained in the Investment Agreement, but will be unable to do so in respect of projects that are not covered by the terms of the Investment Agreement, which may have a material adverse impact on the Corporation and its share price.

There is no assurance that the Corporation will be capable of consistently producing positive operating cash flows, failing which capital may not at all times be available on terms acceptable to the Corporation or at all.

Oyu Tolgoi LLC generated positive operating cash flows in 2021. However, there is no assurance that the Corporation will be capable of producing positive cash flow on a consistent basis or for a sustained period of time. For instance, a reduction or delay in orders from leading customers could have a material adverse effect upon the Corporation’s results of operations, including operating cash flows. Such reduction or delay in orders from leading customers may be due to market, economic or competitive conditions and customers that previously accounted for significant revenue may not necessarily generate similar levels of or any revenue in any future period. The failure to obtain new customers or repeat orders from existing customers may materially affect the Corporation’s operating results, including operating cash flows. The Corporation anticipates that its exposure to a group of key customers in any given fiscal year will continue for the foreseeable future. There is a risk that existing customers will elect not to do business with the Corporation in the future or will experience financial or other difficulties. In addition, suppliers have declared and may continue to declare force majeure on their contracts with the Corporation, and continued impacts of the COVID-19 pandemic may force the Corporation to declare force majeure on customer contracts due to the inability to meet contractual obligations. In March 2021, the Corporation announced that Oyu Tolgoi LLC had declared force majeure in connection with customer contracts for concentrate as a result of Oyu Tolgoi shipments of concentrate to its Chinese customers

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being suspended due to COVID-19 health and safety precautions related to Chinese-Mongolian border crossings. While these shipments resumed in April 2021, changing precautionary measures against COVID-19 transmission risks may continue to significantly disrupt shipments of concentrate to customers.

If as a result of these or other factors the Corporation’s estimated base case incremental funding requirement of US$3.4 billion as of December 31, 2021, prior to giving effect to the funding elements in the A&R HoA, increases significantly and is not capable of being addressed within the framework of the A&R HoA, the Corporation may be required to make arrangements for additional capital, whether through project debt financing or otherwise, to continue open-pit operations as currently planned or in respect of additional funding requirements for the underground mine or for the power plant.

If such additional capital is required, the Corporation may be required to access securities markets. Such markets throughout the world are cyclical and, over time, tend to undergo high levels of price and volume volatility, and the market price of securities of many companies, particularly those in the resource sector, can experience wide fluctuations which are not necessarily related to the operating performance, underlying asset values or prospects of such companies. Increased levels of volatility and resulting market turmoil could adversely impact the Corporation and its share price. In addition, in the past, following periods of volatility in the market price of a particular company’s securities, securities class action litigation has often been brought against that company. The Corporation cannot provide assurance that similar litigation will not occur in the future with respect to it. Such litigation could result in substantial costs and a diversion of management’s attention and resources, which could have a material adverse effect upon the Corporation’s business, operating results, and financial condition.

If the Corporation is required to access credit markets to carry out its development objectives, the state of domestic and international credit markets and other financial systems could affect the Corporation’s access to, and cost of, capital. If these credit markets were significantly disrupted, such disruptions could make it more difficult for the Corporation to obtain, or increase its cost of obtaining, capital and financing for its operations. Such capital may not be available on terms acceptable to the Corporation or at all, which may have a material adverse impact on the value of Oyu Tolgoi and, consequently, on the Corporation and its share price. In addition, as part of the GoM Agreements, the Corporation has agreed not to incur additional debt financing at the Oyu Tolgoi LLC level prior to sustainable production for Panel 0 being achieved, currently expected in the first half of 2023.

The Corporation’s prospects depend on its ability to attract and retain key personnel.

Recruiting and retaining appropriately qualified personnel is critical to the Corporation’s success. The number of persons skilled in the construction, operation, development and exploration of mining properties is limited and competition for such persons is intense. The ongoing COVID-19 pandemic may also make it difficult to recruit, attract and retain skilled personnel, reducing the availability of its workforce, as well as its productivity, and causing health and safety impact that may, in turn, negatively affect its business. The Corporation believes that it has been successful in recruiting the necessary personnel to meet its corporate objectives but, as the Corporation’s business activity grows, it will require additional key financial, operational, technical, mining and management personnel, as well as additional staff on the operations side. The Corporation is also dependent on Rio Tinto for the secondment of skilled labour at Oyu Tolgoi, particularly in the construction and development phases. Although the Corporation believes that it will be successful in attracting and retaining qualified personnel, including qualified secondees on a timely basis from Rio Tinto, there can be no assurance of such success.

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In addition, pursuant to the terms of the Investment Agreement, Oyu Tolgoi LLC is obligated to hire a specific number of Mongolian nationals following the achievement of Commercial Production. Among other obligations, Oyu Tolgoi LLC must use its best endeavours to ensure that 50% of its engineers are Mongolian nationals within five years of achieving Commercial Production (i.e. by September 2018), which target is achieved, and increasing to 70% after ten years of achieving Commercial Production (i.e. after September 2023) (and failure to meet these levels will result in financial penalties).

The Corporation may from time to time hold substantial funds in cash, cash equivalents, loans and receivables, and other deposits and there is a risk that financial market turmoil or other extraordinary events could prevent the Corporation from obtaining timely access to such funds or result in the loss of such funds.

The Corporation may from time to time hold substantial funds in cash, cash equivalents and other deposits, including treasury bills, money market funds, liquidity funds, bank deposits, and receivables and deposits with related parties. Management has adopted a conservative investment policy with respect to such funds, as the Corporation may require that these funds be used on short notice to support its business objectives. Nevertheless, there is a risk that an extraordinary event in financial markets generally or with respect to an obligor under an investment individually will occur that prevents the Corporation from accessing its funds. Such an event could, in the case of delayed liquidity, have a negative impact on the implementation of time sensitive business objectives that require access to such funds or such an event could, in extreme circumstances, result in the loss of some or all of such funds.

The Corporation may experience cybersecurity threats, which could result in disruptions in business operations and adverse operating results.

The Corporation relies on secure and adequate operations of information technology systems in the conduct of its operations. Access to and security of the information technology systems are critical to the Corporation’s operations. To the Corporation’s knowledge, it has not experienced any material losses relating to disruptions to its information technology systems. The Corporation has implemented ongoing policies, controls and practices to manage and safeguard the Corporation and its stakeholders from internal and external cybersecurity threats and to comply with changing legal requirements and industry practice. The Corporation is also dependent on Rio Tinto to manage the information technology systems of Oyu Tolgoi. Given that cyber risks cannot be fully mitigated and the evolving nature of these threats, the Corporation may not have the resources or technical sophistication to anticipate, prevent, or recover from cyber attacks and cannot assure that its information technology systems are fully protected from cybercrime or that the systems will not be inadvertently compromised, or without failures or defects. Disruptions to the Corporation’s information technology systems, including, without limitation, security breaches, power loss, theft, computer viruses, cyber-attacks, natural disasters, and non-compliance by third-party service providers and inadequate levels of cybersecurity expertise and safeguards of third-party information technology service providers, may adversely affect the operations of the Corporation as well as present significant costs and risks including, without limitation, loss or disclosure of confidential, proprietary, personal or sensitive information and third-party data, material adverse effect on its financial performance, compliance with its contractual obligations, compliance with applicable laws, damaged reputation, remediation costs, potential litigation, regulatory enforcement proceedings and heightened regulatory scrutiny.

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The Corporation may be a passive foreign investment corporation (“PFIC”), which could have adverse U.S. federal income tax consequences to U.S. holders of Common Shares.

If the Corporation were to constitute a PFIC within the meaning of Section 1297 of the United States Internal Revenue Code of 1986, as amended for any year during a U.S. holder’s holding period, then certain potentially adverse U.S. federal income tax rules would affect the U.S. federal income tax consequences to such U.S. holder resulting from the acquisition, ownership and disposition of Common Shares.

The U.S. Treasury Department has not issued specific guidance on how the income and assets of a non-U.S. corporation such as the Corporation will be treated under the PFIC rules. Based on financial information for 2021, the Corporation believes that it was not a PFIC for its tax year ended December 31, 2021, and, based on its current and anticipated business activities and financial expectations, the Corporation expects that it will not be a PFIC for its current tax year and for the foreseeable future.

The determination as to whether a corporation is, or will be, a PFIC for a particular tax year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations and uncertainty. In addition, there is limited authority on the application of the relevant PFIC rules to entities such as the Corporation. Accordingly, there can be no assurance that the Internal Revenue Service will not challenge the views of the Corporation concerning its PFIC status. In addition, whether any corporation will be a PFIC for any tax year depends on its assets and income over the course of such tax year, and, as a result, the Corporation’s PFIC status for its current tax year and any future tax year cannot be predicted with certainty. Each U.S. holder should consult its own tax advisor regarding the PFIC status of the Corporation.

The Corporation may be subject to emerging regulatory and legislative requirements and scrutiny with respect to human rights.

The Corporation and its operations may be subject to emerging regulations and legislation globally with respect to human rights issues, including forced labour, child labour and other slavery-like practices, and the Corporation may face heightened scrutiny from investors, shareholders and other stakeholders regarding such matters. Although the Corporation supports and respects human rights consistent with the Universal Declaration of Human Rights and seeks to ensure it is not complicit in human rights abuses committed by others, as described in the Corporation’s Code of Business Conduct, as well as in Rio Tinto’s global code of business conduct that defines the way Rio Tinto manages the economic, social, and environmental challenges of its global operations and in Rio Tinto’s “Modern Slavery & Human Trafficking” statement, the mining industry faces increasing scrutiny by human rights groups and is particularly prone to complaints and/or legal disputes in connection with human rights risks associated with adverse environmental impacts, health and safety, the use of migrant labour, child labour, forced labour and Indigenous peoples.

Compliance with emerging modern slavery, human trafficking and forced labour reporting, training and due diligence regulations and laws could increase the Corporation’s operating costs. Further, if the Corporation fails to appropriately identify and respond to human rights abuses or allegations thereof, either internally or externally or through third party business relationships, it could face costly and disruptive enforcement actions, potential litigation, investor and stakeholder dissatisfaction and reputational damage.

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DESCRIPTION OF THE BUSINESS

Current Technical Report and Qualified Persons

The 2020 OTTR is the current Technical Report for Oyu Tolgoi and related projects. The 2020 OTTR was prepared in accordance with the requirements of NI 43-101 by M. Thomas (FAusIMM) and R. Carlson (MAIG RPGeo) of AMC Consultants Pty Ltd and J. Dudley (FAusIMM) (Chief Operating Officer, Turquoise Hill) and R. Kolkert (FAusIMM) (Director, Resources & Exploration of Turquoise Hill) with an effective date of June 30, 2020. Disclosure of scientific and technical information in this AIF was approved by Jo-Anne Dudley (FAusIMM(CP)) (Chief Operating Officer, Turquoise Hill) for mineral reserves and Racquel Kolkert (FAusIMM (CP)) (Director, Resources & Exploration of Turquoise Hill) for mineral resources each of whom are “qualified persons” as set forth in NI 43-101. The qualified persons have verified the data disclosed in this AIF including sampling, analytical and test data underlying the information contained in this AIF. This included review of mineral resources reports for the historical mineral resources and review of the current mineral resources documentation for the updated Oyut Mineral Resource.

Oyu Tolgoi Project

Project Location

The Oyu Tolgoi project is located in the South Gobi region of Mongolia, approximately 550 km by road south of the capital, Ulaanbaatar. The Project is being developed by Oyu Tolgoi LLC and consists of a series of deposits containing copper, gold, and silver.

The mineral deposits at Oyu Tolgoi lie in a structural corridor where mineralisation has been discovered over a 26 km strike length. Four deposits hosting mineral resources have been identified; Oyut, Hugo North, Hugo South, and Heruga. Mineral Reserves have been reported at the Oyut and Hugo North Deposits. The Oyut deposit is currently being mined as an open pit using conventional drill, blast, load, and haul methods. The Hugo North deposit is currently being developed as an underground mine using the block caving mining method. A staged approach is envisaged for developing the Hugo North deposit, involving mining two block cave lifts (Lift 1 and potentially Lift 2). Mineral Reserves have been estimated for Lift 1, which comprises three panels (Panel 0, Panel 1, and Panel 2).

The location of the Oyu Tolgoi project relative to the capital of Mongolia, Ulaanbaatar, and the major national infrastructure is illustrated below.

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Project Location

Project Access

Access to the property from Ulaanbaatar is by an unpaved road, via Mandalgobi, or by air travel with a flight time of just over one hour. A permanent domestic airport designed to accommodate commercial aircraft up to the Boeing 737-800 series has been constructed 11 km north of the Oyu Tolgoi camp area. The airport also serves as the regional airport for the town of Khanbogd.

The Trans-Mongolian Railway crosses the Mongolia-China border approximately 420 km east of the Oyu Tolgoi project site, traversing the country from south-east to north-west through Ulaanbaatar to the border with Russia. At the Mongolian-Chinese border, the rail gauge changes from the Russian standard to the Chinese standard. There is currently no access from the project site to the rail line within Mongolia except along a 330 km desert trail north-east to Sainshand.

The Government of Mongolia may construct or facilitate the construction and management of a railway in the vicinity of the project to the Mongolia-China border. The Government of Mongolia will consult with Oyu Tolgoi LLC on the location and route of the railway, and, if the railway is constructed, then it will be made available to Oyu Tolgoi LLC on commercial and non-discriminatory terms. Energy Resources LLC is currently constructing a single-track heavy-haul railway from its Ukhaa Khudag coal mine (approximately 120 km to the north-west of Oyu Tolgoi) to Gashuun Sukhait, ultimately to be

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interconnected with the Chinese rail network at Ganqimaodao on the Chinese side of the border. Once constructed, the South Gobi Rail alignment would pass within 12 km of the Oyu Tolgoi area and therefore represents an opportunity for eventual connection of Oyu Tolgoi to the rail network.

The Chinese Government has upgraded 226 km of road from Ganqimaodao to Wuyuan, providing a direct road link between the Mongolian border crossing at Gashuun Sukhait, 80 km south of Oyu Tolgoi, and the Trans-China Railway system. A 105 km sealed road is being constructed to the Mongolian-Chinese border crossing at Gashuun Sukhait. Approximately 23 km of the road are pending final construction to a fully paved standard.

Oyu Tolgoi LLC makes use of the Chinese Port of Tianjin, the largest port in northern China, some 150 km south-east of Beijing, to import freight from overseas. The port is open year-round and has no ice restrictions during winter. Subsequent road delivery follows the extensive network of Chinese highways connecting Tianjin to Wuyuan, a distance of about 1,050 km, from there along a state highway to Hailiutu, about 60 km, and then on to the China-Mongolia border crossing at Ganqimaodao-Gashuun Sukhait. This is the primary border crossing for both cargo and Chinese personnel immigration for the project. Baotou, just east of Wuyuan, will be the consolidation point for freight originating from China.

Oyu Tolgoi Licence Areas

The Oyu Tolgoi project area comprises five mining licences held by Oyu Tolgoi LLC and Entrée LLC, a subsidiary of Entrée Resources Ltd., formerly known as Entrée Gold Inc. The mining licences provide rights to the holders to explore, develop mining infrastructure, and conduct mining operations at Oyu Tolgoi. Oyu Tolgoi LLC owns 100% of three licences; MV-006708 (the Manakht Licence), MV-006709 (the Oyu Tolgoi Licence), and MV-006710 (the Khukh Khad Licence) while legal title to MV-015226 (the Shivee Tolgoi Licence) and MV-015225 (the Javkhlant Licence) is currently held by Entrée LLC, subject to the conditions described below.

Oyu Tolgoi’s legal title to the Shivee Tolgoi and Javkhlant licences is subject to the Entrée Earn-in Agreement, which established a joint venture arrangement between Oyu Tolgoi LLC and Entrée LLC and provides for Oyu Tolgoi LLC to hold legal title in the licences, subject to the terms of the agreement, and to Oyu Tolgoi LLC meeting prescribed earn-in expenditures. Although a formal joint venture agreement has not been signed, the earn-in requirements have been met. Both the Shivee Tolgoi and Javkhlant licences are planned to be operated by Oyu Tolgoi LLC.

Under the Entrée Earn-in Agreement, Oyu Tolgoi LLC’s participating interest in the proposed joint venture arrangements (including the licences) consists of:

· 70 percent of the proceeds from mining from the surface to 560 m below the surface; and

· 80 percent of the proceeds from mining from depths below 560 m.

Most of the identified mineralisation at Oyu Tolgoi occurs at the Hugo North and Oyut deposits within the Oyu Tolgoi Licence (MV-006709). The northernmost extension of the Hugo North deposit extends onto the Shivee Tolgoi Licence and is subject to the terms of the Entrée Earn-in Agreement.

The three Oyu Tolgoi mining licences have 30-year terms from 23 December 2003, and the Shivee Tolgoi Licence and the Javkhlant Licence each have 30-year terms from 27 October 2009. Each of the five mining licences has two 20-year extensions.

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Licence number	Area (ha)	Legal owner	Oyu Tolgoi’s interest
MV-006708	4,533	Oyu Tolgoi LLC	100%
MV-006709	8,490	Oyu Tolgoi LLC	100%
MV-006710	1,763	Oyu Tolgoi LLC	100%
MV-015225 (Javkhlant)	20,327 all under agreement	Entrée LLC (a subsidiary of Entrée Resources Ltd)	70% from the surface to 560 m below the surface; and 80% from below 560 m
MV-015226 (Shivee Tolgoi)	42,592.58 all under agreement	Entrée LLC (a subsidiary of Entrée Resources Ltd)	70% from the surface to 560 m below the surface; and 80% from below 560 m

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The Oyu Tolgoi Licence Areas

The illustration below shows a projected long section stretching 12 km from the Hugo North deposit in the north through to the Heruga deposit in the south.

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Idealised Profile of Oyut, Hugo Dummett, and the Heruga Deposits (Long Section Looking West)

The northernmost extension of the Hugo North deposit crosses onto the Shivee Tolgoi Property. The Heruga deposit lies almost entirely within the Javkhlant Property, with only the far northern extent passing into MV-006709. There are numerous exploration targets across the three Oyu Tolgoi mining licences MV-006708, MV-006709, and MV-006710.

The mining licences comprising the Oyu Tolgoi property were surveyed by an independent consultant in 2002 and by a qualified Mongolian Land Surveyor in 2004. In early-2011, the Government of Mongolia changed its official survey datum to WGS 84 / UTM zone 48N. In accordance with the requirements of the change, Geomaster Co. Ltd. resurveyed the licences and new licence certificates reflecting the slight change from prior surveys were issued to Oyu Tolgoi LLC. The Project is centred at approximately latitude 43°00’45”N, longitude 106°51’15”E.

Project History

The existence of copper in the Oyu Tolgoi area has been recognised since the Bronze Age, but contemporary exploration for mineral resources did not begin until the 1980s, when a joint Mongolian and Russian geochemical survey team identified a molybdenum anomaly. Evidence of alteration and copper mineralisation in the area of the Oyut deposit was first noted in 1983. In September 1996, geologists from the Magma Copper Company identified a porphyry copper leached cap over what is now known as the Central zone of the Oyut deposit. The Magma Copper Company subsequently secured exploration tenements in the area. Magma Copper Company was subsequently acquired by BHP, which became BHP-Billiton (“BHP”).

Geophysical surveying on the Oyu Tolgoi mining licence (MV-006709) was first conducted by BHP in 1997. An airborne magnetometer survey was carried out, followed by induced polarisation (“IP”) surveys.

The surveys covered exploration targets in the area of the Oyut deposit but did not extend into the northern area that ultimately became the Hugo Dummett deposits (Hugo North and Hugo South).

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Between 1997 and 1998, BHP also carried out geological, geophysical, and geochemical (stream sediment and soil) surveys, and diamond drilling programmes (23 drill holes in total) in the Central and South zones of the Oyut deposit. Copper and gold values were encountered at depths from 20 m to 70 m below the surface, and a supergene-enriched, chalcocite blanket was encountered in one drill hole. Based on the results of this drilling, BHP prepared a mineral resource estimate in 1998, but the resulting tonnage and grade estimate was considered too small to meet BHP corporate objectives, and BHP elected to offer the property for joint venture.

In 1999, Turquoise Hill (known at the time as Ivanhoe Mines Ltd.) visited Oyu Tolgoi and agreed to acquire 100% interest in the property, subject to a 2% NSR royalty. The Corporation subsequently acquired the 2% NSR royalty payable by Oyu Tolgoi LLC in November 2003, thereby removing any future obligations to BHP.

In 2000, Ivanhoe, through its subsidiary Oyu Tolgoi LLC (known at the time as Ivanhoe Mines Mongolia Inc. LLC (“IMMI”), completed 8,000 m of reverse circulation (“RC”) drilling, mostly at the Central zone, to explore the chalcocite blanket discovered earlier by BHP, and updated the BHP mineral resource estimate.

In 2001, Oyu Tolgoi LLC continued RC drilling, mostly in the South zone area, to test for additional supergene copper mineralisation. Oyu Tolgoi LLC then drilled three diamond core holes to test the deep hypogene copper-gold potential. One of these holes, drilled over the Southwest zone, intersected 508 m of chalcopyrite mineralisation from a depth of 70 m, grading 0.81% Cu and 1.17 g/t Au. This marked the discovery of the Oyut deposit.

These results encouraged Ivanhoe to mount a major follow-up drilling programme. In late-2002, drilling in the far northern section of the property intersected 638 m of bornite-chalcopyrite-rich mineralisation, starting at a depth of 222 m. This hole marked the discovery of the Hugo Dummett deposits (Hugo North and Hugo South).

In 2003, the Government of Mongolia granted mining licence MV-006709 to IMMI, along with mining licences for MV-006708 and MV-006710.

In 2004, a NI 43-101 Preliminary Economic Assessment (“PEA”) was completed on the economics of open pit mining the Oyut deposit and a first-time Mineral Resource estimate was reported for the Hugo South portion of the Hugo Dummett deposits. In November 2004, following the signing of the Entrée Earn-in Agreement, Oyu Tolgoi LLC initiated exploration work on the Javkhlant and Shivee Tolgoi licences. Entrée LLC had previously undertaken soil geochemical surveys, geophysical surveys and geological mapping, but had failed to locate any mineralisation of significance.

In 2005, the Hugo Dummett Mineral Resource estimate was updated to include Hugo North and a PEA was prepared based on an integrated development plan for open pit mining of the Oyut deposit, two block caves on the Hugo North deposit, and one block cave on Hugo South. The integrated development plan included a processing plant with a capacity of 25.5 million tonnes per annum (Mtpa), with an expansion to 51 Mtpa.

In 2006, following further geophysical exploration and drilling, Oyu Tolgoi LLC reported a first-time resource estimate for the part of the Hugo North deposit that extends onto the Shivee Tolgoi mining licence. This area is known as the Hugo North Extension. A mineral reserve estimate for the Oyut deposit was reported, based on a study assessing an open-pit only mining scenario.

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In January 2006, Shaft 1 headframe, hoisting plant, and associated infrastructure were completed. By January 2008, the shaft had been sunk to a depth of 1,385 m enabling underground exploration development for the Hugo North deposit to commence.

In early 2007, core drilling was initiated to test IP anomalies on Entrée LLC’s Javkhlant licence. The drilling identified the Heruga deposit in 2008. In 2007 the Hugo North mineral resource estimate was also updated.

In 2008, a first-time mineral resource estimate was reported for the Heruga deposit.

In 2009, the Investment Agreement between Oyu Tolgoi LLC and the Government of Mongolia was signed (See “General Development of the Business – Agreements with the Government of Mongolia – Investment Agreement”). As part of the agreement process, Oyu Tolgoi LLC prepared a Mongolian statutory study (“MSS09”) for the Government of Mongolia. MSS09 envisaged open-pit mining on the Oyut deposit and underground mining by block caving on Hugo North, Hugo South, and the Heruga deposits. A processing plant capacity of 36.5 Mtpa expanding to 58 Mtpa was envisaged.

In 2010, an NI 43-101 Technical Report (“2010 Technical Report”) was released based on an integrated development plan for the project. The 2010 Technical Report included a Mineral Reserve for the Oyut deposit based on open-pit mining and an ore reserve for part of the Hugo North deposit (Lift 1) based on the block caving method. The report envisaged the same plant capacity as MSS09. A decision was made to construct the Oyut open pit mine and to construct a 36.5 Mtpa concentrator and supporting infrastructure.

In 2011, an updated NI 43-101 Technical Report was released that updated the 2010 Technical Report while maintaining the same concentrator feed capacity and sinking of Shaft 2 (the main personnel, rock hoisting, and intake ventilation shaft) commenced.

In 2012, Rio Tinto Ltd became the majority shareholder of Ivanhoe and Ivanhoe was renamed Turquoise Hill Resources Ltd. The Detailed Integrated Development and Operating Plan was prepared examining the scenario of open-pit mining on the Oyut deposit and underground block caving on Hugo North Lift 1, without a plant expansion.

In January 2013, Oyu Tolgoi processed its first ore through the concentrator, and shortly thereafter, produced the first copper-gold concentrate. In March 2013, Detailed Integrated Development and Operating Plan and a further Technical Report (the “2013 Technical Report”) was released based on a more detailed study assessing open pit mining of the Oyut deposit and underground block caving of Hugo North Lift 1. In June 2013, more than 40,000 t of concentrate had been produced. The concentrator was reported to be running at full capacity in September 2013. In August 2013, development of the underground mine was suspended to allow matters to be resolved between the parties to the Investment Agreement, including a tax dispute, approval of the Detailed Integrated Development and Operating Plan by Oyu Tolgoi’s shareholders and by the Mongolian Minerals Council, agreement of a comprehensive funding plan, and receipt of all necessary permits.

In 2014, the Hugo North mineral resource estimate was updated, and Oyu Tolgoi LLC submitted a statutory study with the Mongolian Minerals Council. The study envisaged open pit mining on the Oyut deposit and underground block caving on Hugo North Lift 1. In addition, the study considered the development of resources at Hugo North Lift 2, Hugo South, and Heruga. A concentrator throughput rate of 36.5 Mtpa was envisaged. In March 2014, the Corporation announced that it was continuing to work together with Rio Tinto and the Government of Mongolia with the aim of resolving outstanding shareholder matters and finalising Oyu Tolgoi project financing. In October 2014, the Corporation filed

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a Technical Report (the “2014 Technical Report”) for the Project. The 2014 Technical Report was based on a new statutory study prepared by Oyu Tolgoi LLC. The study envisaged the same integrated mining concept as the 2013 Technical Report. Oyu Tolgoi LLC produced 148,400 t of copper and 589,000 oz of gold in concentrates.

In March 2015, Oyu Tolgoi LLC filed a statutory study with the Mongolian Minerals Council and in May 2015, Turquoise Hill announced the signing of the UDP by the Government of Mongolia, the Corporation and Rio Tinto, which addressed key outstanding shareholder matters and set out an agreed basis for the funding of the Project. The study (updated in 2016, and which corresponds to MSS16) incorporated matters resolved between the shareholders and was approved by the Oyu Tolgoi LLC board of directors and shareholders. In August 2015, Oyu Tolgoi LLC filed revised schedules for MSS16 with the Mongolian Minerals Council. The filing aligned MSS16 with the UDP. Oyu Tolgoi LLC produced 202,200 t of copper and produced 653,000 oz of gold in concentrate. It recorded net revenue of approximately $1.6 billion in sales on approximately 820,000 t of concentrates. Mill throughput increased by 23.9% compared to 2014, driven by operational improvements.

In May 2016, Oyu Tolgoi LLC received the formal notice to restart underground development. Underground construction began in mid-2016. In October 2016, the Corporation released the 2016 Technical Report, which updated and replaced the 2014 Technical Report.

In May 2017, Oyu Tolgoi LLC signed a new power purchase agreement with NPTG, which was executed in connection with the power import arrangement between NPTG and IMPIC. The new arrangement took effect on July 4, 2017, subsequent to the expiry of the existing IMPIC agreement, for a term of up to six years, with possibility of early cancellation after the fourth year, if a domestic power plant was commissioned earlier.

In June 2017, Oyu Tolgoi shipped its three millionth tonne of concentrate.

In 2018, Oyu Tolgoi achieved a significant underground development milestone with the completed sinking of Shaft 5 at a final depth of 1,178 metres. In July 2018, the Corporation announced the completed commissioning of Shaft 5 and in December 2018, the Corporation announced the signing of the PSFA between Oyu Tolgoi LLC and the Government of Mongolia, which provided a binding framework and pathway forward for the construction of the TTPP Project, as well as established the basis for a long-term domestic power solution for Oyu Tolgoi. See also “General Development of the Business - Three Year History”.

Geology

The Oyu Tolgoi copper-gold porphyry deposits are situated in a poorly exposed inlier of Devonian mafic to intermediate volcanic, volcaniclastic, and sedimentary rocks that have been intruded by Devonian to Permian felsic plutons. These rocks are unconformably overlain by poorly consolidated Cretaceous sedimentary rocks and younger unconsolidated sedimentary deposits.

The stratigraphic sequences recognised in the project area, from oldest to youngest, include:

· Alagbayan Group – comprising the Bulagbayan and Khalzan-Ovoo Formations that consist of tuffs, basaltic rocks, and sedimentary strata of probable island-arc affinity assigned to the Upper Devonian;

· Sainshandhudag Formation - an overlying succession containing conglomerates, fossiliferous marine siltstones, sandstones, water-lain tuffs, and basaltic to andesitic flows and volcaniclastic rocks, assigned to the Carboniferous;

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· Bayanshiree Formation - overlying Upper Cretaceous clays and gravels; and

· Quaternary sediments.

The Alagbayan and Sainshandhudag sequences are separated by a regional unconformity that, in the Oyu Tolgoi area, is associated with a time gap. The volcanic and sedimentary rocks are cut by several phases of intrusive rocks ranging from batholithic intrusions to narrow discontinuous dykes and sills. Compositional and textural characteristics vary.

The project area is intersected by a complex network of faults, folds, and shear zones. These structures influence the distribution of mineralisation by both controlling the original position and form of mineralised bodies and modifying them during post-mineral deformation events.

The mineralised porphyry centres define a north-north-east trending corridor underlain by east-dipping panels of Upper Devonian or older layered sequences intruded by quartz-monzodiorite and granodiorite stocks and dykes.

Deposits Hosting Mineral Resources

Four deposits hosting Mineral Resources have been identified: Oyut, Hugo North, Hugo South, and Heruga.

Oyut Deposit

The Oyut deposit includes the most mineralised domain called Southwest Oyu (Southwest), but also includes South Oyu (South), Wedge, and Central Oyu (Central) domain and several smaller, fault-bounded zones. The open pit incorporates most of these domains. They form contiguous sectors of mineralisation representing multiple mineralising centres, each with distinct styles of mineralisation, alteration, and host rock lithology. The boundaries between the individual zones coincide with major faults. Faulting has resulted in different erosional histories for the zones, depending on the depth to which a zone has been downfaulted or uplifted relative to neighbouring zones.

The Southwest Oyu zone is a gold-rich porphyry system characterised by a south-west–plunging, pipe-like geometry that has a vertical extent of as much as 700 m. The Central zone is hosted within a swarm of feldspar-phyric quartz-monzodiorite intrusions, emplaced into porphyritic augite basalt and overlying basaltic tuff of the Alagbayan Group. The South Oyu zone is developed mainly in basaltic volcanics and related to small, strongly-sericite altered quartz–monzodiorite dykes.

Hugo North and Hugo South Deposits

The Hugo North and Hugo South deposits contain porphyry-style mineralisation associated with quartz-monzodiorite intrusions, concealed beneath a sequence of Upper Devonian and Lower Carboniferous sedimentary and volcanic rocks. The deposits are highly elongated to the north–north-east and extend over 3 km. The dividing line between the two deposits is 4,766,300 m North, a location marked by the thinning and locally discontinuous nature of the high-grade copper mineralisation (defined by greater than 2.0% copper). The line, which is broadly coincident with the east striking 110° fault, separates the gold-rich and copper-rich zone hosted in augite basalt and quartz-monzodiorite of the Hugo North deposit from the more southerly, gold-poor, ignimbrite and augite basalt-hosted mineralisation at Hugo South.

The highest-grade copper mineralisation in the Hugo North deposit is related to a zone of intensely stockworked to sheeted quartz veins known as the QV90 zone, so named because greater than 90% of the

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rock has greater than 15% quartz veining. The high-grade zone is centred on thin, east dipping quartz monzodiorite intrusions or within the apex of the large quartz monzodiorite body and extends into the adjacent basalt. In addition, moderate-to-high grade copper and gold values occur within quartz monzodiorite below and to the west of the intense vein zone, in the Hugo North gold zone. This zone is distinct and has a high Au (ppm) to Cu (%) ratio of 0.5 to 1.

Heruga Deposit

The Heruga deposit is the most southerly of the known deposits at Oyu Tolgoi. The deposit is a copper–gold–molybdenum porphyry deposit and is zoned with a molybdenum-rich carapace at higher elevations overlying gold-rich mineralisation at depth. The top of the mineralisation starts 500–600 m below the present ground surface. The deposit has been drilled over a 2.3 km length, is elongated in a north–northeast direction and terminates to the north on an east–northeast-trending regional fault with 500 m of apparent dextral displacement.

Quartz monzodiorite intrudes the Devonian augite basalts as elsewhere in the district, and again are the progenitors of mineralisation and alteration. The quartz monzodiorite intrusions are small compared to the stocks present in the Hugo Dummett and Oyut areas, perhaps explaining the lower grade of the Heruga deposit. Non-mineralised dykes, comprising about 15% of the volume of the deposit, cut all other rock types.

The deposit is transected by a series of north–north-east trending vertical fault structures that step down 200 m to 300 m at a time to the west and have divided the deposit into at least two structural blocks.

Mineralised veins have a much lower density at Heruga than in the more northerly Oyut and Hugo Dummett deposits. High-grade copper and gold intersections show a strong spatial association with contacts of the mineralised quartz monzodiorite porphyry intrusion in the southern part of the deposit, occurring both within the outer portion of the intrusion and in adjacent enclosing basaltic country rock. At deeper levels, mineralisation consists of chalcopyrite and pyrite in veins and disseminated within biotite–chlorite–albite–actinolite-altered basalt or sericite–albite-altered quartz monzodiorite. The higher levels of the orebody are overprinted by strong quartz–sericite–tourmaline–pyrite alteration where mineralisation consists of disseminated and vein-controlled pyrite, chalcopyrite and molybdenite.

There is no oxide zone at Heruga, nor is there any high-sulphidation style mineralisation known to date.

Near Mine Exploration and Drilling

Exploration on the mine leases is undertaken by Oyu Tolgoi LLC’s site technical services team. The current exploration strategy is focused on developing a project pipeline prioritised in areas that can impact the current development of the Oyu Tolgoi deposits, seeking low-cost development options and continuing the assessment of legacy datasets to enable future discovery. The table below summarises current exploration targets, based on medium or high priority, which are currently identified. Some of the targets have exploration work planned in 2022 and some targets will be investigated in the future. Development of the known mineral resources is a key objective of stakeholders and over the life of Oyu Tolgoi, Oyu Tolgoi LLC will continue to progress its understanding of these resources and ultimately make decisions on their development.

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Exploration Target Prospect Classification

Company	Mining Licence	High priority	Medium priority
Oyu Tolgoi LLC	Oyu Tolgoi (MV-006709)	·   Shallow Hugo ·   West Oyu ·   Hugo West ·   SW Gold	·   SE Oyu ·   Zeer
	Manakht (MV-006708)		·   West Manakht ·   Manakht Ovoo
	Khukh Khad (MV-006710)		·   Central Khuh Khad
Entrée LLC	Shivee Tolgoi (MV-015226)	·   North Hugo Extension	·   North-Ulaan Khud (Ulaan Khud South) ·   Airstrip target
	Javkhlant (MV-015225)	·   Heruga deposit	·   West Heruga ·   Castle rock target ·   Bumbat Ulaan ·   West Mag ·   SEIP and North-SEIP

The following is a summary of key exploration activities from January 1, 2016 to December 31, 2021.

From 2016 to 2021, several exploration programmes were conducted to assess the potential for additional exploration targets in Oyu Tolgoi and the surrounding tenements. These surveys included geological mapping, geochemical and geophysical surveys, along with diamond and RC drilling programmes in order to define lithology and structure, test geochemical and geophysical anomalies, determine the continuation of mineralisation trends, and to identify potential resource targets. Comprehensive desktop studies to evaluate potential of the targets and plan further exploration programmes at areas of interest including wholerock-zircon studies, rockchip and soil geochemistry and integrated geological-geophysical 3D modelling were carried out. Targets are assessed and ranked as either high, medium or low potential dependent on various factors including favourable lithology, alteration, and structural setting, geophysical or geochemical signature similar to known mineralisation style of other Oyu Tolgoi deposits, and potential for extension along or down dip of known mineralisation. Detailed exploration activities (including drilling programmes) have mostly been focused on finding shallow resources (less than 300 m) near pit and greenfield opportunities. No drilling programmes were conducted in 2020 and 2021 due to the ongoing COVID-19 pandemic and related restrictions, other than infill drilling conducted on the Oyu Tolgoi licence MV-006709. Exploration activities in 2021 included data integration and interpretation at Manakht (MV-006708) and Khukh Khad (MV-006710) licences, and prospect scale 3D geologicalgeophysical modelling at Javkhlant (MV-015225) and Shivee Tolgoi (MV-015226) licences.

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High Priority Targets

Shallow Hugo West (“SHW”) is the area directly to the north and north-west of the Central Oyu Open Pit. In 2018 through to 2020, multi-phase drilling campaigns comprising 14 diamond-core and 49 RC drill holes, for a total of 15,002 m (diamond 2,833 m; RC 12,170 m), were completed at SHW to further test mineralisation previously identified by geochemistry, geophysics and initial drill testing prior to 2016. Drilling has shown that SHW sits within a downfaulted block from the Western BAT Fault and is likely to be a northern offset extension of the Central Oyu deposit. Due to the fault geometry SHW is located deeper than the currently planned Oyut open pit. Further work will include infill drilling and 3D resource modelling to determine if the zone is economically feasible to include in open pit planning.

West Oyu is to the immediate west of the open pit and is characterised by Devonian QMD, augite basalt overlapping high chargeability and gravity features. Several sparsely located RC and diamond holes have been drilled in the past. The results of two holes were 86 m at 0.15% Cu and 56 m at 0.27g/t Au.

Hugo West is immediately to the north of SHW on the main Oyu Tolgoi high chargeability, high gravity trend. It is associated with ignimbrite and dacite units. The shallow part of the target has been partially tested with three holes returning: 76 m at 0.23% Cu (246 m to 322 m), 134 m at 0.35% Cu (366 m to 498 m) and 44 m at 0.17% Cu and 98ppm Mo.

SW Gold target is immediate south-west extension of the open pit and comprises Devonian augite basalts coinciding with high chargeability and density. Several drill holes have been drilled into this target and have returned elevated Au grade intersection from – 30 m to 120 m. Further drilling is needed to evaluate this possible mine extension.

Hugo North Extension has been geologically modelled in 3D using geophysics and geological data for two potential structural geometries that are considered favourable for hosting Oyu Tolgoi style porphyry mineralisation. Drill testing and further work is required.

At Heruga a geochemical characterisation study was completed over an initial single cross-section. The mineral association results indicate that the mineralisation is decreasing to the west, however there is potential for high grade mineralisation in the east (although it will most likely be deeper due to the host lithological bedding configuration). Further work is needed to collect more information on the area for further development and modelling.

Medium Priority Targets

West Manakht is located in the Manakht licence and is characterised by over a 1 km, east-north-east striking 15 m to 30 m wide shear zone hosted in granodiorite massif. The shear zone is associated with quartz-monzonite dyke, quartz veins with copper oxides and sulphides. Rock chip samples have elevated copper grades along the shear zone associated with quartz veins. The target is a deep Induced Polarisation anomaly which has overlapping elevated copper, molybdenum and silver soil anomalies. Further deep exploration will provide information on the potential of the prospect.

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Ulaan Khud South target is located in the far north of the Shivee Tolgoi licence, to the south of the Ulaan Khud porphyry deposit (beyond the licence boundary). This area is relatively unexplored between the northern Ulaan Khud porphyry and main Ulaan Khud prospect to the south. Few holes have been drilled in the past which have shown patchy chalcopyrite mineralisation in quartz veins. Further exploration is planned in the area.

The Airstrip target area is mostly undercover, concealed by Cretaceous clay and is initially identified as a gravity high anomaly. Shallow percussion drilling was conducted to collect bedrock information (58 holes with depth range of 30 m to 120 m). Two follow-up, deeper diamond holes were undertaken. An east-west oriented Induced Polarisation survey traversing the prospect area revealed two separate chargeability anomalies which were drill tested in 2019 (less than 300 m RC drilling). No noteworthy results were received from the shallow RC drilling programme, but there is still an indication of deeper potential for the target. Recent integrated geological-geophysical modelling work highlighted additional prospective areas within the current target focus zone. Additional work included alteration studies, uranium-lead chronology (21 samples) and ASD spectrometer analysis (368 samples) to test for distance of target to the centre of a porphyry system, porphyry fertility responses and favourable alteration species indicating proximity to a porphyry centre. The results indicated a copper-molybdenum-silver-bismuth-tellurium association and associated copper anomaly that suggest potential for copper mineralisation. This target requires more work.

West Heruga is located approximately 1 km to the west of the Heruga deposit and is mostly undercover. Interpreted geological map shows Devonian basalts and sediments coinciding with moderate-high chargeability and moderate-high transitioning gravity towards the Heruga deposit. Further exploration will provide more information on the geological setting of the area and source of the geophysical features.

The South East IP target is located in the south-east of the Javkhlant Licence area and is characterised by large gradient array Induced Polarisation anomaly coinciding with Carboniferous units. Geological mapping has been completed and soil sampling has identified three clusters of copper anomalies (Cu-1, Cu-2, and Cu-3) with copper results from surface rock chip samples ranging from 0.18% to 0.77% Cu. RC drilling programme with 10 shallow RC holes (less than 300 m) was conducted in 2019 to test the potential for surface Cu mineralisation. RC holes intersected Carboniferous volcanic-sedimentary rocks with no significant alteration and mineralisation. Although there is a considerable amount of pyrite distribution (less than 2%) in the holes, the source of the anomaly still needs to be tested with Induced Polarisation and deeper drilling. Recent integrated geological-geophysical modelling suggests additional prospective locations/targets at the area which happen to be away from the strong chargeability feature and RC drill holes. Further exploration work will reveal the potential of the prospect.

The Castle Rock IP anomaly is located in the south of the Javkhlant Licence and includes some outcrops of dacite with sheeted and network quartz veins. Geological mapping was completed and soil sampling over a 400 m by 200 m grid for a total of 402 samples delineated a north-north-east to south-south-west trending molybdenum-arsenic-antimony-selenium-tellurium anomaly coincident with the Induced Polarisation anomaly in 2018. Two lines (7.2 km) of dipole-dipole Induced Polarisation were completed, followed up with two RC drill holes to test the anomaly. No significant copper or gold assays were returned. RC holes intersected andesite-basalt tuffs with strong pyrite concentration up to 6% which may be causing the chargeability high.

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Bumbat Ulaan target is located in the far west of the Javkhlant licence and is characterised by argillic-silica zones in Carboniferous volcanics which are in contacted with granitic batholite. Discrete smaller high chargeability anomalies are partially coincident with the argillic zones and molybdenum, tellurium, selenium geochemical anomalies.

West Mag target is also located in the far west of the Javkhlant licence, to the northeast of the Bumbat Ulaan prospect. The area geology is complex with Carboniferous volcanic sequences being cut by dominantly north-north-east trending intermediate to felsic dykes and porphyries. The target area occupies a contact zone with quartz-granite and the volcanics, chargeability highs, gravity moderate-highs and narrow advanced argillic, phyllic zones with copper-molybdenum-gold soil anomaly.

Resource Delineation Drilling

Infill drilling to increase resource confidence and geotechnical orebody knowledge is part of a longer-term strategy to add incremental resource tonnes and convert resources to reserves, particularly around Oyut (ultimate reserve pit), Hugo North Lift 1 and Lift 2, and Hugo South.

A summary of exploration expenditure by licence from 2016 to 2021 is tabulated below, along with the total drilling metres by year. Expenditure includes drilling defined as resource delineation, orebody knowledge and brownfield exploration.

Licence	Units	2016	2017	2018	2019	2020	2021	Total
MV-006708 (Manakht)	$ Million	0.1	0.1	0.1	0.1	0.04	0.08	0.4
MV-006709 (Oyu Tolgoi)	$ Million	0.1	0.0	1.4	1.9	0.0	3.6	7.0
MV-006710 (Khukh Khad)	$ Million	0.1	0.0	0.2	0.1	0.05	0.06	0.5
MV-015225 (JV-Javkhlant)	$ Million	0.1	0.1	0.3	0.3	0.1	0.5	1.4
MV-015226 (JV-Shivee Tolgoi)	$ Million	0.1	0.0	0.2	0.3	0.3	0.3	1.2
Total Expenditure*	$ Million	0.4	0.3	2.2	2.7	0.5	4.5	10.6
Holes Drilled	Number	30	36	157	247	190	160	820
Metres Drilled	Kilometres	5.2	17.5	57.9	72.7	54.8	44.9	253

Note: Totals may not match due to rounding

Between 2016 and 2021, over $10.6 million was spent on exploration and resource delineation drilling across the five licences. During 2021, a total of 160 holes for 44 km of drilling was completed. Of this, 12 km was resource definition drilling designed to increase resource confidence inside the Oyut ultimate pit.

Sampling, Analysis and Data Verification

Diamond drill core is the main source of geological and grade data for the Oyu Tolgoi resource models. Key data includes drill collar surveys, downhole surveys, geological logging (including lithology, alteration, structure, mineralisation, and recovery and geotechnical data), bulk density, assays, and magnetic susceptibility. Geological logging is captured digitally and stored in an acQuire relational database and exported to a Vulcan ISIS relational database for manipulation and modelling purposes. Validation checks occur at various stages of the data capture process and during the import and export of the data between acQuire and Vulcan.

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Underground face mapping at Hugo North and open pit mapping at Oyut also capture important geological and structural data that is incorporated into the geological modelling as part of the resource modelling process.

Drill core is stored in labelled core boxes showing the drill hole number, a core box identifier and start and end meterage. Core boxes are transferred from the drill rig to the logging area, and after logging then transferred to the sampling area. Drill core is photographed prior to sampling so there is a permanent record.

Sample intervals are generally half core, two metres in length, with samples cut by a diamond saw. The sample intervals are measured and marked on both the core and the core box, and a sample tag stapled to the core box at the end of each interval. Sample numbers are pre-allocated and allow for the insertion of quality assurance and quality control (QA/QC) samples including duplicates, standards, and blanks. Half core is placed directly into pre-numbered sample bags with internal sample tag, and the remaining half core is returned to the core box and retained. Routine bulk density measurements are taken using the Archimedes water immersion method.

Until September 2011, all routine sample preparation and analyses of the Oyu Tolgoi samples were carried out by SGS Mongolia, an independent sample preparation facility on site and an analytical laboratory in Ulaanbaatar. This laboratory was ISO 9001:2000 accredited and conforms to the requirements of ISO/IEC 17025 for specific registered tests. The laboratory performs all fire assay analyses. Between 2011-2016, the samples were submitted to ALS laboratory (Canada) for analysis. From 2016 to 2019, the sample preparation for exploration have been carried out by ALS located in Ulaanbaatar and assay analysis has been performed at ALS laboratory in Perth, Australia and Canada.

Since 2019, the sample preparation and assay analysis for resource estimation and brownfield exploration have been carried out by SGS Mongolia located in Ulaanbaatar.

Since 2011, ICP-MS has been used for assaying of all routine samples. ALS and SGS act as the check laboratories for each other, which ensures systematic secondary laboratory checks of resource and exploration drilling. The check sample rate is one in 20 samples. Run-of-mine samples from the open pit and concentrator are subject to a separate analytical flowchart at the mine laboratory situated within the concentrator complex on site.

Sample security is supported by the fact that the samples were always attended to or locked in a secure sample dispatch facility. Sample collection and transportation were always undertaken by company or laboratory personnel using company vehicles. Chain-of-custody procedures included filling out sample submittal forms that were sent to the laboratory with the sample shipments to ensure that the laboratory received all the samples.

Standard reference materials (“SRMs”) are prepared from Oyu Tolgoi site material of varying matrices and grades to formulate bulk homogenous samples. Ten samples of this material are sent for round-robin testing by at least seven international laboratories. The resulting assay data are analysed statistically to determine a representative mean value and standard deviation necessary for setting acceptance/rejection tolerance limits. Blank samples are also subjected to a round-robin programme to ensure the material is devoid of any of the elements of interest so they can be confidently used to monitor potential contamination.

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Five QA/QC samples are routinely included in every batch of 15 samples to make up a batch of 20 samples. QA/QC samples consist of one duplicate split core sample, one uncrushed field blank, a reject or pulp preparation duplicate, and one or two SRM samples (less than 2% Cu and greater than 2% Cu if higher grade mineralisation is present based on visual estimates). The SRMs are matrix-matched to ensure consistency with routine analytical samples.

The split core, reject, and pulp duplicates are used to monitor precision at the various stages of sample preparation. The field blank can indicate sample contamination or sample mix-ups, and the SRM is used to monitor accuracy of the assay results.

Mineral Resources

The section relates to the construction of the resource models for the Oyut, Hugo North, Hugo South, and Heruga deposits. Each step has been summarised including data acquisition, block model creation, model validation, resource classification and reporting.

Mineral Resources Modelling Methodology

The geology models for the various deposits are based on logging and mapping data collected since project inception. The geology models include wireframes for lithology, alteration, oxidation, supergene and structure.

For Oyut and Hugo North, the geological wireframes form the basis of the estimation domains for the economic elements (Cu, Au, Ag, Mo), deleterious / penalty elements (F, As), density and geometallurgical variables (used in throughput and recovery calculations). The final estimation domain groupings have been defined from statistical analysis of the box plots, histograms and probability plots. For Hugo South and Heruga, the estimation domains for the economic variables are based on grade shells.

For each deposit, the drill hole assays were composited into fixed-length, down-hole composites at a size that was considered appropriate in consideration of estimation block size, required lithological resolution, and probable mining method. The compositing honours the domains by breaking the composites on the domain boundary. Composite lengths of 8 m (approximately half the 15 m selective mining unit) were used for Oyut. Composite lengths of 5 m lengths were used for Hugo North, Hugo South and Heruga.

For each deposit:

· When appropriate, a high-grade restriction or capping has been used to limit the effect of outliers;

· Contact boundary analysis was completed to determine the treatment of boundaries (hard or soft) for estimation; and

· Spatial continuity analysis (variography) was completed to determine search strategies and variogram models were generally fitted using correlograms.

The block size of the final resource models was chosen based on a number of factors including the mining (or anticipated mining) method. The grade has been estimated into sub-blocked models and regularised for resource reporting and mine planning.

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· For Oyut, Hugo South and Heruga the parent block dimensions are 20 m by 20 m by 15 m. The sub-blocked models have block dimensions down to 5 m by 5 m by 5 m, but the actual sub-block sizes vary as necessary to fit the specified boundaries of the wireframes used to tag the block model.

· For Hugo North, the parent block block dimensions are 15 m by 15 m by 15 m. The sub-blocked model has block dimensions down to 5 m by 5 m by 5 m.

For each deposit, grade estimation has been performed using Ordinary Kriging (OK) using a multi-pass kriging strategy. The kriging neighbourhood has been expanded and relaxed with each successive pass while maintaining the same axial ratios for samples searches as in the first pass. The second pass was executed on blocks that did not receive an interpolated grade in the first pass, and the third pass was executed on blocks that did not receive an interpolated grade in the first and second passes.

Density has been estimated either via Simple Kriging (SK) or Inverse Distance Squared (ID2).

In the case of Oyut and Hugo North, the first and second estimation pass kriging neighbourhoods approximately correspond to blocks expected to satisfy Measured and Indicated classification criteria. For Inferred classification, the blocks have been coded based on distance to a drill hole (and this distance varies from deposit to deposit).

Validation of the resource models was completed using several different methods including visual checks of block estimates against the drill composites; statistical analysis of block estimates against the uncapped and capped drill composites; swath plots in northing, easting and elevation; and comparison checks against the nearest neighbour model. At Oyut, the resource model was also validated by checking it against the grade control model.

There has been no change to the resource models for any of the deposits in 2021.

Mineral Resources Classification

The block models have been classified as Measured, Indicated and Inferred Mineral Resources based on drill spacing with consideration of grade and geological continuity. In general, the resource categories have been assigned based on the first, second and third searches. Oyut and Hugo North are the only deposits to have blocks coded as Measured Mineral Resources.

Mineral Resource Reporting

The Oyu Tolgoi deposits contain estimated Measured and Indicated Mineral Resources of 8.3 Mt of contained copper, 9.0 Moz of contained gold, and an estimated Inferred Mineral Resource of 21.8 Mt of contained copper and 34.4 Moz of contained gold.

The individual Mineral Resources for Oyu Tolgoi by deposit (Oyut, Hugo North, Hugo South, Heruga) and the total Mineral Resources are shown in the tables below. The detailed Mineral Resource tabulations (including the breakdown of ownership) are included in Schedule D. The Mineral Resources have been

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prepared in accordance with the CIM Definition Standards and in accordance with the requirements of NI 43-101. The Mineral Resource estimates have been rounded which is in line with industry best practice.

Oyut Open Pit Mineral Resources Summary, December 31, 2021

Classification	Ownership	Mineral Resources				Contained Metal
		Tonnes	Cu	Au	Ag	Copper	Gold	Silver
		(Mt)	(%)	(g/t)	(g/t)	(Mt)	(Moz)	(Moz)
Measured	Oyu Tolgoi LLC	20	0.41	0.38	1.1	0.1	0.2	0.6
Indicated	Oyu Tolgoi LLC	90	0.33	0.30	1.1	0.3	0.9	3.4
Total (Measured + Indicated)	Oyu Tolgoi LLC	110	0.34	0.31	1.1	0.4	1.1	3.9
Inferred	Oyu Tolgoi LLC	340	0.29	0.19	1.0	1.0	2.0	11.1

Oyut Underground Mineral Resources Summary, December 31, 2021

Classification	Ownership	Mineral Resources				Contained Metal
		Tonnes	Cu	Au	Ag	Copper	Gold	Silver
		(Mt)	(%)	(g/t)	(g/t)	(Mt)	(Moz)	(Moz)
Measured	Oyu Tolgoi LLC	10	0.48	0.91	1.3	0.0	0.3	0.4
Indicated	Oyu Tolgoi LLC	50	0.38	0.61	1.2	0.2	1.0	1.9
Total (Measured + Indicated)	Oyu Tolgoi LLC	60	0.40	0.66	1.2	0.2	1.3	2.3
Inferred	Oyu Tolgoi LLC	140	0.41	0.42	1.2	0.6	1.9	5.8

Hugo North Mineral Resources Summary, December 31, 2021

Classification	Ownership	Mineral Resources				Contained Metal
		Tonnes	Cu	Au	Ag	Copper	Gold	Silver
		(Mt)	(%)	(g/t)	(g/t)	(Mt)	(Moz)	(Moz)
Measured	Oyu Tolgoi LLC	60	1.89	0.49	4.24	1.1	0.9	7.6
Indicated	Oyu Tolgoi + Entrée LLC	470	1.42	0.38	3.38	6.6	5.8	50.8
Total (Measured + Indicated)	Oyu Tolgoi + Entrée LLC	520	1.47	0.40	3.47	7.7	6.7	58.4
Inferred	Oyu Tolgoi + Entrée LLC	880	0.87	0.30	2.54	7.6	8.6	71.8

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Hugo South Mineral Resources Summary, December 31, 2021
Classification	Ownership	Mineral Resources				Contained Metal
		Tonnes	Cu	Au	Ag	Copper	Gold	Silver
		(Mt)	(%)	(g/t)	(g/t)	(Mt)	(Moz)	(Moz)
Inferred	Oyu Tolgoi LLC	730	0.83	0.07	1.9	6.1	1.7	44.0
Heruga Mineral Resources Summary, December 31, 2021
Classification	Ownership	Mineral Resources				Contained Metal
		Tonnes	Cu	Au	Ag	Copper	Gold	Silver
		(Mt)	(%)	(g/t)	(g/t)	(Mt)	(Moz)	(Moz)
Inferred	Javkhlant EJV	1500	0.41	0.40	1.4	6.1	19.2	69.4
	Oyu Tolgoi LLC	110	0.42	0.30	1.6	0.4	1.0	5.4
	All Heruga	1610	0.41	0.39	1.4	6.6	20.2	74.9
Total Oyu Tolgoi Mineral Resources Summary, December 31, 2021
Classification		Mineral Resources				Contained Metal
		Tonnes	Cu	Au	Ag	Copper	Gold	Silver
		(Mt)	(%)	(g/t)	(g/t)	(Mt)	(Moz)	(Moz)
Measured		82	1.42	0.52	3.3	1.2	1.4	8.6
Indicated		610	1.17	0.39	2.9	7.1	7.7	56.1
Total (Measured + Indicated)		692	1.20	0.41	2.9	8.3	9.0	64.7
Inferred		3700	0.59	0.29	1.7	21.8	34.4	207.5

Notes to the Mineral Resources:

1. Totals may not match due to rounding.

2. CIM Definition Standards are used for reporting of Mineral Resources.

3. The Mineral Resources exclude Mineral Reserves.

4. The following CuEq formulae have been used for cut-off grade determination in each deposit.

Ø Oyut: CuEq = Cu + ((Au * 40.9679) + (Ag * 0.4227)) / 70.6140

Ø Hugo North: CuEq = Cu + ((Au* 40.9098) + (Ag * 0.5418)) / 70.6140

Ø Hugo South: CuEq = Cu + ((Au * 43.2704) + (Ag * 0.5843)) / 70.6140

Ø Heruga: CuEq = Cu + ((Au * 42.4871) + (Ag * 0.5880) + (Mo * 0.0150)) / 70.5478

5. The metal prices used in determining the CuEq formulae are:

Ø $3.203/lb for copper, $1,479.82/oz for gold, $19.23/oz for silver, and $9.29/lb for molybdenum.

6. The metallurgical recoveries used in determining the CuEq formulae for each deposit are:

Ø Oyut: Copper 78%, Gold 67%, Silver 52%.

Ø Hugo North: Copper 93%, Gold 80%, Silver 81%.

Ø Hugo South: Copper 89%, Gold 81%, Silver 84%

Ø Heruga: Copper 82%, Gold 73%, Silver 78%, Molybdenum 60%.

7. For the Oyut deposit, a cut-off grade of 0.25% CuEq has been used for Mineral Resources with open pit potential.

8. For Hugo North and Oyut underground, a cut-off grade of 0.46% CuEq grade was used based on the assumption that the deposits will be mined using underground mass mining methods.

9. For Hugo South and Heruga, a cut-off grade of 0.41% CuEq grade which is unchanged from previous reporting.

10. The effective date of the Mineral Resources estimates is December 31, 2021.

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11. The Shivee Tolgoi and Javkhlant licences are held by Entrée LLC. The Shivee Tolgoi and Javkhlant Licences are planned to be operated by Oyu Tolgoi LLC. Oyu Tolgoi LLC will receive 80% of cash flows after capital and operating costs for material originating below 560 m, and 70% above this depth. The Corporation holds a 7.9% interest in Entrée LLC.

12. See Schedule D for more detailed information including with respect to ownership of Oyu Tolgoi LLC and Entrée LLC as well as Oyut mineral resources in the open pit and underground.

13. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

14. Molybdenum is excluded from the Total Resources and is shown in Schedule D.

15. The contained copper, gold, silver, and molybdenum estimates in the tables have not been adjusted for metallurgical recoveries.

16. Hugo North contains 1.7Mt of stockpile material for which there are reasonable prospects for eventual economic mineral extraction.

The Mineral Resources have been reported based on a copper equivalent (“CuEq”) cut-off grade. For reporting for the year ended December 31, 2021, the CuEq formulas were updated based on new metal price assumptions of $3.203/lb for copper, $1,479.82/oz for gold, $19.23/oz for silver, and $9.29/lb for molybdenum. The CuEq formulas used for reporting of the Mineral Resources are provided in the table below.

Mineral Resource CuEq formulas

Deposit	CuEq formula
Oyut	Cu + ((Au * 40.9679) + (Ag * 0.4227)) / 70.6140
Hugo North	Cu + ((Au* 40.9098) + (Ag * 0.5418)) / 70.6140
Hugo South	Cu + ((Au * 43.2704) + (Ag * 0.5843)) / 70.6140
Heruga	Cu + ((Au * 42.4871) + (Ag * 0.5880) + (Mo * 0.0150)) / 70.5478

The CuEq cut-off grade for each deposit is based on the estimated value recovered from the subsidiary metals (gold, silver and molybdenum³) relative to the estimated recovered value of the contained copper. The anticipated metallurgical recoveries for each deposit are shown in the table below. The recovery estimates are based on metallurgical test work, and, in the case of the Oyut deposit, actual concentrator performance. Gold and silver are expected to be recovered in all the deposits. There has been no change to the recovery assumptions for each of metals since previously reported.

Mineral Resource metallurgical recoveries

Deposit	Anticipated metallurgical recovery
	Cu	Au	Ag	Mo
Oyut	78%	67%	52%	-
Hugo North	93%	80%	81%	-
Hugo South	89%	81%	84%	-
Heruga	82%	73%	78%	60%

In consideration of reasonable prospects of eventual economic extraction, the Mineral Resources are typically constrained using a spatial constraint that reflects the proposed or actual mining method. For Hugo North the constraining shell was prepared on vertical sections using economic criteria that would

³ At current prices and costs, revenue may not be expected from molybdenum in concentrate.

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pay for primary and secondary development, block-cave mining, ventilation, tramming, hoisting, processing, and G&A costs. There has been no change to the reporting shapes in 2021.

Mineral Resource Discussion

This year, all Mineral Resources for the Oyu Tolgoi Project have been re-reported due to:

· Depletion due to mining (Oyut open pit and Hugo North only);

· Change in metal price assumptions; and

· Updated cost basis (Oyut and Hugo North only).

Pit optimisation limits or spatial constraints have not been updated and as such the stated impacts do not include overall volume changes that may be realised if they were re-optimised.

For Oyut and Hugo North Mineral Resources, the CuEq cut-off has been updated to reflect changes in current actual costs. This has resulted in an increase to both the Oyut open pit cut-off (from 0.24 to 0.25 CuEq) and the underground CuEq cut-off (from 0.41 to 0.46 CuEq).

The CuEq cut-off is unchanged for Hugo South and Heruga as there has been no further work undertaken on these deposits (or mine plans) which would provide any additional confidence in the cost basis. In the case of these deposits there has been a minor increase in stated resources due to the higher metal price assumptions making resource blocks more valuable while the cut-off hurdle remained the same.

The Mineral Resources for Oyut comprise open pit, stockpile and underground resources (as detailed in Schedule D). The Oyut Measured and Indicated Mineral Resources are estimated at 0.6 Mt of contained copper and 2.4 Moz of contained gold. This is a decrease in Measured and Indicated Mineral Resources of 4% contained copper and 2% contained gold from the Measured and Indicated Mineral Resources reported in the Corporation’s Annual Information Form for the year ended December 31, 2020 (the “2020 AIF”). The Oyut Inferred Mineral Resources are estimated at 1.6 Mt of contained copper and 4.0 Moz of contained gold. This is a decrease in Inferred Mineral Resources of 6% contained copper and 3% contained gold from Inferred Mineral Resources reported in the 2020 AIF.

The Hugo North Mineral Resources are based on bulk underground mining of the Hugo North deposit in two lifts (Lift 1 and Lift 2). The Hugo North Mineral Resources include 1.7Mt of stockpile material for which there are reasonable prospects for eventual economic mineral extraction. The Hugo North Measured and Indicated Mineral Resources are estimated at 7.7 Mt of contained copper and 6.7 Moz of contained gold. This is a decrease in Measured and Indicated Mineral Resources of 1% contained copper and 1% contained gold from the Measured and Indicated Mineral Resources reported in the 2020 AIF. The Hugo North Inferred Mineral Resources are estimated at 7.6 Mt of contained copper and 8.6 Moz of contained gold. This is a decrease in Inferred Mineral Resources of 2% contained copper and 3% contained gold from the Inferred Mineral Resources reported in the 2020 AIF.

Factors that could materially affect the Mineral Resource estimates include the following: (i) commodity pricing, (ii) interpretations of fault geometries, (iii) effect of alteration as a control on mineralisation, (iv) lithological interpretations on a local scale, including dyke modelling and discrimination of different host rock phases, (v) pit slope angles, (vi) geotechnical assumptions related to the proposed block cave design and material behaviour, (vii) metal recovery assumptions, (viii) dilution considerations and other

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environmental, permitting, legal, title, socio-political, marketing, or other relevant risks set forth in this AIF.

The resource classifications of Measured, Indicated, and Inferred are Mineral Resource classification confidence categories defined by the CIM Definition Standards and the SEC’s S-K 1300 guide. Measured and Indicated Mineral Resources may not be Mineral Reserves until they have demonstrated economic viability based on a feasibility study or pre-feasibility study. In the Mineral Resource tabulations, the term Entrée LLC refers to ownership by the proposed joint venture arrangement between Oyu Tolgoi LLC and Entrée LLC. See “Cautionary Note to U.S. Investors”.

Mineral Reserves

The Oyu Tolgoi deposits contain estimated Proven and Probable Mineral Reserves of 10.3 Mt of contained copper and 11.5 Moz of contained gold. Mineral Reserves have been estimated for the Oyut deposit and for the Lift 1 of the Hugo North deposit. No Mineral Reserves have yet been estimated for the Hugo South and Heruga deposits.

The Mineral Reserves for Oyu Tolgoi by deposit (Oyut & Hugo North) and the total Mineral Reserves are shown in the tables below. A comparison to the Mineral Reserves as at December 31, 2020, is included in Schedule C. The Mineral Reserves have been prepared in accordance with the CIM Definition Standards and the requirements of NI 43-101.

Reporting of the Mineral Reserves is based on NSR. NSR is an estimate of the revenue generated by the sale of concentrate at the “mine gate” that would be derived from a parcel of in situ mineralisation if it were mined and processed. NSR accounts for the metallurgical recovery of metals to concentrate and all off-site costs associated with concentrate transportation, smelter deductions, treatment and refining charges, and royalties. The cost of mining and processing the parcel of mineralisation, and the site G&A costs that can be assigned to the parcel are not included in NSR calculation. NSR is used to rank the value of the parcel and defines ore and waste through application of a cut-off NSR value for each ore type.

The metal prices and concentrate transport, smelting, and refining costs used for estimating NSR for the 2021 Oyu Tolgoi Mineral Reserves are based on updated long-term metal prices and cost assumptions prepared by Oyu Tolgoi LLC. The difference between the updated metal prices and costs and those used to prepare the 2020 Mineral Reserve are summarised below:

· Increase in metal prices (5.8% increase in Cu price and 2.4% increase in Au price)

· Increase in power price (from 7.13c/kWh to 8.8c/kWh based on SOPP Model)

· Increase in underground mining cost from $7.03/t to $9.04/t.

In addition, there has been further refinements to metallurgical assumptions, including:

· Updated Au recovery response for Oyut open pit

· Updated Au ore blend gold recovery response for Oyut open pit dependant on the Cu:S ratio of the combined ore feed

· Updated copper in concentrate model for geomet oretypes 1-4 in the Oyut open pit

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· Addition of a Hugo North Development Ore type with a Cu recovery downgrade in response to fibre crete impacts on process chemistry

These changes result in minimal overall change to the previously reported Mineral Reserve estimates.

The economic viability of the Mineral Reserves was demonstrated using the same updated cost and revenue assumptions used to determine the NSR values.

Oyut Open Pit Mineral Reserves, December 31, 2021

Classification	Ownership	Mineral Reserves				Contained Metal
		Tonnes	Cu	Au	Ag	Copper	Gold	Silver
		(Mt)	(%)	(g/t)	(g/t)	(Mt)	(Moz)	(Moz)
Proven	Oyu Tolgoi LLC	260	0.52	0.37	1.30	1.4	3.1	10.9
Probable	Oyu Tolgoi LLC	450	0.40	0.24	1.13	1.8	3.4	16.4
Total (Proven + Probable)	Oyu Tolgoi LLC	710	0.44	0.29	1.19	3.1	6.6	27.3
Oyut Stockpile Mineral Reserves, December 31, 2021
Classification	Ownership	Mineral Reserves				Contained Metal
		Tonnes	Cu	Au	Ag	Copper	Gold	Silver
		(Mt)	(%)	(g/t)	(g/t)	(Mt)	(Moz)	(Moz)
Probable	Oyu Tolgoi LLC	50	0.31	0.13	0.96	0.2	0.2	1.6

Hugo North Mineral Reserves, December 31, 2021

Classification	Ownership	Mineral Reserves				Contained Metal
		Tonnes	Cu	Au	Ag	Copper	Gold	Silver
		(Mt)	(%)	(g/t)	(g/t)	(Mt)	(Moz)	(Moz)
Probable	Oyu Tolgoi LLC	410	1.55	0.30	3.19	6.4	4.0	42.1
Probable	Entrée LLC	40	1.55	0.54	3.68	0.6	0.7	4.6
Total Probable		450	1.55	0.32	3.23	7.0	4.7	46.8
Oyu Tolgoi Project Total Mineral Reserves, December 31, 2021
Classification		Mineral Reserves				Contained Metal
		Tonnes	Cu	Au	Ag	Copper	Gold	Silver
		(Mt)	(%)	(g/t)	(g/t)	(Mt)	(Moz)	(Moz)
Proven		260	0.52	0.37	1.30	1.4	3.1	10.9
Probable		950	0.94	0.27	2.12	8.9	8.3	64.8
Total (Proven + Probable)		1210	0.85	0.29	1.94	10.3	11.5	75.7

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Notes to the Mineral Reserves tables above:

1. Totals may not match due to rounding.

2. CIM Definition Standards are used for reporting of Mineral Reserves.

3. The effective date of the Mineral Reserves is December 31, 2021.

4. The Oyut Mineral Reserve is currently being mined by open pit mining methods. The Stockpile Mineral Reserve is on surface close to the Oyut open pit.

5. The Hugo North Mineral Reserve is being mined by underground mining methods. The Hugo North Mineral Reserve includes 1.7Mt of underground development material which has been stockpiled at surface and is awaiting processing.

6. NSR values used for estimating Mineral Reserves are based on forecast long-term copper, gold, and silver prices of $3.203/lb, $1,479.82/oz, and $19.23/oz, respectively.

7. Assumptions for smelting refining and treatment, charges, deductions, and payment terms, concentrate transport, metallurgical recoveries and royalties are included in NSR values.

8. For the Oyut Mineral Reserve, processing and G&A costs used to determine NSR cut-off values vary between $7.67/t and $11.12/t depending on the ore type processed.

9. For the Hugo North Mineral Reserve, NSR shut off grade of $20.79/t is used to determine the point at which each underground drawpoint is closed. This NSR value is based on estimated mining, processing and G&A costs which range from $20.40/t to $21.20/t across the five different ore types with $20.79/t being the weighted average of the ore types.

10. For the Oyut deposit, the Proven Mineral Reserve is derived only from Measured Mineral Resources. The Probable Mineral Reserve is derived from Measured and Indicated Mineral Reserves.

11. For the Hugo North deposit, the Probable Mineral Reserve is derived from a combination of Measured and Indicated Mineral Resources.

12. The Shivee Tolgoi Licence and the Javkhlant Licence are held by Entrée LLC. The Shivee Tolgoi Licence and the Javkhlant Licence are planned to be operated by Oyu Tolgoi LLC. Oyu Tolgoi LLC will receive 80% of cash flows after capital and operating costs for material originating below 560 m and 70% above this depth. The Corporation holds a 7.9% interest in Entrée Resources Ltd.

13. The term Entrée LLC refers to ownership by the proposed joint venture arrangement between Oyu Tolgoi LLC and Entrée LLC.

The estimate of Mineral Reserves may be materially affected by environmental, permitting, legal, title, sociopolitical, marketing, or other relevant issues including risks set forth in this AIF.

It is noted that Oyu Tolgoi LLC registered Mineral Reserves with the Government of Mongolia in 2009. Up until recently, Mongolia has had its own system for reporting mineral reserves and mineral resources which differs from the CIM Definition Standards.

Oyut Open Pit Mineral Reserves

The 2021 Oyut Mineral Reserves are based on mining the Oyut deposit using open pit mining methods. The Oyut Mineral Reserves have been estimated from the same block model that forms the basis of 2021 Oyut Mineral Resources.

The Oyut Mineral Reserves are defined by an ultimate pit design developed using industry standard Lerchs-Grossmann (LG) pit optimisation. The pit optimisation process used Measured and Indicated resource classification blocks only for potential revenue generation. The Mineral Reserve pit contains Inferred Resources that are ignored in the reporting of Mineral Reserves.

NSR cut-off grades by ore type used for the Oyut Mineral Reserve are summarised in the table below. NSR cut-off increased in 2021 for all ore types.

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Oyut NSR Cut-Off Grade by Ore Type

Ore Type	Ore Description	2021 NSR cut-off ($/t)	2020 NSR cut-off ($/t)	Difference   (%)
Hard Gold	Hard chalcopyrite / bornite, high copper and gold recovery, low arsenic bearing	11.12	10.14	9.6%
Hard	Hard chalcopyrite / bornite, high copper and low to moderate gold recovery, low arsenic bearing	11.05	10.09	9.6%
Moderate Gold	Moderate hardness chalcopyrite / bornite, high copper and gold recovery, low arsenic bearing	9.91	9.06	9.4%
Moderate	Moderate hardness chalcopyrite / bornite, high copper and low to moderate gold recovery, low arsenic bearing	9.58	8.77	9.2%
Soft Supergene Enargite	Soft chalcocite, low to moderate copper and gold recovery, high copper-arsenic sulfosalts	7.67	7.18	6.9%
Soft Supergene	Soft chalcocite, low to moderate copper and gold recovery, copper-arsenic sulfosalts	7.82	7.31	7.0%
Soft Hypogene Enargite	Soft covellite / chalcopyrite, high copper and low to moderate gold recovery, high copper-arsenic sulfosalts	8.20	7.66	7.1%
Soft Hypogene	Soft covellite / chalcopyrite, high copper and low to moderate gold recovery, copper-arsenic sulfosalts	7.91	7.39	7.1%
Soft Hypogene Gold	Soft covellite / chalcopyrite, high copper and gold recovery, copper-arsenic sulfosalts	7.81	7.29	7.1%

The Oyut Proven and Probable Mineral Reserves are estimated at 3.3 Mt of contained copper and 6.8 Moz of contained gold. The Oyut Mineral Reserve includes 52 Mt (0.2 Mt contained copper and 0.2 Moz of contained gold) of stockpile material which has been downgraded to Probable this year. The Oyut Stockpile is currently the focus of additional studies and this downgrade reflects the current understanding with respect to uncertainty around oxidation and recovery.

Total Oyut Mineral Reserves have decreased 5% in contained copper and 9% in contained gold from the Mineral Reserves reported in the 2020 AIF, which largely reflects the increase in NSR cut-off and depletion due to mining.

Hugo North Mineral Reserves

The 2021 Hugo North Mineral Reserves are based on mining part of the Hugo North deposit (Lift 1) using the block/panel cave mining method described in the 2020 OTTR. Hugo North Mineral Reserves have been estimated from the same block model that forms the basis of 2021 Hugo North Mineral Resources.

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The boundary of the mining footprint³ is based on an analysis of the NPV generated from numerous production schedules generated by applying a range of footprint boundaries and cut-off values. The final reserve footprint boundary was selected based on consideration of the constructability and operability aspects of the footprint and the overall NSR value generated by the footprint. NSR values also consider the various metallurgical recovery formulas developed from test work on the Hugo North mineralisation and ongoing process plant operations.

The width of the footprint in the northern area of the cave is designed at a minimum mining width of 180 m to ensure adequate cave propagation. Some low value drawpoints have been added to the footprint in this area to meet this minimum width criteria. The height of draw in these drawpoints has been limited to minimise the amount of waste drawn, while ensuring full cave propagation.

To account for ore losses during mining, an estimated 20% of drawpoints are assumed to permanently fail before the full column is drawn from them, in addition, a further 6% of drawpoints are assumed to fail early in the lower fault area of Panel 0. The estimate is based on a geotechnical assessment of rock mass conditions on the extraction level and an assessment of the risk. The Mineral Reserves are based on a break-even shut-off policy which defines the draw column heights. The shut-off parameters are based on the unit cost estimates shown in the table below. The processing cost is the tonnage weighted average cost of processing each ore type.

3 The mining footprint is the horizontal projection of the part of the deposit that is to be mined to recover the Mineral Reserves. The size and shape of the mining footprint is established by analysing the value of the material that can be recovered by making the footprint either larger or smaller.

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Site Operating Costs	($/t)1
Milling cost per tonne4	8.54
G&A costs per tonne5	3.21
Mining costs per tonne6	9.04
Total	20.49

Totals may not match due to rounding adjustments

The 2021 Hugo North Mineral Reserves include updates to both metal price and cost basis. Based on updated forecast costs, the underground mining cost has increased from $7.03 to $9.04/tonne. This is related to increases in mine production costs, shared services and overheads. A range of sensitivities has demonstrated that the Hugo North Lift 1 Mineral Reserve is relatively insensitive to changes in mining cost.

In addition to the changes in metal price assumptions and cost basis, the updated Hugo North Mineral Reserves also includes:

· Additional tonnage and grade of development ore from Panel 1 and Panel 2 resulting from ongoing studies; and

· A decrease in metalurgical recovery from development ore because of the adverse impact of shotcrete in the ore mix.

The Hugo North Probable Mineral Reserves are estimated at 67.0 Mt of contained copper and 4.7 Moz of contained gold. Even though a portion of the Mineral Reserves originates from Measured Mineral Resources, the entire Mineral Reserves are classified as a Probable Mineral Reserves due to the mixing of material during the caving process.

⁴  Milling costs per tonne of ore treated is a non-GAAP ratio which is not a standardized financial measure and is not intended to replace measures prepared in accordance with IFRS and might not be comparable to similar financial measures disclosed by other issuers. Additional details and information for this non-GAAP ratio can be found in the section titled “Non-GAAP and Other Financial Measures” between pages 52 and 55 of the Corporation’s MD&A, which section and pages are incorporated by reference herein. The MD&A is available under the Corporation’s profile on SEDAR at www.sedar.com. In the MD&A these non-GAAP ratios are used for the reporting of full year and quarterly actuals. The ratios reported in this AIF are the life-of-mine assumptions used in the determination of economic reserves and resources.

⁵  G&A costs per tonne of ore treated is a supplementary financial measure which is not a standardized financial measure and is not intended to replace measures prepared in accordance with IFRS and might not be comparable to similar financial measures disclosed by other issuers. Additional details and information for this supplementary financial measure can be found in the section titled “Non-GAAP and Other Financial Measures” between pages 52 and 55 of the Corporation’s MD&A, which section and pages are incorporated by reference herein. The MD&A is available under the Corporation’s profile on SEDAR at HYPERLINK “http:// www.sedar.com/” www.sedar.com. In the MD&A these non-GAAP ratios are used for the reporting of full year and quarterly actuals. The ratios reported in this AIF are the life-of-mine assumptions used in the determination of economic reserves and resources.

⁶  Mining costs per tonne of ore treated is a non-GAAP ratio which is not a standardized financial measure and is not intended to replace measures prepared in accordance with IFRS and might not be comparable to similar financial measures disclosed by other issuers. Additional details and information for this non- GAAP ratio can be found in the section titled “Non-GAAP and Other Financial Measures” between pages 52 and 55 of the Corporation’s MD&A, which section and pages are incorporated by reference herein. The MD&A is available under the Corporation’s profile on SEDAR at www.sedar.com. In the MD&A these non-GAAP ratios are used for the reporting of full year and quarterly actuals. The ratios reported in this AIF are the life-of-mine assumptions used in the determination of economic reserves and resources.

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Approximately 5% of the tonnage included in the Mineral Reserves is dilution originating from Inferred Mineral Resources. The grades of this material have been set to zero to ensure that only metal originating from Measured and Indicated resources is included in the Mineral Reserve estimate.

The Hugo North Mineral Reserves contain ore that is on the Oyu Tolgoi Licence and on the Entrée Joint Venture Shivee Tolgoi Licence. The portion of the Hugo North Probable Mineral Reserves owned by Oyu Tolgoi LLC includes 1.7 Mt of development ore grading 0.57% Cu, 0.18 g/t Au, and 1.41 g/t Ag that is stockpiled on surface awaiting processing.

A comparison to the previously reported Hugo North Mineral Reserves is included in Schedule C. Since the last disclosure in the 2020 AIF, the Mineral Reserves for Hugo North have increased by 3% in contained copper and 4% in contained gold.

Metallurgical Performance

The geometallurgical characteristics of the different ore types in the Oyut and Hugo North deposits are based on a reconciliation of a large database of metallurgical testwork completed to date. The database includes eight years of Phase 1 operating data.

In 2018, the geometallurgical ore types were redefined for the Oyut deposit. Nine ore types were identified based largely on the geological domains used to define the earlier five ore types used. The nine ore types provide an increased level of definition relating to ore hardness, flotation recovery and flotation concentrate grade. Five geometallurgical ore types were identified for the Hugo North deposit, compared with the one ore type used prior to 2018. The ore types are based on the observed differences in flotation recoveries from samples with varying chalcopyrite and bornite content and on the influence of pyrite on concentrate grade.

Following the start of underground development ore processing, a test work programme was commenced to define the impact on flotation performance due to contaminants from the mine ground support system (shotcrete). The testing identified the need to define an additional ore type for headings with heavy ground support, where flotation recovery is reduced. Good agreement was seen between the performance of contaminated ore in bench scale testing and during full scale processing.

The initial metallurgical testwork programmes on Oyu Tolgoi mineralisation were carried out between 2001 and 2007. The testwork formed the basis for the design of the Phase 1 concentrator. The testwork programmes were carried out on drillcore samples from various deposits. The focus was on the Oyut and Hugo North deposits. The testwork programmes identified the mineralogical characteristics and the metallurgical response of the individual deposits and the various blends of ore to be processed through the concentrator at different periods in the planned production schedule. The testwork programmes included:

· Comminution testwork, including semi autogenous grinding (SAG) pilot plant tests using a 250 t bulk sample of mined rock from the Southwest Zone, the sample of which was shipped to SGS Lakefield in 2005;

· Gravity concentration testwork to estimate gold recovery;

· Flotation testwork to determine copper and gold recoveries;

· Laboratory bench-scale and pilot plant flotation testwork programmes; and

· Confirmatory cleaner flotation testwork on the Southwest and Central ore zones.

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Further testwork was completed in 2013, to assess the impact of a change in the expected feed blend to the concentrator. In 2016-2017, a further testwork programme was completed at ALS to confirm and update metallurgical predictions for the Hugo North Lift 1 ore. The testwork programme was performed on drill core from the 2011-2013 drilling programmes. The objectives of the programme were to:

· Complete further and more extensive locked cycle flotation testwork of the first 10 years of underground ore production;

· Confirm or update current assumptions regarding the flotation scale-up factors;

· Carry out limited comminution tests to improve the density and coverage of the Hugo North Lift 1 hardness data;

· Conduct limited alternative comminution tests;

· Confirm the effect of grind size P80 (the 80% passing size of grinding circuit product) on flotation performance;

· Increase the density of quantitative mineralogy; and

· Quantify any differences in tailings rheology and thickening performance between Hugo North Lift 1 ore and the Southwest Zone ore.

Additional testing was carried out in 2021 to define the expected performance of ore from areas with heavy ground support, where shotcrete contamination was expected. The outcomes from this testing programme were used to inform the predicted performance of Hugo North development ore from areas where heavy ground support is expected to be used. The testing work programme looked at flotation performance and investigated:

· The expected recovery on contaminated ore;

· The impact of a number of reagents on performance; and

· The contaminant(s) that was causing reduced flotation recovery.

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Recovery

Copper recovery for the Oyut open pit varies based on copper grade and ore type. Ore type defines the expected copper speciation and the relationship between copper grade and copper recovery is different for each ore type. Gold and silver recovery are predicted based on observed performance in the concentrator, supported by metallurgical testwork.

Copper recovery for Hugo North varies based on the copper grade and ore types. Both gold and silver recovery vary with copper recovery and ore type. It is noted that silver only makes a small contribution to the value of the mineral reserve.

After processing, the estimated recovery of metal to copper concentrate from the Oyu Tolgoi Mineral Reserves are estimated as follows:

Estimate of metal contained in concentrate from each ore source

Mineral Reserve	Ownership	Recovery			Metal in concentrate
		Cu (%)	Au (%)	Ag (%)	Cu (Mt)	Au    (Moz)	Ag    (Moz)
Oyut open pit	Oyu Tolgoi LLC	78	67	52	2.7	4.8	16
Stockpiles	Oyu Tolgoi LLC	73	44	47	0.1	0.1	1
Hugo North	Oyu Tolgoi LLC	93	79	80	5.6	3.0	32
Hugo North	Entrée LLC	92	81	83	0.6	0.5	4
Total Hugo North	Oyu Tolgoi LLC + Entrée LLC	93	79	80	6.2	3.5	36
Total Project	Oyu Tolgoi LLC + Entrée LLC	87	71	69	9.0	8.5	52

Description of the Oyu Tolgoi Operation and Ongoing Development

Open pit mining

The initial investment decision to construct Phase 1 of Oyu Tolgoi was made in 2010. Phase 1 consisted of the Oyut open pit mine, a concentrator, and supporting infrastructure. Mining began in the South West zone of the Oyut deposit in 2012 with production capacity ramped up to more than 100,000 tonnes of ore processed per day.

The Oyut open pit is mined using conventional drill, blast load and haul methods. Mining operations are conducted 24 hours per day, 365 days per year.

Five platform production drill rigs, three diesel-hydraulic and two electric-drive drills are used to drill 311 mm diameters holes for 15 m bench height blasts. Three surface crawler drill rigs support the operation undertaking presplit and smaller surface drilling activities. A blasting contractor provides a down-the-hole charging and firing service, including the supply and storage of explosives, with conventional and high-density explosives being used to suit production requirements.

The primary loading fleet consists of two 56 m³ bucket capacity electric rope-shovels and two 34 m³ bucket capacity diesel-hydraulic shovels. Two 18 m³ bucket capacity front-end loaders support the primary mining loading fleet as required.

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Material is loaded into a fleet of thirty 290 t payload rigid-body trucks, where material is hauled to the primary crusher, ore stockpiles, and waste dumps according to the material type and schedule requirements.

An ancillary fleet supports the primary mining equipment facilitating the production process.

Since open pit mining commenced, five pit phases have been mined to a depth of 430 m. The planned pit has a total of ten phases and a final depth exceeding 600 m.

In 2021, approximately 106.1 Mt of material was moved in the Oyut open pit operation.

Ore Processing

Ore processing operations commenced through the completed Phase 1 concentrator in December 2012, Commercial Production was achieved in September 2013, and first concentrate exported in October 2013.

The Phase 1 concentrator is designed to process ore from the Oyut open pit at a nominal throughput rate of 36 Mtpa. This throughput rate has been consistently exceeded, peaking 40.8 Mtpa in 2019. The comminution circuit uses two conventional crushing, grinding lines, each consisting of a semi-autogenous grinding mill, two parallel ball mills and associated downstream equipment. Cyclone overflow from the circuit at 80% passing 140–180 mm passes to rougher flotation cells. The rougher concentrate is then reground in vertical tower mills to 35 mm before delivery to the first stage cleaners. The concentrate from the first stage cleaners is pumped to the column cells, which produce the final grade concentrate. Tailings from the cleaner-scavenger and rougher flotation cells are combined, thickened, and pumped to the tailings storage facility. Concentrate is thickened, filtered, bagged, and shipped to market.

The Phase 2 concentrator development programme will optimise the Phase 1 concentrator circuits to maximise recovery from a blend of ores from the Hugo North underground mine and the Oyut open pit. Engineering design is ongoing to modify the flowsheet to cater for the anticipated underground and open pit ore mix. The additions to the flow sheet will include the following:

· Installation of a fifth ball mill to achieve a finer primary grind;

· Installation of additional roughing and column flotation capacity to process the higher level of concentrate production; and

· Additional concentrate dewatering and bagging capacity.

The intent of the Phase 2 development programme is to optimise the plant to treat all the higher grade Hugo North ore delivered by the mine, supplemented by lower grade ore from the open pit ore to fill the mill to its capacity limit.

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A summary of the Oyut open pit and process plan production since start-up is summarised in the following table.

Summary of Oyut Open Pit and Process Plant Production to December 31, 2021

Oyu Tolgoi Production Data1	Unit	2013	2014	2015	2016	2017	2018	2019	2020	20212
Open pit material mined (ore + waste)	Mt	72.0	76.9	91.8	96.9	105.9	91.3	101.3	97.7	85.0
Ore treated	Mt	20.3	27.9	34.5	38.2	41.2	38.7	40.8	40.2	39.1
Average mill head grades:
Copper head grade	% Cu	0.47	0.60	0.67	0.65	0.51	0.51	0.45	0.46	0.50
Gold head grade	g/t Au	0.36	0.86	0.78	0.36	0.17	0.36	0.29	0.24	0.54
Silver head grade	g/t Ag	1.39	1.60	1.56	1.83	1.39	1.22	1.13	1.18	1.26
Concentrate produced	kdmt	290.0	563.6	788.5	846.6	722.5	724.9	674.6	693.1	749.6
Average concentrate grade	% Cu	26.4	26.3	25.6	23.8	21.8	21.9	21.7	21.6	21.7
Production of metals in concentrate:
Copper in concentrate	kt	76.7	148.4	202.2	201.3	157.4	159.1	146.3	149.6	163.0
Gold in concentrate	koz	157	589	653	300	114	285	242	182	468
Silver in concentrate	koz	489	893	1,223	1,420	974	914	867	876	977
Metal recovery:
Copper Recovery	%	81.6	89.1	87.6	81.0	75.4	81.4	78.7	79.6	82.8
Gold Recovery	%	66.1	76.6	74.4	68.5	49.7	65.2	63.6	58.6	68.4
Silver Recovery	%	54.2	62.3	69.9	63.1	52.9	60.9	58.1	56.4	61.6

Notes:

¹ Totals may not match due to rounding

² 2021 production includes approximately 1Mt of underground development material that was processed in the latter half of 2021.

Underground mine development

Part of the initial investment decision for Oyu Tolgoi included continued investment into the development of the Hugo North underground mine in parallel with mining the Oyut open pit.

Hugo North underground development work is ongoing, and when underground production reaches full capacity, it is anticipated that this will form the primary source of ore to the concentrator at 33 Mtpa, with the Oyu open pit ore providing the balance of 5 to9 Mtpa.

On July 15, 2019, the Corporation provided an update on underground development and announced that Turquoise Hill, in conjunction with Rio Tinto, continues to review mine design options for the completion of the underground development of the Oyu Tolgoi mine and assess the impact on overall cost and schedule for the underground development. Improved rock mass information and geotechnical data modelling have confirmed that there are stability risks associated with components of the existing mine design. Therefore, to address these risks, a number of mine design options were under consideration to complete the project.

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In May 2020, the updated Panel 0 mine design was approved, based on a block cave method and includes two pillars, one to the north and one to the south of Panel 0. The MSS20 incorporating the new mine design for Hugo North Lift 1 Panel 0 was delivered to the Government of Mongolia in July 2020 and the 2020 OTTR was filed in August 2020.

In July 2021, the Corporation announced that the underground development progress was impacted during the second quarter of 2021 by the COVID-19 constraints on site and in Mongolia, including restrictions on movement of international expertise. Despite such constraints, the Corporation announced that the construction of Material Handling System 1 was greater than 90% complete and that all development and technical readiness activities pertaining to the initiation of the undercut were met or were on track to being met. However, the Corporation announced that it, along with Rio Tinto, was continuing to engage with various Mongolian governmental bodies with a view to resolving outstanding non-technical undercut issues. The Corporation warned that any significant delay to the initiation of the undercut would have a material impact on project schedule, including the timing of sustainable production for Panel 0 as well as the timing and quantum of underground capital expenditure, which would materially adversely impact the timing of expected cash flows from the Oyu Tolgoi underground project thereby increasing the amount of the Corporation’s incremental funding requirement.

In October 2021, the Corporation announced that it expected sustainable production for Panel 0 to be delayed until at least January 2023 due to a number of factors, including:

· The cumulative and ongoing impacts of COVID-19;

· Continued delayed commitments resulting from the Definitive Estimate not yet having received the support of all directors of the board of directors of Oyu Tolgoi LLC;

· The outstanding unresolved non-technical undercut issues, including the support of all Oyu Tolgoi LLC board directors to increase the underground development capital investment and to commence discussions with the project finance lenders;

· Obtaining outstanding required regulatory approvals; and

· Agreeing on a pathway to meet Oyu Tolgoi LLC’s long-term power requirements.

The Corporation also announced that Oyu Tolgoi had advised that a 9-month delay on Shafts 3 and 4 due to the impact of COVID-19 was forecast which, in combination with the reduced underground development progress, would result in delays to the start of Panel 2. In November 2021, the Corporation elaborated that it then expected sustainable production for Panel 0 to be delayed to the first half of 2023, broadly in line with the then forecast 6-month delay to undercut commencement, and that the previously announced 9-month delay on Shafts 3 and 4, in combination with the COVID-related reduced underground development progress and expected changes to mining scope, would result in delays to the start of Panel 2 by approximately 14-16 months compared to the Definitive Estimate, and to the start of Panel 1 by approximately 11 months compared to the Definitive Estimate.

In October 2021, the Corporation announced that COVID-19 restrictions had adversely impacted both open pit operations and underground development progress, which, through the end of the third quarter

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of 2021, had resulted in a cumulative increase of $140 million to the estimate of underground development capital included in the Definitive Estimate.

In November 2021, the Corporation announced that the board of directors of Oyu Tolgoi LLC approved a bridging budget of $75 million to continue to progress critical activities in the Oyu Tolgoi underground mine development project.

In January 2022, the Corporation announced that it had entered into the GoM Agreements, and that the board of directors of Oyu Tolgoi LLC had unanimously approved the commencement of the undercut. The Corporation began caving operations in January 2022. With this decision, the Corporation continues to expect that the underground mine will achieve sustainable production for Panel 0 in the first half of 2023. Below is a schedule of key production milestones in light of the foregoing:

Key Milestone Dates

Milestone	2020 OTTR	Actual or Currently Projected Dates
Start Undercut blasting	July 2021	January 2022 (Actual)
Material Handling System 1 (including Crusher 1) commissioning	Q4’21	February 2022 (Actual)
First drawbell blasted	May 2022	Q3’22
Sustainable Production (sustainable cave propagation)	February 2023 (~30 drawbellss active*)	H1’23 (~21 drawbells active*)
First drawbell Panel 2	Q4’24	H1’26
First drawbell Panel 1	H2’26	H1’27
Shaft 3 commissioned	H1’22	H2’23
Shaft 4 commissioned	H1’22	H2’23

*Design refinements identified that a minor modification to undercut sequence changed estimated number of drawbells to reach critical hydraulic radius, the point at which sustainable production is anticipated to commence. Critical hydraulic radius is an estimated factor, based on the best available data but some variability in the exact number of drawbells needed to reach critical hydraulic radius is expected to occur with the potential for the number to be higher or lower than 21 drawbells.

Summary Description of the Hugo North Lift 1 Project

The Hugo North deposit is planned to be mined in two panel cave mining lifts – Lift 1 followed by a deeper Lift 2. The Lift 1 extraction level is approximately 1,300 m below surface and has footprint dimensions of approximately 2,000 m long x 280 m wide. To aid mine planning and production scheduling, the Lift 1 footprint has been divided into three panels (Panel 0, Panel 1, and Panel 2). Panel 0 is in the central part of the footprint. Panel 1 is to the north and Panel 2 is to the south.

To support mining of Lift 1, two declines, five shafts and substantial underground infrastructure are required and are currently in an advanced stage of development.

The position, extent and design of the Lift 1 footprint was established in a series of studies carried out prior to 2016. The design includes an El Teniente style extraction level layout, an undercut level and an apex drive level. Ore from drawpoints on the extraction level is tipped to ore passes then trucked to an underground crushing and conveying system before being transferred to surface via the shaft hoisting and conveying systems.

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The current cave design parameters are summarised in the following table:

· Extraction drive and drawpoint spacing — 31 m and 18 m;

· Undercutting sequence — advanced undercut;

· Number of drawpoints and extraction drives — 1,439 drawpoints in 48 extraction drives;

· Minimum footprint width — 180 m;

· Draw column heights — Average 360 m, maximum 650 m, minimum 100 m; and

· Structural pillars – incorporation of two pillars greater than 120m to the north and south of Panel 0 enabling independent mining of Panel 0, Panel 1 and Panel 2.

Progress from Underground Restart in 2016 to December 31, 2021

The following points highlight the timeline of key decisions and achievements in developing the Hugo North underground project since the restart of development in 2016.

2016

· Notice to Proceed received May 5, 2016;

· Oyu Tolgoi 2016 Technical Report published on October 21, 2016;

· Conveyor-to-Surface bulk excavation completed;

· Site infrastructure office established; and

· Contracts signed for the sinking of Shaft 2 and Shaft 5, EPCM; and twin decline development.

2017

· 3,500 tpd development crusher installed;

· Eleven underground workshops completed; and

· Underground dewatering system installed.

2018

· Shaft 2 – sinking and stripping completed, collar doors and controls commissioned and mechanical installation of rock breaker;

· Shaft 5 sinking and commissioning;

· Lining installed and handover for final fit-out and commissioning of Ore Bin 11;

· Shaft 3 & Shaft 4 box-cuts completed;

· Permanent ventilation commissioned for conveyor-to-surface; and

· Completion of a new camp to house over 5,500 workers.

2019

· Completion and commissioning of Shaft 2 together with supporting development and construction activities;

· Completion of a Shaft 2 ore handling system trial that saw approximately 20,000 t of underground ore report to the mill;

· Completion of the two-storey 13,700 m² Chandmani mine operations centre;

· Expansion of the central heating plant to 58 MW;

· The installation of Shaft 2 stage 1 and 2 mine air heaters;

· Completion of the Shaft 2 jaw crusher ore handling system with capacity of 9,500 tpd including construction of a 10 m diameter, 40 m high surge bin with conveyor loading system;

· Primary crusher excavation of over 30,000 m³;

· Continued Shaft 3 and 4 pre-sinking work;

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· Commissioning of the load-out conveyor, surface discharge conveyor, and Shaft 2 integrated materials handling system enabling delivery to the processing plant; and

· Over 7,000 employees engaged in project execution with over 300 contractors.

2020

· Approval of the design change to Panel 0 with subsequent completion of the 2020 OTTR and the Definitive Estimate;

· Submission of updated Mineral Reserves and Mineral Resources prepared by Oyu Tolgoi LLC for the Minerals Council of Mongolia pursuant to Mongolian regulatory requirements;

· Advocated for legislation amendments to allow females to work underground, consequently gender participation increased to 300 female miners and professionals;

· Successful completion of routine Shaft 2 rope shortening using remote presence technology to assist onsite teams to safely perform the task;

· Installed the first fully independently certified Safety Integrity Level 3 mine hoist braking system on Shaft 2, which has two of the largest production and service hoists in the world;

· Exceeded one million tonne of material moved through Shaft 2 since commissioning;

· Completion of all surface infrastructure required for first sustainable production;

· Advanced preparation activities for Shaft 3 with installation of equipment ahead of planning commencement of sinking commencing in 2021. Shaft 4 rope installation and commissioning of equipment ahead of sinking which commenced in early February 2021;

· Completed all concrete civil works for Primary Crusher 1; and

· Pre-production on footprint lateral development nearly completed.

2021

· Despite challenges dealing with COVID-19 and delayed budget approvals at the Oyu Tolgoi LLC level, work on the underground project continued;

· Material Handling System 1 construction was completed by the end of 2021;

· Breakthrough of both Conveyor and Service Declines in the conveyor to surface project components consisting of 6km twin tunnels;

· Construction of the first on-footprint truck chute progressed;

· Work on Shafts 3 and 4 was hampered by limited workforce availability (both domestic and international). However, as at the end of the year, Shaft 4 sinking activities recommenced in October and Shaft 3 readiness works advanced significantly;

· The project committed over 79% of direct contract and procurement packages to Mongolian companies;

· Underground project progress was at over 70% complete at the end of 2021 and total underground spend since January 1, 2016 was approximately $5,4 billion, including 0.3 billion of underground sustaining capital;

· All technical criteria for commencement of the undercut were completed at the beginning of the third quarter of 2021. Undercut commencement was delayed until the necessary non-technical criteria were resolved;

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· In September 2021, the updated 2019 Resources and Reserves⁷ was approved for registration by the Minerals Council of Mongolia;.

· In December 2021, the 2022 Annual Mine Plan for Underground was approved by the Mining and Research department of the Mineral Resources and Petroleum Authority of Mongolia;

· In the fourth quarter of 2021, MSS20 was submitted to the Mongolian Minerals Council pursuant to Mongolian regulatory requirements and the expert review by the Professional Minerals Council of Mongolia commenced; and

· On December 30, 2021, the board of directors of Oyu Tolgoi LLC approved the operating programme and budget for the 2022 financial year, including additional commitments for the Oyu Tolgoi underground project to allow the project to progress to undercutting and sustainable production and beyond.

2022

· Undercut blasting commenced on January 25, 2022, following the entering into of the GoM Agreements. See “General Development of the Business – Three Year History – 2022 to Date”;

· Material Handling System 1 as well as the first on-footprint truck chute commissioning was completed in February; and

· In January 2022, new labour laws impacting the working rosters at Oyu Tolgoi were implemented.

⁷ It is noted that Oyu Tolgoi LLC registers Resources and Reserves with the Government of Mongolia pursuant to local laws and regulations which differ from the CIM Definition Standards.

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The following tables summarise the amount of development work carried out since 2016. The development is reported in equivalent development metres, which includes the volume of mass excavations, as crusher chambers, converted to development metres. It excludes shafts and other vertical excavations. The 2021 development of the conveyor and access declines to surface, which total 15.0 km of equivalent development, are shown separately.

Oyu Tolgoi  Underground Project Development Progress Excluding Conveyor Declines
Year	Total Equivalent               Development               (Km)	Lateral Development               (Km)	Mass Excavation               (‘000’ (m3)
2016	1.6	1.5	3.0
Q1’17	1.0	0.8	5.2
Q2’17	1.4	0.9	9.2
Q3’17	1.4	1.2	8.3
Q4’17	2.2	1.9	8.9
2017	6.1	4.8	31.6
Q1’18	2.6	2.1	11.6
Q2’18	2.4	2.1	8.6
Q3’18	3.0	2.1*	23.3*
Q4’18	2.3	1.6	16.0
2018	10.3	7.9	59.5
Q1’19	3.2	2.3	21.4
Q2’19	3.2	2.4	19.3
Q3’19	3.6	3.2	11.4
Q4’19	4.8	4.5	9.0
2019	14.9	12.4	61.1
Q1’20	5.5	5.3	3.2
Q2’20	5.5	5.1	10.6
Q3’20	4.7	4.1	14.3
Q4’20	4.2	3.8	8.5
2020	19.9	18.4	36.6
Q1’21	3.5	2.9	13.5
Q2’21	1.7	1.2	11.6
Q3’21	2.2	1.8	8.1
Q4’21	3.3	2.7	14.9
2021	10.6	8.7	48.1
Total	63.4	53.7	240.1

Notes:

Totals may not match due to rounding

* Lateral development and mass excavation amount for Q3’18 have been updated to reflect revised results.

Oyu Tolgoi Conveyor Decline Project Development Progress
Year	Total Equivalent               Development               (Km)	Lateral Development               (Km)	Mass Excavation               (‘000’ (m3)
2016	0.0	0.0	0.0
Q1’17	0.1	0.1	0.0

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Oyu Tolgoi Conveyor Decline Project Development Progress
Year	Total Equivalent               Development               (Km)	Lateral Development               (Km)	Mass Excavation               (‘000’ (m3)
2016	0.0	0.0	0.0
Q2’17	0.4	0.4	0.2
Q3’17	0.9	0.9	0.5
Q4’17	0.9	0.8	0.5
2017	2.3	2.3	1.2
Q1’18	0.8	0.8	0.1
Q2’18	0.8	0.8	0.1
Q3’18	0.8	0.8	0.3
Q4’18	0.6	0.6	0.1
2018	3.0	3.0	0.6
Q1’19	0.8	0.8	0.8
Q2’19	0.9	0.9	0.8
Q3’19	0.9	0.7	4.9
Q4’19	1.1	0.7	8.3
2019	3.7	3.1	14.7
Q1’20	1.0	0.7	7.5
Q2’20	1.0	0.9	2.6
Q3’20	0.9	0.9	0.0
Q4’20	1.0	1.0	0.0
2020	4.0	3.6	10.1
Q1’21	0.8	0.8	0.0
Q2’21	0.7	0.6	3.2
Q3’21	0.6	0.6	1.6
Q4’21	0.7	0.3	10.2
2021	2.9	2.3	15.0
Total	15.9	14.2	41.7

Infrastructure

Oyu Tolgoi is a remote brownfields project and extensive infrastructure has been constructed in addition to the concentrating facilities. The major initial infrastructure elements included:

· Water borefields;

· Water treatment;

· Housing;

· Airport;

· Supporting facilities; and

· Power transmission lines and sub-station.

Most of the infrastructure facilities required for the Oyu Tolgoi project are complete. See also “Description of the Business – Oyu Tolgoi Project – Description of the Oyu Tolgoi Operation and Ongoing Development - Underground Mine Development”.

Underground studies update

Several mining studies are in progress for Hugo North Lift 1. The studies are focused on the evaluation of different design and sequencing options and will continue through to 2023. The studies currently in progress include:

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· Design optimisation for Panel 2;

· Design optimisation for Panel 1; and

· Pillar recovery assessment.

To support the mining studies, additional data has been collected via a surface and underground drilling programme. During 2021, a total of 38,247 m was drilled into the Hugo North deposit which was a considerable achievement given the COVID-19 situation. Of the total metres drilled, the vast majority were designed to increase orebody knowledge in Panel 1 (10,494 m) and Panel 2 (11,188 m). From 2022 onwards, the focus of drilling will shift to Lift 2 and peripheral areas of Lift 1. The data collected from the drilling programme has been used to refine the structural and geotechnical models which form the basis of the mine design.

For more details on the drilling completed in 2021, refer to the table below.

Hugo North Mining Area	Monitoring	Spiling/Operational Support	Orebody Knowledge	Total
Lift 1, Panel 0	4,633	5,091		9,724
Lift 1, Panel 1			10,494	10,494
Lift 1, Panel 2			11,188	11,188
Off Footprint		3,426		3,426
Lift 2, Panel 1			1,009	1,009
Lift 2, Panel 2			2,406	2,406
Total (All Area)	4,633	8,517	25,097	38,247

   Notes: Summary of Hugo North metres drilled for 2021. Holes that were started in 2021, but not completed until 2022 have been excluded.

Preliminary results from the Panel 2 study are expected in the first half of 2022. The scope of this study includes a review of the base case including optimisation of the extraction drive orientation and the undercut strategy. The immediate focus is on the northern section of Panel 2 (where additional data is already available) and will be expanded to include the southern section in the second half of 2022. The Panel 1 and Pillar recovery studies are scheduled for completion in the first half of 2023.

See “General Development of the Business – Three Year History – 2021” for further detail.

Permitting and Compliance Activities

Oyu Tolgoi LLC has completed a comprehensive ESIA for Oyu Tolgoi. The ESIA undertaken as part of the project finance process was publically disclosed in August 2012. As the culmination of nearly ten years of independent work and research carried out by both international and Mongolian experts, the ESIA identifies and assesses the potential environmental and social impacts of the project, including cumulative impacts, focusing on key areas such as biodiversity, water resources, cultural heritage, and resettlement.

The ESIA also sets out measures through all project phases to avoid, minimise, mitigate, and manage potential adverse impacts to acceptable levels established by Mongolian regulatory requirements and good international industry practice, as defined by the requirements of the Equator Principles, and the standards and policies of the International Finance Corporation (“IFC”), European Bank for Reconstruction and Development (“EBRD”), and other financing institutions.

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Corporate commitment to sound environmental and social planning for the project is based on the Corporation’s values, responsibilities and support for human rights, social justice, and sound environment management, including the United Nations Universal Declaration of Human Rights (1948), and is described in The Way We Work, Rio Tinto’s global code of business conduct that defines the way Rio Tinto manages the economic, social, and environmental challenges of its global operations.

Oyu Tolgoi LLC has implemented and audited an environmental management system (“EMS”) that conforms to the requirements of ISO 14001:2004. Implementation of the EMS during the construction phases focuses on the environmental policy, significant environmental aspects and impacts and their risks prioritisation, legal and other requirements, environmental performance objectives and targets, environmental management programmes, and environmental incident reporting. The Oyu Tolgoi ESIA builds upon an extensive body of studies and reports, and DEIAs that have been prepared for project design and development purposes, and for Mongolian approvals under the following laws:

· The Environmental Protection Law (1995);

· The Law on Environmental Impact Assessment (1998, as amended in 2001); and

· The Minerals Law (2006).

These initial studies, reports, and DEIAs were prepared over a six-year period between 2002 and 2008, primarily by the Mongolian company Eco-Trade LLC, with input from Aquaterra on water issues.

The original DEIAs provided baseline information for both social and environmental issues. These DEIAs covered impact assessments for different project areas and were prepared as separate components to facilitate technical review as requested by the Government of Mongolia.

The original DEIAs were in accordance with Mongolian standards and while they incorporated World Bank and IFC guidelines, they were not intended to comprehensively address overarching IFC policies such as the IFC Policy on Social and Environmental Sustainability, or the EBRD Environmental and Social Policy.

Following submission and approval of the initial DEIAs, the Government of Mongolia requested that Oyu Tolgoi LLC prepare an updated comprehensive ESIA whereby the discussion of impacts and mitigation measures was project-wide and based on the latest project design. The ESIA was also to address social issues, meet Government of Mongolia legal requirements, and comply with current IFC good practice.

For the ESIA, the baseline information from the original DEIAs was updated with recent monitoring and survey data. In addition, a social analysis was completed through the commissioning of a Socio-Economic Baseline Study and the preparation of a Social Impact Assessment (“SIA”) for the project.

The requested ESIA, completed in 2012, combines the DEIAs, the project SIA, and other studies and activities that have been prepared and undertaken by and for Oyu Tolgoi LLC. Independent reports on progress were subsequently submitted in 2013 and 2016. The DEIAs are subject to periodic review on five-year cycles or when there are significant changes to the project description.

Human Resources and Training Strategy

The human resources and training strategy of Oyu Tolgoi LLC provides a framework of policies, procedures, and processes that are well defined and aligned to support the achievement of the overall business objectives of Oyu Tolgoi LLC. Oyu Tolgoi LLC is working in partnership with relevant Mongolian government agencies and NGOs to ensure that a suitably qualified workforce is available to meet the requirements of Oyu Tolgoi. Oyu Tolgoi LLC’s policies and procedures for human resources and training

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meet all applicable Mongolian Labour and Social Security Laws and regulations, including those contained within the Labour Law of Mongolia (July 1999). International conventions and standards, including applicable International Labour Organisation conventions, IFC Performance Standards, and the EBRD guide the human resources and training strategy and activities.

Oyu Tolgoi LLC prioritises employment of local residents from the soums within the Project Area of Influence (as such term is defined in the 2020 OTTR), which include Khanbogd, Manlai, Bayan Ovoo, and Dalanzadgad, as well as from other areas in the South Gobi region. Oyu Tolgoi LLC has a requirement that not less than 90% of its employees consist of citizens of Mongolia. Oyu Tolgoi LLC meets this requirement.

Occupational Health, Hygiene and Safety

Oyu Tolgoi LLC’s health, safety and environment management system (“HSE MS”) has been implemented and audited as compliant against AS/NZS ISO 14001:2004 Environmental Management System and OHSAS 18001:2007 Occupational Health and Safety management system. The HSE MS was developed to provide management with clear direction on HSE management, means to ensure compliance, and a basis for driving improvements. The Oyu Tolgoi HSE MS applies to all persons working for or on behalf of Oyu Tolgoi LLC, including contractors, suppliers, the general public, special interest groups, and government representatives, and covers the health, safety, and environmental management of all Oyu Tolgoi LLC’s activities, assets, products, and services. Oyu Tolgoi LLC achieved an excellent safety performance for 2021 with an AIFR of 0.14 per 200,000 hours worked.

The Oyu Tolgoi LLC HSE Policy has been developed and is regularly reviewed in consultation with key stakeholders. Such policy is intended to reflect a best practice approach to health, safety, and environment with the underlying principle that all people are accountable for health and safety.

The Oyu Tolgoi LLC HSE Policy is seen as an enabler for the entire HSE MS. It provides high-level principles that are intended to be implemented through the application of all parts of the HSE MS. The Oyu Tolgoi LLC HSE Policy is endorsed by the chief executive officer of Oyu Tolgoi LLC to ensure the appropriate priority is placed on implementation and compliance.

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Capital and Operating Costs

A breakdown of the major incurred cost areas for the Phase 2 development capital is shown in the table below. Costs are reported on a 100% project basis. Actual project cash to December 31, 2021, is $4.9 billion of the $6.75 billion Definitive Estimate development capital forecast plus $175 million of the known costs related to the ongoing COVID-19 pandemic as at December 31, 2021⁸.

Description	Spent from 1 January 2015 to       31 December 2021         ($ billion)	Forecast to complete       from 1 January         2022 ($ billion)	Total Phase*       2 ($ billion)
Underground mine (Hugo North Lift 1)	2.2	0.7	2.9
Site development	0.0	0.0	0.1
Concentrator Modifications	0.0	0.2	0.2
Utilities and ancillaries	0.2	0.0	0.2
Offsite facilities	0.1	0.0	0.1
Subtotal direct costs	2.5	0.9	3.4
Indirect costs	1.2	0.3	1.5
Owner’s costs, escalation, growth, forex, contingency	1.3	0.6	2.0
Subtotal – indirect costs	2.5	1.0	3.5
Total	5.0	1.9	6.9

*Totals may not match due to rounding.

The forecast development capital expenditure estimate targets an accuracy of ±20% in line with Mongolian regulatory requirements. The estimate is subject to further study and assessment as part of Oyu Tolgoi LLC’s ongoing cost estimation and project management processes, including preparation of a cost and schedule update and ongoing studies for Panels 1 and 2.

The forecast development capital includes contingency and escalation but excludes interest costs during construction.

The total sustaining capital estimate over the life of the project from January 1, 2021 is summarised in the table below. The estimate has been prepared by Oyu Tolgoi LLC. Sustaining capital costs are expressed in 2020 US dollars based on fixed exchange rates. The costs are un-escalated and are presented on a 100% project basis.

⁸ Note to readers: The $6.75 billion Definitive Estimate development capital estimate does not include the known costs related to the ongoing COVID-19 pandemic as of December 31, 2021, being $175 million, as disclosed in the Corporation’s MD&A. The capital estimate also excludes the unknown costs related to COVID-19 as well as costs relating to the delayed approval of the full project budget by the board of directors of Oyu Tolgoi LLC. An estimate is underway that is expected to provide an update in Q2’22.

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Description	Total                              ($ billion)*
Open Pit	0.8
Hugo North Lift 1	2.7
Concentrator	0.1
Tailings	0.8
Infrastructure	0.3
Other	0.2
Sub-total	5.0
Value Added Tax (VAT) and duties	0.5
Total	5.5

*The 2020 OTTR sustaining capital estimate, which has not materially changed in subsequent work. An update of the sustaining capital estimate will be provided upon completion of the Panel 1 and 2 studies which are ongoing in 2022.

The total operating cost over the life of the project from January 1, 2021, onwards are summarised in the table below. Operating costs are un-escalated and are expressed on a 100% project basis in real 2020 US dollars based on fixed exchange rates.

The estimates include all expenses required to operate and maintain the open pit mine, the underground mine, the concentrator, and the project support activities. The following are excluded from the operating cost estimates: (i) escalation, (ii) financing costs, (iii) royalties, and (iv) selling costs.

The estimates are built up on the fundamental principle of centrality, giving them an equal probability of upside and downside. The cost estimate for the open pit includes an adjustment for deferred waste stripping.

Description	Total ($ billion)1
Oyut open pit2	3.5
Hugo North	3.4
Concentrator	7.7
Infrastructure	2.5
Administrative expenses, including exploration and evaluation, and technical support costs	2.3
Sub-total	19.4
VAT and duties	1.8
Total	21.1

¹ The 2020 OTTR operating cost estimate, which has not materially changed in subsequent work. An update of the operating cost estimate will be provided upon completion of the Panel 1 and 2 studies which are ongoing in 2022.

² Excludes costs associated with deferred stripping of $1.3 billion (pre-tax) which are capitalised.

Power is a significant component of the project’s operating cost. The project currently sources its power under an agreement from IMPIC via NPTG. This agreement is due to expire in July 2023. On January 24, 2022, the Corporation announced that, as part of the entering into of the GoM Agreements, the Oyu Tolgoi LLC board of directors had approved the signing of the ESA to provide Oyu Tolgoi with a long-term source of power from the Mongolian grid on terms fully agreed with the Government of Mongolia.

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As part of the GoM Agreements, an agreement-in-principle has been reached between NPTG and IMPIC for a three-year fixed term extension of the power sources agreement to July 2026, potentially followed by an extension to up to 2030, if required. See “General Development of the Business – Agreements with the Government of Mongolia – Investment Agreement – Power Supply”.

Other Projects

Regional Exploration Overview

Turquoise Hill, through its wholly owned subsidiaries, Asia Gold Mongolia LLC, Heruga Exploration LLC and SGLS LLC, operates an exploration programme in Mongolia on licences that are not part of Oyu Tolgoi.

In early 2021, Heruga Exploration LLC acquired a new exploration licence named Khatavch. With the addition of this licence, Turquoise Hill now has three exploration licences in the South Gobi region of Mongolia, totalling 19,441 ha.

· The Bag and Od-2 licences are located approximately 25 km north of the Oyu Tolgoi Cu-Au deposit and approximately 17 km north-west of Khanbogd soum in the Ömnögovi province.

· The Khatavch licence is located approximately 200 km east of the Bag licence and approximately 90 km south of Mandakh soum in the Dornogovi province.

All three Turquoise Hill licences are located within the Gurvansaikhan island arc tectonic terrain. This belt is predominantly comprised of Devonian to Carboniferous magmatic formations which host known porphyry copper deposits e.g., Oyu Tolgoi, Tsagaan Suvarga, Kharmagtai.

Licence Name	Licence #	Status	Province	Owner	Year Granted	Hectares
Bag	XV-019315	EL	Ömnögovi	HEX	2016	14,575
Od-2	XV-020357	EL	Ömnögovi	SGLS	2016	3,051
Khatavch	XV-021737	EL	Dornogovi	HEX	2021	1,815

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In 2021, exploration activities were undertaken on all three licences. At Bag and Od-2, the team completed a geophysics programme. At Khatavch, the team completed various geological surveys including mapping, sampling, ground gravity, topography and magnetics.

Bag and Od-2 Licences

The district geology is comprised of Devonian and Carboniferous volcano-sedimentary packages intruded by Permian plutons. Regional arcuate faults form basin and ridge topography, with depressions or valleys in-filled by young cover includes Jurassic, Cretaceous volcano-sedimentary rocks and Quaternary loose sediments.

The local geology is dominated by andesitic rocks, tuffaceous and laminated siltstones, and agglomerates with clasts of granitoid xenoliths and pumice fragments. These rocks lie unconformably above, or are in fault contact with monzonite, monzodiorite, granite and syenite stocks intruding along and controlled by WNW – ENE trending faults. Interpretive work suggests the volcanic sequences are uppermost Carboniferous or Permian in age. Palaeozoic outcrops are exposed in the south-western and southern part of the Bag licence, approximately 13 km away from Bag conceptual target and anomalies.

In 2021, Turquoise Hill completed a Pole-Dipole-Induced Polarisation (“PDIP”) geophysical survey on the Bag and Od-2 licences. A total of 7 lines were completed, totalling 36 km. The geophysical survey was initially planned for 2020, but much of the work had to be postponed to 2021 due to COVID-19.

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Low to moderate and deep chargeable anomalies associated with low to moderate resistive anomalies were detected on four of the PDIP lines. The most promising anomaly is interpreted to be approximately 0.7 x 3 km in size, at a depth of approximately 500 m and aligned with the main fault orientation. The anomaly partly coincides with a broad, moderate gravity-high and is represented by a low-to-moderate transition on gravity anomaly map.

Drill testing is planned for 2022 to test the strongest chargeability anomaly and its potential extensions.

Company	Exploration     Licence	Medium priority
Heruga Exploration LLC	Bag (XV-019315)	·  Drill target 1 – Moderate chargeability (20-25 millivolts) anomaly associated with low (60-100ohm) resistivity, at depth of below 550m. ·  Drill target 2 – Weak chargeability (11-12 millivolts) anomaly associated with low (100-130ohm) resistivity, at depth of below 600m.
SGLS LLC	Od-2 (XV-020357)	·  No known targets

Khatavch Licence

The project area is comprised of two metamorphic complexes which are Paleo-Proterozoic to Meso-Proterozoic in age. The southern half of the project area is interpreted to be predominantly Paleo-

Proterozoic coarse grained, metamorphosed granite and granite-gneiss. The younger northern half of the project area is comprised of quartzite, gneiss, meta-sandstone, limestone, mica-schist and minor marble, amphibolite and skarn, and meta-agglomerate with abundant milky white quartz veins. The two metamorphic complexes are separated by a south-west-north-east fault structure.

The area is not well studied, and very little information exists on the Proterozoic basement rocks. The area is considered to have potential for skarn metasomatic Cu mineralisation (with a previously registered Cu skarn type copper occurrence).

In 2021, Turquoise Hill completed a ground gravity and magnetic survey and rock-chip geochemical sampling at Khatavch. A total of 806 gravity station with 200 m x 200 m grid gravity survey used CG5 gravimeter and 152-line km of ground magnetic data with 14.6-line km of tie line data were acquired with GSM-19TW magnetometers. The lines were spaced 200 metres apart and tie lines were 2000 metres apart. The survey results showed main structures orientated north-east; however, the minor structures were not clearly mapped due to the wide line spacing. The survey identified six areas of interest including five high magnetic responses and one demagnetised zone. High magnetic responses M1- M5 are circular magnetic units (core) that are continuous at depth, surrounded by low magnetic responses (shell) and likely related to multi-phase intrusions.

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During mapping, two additional zones of interest were identified which coincided with mapped alteration. However, surface rock-chip geochemistry results did not identify any copper mineralisation associated with these zones.

In 2022, various exploration activities are planned to follow-up on the identified alteration zones and magnetic anomalies.

Company	Exploration     Licence	Medium priority
Heruga Exploration LLC	Khatavch (XV-021737)	·  A1-Alteration zone. Patchy silica-sericite alteration interpreted to be structurally controlled vein-related. Exposed in area of approximately 150 x 250m, associated with granitic intrusive. Low gravity and low magnetic responses. ·  A2-Alteration zone. Mapped amphibole-skarn zone associated with contact metamorphism. No visible mineralisation, but potential for Fe, Ni, Co +/-Mn element association based on rock-chip geochemistry. The zone has a dyke-like high magnetic response (1.5 km x 0.2 km) that corresponds with a mapped south-west-north-east major fault structure and a gravity anomaly which splits the main lithology. The potential target is concealed but interpreted to be at shallow depth. ·  M1-M5 High magnetic anomalies. These high magnetic anomalies are likely related to intermediate to mafic intrusion. Magnetic responses occur from the near surface to the maximum depth of 200-300 m and continuous at depth.

Other Information

Equity Investments

Turquoise Hill holds equity investments in one publicly traded, non-subsidiary mineral exploration and development company. The following table outlines the equity investments held by the Turquoise Hill Group and, in respect of each such equity investment involving securities that are listed on a stock exchange, their quoted market value as at December 31, 2021:

Company	Number of Shares	Value
Entrée Resources Ltd. (TSX)	14,539,333	C$  11,776,860

Employees

As at December 31, 2021, Turquoise Hill and Oyu Tolgoi LLC collectively had a total of 3,478 employees.

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DIVIDENDS

Turquoise Hill has not declared or paid any dividends on its outstanding Common Shares since its incorporation and does not anticipate that it will do so in the foreseeable future. The declaration of dividends on the Common Shares is, subject to certain statutory restrictions described below, within the discretion of the Board of Directors based on their assessment of, among other factors, Turquoise Hill’s earnings or lack thereof, its capital and operating expenditure requirements and its overall financial condition. Under the YBCA, the discretion of the Board of Directors to declare or pay a dividend on the Common Shares is restricted if reasonable grounds exist to conclude that Turquoise Hill is, or after payment of the dividend would be, unable to pay its liabilities as they become due or that the realizable value of its assets would, as a result of the dividend, be less than the aggregate sum of its liabilities and the stated capital of the Common Shares.

DESCRIPTION OF CAPITAL STRUCTURE

The authorized share capital of Turquoise Hill consists of an unlimited number of Common Shares without par value and an unlimited number of Preferred Shares. As of the date hereof, there are 201,231,446 Common Shares and no Preferred Shares issued and outstanding. Rights and restrictions in respect of the Common Shares and the Preferred Shares are set out in Turquoise Hill’s restated articles of incorporation, Turquoise Hill’s by-laws and in the YBCA and its regulations.

Common Shares

The holders of Common Shares are entitled to one vote per Common Share at all meetings of shareholders except meetings at which only holders of another specified class or series of shares of Turquoise Hill are entitled to vote separately as a class or series. Subject to the prior rights of the holders of Preferred Shares, the holders of Common Shares are entitled to receive dividends as and when declared by the directors, and to receive a pro rata share of the remaining property and assets of Turquoise Hill in the event of liquidation, dissolution or winding up of Turquoise Hill. The Common Shares have no pre-emptive, redemption, purchase or conversion rights, however, under the Private Placement Agreement, RTIH has pre-emptive rights entitling RTIH to participate, subject to certain specific exceptions, in future issuances of Common Shares on a basis sufficient to maintain its percentage shareholding interest in Turquoise Hill on economic terms equivalent to those upon which any such Common Shares (including securities convertible into or exercisable for Common Shares) are issued to third parties. Neither the YBCA nor the constating documents of Turquoise Hill impose restrictions on the transfer of Common Shares on the register of Turquoise Hill, provided that Turquoise Hill receives the certificate representing the Common Shares to be transferred together with a duly endorsed instrument of transfer and payment of any fees and taxes which may be prescribed by the Board of Directors from time to time. There are no sinking fund provisions in relation to the Common Shares and they are not liable to further calls or to assessment by Turquoise Hill. The YBCA provides that the rights and provisions attached to any class of shares may not be modified, amended or varied unless consented to by special resolution passed by a majority of not less than two-thirds of the votes cast in person or by proxy by holders of shares of that class.

Preferred Shares

The Preferred Shares are non-voting and issuable in one or more series, each consisting of such number of Preferred Shares as may be fixed by Turquoise Hill’s directors. Turquoise Hill’s directors may from time to time, by resolution passed before the issuance of any Preferred Shares of any particular series, alter

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the constating documents of Turquoise Hill to determine the designation of the Preferred Shares of that series, to fix the number of Preferred Shares therein and alter the constating documents to create, define and attach special rights and restrictions to the shares of that series including, without limitation, the following: (i) the nature, rate or amount of dividends and the dates, places and currencies of payment thereof; (ii) the consideration for, and the terms and conditions of, any purchase of the Preferred Shares for cancellation or redemption; (iii) conversion or exchange rights; (iv) the terms and conditions of any share purchase plan or sinking fund; and (v) voting rights and restrictions.

Under the terms of the restrictive covenants contained in the Turquoise Hill Financing Support Agreement, the Corporation is prohibited from amending its constating documents to create and issue Preferred Shares without the prior written consent of Rio Tinto.

Registered holders of both the Preferred Shares and Common Shares are entitled, at their option, to a certificate representing their shares of Turquoise Hill.

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MARKET FOR SECURITIES

The Common Shares of Turquoise Hill are traded in Canada on the TSX, and in the U.S. on the NYSE. The closing price of Turquoise Hill’s Common Shares on the TSX on March 1, 2022 was C$26.58. The closing price listed on the NYSE on March 1, 2022 was $20.83.

The following table indicates the monthly range of high and low closing prices of a Common Share and the total monthly volumes traded on the TSX and the NYSE during the period beginning on January 1, 2021 and ending on December 31, 2021:

		NYSE(1)			TSX(2)
	High	Low	Volume	High	Low	Volume
	$	$		C$	C$
2021
January	$14.62	$10.14	21,363,881	$18.58	$12.97	7,164,393
February	$16.86	$11.30	19,458,332	$21.09	$14.43	7,019,796
March	$18.20	$13.13	26,907,330	$22.58	$16.67	12,274,110
April	$19.64	$16.14	20,550,976	$24.65	$20.31	4,856,746
May	$21.89	$16.04	28,232,039	$26.45	$19.41	7,260,926
June	$18.56	$15.64	17,117,526	$22.32	$19.35	4,140,155
July	$17.41	$12.57	20,811,943	$21.67	$16.06	4,999,477
August	$16.85	$13.25	11,564,237	$20.59	$17.01	3,626,760
September	$16.00	$13.98	8,486,134	$20.13	$17.92	3,501,281
October	$15.70	$11.92	15,450,899	$19.42	$14.74	5,783,835
November	$15.59	$9.75	26,417,368	$19.80	$12.15	7,617,860
December	$17.19	$13.60	23,102,531	$22.00	$17.41	3,682,946

(1) Information is presented on a consolidated basis for all of the U.S. as reported by Bloomberg under “TRQ US”.

(2) Information is presented on a consolidated basis for all of Canada as reported by Bloomberg under “TRQ CN”.

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DIRECTORS AND OFFICERS

Name and Occupation

The name, province or state, and country of residence of each director and executive officer of Turquoise Hill, as of the date hereof (except as otherwise disclosed), as well as their respective positions and offices held with Turquoise Hill and their respective principal occupations during the immediately preceding five years is as follows:

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Name and Municipality             of Residence	Position with Turquoise                      Hill	Principal Occupation During Past Five Years
GEORGE R. BURNS Vancouver, British Columbia, Canada	Director (since January 2020)	President and Chief Executive Officer, Eldorado Gold Inc. (2017 to present); Executive Vice President and Chief Operating Officer, Goldcorp Inc. (2012 to 2017).
LUKE COLTON Montréal, Québec, Canada	Chief Financial Officer (since October 2017)	Chief Financial Officer, Turquoise Hill (2017 to present); Interim Chief Executive Officer, Turquoise Hill (2018); Chief Financial Officer, Richards Bay Minerals (2013 to 2017).
JO-ANNE DUDLEY Brisbane, Queensland, Australia	Chief Operating Officer (since June 2019)	Chief Operating Officer, Turquoise Hill (2019 to present); Manager Strategic Mine & Resources Planning, Studies & Technical, Oyu Tolgoi LLC (2017 to 2019); Manager Strategic Mine Planning, Oyu Tolgoi LLC (2014 to 2017).
R. PETER GILLIN Toronto, Ontario, Canada	Director and Chairman (Director since May 2012 and Chairman since January 2017)	Advisory Board and Independent Review Committee member, Strathbridge group of investment funds (2021); Deputy Chairman, Dundee Precious Metals Inc. (2021); Director, TD Mutual Funds Corporate Class Ltd. (2010 to 2020); Director, Sherritt International (2010 to 2019); Lead Director, Dundee Precious Metals Inc. (2009 to 2021); Wheaton Precious Metals Corp. (2004 to present).
ALFRED P. GRIGG Brisbane, Queensland, Australia	Director (since September 2020)	Acting General Manager, Energy & Joint Ventures, Aluminium, Rio Tinto (2021 to present); Chief Counsel, Aluminum and Strategic Partnerships (2021); Chief Counsel, Pacific Aluminum Rio Tinto (2013 to 2021).
DUSTIN ISAACS Montréal, Québec, Canada	Chief Legal Officer and Corporate Secretary (since December 2020)	Chief Legal Officer and Corporate Secretary, Turquoise Hill (2020 to present); Vice President, General Counsel and Corporate Secretary (2017 to 2020); General Counsel and Corporate Secretary (2013 to 2017).
STEPHEN JONES City Beach, Western Australia, Australia	Director (since December 2017)	Managing Director, Planning, Integration & Assets, Rio Tinto Iron Ore (2021); Technical Director, Copper & Diamonds, Rio Tinto (2019 to 2020); Head of Technical Review, Rio Tinto (2018 to 2019); Chief Advisor Surface Mining and Geosciences, Rio Tinto (2018); Chief Operating Officer, Oyu Tolgoi LLC (2017);

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Name and Municipality             of Residence	Position with Turquoise                      Hill	Principal Occupation During Past Five Years
		Acting Chief Executive Officer, Oyu Tolgoi LLC (2016 to 2017).
RUSSEL C. ROBERTSON Toronto, Ontario, Canada	Director (since June 2012)	Director, Hydro One Inc. (2018 to present); Director, Bausch Health Inc. (2016 to present).
MARYSE SAINT-LAURENT Calgary, Alberta, Canada	Director (since January 2017)	Director, Pretivm Resources Inc. (2021 to present); Director, North American Construction Group Ltd. (2019 to present); Director, Guyana Goldfields Inc. (2019 to 2020); Board member, Alberta Securities Commission (2016 to present).
STEVE THIBEAULT Lac Delage, Québec, Canada	Interim Chief Executive Officer (since March 2021)	Interim Chief Executive Officer, Turquoise Hill (2021 to present); Chief Financial Officer, Canada Steamship Line Group (2017 to 2020); Chief Financial officer, Turquoise Hill (2014 to 2017).

Each director’s term of office expires at the next annual general meeting of Turquoise Hill.

Shareholdings of Directors and Executive Officers

As of the date hereof, the directors and executive officers, as a group, own, directly or indirectly, 19,468 Common Shares, which represents less than 0.01% of the Corporation’s Common Shares.

Committees of the Board of Directors

The committees of the Board of Directors consist of the following standing committees: Audit Committee, Compensation and Benefits Committee, Nominating, Corporate Governance and Sustainability Committee and Health, Safety, Environment, Communities and Operations Committee. The current members of the Audit Committee are Russel C. Robertson (Chair), George R. Burns and Maryse Saint-Laurent. The current members of the Compensation and Benefits Committee are Maryse Saint-Laurent (Chair), George R. Burns and Russel C. Robertson. The current members of the Nominating, Corporate Governance and Sustainability Committee are Maryse Saint-Laurent (Chair), Alfred P. Grigg and Russel C. Robertson. The current members of the Health, Safety, Environment, Communities and Operations Committee are Stephen Jones (Chair), George R. Burns and Steve Thibeault. Additionally, under the Board Mandate, the Board has the right to appoint committees and delegate to any such committee powers of the Board. The Board currently has the Special Committee (Operations), solely comprised of independent directors of the Corporation, which was formed for the purposes of, among other things, assisting with the investigation and review of sustainable first production delays and project development capital spend increases in relation to the Oyu Tolgoi underground mine development. On December 3, 2021, the mandate of the Special Committee (Operations) was expanded to include duties that were initially delegated to the previously existing Special Committee (Financing), which ceased to exist on May 12, 2021, namely matters relating to the funding plan for the completion of the Oyu Tolgoi underground project and the raising of capital for the Corporation’s funding of same. Upon the Board’s

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determination that the Special Committee (Operations)’s mandate was fulfilled, it was dissolved on March 1, 2022. The members of the Special Committee (Operations) were George R. Burn (Co-Chair), Maryse Saint-Laurent (Co-Chair), Russel C. Robertson (Co-Chair), who was appointed Co-Chair with the expansion of the Special Committee’s duties, and R. Peter Gillin.

Legal Proceedings

In February 2020, the Corporation announced that Oyu Tolgoi LLC was unable to reach a resolution of its dispute with the Mongolian Tax Authority with respect to a tax assessment for approximately $155 million relating to an audit on taxes imposed and paid by Oyu Tolgoi LLC between 2013 and 2015, and was proceeding with the initiation of a formal international arbitration proceeding in accordance with the dispute resolution provisions of the Investment Agreement and the UDP. Further, in December 2020, the Corporation announced that Oyu Tolgoi LLC had received and was evaluating a tax assessment for approximately $228 million cash tax from the Mongolian Tax Authority relating to an audit on taxes imposed and paid by Oyu Tolgoi LLC between 2016 and 2018. Most of the matters raised in respect of the $228 million cash tax assessment for the 2016 to 2018 years are of a similar nature to the matters that were referred to international arbitration for the 2013 to 2015 years, as announced in February 2020.

In January 2021, Oyu Tolgoi LLC gave notice of its intention to apply to the UNCITRAL tribunal to amend its statement of claim to include the issues raised in the tax assessment for the 2016 to 2018 years, as many of the matters raised in the tax assessment of the Mongolian Tax Authority for the 2016 to 2018 years were of a similar nature to those raised in the tax assessment for the 2013 to 2014 years. In February 2021, Oyu Tolgoi LLC’s application to include these matters was accepted.

In February 2021, Oyu Tolgoi LLC received a notice of payment for $83 million from the Capital City tax department relating to a partial payment of the amounts disputed under the tax assessment for the 2016 to 2018 years, as well as a notice of payment for $147 million from the Mongolian Tax Authority relating to the remaining portion of the amounts disputed under the 2016 to 2018 Tax Assessment. In March 2021, Oyu Tolgoi received notices of payment totalling $126 million relating to amounts disputed under an audit on taxes imposed and paid between 2013 and 2015. Under article 43.3 of the Mongolian General Tax Law, the amounts were due and paid by Oyu Tolgoi LLC within 10 business days from the date of the notices of payment. Under the same legislation, the Corporation is entitled to a refund in the event of a favorable decision from the relevant dispute resolution authorities.

In May 2021, the Corporation announced that the Government of Mongolia filed its Defence and Counterclaim in relation to the tax arbitration proceeding. Although not a party to that arbitration, the Corporation announced that the Defence and Counterclaim included a request that the arbitral tribunal add both the Corporation and a member of Rio Tinto as parties to the tax arbitration and that the Defence and Counterclaim was sought to reject Oyu Tolgoi LLC’s tax claims in their entirety. As part of the counterclaim, the Government of Mongolia made assertions surrounding previously-reported allegations of historical improper payments made to Mongolian officials and sought unquantified damages. Also, in the event Oyu Tolgoi LLC’s tax claims are not dismissed in their entirety, the Government of Mongolia was seeking in the counterclaim an alternative declaration that the Investment Agreement is void. The Corporation denied the allegations relating to it in the Defence and Counterclaim and announced its intention to oppose the Government of Mongolia’s request that it be added to the tax arbitration as and when that application was formally served on the Corporation. In January 2022, the Corporation announced that following a hearing, the arbitral tribunal had issued a ruling deciding that the Corporation would not be added as a party to the arbitration. On February 11, 2022, the arbitral tribunal issued a Partial Award confirming its earlier ruling that Turquoise Hill not be added as a party to the tax

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arbitration. On the same day, at the request of the parties to the tax arbitration, the arbitral tribunal issued an order suspending the tax arbitration for six months (until August 11, 2022) or until 21 days from when the tribunal receives notice from Oyu Tolgoi LLC or the Government of Mongolia to terminate the suspension.

In October 2020, a class action complaint was filed in the U.S. District Court, Southern District of New York against the Corporation, certain of its current and former officers as well as Rio Tinto and certain of its officers. The complaint alleges that the defendants made material misstatements and material omissions with respect to, among other things, the schedule, cost and progress to completion of the development of Oyu Tolgoi in violation of Section 10(b) of the U.S. Securities Exchange Act and Rule 10b-5 thereunder. Under the schedule established by the court, a first amended complaint was filed on March 16, 2021, and a second amended complaint was filed on September 16, 2021. Defendants moved to dismiss the operative amended complaint on October 19, 2021, under Rule 12(b)(6) of the Federal Rules of Civil Procedure and the Private Securities Litigation Reform Act of 1995, for failure to state a claim. As of December 17, 2021, the motion is fully briefed and pending before the Court. The Corporation believes that the complaint against it is without merit.

In January 2021, a proposed class action was initiated in the Superior Court in the District of Montréal against the Corporation and certain of its current and former officers. An amended complaint was filed on July 27, 2021 which did not substantially alter the claim. The claim alleges that the Corporation and its current and former officers named therein as defendants made material misstatements and material omissions with respect to, among other things, the schedule, cost and progress to completion of the development of Oyu Tolgoi in violation of, among other things, sections 225.8, 225.9 and 225.11 of the Quebec Securities Act. On January 7, 2022 the plaintiff re-amended the claim to include allegations relating to developments arising since the previous amended complaint was filed. The Corporation and the other defendants expect to produce their evidence to contest certification of the class action at the end of March 2022. No hearing has been scheduled yet. The Corporation believes that the complaint against it is without merit and is preparing to defend the application for leave and certification of the proceeding.

Conflicts of Interest

Certain directors and executive officers of Turquoise Hill and its subsidiaries are associated with other reporting issuers or other corporations. These relationships may give rise to conflicts of interest from time to time. For example, Messrs. Grigg and Jones, are nominated by RTIH to act as directors of the Corporation, and are officers of Rio Tinto, which has a controlling interest in the Corporation.

The Corporation’s commitment to diversity and inclusion aligns with its values of accountability, respect, teamwork and integrity and is reflected in its Code of Business Conduct, The Way We Work. The Code of Business Conduct is applicable to all employees, consultants, officers and directors regardless of their position in the organisation, at all times and everywhere the Corporation does business. The Code of Business Conduct provides that the Corporation’s employees, consultants, officers and directors will uphold its commitment to a culture of honesty, integrity and accountability and the Corporation requires the highest standards of professional and ethical conduct from its employees, consultants, officers and directors. The Corporation takes any violation of applicable Anti-Corruption Legislation very seriously and any employee, consultant, officer or director who violates these laws will be subject to disciplinary measures up to and including termination of employment.

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The Corporation believes that its Code of Business Conduct is responsive to the potential issues such policies are meant to address and clearly demonstrates the Corporation’s full commitment to all of its stakeholders to act at all times as a responsible social and corporate citizen.

The Corporation has a confidential whistleblower programme. Employees are encouraged to report any suspicion of unethical or illegal practices.

Audit Committee Information

Information concerning the Audit Committee of Turquoise Hill, as required by National Instrument 52-110 – Audit Committees, is provided in Schedule A to this AIF.

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL

TRANSACTIONS

Other than as disclosed below or elsewhere in this AIF, no director or executive officer of the Corporation, or person or company that beneficially owns, or controls or directs, directly or indirectly, more than 10% of the issued and outstanding Common Shares, nor any associate or affiliate of the foregoing, has any material interest, direct or indirect, in any transaction within the Corporation’s three most recently completed financial years, or during the current financial year, that has materially affected, or is reasonably expected to materially affect, the Corporation.

RTIH, together with its affiliates, is the Corporation’s majority shareholder, holding 50.8% of the issued and outstanding Common Shares. Within the Corporation’s three most recently completed financial years, and within the current financial year, Rio Tinto has been party to a series of transactions that have materially affected, or could materially affect, the Corporation. See “General Development of the Business – Agreements with Rio Tinto”. During the year ended December 31, 2021, Rio Tinto provided services to the Corporation for Oyu Tolgoi on a cost-recovery basis which amounted to $78.2 million (2020 – $94.5 million and 2019 – $83.5 million). In addition, various other transactions were entered into between the Corporation and Rio Tinto in fiscal 2021, as further described under the heading “Related-Party Transactions” of the Corporation’s MD&A.

TRANSFER AGENT AND REGISTRAR

The registrar and transfer agent for the Common Shares is TSX Trust Company in Canada at its principal offices in Montréal, Toronto and Vancouver and American Stock Transfer & Trust Company, LLC in the United States at its principal office in Brooklyn, New York.

MATERIAL CONTRACTS

Material contracts under National Instrument 51-102 Continuous Disclosure Obligations are contracts, other than contracts entered into in the ordinary course of the Corporation’s business, that are material to the Corporation. The following is a list of: (i) material contracts entered into since January 1, 2021; and (ii) material contracts entered into prior to January 1, 2021 but after January 1, 2002 that remain in effect:

1. Entrée Earn-in Agreement.⁹ See “Description of the Business – Oyu Tolgoi Project – Project Description, Location and Access”.

⁹ Under the terms of the Investment Agreement, Turquoise Hill agreed to transfer its interest in the Entrée Joint Venture to Oyu Tolgoi LLC.

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2. Private Placement Agreement. See “General Development of the Business – Agreements with Rio Tinto – Private Placement Agreement”.

3. Investment Agreement. See “General Development of the Business – Agreements with the Government of Mongolia – Investment Agreement”.

4. ARSHA. See “General Development of the Business – Agreements with the Government of Mongolia – ARSHA”.

5. 2010 HoA. See “General Development of the Business – Agreements with Rio Tinto – 2010 HoA”.

6. 2012 MoA. See “General Development of the Business – Agreements with Rio Tinto – 2012 MoA”.

7. 2013 MoA. See “General Development of the Business – Agreements with Rio Tinto – 2013 MoA”.

8. UDP. See “General Development of the Business – Agreements with the Government of Mongolia – UDP”.

9. Turquoise Hill Financing Support Agreement. See “General Development of the Business – Agreements with Rio Tinto – Agreements in Connection with Oyu Tolgoi Project Financing”.

10. Oyu Tolgoi Financing Support Agreement. See “General Development of the Business – Agreements with Rio Tinto – Agreements in Connection with Oyu Tolgoi Project Financing”.

11. Sponsor Debt Service Undertaking. See “General Development of the Business – Agreements with Rio Tinto – Agreements in Connection with Oyu Tolgoi Project Financing”.

12. PSFA. See “General Development of the Business – Agreements with the Government of Mongolia – Investment Agreement – Power Supply”.

13. A&R HoA. See “Geneveral Development of the Business – Agreements with Rio Tinto – A&R HoA”.

INTERESTS OF EXPERTS

KPMG LLP, Chartered Professional Accountants, are the independent auditors of the Corporation who have issued an independent auditor’s report dated March 2, 2022 in respect of the consolidated financial statements of the Corporation as at December 31, 2021 and December 31, 2020 and for the years then ended and the Corporation’s internal control over financial reporting as of December 31, 2021. KPMG LLP has advised that they are independent within the meaning of the relevant rules and related interpretations prescribed

by the relevant professional bodies in Canada and any applicable legislation or regulations and also that they are independent accountants with respect to the Corporation under all relevant US professional and regulatory standards. Turquoise Hill has relied on the work of the qualified persons listed in the section of this AIF titled “Description of the Business – Current Technical Report and Qualified Persons” in connection with the scientific and technical information presented in this AIF in respect of its material mineral property, Oyu Tolgoi, which is based in part upon the 2020 OTTR, which report is available for review on SEDAR at www.sedar.com.

To the knowledge of Turquoise Hill, none of the qualified persons listed in the section of this AIF titled “Description of the Business – Current Technical Report and Qualified Persons” nor any of the companies listed therein that employ those individuals, hold Common Shares or securities exercisable to acquire Common Shares equal to or greater than 1% of the issued and outstanding Common Shares.

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ADDITIONAL INFORMATION

Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of Turquoise Hill securities and options to purchase Common Shares is contained in the management proxy circular for the annual meeting of Turquoise Hill held on May 12, 2021, filed on SEDAR at www.sedar.com. Additional financial information is contained in Turquoise Hill’s comparative financial statements and MD&A as at and for the years ended December 31, 2021 and 2020. Copies of the management proxy circular, financial statements and MD&A (when filed) are available on SEDAR at www.sedar.com, and may also be obtained upon request from Turquoise Hill at 1 Place Ville-Marie, Suite 3680, Montréal, Québec, H3B 3P2.

Additional information relating to Turquoise Hill may be found on SEDAR at www.sedar.com.

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SCHEDULE A

AUDIT COMMITTEE INFORMATION

Composition of Audit Committee

Turquoise Hill’s Audit Committee consists of Russel C. Robertson, George R. Burns and Maryse Saint-Laurent. Mr. Robertson has been Chair of the Audit Committee since January 1, 2015. The Board of Directors has determined that all members of the Audit Committee satisfy the independence, financial literacy, expertise and financial experience requirements under applicable securities laws, rules and regulations, stock exchange and any other regulatory requirements applicable to Turquoise Hill. In addition, in accordance with the Sarbanes-Oxley Act of 2022 (the “Sarbanes-Oxley Act”), the Board of Directors has determined that Russel C. Robertson is an audit committee financial expert.

Relevant Education and Experience

Russel C. Robertson

Mr. Robertson holds a Bachelor of Arts degree (Honours) from the Richard Ivey School of Business at the University of Western Ontario, is a Chartered Professional Accountant (FCPA, FPA) and a Fellow of the Institute of Chartered Professional Accountants (Ontario). He is a member of the Institute of Corporate Directors. From June 2013 to August 2016, Mr. Robertson served as Executive Vice-President, and Head, Anti-Money Laundering at BMO Financial Group. Mr. Robertson previously held various senior positions with two major accounting firms, including holding the positions of Vice-Chair, Deloitte & Touche LLP (Canada), and Canadian Managing Partner, Arthur Andersen LLP (Canada).

George R. Burns

Mr. Burns holds a Bachelor of Science Degree in Mining Engineering with a focus on Business from Montana Technological University in Butte, Montana USA. Mr. Burns has spent most of his career in Senior Management and Executive positions with public companies requiring multijurisdictional and complex management of results and financial statements. Mr. Burns was involved in management implementation and oversight and participated in audit committee meetings for over a decade as the Chief Operating Officer of Centerra Gold, Chief Operating Officer of Goldcorp and most recently as President and Chief Executive Officer of Eldorado Gold.

Maryse Saint-Laurent

Ms. Saint-Laurent holds a Master of Laws (securities and finance), from York University, Osgoode Hall Law School, and LL.B., BA and Certification in Human Resources from the University of Alberta as well as her Institute of Corporate Directors (ICD.D) designation. Ms. Saint- Laurent is an accomplished executive and corporate director with over 25 years’ experience as a business-oriented corporate, transactional and securities lawyer in the energy, power, and mining sectors. She has led several M&A and multi-faceted financing transactions and has a strong governance background. Ms. Saint-Laurent also possesses several years’ experience in human resources, compensation, and benefits/pension management. Ms. Saint-Laurent is a member of the board of the Alberta Securities Commission, where she serves as chair of the Human Resources Committee, North American Construction Group Ltd. where she serves as Chair of the Nominating, Governance and Sustainability Committee, and Pretivm Resources Inc. where she serves as a member of both the Human Resources Committee and the

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Governance and Nominating Committee.

Fees for audit and other services

KPMG LLP is the Corporation’s auditor since March 20, 2020. PricewaterhouseCoopers LLP was the Corporation’s auditor from April 2012 to March 2020. Deloitte LLP was the Corporation’s auditor from January 1995 to April 2012.

The aggregate fees incurred by KPMG LLP and its affiliates in fiscal 2021 and 2020 are detailed below:

	2021	2020
Audit Fees (a)	C$ 2,338,625	C$ 2,094,422
Audit Related Fees (b)	C$ 78,765	C$ 60,990
Tax Fees	C$ Nil	C$ Nil
Other Fees	C$ Nil	C$ Nil
Total	C$ 2,417,390	C$ 2,155,412

(a) Fees for audit services relating to fiscal 2021 and 2020 consist of:

• Audit of the Corporation’s annual consolidated financial statements;

• Audit of the Corporation’s subsidiaries in Mongolia, Singapore, Australia and the Netherlands;

• Reviews of the Corporation’s interim financial statements; and

• Auditor involvement in prospectus and other securities filings

(b) Audit related fees billed relating to fiscal 2021 and 2020 consist of translation services.

In addition, in 2021 and 2020, fees were paid for services provided pursuant to section 404 of the Sarbanes-Oxley Act, applicable Canadian securities laws and the required attestations relating to the effectiveness of the Corporation’s internal control on financial reporting.

The Audit Committee’s charter requires the pre-approval by the Audit Committee of all services provided by the external auditor. Pre-approval from the Audit Committee can be sought for planned engagements based on budgeted or committed fees. The Audit Committee has adopted a procedure whereby the Chair of the Audit Committee shall pre-approve any non-audit services totalling segments of $50,000 or less per occurrence, up to a total of $100,000 per year, and shall be required to report on this at the first scheduled Audit Committee meeting following such pre-approval. Any amounts exceeding the $100,000 threshold must be pre-approved by the Audit Committee, according to the procedure. Pre-approval from the Audit Committee can be sought for planned engagements based on budgeted or committed fees. No further approval is required to pay pre-approved fees. Additional pre-approval is required for any increase in scope or in final fees.

Pursuant to these procedures, all of the services provided by the Corporation’s external auditor requiring pre-approval relating to the fees reported as audit, audit-related, tax and other fees were pre-approved by the Audit Committee.

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Audit Committee Charter

1 Purpose

The primary objective of the Audit Committee (the “Committee”) of Turquoise Hill Resources Ltd. (the “Corporation”) is to act as a liaison between the Board of Directors of the Corporation (the “Board”) and the Corporation’s independent auditors (the “Auditors”) and to assist the Board in fulfilling its oversight responsibilities with respect to: (a) the accounting and financial reporting processes of the Corporation, including the integrity of the financial statements and other financial information provided by the Corporation to its shareholders, the public and others, (b) the Corporation’s compliance with legal and regulatory requirements, (c) the audit of the Corporation’s financial statements, (d) the qualifications, independence and performance of the Auditors, (e) the Corporation’s risk management and internal financial and accounting controls, and management information systems, including the performance of the Corporation’s internal audit function, and (f) such other matters as shall be mandated under applicable laws, rules and regulations.

2 Organization of the Audit Committee

The Committee shall consist of three or more directors and shall satisfy the independence, financial literacy, expertise and financial experience requirements of applicable securities laws, stock exchanges and any other regulatory requirements. The members of the Committee shall be appointed by the Board on the recommendation of the Nominating, Corporate Governance and Sustainability Committee and serve at the pleasure of the Board. A majority of the members of the Committee shall constitute a quorum. Where a vacancy occurs at any time in the membership of the Committee, it may be filled by the Board on the recommendation of the Nominating, Corporate Governance and Sustainability Committee.

Members of the Committee must be financially literate as the Board interprets such qualification in accordance with applicable Canadian and U.S. securities legislation and regulations, as well as the New York Stock Exchange (“NYSE”) standards relating to corporate governance and Nasdaq Capital Market (“Nasdaq”) standards relating to corporate governance.

No member of the Committee may serve simultaneously on the audit committees of more than three public companies, including the Corporation, unless the Board determines that such simultaneous service would not limit or impair the ability of such member to effectively serve on the Committee. The basis for such determination shall be disclosed as required by law or stock exchange regulation.

The Committee has at all times a direct line of communication with the internal auditors and the Auditors.

3 Meetings of the Audit Committee

The Committee shall meet as many times as the Committee deems necessary to carry out its duties effectively, but not less frequently than four times per year. The Committee will meet with management, the Corporation’s internal auditors and the Auditors in separate executive sessions to discuss any matters that the Committee or each of these groups believe should be discussed privately. Meetings shall be called by the chair of the Committee or by a majority of the members of the Committee.

The Board, or failing such selection, the members of the Committee, shall select from the Committee members a chair who will preside at each meeting of the Committee.

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The chair of the Committee shall ensure that the agenda for each upcoming meeting of the Committee is circulated to each member of the Committee on a timely basis in advance of such meeting.

The Corporation’s internal auditors shall attend any meeting when requested to do so by the chair of the Committee.

4 Responsibilities of the Committee

The Committee shall have the following responsibilities:

(a) With respect to the Auditors

• Be directly responsible for the appointment, compensation, retention (including termination) and oversight of the work of any independent registered public accounting firm engaged by the Corporation (including for the purposes of preparing or issuing an audit report or performing other audit, review or attestation services or other work for the Corporation and including the resolution of disagreements between management and the Corporation’s independent registered public accounting firm regarding financial reporting) and ensure that such firm shall report directly to it; recommend to the Board the independent auditors to be nominated for appointment as Auditors of the Corporation at the Corporation’s annual meeting, the remuneration to be paid to the Auditors for services performed during the preceding year; and recommend to the Board and the shareholders the termination of the appointment of the Auditors, if and when advisable. The Committee shall have the sole authority to determine the terms of engagement and the extent of funding necessary (and to be provided by the Corporation) for payment of compensation to the Auditors retained to advise the Committee and ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.

• Annually review the Auditor’s audit plan with the Auditor and management and approve the scope, extent and schedule of such audit plan.

• Evaluate on an annual basis the performance of the Auditors, including the lead audit partner.

• Take reasonable steps to confirm the independence of the Auditors, which include:

- Reviewing the annual written statement of the Auditors regarding all of their relationships with the Corporation and other engagements that may reasonably be thought to bear on the independence of the Auditors, and discussing any relationships or services that may impact on their objectivity or independence;

- Approving and overseeing the disclosure of all audit services provided by the external advisors to the Corporation or any of its subsidiaries, pre-approving all non-audit services provided by the Auditors and, exceptionally, approving and overseeing the disclosure of permitted non-audit services to be performed by the Auditors; and

- As necessary, taking or recommending that the Board take appropriate action to oversee the independence of the Auditors.

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• Review and approve any disclosures required to be included in periodic reports under applicable securities laws, rules and regulations and stock exchange and other regulatory requirements with respect to non-audit services.

• Consider the tenure of the lead audit partner on the engagement in light of applicable securities laws, stock exchange or applicable regulatory requirements.

• Review all reports required to be submitted by the Auditors to the Committee under applicable securities laws, rules and regulations and stock exchange or other regulatory requirements.

• Review and approve policies for the hiring of employees, partners, former employees or former partners of the Auditors or the Corporation’s former independent auditors.

(b) With respect to accounting and financial reporting

• Review and discuss with management, the financial and accounting officer(s) and the Auditors, the Corporation’s annual audited financial statements and accompanying notes, the Auditors’ report thereon and the related press release, including disclosures made in management’s discussion and analysis, and obtain explanations from management on all significant variances with comparative periods, prior to recommending approval by the Board and the release thereof.

• Review and discuss with management, the financial and accounting officer(s) and the Auditors, the Corporation’s interim financial statements (and the interim profit or loss press release associated therewith), management’s discussion and analysis and the Auditor’s review thereof, before recommending the approval by the Board and the release thereof.

• Be satisfied that adequate procedures are in place for the review and approval, if required, of the Corporation’s disclosure of financial information extracted or derived from the Corporation’s financial statements and periodically assess the adequacy of these procedures.

• Review with management and the Auditors the quality and not just the acceptability of the Corporation’s accounting policies and any changes that are proposed to be made thereto, including: (i) all critical accounting policies and practices used, (ii) any alternative treatments of financial information that have been discussed with management, the ramification of their use and the Auditors’ preferred treatment, and (iii) any other material communications with management with respect thereto, and reviewing the disclosure and impact of contingencies and the reasonableness of the provisions, reserves and estimates that may have a material impact on financial reporting.

• Discuss with the Auditors the matters required to be discussed by applicable auditing standards requirements relating to the conduct of the audit.

• Discuss with management and the Auditors major issues regarding accounting principles used in the preparation of the Corporation’s financial statements, including any significant changes in the Corporation’s selection or application of accounting principles. Review and discuss analyses prepared by management and/or the Auditors setting forth significant

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financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative approaches under generally accepted accounting principles.

• Review the Corporation’s Annual Information Form and Form 40-F and recommend these for approval by the Board.

(c) With respect to risk management, internal controls

• Take all reasonable measures to ensure that management has designed and implemented effective systems of risk management and internal controls and, at least annually, review the effectiveness of the implementation of such systems.

• In consultation with management, the Auditors and the internal audit group, review the adequacy of the Corporation’s internal controls, its disclosure processes and its procedures designed to ensure compliance with laws and regulations, and any special audit steps adopted in light of material control deficiencies.

• Establish procedures for (a) the receipt, retention and treatment of complaints received by the Corporation with respect to any matter, including accounting, internal accounting controls or auditing matters and (b) the confidential, anonymous submission by employees of the Corporation of concerns respecting any aspect of the Corporation’s business, including questionable accounting or auditing matters.

(d) With respect to the internal auditors

• Monitor the qualifications of the internal auditors.

• Maintain a direct report relationship with the internal auditors and review: (i) the internal control reports prepared by management, including management’s assessment of the effectiveness of the Corporation’s internal control structure and procedures for financial reporting; and (ii) the performance of the internal auditors on an annual basis.

• Discuss with management, the internal auditors and the Auditors any changes in internal control over financial reporting considered for disclosure in the Corporation’s public filings.

• Review the internal audit plan periodically and monitor its execution.

(e) With respect to the Committee

• Review and assess annually its own performance and the adequacy of this Charter and recommend to the Nominating, Corporate Governance and Sustainability Committee any changes to this Charter deemed appropriate by the Committee.

In fulfilling its duties and responsibilities under this Charter, the Committee will be entitled to reasonably rely on (a) the integrity of those persons within the Corporation and of the professionals and experts (such as the Auditors) from which it receives information, (b) the accuracy of the financial and other information provided to the Committee by such persons, professionals or experts, and (c) the representations made by the Auditors as to any services provided by it to the Corporation.

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5 Reporting

The chair of the Committee reports regularly to the Board on the business of the Committee as well as at such time and in such manner as the Board may otherwise require.

The Committee shall review with the full Board any issues that have arisen with respect to the quality or integrity of the Corporation’s financial statements, the Corporation’s compliance with legal or regulatory requirements, the performance or independence of the Auditors or the performance of the Corporation’s financial and accounting group.

6 Retention of Independent Advisors

In performing its responsibilities, the Committee may, as required and subject to advising the chairman of the Board, engage an outside advisor for advice and assistance at the expense of the Corporation.

7 Charter Review

The Committee shall review and update this charter annually and present it to the Nominating, Corporate Governance and Sustainability Committee for approval.

8 Additional

Note that the Corporation is subject to the requirements set forth in the following agreements which may affect the above:

• The Private Placement Agreement dated October 18, 2006 among the Corporation and Rio Tinto International Holdings Limited;

• The Heads of Agreement dated December 8, 2010 among the Corporation and Rio Tinto International Holdings Limited;

• The Memorandum of Agreement dated April 17, 2012 among the Corporation, Rio Tinto International Holdings Limited and Rio Tinto South East Asia Limited, as amended pursuant to an Amending Agreement dated May 22, 2012;

• The Memorandum of Agreement dated August 23, 2013 among the Corporation, Rio Tinto International Holdings Limited and Rio Tinto South East Asia Limited, as amended pursuant to an Amending Agreement dated November 14, 2013; and

• The Financing Support Agreement dated December 15, 2015 among the Corporation and Rio Tinto plc;

Nothing contained in this Charter is intended to expand applicable standards of conduct under statutory, regulatory or exchange requirements for the directors of the Corporation or the members of the Committee.

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SCHEDULE B

GLOSSARY OF TECHNICAL TERMS AND ABBREVIATIONS

Ag: silver. A metal element of economic interest.

anomaly: a departure from the norm which may indicate the presence of mineralisation in the underlying bedrock.

As: arsenic.

Au: gold. A metal element of economic interest.

augite: a monoclinic mineral of the pyroxene group. It appears dark-green to black with prismatic cleavage. It is a common rock-forming mineral in igneous and metamorphic rocks.

basalt: a dark-coloured mafic igneous rocks, commonly extrusive but locally intrusive (e.g., as dikes). It is composed chiefly of calcic plagioclase and clinopyroxene. Nepheline, olivine, orthopyroxene, or quartz may be present in the rocks.

biotite: a monoclinic mineral of the mica group. It is dark brown, dark green, black and is a common rock-forming mineral in crystalline rocks, either as an original crystal in igneous rocks or as a metamorphic product in gneisses and schists.

bornite: an isometric mineral which is metallic. It appears brownish bronze tarnishing to iridescent blue and purple. It is a valuable source of copper.

chalcocite: a form of copper mineral ore that generally contains a high copper content.

chalcopyrite: a form of copper mineral ore that generally contains a low copper content.

concentrate: a product containing valuable metal from which most of the waste material in the ore has been eliminated.

concentrator: a plant for recovery of valuable minerals from ore in the form of concentrate. The concentrate must then be treated in some other type of plant, such as a smelter, to effect recovery of the pure metal.

covellite: a supergene mineral found in copper deposits; a source of copper.

Cu: copper. A metal element of economic interest.

CuEq: a copper equivalent grade, calculated using assumed metal prices for copper, gold and, where applicable, molybdenum.

cut-off grade: the lowest grade of mineral resources considered economic; used in the calculation of reserves and resources in a given deposit.

dacite: a light gray volcanic rock containing a mixture of plagioclase and other crystalline minerals in glassy silica, similar in appearance to rhyolite.

dyke: a tabular igneous intrusion that cuts across the bedding or foliation of the country rock.

fault: a fracture in rock along which the adjacent rock surfaces are differentially displaced.

fold: a curve or bend of a planar structure such as rock strata, bedding planes, foliation, or cleavage. A fold is a product of deformation, although its definition is descriptive and not genetic and may include primary structures.

g: SI unit symbol for gram (one one-thousandth of a kilogram).

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gangue: valueless rock or mineral in ore.

granodiorite: a group of coarse-grained plutonic rocks intermediate in composition between quartz diorite and quartz monzonite, containing quartz, plagioclase (oligoclase or andesine), and potassium feldspar, with biotite, hornblende, or, more rarely, pyroxene, as the mafic components.

g/t: grams per tonne.

Ha: SI symbol for hectare.

hypogene: primary mineralisation formed by mineralising solutions emanating up from a deep magnetic source.

intrusive: rock which while molten, penetrated into or between other rocks but solidified before reaching the surface.

IP: induced polarisation.

km: SI unit symbol for kilometre.

koz: thousand ounces.

ktpd: thousand tonnes per day.

lb: pound (mass).

leach: to dissolve minerals or metals out of ore with chemicals.

lithology: the general physical characteristics of rocks in a particular area.

m: SI unit symbol for metre.

Mlb: million pounds.

mm: SI symbol for millimetre.

Mo: molybdenum. A metal element of economic interest.

monzodiorite: a coarse-grained igneous rock consisting of essential plagioclase feldspar, orthoclase feldspar, hornblende, and biotite, with or without pyroxene.

Moz: million troy ounces.

Mt: million tonnes.

oz: troy ounce (mass).

porphyry: any igneous rock in which relatively large, conspicuous crystals (called phenocrysts) set in a fine-grained ground mass.

ppm: parts per million.

pyrite: an isometric mineral. It is an accessory in igneous rocks, and in metamorphic rocks, in sedimentary rocks including coal seams and is a source of sulphur which may have included gold.

quartz: a general term for a variety of cryptocrystalline varieties of silica.

QMD: quartz monzodiorite.

RC: reverse circulation method of drilling.

rhyolite: a group of extrusive igneous rocks, typically porphyritic and commonly exhibiting flow texture, with phenocrysts of quartz and alkali feldspar in a glassy to cryptocrystalline groundmass and

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also refers to any rock in that group. Rhyolite grades into rhyodacite with decreasing alkali feldspar content and into trachyte with a decrease in quartz.

shear zones: volumes of rock deformed by shearing stress under brittle-ductile or ductile conditions, typically in subduction zones at depths down to 10-20 km.

stratigraphic sequence: a chronologic succession of sedimentary rocks from older below to younger above, essentially without interruption.

strike: the direction, or course or bearing, of a vein or rock formation measured on a level surface.

supergene: ore minerals that have been formed by the effects (usually oxidisation and secondary sulphide enrichment) of descending ground water.

t: metric tonne (1000kg).

tailings: the gangue and other refuse material resulting from the washing, concentration, or treatment of ground ore.

tpd: tonnes per day.

tuff: consolidated pyroclastic rocks.

vein: a zone or belt of mineralised rock lying within boundaries clearly separating it from neighbouring rock. It includes all deposits of mineral matter found through a mineralised zone or belt coming from the same source, impressed with the same forms and appearing to have been created by the same processes.

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SCHEDULE C

CHANGE IN MINERAL RESERVES FROM DECEMBER 31, 2020

TO DECEMBER 31, 2021

The following is a comparison between the Oyu Tolgoi Mineral Reserves as at December 31, 2020 and the Mineral Reserves as at December 31, 2021.

Oyut Open Pit Mineral Reserves Change

	Classification	Ownership	Mineral Reserve				Contained Metal
			Tonnage	Cu	Au	Ag	Cu	Au	Ag
			(Mt)	(%)	(g/t)	(g/t)	(Mt)	(Moz)	(Moz)
Oyut Mineral Reserve at December 31, 2020	Proven	Oyu Tolgoi LLC	280	0.52	0.40	1.32	1.5	3.7	12.0
	Probable	Oyu Tolgoi LLC	460	0.39	0.24	1.13	1.8	3.5	16.7
	Total (Proven + Probable)	Oyu Tolgoi LLC	740	0.44	0.30	1.20	3.3	7.2	28.7
Oyut Mineral Reserve at December 31, 2021	Proven	Oyu Tolgoi LLC	260	0.52	0.37	1.30	1.4	3.1	10.9
	Probable	Oyu Tolgoi LLC	450	0.40	0.24	1.13	1.8	3.4	16.4
	Total (Proven + Probable)	Oyu Tolgoi LLC	710	0.44	0.29	1.19	3.1	6.6	27.3
Difference	Proven	Oyu Tolgoi LLC	-20	-0.01	-0.03	-0.02	-0.1	-0.6	-1.1
	Probable	Oyu Tolgoi LLC	-10	0.00	0.00	0.00	0.0	-0.1	-0.4
	Total (Proven + Probable)	Oyu Tolgoi LLC	-30	0.00	-0.01	-0.01	-0.2	-0.6	-1.5
Percentage Change	Proven	Oyu Tolgoi LLC	-8%	-1%	-8%	-2%	-9%	-15%	-9%
	Probable	Oyu Tolgoi LLC	-2%	0%	0%	0%	-2%	-2%	-2%
	Total (Proven + Probable)	Oyu Tolgoi LLC	-4%	-1%	-5%	-1%	-5%	-9%	-5%

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Oyut Stockpile Change

Stockpile	Classification	Ownership	Mineral Reserve				Contained Metal
			Tonnage	Cu	Au	Ag	Cu	Au	Ag
			(Mt)	(%)	(g/t)	(g/t)	(Mt)	(Moz)	(Moz)
Oyut Stockpiles at December 31, 2020	Proven	Oyu Tolgoi LLC	60	0.32	0.13	0.93	0.2	0.2	1.7
	Probable	Oyu Tolgoi LLC	0	0.00	0.00	0.00	0.0	0.0	0.0
	Total (Proven + Probable)	Oyu Tolgoi LLC	60	0.32	0.13	0.93	0.2	0.2	1.7
Oyut Stockpiles at December 31, 2021	Proven	Oyu Tolgoi LLC	0	0.00	0.00	0.00	0.0	0.0	0.0
	Probable	Oyu Tolgoi LLC	50	0.31	0.13	0.96	0.2	0.2	1.6
	Total (Proven + Probable)	Oyu Tolgoi LLC	50	0.31	0.13	0.96	0.2	0.2	1.6
Difference	Proven	Oyu Tolgoi LLC	-60	-0.32	-0.13	-0.93	-0.2	-0.2	-1.7
	Probable	Oyu Tolgoi LLC	50	0.31	0.13	0.96	0.2	0.2	1.6
	Total (Proven + Probable)	Oyu Tolgoi LLC	0	-0.01	0.00	0.03	0.0	0.0	-0.1
Percentage Change	Proven	Oyu Tolgoi LLC	—	—	—	—	—	—	—
	Probable	Oyu Tolgoi LLC	—	—	—	—	—	—	—
	Total (Proven + Probable)	Oyu Tolgoi LLC	-8%	-2%	2%	3%	-10%	-6%	-5%
Hugo North Mineral Reserves Change
Stockpile	Classification	Ownership	Mineral Reserve				Contained Metal
			Tonnage	Cu	Au	Ag	Cu	Au	Ag
			(Mt)	(%)	(g/t)	(g/t)	(Mt)	(Moz)	(Moz)
Hugo North Total Mineral Reserves at December 31, 2020	Probable	Oyu Tolgoi LLC	410	1.51	0.29	3.12	6.2	3.8	41.0
	Probable	Entrée LLC	40	1.56	0.54	3.69	0.6	0.7	4.6
	Total Probable		450	1.52	0.31	3.17	6.8	4.5	45.6
Hugo North Total Mineral Reserves at December 31, 2021	Probable	Oyu Tolgoi LLC	410	1.55	0.30	3.19	6.4	4.0	42.1
	Probable	Entrée LLC	40	1.55	0.54	3.68	0.6	0.7	4.6
	Total Probable		450	1.55	0.32	3.23	7.0	4.7	46.8
Difference	Probable	Oyu Tolgoi LLC	0	0.04	0.01	0.07	0.2	0.2	1.2
	Probable	Entrée LLC	0	0.00	0.00	-0.01	0.0	0.0	0.0
	Total Probable		0	0.03	0.01	0.07	0.2	0.2	1.2
Percentage Change	Probable	Oyu Tolgoi LLC	0%	2%	4%	2%	3%	5%	3%
	Probable	Entrée LLC	1%	0%	0%	0%	0%	1%	0%
	Total Probable		0%	2%	4%	2%	3%	4%	3%

- C - III -

Notes to the Mineral Reserves at December 31, 2020 and to the Mineral Reserves at December 31, 2021.

1.	Totals may not match due to rounding.
2.	CIM Definition Standards are used for reporting of Mineral Reserves.
3.	The effective date of the Mineral Reserves is 31 December 2021.
4.	Assumptions for smelting refining and treatment, charges, deductions, and payment terms, concentrate transport, metallurgical recoveries and royalties are included in the NSR values.
5.	The Oyut Mineral Reserve is currently being mined by open pit mining methods. The Stockpile Mineral Reserve is on surface close to the Oyut open pit.
6.	For the Hugo North deposit, the Probable Mineral Reserve is derived from a combination of Measured and Indicated Mineral Resources.
7.	The Shivee Tolgoi Licence and the Javkhlant Licence are held by Entrée LLC. The Shivee Tolgoi Licence and the Javkhlant Licence are planned to be operated by Oyu Tolgoi LLC. Oyu Tolgoi LLC will receive 80% of cash flows after capital and operating costs for material originating below 560 m and 70% above this depth. The Corporation holds a 7.9% interest in Entrée Resources Ltd.
8.	The term Entrée LLC refers to ownership by the proposed joint venture arrangement between Oyu Tolgoi LLC and Entrée LLC.

Notes to the Mineral Reserves at December 31, 2021.

1. NSR values used for estimating Mineral Reserves are based on forecast long-term copper, gold, and silver prices of $3.03/lb, $1,441/oz, and $19.10/oz, respectively.

2. The Hugo North Mineral Reserve includes 1.5Mt of underground development material which has been stockpiled at surface and is awaiting processing.

3. For the Oyut Mineral Reserve, processing and general administration costs used to determine cut-off NSR values vary between $7.18/t and $10.14/t depending on the ore type processed.

4. For the Hugo North Mineral Reserve, an NSR shut off grade of $17.84/t is used to determine the point at which each underground drawpoint is closed. This NSR value is based on estimated mining, processing and G&A costs which range from $17.27/t to $17.90/t across the five different ore types.

5. For the Oyut deposit, the Proven Mineral Reserve is derived only from Measured Mineral Resources. The Probable Mineral Reserve is derived only from Indicated Mineral Reserves.

Notes to the Mineral Reserves at December 31, 2021

1. NSR values used for estimating Mineral Reserves are based on forecast long-term copper, gold, and silver prices of $3.203/lb, $1,479.82/oz, and $19.23/oz, respectively.

2. The Hugo North Mineral Reserve is being mined by underground mining methods. The Hugo North Mineral Reserve includes 1.7Mt of underground development material which has been stockpiled at surface and is awaiting processing.

3. For the Oyut Mineral Reserve, processing and G&A costs used to determine NSR cut-off values vary between $7.67/t and $11.12 /t depending on the ore type processed.

4. For the Hugo North Mineral Reserve, an NSR shut off grade of $20.79/t is used to determine the point at which each underground drawpoint is closed. This NSR value is based on estimated mining, processing and G&A costs which range from $20.40/t to $21.20/t across the five different ore types with $20.79/t being the weighted average of the ore types.

5. For the Oyut deposit, the Proven Mineral Reserve is derived only from Measured Mineral Resources. The Probable Mineral Reserve is derived only from Measurd and Indicated Mineral Reserves.

- D - I -

SCHEDULE D

DETAILED MINERAL RESOURCES AS AT DECEMBER 31, 2021

The following provides further detail for the Oyu Tolgoi Mineral Resources as at December 31 2021, including with respect to ownership of Oyu Tolgoi LLC and Entrée LLC as well as Oyut Mineral Resources in the open pit and underground.

Oyut (Open Pit) Mineral Resources as of December 31, 2021

Classification	Ownership	Mineral Resources				Contained Metal
		Tonnes	Cu	Au	Ag	Copper	Gold	Silver
		(Mt)	(%)	(g/t)	(g/t)	(Mt)	(Moz)	(Moz)
Measured	Oyu Tolgoi LLC	20	0.41	0.38	1.1	0.1	0.2	0.6
Indicated	Oyu Tolgoi LLC	90	0.33	0.30	1.1	0.3	0.9	3.4
Total (Measured + Indicated)	Oyu Tolgoi LLC	110	0.34	0.31	1.1	0.4	1.1	3.9
Inferred	Oyu Tolgoi LLC	340	0.29	0.19	1.0	1.0	2.0	11.1
Oyut (Underground) Mineral Resources as of December 31, 2021
Classification	Ownership	Mineral Resources				Contained Metal
		Tonnes	Cu	Au	Ag	Copper	Gold	Silver
		(Mt)	(%)	(g/t)	(g/t)	(Mt)	(Moz)	(Moz)
Measured	Oyu Tolgoi LLC	10	0.48	0.91	1.3	0.0	0.3	0.4
Indicated	Oyu Tolgoi LLC	50	0.38	0.61	1.2	0.2	1.0	1.9
Total (Measured + Indicated)	Oyu Tolgoi LLC	60	0.40	0.66	1.2	0.2	1.3	2.3
Inferred	Oyu Tolgoi LLC	140	0.41	0.42	1.2	0.6	1.9	5.8
Hugo North (Oyu Tolgoi LLC) Mineral Resources as of December 31, 2021
Classification	Ownership	Mineral Resources				Contained Metal
		Tonnes	Cu	Au	Ag	Copper	Gold	Silver
		(Mt)	(%)	(g/t)	(g/t)	(Mt)	(Moz)	(Moz)
Measured	Oyu Tolgoi LLC	60	1.89	0.49	4.2	1.1	0.9	7.6
Indicated	Oyu Tolgoi LLC	380	1.37	0.35	3.2	5.3	4.3	39.5
Total (Measured + Indicated)	Oyu Tolgoi LLC	440	1.44	0.37	3.3	6.3	5.2	47.1
Inferred	Oyu Tolgoi LLC	720	0.83	0.29	2.5	6.0	6.7	57.1

- D - II -

Hugo North (Entrée LLC) Mineral Resources as of December 31, 2021

Classification	Ownership	Mineral Resources				Contained Metal
		Tonnes	Cu	Au	Ag	Copper	Gold	Silver
		(Mt)	(%)	(g/t)	(g/t)	(Mt)	(Moz)	(Moz)
Measured	Entrée LLC	-	-	-	-	-	-	-
Indicated	Entrée LLC	80	1.62	0.55	4.2	1.4	1.5	11.4
Total (Measured + Indicated)	Entrée LLC	80	1.62	0.55	4.2	1.4	1.5	11.4
Inferred	Entrée LLC	160	1.05	0.37	2.8	1.7	1.9	14.6
Hugo South Mineral Resources as of December 31, 2021
Classification	Ownership	Mineral Resources				Contained Metal
		Tonnes	Cu	Au	Ag	Copper	Gold	Silver
		(Mt)	(%)	(g/t)	(g/t)	(Mt)	(Moz)	(Moz)
Inferred	Oyu Tolgoi LLC	730	0.83	0.07	1.9	6.1	1.7	44.0
Heruga Mineral Resources as of December 31, 2021

Classification	Ownership	Mineral Resources					Contained Metal
		Tonnes	Cu	Au	Ag	Mo	Copper	Gold	Silver	Mo
		(Mt)	(%)	(g/t)	(g/t)	(ppm)	(Mt)	(Moz)	(Moz)	(Mlbs)
Inferred	Javkhlant EJV	1500	0.41	0.40	1.4	118	6.1	19.2	69.4	390
	Oyu Tolgoi LLC	110	0.42	0.30	1.6	112	0.4	1.0	5.4	30
	All Heruga	1610	0.41	0.39	1.4	118	6.6	20.2	74.9	420

Notes to the Mineral Resources:

1. Totals may not match due to rounding.

2. CIM Definition Standards are used for reporting of Mineral Resources.

3. The Mineral Resources exclude Mineral Reserves.

4. The following CuEq formulae have been used for cut-off grade determination in each deposit.

Ø Oyut: CuEq = Cu + ((Au * 40.9679) + (Ag * 0.4227)) / 70.6140

Ø Hugo North: CuEq = Cu + ((Au* 40.9098) + (Ag * 0.5418)) / 70.6140

Ø Hugo South: CuEq = Cu + ((Au * 43.2704) + (Ag * 0.5843)) / 70.6140

Ø Heruga: CuEq = Cu + ((Au * 42.4871) + (Ag * 0.5880) + (Mo * 0.0150)) / 70.5478

5. The metal prices used in determining the CuEq formulae are:

a. $3.203/lb for copper, $1,479.82/oz for gold, $19.23/oz for silver, and $9.29/lb for molybdenum.

6. The metallurgical recoveries used in determining the CuEq formulae for each deposit are:

a. Oyut: Copper 78%, Gold 67%, Silver 52%.

b. Hugo North: Copper 93%, Gold 80%, Silver 81%.

c. Hugo South: Copper 89%, Gold 81%, Silver 84%

d. Heruga: Copper 82%, Gold 73%, Silver 78%, Molybdenum 60%.

7. For the Oyut deposit, a cut-off grade of 0.25% CuEq has been used for Mineral Resources with open pit potential.

8. For Hugo North and Oyut underground, a cut-off grade of 0.46% CuEq grade was used based on the assumption that the deposits will be mined using underground mass mining methods

9. For Hugo South and Heruga, a cut-off grade of 0.41% CuEq grade which is unchanged from previous reporting.

10. The effective date of the Mineral Resources estimates is December 31, 2021.

11. The Shivee Tolgoi and Javkhlant licences are held by Entrée LLC. The Shivee Tolgoi and Javkhlant Licences are planned to be operated by Oyu Tolgoi LLC. Oyu Tolgoi LLC will receive 80% of cash flows after capital and operating costs for material originating below 560 m, and 70% above this depth. The Corporation holds a 7.9% interest in Entrée LLC.

- D - III -

12. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

13. The contained copper, gold, silver, and molybdenum estimates in the tables have not been adjusted for metallurgical recoveries.

14. Hugo North contains 1.7Mt of stockpile material for which there are reasonable prospects for eventual economic mineral extraction.

EX-99.2

Exhibit 99.2

Turquoise Hill Resources Ltd.

Consolidated Financial Statements

December 31, 2021 and 2020

KPMG LLP	Telephone     (604) 691-3000
Chartered Professional Accountants PO Box 10426 777 Dunsmuir Street Vancouver BC V7Y 1K3	Fax                 (604) 691-3031 Internet          www.kpmg.ca
Canada

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Turquoise Hill Resources Ltd.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Turquoise Hill Resources Ltd. and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, cash flows and equity for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with International Financing Reporting Standards as issued by the International Accounting Standards Board.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 2, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

© 2021 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

Turquoise Hill Resources Ltd.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Assessment of the recoverable amount of the Oyu Tolgoi cash-generating unit

As discussed in Note 2 to the consolidated financial statements, property, plant and equipment is reviewed for impairment when events or changes in circumstances indicate that the full carrying amount may not be recoverable. The Company determined that there was an indicator of impairment at the Oyu Tolgoi cash-generating unit (CGU) at December 31, 2021 and an assessment of the recoverable amount of the CGU was undertaken. As discussed in Note 13 to the consolidated financial statements, the Company’s assessment of recoverable amount at December 31, 2021 did not result in any additional impairment or reversal of impairment being recorded for the Oyu Tolgoi CGU at December 31, 2021.

We identified the assessment of the recoverable amount of the Oyu Tolgoi CGU to be a critical audit matter. A high degree of auditor judgment was required to evaluate the inputs used to estimate the recoverable amount. The recoverable amount was determined by a fair value less cost of disposal model estimated based on detailed life-of-mine plans. Significant assumptions used in the discounted cash flow model included estimates of long-term commodity prices, discount rate, reserves and resources, operating costs, development capital, and scheduling in the detailed life-of- mine plan. Changes in any of these assumptions could have had a significant effect on the determination of the estimated recoverable amount.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to determine the recoverable amount of the Oyu Tolgoi CGU. This included controls over the Company’s development of the significant assumptions used to estimate the recoverable amount. We evaluated the competence, experience and objectivity of the qualified persons responsible for the reserves and resources estimates and the life-of-mine plan. We compared the amount of reserves and resources in the cash flow model used in the determination of the recoverable amount to the Company’s estimates of mineral reserves and resources. We compared the Company’s historical estimates of operating results to actual results to assess the accuracy of the Company’s forecasting process. We compared estimated operating costs and development capital in the cash flow model to the approved life-of-mine plan and to historical expenditures. We involved valuation professionals with specialized skills and knowledge, who assisted in (1) assessing the long-term forecast commodity prices by comparing to third party data; and (2) evaluating the discount rate used by comparing it to an independently calculated range of discount rates using internal and external independent sources.

Turquoise Hill Resources Ltd.

Recoverability of deferred tax assets in Mongolia

As discussed in Note 2 to the consolidated financial statements, the Company assesses the recoverability of deferred tax assets at each reporting period-end based on future taxable income to determine the deferred tax asset to be recognized. The determination of the ability of the Company to utilize tax losses and temporary differences requires management to exercise judgment and make assumptions about the Company’s future performance. As discussed in Note 16 to the consolidated financial statements, the Company has deferred tax assets of $561.9 million in Mongolia as at December 31, 2021.

We identified the assessment of the recoverability of deferred tax assets in Mongolia as a critical audit matter. Assessing the forecasts of future taxable income, specifically the significant assumptions including estimates for commodity prices, reserves and resources, operating costs, development capital and scheduling required subjective auditor judgment.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process for determining the recoverability of deferred tax assets in Mongolia. This included controls over the determination of significant assumptions used in the forecasts of future taxable income. We compared the significant assumptions used in the forecasts of taxable income to the significant assumptions used by the Company in its determination of the recoverable amount of the Oyu Tolgoi CGU. We compared the Company’s previous forecasts to actual results to assess the Company’s ability to estimate future taxable income.

Evaluation of provisions for uncertain tax positions – Mongolian Tax Assessments

As discussed in Note 2 to the consolidated financial statements, the Company recognizes potential liabilities and records tax liabilities for uncertain tax positions based on its judgement of whether, and the extent to which, additional taxes will be due. As discussed in Note 23(b) to the consolidated financial statements, the Company received tax assessments from the Mongolian Tax Authority (MTA) as a result of tax audits performed on the periods 2013 through 2015 and 2016 to 2018, Certain of the matters contained in these tax assessments are being disputed in arbitration proceedings. In 2021, the Company received notices of payment for these aforementioned tax assessments and made payments totaling $354 million. These payments have been recorded as a non-current prepayment and a provision was not recorded for the amount of the tax assessments, or for the impact of any reduction in available carried forward losses, disputed by the Company under arbitration proceedings relating to those years or any additional potential assessments related to 2019 through December 31, 2021.

We identified the evaluation of provisions for uncertain tax positions pertaining to disputed tax assessments received from the MTA as a critical audit matter. A high degree of subjective auditor judgment and specialized skills and knowledge were required in assessing the Company’s judgments relating to the application of tax law in Mongolia including possible outcomes from related arbitration proceedings.

Turquoise Hill Resources Ltd.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s tax process, including controls over the determination of and accounting for provisions for uncertain tax positions in Mongolia. We involved tax professionals with specialized skills and knowledge who assisted in evaluating the Company’s application of tax law and assessing its uncertain tax positions by inspecting internally and externally prepared documentation, including correspondence with the MTA and third-party legal and tax advice received by the Company.

//s// KPMG LLP

Chartered Professional Accountants

We have served as the Company’s auditor since 2020.

Vancouver, Canada

March 2, 2022

KPMG LLP	Telephone     (604) 691-3000
Chartered Professional Accountants PO Box 10426 777 Dunsmuir Street Vancouver BC V7Y 1K3	Fax                (604) 691-3031 Internet          www.kpmg.ca
Canada

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Turquoise Hill Resources Ltd.:

Opinion on Internal Control Over Financial Reporting

We have audited Turquoise Hill Resources Ltd. and subsidiaries (the Company) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, cash flows, and equity for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements), and our report dated March 2, 2022 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting in the accompanying Management’s Discussion and Analysis of Financial Condition and Results of Operations. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the

© 2021 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

Turquoise Hill Resources Ltd.

maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

//s// KPMG LLP

Chartered Professional Accountants

Vancouver, Canada

March 2, 2022

TURQUOISE HILL RESOURCES LTD.

Consolidated Statements of Income

(Stated in thousands of U.S. dollars, except share and per share amounts)

			Year Ended December 31,
	Note		2021			2020
Revenue		4	$	1,971,042		$	1,078,192
Cost of sales		5		(622,329	)		(669,394	)
Gross margin				1,348,713			408,798
Operating expenses		6		(275,487	)		(202,271	)
Corporate administration expenses				(37,699	)		(30,602	)
Other (expenses) income				(37,577	)		482
Income before finance items and taxes				997,950			176,407
Finance items
Finance income		7		2,998			17,349
Finance costs		7		(8,036	)		(5,510	)
				(5,038	)		11,839
Income from operations before taxes			$	992,912		$	188,246
Income and other taxes		16		(311,792	)		306,396
Income for the year			$	681,120		$	494,642
Attributable to owners of Turquoise Hill Resources Ltd.				524,890			406,288
Attributable to owner of non-controlling interest				156,230			88,354
Income for the year			$	681,120		$	494,642
Basic and diluted earnings per share attributable to Turquoise Hill Resources Ltd.		21	$	2.61		$	2.02
Basic weighted average number of shares outstanding (000’s)		18		201,231			201,231

The accompanying notes are an integral part of these consolidated financial statements.

8

TURQUOISE HILL RESOURCES LTD.

Consolidated Statements of Comprehensive Income

(Stated in thousands of U.S. dollars)

	Year Ended December 31,
	2021		2020
Income for the year	$	681,120	$	494,642
Other comprehensive income:
Items that will not be reclassified to income:
Changes in the fair value of marketable securities at FVOCI		2,945		2,231
Other comprehensive income for the year (a)	$	2,945	$	2,231
Total comprehensive income for the year	$	684,065	$	496,873
Attributable to owners of Turquoise Hill		527,835		408,519
Attributable to owner of non-controlling interest		156,230		88,354
Total comprehensive income for the year	$	684,065	$	496,873

(a) No tax charges and credits arose on items recognized as other comprehensive income in 2021 (2020 - nil).

The accompanying notes are an integral part of these consolidated financial statements.

9

TURQUOISE HILL RESOURCES LTD.

Consolidated Statements of Cash Flows

(Stated in thousands of U.S. dollars)

		Year Ended December 31,
	Note	2021			2020
Cash generated from operating activities before interest and tax	20	$	1,210,790		$	371,169
Interest received			2,735			20,407
Interest paid			(276,392	)		(316,778	)
Income and other taxes paid	23		(361,040	)		(33,855	)
Net cash generated from operating activities		$	576,093		$	40,943
Cash flows from investing activities
Receivable from related party: amounts withdrawn	22		-			511,284
Expenditures on property, plant and equipment			(996,917	)		(1,080,516	)
Pre-production sales proceeds	13		69,726			26,091
Purchase of other financial assets			(206	)		(399	)
Purchase of put options	24		(29,907	)		-
Other investing cash flows			63			1,106
Cash used in investing activities		$	(957,241	)	$	(542,434	)
Cash flows from financing activities
Repayment of project finance facility			(43,489	)		(23,289	)
Payment of lease liability			(4,085	)		(4,344	)
Cash used in financing activities		$	(47,574	)	$	(27,633	)
Effects of exchange rates on cash and cash equivalents			(603	)		760
Net decrease in cash and cash equivalents		$	(429,325	)	$	(528,364	)
Cash and cash equivalents - beginning of year		$	1,123,621		$	1,651,985
Cash and cash equivalents - end of year			694,296			1,123,621
Cash and cash equivalents as presented in the consolidated balance sheets		$	694,296		$	1,123,621

The accompanying notes are an integral part of these consolidated financial statements.

10

TURQUOISE HILL RESOURCES LTD.

Consolidated Balance Sheets

(Stated in thousands of U.S. dollars)

	Note		December 31,  2021			December 31,  2020
Current assets
Cash and cash equivalents		8	$	694,296		$	1,123,621
Inventories		9		290,017			197,962
Trade and other receivables		10		16,119			60,012
Prepaid expenses and other assets		11		120,606			127,274
Other financial assets		12		109			-
				1,121,147			1,508,869
Non-current assets
Property, plant and equipment		13		11,974,480			10,927,512
Inventories		9		60,711			37,557
Prepaid expenses		11		348,671			-
Deferred income tax assets		16		602,862			880,705
Other financial assets		12		16,818			14,118
				13,003,542			11,859,892
Total assets			$	14,124,689		$	13,368,761
Current liabilities
Borrowings and other financial liabilities		15	$	397,421		$	28,288
Trade and other payables		14		384,488			390,059
Deferred revenue				149,368			103,289
				931,277			521,636
Non-current liabilities
Borrowings and other financial liabilities		15		3,785,358			4,173,491
Deferred income tax liabilities		16		145,434			111,717
Decommissioning obligations		17		153,662			133,964
				4,084,454			4,419,172
Total liabilities			$	5,015,731		$	4,940,808
Equity
Share capital		18	$	11,432,122		$	11,432,122
Contributed surplus				1,555,774			1,558,834
Accumulated other comprehensive income				4,363			1,418
Deficit				(2,890,711	)		(3,415,601	)
Equity attributable to owners of Turquoise Hill				10,101,548			9,576,773
Attributable to non-controlling interest		19		(992,590	)		(1,148,820	)
Total equity			$	9,108,958		$	8,427,953
Total liabilities and equity			$	14,124,689		$	13,368,761

Commitments and contingencies (Note 23)

Subsequent events (Note 26)

The accompanying notes are an integral part of these consolidated financial statements.

The financial statements were approved by the directors on March 2, 2022 and signed on their behalf by:

/s/ P. Gillin	/s/ R. Robertson
P. Gillin, Director	R. Robertson, Director

11

TURQUOISE HILL RESOURCES LTD.

Consolidated Statements of Equity

(Stated in thousands of U.S. dollars)

Year Ended December 31, 2021			Attributable to owners of Turquoise Hill
	Share capital		Contributed surplus			Accumulated other comprehensive income			Deficit			Total			Non-controlling Interest             (Note 19)			Total equity
Opening balance	$	11,432,122	$	1,558,834		$	1,418		$	(3,415,601	)	$	9,576,773		$	(1,148,820	)	$	8,427,953
Income for the year		-		-			-			524,890			524,890			156,230			681,120
Other comprehensive income for the year		-		-			2,945			-			2,945			-			2,945
Employee share plans		-		(3,060	)		-			-			(3,060	)		-			(3,060	)
Closing balance	$	11,432,122	$	1,555,774		$	4,363		$	(2,890,711)		$	10,101,548		$	(992,590	)	$	9,108,958
Year Ended December 31, 2020				Attributable to owners of Turquoise Hill
	Share capital		Contributed surplus			Accumulated other comprehensive income (loss)			Deficit			Total			Non-controlling Interest             (Note 19)			Total equity
Opening balance	$	11,432,122	$	1,558,811		$	(813	)	$	(3,821,889)		$	9,168,231		$	(1,237,174	)	$	7,931,057
Income for the year		-		-			-			406,288			406,288			88,354			494,642
Other comprehensive income for the year		-		-			2,231			-			2,231			-			2,231
Employee share plans		-		23			-			-			23			-			23
Closing balance	$	11,432,122	$	1,558,834		$	1,418		$	(3,415,601	)	$	9,576,773		$	(1,148,820	)	$	8,427,953

The accompanying notes are an integral part of these consolidated financial statements.

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TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

1. Nature of operations and liquidity risk

Rio Tinto plc is the ultimate parent company and indirectly owned a 50.8% majority interest in Turquoise Hill Resources Ltd. (“Turquoise Hill”), as at December 31, 2021. 

Turquoise Hill, together with its subsidiaries (collectively referred to as “the Company”), is an international mining company focused principally on the operation and further development of the Oyu Tolgoi copper-gold mine in Southern Mongolia. Turquoise Hill’s head office is located at 1 Place Ville Marie, Suite 3680, Montreal, Quebec, Canada, H3B 3P2. Turquoise Hill’s registered office is located at 300-204 Black Street, Whitehorse, Yukon, Canada, Y1A 2M9.

Turquoise Hill has its primary listing in Canada on the Toronto Stock Exchange and a secondary listing in the U.S. on the New York Stock Exchange.

The consolidated financial statements of Turquoise Hill were authorized for issue in accordance with a directors’ resolution on March 2, 2022.

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages liquidity risk by the preparation of internally generated short-term cash flow forecasts and taking measures in response to the review of forecasts. These short-term cash flow forecasts consider estimation of future operating costs, financing costs, sustaining and development capital, tax payments and cash receipts from sales revenue. Sensitivity analyses are performed over these estimates including the impact of estimated commodity prices on cash receipts.

As at December 31, 2021, the Company had $0.7 billion of available liquidity, consisting of consolidated cash and cash equivalents. The Company’s current assets exceeded current liabilities by $0.2 billion at December 31, 2021. The Company’s short-term cash flow forecasts indicate that additional financing will be required to fund its planned activities. In addition to the Company’s liquidity position and cash flow generated from its existing open pit operations, the Company plans to access sources of funding that form part of the Amended and Restated Heads of Agreement (“Amended HOA”) that was signed between the Company and Rio Tinto on January 25, 2022. Access to these sources of funding is considered probable with an equity offering of at least $650 million expected to be completed by August 31, 2022. The Amended HOA also provides the Company with access to a $300 million short-term secured advance from Rio Tinto, in the period to achievement of sustainable production, which is expected in the first half of 2023. The Company also expects to complete re-profiling of its scheduled December 2022 principal repayment under its existing project finance borrowings. The Company continues to review its near-term plans and continues to take steps to achieve operating efficiencies to maximize cash flows from its operations.

In addition, these short-term cash flow forecasts include the possible impact of the COVID-19 pandemic. Mongolia continued to experience a significant number of cases of COVID-19 through to the end of the year, which continued to impact manning levels at Oyu Tolgoi, where average workforce numbers remained below planned levels. COVID-19 restrictions continued to adversely impact open pit operations and underground development, which, through the end of 2021, resulted in a cumulative increase of $175 million to the estimate of underground development capital included in the Definitive Estimate. This increase includes the currently known, incremental, time-related costs of COVID-19 restrictions.

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TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

1. Nature of operations and liquidity risk (continued)

The short-term cash flow forecasts at December 31, 2021 included the impact of the previously reported delay to sustainable production for Panel 0 until the first half of 2023, as announced by the Company on October 14, 2021. Forecasts reflect the expected cash requirements at Oyu Tolgoi LLC (“Oyu Tolgoi”) based on the approved 2022 capital and operating plan and assumes cash inflows from the drawdown of concentrate inventories to target levels at some point during 2022.

The short-term cash forecasts at December 31, 2021 include the assessment of the estimated impact on the timing of cash receipts resulting from the ongoing force majeure that was first announced by the Company on March 30, 2021. Oyu Tolgoi concentrate inventory levels increased towards the end of the year as a result of interruptions to shipments across the border as a result of COVID-19 restrictions. Oyu Tolgoi continues to work closely with Mongolian and Chinese authorities to manage any supply chain disruptions. The force majeure will remain in place until there are sufficiently sustained volumes of convoys crossing the border to ensure Oyu Tolgoi’s ability to meet its on-going commitments to customers and to return on-site concentrate inventory to target levels. Turquoise Hill and Oyu Tolgoi continue to deploy a range of contingency plans to manage short-term liquidity and the expected ongoing COVID-19 impacts on site operations and concentrate shipments.

On January 24, 2022 the Company announced that it had successfully concluded the negotiations with various Mongolian governmental bodies to resolve the remaining outstanding non-technical undercut criteria that were necessary to announce the start of underground mine operations at Oyu Tolgoi, a renewed partnership with the Government of Mongolia and the Amended HOA agreement with Rio Tinto – refer to Note 26 – Subsequent events. The board of directors of Oyu Tolgoi also approved the start of formal negotiations with project finance lenders in relation to the Amended HOA.

The Company believes the funding available under the amended HOA provides sufficient liquidity to meet its minimum obligations for a period of at least 12 months from the balance sheet date, and to meet requirements of the Company, including its operations and capital expenditures, over the same period.

2. Summary of significant accounting policies

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

These consolidated financial statements have been prepared on a going concern basis, and in making the assessment that the Company is a going concern, management have taken into account all available future information, which extends for a period of at least 12 months from December 31, 2021. Refer to Note 1.

(b) Change in accounting policies

A number of new standards, and amendments to standards and interpretations, are effective as of January 1, 2021, and have been applied in preparing these consolidated financial statements. None of these standards and amendments to standards and interpretations had a significant effect on the consolidated financial statements of the Company.

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TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(c) Areas of judgement and estimation uncertainty

The preparation of consolidated financial statements in accordance with IFRS often requires management to make estimates about, and apply assumptions or subjective judgement to, future events and other matters that affect the reported amounts of the Company’s assets, liabilities, revenues, expenses and related disclosures. Assumptions, estimates and judgements are based on historical experience, expectations, current trends and other factors that management believes to be relevant at the time the Company’s consolidated financial statements are prepared.

With the emergence of the new and more transmissible Omicron variant in Mongolia and elsewhere, COVID-19 continues to create significant volatility and negative pressures on international economies, as well as financial and commodity markets. At December 31, 2021, it is still not possible to predict the duration, severity, or scope of the pandemic’s impact on the Company or to predict the steps that governmental and non-governmental agencies may be required to take in response to COVID-19.

By their very nature, COVID-19 related judgements and estimates made for the purposes of preparing the consolidated financial statements relate to matters that are inherently uncertain. However, the Company is closely monitoring the changing conditions and their impacts.

(i) Sources of estimation uncertainty

Key sources of estimation uncertainty that have a risk of resulting in a material adjustment to the carrying amount of assets and liabilities within the next twelve months are summarized below:

Going concern assessment

The Company has made judgements, based on an internally generated short-term cash flow forecast, in concluding that there are no material uncertainties related to events or conditions that may cast significant doubt upon the Company’s ability to continue as a going concern. The short term cashflow forecast includes plans to access additional sources of funding under the amended HOA where management consider implementation of those plans to be probable. Judgements and estimates are made in forming assumptions of future activities, future cash flows and timing of those cash flows, including cash flows relating to the financing plans for re-profiling of project finance debt, the short-term secured advance from Rio Tinto and equity offering in the Amended HOA whose implementation is probable in the next twelve months. Significant assumptions used in preparing the short-term cash flow forecast include, but are not limited to, short-term commodity prices, production volumes, reserves, operating costs, financing costs, development capital, and the announced equity offering. Changes to these assumptions could affect the estimate of the Company’s available liquidity and conclusion as to whether there are material uncertainties related to events or conditions that may cast significant doubt upon the Company’s ability to continue as a going concern. However, the Company’s assessment of going concern did include sensitivity analyses that were performed over the significant assumptions included in the short-term cash flow forecast including the impact of estimated commodity prices on cash receipts.

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TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(c) Areas of judgement and estimation uncertainty (continued)

(i) Sources of estimation uncertainty (continued)

Recoverable amount of property, plant and equipment

When there is an indicator of impairment or impairment reversal, the recoverable amount is assessed by reference to the higher of value in use (“VIU”) and fair value less costs of disposal (“FVLCD”). The VIU is the net present value of expected future pre-tax cash flows from the relevant cash-generating unit in its current condition, both from continuing use and ultimate disposal. FVLCD is estimated either from the value obtained from an active market where applicable, or by using a discounted post-tax cash flow model based on detailed life-of-mine and/or production plans. Significant assumptions used in the discounted cash flow model include estimates of long-term commodity prices, discount rates, reserves and resources, operating costs, development capital, and scheduling and mine design.

These inputs are based on the Company’s best estimates of what an independent market participant would consider appropriate. Changes to these inputs may alter the results of the test for impairment or impairment reversal, the amount of the impairment charge or impairment reversal recorded in the consolidated statement of income and the resulting carrying value of property, plant and equipment.

An indicator of impairment was identified during the year ended December 31, 2021, and an assessment of recoverable amount was undertaken as at December 31, 2021; refer to Note 13.

Recovery of deferred tax assets in Mongolia

The Company assesses the recoverability of deferred tax assets at each reporting period-end based on future taxable income to determine the deferred tax asset to be recognized. Significant assumptions used to determine future taxable income include estimates for commodity prices, reserves and resources, operating costs, financing costs, development capital, and scheduling and mine design. Revisions to these estimates could result in material adjustments to the financial statements.

Reserves and Resources

Estimates of mineral reserves and resources are based on various assumptions relating to operating matters set forth in National Instrument 43-101. These include production costs, mining and processing recoveries, cut-off grades, long term commodity prices and the costs and availability of treatment and refining services for the metals mined. Cost estimates are based on feasibility study estimates and operating history. The Company estimates its mineral reserves and resources based on information compiled and reviewed by qualified persons as defined in accordance with National Instrument 43-101 requirements.

Estimated mineral reserves and, in certain circumstances, resources are used to determine the depreciation of property, plant and equipment; to account for capitalized deferred stripping costs; to perform, when required, assessments of the recoverable amount of property, plant and equipment; as an input to the projection of future taxable profits which support assessments of deferred income tax recoverability; and to forecast the timing of the payment of decommissioning obligations.

16

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(c) Areas of judgement and estimation uncertainty (continued)

(i) Sources of estimation uncertainty (continued)

Depletion and depreciation of property, plant and equipment

Property, plant and equipment is the largest component of the Company’s assets and, as such, the depreciation of these assets has a significant effect on the Company’s financial statements.

Mining plant and equipment and other capital assets are depreciated over their expected economic lives using either the units of production method or the straight-line method. Depletion of each mineral property interest is provided on the units of production basis using estimated proven and probable reserves as the depletion basis. A change in the estimated useful life or residual value of a long-lived asset would result in a change in the rate of depreciation for that asset.

For long-lived assets that are depleted or depreciated over proven and probable reserves using the units of production method, a change in the original estimate of proven and probable reserves would result in a change in the rate of depletion or depreciation.

Decommissioning Costs

The estimate of decommissioning costs is based on future expectations in the determination of closure provisions. Management makes a number of assumptions and judgements including estimating the amount of future reclamation costs and their timing, inflation rates and risk-free discount rates. These assumptions are formed based on environmental and regulatory requirements and the Company’s internal policies. The costs are more uncertain the further into the future the mine closure activities are to be carried out. Actual costs incurred in future periods in relation to the remediation of the Company’s existing assets could differ materially from their estimated undiscounted future value. Refer to Note 17 for the Company’s total decommissioning obligations recorded in the consolidated financial statements, the undiscounted values and the rate used to discount the liability.

Net realizable value of inventories

Ore stockpile inventory is valued at the lower of weighted average cost and net realizable value (“NRV”). If ore stockpiles are not expected to be processed within the 12 months after the balance sheet date, they are included within non-current assets and net realizable value is calculated on a discounted cash flow basis over the planned processing timeframe for such ore. Evaluating NRV requires management judgement in the selection of estimates for, among other inputs, discount rate, price assumptions, timing of processing and costs to complete.

17

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(c) Areas of judgement and estimation uncertainty (continued)

(ii) Areas of judgement

Impairment indicator of property, plant and equipment

Judgement is required in assessing whether certain factors would be considered an indicator of impairment or impairment reversal. Management considers both internal and external information to determine whether there is an indicator of impairment and, accordingly, whether impairment testing is required. The information considered in assessing whether there is an indicator of impairment includes, but is not limited to, long-term commodity prices, the Company’s market capitalization relative to its net asset carrying amount, life of mine plans and changes in significant assumptions including reserves and resources, development capital estimates and scheduling and mine designs.

The Company’s assessment for the year ended December 31, 2021 considered the approval by the Oyu Tolgoi board of directors of the operating program and budget for the 2022 financial year, including over $780 million to cover capital plans relating to the Oyu Tolgoi underground project, which will allow continued progression towards undercutting.

The Company’s assessment also considered the information included within its announcement on January 17, 2022, in relation to its fourth quarter 2021 production and in which the Company provided an update on the Oyu Tolgoi mine and the status of negotiations with the Government of Mongolia as at December 31, 2021.

The Company’s assessment also considered the information included within its January 17, 2022 announcement regarding the ongoing COVID-19 restrictions continuing to adversely impact both open pit operations and underground development. Further, consideration was given to the COVID-19 situation in Mongolia, as well as the schedule delays and delayed commitments caused by the Definitive Estimate not having received the unanimous support of all the directors of the Oyu Tolgoi board as at December 31, 2021, which delayed the Company’s expected timing for initiating the undercut. In addition, consideration was given to the information in the January 17, 2022 announcement regarding updates on the progress of Shaft 4 sinking activities and Shaft 3 readiness work. The announcement confirmed that Panels 1 and 2 are expected to be delayed due to COVID-19 related work restrictions impacting both Shafts 3 and 4 and underground development progress as well as changes to mining scope previously disclosed.

The Company’s assessment also considered the status of negotiations between the Company, Rio Tinto and the Government of Mongolia as at December 31, 2021. On December 30, 2021, the Mongolian Parliament passed Parliamentary Resolution 103 to authorize the Government of Mongolia to take certain measures in connection with Oyu Tolgoi, restricting additional shareholder or third-party debt financing at the Oyu Tolgoi level until commencement of sustainable production. The effect of the resolution required key negotiations to continue into 2022. Despite the positive progress made through the negotiations in 2021, management concluded that the potential for further delays and the resulting uncertainty as to the timing of underground project completion constituted an indicator of impairment at the Oyu Tolgoi cash generating unit level at December 31, 2021.

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TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(c) Areas of judgement and estimation uncertainty (continued)

(ii) Areas of judgement (continued)

Impairment indicator of property, plant and equipment (continued)

Subsequent to year-end, on January 24, 2022, the Company announced that it had successfully concluded the negotiations with Rio Tinto and the Government of Mongolia that were necessary for the board of directors of Oyu Tolgoi to unanimously approve the start of underground mine operations at Oyu Tolgoi as well as signing of the Amended HOA with Rio Tinto; refer to Note 26. As these events occurred after the balance sheet date, they do not form part of management’s assessment of potential indicators of impairment or impairment reversal as at December 31, 2021.

Income taxes - provision for income taxes and composition of deferred income tax assets and liabilities

The Company must make significant estimates in respect of the provision for income taxes and the composition of its deferred income tax assets and deferred income tax liabilities. The Company’s operations are, in part, subject to foreign tax laws where interpretations, regulations and legislation are complex and can be subject to change. As a result, there are usually some tax matters in question which may, on resolution in the future, result in adjustments to the amount of current or deferred income tax assets or liabilities, and those adjustments may be material to the Company’s balance sheet and results of operations.

The Company recognizes potential liabilities and records tax liabilities for uncertain tax positions based on its judgement of whether, and the extent to which, additional taxes will be due. Consistent with IFRIC 23, Uncertainty Over Income Tax Treatments, the Company first considers if it is probable that a taxation authority will accept an uncertain tax treatment. If it is concluded that it is not probable, a probability-weighted approach is to be taken for issues for which there are a wide range of possible outcomes. For tax issues with a binary outcome, the most likely amount method still remains. The Company adjusts these liabilities as facts and circumstances change. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate, which could result in material adjustments to the consolidated financial statements. Refer to Note 23 for further information on tax matters between Oyu Tolgoi and the Mongolian Tax Authority.

Income taxes – utilization of tax losses carried forward

The determination of the ability of the Company to utilize tax losses carried forward to offset income taxes payable in the future and to utilize temporary differences which will reverse in the future requires management to exercise judgement and make assumptions about the Company’s future performance. Management is required to assess whether it is probable that the Company is able to benefit from these tax losses and temporary differences.

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TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(d) Basis of consolidation

The financial statements consist of the consolidation of the accounts of Turquoise Hill and its respective subsidiaries. All intercompany transactions and balances between Turquoise Hill and its subsidiaries have been eliminated on consolidation. Where necessary, adjustments are made to assets, liabilities, and results of subsidiaries to bring their accounting policies into line with those used by the Company.

Subsidiaries are entities controlled by Turquoise Hill. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The Company controls an entity if it has power to direct the activities of the entity in a manner that significantly affects its returns, has exposure or rights to variable returns from its involvement with the entity and has the ability to use its power to affect those returns.

The Company consolidates all subsidiaries. The Company’s principal operating subsidiary is Oyu Tolgoi. Wholly owned subsidiaries of Turquoise Hill together hold a 66.0% interest in Oyu Tolgoi, whose principal asset is the Oyu Tolgoi copper-gold mine located in Southern Mongolia. The remaining 34% non-controlling interest in Oyu Tolgoi is owned by Erdenes Oyu Tolgoi LLC (“Erdenes”), a company controlled by the Mongolian government. The Company has historically funded 100% of the Oyu Tolgoi copper-gold mine’s exploration and development costs via equity and debt investments in Oyu Tolgoi and non-recourse loans to Erdenes. Income or loss of Oyu Tolgoi is attributed to the controlling and non-controlling shareholders based on ownership percentage. Non-recourse loans advanced to Erdenes upon the issuance of additional equity interests to Erdenes are accounted for separately and recorded as an offset to non-controlling interest in equity. Unrealized interest on the non-recourse loans to Erdenes, which are recoverable principally through dividends from Oyu Tolgoi or sale by Erdenes of its interests in Oyu Tolgoi, is recognized when payment of the interest can be reliably determined. Subsequent to December 31, 2021, the Company waived these non-recourse loans and unrealized interest in full. Refer to Note 26 - Subsequent events.

(e) Currency translation and foreign exchange

The Company has determined the U.S. dollar to be the functional currency of Turquoise Hill and its significant subsidiaries as it is the currency of the primary economic environment in which Turquoise Hill and all of its significant subsidiaries operate. Accordingly, monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect at the date of the balance sheet and non-monetary assets and liabilities are translated at the time of acquisition or issue. Revenues and expenses are translated at rates approximating the exchange rates in effect at the date of the transaction. All exchange gains and losses are included in the consolidated statement of income during the year.

20

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(f) Revenue

The Company generates revenue from the sale of concentrate containing copper, gold and silver. Sales revenue is recognized on individual sales to depict the transfer of promised goods to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods. The Company considers five steps in assessing whether all of the revenue recognition criteria are met:

· identify the contract with a customer;

· identify the performance obligations in the contract;

· determine the transaction price;

· allocate the transaction price to performance obligations; and

· recognize revenue when or as a performance obligation is satisfied.

The Company satisfies its performance obligation and sales revenue is recognized at the point in time when the product is delivered as specified by the customer, which is typically upon loading of the product to the customer’s truck, train or vessel. The Company considers that control has passed when there is a present obligation to pay from the customer’s perspective; physical possession, legal title and the risks and rewards of ownership have all passed to the customer; and the customer has accepted the concentrate. The Company recognizes deferred revenue in the event it receives payment from a customer before a sales transaction meets all the criteria for revenue recognition.

Concentrate is provisionally priced whereby the selling price is subject to final adjustment at the end of a period normally ranging from 30 to 180 days after delivery to the customer as defined in the sales contract. The final price is based on the market price at the relevant quotation point stipulated in the contract. At each reporting date, the receivable is marked to fair value based on the forward selling price for the quotation period stipulated in the contract. The change in fair value of the receivable subsequent to the date of revenue recognition is recognized within ‘Revenue’ on the face of the statements of income and is shown separately as ‘other revenue’ in the notes to the consolidated financial statements.

Mining royalties paid to the government of Mongolia are included in operating expenses.

(g) Exploration and evaluation

All direct costs related to the acquisition of mineral property interests are capitalized in the period incurred.

Exploration and evaluation costs are charged to operations in the period incurred until such time as it has been determined that a mineral property has proven and probable reserves and the property is economically viable, in which case subsequent evaluation costs incurred to develop a mineral property are capitalized. Exploration and evaluation costs include value-added taxes incurred in foreign jurisdictions when recoverability of those taxes is uncertain.

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TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(h) Property, plant and equipment

Property, plant and equipment are recorded at cost, less accumulated depletion and depreciation and accumulated impairment losses. The cost of property, plant and equipment includes the estimated close down and restoration costs associated with the asset.

Once an undeveloped mining project has been established as commercially viable, including that it has established proven and probable reserves and approval to mine by governmental authorities has been given, expenditure (including qualifying exploration and evaluation costs) other than on land, buildings, plant and equipment is capitalized under “Mineral property interests.” Ore reserves may be declared for an undeveloped mining project before its commercial viability has been fully determined and approval to mine has been given. Evaluation costs may be capitalized during the period between declaration of reserves and approval to mine as further work is undertaken in order to refine the development case to maximize the project’s return.

Project development expenditures, including costs to acquire and construct buildings and equipment are capitalized under “Capital works in progress” provided that the project has been established as commercially viable. Capital works in progress are not categorized as mineral property interests, mining plant and equipment or other capital assets until the capital asset is in the condition and location necessary for its intended use.

Sales of concentrate and associated costs, which are incurred during the commissioning phase, that are necessary for the successful commissioning of new assets, are capitalized. Development costs incurred after the commencement of production are capitalized to the extent they are expected to give rise to a future economic benefit. Borrowing costs related to construction or development of a qualifying asset are capitalized until the point when substantially all the activities that are necessary to make the asset ready for its intended use are complete. Where funds have been borrowed specifically to finance an asset, the amount capitalized is the actual interest on borrowings incurred, net of any returns on invested funds. Where the funds used to finance an asset form part of general borrowings, the amount capitalized is calculated using a weighted average of rates applicable to relevant general borrowings of the Company during the period.

(i) Deferred stripping

In open pit mining operations, it is necessary to remove overburden and other waste materials to access ore from which minerals can be extracted economically. The process of mining overburden and waste materials is referred to as stripping.

During the development of an open pit mine, before production commences, stripping costs are capitalized as part of mineral property interests and are subsequently amortized over the life of the mine on a units of production basis.

During the production phase, stripping activity is undertaken for the dual purpose of extracting inventory for current production as well as improving access to the ore body.

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TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(i) Deferred stripping (continued)

Stripping costs incurred for the purpose of extracting current inventories are included in the costs of inventory produced during the period the stripping costs are incurred.

In order for production phase stripping costs to qualify for capitalization as a stripping activity asset, three criteria must be met:

· it must be probable that economic benefit will be realized in a future accounting period as a result of improved access to the ore body created by the stripping activity;

· it must be possible to identify the “component” of the ore body for which access has been improved; and

· it must be possible to reliably measure the costs that relate to the stripping activity.

When the cost of stripping related to development which has a future benefit is not distinguishable from the cost of producing current inventories, the stripping costs are allocated to each activity based on a relevant production measure. Generally, the measure would be calculated based on a ratio obtained by dividing the tonnage of waste mined for the component for the period by the quantity of ore mined for the component. Stripping costs incurred in the period related to the component are deferred to the extent that the current period ratio exceeds the historical life of component ratio. The stripping activity asset is depreciated on a units of production basis based on expected production of ore over the useful life of the component that has been made more accessible as a result of the stripping activity. The life of component ratios are based on proven and probable reserves based on the mine plan; they are a function of the mine design and therefore changes to that design will generally result in changes to the ratios. Changes in other technical or economic parameters that impact reserves may also impact the life of component ratios. Changes to the life of component ratios are accounted for prospectively.

Deferred stripping costs are included in “Mineral property interests” within property, plant and equipment.    Amortization of deferred stripping costs is included as a cost of production in the period.

(j) Depreciation and depletion

Property, plant and equipment is depreciated over its useful life, or over the remaining life of the mine if that is shorter.

The useful lives of the major assets of a cash-generating unit are often dependent on the life of the ore body to which they relate. Where this is the case, the lives of mining properties, and their associated concentrators and other long lived processing equipment generally relate to the expected life of the ore body. The life of the ore body, in turn, is estimated on the basis of the life-of-mine plan. In applying the units of production method, depreciation is calculated using the copper content of the ore extracted from the mine in the period as a percentage of the total metal content of the ore to be extracted in current and future periods based on proven and probable reserves.

Development costs that relate to a discrete section of an ore body, and which only provide benefit over the life of those reserves, are depreciated over the estimated life of that discrete section. Development costs incurred that relate to the entire ore body are depreciated over the estimated life of the entire ore body.

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TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(j) Depreciation and depletion (continued)

Assets within operations for which production is not expected to fluctuate significantly from one year to another or which have a physical life shorter than the mine are depreciated on a straight-line basis. Depreciation commences when an asset is available for use.

(k) Impairment of non-current assets

Property, plant and equipment is reviewed for impairment when events or changes in circumstances indicate that the full carrying amount may not be recoverable. Non-current assets that have previously been impaired are tested for possible reversal of the impairment whenever events or changes in circumstances indicate that the impairment may have reversed.

Impairment is assessed at the level of cash-generating units which are identified as the smallest identifiable group of assets capable of generating cash inflows which are largely independent of the cash inflows from other assets. When an impairment review is undertaken, the recoverable amount is assessed by reference to the higher of VIU and FVLCD.

The VIU is the net present value of expected future pre-tax cash flows from the relevant cash-generating unit in its current condition, both from continuing use and ultimate disposal. For VIU, recent cost levels are considered, together with expected changes in costs that are compatible with the current condition of the business and which meet the requirements of IFRS.

The best evidence of FVLCD is often the value obtained from an active market or binding sale agreement. Where this is not the case, or where neither an active market nor a binding sale agreement exists, FVLCD is based on the best information available to reflect the amount a market participant would pay for the cash-generating unit in an arm’s length transaction. This is often estimated using discounted post tax cash flow techniques based on detailed life-of-mine and/or production plans.

The cash flow forecasts are based on management’s best estimates of expected future revenues and costs, including the future cash costs of production and capital expenditure, which for FVLCD purposes management believe approximate those of a market participant.

Forecast cash flows for impairment purposes are generally based on management’s price forecasts of commodity prices, which assume short term observable market prices will revert to the Company’s assessment of the long term price, generally over a period of three to five years. These long-term forecast commodity prices are derived from industry analyst consensus.

The discount rates applied to the future cash flow forecasts represent an estimate of the rate the market would apply having regard to the time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted.

24

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(l) Decommissioning obligations

The Company recognizes liabilities for statutory, contractual, legal or constructive obligations associated with the retirement of property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, a provision for a decommissioning obligation is recognized at its net present value in the period in which it is incurred, using a discounted cash flow technique with market-based risk-free discount rates and estimates of the timing and amount of the settlement of the obligation. Upon initial recognition of the liability, the corresponding decommissioning cost is added to the carrying amount of the related asset.

Following initial recognition of the decommissioning obligation, the carrying amount of the liability is increased for the passage of time and adjusted for changes to significant estimates including the current discount rate, the amount or timing of the underlying cash flows needed to settle the obligation and the requirements of the relevant legal and regulatory framework. Subsequent changes in the provisions resulting from new disturbance, updated cost estimates, changes to estimated lives of operations and revisions to discount rates are also capitalized to the related property, plant and equipment. Amounts capitalized to the related property, plant and equipment are depreciated over the lives of the assets to which they relate. The amortization or unwinding of the discount applied in establishing the net present value of provisions is charged to expense and is included within finance costs in the consolidated statement of income.

(m) Inventories

Concentrate inventory is valued at the lower of weighted average cost and net realizable value. Cost comprises production and processing costs, which includes direct and indirect labour, operating materials and supplies, applicable transportation costs and apportionment of operating overheads, including depreciation and depletion. Net realizable value is the expected average selling price of the concentrate inventory less applicable selling and transportation costs.

Stockpiles represent ore that has been extracted and is available for further processing. Stockpiles are valued at the lower of weighted average production cost and net realizable value. Production cost includes direct and indirect labour, operating materials and supplies, applicable transportation costs, and apportionment of operating overheads, including depreciation and depletion. Net realizable value is the expected average selling price of the finished product less the costs to get the product into saleable form and to the selling location. If the ore will not be processed and sold within 12 months after the consolidated balance sheet date it is included within non-current assets and net realizable value is calculated on a discounted cash flow basis over the planned period within which the ore is estimated to be processed.

Mine stores and supplies are valued at the lower of the weighted average cost and net realizable value.

25

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(n) Taxation

Income tax expense comprises current and deferred tax. Current tax and deferred taxes are recognized in the consolidated statement of income except to the extent that they relate to items recognized directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date.

Deferred tax is recognized in respect of unused tax losses and credits, as well as temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.    Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on enacted or substantively enacted laws at the reporting date.    

The Company computes the provision for deferred income taxes under the liability method. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, only to the extent that it is probable that future taxable profits will be available against which they can be utilized. Future taxable profits are estimated using an income forecast derived from cash flow projections, based on detailed life-of-mine plans and corporate forecasts. Where applicable, the probability of utilizing tax losses or credits is evaluated by considering risks relevant to future cash flows, and the expiry dates after which these losses or credits can no longer be utilized.

Deferred tax is not recognized for the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries, associates and joint arrangements to the extent that it is probable that they will not reverse in the foreseeable future.

The Company is subject to assessments by various taxation authorities, who may interpret tax legislation differently from the Company. The final amount of taxes to be paid depends on a number of factors, including the outcomes of audits, appeals or negotiated settlements. Such differences are accounted for based on management’s best estimate of the probable outcome of these matters.

The Company must make significant estimates and judgements in respect of its provision for income taxes and the composition and measurement of its deferred income tax assets and liabilities. The Company’s operations are, in part, subject to foreign tax laws where interpretations, regulations and legislation are complex and subject to change. As a result, there are some tax matters in question that may, upon resolution in the future, result in adjustments to the amount of deferred income tax assets and liabilities; those adjustments may be material.

(o) Employee benefits

Wages, salaries, contributions to government pension and social insurance funds, compensated absences and bonuses are accrued in the year in which the employees render the associated services.

26

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(p) Cash and cash equivalents

For the purposes of the consolidated balance sheet, cash and cash equivalents comprise cash on hand, demand deposits and short term, highly liquid investments with an initial maturity of three months or less that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

(q) Financial instruments

The Company classifies its financial instruments in the following categories: at fair value through profit or loss, fair value through other comprehensive income or at amortized cost.

Classification

The Company determines the classification of financial instruments at initial recognition.

The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. A debt instrument is measured at amortized cost if the objective of the business model is to hold the debt instrument for the collection of contractual cash flows, and the asset’s contractual cash flows are comprised solely of payments of principal and interest (“SPPI”).

A debt instrument held under a business model under which financial assets may be either held to collect contractual cash flows or sold is classified as held at fair value through other comprehensive income if the SPPI criteria are met. Any other financial assets are classified at fair value through profit or loss.

Debt instruments held to maturity are classified as current or non-current assets based upon their maturity date. Equity instruments that are held for trading are classified as fair value through profit or loss. For other equity instruments, on the day of acquisition, the Company is able to make an irrevocable election (on an instrument-by-instrument basis) to designate them as at fair value through other comprehensive income.

Financial liabilities are measured at amortized cost, unless they are required to be measured at fair value through profit or loss (such as instruments held for trading or derivatives) or where the Company has opted to measure at fair value through profit or loss.

Measurement

(i) Financial assets and liabilities at fair value through profit or loss

Financial assets and liabilities at fair value through profit or loss are initially recognized at fair value and transaction costs are expensed in the consolidated statements of income. Realized and unrealized gains and losses arising from changes in fair value are included in the consolidated statement of income in the period in which they arise. Where the Company has elected to recognize a financial liability at fair value through profit or loss, any changes associated with the Company’s own credit risk will be recognized in other comprehensive income.

27

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(q) Financial instruments (continued)

(ii) Financial assets at fair value through other comprehensive income

Investments in equity instruments at fair value through other comprehensive income are initially recognized at fair value plus transaction costs. Subsequent to initial recognition, they are measured at fair value, with gains and losses recognized in other comprehensive income.

(iii) Financial assets and liabilities at amortized cost

Financial assets and liabilities at amortized cost are initially recognized at fair value net of transaction costs, and subsequently carried at amortized cost less any impairment charges.

(iv) Derivative financial instruments

Derivatives are classified as fair value through profit or loss. Derivatives embedded in financial liabilities are treated as separate derivatives when their risks and characteristics are not closely related to their host contracts. Commodity-based derivatives resulting from provisionally priced concentrate are classified as fair value through profit or loss with changes in value recognized in revenue.

Impairment of financial assets

The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost.

At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the 12 month expected credit loss for performing assets and the lifetime expected credit loss if the credit risk on the financial asset has increased significantly since initial recognition. For financial assets that are credit impaired at inception, the Company recognizes the expected lifetime credit loss allowance and any interest income is calculated on the net carrying amount.

Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the expected credit losses are reversed after the impairment was recognized.

Derecognition

Financial assets are derecognized when the investments mature or are sold, and substantially all the risks and rewards of ownership have been transferred. A financial liability is derecognized when the obligation under the liability is discharged, canceled or expired. Gains and losses on derecognition are recognized within finance income and finance costs, respectively. Gains or losses on equity instruments designated as fair value through other comprehensive income remain within accumulated other comprehensive income.

28

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(r) Share based payments

The Company has a Performance Share Unit (“PSU”) Plan, a Restricted Share Unit (“RSU”) plan, and a Director Deferred Share Unit (“DDSU”) Plan.

The PSUs, RSUs, and DDSUs are accounted for at fair value upon issuance and remeasured each reporting period, based on the fair market value of a common share of the Company, and recognized as an expense on a straight-line basis over the vesting period.

(s) Segment reporting

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components. Operating segments are reported consistently with internal information provided to the chief operating decision maker (“CODM”). The CODM, who is responsible for allocating resources and assessing performance, has been identified as Turquoise Hill’s Chief Executive Officer. Based upon management’s assessment of the above criteria, the Company has one operating segment, Oyu Tolgoi, with its copper-gold mine in Southern Mongolia.

(t) Leases

At inception of the contract, the Company assesses whether a contract is, or contains, a lease. The contract contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

To assess this, the Company considers whether:

– The contract involves the use of an identified asset;

– the Company has the right to obtain substantially all the economic benefits from use of the asset throughout the period of use; and

– the Company has the right to direct the use of the asset.

The Company recognizes a right of use asset and a lease liability at the lease commencement date. The right of use asset is initially measured at cost. The right of use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the useful life or the end of the lease term. The estimated useful lives of right of use assets are determined on the same basis as those of property, plant and equipment. In addition, they are periodically reduced by any impairment losses and adjusted for certain re-measurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted at the weighted average incremental borrowing rate.

29

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(t) Leases (continued)

Lease payments included in the measurement of the lease liability comprise: fixed payments; variable lease payments that depend on an index or a rate; amounts expected to be payable under any residual value guarantee, and the exercise price under any purchase option that the Company would be reasonably certain to exercise; lease payments in any optional renewal period if the Company is reasonably certain to exercise an extension option; and penalties for any early termination of a lease unless the Company is reasonably certain not to terminate early.

The lease liability is measured at amortized cost using the effective interest rate method. It is re-measured when there is a change in future lease payments arising from a change in index payment or rate, if there is a change in the Company’s estimate of the amount expected to be payable under any residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension, or termination option.

When the lease liability is re-measured in this way, a corresponding adjustment is made to the carrying amount of the right of use asset or is recorded in the consolidated statement of income if the carrying amount of the asset has been reduced to nil.

The Company presents right of use assets in Property, plant, and equipment and lease liabilities in Borrowings and other financial liabilities in the consolidated balance sheet.

(u) New standards and interpretations not yet adopted

IAS 16, Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) is effective for the Company’s fiscal year ending December 31, 2022. This narrow-scope amendment to IAS 16 prohibits an entity from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Under the amendment, the Company will be required to recognise the proceeds from selling such items, and the cost of producing them, in the Consolidated Statement of Income.

This amendment is effective for the Company’s annual reporting periods beginning January 1, 2022 with retrospective application required as it relates to items of property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after January 1, 2021. IAS 2 Inventories will apply to the identification and measurement of inventory produced. Identifying the related cost may require significant estimation and judgment in the selection of an appropriate method for allocating development expenditure to such inventory.

The impact of adjustments to amounts recorded within opening balances at January 1, 2021 are expected to decrease the deficit reported within equity by $21 million and to increase capital work in progress within property, plant and equipment by $21 million. Upon adoption of the amendment for reporting periods starting from January 1, 2022, the restatement of the Company’s Consolidated Statement of Income and Consolidated Balance Sheet as at and for the year ended December 31, 2021 will result in a $70 million increase to revenue, a $15 million increase in cost of sales and a $55 million increase to capital work in progress within property, plant and equipment.

30

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

3. Operating segment

	Year Ended December 31, 2021
				Corporate
				and other
	Oyu Tolgoi			eliminations			Consolidated
Revenue	$	1,971,042		$	-		$	1,971,042
Cost of sales		(622,329	)		-			(622,329	)
Gross margin		1,348,713			-			1,348,713
Operating (expenses) income		(321,257	)		45,770			(275,487	)
Corporate administration expenses		-			(37,699	)		(37,699	)
Other expenses		(7,575	)		(30,002	)		(37,577	)
Income (loss) before finance items and taxes		1,019,881			(21,931	)		997,950
Finance items
Finance income		1,783			1,215			2,998
Finance costs		(282,606	)		274,570			(8,036	)
Income from operations before taxes	$	739,058		$	253,854		$	992,912
Income and other taxes		(279,559	)		(32,233	)		(311,792	)
Income for the year	$	459,499		$	221,621		$	681,120
Depreciation and depletion		165,269			97			165,366
Capital additions		1,263,698			-			1,263,698
Current assets		497,845			623,302			1,121,147
Non-current assets		13,375,066			(371,524	)		13,003,542
Current liabilities		909,328			21,949			931,277
Non-current liabilities (a)		12,443,023			(8,358,569	)		4,084,454
Net increase (decrease) in cash		25,245			(454,570	)		(429,325	)

(a) The Oyu Tolgoi segment’s non-current liabilities includes $8.1 billion of shareholder loan and accrued interest liability and the Corporate and other elimination segment’s non-current liabilities includes $8.1 billion of shareholder loan and accrued interest asset at December 31, 2021.

Revenue by geographic destination is based on the ultimate country of destination, if known. If the destination of the concentrate sold through traders is not known, then revenue is allocated to the location of the concentrate at the time when revenue is recognized. During the years ended December 31, 2021 and 2020, principally all of Oyu Tolgoi’s revenue arose from concentrate sales to customers in China and revenue from individual customers in excess of 10% of Oyu Tolgoi’s revenue was $234.2 million, $226.0 million, $216.9 million and $214.5 million (December 31, 2020 - $230.7 million, $177.4 million, $110.5 million and $106.2 million).

Substantially all long-lived assets of the Oyu Tolgoi segment, other than financial instruments and deferred tax assets, are located in Mongolia.

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TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

3. Operating segment (continued)

	Year Ended December 31, 2020
				Corporate
				and other
	Oyu Tolgoi			eliminations			Consolidated
Revenue	$	1,078,192		$	-		$	1,078,192
Cost of sales		(669,394	)		-			(669,394	)
Gross margin		408,798			-			408,798
Operating (expenses) income		(245,718	)		43,447			(202,271	)
Corporate administration expenses		-			(30,602	)		(30,602	)
Other income (expenses)		3,254			(2,772	)		482
Income before finance items and taxes		166,334			10,073			176,407
Finance items
Finance income		4,292			13,057			17,349
Finance costs		(257,765	)		252,255			(5,510	)
Income (loss) from operations before taxes	$	(87,139)		$	275,385		$	188,246
Income and other taxes		347,003			(40,607	)		306,396
Income for the year	$	259,864		$	234,778		$	494,642
Depreciation and depletion		181,146			114			181,260
Capital additions		1,326,274			-			1,326,274
Current assets		431,271			1,077,598			1,508,869
Non-current assets		12,025,763			(165,871	)		11,859,892
Current liabilities		501,013			20,623			521,636
Non-current liabilities (a)		11,954,961			(7,535,789	)		4,419,172
Net decrease in cash		(38,563	)		(489,801	)		(528,364	)

(a) The Oyu Tolgoi segment’s non-current liabilities includes $7.3 billion of shareholder loan and accrued interest liability and the Corporate and other elimination segment’s non-current liabilities includes $7.3 billion of shareholder loan and accrued interest asset at December 31, 2020.

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TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

4. Revenue

	Year Ended December 31, 2021
	Revenue from contracts with customers		Other revenue (a)			Total revenue
Total revenue:
Copper	$	1,151,118	$	53,401		$	1,204,519
Gold		754,345		(5,763	)		748,582
Silver		18,127		(186	)		17,941
	$	1,923,590	$	47,452		$	1,971,042
	Year Ended December 31, 2020
	Revenue from contracts with customers		Other revenue (a)			Total revenue
Total revenue:
Copper	$	755,874	$	41,423		$	797,297
Gold		260,055		5,593			265,648
Silver		14,575		672			15,247
	$	1,030,504	$	47,688		$	1,078,192

(a) Other revenue relates to gains (losses) on the revaluation of trade receivables.

5. Cost of sales

	Year Ended December 31,
	2021		2020
Production and delivery	$	459,322	$	493,370
Depreciation and depletion		163,007		176,024
	$	622,329	$	669,394

33

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

6. Operating expenses

	Year Ended December 31,
	2021			2020
Oyu Tolgoi administration expenses	$	156,066		$	124,889
Royalty expenses		105,399			63,420
Inventory reversals (a)		(3,465	)		(2,703	)
Selling expenses		15,041			11,147
Depreciation		2,359			5,236
Other		87			282
	$	275,487		$	202,271

(a) Inventory reversals include net adjustments to the carrying value of ore stockpile inventories and materials and supplies; refer to Note 9.

7. Finance items

	Year Ended December 31,
	2021			2020
Finance income:
Interest income (a)	$	2,998		$	17,349
	$	2,998		$	17,349
Finance costs:
Interest expense and similar charges	$	(299,618	)	$	(340,040	)
Amounts capitalized to property, plant and equipment (b)		297,392			337,727
Accretion of decommissioning obligations (Note 17)		(5,810	)		(3,197	)
	$	(8,036	)	$	(5,510	)

(a) Finance income for the year ended December 31, 2021 does not include interest on the related party receivable. For the year ended December 31, 2020, finance income includes $2.1 million on the related party receivable (refer to Note 22). Amounts had previously been placed with Rio Tinto under an agreement for cash management services in connection with net proceeds from the project finance facility. This was settled during the second quarter of 2020.

(b) The majority of the costs capitalized to property, plant and equipment were capitalized at the weighted average rate of the Company’s general borrowings of 8.1% (2020: 8.3%) (refer to Note 13).

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TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

8. Cash and cash equivalents

		December 31, 2021		December 31, 2020
Cash at bank and on hand	$	101,745	$	61,783
Money market funds		193,243		667,542
Other cash equivalents		399,308		394,296
	$	694,296	$	1,123,621

9. Inventories

	December 31, 2021			December 31, 2020
Current
Concentrate		$    148,270			$     48,504
Ore stockpiles		27,911			44,846
Materials and supplies		185,797			180,038
Provision against carrying value of materials and supplies		(71,961	)		(75,426	)
		$    290,017			$   197,962
Non-current
Ore stockpiles		$      60,711			$     37,557
		$      60,711			$     37,557

During the year ended December 31, 2021, $622.3 million (2020 - $669.4 million) of inventory was charged to cost of sales (Note 5). 

During the year ended December 31, 2021, net reversals of $3.5 million (2020 - $2.7 million) were recognized in the consolidated statement of income relating to inventory write off and movement in provisions against carrying value. During the year ended December 31, 2021, no inventory (2020 - $0.1 million) with a provision against its carrying value was sold.

35

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

10. Trade and other receivables

	December 31, 2021		December 31, 2020
Trade receivables from provisionally priced sales	$	13,645	$	50,459
Other receivables		2,435		8,701
Due from related parties (Note 22)		39		852
	$	16,119	$	60,012

11. Prepaid expenses and other assets

	December 31, 2021		December 31, 2020
Current Prepaid Expenses:
Prepaid expenses	$	38,881	$	44,130
Amounts prepaid to related parties (Note 22)		81,725		83,144
	$	120,606	$	127,274
Non-current Prepaid Expenses:
Prepaid Mongolian corporate tax (Note 23)	$	348,171	$	-
Other		500		-
	$	348,671	$	-

12. Other non-current financial assets

	December 31, 2021		December 31, 2020
Current assets:
Commodity put options	$	109	$	-
	$	109	$	-
Non-current assets:
Marketable securities	$	9,323	$	6,379
Other		7,495		7,739
	$	16,818	$	14,118

36

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

13. Property, plant and equipment

			Oyu Tolgoi
Year Ended December 31, 2021		Mineral property interests			Plant and equipment	(c)		Capital works in progress		Other capital assets		Total
Net book value:
January 1, 2021	$	695,552		$	3,011,522		$	7,219,502	$	936	$	10,927,512
Additions (a)		33,208			13,906			919,192		-		966,306
Interest capitalized (Note 7)		-			-			297,392		-		297,392
Changes to decommissioning obligations (Note 17)		13,888			-			-		-		13,888
Depreciation for the period		(48,967)			(181,405)			-		(97)		(230,469)
Disposals and write offs		-			(149)			-		-		(149)
Transfers and other movements		-			148,720			(148,720)		-		-
December 31, 2021	$	693,681	$		2,992,594		$	8,287,366	$	839	$	11,974,480
Cost		1,350,231			5,023,101			8,652,073		1,131		15,026,536
Accumulated depreciation / impairment		(656,550)			(2,030,507	)		(364,707)		(292)		(3,052,056	)
December 31, 2021	$	693,681	$		2,992,594		$	8,287,366	$	839	$	11,974,480
Non-current assets pledged as security (b)	$	693,681	$		2,992,594		$	8,287,366	$	-	$	11,973,641
			Oyu Tolgoi
Year Ended December 31, 2020		Mineral property interests			Plant and equipment	(c)		Capital works in progress		Other capital assets		Total
Net book value:
January 1, 2020	$	723,516		$	3,126,331		$	5,931,750	$	1,050	$	9,782,647
Additions (a)		5,965			-			982,582		-		988,547
Interest capitalized (Note 7)		-			-			337,727		-		337,727
Changes to decommissioning obligations (Note 17)		26,529			-			-		-		26,529
Depreciation for the period		(60,458)			(145,979)			-		(114)		(206,551)
Disposals and write offs		-			(858)			(529)		-		(1,387)
Transfers and other movements		-			32,028			(32,028)		-		-
December 31, 2020	$	695,552	$		3,011,522		$	7,219,502	$	936	$	10,927,512
Cost		1,303,134			4,868,370			7,584,209		1,131		13,756,844
Accumulated depreciation / impairment		(607,582)			(1,856,848)			(364,707)		(195)		(2,829,332)
December 31, 2020	$	695,552	$		3,011,522		$	7,219,502	$	936	$	10,927,512
Non-current assets pledged as security (b)	$	695,552	$		3,011,522		$	7,219,502	$	-	$	10,926,576

37

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

13. Property, plant and equipment (continued)

(a) Pre-production sales proceeds of $69.7 million (2020 - $26.1 million) and associated costs of $14.9 million (2020 – $5.4 million) have been recorded as a net reduction to additions to Capital works in progress during the year ended December 31, 2021.

(b) In addition to property, plant and equipment, at December 31, 2021 current and non-current inventory of $290.0 million (December 31, 2020 - $197.9 million) and $60.7 million (December 31, 2020 - $37.6 million) respectively, and cash at bank and on hand of $72.9 million (December 31, 2020 - $47.7 million) are pledged as security for the project finance facility.

(c) Plant and equipment comprise owned and leased assets:

	December 31,			December 31,
	2021			2020
Plant and equipment owned	$	11,961,967		$	10,923,294
Right of use assets		12,513			4,218
	$	11,974,480		$	10,927,512
The Company leases certain assets including warehouse and office facilities as well as transportation equipment, substantially all at Oyu Tolgoi. Information about leases for which the Company is a lessee is presented below:
	Year Ended December 31,
Plant and equipment:	2021			2020
Opening Carrying Amount	$	4,218		$	8,710
Additions		13,945			-
Depreciation for the period		(5,650	)		(4,492	)
	$	12,513		$	4,218

(d) Impairment charges

As disclosed in the press release on December 13, 2021, Turquoise Hill and Rio Tinto made a joint offer to the Government of Mongolia to conclude negotiations over the non-technical criteria for approval to initiate the caving process, known as the undercut, at Oyu Tolgoi. Further to this offer, the Mongolian Parliament passed Parliamentary Resolution 103, on December 30, 2021, to authorize the Government of Mongolia to take certain measures in connection with the negotiations that meant that they would now continue into 2022. Resolution 103 also placed additional funding constraints on the shareholders of Oyu Tolgoi LLC until first sustainable production. The potential for further delays and the resulting uncertainty as to whether the underground project could be completed within ranges previously tested for impairment in 2019 led to the identification of an indicator of impairment and a recoverable amount assessment being undertaken at December 31, 2021.

38

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

13. Property, plant and equipment (continued)

(d) Impairment charges (continued)

The recoverable amount was determined by a fair value less cost of disposal (FVLCD) model using post-tax cash flows expressed in real terms, estimated based on detailed life-of-mine plans and discounted using a post-tax real discount rate of 8.0%. The long-term forecast copper price of $3.43 per pound and a long-term forecast gold price of $1,601 per ounce were used, estimated using analyst consensus forecasts. The cash flows reflected in the FVLCD model incorporated a portion of material classified as mineral resources, which contributed approximately 19% of the total recoverable amount. Other significant assumptions within the assessment of recoverable amount include operating costs, development capital, scheduling and mine design.

The Company’s assessment of recoverable amount at December 31, 2021 did not result in any additional impairment or impairment reversal being recorded at December 31, 2021.

The recoverable amount was estimated taking into account technical risks associated with the mine plan through to ramp-up of underground production over the period from 2025 to 2031. The recoverable amount estimated also reflects the inherent uncertainty of assumptions during the construction phase of a project, taking into account factors including the duration, severity and scope of impacts from COVID-19 and the potential duration and outcome of negotiations with the Government of Mongolia.

Together with operating costs, development capital, and scheduling and mine design, other significant assumptions in the determination of recoverable amount include the discount rate, long-term commodity prices and the inclusion of mineral resources (in addition to mineral reserves). Reasonably possible movements in the assumptions disclosed in Note 2 - impairment could have changed the calculated recoverable amount. An increase in the post-tax real discount rate by 1.0% to 9.0%, with all other inputs remaining constant, would reduce the recoverable amount by $1.6 billion. A 5% decrease to the long-term copper and gold prices, with all other inputs remaining constant, would reduce the recoverable amount by
$1.1 billion. A 5% increase to the long-term copper and gold prices, with all other inputs remaining constant, would increase the recoverable amount by $1.1 billion. 

14. Trade and other payables

	December 31,		December 31,
	2021		2020
Trade payables and accrued liabilities	$	320,791	$	315,570
Interest payable on long-term borrowings		7,280		7,266
Payable to related parties (Note 22)		54,153		65,552
Other		2,264		1,671
	$	384,488	$	390,059

39

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

15. Borrowings and other financial liabilities

	December 31,		December 31,
	2021		2020
Current liabilities:
Project finance facility (a)	$	387,561	$	27,567
Lease liabilities (b)		9,860		721
	$	397,421	$	28,288
Non-current liabilities:
Project finance facility (a)	$	3,769,783	$	4,157,344
Lease liabilities (b)		15,575		16,147
	$	3,785,358	$	4,173,491

(a) Project finance facility

On December 14, 2015, Oyu Tolgoi signed a $4.4 billion project finance facility. The facility is provided by a syndicate of international financial institutions and export credit agencies representing the governments of Canada, the United States and Australia, along with 15 commercial banks. The project finance lenders have agreed a debt cap of $6.0 billion. In addition to the funding drawn down to date there is an additional $0.1 billion available, subject to certain conditions (refer to Note 26 – Subsequent events), under the Company’s facility with the Export-Import Bank of the United States, and the potential for an additional $1.6 billion of supplemental debt in the future. Under the terms of the project finance facility held by Oyu Tolgoi, there are certain restrictions on the ability of Oyu Tolgoi to make shareholder distributions. Subsequent to December 31, 2021, Oyu Tolgoi notified its lenders of a potential event of default. Refer to Note 26.

At December 31, 2021, Oyu Tolgoi has drawn down $4.3 billion of the project finance facility:

	December 31, 2021				Original		Annual interest rate
Facility	Carrying Value (i)		Fair Value (i)		Term (ii)		Pre-completion		Post-completion
International Financial Institutions - A Loan	$	775,836	$	820,958		15 years		LIBOR + 3.78%		LIBOR + 4.78%
Export Credit Agencies		865,801		921,116		14 years		LIBOR + 3.65%		LIBOR + 4.65%
Loan		277,511		311,637		13 years		2.3%		2.3%
MIGA Insured Loan (iii)		673,248		711,980		12 years		LIBOR + 2.65%		LIBOR + 3.65%
Commercial Banks		1,564,948		1,672,455		12 years		LIBOR + 3.4%		LIBOR + 4.4%
- B Loan								Includes $50 million 15-year loan at A Loan rate
	$	4,157,344	$	4,438,146

40

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

15. Borrowings and other financial liabilities (continued)

(a) Project finance facility (continued)

(i) The carrying value of borrowings under the project finance facility differs from fair value due to amortized transaction costs, and changes in the estimate of fair value between the initial recognition date and the balance sheet date. Project finance borrowings were initially recognized at fair value less transaction costs on the relevant draw down dates, with aggregate initial fair value being $4,348.9 million before transaction costs. At December 31, 2021, these borrowings are stated net of $124.8 million unamortized transaction costs.

At December 31, 2021, the fair value of the Company’s borrowings has been estimated with reference to a market yield, the variability of which is considered a reasonable indicator, over the pre-completion period, of movements in the fair value of amounts drawn under the project finance facility. Post completion, the fair value has been estimated using a separate discount rate that incorporates the annual interest rate on each tranche of the facility with reference to the consideration of factors that could indicate a change in the credit assessment of Oyu Tolgoi LLC as a counterparty to project finance. These considerations include in-country risk relating to the Oyu Tolgoi project and the assumed date of transition from pre-completion to post-completion.    The transition from pre-completion to post-completion is determined by a set of tests for both completion of physical infrastructure and the ability to extract and process ore of defined grades over a defined period. This is considered a level 3 fair value measurement. Refer to Note 22 (v) for a description of Rio Tinto guarantee arrangements with respect to project finance borrowings.

(ii) The project finance facility provides for interest only payments for the first five years followed by minimum repayments according to a stepped amortization schedule for the remaining life of the facility. The maturity analysis of principal repayments is as follows:

	December 31,  2021		December 31,  2020
Maturity analysis - Project Finance facility (1)
Less than one year	$	403,483	$	43,489
One to five years		2,610,445		2,418,861
More than five years		1,268,212		1,863,279
	$	4,282,140	$	4,325,629

(1) The rows are represented in dates as follows: As at December 31, 2021: 12 months to December 31, 2022; 48 months between January 1, 2023 and December 31, 2026; Beyond January 1, 2027. As at December 31, 2020: 12 months to December 31, 2021; 48 months between January 1, 2022 and December 31, 2025; Beyond January 1, 2026.

(iii) The Multilateral Investment Guarantee Agency (“MIGA”) provides political risk insurance for commercial banks. The Company is required to pay an annual insurance premium of 1.4% of the MIGA Insured Loan for the remaining life of the facility.

41

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

15. Borrowings and other financial liabilities (continued)

(b) Lease liabilities

	December 31,  2021		December 31,  2020
Maturity analysis - contractual undiscounted cash flows (1)
Less than one year	$	10,727	$	1,121
One to five years		20,752		19,631
More than five years		306		205
Total undiscounted lease liabilities	$	31,785	$	20,957
Lease liabilities included in the Consolidated balance sheet	$	25,435	$	16,868
Current	$	9,860	$	721
Non-Current	$	15,575	$	16,147

(1) The rows are represented in dates as follows: As at December 31, 2021: 12 months to December 31, 2022; 48 months between January 1, 2023 and December 31, 2026; Beyond January 1, 2027. As at December 31, 2020: 12 months to December 31, 2021; 48 months between January 1, 2022 and December 31, 2025; Beyond January 1, 2026.

Lease liabilities are discounted at the weighted average incremental borrowing rate of 7.6% (2020: 7.8%).

16. Income taxes

(a) Tax expense (benefit)

	Year Ended December 31,
	2021		2020
Current (i)	$	232	$	7,694
Deferred
Temporary differences including tax losses (ii)		277,843		(346,627	)
Withholding taxes (iii)		33,717		32,537
	$	311,560	$	(314,090	)
Net income statement expense (benefit) for income taxes	$	311,792	$	(306,396	)

(i) Current taxes

In 2021, a cash payment of $0.2 million (2020 - $28.3 million) was made in respect of current taxes payable. Deferred tax liabilities for withholding taxes are reclassified to current tax prior to settlement.

(ii) Deferred tax assets

2021 – Mongolia

Deferred tax assets of $561.9 million were recognized at December 31, 2021 in Mongolia, comprised of $150.7 million relating to tax losses that expire if not recovered against taxable income within eight years and $411.2 million relating to accrued but unpaid interest expense and other temporary differences. Tax losses have been calculated in accordance with the provisions of the Oyu Tolgoi Investment Agreement and Mongolian laws.

42

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

16.    Income  taxes (continued)

(a) Tax expense (benefit) (continued)

(ii) Deferred tax assets (continued)

2021 – Mongolia (continued)

The Company recognized deferred tax assets at December 31, 2021 to the extent recovery is considered probable. In assessing the probability of recovery, future taxable income, derived from cash flows from detailed life-of-mine and production plans, was evaluated with reference to commodity price sensitivities, operating cost assumptions and carry-forward limits. Updated mine plan assumptions reflected the expected delays in sustainable production to the first half of 2023 and to shaft 3 and 4 development that were announced on October 14, 2021.

During the year ended December 31, 2021, the Company decreased its recognized Mongolian deferred tax assets by $279.4 million. The movement in the Mongolian deferred tax asset represented a decrease of $308.3 million in the recognized deferred tax asset for prior year losses and other temporary differences, mainly related to property, plant and equipment. This was partially offset by accrued but unpaid interest expense incurred by Oyu Tolgoi in the year, which increased the recognized deferred tax asset by $28.9 million.

The adjustment to the previously recognized deferred tax asset for prior year losses and other temporary differences was due in part to the utilization of prior year losses carried forward against taxable income in the year combined with the changes made to mine plan operating assumptions, which led to an increase in the amount of loss carry forwards and temporary differences estimated to expire unutilized.

2020 – Mongolia

Deferred tax assets of $841.3 million were recognized at December 31, 2020 in Mongolia, comprised of $389.3 million relating to tax losses that expire if not recovered against taxable income within eight years and $452.0 million relating to accrued but unpaid interest expense and other temporary differences. During the year ended December 31, 2020, the Company increased its recognized Mongolian deferred tax assets by $347.3 million. The movement in the Mongolian deferred tax asset represented an increase of $270.7 million in the recognized deferred tax asset for prior year losses and other temporary differences and an increase of $76.6 million related to current year activity. The adjustment to the Mongolian deferred tax was primarily due to an overall strengthening in taxable income forecasts during 2020 driven by improved commodity price projections and updated operating assumptions in mine planning and scheduling. The improvement in taxable income forecasts led to an increase in the amount of loss carry forwards and temporary differences estimated to be utilized prior to expiration.

2021 – Canada

Deferred tax assets of $41.0 million were recognized at December 31, 2021 in Canada comprised of $39.5 million relating to non-capital Canadian tax losses carried forward and $1.5 million relating to other temporary differences. The recognized deferred tax asset increased during 2021 due to the additional non-capital tax losses incurred in the year, only part of which is estimated to be utilized prior to expiration. Non-capital losses expire if not used to offset taxable income within twenty years.

43

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

16.    Income  taxes (continued)

(a) Tax expense (benefit) (continued)

(ii) Deferred tax assets (continued)

2020 – Canada

Deferred tax assets at December 31, 2020 were $39.4 million, of which $38.4 million were recognized in relation to non-capital Canadian tax losses carried forward and $1.0 million relating to other temporary differences.

(iii) Withholding taxes

Withholding tax is accrued on interest owing on shareholder loans and recognized within deferred tax liabilities as interest accrues. Mongolian withholding tax will be due upon receipt of loan interest.

(b) Reconciliation of income taxes calculated at the statutory rates to the actual tax provision

	Year Ended December 31,
	2021			2020
Income (loss) from operations before taxes	$	992,912		$	188,246
Tax at Canadian combined federal and provincial income tax rate (2021: 26.5%; 2020: 26.5%)		263,122			49,885
Tax effect of:
Change in amount of deferred tax recognized		151,117			(276,945	)
Difference in tax rates and treatment in foreign jurisdictions		(140,903	)		(116,208	)
Withholding taxes		33,717			32,537
Non deductible losses and expense		4,739			4,335
	$	311,792		$	(306,396	)

(c) Recognized and unrecognized deferred tax assets and liabilities

Recognized and unrecognized deferred tax assets and liabilities are shown in the table below:

	Recognized						Unrecognized
	December 31,			December 31,			December 31,		December 31,
	2021			2020			2021		2020
Deferred tax assets
Non-capital losses (i)	$	190,203		$	427,695		$	152,853	$	281,643
Capital losses		-			-			117,517		117,945
Other temporary differences including accrued interest		412,659			453,010			319,227		63,471
	$	602,862		$	880,705		$	589,597	$	463,059
Deferred tax liabilities (ii)
Withholding tax		(145,434	)		(111,717	)		-		-
	$	(145,434	)	$	(111,717	)	$	-	$	-

(i) Unrecognized deferred tax assets relating to non-capital losses for which recovery is not considered probable as at December 31, 2021 expire between 2024 and 2041 (2020 - between 2024 and 2025).

 

44

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

16. Income taxes (continued)

(c) Recognized and unrecognized deferred tax assets and liabilities

(ii) At December 31, 2021, the Company has not recognized a deferred tax liability on unremitted earnings in subsidiaries of  $1,188 million (2020 - $606 million).

In addition to the above, the Company has $812.1 million of investment tax credits at December 31, 2021 (2020 – $812.1 million). No deferred tax asset has been recognized in respect of these credits, in accordance with the initial recognition exception in IAS 12 Income taxes for transactions that are not a part of a business combination and do not affect accounting or taxable profit.

17. Decommissioning obligations

	Year Ended December 31,
	2021		2020
Opening carrying amount	$	133,964	$	104,238
Changes in estimates		13,888		26,529
Accretion of present value discount		5,810		3,197
	$	153,662	$	133,964

All decommissioning obligations relate to Oyu Tolgoi. Reclamation and closure costs have been estimated based on the Company’s interpretation of current regulatory requirements and other commitments made to stakeholders, and are measured as the net present value of estimated future cash expenditures upon reclamation and closure.

Estimated future cash expenditures of $349.7 million (2020 - $227.8 million), before discounting, have been discounted from anticipated closure dates that range from 2070 to 2101 (2020 – anticipated closure date 2055) to their present value at a real rate of 1.5% (December 31, 2020 – 1.5%).

18. Share capital

The authorized share capital of Turquoise Hill consists of an unlimited number of Common Shares without par value and an unlimited number of Preferred Shares.

On October 23, 2020, the Company implemented a consolidation (or reverse stock split) of the Company’s issued and outstanding common shares at a ratio of one post-consolidation share for every ten pre-consolidation shares (“Share Consolidation”). The Share Consolidation reduced the number of issued and outstanding common shares of the Company from 2,012,314,469 shares to 201,231,446 shares. The reduction in the number of issued and outstanding common shares has been retrospectively applied to all figures presented herein.

As at December 31, 2021, there were 201,231,446 Common Shares and no Preferred Shares issued and outstanding (2020: 201,231,446 Common Shares and no Preferred Shares issued and outstanding).

45

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

19. Non-controlling interests

	Non-controlling Interest: Oyu Tolgoi (a) Year Ended December 31,
	2021			2020
Balance, January 1	$	(1,148,820	)	$	(1,237,174	)
Non-controlling interest’s share of income		156,230			88,354
Common share investments funded on behalf of non-controlling interest (a)		20,400			137,700
Funded amounts repayable to the Company (a)		(20,400	)		(137,700	)
Balance, December 31	$	(992,590	)	$	(1,148,820	)

(a) Since 2011, the Company has funded common share investments in Oyu Tolgoi on behalf of Erdenes. In accordance with the Amended and Restated Shareholders Agreement dated June 8, 2011, such funded amounts earn interest at an effective annual rate of LIBOR plus 6.5% and were repayable to the Company via a pledge over Erdenes’ share of future Oyu Tolgoi common share dividends. Erdenes also had the right to reduce the outstanding balance by making payments directly to the Company.

Common share investments funded on behalf of Erdenes have been recorded as a reduction to the net carrying value of non-controlling interest. As at December 31, 2021, the cumulative amount of such funding was $1,398.9 million (December 31, 2020 - $1,378.4 million). Accrued interest of $953.4 million (December 31, 2020 - $804.4 million) relating to this funding has not been recognized in these consolidated financial statements, as payment was expected to be triggered on common share dividend distribution by Oyu Tolgoi, the certainty of which could not be reliably determined.

On January 24, 2022 the Company announced the start of underground mining operations at Oyu Tolgoi and agreements that reset the relationship with the Government of Mongolia. These agreements included a waiver of the common share investments funded on behalf of Erdenes, together with the accrued interest relating to this funding – see Note 26.

46

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

20. Cash flow information

(a) Reconciliation of net income to net cash flow generated from operating activities before interest and tax

	Year Ended December 31,
	2021			2020
Income (loss) for the year	$	681,120		$	494,642
Adjustments for:
Depreciation and amortization		165,366			181,260
Finance items:
Interest income		(2,998	)		(17,349	)
Interest and accretion expense		8,036			5,510
Unrealized foreign exchange (gain) loss		2,228			(4,297	)
Inventory write down reversals		(3,465	)		(2,703	)
Write off of property, plant and equipment		87			282
Realized and unrealized losses on commodity put options		29,797			-
Income and other taxes		311,792			(306,396	)
Other items		258			2,403
Net change in non-cash operating working capital items:
(Increase) decrease in:
Inventories		(109,212	)		(26,534	)
Trade, other receivables and prepaid expenses		52,148			(43,456	)
(Decrease) increase in:
Trade and other payables		29,554			12,414
Deferred revenue		46,079			75,393
Cash generated from operating activities before interest and tax	$	1,210,790		$	371,169

(b) Supplementary information regarding other non-cash transactions

The non-cash investing and financing activities relating to operations not already disclosed in the consolidated statements of cash flows were as follows:

	Year Ended December 31
	2021			2020
Investing activities
Change in accounts payable and accrued liabilities related to purchase of property, plant and equipment	$	(40,022	)	$	(79,879)
Additions to property, plant and equipment - leased assets		13,945			-

47

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

21. Earnings per share

Basic earnings per share is computed by dividing the net income attributable to owners of Turquoise Hill by the weighted average number of common shares outstanding during the period. Pursuant to the Share Consolidation (refer to Note 18), the reduction in the number of issued and outstanding common shares was retrospectively incorporated into the determination of the basic weighted average number of shares outstanding for the purpose of calculating basic and diluted earnings per share attributable to Turquoise Hill Resources Ltd.

As of December 31, 2021 and 2020, the Company had not issued any equity instruments that are potentially dilutive to earnings per share.

22. Related parties

As at December 31, 2021, Rio Tinto plc’s indirect equity ownership in the Company was 50.8% (December 31, 2020: 50.8%). The following tables present the consolidated financial statements line items within which transactions with a Rio Tinto entity or entities (“Rio Tinto”) are reported. Rio Tinto entities comprise Rio Tinto plc, Rio Tinto Limited and their respective subsidiaries other than Turquoise Hill and its subsidiaries.

	Year Ended December 31,
Statements of Income	2021			2020
Operating and corporate administration expenses:
Cost recoveries - Turquoise Hill	$	1,151		$	2,803
Management services payment (i)		(29,706	)		(28,305	)
Cost recoveries - Rio Tinto (ii)		(66,362	)		(38,213	)
Finance income:
Cash and cash equivalents (iii)		-			2,329
Receivable from Rio Tinto (iv)		-			2,123
Finance costs:
Completion support fee (v)		(109,315	)		(110,054	)
	$	(204,232	)	$	(169,317	)

	Year Ended December 31,
Statements of Cash Flows	2021			2020
Cash generated from operating activities
Interest received (iii, iv)	$	-		$	9,848
Interest paid (v)		(107,896	)		(107,948	)
Cash flows from investing activities
Receivable from related party: amounts withdrawn (iv)		-			511,284
Expenditures on property, plant and equipment:
Management services payment and cost recoveries - Rio Tinto (i), (ii)		(37,302	)		(75,470	)

48

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

22. Related parties (continued)

Balance Sheets	December 31, 2021			December 31, 2020
Trade and other receivables (Note 10)	$	39		$	852
Prepaid expenses and other assets (Note 11)		81,725			83,144
Trade and other payables (Note 14)
Management services payment - Rio Tinto (i)		(14,584	)		(13,137	)
Cost recoveries - Rio Tinto (ii)		(39,569	)		(52,415	)
	$	27,611		$	18,444

(i) In accordance with the Amended and Restated Shareholders’ Agreement, which was signed on June 8, 2011, and other related agreements, Turquoise Hill is required to make a management services payment to Rio Tinto equal to a percentage of all capital costs and operating costs incurred by Oyu Tolgoi from March 31, 2010 onwards. After signing the Underground Mine Development and Financing Plan on May 18, 2015, the management services payment to Rio Tinto has been calculated as 1.5% applied to underground development and sustaining capital costs, and 3% applied to operating costs and capital related to current operations.

(ii) Rio Tinto recovers the costs of providing general corporate support services and mine management services to Turquoise Hill. Mine management services are provided by Rio Tinto in its capacity as the manager of Oyu Tolgoi.

(iii) In addition to placing cash and cash equivalents on deposit with banks or investing funds with other financial institutions, Turquoise Hill may deposit cash and cash equivalents with Rio Tinto in accordance with an agreed upon policy and strategy for the management of liquid resources. Funds deposited with Rio Tinto earn interest at rates equivalent to those offered by financial institutions or short-term corporate debt. At December 31, 2021 and December 31, 2020, there were no funds deposited with wholly owned subsidiaries of Rio Tinto.

(iv) As part of project finance (Note 15), Turquoise Hill appointed 9539549 Canada Inc., a wholly owned subsidiary of Rio Tinto, as service provider to provide post-drawdown cash management services in connection with net proceeds from the project finance facility, which were placed with 9539549 Canada Inc. and shall be returned to Turquoise Hill as required for purposes of Oyu Tolgoi underground mine development and funding. Rio Tinto International Holdings Limited, a wholly owned subsidiary of Rio Tinto, agreed to guarantee the obligations of the service provider under this agreement. At December 31, 2021 and December 31, 2020, there were no amounts due from 9539549 Canada Inc. Amounts due had been earning interest at an effective annual rate of LIBOR plus 2.45%. The interest rate reflected: interest receivable at LIBOR minus 0.05%; plus a benefit of 2.5% arising on amounts receivable from 9539549 Canada Inc. under the Cash Management Services Agreement, which are net settled with the 2.5% completion support fee described in (v) below.

49

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

22. Related parties (continued)

(v) As part of the project finance agreements (Note 15), Rio Tinto agreed to provide a guarantee, known as the completion support undertaking (“CSU”) in favour of the Commercial Banks and the Export Credit Agencies. In consideration for providing the CSU, the Company is required to pay Rio Tinto a fee equal to 2.5% of the amounts drawn under the facility. The annual completion support fee of 2.5% on amounts drawn under the facility is accounted for as a borrowing cost and included within interest expense and similar charges (refer to Note 7). The fee is settled net of a benefit arising on amounts receivable from 9539549 Canada Inc. under the Cash Management Services Agreement described in (iv) above. The fee payment obligation will terminate on the date Rio Tinto’s CSU obligations to the project lenders terminate.

The above noted transactions were carried out in the normal course of operations and were measured at the transaction amount, which is the amount of consideration established and agreed to by the related parties.

23. Commitments and contingencies

(a) Capital commitments

At December 31, 2021, the Company had capital expenditure commitments at the balance sheet date of $26.0 million. These commitments represent minimum non-cancellable obligations and exit costs for cancellable obligations.

At December 31, 2021, the Company had power purchase commitments of $62.8 million. These commitments represent minimum non-cancellable obligations (refer to Note 26 – Subsequent events).

(b) Mongolian Tax Assessments

On January 16, 2018, the Company announced that Oyu Tolgoi received a tax assessment for approximately $155 million (which was converted from Mongolian Tugrik to U.S. dollars at the exchange rate on that date) from the “MTA” as a result of a general tax audit for the period covering 2013 through 2015 (“2013 to 2015 Tax Assessment”). In January 2018 Oyu Tolgoi paid an amount of $4.8 million to settle unpaid taxes, fines, and penalties for accepted items.

The Company was of the opinion that Oyu Tolgoi had paid all taxes and charges required under the 2009 Oyu Tolgoi Investment Agreement (“Investment Agreement”), the Amended and Restated Shareholder Agreement (“ARSHA”), the Underground Mine Development and Financing Plan and Mongolian Law (“UDP”). Following engagement with the MTA, Oyu Tolgoi was advised that the MTA could not resolve Oyu Tolgoi’s objections to the 2013 to 2015 Tax Assessment.

On February 20, 2020, the Company announced that Oyu Tolgoi had proceeded with the initiation of a formal international arbitration proceeding in accordance with the dispute resolution provisions within Chapter 14 of the Investment Agreement, entered into with the Government of Mongolia in 2009 and Chapter 8 of the UDP, entered into with the Government of Mongolia in 2015. The dispute resolution provisions call for arbitration under the United Nations Commission on International Trade Law (“UNCITRAL”) seated in London before a panel of three arbitrators. By agreeing to resolve certain matters within the 2013 to 2015 Tax Assessment dispute under UNCITRAL Arbitration Rules, both parties agreed that the arbitral award shall be final and binding on both parties and the parties shall carry out the award without delay.

50

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

23. Commitments and contingencies (continued)

(b) Mongolian Tax Assessments (continued)

On December 23, 2020, the Company announced that Oyu Tolgoi had received a tax assessment for approximately $228 million (which was converted from Mongolian Tugrik to U.S. dollars at the exchange rate on that date) from the MTA relating to an audit on taxes imposed and paid by Oyu Tolgoi between 2016 and 2018 (“2016 to 2018 Tax Assessment”). The MTA also proposed a $1.4 billion adjustment to the balance of Oyu Tolgoi’s carried forward tax losses. The adjustments are to disallow or defer certain tax deductions claimed in the 2016 to 2018 years.

On January 11, 2021, the Company announced that Oyu Tolgoi had evaluated the 2016 to 2018 Tax Assessment claim and confirmed that Oyu Tolgoi had given notice of its intention to apply to the Tribunal in the Arbitration for leave to amend its Statement of Claim to include certain matters raised in the 2016 to 2018 Tax Assessment. Most of the matters raised in respect of the 2016 to 2018 Tax Assessment are of a similar nature to the matters that were raised in the 2013 to 2015 Tax Assessment. Oyu Tolgoi’s application to include these matters in the Arbitration for the 2013 to 2015 Tax Assessment was accepted. In addition to those matters included within the Statement of Claim, there were certain limited tax matters included in the 2013 to 2015 and 2016 to 2018 Tax Assessments which were being addressed in local Mongolian tax courts. The Company has expensed certain amounts related to these matters and has also adjusted its loss carry forwards.

In February 2021, Oyu Tolgoi received notices of payment totalling $228 million (which were converted from Mongolian Tugrik to U.S. dollars at the exchange rate on the relevant dates) relating to amounts disputed under the 2016 to 2018 Tax Assessment. In March 2021, Oyu Tolgoi received notices of payment totalling $126 million (which were converted from Mongolian Tugrik to U.S. dollars at the exchange rate on the relevant dates) relating to amounts disputed under the 2013 to 2015 Tax Assessment. Under the Mongolian General Tax Law, the amounts were due and paid by Oyu Tolgoi LLC within 10 business days from the dates of the notices of payment. Under the same legislation, Oyu Tolgoi LLC would be entitled to recover the amounts, including via offset against future tax liabilities, in the event of a favourable decision from the relevant dispute resolution authorities. These payments were recorded within non-current Prepaid expenses and other assets in the consolidated balance sheet, and within Income and other taxes paid in the consolidated statement of cash flows for the twelve months ended December 31, 2021.

On May 3, 2021, the Company announced that the Government of Mongolia filed its statement of defence together with a counterclaim (“GOM Defence and Counterclaim”) in relation to the international tax arbitration proceeding brought by Oyu Tolgoi against the Government of Mongolia on February 20, 2020, as amended. Turquoise Hill was not a party to that arbitration, but the GOM Defence and Counterclaim requested that the arbitral tribunal add both Turquoise Hill and a member of the Rio Tinto Group as parties to the tax arbitration. The principal thrust of the GOM Defence and Counterclaim is to seek the rejection of Oyu Tolgoi’s tax claims in their entirety. As part of the counterclaim, the Government of Mongolia makes assertions surrounding previously reported allegations of historical improper payments made to Government of Mongolia officials and seeks unquantified damages. Also, in the event Oyu Tolgoi’s tax claims are not dismissed in their entirety, the Government of Mongolia is seeking in the counterclaim an alternative declaration that the 2009 Investment Agreement is void.

51

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

23. Commitments and contingencies (continued)

(b) Mongolian Tax Assessments (continued)

Turquoise Hill denied the allegations relating to the Company in the GOM Defence and Counterclaim and filed submissions to the arbitral tribunal to oppose the Government of Mongolia’s request that it be added to the tax arbitration. As announced by the Company on January 17, 2022, the arbitral tribunal issued a ruling deciding that Turquoise Hill not be added as a party to the arbitration.

On December 30, 2021, the Parliament of Mongolia passed a resolution (“Resolution 103”) authorizing certain measures to be completed by the Government of Mongolia in order for Resolution 92 to be considered formally implemented. As announced by the Company on January 24, 2022, the Company remains committed to continue the work with the Government of Mongolia and Rio Tinto to finalize the remaining outstanding matters of Resolution 103, including resolution of the outstanding tax arbitration. On February 11, 2022, at the request of the parties to the tax arbitration, the arbitral tribunal issued an order suspending the tax arbitration for six months or until 21 days from when the tribunal receives notice from Oyu Tolgoi LLC or the Government of Mongolia to terminate the suspension (refer to Note 26 – Subsequent events).

Management remains of the opinion that the tax positions adopted by Oyu Tolgoi in its tax filings were correct and that Oyu Tolgoi has paid all taxes and charges as required under the Investment Agreement, ARSHA, the UDP and Mongolian law. In the opinion of the Company, at December 31, 2021, a provision is not required for the amounts disputed by the Company under arbitration proceedings relating to the years 2013 through 2015. In addition, a provision is not required for the amounts disputed under the arbitration proceedings relating to the years 2016 through 2018, any reduction in available carried forward losses or any additional amounts related to 2019 through December 31, 2021. The final amount of taxes to be paid depends on a number of factors, including the outcome of discussions with the Government of Mongolia and the outcome of the international arbitration proceedings. Changes in management’s assessment of the outcome of this matter could result in material adjustments to the Company’s statements of income and financial position.

(c) Power Source Framework Agreement

Oyu Tolgoi is obliged under the 2009 Oyu Tolgoi Investment Agreement to secure a long-term domestic source of power for the Oyu Tolgoi mine. The Power Source Framework Agreement (PSFA) entered into between Oyu Tolgoi and the Government of Mongolia on December 31, 2018 provides a binding framework and pathway for long-term power supply to the Oyu Tolgoi mine. The PSFA originally contemplated the construction of a power plant at Tavan Tolgoi (TTPP), which would be majority-owned by Oyu Tolgoi and situated close to the Tavan Tolgoi coal mining district located approximately 150 kilometres from the Oyu Tolgoi mine. In April 2020, the Government of Mongolia advised that it was unwilling to support Oyu Tolgoi’s proposal to develop TTPP and announced its intention to fund and construct a State-owned Power Plant (SOPP) at Tavan Tolgoi.

52

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

23. Commitments and contingencies (continued)

(c) Power Source Framework Agreement (continued)

On June 26, 2020, Oyu Tolgoi and the Government of Mongolia amended the PSFA (PSFA Amendment) to reflect their agreement to jointly prioritise and progress SOPP, in accordance with and subject to agreed milestones, as the domestic source of power for the Oyu Tolgoi mine. The PSFA Amendment provides that if certain agreed milestones are not met in a timely manner (subject to extension for Delay Events as defined) then Oyu Tolgoi will be entitled to select from, and implement, the alternative power solutions specified in the PSFA (as amended), comprising an Oyu Tolgoi-led coal fired power plant, supply from the Mongolian national grid and a primary renewables solution, and the Government of Mongolia would be obliged to support such decision.

In relation to the PSFA Amendment that was executed in June 2020, the first three PSFA Amendment milestones (execution of the extension of the IMPIC supply arrangements, execution of the SOPP PPA and start of SOPP construction) were not met by the original dates of March 1, 2021, March 31, 2021 and July 1, 2021 respectively.

Oyu Tolgoi continued to engage with the Ministry of Energy at a sub-working group level to discuss the long-term power solution for Oyu Tolgoi. On January 26, 2022, OT LLC entered into an Electricity Supply Agreement (ESA) with, amongst others, the Southern Region Electricity Distribution Network (SOJSC) to provide Oyu Tolgoi with power from the Mongolian grid once certain technical conditions are satisfied. (refer to Note 26 – Subsequent events)

While the Mongolian grid prepares to connect the Oyu Tolgoi mine, OT LLC expects to continue to import its power from Inner Mongolia, China.

As at December 31, 2021, the Company had no capital commitments related to the PSFA Amendment.

(d) Class Action Complaints

In October 2020, a class action complaint was filed in the U.S. District Court, Southern District of New York against the Company, certain of its current and former officers as well as Rio Tinto and certain of its officers. The complaint alleges that the defendants made material misstatements and material omissions with respect to, among other things, the schedule, cost and progress to completion of the development of Oyu Tolgoi in violation of Section 10(b) of the U.S. Securities Exchange Act of 1934, as amended (the Exchange Act) and Rule 10b-5 thereunder. Under the schedule established by the court, a first amended complaint was filed on March 16, 2021, and a second amended complaint was filed on September 16, 2021. Defendants moved to dismiss the operative amended complaint on October 19, 2021, under Rule 12(b)(6) of the Federal Rules of Civil Procedure and the Private Securities Litigation Reform Act of 1995, for failure to state a claim. As of December 17, 2021, the motion was fully briefed and pending before the Court. The Company believes that the complaint against it is without merit.

53

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

23. Commitments and contingencies (continued)

(d) Class Action Complaints (continued)

In January 2021, a proposed class action was initiated in the Superior Court in the District of Montreal against the Company and certain of its current and former officers. An amended complaint was filed on July 27, 2021 which did not substantially alter the claim. The claim alleges that the Company and its current and former officers named therein as defendants made material misstatements and material omissions with respect to, among other things, the schedule, cost and progress to completion of Oyu Tolgoi, in violation of, among other things, sections 225.8, 225.9 and 225.11 of the Securities Act (Quebec). On January 7, 2022 the plaintiff re-amended its claim to include allegations relating to developments arising since the previous amended complaint was filed. The Company and the other defendants expect to produce their evidence to contest certification of the class action in 2022. No hearing has been scheduled yet. The Company believes that the complaint against it is without merit and is preparing to defend the application for leave and certification of the proceeding.

Due to the size, complexity and nature of Turquoise Hill’s operations, various legal and tax matters arise in the ordinary course of business. Turquoise Hill recognizes a liability with respect to such matters when an outflow of economic resources is assessed as probable and the amount can be reliably estimated. In the opinion of management, these matters will not have a material effect on the consolidated financial statements of the Company.

24. Financial instruments and fair value measurements

Certain of the Company’s financial assets and liabilities are measured at fair value on a recurring basis and classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Certain non-financial assets and liabilities may also be measured at fair value on a non-recurring basis.

The fair value of financial assets and financial liabilities measured at amortized cost is determined in accordance with accepted pricing models based on discounted cash flow analysis or using prices from observable current market transactions. Except as otherwise specified, the Company considers that the carrying amount of cash, other receivables, trade payables and other financial assets measured at amortized cost approximates their fair value because of the demand nature or short-term maturity of these instruments.

The following tables provide an analysis of the Company’s financial assets that are measured subsequent to initial recognition at fair value on a recurring basis, grouped into Level 1 to 3 based on the degree to which the significant inputs used to determine the fair value are observable.

· Level 1 fair value measurements are those derived from quoted prices in active markets for identical assets or liabilities.

· Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1, that are observable either directly or indirectly.

· Level 3 fair value measurements are those derived from valuation techniques that include significant inputs that are not based on observable market data.

54

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

24. Financial instruments and fair value measurements (continued)

			Fair Value at December 31, 2021
	Total		Level 1		Level 2		Level 3
Money market funds (a)	$	193,243	$	193,243	$	-	$	-
Marketable securities (a)		9,323		9,323		-		-
Trade receivables (b)		13,645		-		13,645		-
Commodity put options (c)		109		-		109		-
	$	216,320	$	202,566	$	13,754	$	-
			Fair Value at December 31, 2020
	Total		Level 1		Level 2		Level 3
Money market funds (a)	$	667,542	$	667,542	$	-	$	-
Marketable securities (a)		6,379		6,379		-		-
Trade receivables (b)		50,459		-		50,459		-
	$	724,380	$	673,921	$	50,459	$	-

(a) The Company’s money market funds and marketable securities are classified within level 1 of the fair value hierarchy as they are valued using quoted market prices in active markets.

(b) Trade receivables from provisionally priced concentrate sales are included in level 2 of the fair value hierarchy as the basis of valuation uses quoted commodity prices.

(c) In 2021 the Company purchased copper and gold put options to establish a synthetic copper and gold price floor in order to provide increased certainty around the Company’s liquidity horizon. During the year ended December 31, 2021 the Company recognized a realized loss of $23.9 million and an unrealized loss of $5.9 million within Other income (expenses) in the consolidated statement of income, and a financial asset of $0.1 million within current Other financial assets in the consolidated balance sheet as at December 31, 2021. Commodity put options are included in level 2 of the fair value hierarchy as the basis of valuation uses quoted prices.

Financial risk management

Certain of the Company’s activities expose it to a number of financial risks, which include liquidity risk, foreign exchange risk, interest rate risk, credit risk and commodity price risk. During the year ended December 31, 2021, the Company purchased copper and gold put options to establish a synthetic copper and gold price floor in order to provide increased certainty around the Company’s liquidity horizon. In the event of a significant downturn in the price of copper or gold, the expected revenues to be received by the Company for either commodity would have a floor on the portion of associated production and help provide additional certainty with respect to the Company’s expectation of having sufficient liquidity to meet its requirements, including its operations and underground development.

55

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

24. Financial instruments and fair value measurements (continued)

Financial risk management (continued)

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations as they fall due. The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted and include contractual interest payments. Interest payments on variable interest rate loans reflect interest rates at the reporting date and these amounts may change as market interest rates change. Refer to additional disclosures around liquidity risk in Note 1.

			Between 1
At December 31, 2021	Less than 1 year		and 5 years		After 5 years		Total		Carrying amount
Non-derivative Financial Liabilities
Trade and other payables	$	384,488	$	-	$	-	$	384,488	$	384,488
Expected lease liability		10,727		20,752		306		31,785		25,435
Borrowings		564,742		3,059,498		1,373,049		4,997,289		4,157,344
Total	$	959,957	$	3,080,250	$	1,373,355	$	5,413,562	$	4,567,267
			Between 1
At December 31, 2020	Less than 1 year		and 5 years		After 5 years		Total			Carrying amount
Non-derivative Financial Liabilities
Trade and other payables	$	390,059	$	-	$	-	$	390,059	$	390,059
Expected lease liability		1,121		19,631		205		20,957		16,868
Borrowings		204,035		2,935,929		2,048,916		5,188,880		4,184,911
Total	$	595,215	$	2,955,560	$	2,049,121	$	5,599,896	$	4,591,838

Foreign exchange risk

The Company operates on an international basis and therefore foreign exchange risk exposures arise from transactions not denominated in U.S. dollars, its functional currency. The Company is only exposed to foreign exchange risk on its trade payables and accrued liabilities not denominated in U.S. dollars. As at December 31, 2021, the effect on income for the year of a 10% strengthening in the Mongolian Tugrik against the U.S. dollar, with all other variables held constant, would be a charge of $20.4 million (2020 - $19.2 million).

Interest rate risk

Interest rate risk is the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to changes in market interest rates. As at December 31, 2021, The Company is exposed to interest rate risk on its third-party project finance borrowings, the majority of which are at variable rates. As at December 31, 2021, the effect on income for the year of a 100 basis point increase in LIBOR interest rates, with all other variables held constant, would be a charge of $41.5 million (2020 – $40.7 million). Cash and cash equivalents have limited interest rate risk due to their short-term nature and receive interest based upon market interest rates or rates equivalent to those offered by financial institutions. As at December 31, 2021, the effect on income would not be significant. 

56

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

24. Financial instruments and fair value measurements (continued)

Financial risk management (continued)

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily from customer receivables) and from its financing activities, including deposits with (and / or receivables from) banks and other financial institutions, other short term liquid investments and other financial instruments.

The Company manages its customer credit risk subject to the Company’s established policy, procedures and controls relating to customer credit risk management. Credit limits are established for all customers based on internal or external rating criteria. The Company deposits its cash and cash equivalents with high credit quality counterparties as referenced by ratings agencies. The Company’s maximum balance sheet exposure to credit risk at December 31, 2021 is the carrying value of its cash and cash equivalents, and its trade and other receivables (refer to Note 1).

Expected credit losses on trade and other receivables do not have a material impact on the Company’s consolidated financial statements at December 31, 2021.

Commodity price risk

The Company is exposed to commodity price risk from fluctuations in market prices of the commodities that the Company produces. Copper concentrate is “provisionally priced” whereby the selling price is subject to final adjustment at the end of a period normally ranging from 30 to 180 days after delivery to the customer as defined in the sales contract. The final price is based on the market price at the relevant quotation point stipulated in the contract. At each reporting date, the receivable is re-measured at its fair value based on the forward selling price for the quotation period stipulated in the contract. As at December 31, 2021, the Company had 21.8 thousand tonnes (2020 - 29.4 thousand tonnes) of copper in concentrate sales that were provisionally priced. The Company does not have a material exposure to commodity price risk on its provisionally priced copper in concentrate sales at December 31, 2021.

Capital risk management

The Company’s objectives when managing capital risk are to safeguard its ability to continue as a going concern, to provide an adequate return to shareholders and to support any growth plans.

The Company considers its capital to be share capital and third-party borrowings. To effectively manage capital requirements, the Company has in place a planning and budgeting process to help determine the funds required to ensure the Company has the appropriate liquidity to meet its operating needs. The Company seeks to ensure that there is sufficient borrowing capacity and cash to meet its short-term business requirements, taking into account its anticipated cash flows from operations and its holdings of cash and cash equivalents. Refer to additional disclosures around capital risk management in Note 1.

57

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

25. Key management compensation

The compensation for key management, which comprises Turquoise Hill’s directors, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, and Chief Legal Officer in respect of employee services is as follows:

	Year Ended December 31,
		2021		2020
Salaries, director fees and other short term benefits	$	6,776	$		3,186
Post-employment benefits		193			293
Share based payment		1,412			1,628
	$	8,381	$		5,107

26. Subsequent events

On January 24, 2022 the Company announced the start of underground mine operations at Oyu Tolgoi, a renewed partnership with the Government of Mongolia and agreement with Rio Tinto on the Amended HOA, the latter providing a comprehensive funding arrangement to address the Company’s estimated funding requirements.

In conjunction with this announcement, the board of directors of Oyu Tolgoi LLC (“Oyu Tolgoi”) unanimously approved:

● commencement of the undercut, namely commencement of blasting that will start the Oyu Tolgoi underground mine production;

● the start of formal discussions with Senior Project Finance lenders in relation to the Amended HOA; and

● signing of an Electricity Supply Agreement to provide Oyu Tolgoi with a long-term source of power from the Mongolian grid on terms fully agreed with the Government of Mongolia. 

(a) Commencement of undercutting

Following the announcements on January 24, 2022, Oyu Tolgoi started operations at the Oyu Tolgoi underground mine on January 25, 2022 with the commencement of blasting to begin caving operations and the start of Oyu Tolgoi underground mine production. With the successful completion of this milestone, the Company continues to expect that the underground mine will achieve sustainable production for Panel 0 in the first half of 2023.

Oyu Tolgoi has notified the senior project finance lenders that the commencement of undercutting the underground mine may constitute an event of default under the Common Terms Agreement as a material amendment to the Mine Plan that existed at the time project finance was secured and could indirectly result in Oyu Tolgoi’s inability to meet the original project completion longstop date specified in the project finance agreements. This potential event of default does not impact the existing repayment schedule for project finance debt but would allow the project finance lenders to restrict further drawdown of any funds that are still available – see Note 15 (a). Oyu Tolgoi has sent a waiver request in relation to this potential event of default to Sumitomo Mitsui Banking Corporation in their capacity as Intercreditor Agent.

58

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

26. Subsequent events (continued)

(b) Agreement with Rio Tinto on an Amended and Restated Heads of Agreement

Turquoise Hill and Rio Tinto entered into an Amended HOA on January 24, 2022, replacing the prior Heads of Agreement dated April 9, 2021. This Amended HOA is binding and delineates a comprehensive funding arrangement to address the Company’s estimated incremental funding requirements.

Key elements of the Amended HOA include:

● pursuing the rescheduling of principal repayments of existing debt (“Re-profiling”) to potentially reduce the base case funding requirement by up to $1.7 billion;

● seeking to raise up to $500 million of senior supplemental debt (“SSD”);

● Rio Tinto committing to provide a co-lending facility, incremental to the Re-profiling and the SSD, of up to $750 million to be made available once sustainable production has been achieved;

● Rio Tinto committing to provide a short-term secured advance directly to the Company by way of one or more secured advances up to a maximum of $300 million, which would be available during the debt funding restriction period
identified in Resolution 103 and would be indirectly repaid out of the proceeds of the $750 million co-lending facility;  and

● the Company agreeing to conduct an equity offering in a form of its choosing of at least $650 million (including a Rio Tinto pro rata participation) by no later than August 31, 2022. 

● In the event that additional funding was required, the Amended HOA provides that, if necessary, Turquoise Hill could be required to raise up to a total of $1.5 billion (less the amount raised in the initial equity offering) via equity in a form of its choosing.

(c) Electricity Supply Agreement

On January 26, 2022, Oyu Tolgoi entered into an Electricity Supply Agreement (ESA) with, amongst others, Southern Region Electricity Distribution Network (SOJSC) to provide Oyu Tolgoi with power from the Mongolian grid. Power will be delivered pursuant to the ESA once certain technical conditions are satisfied.

The ESA has a term of 20 years from the date on which supply commences and provides a pathway to meeting Oyu Tolgoi’s long-term power requirements from domestic power sources.

While the Mongolian grid undergoes an upgrade to be in a position to provide stable and reliable power to the Oyu Tolgoi mine, Oyu Tolgoi will continue to import its power from Inner Mongolia, China. An agreement in-principle has been reached between the National Power Transmission Grid (NPTG) and the Inner Mongolia Power International Cooperation Company (IMPIC) for a three-year fixed term extension to 2026, potentially followed by an extension to up to 2030, if required (the current agreement expires in July 2023). The outstanding commercial terms are in the process of being finalized. 

59

TURQUOISE HILL RESOURCES LTD.

Notes to the consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

26. Subsequent events (continued)

(d) Key terms agreed with the Government of Mongolia

As part of the agreements with the Government of Mongolia, Turquoise Hill waived in full the US$2,363 million non-recourse loan to Erdenes. The loan comprised the amount of equity invested (US$1,399 million) in Oyu Tolgoi by the Company on behalf of Erdenes to date, plus US$964 million of accrued interest as at January 25, 2022, the date that the waiver was formally granted to and acknowledged by Erdenes.

Turquoise Hill’s funding of common share investments in Oyu Tolgoi on behalf of Erdenes took the form of non-recourse loans with interest; Erdenes’ obligation to repay would only have been triggered upon declaration of dividends from Oyu Tolgoi or upon certain events (such as a sale of the shares by Erdenes) at Erdenes’ sole discretion.

Further, the parties have also agreed to improve cooperation with EOT in monitoring the OT underground development and enhancing ESG matters.

(e) Suspension of tax arbitration

As announced by the Company on January 17, 2022, the arbitral tribunal issued a ruling deciding that Turquoise Hill would not be added as a party to the arbitration. On February 11, 2022, the arbitral tribunal issued a Partial Award confirming its earlier ruling that Turquoise Hill not be added as a party to the tax arbitration. On the same day, at the request of the parties to the tax arbitration, the arbitral tribunal issued an order suspending the tax arbitration for six months or until 21 days from when the tribunal receives notice from Oyu Tolgoi LLC or the Government of Mongolia to terminate the suspension.

60

EX-99.3

Exhibit 99.3

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

INTRODUCTION

This management’s discussion and analysis of the financial condition and results of operations (MD&A) of Turquoise Hill Resources Ltd. should be read in conjunction with the audited consolidated financial statements of Turquoise Hill Resources Ltd. and the notes thereto for the year ended December 31, 2021. The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). In this MD&A, unless the context otherwise dictates, a reference to the “Company”, “we” or “our” refers to Turquoise Hill Resources Ltd. and a reference to “Turquoise Hill” refers to Turquoise Hill Resources Ltd. together with its subsidiaries. Additional information about the Company, including its Annual Information Form for the year ended December 31, 2021, dated as of March 2, 2022 (AIF), is available under the Company’s profile on SEDAR at www.sedar.com.

References to “C$” refer to Canadian dollars and “$” to United States dollars.

This MD&A refers to the All Injury Frequency Rate (AIFR), which is an indicator of workplace health and safety and provides insight into an organisation’s efforts to protect its workforce from work-related hazards. Oyu Tolgoi’s AIFR is based on 200,000 hours of work exposure.

This MD&A contains certain forward-looking statements and certain forward-looking information. Please refer to the cautionary language commencing on page 57.

This MD&A also contains certain non-GAAP financial measures, non-GAAP ratios, and supplementary financial measures. Please refer to the section titled “Non-GAAP and Other Financial Measures” commencing on page 52 for more information.

All readers of this MD&A are advised to review and consider the risk factors discussed under the heading “Risks and Uncertainties” in this MD&A commencing on page 31.

The date of this MD&A is March 2, 2022.

December 31, 2021 Page |  1        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

TABLE OF CONTENTS
FINANCIAL AND OPERATIONAL HIGHLIGHTS FOR 2021	3
OPERATIONAL OUTLOOK FOR 2022	5
OUR BUSINESS	6
SELECTED ANNUAL FINANCIAL INFORMATION	7
SELECTED FINANCIAL METRICS	7
OYU TOLGOI	10
FUNDING OF OT LLC BY TURQUOISE HILL	15
GOVERNMENT RELATIONS	18
CLASS ACTION COMPLAINTS	22
CORPORATE ACTIVITIES	23
INCOME AND OTHER TAXES	24
LIQUIDITY AND CAPITAL RESOURCES	25
SHARE CAPITAL	27
COPPER, GOLD AND FOREIGN EXCHANGE MARKET COMMENTARY	27
OFF-BALANCE SHEET ARRANGEMENTS	27
CONTRACTUAL OBLIGATIONS	28
CHANGES IN ACCOUNTING POLICIES	28
CRITICAL ACCOUNTING ESTIMATES	28
RECENT ACCOUNTING PRONOUNCEMENTS	31
RISKS AND UNCERTAINTIES	31
RELATED-PARTY TRANSACTIONS	50
SELECTED QUARTERLY DATA	51
NON-GAAP AND OTHER FINANCIAL MEASURES	52
INTERNAL CONTROL OVER FINANCIAL REPORTING AND DISCLOSURE CONTROLS AND PROCEDURES	56
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING	56
AUDIT COMMITTEE OVERSIGHT	57
QUALIFIED PERSON	57
CAUTIONARY STATEMENTS	57
FORWARD-LOOKING STATEMENTS AND FORWARD-LOOKING INFORMATION	57
MANAGEMENT’S REPORT TO SHAREHOLDERS	61

December 31, 2021 Page |  2        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

FINANCIAL AND OPERATIONAL HIGHLIGHTS FOR 2021

Subsequent to December 31, 2021

• Turquoise Hill successfully reached a mutual understanding for a renewed partnership with the Government of Mongolia and the board of directors of Oyu Tolgoi LLC (OT LLC) unanimously approved commencement of the undercut. On January 25, 2022, a ceremony was held at the mine site to celebrate the commencement of blasting the undercut that started the Oyu Tolgoi Hugo North underground mine production.

• Turquoise Hill and Rio Tinto agreed to a comprehensive and binding, amended funding agreement that provides a pathway forward to address the Company’s estimated funding requirements. See the section “Funding of OT LLC by Turquoise Hill” in this MD&A.

• OT LLC signed an Electricity Supply Agreement (ESA) to provide Oyu Tolgoi with a long-term source of power from the Mongolian grid on terms fully agreed with the Government of Mongolia. Power will be delivered pursuant to the ESA once certain technical conditions are satisfied.

Full Year 2021

• Oyu Tolgoi open-pit and underground workforce posted an AIFR of 0.14 per 200,000 hours worked, the best full-year AIFR the site has achieved.

• As at December 31, 2021, Turquoise Hill had $0.7 billion of available liquidity in the form of cash and cash equivalents.

• Turquoise Hill currently estimates a base case incremental funding requirement of $3.4 billion, compared to $3.6 billion estimated in the Company’s Q3’21 earnings release.

• Full year copper production of 163 thousand tonnes was within the Company’s revised guidance of 150 – 180 thousand tonnes.

• Full year gold production of 468 thousand ounces was within the Company’s revised guidance of 400 – 480 thousand ounces.

• Full year mill throughput of 39.1 million tonnes included over 1 million tonnes of underground development material.

• Revenue of $1,971.0 million in 2021 increased 82.8% versus 2020. Copper and gold volumes increased by 9.0% and 157.1%, respectively. This was driven by the scheduled move to the higher grade areas of Phase 4B. Average prices were 53.4% higher for copper and 2.4% higher for gold.

• Income in 2021 was $681.1 million versus $494.6 million in 2020 due primarily to $0.9 billion higher revenue offset by $0.6 billion additional tax charges in 2021 versus 2020. 2021 reflects a $277.8 million deferred tax asset expense (2020: recognition of $346.6 million), which resulted mainly from the utilisation of prior year tax losses against current year taxable income and from previously disclosed underground delays, which have contributed to a reduction in the loss carry-forwards anticipated to be utilised in future periods. Income attributable to owners of Turquoise Hill was $524.9 million ($2.61 per share) in 2021 compared with $406.3 million ($2.02 per share) in 2020.

December 31, 2021 Page |  3        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

• Cost of sales in 2021 was $2.02 per pound of copper sold¹ and C1 cash costs were $0.22 per pound of copper produced², slightly higher than the Company’s revised guidance of negative $0.20 per pound of copper to positive $0.20 per pound of copper produced. All-in sustaining costs were $0.87 per pound of copper produced².

• Total operating cash costs³ in 2021 of $874.8 million, which increased 17.0% from $747.9 million in 2020, were slightly higher than the 2021 guidance range of $800 million to $850 million. The increase from the prior year was primarily driven by the impact of higher prices and volumes on royalties, together with additional COVID-19 related costs, higher consumable costs from processing harder Phase 4B ore and higher fuel prices, partially offset by lower power study costs.

• Expenditures on property, plant and equipment in 2021 were $996.9 million, which included capital expenditures of $913.3 million on the underground project. The capital expenditure on the underground project, which is inclusive of $232.4 million of underground sustaining capital, was marginally higher than the revised 2021 guidance range of $0.8 billion to $0.9 billion. At December 31, 2021, total underground spend since January 1, 2016 was approximately $5.4 billion, including $0.3 billion of underground sustaining capital.

• Cash generated from operating activities before interest and tax was $1,210.8 million in 2021 versus $371.2 million in 2020, driven mainly by $892.8 million higher revenue.

• Breakthrough of the conveyor and service declines was achieved in H2’21.

• Underground progress continues with Shaft 4 sinking and commencement of no-load Material Handling System 1 (MHS1), including Primary Crusher 1, commissioned in October 2021.

Fourth Quarter 2021

• In Q4’21, Oyu Tolgoi produced 38.9 thousand tonnes of copper and 78.6 thousand ounces of gold which is lower than Q4’20 production of 41.6 thousand tonnes of copper and 87.8 thousand ounces of gold due to the processing of comparatively lower grade ore.

• Mill throughput of 10.6 million tonnes in Q4’21 was higher than Q4’20 of 9.6 million tonnes primarily due to softer ore in the mill feed in the quarter.

• Revenue of $503.9 million in Q4’21 increased 24.4% from $405.1 million in Q4’20 due to 35.8% higher average copper prices and 54.5% higher gold sales volumes. Q4’21 production volumes of copper and gold decreased by 6.5% and 10.2%, respectively, as a higher proportion of mill feed came from lower grade sources.

• Income for the period was $207.3 million in Q4’21 versus $241.6 million in Q4’20, reflecting higher tax charges and total operating cash costs³ offset with $98.8 million higher revenue. The increase in revenues reflects higher copper prices and gold volumes. There was a $19.7 million de-recognition of deferred tax assets in Q4’21 (Q4’20: recognition of $86.1 million). The de-recognition in Q4’21 was due to the partial utilisation of 2016 losses against Q4’21 income, offset by an increase in temporary differences that relates primarily to tax depreciation on property, plant and equipment. Income attributable to owners of Turquoise Hill in Q4’21 was $156.4 million ($0.78 per share) versus $159.9 million ($0.79 per share) in Q4’20.

¹ Cost of sales per pound of copper sold is a supplementary financial measure. Please refer to Section “Non-GAAP and Other Financial Measures” – on page 52 of this MD&A for further information.

² C1 cash costs per pound of copper produced and all-in sustaining costs per pound of copper produced are non-GAAP ratios. Please refer to Section – “Non-GAAP and Other Financial Measures” – on page 52 of this MD&A for further information.

³ Total operating cash costs is a non-GAAP financial measure. Please refer to Section – “Non-GAAP and Other Financial Measures”– on page 52 of this MD&A for further information.

December 31, 2021 Page |  4        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

• Cost of sales in Q4’21 was $2.39 per pound of copper sold⁴ and C1 cash costs were $0.73 per pound of copper produced⁵. All-in sustaining costs were $1.66 per pound of copper produced⁵.

• Total operating cash costs⁶ of $246.9 million in Q4’21 increased 24.9% from $197.7 million in Q4’20, primarily due to additional COVID-19 related costs, higher processing costs due to the harder ore being mined in Phase 4B and higher fuel prices.

• Expenditures on property, plant and equipment in Q4’21 were $299.5 million, which included $259.2 million of capital expenditures on the underground project. The capital expenditure on the underground project included $57.8 million of underground sustaining capital expenditure. At December 31, 2021, total underground capital expenditure since January 1, 2016 was $5.4 billion, including $0.3 billion of underground sustaining capital.

• Net cash generated from operating activities in Q4’21 was $149.4 million versus $69.5 million in Q4’20, reflecting a $70.0 million improvement in cash generated from operating activities before interest and tax due to a $91.0 million increase in gross margin from increased sales revenue, offset by $10.6 million higher operating expenses associated with the implementation of COVID-19 controls.

• Oyu Tolgoi concentrate shipment volumes to customers remained challenged during the quarter and above target inventory levels remained at the end of Q4’21. The challenges were mainly a continuation of the COVID-19 related Mongolia / Chinese border restrictions that resulted in force majeure being declared from March 30, 2021. OT LLC continues to work closely with Mongolian and Chinese authorities to manage any supply chain disruptions.

• Shaft 4 sinking activities re-commenced in October 2021 with advancement at 148 metres below ground level at December 31, 2021. Shaft 3 readiness works continued with sinking commencement expected by the end of Q1’22.

• Beyond the incurred impact of delayed undercut commencement, Panels 1 and 2 are expected to be delayed due to COVID-19 related work restrictions impacting both Shafts 3 and 4 and underground development progress as well as changes to mining scope. Efforts to minimise the delays to Panel 1 and Panel 2 due to ventilation constraints ahead of Shaft 3 and 4 commissioning continue. See the section “Oyut Open-Pit Operations and Hugo North Underground” of this MD&A.

OPERATIONAL OUTLOOK FOR 2022

Oyu Tolgoi is expected to produce 110 to 150 thousand tonnes of copper and 115 to 165 thousand ounces of gold in concentrates in 2022 from processing of open-pit and underground development material as well as stockpiles. Gold and copper production is forecast to be lower in 2022 vs 2021 due to stripping of the next cutback and processing lower grade stockpile material.

Total operating cash costs⁷ for 2022 are expected to be $800 million to $875 million.

Expenditures on property, plant and equipment for 2022 are expected to be approximately $170 million to $200 million for open-pit operations and $1.2 billion to $1.4 billion for the underground.

⁴ Cost of sales per pound of copper sold is a supplementary financial measure. Please refer to Section “Non-GAAP and Other Financial Measures” – on page 52 of this MD&A for further information.

⁵ C1 cash costs per pound of copper produced and all-in sustaining costs per pound of copper produced are non-GAAP ratios. Please refer to Section – “Non-GAAP and Other Financial Measures” – on page 52 of this MD&A for further information.

⁶ Total operating cash costs is a non-GAAP financial measure. Please refer to Section – “Non-GAAP and Other Financial Measures”– on page 52 of this MD&A for further information.

⁷ Total operating cash costs is a non-GAAP measure that is forward-looking information. Please refer to Section – Non-GAAP and Other Financial Measures – on page 52 of this MD&A for further information.

December 31, 2021 Page |  5        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

Open-pit capital is mainly comprised of deferred stripping, equipment purchases, tailings storage facility construction and maintenance componentisation. Underground capital is inclusive of VAT.

2022 C1 cash costs are expected to be in the range of positive $1.95 to positive $2.35 per pound of copper produced⁸, which is higher than 2021 due to lower gold production in 2022, as mining transitions to the next phase of open-pit development. Unit cost guidance assumes the midpoint of the expected 2022 copper and gold production ranges and a gold commodity price assumption of $1,801 per ounce.

Estimates of future production, expenditures on property, plant and equipment, total operating cash costs⁹ and C1 cash costs per pound of copper produced⁸ presented in this MD&A are based on mine plans that reflect the expected method by which the Company will mine reserves at Oyu Tolgoi. Actual gold and copper production and associated costs may vary from these estimates due to a number of operational and non-operational risk factors (see the section “Forward-Looking Statements and Forward-Looking Information” of this MD&A for a description of certain risk factors that could cause actual results to differ materially from these estimates).

OUR BUSINESS

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. The Company’s ownership of the Oyu Tolgoi mine is held through a 66% interest in OT LLC; the remaining 34% interest is held by Erdenes Oyu Tolgoi LLC (Erdenes or EOT), a Mongolian state-owned entity.

The Oyu Tolgoi property is located approximately 550 kilometres south of Ulaanbaatar, Mongolia’s capital city, and 80 kilometres north of the Mongolia-China border. The property is cut by the Oyu Tolgoi trend, a 12 kilometres north-south orientated corridor which is host to the known deposits, Hugo North, Hugo South, Oyut and Heruga. Open-pit mining operations commenced at Oyut in 2013. The Hugo North deposit (Lift 1) is currently being developed as an underground operation.

The copper concentrator plant, with related facilities and necessary infrastructure, was originally designed to process approximately 100,000 tonnes of ore per day from the Oyut open-pit. However, since 2014, the concentrator has consistently achieved a throughput of over 105,000 tonnes per day due to improvements in operating practices. Concentrator throughput for 2022 is targeted at over 110,000 tonnes per day and expected to be approximately 40 million tonnes for the year due to improvements in concentrator performance and more favourable ore characteristics.

At December 31, 2021, Oyu Tolgoi had a total workforce (employees and contractors), including for underground project construction, of approximately 14,400 workers, of which over 96% were Mongolian.

⁸ C1 cash costs per pound of copper produced is a non-GAAP ratio. Please refer to Section – “Non-GAAP and Other Financial Measures” – on page 52 of this MD&A for further information.

⁹ Total operating cash costs is a non-GAAP financial measure. Please refer to Section – “Non-GAAP and Other Financial Measures”– on page 52 of this MD&A for further information.

December 31, 2021 Page |  6        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

SELECTED ANNUAL FINANCIAL INFORMATION

($ in millions, except per share information)	Year Ended December 31
	2021		2020		2019
Revenue	$	1,971.0	$	1,078.2	$	1,166.0
Income (loss) for the year	$	681.1	$	494.6	$	(476.9	)
Net income (loss) attributable to owners of Turquoise Hill Resources Ltd	$	524.9	$	406.3	$	(150.5	)
Basic and diluted earnings per share attributable to owners of Turquoise Hill Resources Ltd	$	2.61	$	2.02	$	(0.75	)
Total assets	$	14,124.7	$	13,368.8	$	12,822.4
Long-term liabilities
Borrowings and other financial liabilities	$	3,785.4	$	4,173.5	$	4,187.3
Decommissioning obligations	$	153.7	$	134.0	$	104.2
Deferred income tax liabilities	$	145.4	$	111.7	$	79.2

Note: Annual financial information has been extracted from the audited financial statements of Turquoise Hill, which are prepared in accordance with IFRS.

SELECTED FINANCIAL METRICS ⁽¹⁾

	Three months ended				Year ended
($ in millions, unless otherwise noted)		4Q 2021	4Q 2020	Change %		12 months 2021	12 months 2020	Change %
Revenue		503.9	405.1	24.4%		1,971.0	1,078.2	82.8%
Income (loss) for the period		207.3	241.6	(14.2%)		681.1	494.6	37.7%
Income (loss) attributable to owners of Turquoise Hill Resources Ltd		156.4	159.9	(2.2%)		524.9	406.3	29.2%
Basic and diluted earnings per share attributable to owners of Turquoise Hill Resources Ltd		0.78	0.79	(1.6%)		2.61	2.02	29.1%
Revenue by metals in concentrates
Copper		320.7	280.0	14.5%		1,204.5	797.3	51.1%
Gold		178.6	120.4	48.3%		748.6	265.7	181.7%
Silver		4.6	4.7	(2.1%)		17.9	15.2	17.8%
Cost of sales		181.4	173.6	4.5%		622.3	669.4	(7.0%)
Production and delivery costs		141.9	125.9	12.7%		459.3	493.4	(6.9%)
Depreciation and depletion		39.5	47.7	(17.2%)		163.0	176.0	(7.4%)
Capital expenditure on cash basis (2)		299.5	263.0	13.9%		996.9	1,080.5	(7.7%)
Underground-Development		201.4	193.0	4.4%		680.9	926.7	(26.5%)
Underground-Sustaining		57.8	44.5	29.9%		232.4	94.4	146.2%
Open pit		40.3	25.5	58.0%		83.6	59.4	40.7%
Pre-production sales proceeds		(18.4)	–	100.0%		(69.7)	(26.1)	167.0%
Royalty expenses		22.6	23.4	(3.4%)		105.4	63.4	66.2%
Total operating cash costs (3)		246.9	197.7	24.9%		874.8	747.9	17.0%
Unit costs ($)
Cost of sales (per pound of copper sold) (4)		2.39	2.08	14.9%		2.02	2.20	(8.2%)
C1 (per pound of copper produced) (5)		0.73	0.76	(3.9%)		0.22	1.45	(84.8%)
All-in sustaining (per pound of copper produced) (5)		1.66	1.45	14.5%		0.87	1.94	(55.2%)
Mining costs (per tonne of material mined) (5)		2.36	1.85	27.4%		2.24	1.80	24.7%
Milling costs (per tonne of ore treated) (5)		7.19	7.29	(1.3%)		7.13	6.35	12.2%
G&A costs (per tonne of ore treated) (4)		3.90	3.28	19.0%		3.99	3.11	28.3%
Net cash generated from (used in) operating activities		149.4	69.5	115.0%		576.1	40.9	1,308.6%
Cash generated from operating activities before interest and tax		315.8	245.8	28.5%		1,210.8	371.2	226.2%
Interest paid		164.5	170.6	(3.6%)		276.4	316.8	(12.8%)
Total assets		14,125	13,369	5.7%		14,125	13,369	5.7%
Total non-current financial liabilities		4,084	4,419	(7.6%)		4,084	4,419	(7.6%)

⁽¹⁾ All financial information in this MD&A should be reviewed in conjunction with the Company‘s consolidated financial statements for the reporting periods indicated.

December 31, 2021 Page |  7        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

⁽²⁾ Capital expenditure on cash basis for underground-development, for underground sustaining and for open-pit are supplementary financial measures which are not standardised financial measures and are not intended to replace measures prepared in accordance with IFRS. Please refer to Section – “Non-GAAP and Other Financial Measures” – on page 52 of this MD&A for further information.

⁽³⁾ Total operating cash costs is a non-GAAP financial measure. Please refer to Section – “Non-GAAP and Other Financial Measures” – on page 52 of this MD&A for further information.

⁽⁴⁾ Cost of sales (per pound of copper sold) and General & Administrative (G&A) costs (per tonne of ore treated) are supplementary financial measures which are not standardised financial measures and are not intended to replace measures prepared in accordance with IFRS. Please refer to Section – “Non-GAAP and Other Financial Measures” – on page 52 of this MD&A for further information.

⁽⁵⁾ C1 cash costs (per pound of copper produced), all-in sustaining costs (per pound of copper produced), mining costs (per tonne of material mined), and milling costs (per tonne of ore treated) are non-GAAP ratios which are not standardised financial measures and are not intended to replace measures prepared in accordance with IFRS. Please refer to Section – “Non-GAAP and Other Financial Measures” – on page 52 of this MD&A for further information.

Full Year 2021 vs 2020

• Revenue of $1,971.0 million in 2021 increased 82.8% compared to $1,078.2 million in 2020. Copper and gold volumes increased by 9.0% and 157.1% respectively. This was driven by the scheduled move to the higher grade areas of Phase 4B. Average prices were 53.4% higher for copper and 2.4% higher for gold.

• Income in 2021 was $681.1 million versus $494.6 million in 2020 due primarily to $0.9 billion higher revenue offset by $0.6 billion additional tax charges in 2021 versus 2020. 2021 reflects a $277.8 million deferred tax expense (2020: recognition of $346.6 million), which resulted mainly from the utilisation of prior year tax losses against current year taxable income and from previously announced underground delays, which contributed to a reduction in the loss carry-forwards anticipated to be utilised in future periods. Income attributable to owners of Turquoise Hill was $524.9 million ($2.61 per share) in 2021 compared with $406.3 million ($2.02 per share) in 2020.

• Cost of sales in 2021 was $622.3 million versus $669.4 million in 2020, as the transition to higher grade ore in Phase 4B provided an opportunity to deliver increased concentrate volumes despite lower milling rates and reduced material mined.

• Expenditures on property, plant and equipment for 2021 were $996.9 million compared to $1,080.5 million in 2020, comprising $913.3 million (2020 - $1,021.1 million) of underground capital expenditure, which included $232.4 million (2020 - $94.4 million) in underground sustaining capital expenditure, as well as open-pit expenditure of $83.6 million (2020 - $59.4 million). 2021 open-pit capital expenditure includes deferred stripping of $26.8 million and tailings storage facility spend of $26.2 million.

• Total operating cash costs¹⁰ in 2021 of $874.8 million increased 17.0% from $747.9 million in 2020. The increase from the prior year was primarily driven by the impact of higher prices and volumes on royalties, together with additional COVID-19 related costs, higher consumable costs from processing harder Phase 4B ore and higher fuel prices, partially offset by lower power study costs.

• Cost of sales in 2021 was $2.02 per pound of copper sold¹¹ in 2021, compared to $2.20 per pound of copper sold in 2020, reflecting a lower unit cost from fixed costs efficiencies due to higher concentrate production as well as the impact of higher volumes of metals in concentrate sold.

• C1 cash costs in 2021 were $0.22 per pound of copper produced¹², decreasing from $1.45 per pound of copper produced in 2020. The decrease was primarily driven by the impact of higher gold credits due to the higher gold revenue in 2021.

• All-in sustaining costs in 2021 were $0.87 per pound of copper produced¹² versus $1.94 per pound of copper produced in 2020. All-in sustaining costs were impacted by the same factors that impacted C1 cash costs

¹⁰ Total operating cash costs is a non-GAAP financial measure. Please refer to Section – “Non-GAAP and Other Financial Measures” – on page 52 of this MD&A for further information.

¹¹ Cost of sale per pound of copper sold is a supplementary financial measure. Please refer to Section – “Non-GAAP and Other Financial Measures” – on page 52 of this MD&A for further information.

¹² C1 cash costs per pound of copper produced and all-in sustaining costs per pound of copper produced are non-GAAP ratios. Please refer to Section – “Non-GAAP and Other Financial Measures” – on page 52 of this MD&A for further information.

December 31, 2021 Page |  8        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

offset by the impact of a $24.2 million increase in open-pit sustaining capital expenditure compared to 2020. Deferred stripping was $21.7 million higher in 2021 due to higher waste mined ahead of the transition of mining to Phase 5.

• Mining costs in 2021 were $2.24 per tonne of material mined¹³ versus $1.80 per tonne of material mined in 2020. The increase was mainly due to lower material mined, which resulted from changes in mine design and a reduction in open-pit workforce levels to manage COVID-19, as well as higher mining costs. The increase in mine operating cost was mainly from COVID-19 related costs and higher consumables prices as well as higher fuel and tire consumption rates due to higher cycle times related to the current mining strategy.

• Milling costs in 2021 were $7.13 per tonne of ore treated¹³ versus $6.35 per tonne of ore treated in 2020. The increase was from higher milling costs and 2.7% lower milled ore. The higher milling costs mainly resulted from bringing forward a maintenance shutdown from 2022 and processing harder ore compared to 2020.

• G&A costs in 2021 were $3.99 per tonne of ore treated¹⁴ versus $3.11 per tonne of ore treated in 2020. The increase was mainly due to higher insurance, higher COVID-19 related costs and higher support costs in preparation for the undercut.

• Net cash generated from operating activities was $576.1 million in 2021 versus $40.9 million during 2020. This was primarily due to $0.9 billion higher revenue and lower interest paid as a result of a lower average LIBOR rate, partially offset by the impact of $17.7 million lower interest received on bank deposits and money market funds and $327.2 million higher taxes paid, which was driven by $356 million in payments made to the Government of Mongolia relating to the 2013 to 2015 and 2016 to 2018 tax assessments subject to international tax arbitration proceedings.

Q4’21 vs Q4’20

• Revenue of $503.9 million in Q4’21 increased 24.4% from $405.1 million in Q4’20. Revenue increased due to 35.8% higher average copper prices and 54.5% higher gold sales volumes. Q4’21 production volumes of copper and gold decreased by 6.5% and 10.2% respectively, as a higher proportion of mill feed came from lower grade sources.

• Income for the period was $207.3 million in Q4’21 versus $241.6 million in Q4’20, reflecting higher tax charges and total operating cash costs¹⁵ offset by $98.8 million higher revenue. The increase in revenues reflects higher copper prices and gold volumes. There was a $19.7 million de-recognition of deferred tax assets in Q4’21 due to the utilisation of prior year tax losses (Q4’20: recognition of $86.1 million). The de-recognition in Q4’21 was due to the partial utilisation of 2016 losses against Q4’21 income, offset by an increase in temporary differences that relates primarily to tax depreciation on property, plant and equipment Income attributable to owners of Turquoise Hill in Q4’21 was $156.4 million ($0.78 per share) versus $159.9 million ($0.79 per share) in Q4’20.

• Cost of sales of $181.4 million in Q4’21 increased 4.5% from $173.6 million in Q4’20, primarily driven by higher labour costs due to COVID-19 restrictions, higher prices for fuel and explosives and timing differences on maintenance activities.

• Expenditures on property, plant and equipment Were $299.5 million in Q4’21 versus $263.0 million in Q4’20, comprised of $259.2 million (Q4’20: $237.5 million) in underground capital expenditure, including $57.8

¹³ Mining costs per tonne of material mined and milling costs per tonne of ore treated are non-GAAP ratios. Please refer to Section – “Non-GAAP and Other Financial Measures” – on page 52 of this MD&A for further information.

¹⁴ G&A costs per tonne of ore treated is a supplementary financial measure. Please refer to Section – “Non-GAAP and Other Financial Measures” – on page 52 of this MD&A for further information.

¹⁵ Total operating cash costs is a non-GAAP financial measure. Please refer to Section – “Non-GAAP and Other Financial Measures” – on page 52 of this MD&A for further information.

December 31, 2021 Page |  9        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

million (Q4’20: $44.5 million) in underground sustaining capital expenditure as well as $40.3 million (Q4’20: $25.5 million) in open-pit sustaining capital expenditure.

• Total operating cash costs¹⁶ of $246.9 million in Q4’21 increased 24.9% from $197.7 million in Q4’20, primarily due to additional COVID-19 related costs, higher processing costs due to the harder ore being mined in Phase 4B and higher fuel prices.

• Unit cost of sales of $2.39 per pound of copper sold¹⁷ in Q4’21 increased 14.9% from $2.08 per pound of copper sold in Q4’20, reflecting an increase in unit fixed costs from lower metal production.

• Oyu Tolgoi’s C1 cash costs of $0.73 per pound of copper produced¹⁸ in Q4’21 decreased from $0.76 per pound of copper produced in Q4’20, primarily reflecting the impact of a $58.2 million increase in gold revenue.

• All-in sustaining costs of $1.66 per pound of copper produced¹⁸ in Q4’21 increased from $1.45 per pound of copper produced in Q4’20, driven by a $14.8 million increase in open-pit sustaining capital expenditure offset by the impact of the higher gold revenue.

• Mining costs of $2.36 per tonne of material mined¹⁸ in Q4’21 increased 27.4% from $1.85 per tonne of material mined in Q4’20. The increase was mainly driven by timing differences on maintenance activity, higher labour costs due to COVID-19 restrictions, and higher fuel and blast costs due to market price increases.

• Milling costs of $7.19 per tonne of ore treated¹⁸ in Q4’21 decreased 1.3% from $7.29 per tonne of ore treated in Q4’20. The decrease is due to higher milled ore partially offset by the impact of additional maintenance costs due to bringing forward a maintenance shutdown from 2022, higher labour costs due to COVID-19 restrictions, and higher fuel and explosive costs due to market price increases.

• G&A costs of $3.90 per tonne of ore treated¹⁹ in Q4’21 increased 19.0% from $3.28 per tonne of ore treated in Q4’20. The increase was mainly due to higher COVID-19 related costs and higher support costs associated with preparation for the undercut.

• Net cash generated from operating activities was $149.4 million in Q4’21 versus $69.5 million in Q4’20, reflecting a $70.0 million improvement in cash generated from operating activities before interest and tax, which resulted from a $91.0 million increase in gross margin from increased sales revenue offset by $10.6 million higher operating expenses associated with the implementation of COVID-19 controls.

OYU TOLGOI

Operations, Safety Performance and COVID-19 Update

The Oyu Tolgoi open-pit and underground workforce posted an AIFR of 0.14 per 200,000 hours worked for the period ending December 31, 2021, the lowest full-year AIFR achieved to date.

During Q4’21, Mongolia continued to experience the impact of the ongoing COVID-19 pandemic. COVID-19 restrictions in Q4’21 adversely impacted both open-pit operations and underground development, and Oyu Tolgoi’s ability to maintain normal roster changes for workers remained challenged. This resulted in a further

¹⁶ Total operating cash costs is a non-GAAP financial measure. Please refer to Section – “Non-GAAP and Other Financial Measures” – on page 52 of this MD&A for further information.

¹⁷ Cost of sales per pound of copper sold is a supplementary financial measure. Please refer to Section – “Non-GAAP and Other Financial Measures” – on page 52 of this MD&A for further information.

¹⁸ C1 cash costs per pound of copper produced, all-in sustaining costs per pound of copper produced, mining costs per tonne of material mined and milling costs per tonne of ore treated are non-GAAP ratios. Please refer to Section – “Non-GAAP and Other Financial Measures” – on page 52 of this MD&A for further information.

¹⁹ G&A costs per tonne of ore treated is a supplementary financial measure. Please refer to Section – “Non-GAAP and Other Financial Measures” – on page 52 of this MD&A for further information.

December 31, 2021 Page |  10        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

$35 million increase in estimated underground development capital since September 30, 2021. The total cumulative increase to the Definitive Estimate (the confirmatory analysis of the underground project costs and schedule contained in MSS20) underground development capital cost due to the impacts of COVID-19 through the end of Q4’21 was $175 million. This increase includes the currently known, incremental, time-related costs of COVID-19 restrictions; however, it does not include any impacts arising from associated schedule delays or delayed commitments caused by the delays to approval of the full budget uplift which has now been approved by the OT LLC board of directors (OT LLC Board). A reforecast of cost and schedule for the remaining project scope is now expected in Q2’22. The Company continues to monitor COVID-19 related impacts and will update the market as appropriate.

Oyu Tolgoi continues to implement multiple COVID-19 controls at site, including maintaining 1.5 metres social distancing, always wearing masks, regular hand washing, sanitisation, and personnel temperature checks at all high traffic areas. The Oyu Tolgoi site maintains a 5-day mandatory isolation for workers prior to entering the mine site. In Ulaanbaatar, office-based employees are working under flexible work arrangements.

With the arrival of the Omicron variant of COVID-19, cases increased at site during early 2022, however shorter quarantine periods have been maintained and cases are being managed well. Some interruption to work progress is expected in Q1’22 as a result and the Company continues to monitor the situation.

Oyu Tolgoi concentrate shipment volumes to customers remained challenged during the quarter and above target inventory levels remained at the end of Q4’21. The challenges were mainly a continuation of the COVID-19 related Mongolia / Chinese border restrictions that resulted in force majeure being declared from March 30, 2021. Shipments to Chinese customers recommenced on April 15, 2021, and Oyu Tolgoi continues to work closely with Mongolian and Chinese authorities to manage any supply chain disruptions. The force majeure will remain in place until there are sufficiently sustained volumes of convoys crossing the border to ensure OT LLC’s ability to meet its on-going commitments to customers and to return onsite concentrate inventory to target levels.

Selected Operational Metrics

Oyu Tolgoi Production Data

All data represents full production and sales on a 100% basis

	4Q 2021	4Q 2020	Change	Full Year 2021	Full Year 2020	Change
Open pit material mined (‘000 tonnes)	23,979	23,663	1.3%	84,983	97,694	(13.0%)
Ore treated (‘000 tonnes)	10,573	9,594	10.2%	39,124	40,200	(2.7%)
Average mill head grades:
Copper (%)	0.46	0.50	(8.0%)	0.50	0.46	8.7%
Gold (g/t)	0.38	0.41	(7.3%)	0.54	0.24	125.0%
Silver (g/t)	1.27	1.16	9.5%	1.26	1.18	6.8%
Concentrates produced (‘000 tonnes)	182.7	190.2	(3.9%)	749.6	693.1	8.2%
Average concentrate grade (% Cu)	21.3	21.9	(2.7%)	21.7	21.6	0.5%
Production of metals in concentrates:
Copper (‘000 tonnes)	38.9	41.6	(6.5%)	163.0	149.6	9.0%
Gold (‘000 ounces)	79	88	(10.2%)	468	182	157.1%
Silver (‘000 ounces)	238	231	3.0%	977	876	11.5%
Concentrate sold (‘000 tonnes)	165.9	181.5	(8.6%)	669.2	669.6	(0.1%)
Sales of metals in concentrates:
Copper (‘000 tonnes)	34.4	37.9	(9.2%)	139.4	137.8	1.2%
Gold (‘000 ounces)	102	66	54.5%	435	150	190.0%
Silver (‘000 ounces)	192	194	(1.0%)	783	760	3.0%
Metal recovery (%)
Copper	80.1	85.9	(6.8%)	82.8	79.6	4.0%
Gold	59.3	68.8	(13.8%)	68.4	58.6	16.7%
Silver	55.1	64.3	(14.3%)	61.6	56.4	9.2%

December 31, 2021 Page |  11        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

Oyut Open-Pit Operations and Hugo North Underground

Despite the challenges to workforce levels, the full year 2021 copper production was 9.0% higher and gold production was 157.1% higher than 2020. This was primarily due to the mining of higher-grade ore sourced from Phase 4B. In 2021, the concentrator received approximately 1 million tonnes of material from the underground project.

During Q4’21, open-pit mining in Phase 4B neared completion and the majority of mill feed came from other phases and stockpile material. Consequently, both copper and gold production for Q4’21 was lower than Q4’20.

Mill throughput of 10.6 million tonnes in Q4’21 was higher than Q4’20 of 9.6 million tonnes primarily due to softer ore in the mill feed in the quarter.

The Oyu Tolgoi team continues to work to optimise the integrated mine plan with the goal of moving metal earlier in the 5-year window. The updated mine plan is expected in Q3’22, however updates will be provided earlier if the work is sufficiently developed to do so.

The underground project progressed well during Q4’21 with breakthrough of the service decline achieved and caving related development and construction continuing. MHS1 construction was completed in Q4’21. MHS1 commissioning and construction of the first on-footprint truck chute, a key enabler for production, was achieved in February 2022, and sustainable production is still expected in H1’23.

Although COVID-19 related restrictions continued to impact shaft activities, progress was made during the quarter. Shaft 4 sinking activities re-commenced in October 2021, with advancement now at 148 metres below ground level. Shaft 3 readiness works continued, with sinking commencement expected by the end of Q1’22. In response to slower than planned sinking rates at Shaft 4, a productivity improvement programme is underway, and outcomes will be applied to activities in both shafts.

Following progress in negotiations with the Government of Mongolia, all undercut readiness criteria were considered to be achieved on January 24, 2022 with the OT LLC Board having unanimously approved commencement of the undercut. On January 25, 2022, a ceremony was held at the mine site to coincide with the commencement of undercutting.

Ahead of the first drawbell blast, expected in Q3’22, development and construction work on the extraction level continues with drawbell drives in the initiation area being excavated, drawpoint construction underway and concrete roadways laid, as well as continued construction work on truck chutes supporting Panel 0.

Following undercut commencement in January 2022, Panels 1 and 2 are expected to be delayed due to COVID-19 related work restrictions impacting both Shafts 3 and 4 and underground development progress as well as changes to mining scope previously disclosed.

The table below provides the Company’s currently estimated key milestone dates as compared to corresponding milestone dates disclosed in the 2020 Oyu Tolgoi Technical Report (2020 OTTR):

Milestone	2020 OTTR	Actual or Currently Projected Dates
Start Undercut blasting	July 2021	January 2022 (Actual)
MHS 1 (including Crusher 1) commissioning	Q4’21	February 2022 (Actual)
First drawbell blasted	May 2022	Q3’22
Sustainable Production (sustainable cave propagation)	February 2023 (~30 drawbells active(1))	H1’23 (~ 21 drawbells active(1))
First drawbell Panel 2	Q4’24	H1’26
First drawbell Panel 1	H2’26	H1’27
Shaft 3 commissioned	H1’22	H2’23(2)
Shaft 4 commissioned	H1’22	H2’23(2)

December 31, 2021 Page |  12        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

⁽¹⁾ Design refinements identified that a minor modification to undercut sequence following additional geotechnical assessment of cave initiation conditions, changed the estimated number of drawbells to reach critical hydraulic radius, which is the point at which sustainable production is anticipated to commence. Critical hydraulic radius is an estimated factor, based on the best available data but some variability in the exact number of drawbells needed to reach critical hydraulic radius could occur with the potential for the requirement to be more or less than 21 drawbells.

⁽²⁾ Delays to Shafts 3 and 4 remain materially aligned to the Company’s disclosure in Q4’21.

As at the end of Q4’21, cumulative* underground development progress was 63,418 equivalent metres (eqm) and cumulative* Conveyor to Surface advancement was 15,862 eqm.

Oyu Tolgoi Underground Project Development Progress Excluding Conveyor Declines**
Year	Total Equivalent Development (Km)	Lateral Development (Km)	Mass Excavation (‘000’ m3)
2016	1.6	1.5	3.0
Q1’17	1.0	0.8	5.2
Q2’17	1.4	0.9	9.2
Q3’17	1.4	1.2	8.3
Q4’17	2.2	1.9	8.9
2017	6.1	4.8	31.6
Q1’18	2.6	2.1	11.6
Q2’18	2.4	2.1	8.6
Q3’18	3.0	2.1*	23.3*
Q4’18	2.3	1.6	16.0
2018	10.3	7.9	59.5
Q1’19	3.2	2.3	21.4
Q2’19	3.2	2.4	19.3
Q3’19	3.6	3.2	11.4
Q4’19	4.8	4.5	9.0
2019	14.9	12.4	61.1
Q1’20	5.5	5.3	3.2
Q2’20	5.5	5.1	10.6
Q3’20	4.7	4.1	14.3
Q4’20	4.2	3.8	8.5
2020	19.9	18.4	36.6
Q1’21	3.5	2.9	13.5
Q2’21	1.7	1.2	11.6
Q3’21	2.2	1.8	8.1
Q4’21	3.3	2.7	14.9
2021	10.6	8.7	48.1
Total	63.4	53.7	240.1

Notes:

 Totals may not match due to rounding.

 *  Lateral development and mass excavation amounts for Q3’18 have been updated to reflect revised results.

** Excludes Conveyor Declines but includes sustaining capital development metres in the quarter.

Oyu Tolgoi Conveyor Decline Project Development Progress
Year	Total Equivalent Development (Km)	Lateral Development (Km)	Mass Excavation (‘000’ m3)
2016	0.0	0.0	0.0
Q1’17	0.1	0.1	0.0
Q2’17	0.4	0.4	0.2
Q3’17	0.9	0.9	0.5
Q4’17	0.9	0.8	0.5

December 31, 2021 Page |  13        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

2017	2.3	2.3	1.2
Q1’18	0.8	0.8	0.1
Q2’18	0.8	0.8	0.1
Q3’18	0.8	0.8	0.3
Q4’18	0.6	0.6	0.1
2018	3.0	3.0	0.6
Q1’19	0.8	0.8	0.8
Q2’19	0.9	0.9	0.8
Q3’19	0.9	0.7	4.9
Q4’19	1.1	0.7	8.3
2019	3.7	3.1	14.7
Q1’20	1.0	0.7	7.5
Q2’20	1.0	0.9	2.6
Q3’20	0.9	0.9	0.0
Q4’20	1.0	1.0	0.0
2020	4.0	3.6	10.1
Q1’21	0.8	0.8	0.0
Q2’21	0.7	0.6	3.2
Q3’21	0.6	0.6	1.6
Q4’21	0.7	0.3	10.2
2021	2.9	2.3	15.0
Total	15.9	14.2	41.7

Note: Totals may not match due to rounding.

The additional 2021 development cost impact of the known COVID-19 delays up to the end of 2021 is estimated to be approximately $175 million, and additional impacts are expected as COVID-19 restrictions persist into 2022, albeit at reduced levels. The Company continues to monitor the impacts associated with COVID-19 delays and other issues impacting the underground development capital estimate as well as the overall project schedule. The manager is reviewing the cost and schedule following undercut commencement and is expected to provide an update in Q2’22.

OT LLC spent $259.2 million on underground capital expenditure during Q4’21, including $57.8 million of underground sustaining capital expenditure. Total underground capital expenditure from January 1, 2016, to December 31, 2021, was approximately $5.4 billion, including $0.3 billion of underground sustaining capital expenditure. Underground capital expenditure on a cash basis includes VAT and capitalised management services payments but excludes capitalised interest. In addition, OT LLC had contractual obligations²⁰ of $0.4 billion as at December 31, 2021. From the restart of project development in 2016 through December 31, 2021, Oyu Tolgoi has committed over $4.0 billion to Mongolian vendors and contractors.

Incremental Mine Design Refinements

Panel 1 and Panel 2 are the focus of additional study work, which will continue through to 2023. The study work includes:

● Design optimisation for Panel 2

● Design optimisation for Panel 1

● Pillar recovery assessment

To support the mining studies, additional data is being collected via a surface and underground drilling programme. The focus of the drilling programme during Q4’21 was the northern part of Panel 1 and the southern part of Panel 2. Although drilling slowed during Q4’21, the study work remains broadly on schedule.

²⁰ Contractual obligations is a non-GAAP financial measure. Please refer to Section – “Non-GAAP and Other Financial Measures” – on page 52 of this MD&A for further information.

December 31, 2021 Page |  14        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

Preliminary results from the ongoing Panel 2 mine design optimisation are expected in H1’22. The scope of this study includes a review of the base case, including optimisation of the extraction drive orientation and the undercut strategy, reducing exposure to caving-related risks. Risk reduction efforts could alter the mining sequence within panels which may result in movement of the metal profile. The initial focus is on the northern section of Panel 2, where additional data is already available and will be expanded to include the southern section in the latter part of 2022.

The Panel 1 and Pillar Recovery studies are scheduled for completion in early 2023.

FUNDING OF OT LLC BY TURQUOISE HILL

In accordance with the Amended and Restated Shareholders’ Agreement dated June 8, 2011 (ARSHA), Turquoise Hill has funded OT LLC’s cash requirements beyond internally generated cash flows by a combination of equity investment and shareholder debt.

For amounts funded by debt, OT LLC must repay such amounts, including accrued interest, before it can pay common share dividends. As at December 31, 2021, the aggregate outstanding balance of shareholder loans extended by subsidiaries of the Company to OT LLC was $8.1 billion, including accrued interest of $2.2 billion. These loans bear interest at an effective annual rate of LIBOR plus 6.5%.

In accordance with the ARSHA, a subsidiary of the Company has funded the common share investments in OT LLC on behalf of state-owned Erdenes. These funded amounts earned interest at an effective annual rate of LIBOR plus 6.5% and were expected to be repayable, by Erdenes to a subsidiary of the Company, via a pledge over Erdenes’ share of OT LLC common share dividends. Erdenes also had the right to reduce the outstanding balance by making cash payments at any time. As at December 31, 2021, the cumulative amount of such funded amounts was $1.4 billion, representing 34% of invested common share equity, with unrecognised interest on such amounts of $1.0 billion. As announced on January 24, 2022, as part of the resolution of outstanding issues relating to the development of the Oyu Tolgoi underground project and the entering into of key agreements with the Government of Mongolia (the GoM Agreements), the Company agreed to waive in full the outstanding balance in relation to these funded amounts.

On December 30, 2021 the Parliament of Mongolia passed Resolution 103 to resolve the outstanding issues among the Company, Rio Tinto and the Government of Mongolia in relation to the implementation of Resolution 92 (see the section “Government Relations - Negotiations with Government of Mongolia” of this MD&A). Resolution 103 placed financing debt restrictions that will limit the Company’s ability to fund OT LLC with shareholder debt or to carry common share investments in OT LLC on behalf of Erdenes until sustainable production is achieved, which is currently expected in H1’23.

As at December 31, 2021, Turquoise Hill had $0.7 billion of available liquidity in the form of cash and cash equivalents, which, under current projections and together with the various sources of funding available to the Company under the Amended and Restated Heads of Agreement (the Amended HoA) dated as of January 24, 2022 between the Company and Rio Tinto International Holdings Limited (RTIH), are expected to provide the Company with sufficient liquidity and resources to meet its minimum obligations for a period of at least 12 months from the balance sheet date of December 31, 2021.

The Amended HoA replaced the prior Heads of Agreement, entered into on April 9, 2021, which itself replaced the non-binding Memorandum of Understanding that Rio Tinto and Turquoise Hill entered into on September 9, 2020. The Amended HoA is binding and delineates a comprehensive funding arrangement (the Funding Plan) to address the Company’s estimated incremental funding requirement.

Key elements of the Amended HoA include:

• Pursuing the rescheduling of principal repayments of existing debt (Re-profiling) to potentially reduce the base case funding requirement by up to $1.7 billion;

• Seeking to raise up to $500 million of additional senior supplemental debt (SSD);

December 31, 2021 Page |  15        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

• Rio Tinto committing to provide a co-lending facility (Co-Lending Facility), incremental to the Re-profiling and the SSD, of up to $750 million to be made available once sustainable production has been achieved;

• Rio Tinto committing to provide a short-term secured advance (RT Advance) directly to the Company by way of one or more secured advances up to a maximum of $300 million, which would be available during the debt funding restriction period identified in Resolution 103 and would be indirectly repaid out of the proceeds of the $750 million Co-Lending Facility; and

• The Company agreeing to conduct an equity offering in a form of its choosing of at least $650 million (Initial Equity Offering) (including a Rio Tinto pro rata participation) by no later than August 31, 2022.

Under the current base case assumptions, additional equity in excess of the initial $650 million would not be required if the Re-profiling, SSD and Co-Lending Facility are fully successful. In addition, the Amended HoA provides that, if necessary, Turquoise Hill could be required to raise up to a total of $1.5 billion (less the amount raised in the Initial Equity Offering) via equity in a form of its choosing.

The requirement of Rio Tinto to advance funds under the Co-Lending Facility is subject to a number of conditions precedent set out in the Amended HoA, including, among others: that certain undertakings provided by the Company in favour of the Oyu Tolgoi project finance lenders be amended to cover the Co-Lending Facility; that terms of the Oyu Tolgoi project finance agreements with respect to a “Sponsor Senior Loan” not be amended in any material respect; the absence of new material claims and proceedings against Turquoise Hill or Rio Tinto that could adversely impact the funding elements of the Amended HoA; the absence of a material adverse change and of a “Suspensive Event” as defined under the Oyu Tolgoi project finance agreements, and operations at Oyu Tolgoi not having been suspended for certain defined periods of time; and all relevant third party approvals and consents having been obtained. The requirement of Rio Tinto to advance funds under the RT Advance is also subject to a number of conditions precedent set out in the Amended HoA substantially similar to those applicable to the Co-Lending Facility. The foregoing list of conditions does not purport to be exhaustive, and investors should refer to a copy of the Amended HoA as filed on the SEDAR and EDGAR profiles of the Company.

In light of the financing debt restrictions in Resolution 103, until sustainable production is achieved (currently expected in H1’23), OT LLC’s estimated funding requirements are expected to be addressed by cash on hand at OT LLC, the Re-profiling and a pre-paid copper concentrate sale arrangement between Turquoise Hill and OT LLC.

Assuming successful completion of the above elements, the Company currently estimates it can address its $3.4 billion incremental funding requirement within the new timing framework of the Amended HoA, which sets a target date for the Re-profiling of no later than December 31, 2022 and an outside date for the SSD and Co-Lending Facility to the earlier of the three months following the lifting of the debt restrictions under Resolution 103 and December 31, 2023.

Successful implementation of the Amended HoA is subject to achieving alignment with relevant stakeholders in addition to Rio Tinto (including existing lenders, any potential new lenders and the Government of Mongolia), market conditions and other factors. However, non-fulfilment of any of the conditions precedent identified in the Amended HoA would also adversely affect the ability of the Company and OT LLC to obtain additional funding or re-profile existing debt as contemplated within the timeframe set out in the Amended HoA. The Company is in discussions with Rio Tinto regarding implementation of the Amended HoA as well as its residual funding requirements. In addition, given the uncertainties outlined above, the Company is currently assessing alternatives in the event that the timeline as outlined in the Amended HoA is not achieved.

Turquoise Hill’s liquidity outlook will continue to be impacted, either positively or negatively, by various factors, many of which are outside the Company’s control, including:

• Successful implementation of the Amended HoA;

• Changes in commodity prices and other market-based assumptions;

• Open-pit operating performance as well as the successful implementation (or otherwise) of ongoing optimisation efforts;

December 31, 2021 Page |  16        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

• Further and/or unanticipated impacts on operations and underground development related to the COVID-19 pandemic as well as the economic, commercial and financial consequences thereof; and

• The outcomes of Turquoise Hill’s and Rio Tinto’s ongoing engagement with various Mongolian governmental bodies as the Mongolian Government implements Resolution 103, as discussed in the “Negotiations with the Government of Mongolia” section of this MD&A below.

Turquoise Hill continues to monitor its liquidity outlook and will provide updates as and when circumstances require.

As noted above, Turquoise Hill currently estimates its base case incremental funding requirement to be $3.4 billion (September 30, 2021: $3.6 billion), taking into consideration:

• Metal price assumptions for copper and gold over the incremental funding period, as delineated in the table below;

• The Definitive Estimate, which estimated a development capital cost of $6.75 billion;

• The additional cost impacts of COVID-19, including the known development cost impact up to the end of 2021 of approximately $175 million. Additional impacts are expected as COVID-19 restrictions persist into 2022, albeit at reduced levels. The Company continues to monitor the impacts associated with COVID-19 delays and other issues impacting the underground development capital estimate as well as the overall project schedule;

• The current forecast of sustainable production for Panel 0, which is H1’23;

• The current forecast of delays to Shafts 3 and 4 (for further information, see the “Oyut Open-Pit Operations and Hugo North Underground” section of this MD&A above); and

• The impact of the open-pit mine redesign in response to previously reported geotechnical events, resequencing of open-pit ore phases due to the delayed commencement of the undercut as well as the impacts of COVID-19 on the open-pit waste movement (for further information, see the “Oyut Open-Pit Operations and Hugo North Underground” section of this MD&A above).

The specific metal price assumptions used in determining the base case incremental funding gap are as follows:

Year	Copper ($ / pound)	Gold ($ / troy ounce)
2022	4.22	1,816
2023	4.06	1,789
2024	3.83	1,708

Within the base case funding requirement are $1.8 billion of scheduled principal repayments, which the Company is attempting to re-profile.

The decrease in the Company’s estimated incremental funding requirements to $3.4 billion as at December 31, 2021 (September 30, 2021: $3.6 billion) is primarily the result of updates to metal price assumptions.

Additionally, Turquoise Hill currently estimates its base case incremental funding will continue to be influenced, either positively or negatively, by various factors over the incremental funding period, many of which are outside the Company’s control, including:

• Any further revisions to the amount of development capital required to ramp-up the underground mine production from the Definitive Estimate of $6.75 billion plus the additional $175 million in known COVID-19 related costs at December 31, 2021;

• The timing of sustainable production and ramp-up profile and their impact on cash flows including any further COVID-19-related delays (for further information, see the “Oyut Open-Pit Operations and Hugo North Underground” section of this MD&A above);

• The outcomes of Turquoise Hill’s and Rio Tinto’s ongoing engagement with various Mongolian governmental bodies to resolve remaining outstanding items relating to the Government of Mongolia’s implementation of Resolution 103 as discussed in the “Negotiations with the Government of Mongolia” section of this MD&A below;

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

• Changes to the amount of cash flow expected to be generated from open-pit operations, net of underground and open-pit sustaining capital requirements;

• Further and/or unanticipated impacts on operations and underground development related to the COVID-19 pandemic as well as the economic, commercial and financial consequences thereof; and

• Changes in expected commodity prices and other market-based assumptions (upside and downside pricing sensitivities would have, respectively, a favourable or unfavourable impact on the base case incremental funding requirement).

More generally, any changes in the above factors will impact the incremental funding requirement and, as a result, the actual quantum of incremental funding required may be greater or less than the $3.4 billion base case estimate, and such variance may be significant. See the sections “Risks and Uncertainties” and “Forward-Looking Statements and Forward-Looking Information” in this MD&A.

GOVERNMENT RELATIONS

Turquoise Hill’s ownership of the Oyu Tolgoi mine is held through a 66% interest in OT LLC. The remaining 34% interest in OT LLC is held by Erdenes. Turquoise Hill was obliged to fund Erdenes’ share of Oyu Tolgoi’s funding requirements until September 2016, and Erdenes’ share of the capital costs and operating costs of the underground mine until September 2021 under the ARSHA and the Oyu Tolgoi Underground Mine Development and Financing Plan (UDP) entered into on May 18, 2015 between, among others, the Company, the Government of Mongolia, Erdenes and OT LLC.

Underground construction recommenced in May 2016 when OT LLC received the final requirement for the restart of underground development: formal notice to proceed approval by the boards of Turquoise Hill, Rio Tinto (as project manager) and OT LLC. Approval followed the signing of the UDP in May 2015 and the signing of a $4.4 billion project finance facility in December 2015. Development had been suspended in August 2013 pending resolution of matters with the Government of Mongolia.

Turquoise Hill’s investment in the Oyu Tolgoi mine is governed by the 2009 Investment Agreement among Turquoise Hill, the Government of Mongolia, OT LLC and an affiliate of Rio Tinto (Investment Agreement or IA). The Investment Agreement framework was authorised by the Mongolian Parliament and was concluded after 16 months of negotiations. It was reviewed by numerous constituencies within the Government. Turquoise Hill has been operating in good faith under the terms of the Investment Agreement since 2009, and we believe not only that it is a valid and binding agreement, but that it has proven to be beneficial for all parties.

Adherence to the principles of the Investment Agreement, the ARSHA and the UDP has allowed for the development of the Oyu Tolgoi mine in a manner that has given rise to significant long-term benefits to Mongolia. Benefits from the Oyu Tolgoi mine open-pit operations and underground development include, but are not limited to, employment, royalties and taxes, local procurement, economic development and sustainability investments.

Oyu Tolgoi Special Committee Independent Consulting Group Report

As previously disclosed by the Company, a special committee of Turquoise Hill’s board of directors, comprised solely of independent directors of the Company (the Special Committee), has been independently reviewing the construction delays and cost overruns that were disclosed to Turquoise Hill by Rio Tinto OT Management Limited, a subsidiary of Rio Tinto, (Rio Tinto Manager) and publicly announced by the Company and Rio Tinto in July 2019. The Special Committee was formally constituted in December 2020 to carry out this review.

Also, as announced on December 1, 2020, the OT LLC Board established a special board committee (the OT Special Committee) comprised of two representatives of Erdenes and two representatives of the Company to investigate the causes of the increase in cost and schedule extension to the underground development of Oyu

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

Tolgoi during the period between the 2016 Mongolian Statutory Study²¹ (previously referred to as the “2016 Feasibility Study”) and the Definitive Estimate. The OT Special Committee commissioned a report from a group of consultants (the Independent Consulting Group or ICG), to conduct the review on behalf of the OT Special Committee. The work of the ICG did not include any analysis of the legal rights of OT LLC with respect to the role of Rio Tinto Manager or assess whether the conduct of Rio Tinto Manager failed to meet the standards of performance under the management agreement.

On July 31, 2021, ICG released its report (the ICG Report) and on August 9, 2021, Turquoise Hill announced that it was reviewing the ICG Report.

Following the release of the ICG Report, the plaintiffs in class action proceedings against the Company, previously commenced in the United States District Court for the Southern District of New York, and in a parallel Canadian class action before the Superior Court of Québec amended their complaints to include certain allegations concerning statements made in the ICG Report in support of their claims.

Since the release of the ICG Report, the Special Committee continued to carry out its review of project cost overruns and schedule delays and the performance of Rio Tinto Manager. This work has been performed in parallel with the work of the Company’s independent directors in overseeing the negotiations of a comprehensive agreement with the Government of Mongolia and the Amended HoA.

In connection with the Company’s negotiations with Rio Tinto with respect to the agreements with the Government of Mongolia and the Amended HoA, the Special Committee has sought to achieve a comprehensive solution that allows all parties to move forward in a manner that advances the development of the project for the benefit of all stakeholders, including the Mongolian people and Turquoise Hill’s shareholders.

In assessing whether the terms of the agreements with the Government of Mongolia and Amended HoA should be recommended for approval by the board of directors of the Company (the Board of Directors), the Special Committee, with the advice of external advisors, considered the following non-exhaustive list of considerations: the proposed agreements with the Government of Mongolia and the Amended HoA; views expressed by the Government of Mongolia and various minority shareholders with respect to Rio Tinto Manager’s performance; Rio Tinto’s position with respect to Rio Tinto Manager’s performance; inherent risks in large underground project development; and the terms of the agreements between the Company, OT LLC, and Rio Tinto, including those which establish a “gross fault” standard for liability for Rio Tinto Manager and the absence of guarantees with respect to project cost or time for completion.

The Special Committee further considered the significant benefits of resolving all matters amongst the parties, including enabling the parties to proceed with the undercut, avoiding further delays that would likely arise if the parties were unable to resolve outstanding issues and the additional costs and potential value destruction of such delays as well as the value of the concessions offered by Rio Tinto in amending the terms of the HoA. After weighing these and other considerations, the Special Committee determined that it would be in the best interests of the Company to obtain a comprehensive resolution of outstanding issues between all parties involved in the Oyu Tolgoi underground project that enables the project to move forward. The Special Committee recommended to the Board of Directors that the Company accept the terms in the Amended HoA and not assert any claims of breach of any obligation of Rio Tinto or its affiliates under any agreement between the Company or any of its subsidiaries and Rio Tinto or any of its affiliates based on facts available to and known by the Company as of the date of the Amended HoA.

²¹ The 2016 Mongolian Statutory Study is neither a “feasibility study” within the meaning of National Instrument 43-101 – Standards of Disclosure for Mineral Projects (NI 43-101) nor as defined under the CIM (Canadian Institute of Mining, Metallurgy and Petroleum) Definition Standards on Mineral Resources and Mineral Reserves adopted by CIM Council (CIM Definition Standards).

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Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

Negotiations with Government of Mongolia

In Q4’21, negotiations between Turquoise Hill, Rio Tinto and various Mongolian governmental bodies continued to progress towards resolution of the outstanding items necessary to enable undercut commencement including approval for registration of the updated Resources and Reserves (RR19) through the Minerals Council of Mongolia in Q4’21 and submission for assessment of the updated Mongolian Statutory Study (MSS20)²².

On December 13, 2021 Rio Tinto and the Company made a joint offer to the Government of Mongolia with the aim of resetting the relationship and allowing all parties to move forward together. Subsequently on December 30, 2021 the Mongolian Parliament passed Resolution 103 that aimed to improve the benefits to Mongolia from the Oyu Tolgoi project and set out a number of required measures to resolve the outstanding issues in relation to Parliamentary Resolution 92.

In parallel, on December 30, 2021, the OT LLC Board approved the operating programme and budget for OT LLC’s 2022 financial year, consisting of over $780 million related to commitments to enable the Oyu Tolgoi underground project to continue to progress towards undercutting, sustainable production and ramp-up.

On January 24, 2022, the Company announced that it had successfully reached a mutual understanding for a renewed partnership with the Government of Mongolia and that the OT LLC Board had unanimously approved the commencement of the undercut, namely the commencement of blasting that will start the Oyu Tolgoi underground mine production and the full Definitive Estimate underground development budget of $6.75 billion.

The decision to approve the undercut represented a reset of the relationship with the Government of Mongolia with a view to delivering economic benefits to all stakeholders including the people of Mongolia and followed resolution of many of the conditions required in Resolution 103 including:

• Turquoise Hill agreeing to waive in full the US$2.4 billion carry account loan of Erdenes. See the section “Funding of OT LLC by Turquoise Hill” in this MD&A;

• Improved cooperation with Erdenes in monitoring the Oyu Tolgoi underground development and enhancing environment, social and governance (ESG) matters;

• The approval of the ESA; and

• The establishment of a funding structure at OT LLC that does not incur additional loan financing prior to sustainable production for Panel 0 (expected in the first half of 2023).

The Company continues to work with the Government of Mongolia and Rio Tinto to finalise the remaining outstanding measures of Resolution 103, namely the formal termination of the UDP and resolution of the outstanding OT LLC tax arbitration.

On January 25, 2022, undercutting commenced with a celebration on site to mark the occasion, with dignitaries from the Government of Mongolia as well as Rio Tinto and Turquoise Hill in attendance.

Oyu Tolgoi Mine Power Supply

OT LLC currently sources power for the Oyu Tolgoi mine from China’s Inner Mongolian Western Grid, via overhead power line, pursuant to back-to-back power purchase arrangements with Mongolia’s National Power Transmission Grid (NPTG), the relevant Mongolian power authority, and Inner Mongolia Power International Cooperation Co., Ltd (IMPIC), the subsidiary of Inner Mongolia’s power grid company.

OT LLC is obliged under the Investment Agreement to secure a long-term domestic source of power for the Oyu Tolgoi mine. The Power Source Framework Agreement (PSFA) entered into between OT LLC and the

²² Previously referred to as “OTFS20”. MSS20 is neither a “feasibility study” within the meaning of NI 43-101 nor as defined under the CIM Definition Standards.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

Government of Mongolia in December 2018 provided a binding framework and pathway for long-term power supply to the Oyu Tolgoi mine.

In June 2020, OT LLC and the Government of Mongolia entered into an amendment to the PSFA (PSFA Amendment) to reflect their agreement to jointly prioritise and progress a Government of Mongolia funded, owned and operated power plant at Tavan Tolgoi, in accordance with and subject to agreed milestones, as the domestic source of power for the Oyu Tolgoi mine.

The PSFA Amendment provided that if certain agreed milestones are not met in a timely manner, OT LLC would be entitled to select from, and implement the alternative power solutions specified in the PSFA Amendment, including a coal-fired power plant at Oyu Tolgoi, the Mongolian grid or a primary renewables solution, and the Government of Mongolia would be obliged to support such decision.

The three PSFA Amendment milestones were not met by the original dates of March 1, 2021, March 31, 2021, and July 1, 2021.

On January 26, 2022, OT LLC entered into the ESA with, amongst others, Southern Region Electricity Distribution Network to provide OT LLC with power from the Mongolian grid. Power will be delivered pursuant to the ESA once certain technical conditions are satisfied.

The ESA has a term of 20 years from the date on which supply commences and provides a pathway to meeting OT LLC’s long-term power requirements from domestic power sources.

While the Mongolian grid undergoes an upgrade to be in a position to provide stable and reliable power to the Oyu Tolgoi mine, OT LLC will continue to import its power from Inner Mongolia, China. An agreement in-principle has been reached between NPTG and IMPIC for a three-year fixed term extension to 2026, potentially followed by an extension to up to 2030, if required. The outstanding commercial terms are in the process of being finalised.

Oyu Tolgoi Tax Assessments

On January 16, 2018, Turquoise Hill announced that OT LLC had received and was evaluating a tax assessment for approximately $155 million (which was converted from Mongolian Tugrik to U.S. dollars at the exchange rate on that date) from the Mongolian Tax Authority (MTA) relating to an audit on taxes imposed and paid by OT LLC between 2013 and 2015 (the 2013 to 2015 Tax Assessment). In January 2018, OT LLC paid an amount of approximately $4.8 million to settle unpaid taxes, fines and penalties for accepted items.

On February 20, 2020, the Company announced that OT LLC would be proceeding with the initiation of a formal international arbitration proceeding in accordance with dispute resolution provisions within Chapter 14 of the Investment Agreement and Chapter 8 of the UDP. The dispute resolution provisions call for arbitration under the United Nations Commission on International Trade Law (UNCITRAL) seated in London before a panel of three arbitrators. By agreeing to resolve certain matters within the 2013 to 2015 Tax Assessment dispute under UNCITRAL Arbitration Rules, both parties have agreed that the arbitral award shall be final and binding on both parties and the parties shall carry out the award without delay.

On December 23, 2020, Turquoise Hill announced that OT LLC had received and was evaluating a tax assessment for approximately $228 million (which was converted from Mongolian Tugrik to U.S. dollars at the exchange rate on that date) from the MTA relating to an audit on taxes imposed and paid by OT LLC between 2016 and 2018 (the 2016 to 2018 Tax Assessment). Most of the matters raised in respect of the 2016 to 2018 Tax Assessment are of a similar nature to the matters that were raised in the 2013 to 2015 Tax Assessment. The MTA also proposed a $1.4 billion adjustment to the balance of OT LLC’s carried forward tax losses. The adjustments are to disallow or defer certain tax deductions claimed in the 2016 to 2018 years.

On January 11, 2021, Turquoise Hill announced that OT LLC had completed its evaluation of the 2016 to 2018 Tax Assessment claim and confirmed that OT LLC had given notice of its intention to apply to the UNCITRAL tribunal to amend its statement of claim to include certain matters raised in the 2016 to 2018 Tax Assessment. OT LLC’s application to include these matters in the pending arbitration for the 2013 to 2015 Tax Assessment

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

was accepted. In addition to those matters included within the statement of claim, there are certain limited tax matters included in the 2013 to 2015 and 2016 to 2018 Tax Assessments, which are being addressed in local Mongolian tax courts. As there is less certainty with respect to the resolution of these matters, the Company has accrued for certain amounts and has also adjusted its loss carry forwards.

In February 2021, OT LLC received notices of payment totalling approximately $228 million (which were converted from Mongolian Tugrik to U.S. dollars at the exchange rate on those dates) relating to amounts disputed under the 2016 to 2018 Tax Assessment, and in March 2021, OT LLC received notices of payment totalling $126 million (which were converted from Mongolian Tugrik to U.S. dollars at the exchange rate on those dates) relating to amounts disputed under the 2013 to 2015 Tax Assessment. Under the Mongolian General Tax Law, the amounts were due and paid by OT LLC within 10 business days from the dates of the notices of payment. Under the same legislation, OT LLC would be entitled to recover the amounts, including via offset against future tax liabilities, in the event of a favourable decision from the relevant dispute resolution authorities.

On May 3, 2021, the Company announced that the Government of Mongolia filed its statement of defence together with a counterclaim (GOM Defence and Counterclaim) in relation to the tax arbitration proceeding. Turquoise Hill was not a party to the arbitration, but the GOM Defence and Counterclaim requested that the arbitral tribunal add both the Company and a member of the Rio Tinto Group as parties to the tax arbitration. The principal thrust of the GOM Defence and Counterclaim is to seek the rejection of OT LLC’s tax claims in their entirety. As part of the counterclaim, the Government of Mongolia also makes assertions surrounding previously reported allegations of historical improper payments made to Government of Mongolia officials and seeks unquantified damages. Also, in the event OT LLC’s tax claims are not dismissed in their entirety, the Government of Mongolia is seeking in the counterclaim an alternative declaration that the Investment Agreement is void.

The Company denied the allegations relating to it in the GOM Defence and Counterclaim and filed a submission to the arbitral tribunal to oppose the Government of Mongolia’s request that it be added to the tax arbitration. As announced by the Company on January 17, 2022, following a hearing on this issue, the arbitral tribunal issued a ruling deciding that Turquoise Hill not be added as a party to the arbitration.

As described above, Resolution 103 authorised certain measures to be completed by the Government of Mongolia in order for Resolution 92 to be considered formally implemented. As announced on January 24, 2022, the Company remains committed to continue to work with the Government of Mongolia and Rio Tinto to finalise the remaining outstanding matters of Resolution 103, including resolution of the outstanding tax arbitration.

The Company remains of the opinion that the tax positions adopted by OT LLC in its tax filings were correct and that OT LLC has paid all taxes and charges required under the Investment Agreement, the ARSHA, the UDP and Mongolian law.

On February 11, 2022, the arbitral tribunal issued a Partial Award confirming its earlier ruling that Turquoise Hill not be added as a party to the tax arbitration. On the same day, at the request of the parties to the tax arbitration, the arbitral tribunal issued an order suspending the tax arbitration for six months (until August 11, 2022) or until 21 days from when the tribunal receives notice from OT LLC or the Government of Mongolia to terminate the suspension.

Anti-Corruption Authority Information requests

On March 1, 2022, OT LLC notified the Company that it received a letter from the Mongolian Anti-Corruption Authority requesting certain documents and information relating to an investigation regarding the underground construction work. The Company has no further details at this time and will update the market as appropriate.

CLASS ACTION COMPLAINTS

In October 2020, a class action complaint was filed in the U.S. District Court, Southern District of New York against the Company, certain of its current and former officers as well as Rio Tinto and certain of its officers.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

The complaint alleges that the defendants made material misstatements and material omissions with respect to, among other things, the schedule, cost and progress to completion of the development of Oyu Tolgoi in violation of Section 10(b) of the U.S. Securities Exchange Act of 1934, as amended (the Exchange Act) and Rule 10b-5 thereunder. Under the schedule established by the court, a first amended complaint was filed on March 16, 2021, and a second amended complaint was filed on September 16, 2021. Defendants moved to dismiss the operative amended complaint on October 19, 2021, under Rule 12(b)(6) of the Federal Rules of Civil Procedure and the Private Securities Litigation Reform Act of 1995, for failure to state a claim. As of December 17, 2021, the motion is fully briefed and pending before the Court. The Company believes that the complaint against it is without merit.

In January 2021, a proposed class action was initiated in the Superior Court in the District of Montreal against the Company and certain of its current and former officers. An amended complaint was filed on July 27, 2021 which did not substantially alter the claim. The claim alleges that the Company and its current and former officers named therein as defendants made material misstatements and material omissions with respect to, among other things, the schedule, cost and progress to completion of the development of Oyu Tolgoi, in violation of, among other things, sections 225.8, 225.9 and 225.11 of the Securities Act (Quebec). On January 7, 2022 the plaintiff re-amended the claim to include allegations relating to developments arising since the previous amended complaint was filed. The Company and the other defendants expect to produce their evidence to contest certification of the class action at the end of March 2022. No hearing has been scheduled yet. The Company believes that the complaint against it is without merit and is preparing to defend the application for leave and certification of the proceeding.

See the risk factor titled “The Company may be subject to public allegations, regulatory investigations or litigation that could materially and adversely affect the Company’s business” in the “RISKS AND UNCERTAINTIES” section of this MD&A.

CORPORATE ACTIVITIES

Exploration

Turquoise Hill, through its wholly owned subsidiaries, Asia Gold Mongolia LLC, Heruga Exploration LLC and SGLS LLC, operates an exploration programme in Mongolia on licences that are not part of Oyu Tolgoi. Turquoise Hill owns three exploration licences: Bag and Od-2 in the Umnugobi province and Khatavch in the Dornogovi province.

In 2021, the team successfully completed field work on all three of its exploration licences. The field work was completed safely and efficiently, which is a remarkable achievement given the many challenges associated with the COVID-19 pandemic. During Q4’21, the results from the geophysical survey at Bag and Od-2 were received. The results identified two potential drill targets that will be followed up in 2022. Also during Q4’21, the team completed field work at Khatavch. The results of this work show several areas of interest which will be followed-up via further mapping, sampling, and high-resolution ground magnetics in 2022.

As part of Turquoise Hill’s exploration growth strategy, the team continues to pursue other land opportunities. During Q4’21, the exploration team reviewed a total of 154 land areas that were made available for tender by the Mineral Resources and Petroleum Authority of Mongolia. To date, none of the declared areas have been of interest due to unfavourable geological terrains and/or mineralisation style.

Executive Appointment

On March 4, 2021, the Company announced the resignation of its Chief Executive Officer, Ulf Quellmann, effective March 3, 2021 and the appointment of Steve Thibeault as Interim Chief Executive Officer. Mr. Quellmann also resigned as a director of the Company, and Mr. Thibeault was appointed as a director.

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Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

INCOME AND OTHER TAXES

The Company recorded an income statement charge of $311.8 million for income and other taxes during 2021, compared with a credit of $306.4 million in 2020. Income and other taxes include adjustments to deferred tax assets in Mongolia and Canada, in addition to withholding taxes accrued and current tax payable.

Adjustments to deferred tax assets resulted in income statement charges within income and other taxes for 2021 of $277.8 million. During 2021, there was a decrease to the amount of Mongolian deferred tax assets recognised of $279.4 million and increase to Canadian deferred tax assets of $1.6 million.

Deferred tax assets relate to tax operating losses, accrued but unpaid interest expense on shareholder loans and other temporary differences. Recoverability of these losses was assessed against an estimate of future taxable profits. Movements in the deferred tax assets result from period end reassessments of recoverability and include adjustments to record potential deferred tax assets not recognised in previous periods.

The adjustment to the Mongolian deferred tax assets in 2021 represented a decrease of $308.3 million in the recognised deferred tax assets for prior year losses and other temporary differences, mainly related to property, plant and equipment. Operating losses and accrued but unpaid interest expense incurred by OT LLC during 2021 increased the recognised deferred tax assets by $28.9 million.

The adjustment to the previously recognised deferred tax asset for prior year losses and other temporary differences were due in part to the utilisation of prior year losses carried forward against taxable income in the year combined with the changes made to mine plan operating assumptions, which led to an increase in the amount of loss carry forwards and temporary differences estimated to expire unutilised. Updated mine plan assumptions during the year reflected the expected delays in sustainable production to the first half of 2023 and in commencement of production from Panel 2, and to a lesser extent Panel 1, driven by the forecast delay on Shafts 3 and 4 development that were announced in the third quarter results.

An effective tax rate of approximately 30% during 2021 arose as the Company reported income from continuing operations before tax of $992.9 million while recording in the same period a net income statement tax charge (inclusive of adjustments to deferred tax assets and accrued withholding taxes) of $311.8 million.

During 2020, there was an increase to the amount of Mongolian deferred tax assets recognised of $347.3 million and a reduction to Canadian deferred tax assets of $0.6 million.

The adjustment to the Mongolian deferred tax assets in 2020 represented an increase of $270.7 million in the recognised deferred tax assets for prior year losses and other temporary differences, mainly related to property, plant and equipment. In addition, operating losses and accrued but unpaid interest expense incurred by OT LLC during 2020 increased the recognised deferred tax assets by $76.6 million.

A negative tax rate of approximately 150% during 2020 arose as the Company reported income from continuing operations before tax of $188.2 million, while recording in the same period a net income statement tax credit (inclusive of adjustments to deferred tax assets and accrued withholding taxes) of $306.4 million.

Turquoise Hill’s effective tax rate represents the income statement charge or credit for income and other taxes as a percentage of income or loss from operations before taxes. It is possible for Turquoise Hill’s effective tax rate to be in excess of approximately 100%, primarily because of different tax jurisdictions applying different tax rates to intercompany loan interest, recognition of previously unrecognised deferred tax assets and/or de-recognition of deferred tax assets previously recognised.

Additional income statement information, including income and other taxes relating to OT LLC and the Company’s corporate operations is provided in Note 3 – Operating segment – to the consolidated financial statements.

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Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow

Operating activities. Net cash generated from operating activities was $576.1 million in 2021 versus $40.9 million in 2020. Cash generated from operating activities before interest and tax was $1,210.8 million in 2021 versus $371.2 million in 2020, resulting from a $939.9 million increase in gross margin from increased sales revenue partially offset by higher operating costs.

Interest paid in 2021 was $276.4 million versus $316.8 million in 2020 due to a lower average LIBOR rate. Interest received in 2021 was $2.7 million versus $20.4 million in 2020, primarily due to lower funds invested in bank deposits and money market funds and the impact of the Company earning no interest in 2021 on its deposit with Rio Tinto under the Cash Management Services Agreement entered into on December 15, 2015 as part of project financing (CMSA), as the deposit was fully drawn during Q2’20. $361.0 million of income and other taxes were paid in 2021 versus $33.9 million in 2020. $356 million in payments made by OT LLC in Q1’21 related to the 2013 to 2015 and 2016 to 2018 Tax Assessments.

Investing activities. Cash used in investing activities was $957.2 million in 2021 versus $542.4 million in 2020, representing expenditures on property, plant and equipment of $996.9 million partly offset with proceeds from pre-production sales from the underground of $69.7 million. $29.9 million was spent by the Company in Q1’21 on the purchase of copper and gold put options to establish a synthetic copper and gold price floor in order to provide increased certainty around the Company’s liquidity horizon. Cash used in investing activities in 2020 reflects capital expenditure of $1.1 billion (net of pre-production proceeds of $26.1 million) offset by $511.3 million withdrawn from the Company’s CMSA deposit with Rio Tinto.

Financing activities. Cash used in financing activities in 2021 was $47.6 million, compared to $27.6 million in 2020, representing principal repayments made on the project finance facility and other payments made in relation to lease liabilities.

Liquidity

As at December 31, 2021, Turquoise Hill had consolidated cash and cash equivalents of approximately $0.7 billion (December 31, 2020: $1.1 billion) and consolidated working capital²³ of negative $68.8 million (December 31, 2020: negative $123.1 million). The movement in consolidated working capital during 2021 was primarily due to higher inventories offset by lower receivables. These variances were largely a result of increased inventory towards the end of the year due to COVID-19 related border restrictions. Consolidated working capital is expected to remain negative while expenditure on underground development continues and associated payables are recorded.

Turquoise Hill manages liquidity risk by the preparation of internally generated short-term cash flow forecasts. These short-term cash flow forecasts consider the aggregation of non-cancellable obligations together with an estimation of future operating costs, financing and tax costs, capital expenditures and cash receipts from sales revenue. Among other things, the Company’s short-term cash flow forecasts at December 31, 2021 also gave consideration to:

• Possible impacts of the COVID-19 pandemic, including the increase of $175 million to the estimate of underground development capital included in the Definitive Estimate;

• The impact of expected first sustainable production for Panel 0 in H1’23;

• The impacts of resequencing of ore phases of the open-pit mine and the open-pit geotechnical events disclosed earlier in the year as well as delayed open-pit waste movement;

• The estimated impact on the timing of cash receipts resulting from the ongoing force majeure that was announced by the Company on March 30, 2021; and

²³ Consolidated working capital is a non-GAAP financial measure. Please refer to Section – “Non-GAAP and Other Financial Measures” – on page 52 of this MD&A for further information.

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Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

• Plans to access additional sources of funding under the Amended HoA where management consider implementation of those plans to be probable.

As at December 31, 2021, the Company had $0.7 billion of liquidity in the form of cash and cash equivalents. Sensitivity analyses are performed over the short-term cash flow forecasts including the impact of estimated commodity prices on cash receipts. Liquidity forecasts reflect management’s assessment of the probability of executing on the additional sources of funding included within the Amended HoA. The additional funding needed is expected to be provided through proceeds from the Initial Equity Offering as well as the Re-profiling. The Initial Equity Offering is considered by management to be probable. Management also considers the timeframe and acceptability of expected terms and conditions for the Re-profiling to be probable. However, if Re-profiling is delayed, the Company has access to the committed RT Advance of $300 million. On the basis of all of the foregoing, the Company believes that its $0.7 billion of available liquidity as at December 31, 2021, together with the various sources of funding available to the Company under the Amended HoA, should provide it with sufficient liquidity and resources to meet its minimum obligations for a period of at least 12 months from the balance sheet date of December 31, 2021, including its operations and capital expenditures, over the same period. Turquoise Hill also expects to access the incremental financing to sustain its operations and underground development beyond this period through further implementation of the Amended HoA (see “Funding of OT LLC by Turquoise Hill” of this MD&A).

Capital Resources

The Company considers its capital to be share capital and third-party borrowings. To effectively manage capital requirements, the Company has in place a planning and budgeting process to help determine the funds required to ensure the Company has the appropriate liquidity to meet its strategic and operating needs.

In December 2015, OT LLC signed the $4.4 billion project finance facility for the purposes of developing the underground mine, of which $4.3 billion had been drawn down as at December 31, 2021. The additional $0.1 billion would be available, subject to certain conditions, under the Company’s facility with the Export-Import Bank of the United States. As of December 31, 2021, the full original net proceeds of $4.2 billion had been advanced to OT LLC²⁴.

The project finance lenders have agreed to a debt cap of $6.0 billion thus allowing for the potential of an additional $1.6 billion of SSD to be raised in the future subject to meeting certain requirements relating to the tenor, amount and timing of debt service obligations of such SSD and other customary conditions. Under the project finance agreements, the $6.0 billion debt cap may be increased in connection with an expansion facility, which may include the construction of one of the alternative power solutions specified in the PSFA Amendment (see “Oyu Tolgoi Mine Power Supply” of this MD&A). The restrictions imposed by Resolution 103 on additional third party funding at OT LLC until achievement of sustainable production, which is currently expected in H1’23, means that SSD would not be drawn down until after sustainable production. However, negotiations with the project finance lenders can start before sustainable production is achieved.

OT LLC has notified the senior project finance lenders that the commencement of the undercutting for the underground mine in January 2022 may constitute an event of default under the Common Terms Agreement as a material amendment to the mine plan that existed at the time project finance was secured and could indirectly result in Oyu Tolgoi’s inability to meet the original project completion longstop date specified in the project finance agreements. The potential event of default would not impact the existing repayment schedule for project finance debt but would allow the project finance lenders to restrict further drawdown of debt. OT LLC has requested a waiver of this potential event of default.

The Company’s accumulated deficit as at December 31, 2021 was $2.9 billion, compared to $3.4 billion at December 31, 2020.

²⁴ Please refer to Section – Our Business – on page 6 and to Section – RELATED-PARTY TRANSACTIONS – on page 50 of this MD&A.

December 31, 2021 Page |  26        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

See also the section “Funding of OT LLC by Turquoise Hill” of this MD&A for a discussion of future capital requirements.

SHARE CAPITAL

As at December 31, 2021 the Company had a total of 201,231,446 common shares issued and outstanding.

COPPER, GOLD AND FOREIGN EXCHANGE MARKET COMMENTARY

The information below is in addition to disclosures already contained in this report regarding the Company’s operations and activities.

Copper and Gold Markets

Copper price started Q4’21 strongly, rising above $10,500/t in mid-October, challenging the record-high set in May 2021. This happened as inventory was rapidly withdrawn from exchange warehouses globally. The cash-3M backwardation reached a record of greater than $1,000/t on October 20, 2021. Although spreads narrowed after temporary rule changes by the London Metal Exchange, the event highlighted tightness in spot market. Chinese smelters exported cathode in response to the backwardation, but volumes were muted with reports of only around 15kt delivered abroad. In November, concerns on availability of VAT invoice on copper cathode imports in China also increased Chinese domestic premiums. Despite a backdrop of COVID-19, rising inflation, logistical issues, and troubles in the Chinese property market, prices ended the year averaging at $9,774/t, 5% higher than the 2020 average. In 2022, fundamentals will continue to support high copper prices, notwithstanding the risk to economic growth posed by the new COVID-19 Omicron variant.

The 2022 benchmark treatment and refining charges (TC/RCs) were settled at $65/t and 6.5c/lb in December 2021. This represents a 9% increase on 2021 levels, the first rise in the benchmark TC/RCs in seven years. Spot activity was muted in Q4’21 as market participants focused on benchmark negotiations, and Chinese smelters were reportedly well stocked. Spot treatment charges (TCs) traded in the high $50s for most of Q4’21. Concerns over spread of Omicron and resultant impact on supply chains and mine supply disruptions amongst other factors could see potential near-term tightness on the concentrates market in 2022.

Gold prices traded sideways for most of Q4’21 averaging $1,800/oz for 2021 – a 13% drop from August 2020 when prices touched record-high of $2,067/oz. Physical demand for bars and coins were strong but exchange traded funds (ETFs) saw a net outflow over the course of 2021. With attention firmly turning to interest rate hikes this year, we expect gold prices to trend lower. However, stronger than anticipated inflation, or worsening geopolitical tensions, may help temper the downward price trend.

Foreign Exchange Rates

OT LLC’s sales are determined and settled in U.S. dollars and a portion of its expenses are incurred in local currencies. Short-term foreign exchange fluctuations could have an effect on Turquoise Hill’s operating margins; however, in view of the proportion of locally incurred expenditures, such fluctuations are not expected to have a significant impact on Turquoise Hill’s long-term financial performance.

OFF-BALANCE SHEET ARRANGEMENTS

With the exception of the Company’s power commitments disclosed within the section “Contractual Obligations” and “Oyu Tolgoi Mine Power Supply” of this MD&A, as at December 31, 2021, Turquoise Hill was not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a significant current or future effect on the results of the operations, financial condition, revenues or expenses, liquidity, capital expenditures or capital resources of the Company.

December 31, 2021 Page |  27        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

CONTRACTUAL OBLIGATIONS

The following table summarises Turquoise Hill’s contractual obligations²⁵ as at December 31, 2021.

(Stated in $000’s of dollars)	Payments Due by Period (4)
	Less than 1 year		1 - 3 years		4-5 years		After 5 years		Total
Project finance facility (1)		403,483		1,446,635		1,163,810		1,268,212		4,282,140
Purchase obligations (2)		370,544		12,961		-		-		383,505
Other obligations (3)		343,768		-		-		-		343,768
Power commitments		125,600		63,214		-		-		188,814
Lease liabilities		10,727		18,877		1,875		306		31,785
Decommissioning obligations		-		-		-		349,666		349,666
Total		1,254,122		1,541,687		1,165,685		1,618,184		5,579,678

⁽¹⁾ These amounts relate to principal repayments on the project finance facility.

⁽²⁾ These amounts mainly represent various long-term contracts that include commitments for future development and operating payments for supply of engineering, equipment rentals and other arrangements.

⁽³⁾ These amounts include trade and other payables.

⁽⁴⁾ The columns are represented in dates as follows: 12 months to December 31, 2022; 24 months between January 1, 2023 and December 31, 2024; 24 months between January 1, 2025 and December 31, 2026; Beyond January 1, 2027.

The total of non-derivative financial liabilities is $4,567 million as at December 31, 2021 (December 31, 2020: $4,592 million). The total reported financial liability represents obligations that are non-cancellable.

CHANGES IN ACCOUNTING POLICIES

There were no changes in Turquoise Hill’s accounting policies during 2021.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with IFRS requires Turquoise Hill to establish accounting policies and to make estimates that affect both the amount and timing of the recording of assets, liabilities, revenues and expenses. Some of these estimates require judgments about matters that are inherently uncertain.

The Company’s estimates identified as being critical are substantially unchanged from those disclosed in the MD&A for the year ended December 31, 2020.

A detailed summary of all of the Company’s significant accounting policies and the key sources of estimation uncertainty that have a risk of resulting in a material adjustment to the carrying amount of assets and liabilities within the next twelve months are included in Note 2 to the consolidated financial statements for the year ended December 31, 2021. While all of the key sources are important to the Company’s consolidated financial statements, the following key sources have been identified as being critical:

• Going concern assessment;

• Recoverable amount of property, plant and equipment;

• Income taxes;

• Reserves and resources;

• Decommissioning costs;

• Net realizable value of inventories; and

²⁵ Contractual obligations is a non-GAAP financial measure. Please refer to Section – “Non-GAAP and Other Financial Measures” – on page 52 of this MD&A for further information

December 31, 2021 Page |  28        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

• Depletion and depreciation of property, plant and equipment.

Going concern assessment

The Company has made judgements, based on an internally generated short-term cash flow forecast, in concluding that there are no material uncertainties related to events or conditions that may cast significant doubt upon the Company’s ability to continue as a going concern. Judgements and estimates are made in forming assumptions of future activities, future cash flows and timing of those cash flows, including cash flows relating to the financing plans in the Amended HOA whose implementation is probable in the next twelve months. Significant assumptions used in preparing the short-term cash flow forecast include, but are not limited to, short-term commodity prices, production volumes, reserves, operating costs, financing costs, development capital, and the announced equity offering. Changes to these assumptions could affect the estimate of the Company’s available liquidity and conclusion as to whether there are material uncertainties related to events or conditions that may cast significant doubt upon the Company’s ability to continue as a going concern.

Recoverable amount of property, plant and equipment

When an impairment review is undertaken, the recoverable amount is assessed by reference to the higher of value in use (VIU) and fair value less costs of disposal (FVLCD). The VIU is the net present value of expected future pre-tax cash flows from the relevant cash-generating unit in its current condition, both from continuing use and ultimate disposal. FVLCD is estimated either from the value obtained from an active market where applicable, or by using a discounted post-tax cash flow model based on detailed life-of-mine and/or production plans. FVLCD will always exceed VIU at Oyu Tolgoi because there is incremental value in its resources that cannot be included in a VIU assessment. Significant assumptions used in the discounted cash flow model include estimates of long-term commodity prices, discount rates, reserves and resources, operating costs, development capital, and scheduling and mine design.

These inputs are based on the Company’s best estimates of what an independent market participant would consider appropriate. Changes to these inputs may alter the results of the impairment test, the amount of the impairment charge recorded in the consolidated statement of income and the resulting carrying value of property, plant and equipment.

An indicator of impairment was identified during the year ended December 31, 2021, and an assessment of recoverable amount was undertaken as at December 31, 2021; refer to Note 13 of the Company’s consolidated financial statements for the year ended December 31, 2021.

Income taxes

The Company must make significant estimates in respect of the provision for income taxes and the composition of its deferred income tax assets and deferred income tax liabilities. The Company’s operations are, in part, subject to foreign tax laws where interpretations, regulations and legislation are complex and can be subject to change. As a result, there are usually some tax matters in question which may, on resolution in the future, result in adjustments to the amount of current or deferred income tax assets or liabilities, and those adjustments may be material to the Company’s balance sheet and results of operations.

The Company recognises potential liabilities and records tax liabilities for uncertain tax positions based on its judgement of whether, and the extent to which, additional taxes will be due. The Company adjusts these liabilities as facts and circumstances change. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate, which could result in material adjustments to the consolidated financial statements. Refer to Note 23 of the Company’s consolidated financial statements for further information on tax matters between OT LLC and the Mongolian Tax Authority.

The Company assesses the recoverability of deferred tax assets at each reporting period-end based on future taxable income to determine the deferred tax asset to be recognised. Significant assumptions used to determine future taxable income include estimates for long-term commodity prices, reserves and resources, operating

December 31, 2021 Page |  29        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

costs, financing costs, development capital, and scheduling and mine design. Revisions to these estimates could result in material adjustments to the financial statements.

Reserves and resources

Mineral reserves and resources are based on various assumptions relating to operating matters set forth in NI 43-101. These include production costs, mining and processing recoveries, cut-off grades, long term commodity prices, inflation rates and the costs and availability of treatment and refining services for the metals mined. Cost estimates are based on feasibility study estimates and operating history. The Company estimates its mineral reserves and resources based on information compiled and reviewed by qualified persons as defined in accordance with NI 43-101 requirements.

Estimated mineral reserves and resources are used to determine the depreciation of property, plant and equipment; to account for capitalised deferred stripping costs; to perform, when required, assessments of the recoverable amount of property, plant and equipment; as an input to the projection of future taxable profits which support assessments of deferred income tax recoverability; and to forecast the timing of the payment of decommissioning obligations.

Decommissioning costs

The estimate of decommissioning costs is based on future expectations in the determination of closure provisions. Management makes a number of assumptions and judgements including estimating the amount of future reclamation costs and their timing, inflation rates and risk-free discount rates. These assumptions are formed based on environmental and regulatory requirements and the Company’s internal policies. The costs are more uncertain the further into the future the mine closure activities are to be carried out. Actual costs incurred in future periods in relation to the remediation of the Company’s existing assets could differ materially from their estimated undiscounted future value. Refer to Note 17 for the Company’s total decommissioning obligations recorded in the consolidated financial statements, the undiscounted values and the rate used to discount the liability.

Net realizable value of inventories

Inventory, including stockpiles of ore, are valued at the lower of weighted average cost and net realizable value (NRV). If ore stockpiles are not expected to be processed within the 12 months after the balance sheet date, they are included within non-current assets and NRV is calculated on a discounted cash flow basis over the planned processing timeframe for such ore. Evaluating NRV requires management judgement in the selection of estimates for, among other inputs, discount rate, price assumptions, timing of processing and costs to complete.

Depletion and depreciation of property, plant and equipment

Property, plant and equipment is the largest component of the Company’s assets and, as such, the depreciation of these assets has a significant effect on the Company’s financial statements.

Mining plant and equipment and other capital assets are depreciated over their expected economic lives using either the units of production method or the straight-line method. Depletion of each mineral property interest is provided on the units of production basis using estimated proven and probable reserves as the depletion basis. A change in the estimated useful life or residual value of a long-lived asset would result in a change in the rate of depreciation for that asset.

For long-lived assets that are depleted or depreciated over proven and probable reserves using the units of production method, a change in the original estimate of proven and probable reserves would result in a change in the rate of depletion or depreciation.

December 31, 2021 Page |  30        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

RECENT ACCOUNTING PRONOUNCEMENTS

A number of new standards, and amendments to standards and interpretations, are effective as of January 1, 2021, and have been applied in preparing these consolidated financial statements. None of these standards and amendments to standards and interpretations had a significant effect on the consolidated financial statements of the Company.

Property, Plant and Equipment: Proceeds before Intended Use (Amendments to International Accounting Standards (IAS) 16): The amendment prohibits an entity from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Under the amendment, the Company will be required to recognise the proceeds from selling such items, and the cost of producing those items, in the Consolidated Statement of Income (Loss).

This amendment is effective for the Company’s annual reporting periods beginning January 1, 2022 with retrospective application required as it relates to items of property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after January 1, 2020. IAS 2 Inventories will apply to the identification and measurement of inventory produced. Identifying the related cost may require significant estimation and judgment in the selection of an appropriate method for allocating development expenditure to such inventory.

The impact of adjustments to amounts recorded within opening balances at January 1, 2020 will be to decrease the deficit reported within equity by $21 million and to increase capital work in progress within property, plant and equipment by $21 million. Upon adoption of the amendments for reporting periods starting from January 1, 2022, the restatement of the Company’s Consolidated Statement of Income and Consolidated Balance Sheet at December 31, 2021 will result in a $70 million increase to revenue, a $15 million increase in cost of sales and a $55 million increase to capital work in progress within property, plant and equipment.

None of the remaining standards and amendments to standards and interpretations, which have been issued but are not yet effective, are expected to have a significant effect on the consolidated financial statements of the Company.

RISKS AND UNCERTAINTIES

Turquoise Hill is subject to a number of risks due to the nature of the industry in which it operates, the present state of development of its business and the foreign jurisdictions in which it carries on business. The material risks and uncertainties affecting Turquoise Hill, their potential impact, and the Company’s principal risk-management strategies are subject to disclosure made elsewhere in this MD&A. See, in particular, the sections in this MD&A titled “OPERATIONAL OUTLOOK FOR 2022”, “OYU TOLGOI – Oyut Open-Pit Operations and Hugo North Underground”; “FUNDING OF OT LLC BY TURQUOISE HILL” and “GOVERNMENT RELATIONS” for more specific updates regarding, among other matters, the impact of COVID-19 on Turquoise Hill’s and Oyu Tolgoi’s operations, the anticipated size of future funding requirements and the status of discussions regarding details to implement various funding elements under the Amended HoA as well as various matters involving the Government of Mongolia. The following is a summary description of the material risks and uncertainties to which the Company is subject. Some of the following statements are forward-looking and actual results may differ materially from the results anticipated in these forward-looking statements. See also the Section of this MD&A titled “Forward-Looking Statements and Forward-Looking Information”. If any of such risks or risks not currently known to the Company actually occurs or materialises, the Company’s business, financial condition or results of operations could be adversely affected, even materially adversely affected.

The Company’s ability to carry out its activities in multiple jurisdictions, including Mongolia, is subject to various legal and political risks.

Although the Company expects that the Investment Agreement and the UDP (to the extent such agreement remains enforceable) should continue to bring significant stability and clarity to the legal, political and operating environment in which the Company will develop and operate Oyu Tolgoi, the Company remains subject to

December 31, 2021 Page |  31        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

various legal and political risks in Mongolia. In addition, the Government of Mongolia also owns a significant stake in OT LLC which holds the Oyu Tolgoi property.

There can be no assurance that the Company’s assets will not be subject to nationalisation, requisition, expropriation or confiscation, whether legitimate or not, by any authority or body. In addition, there can be no assurance that the political and economic policies of neighbouring countries, including China, in relation to Mongolia will not have adverse economic effects on the development of the Company’s mining projects, including its ability to access power, transport (including across borders) and sell its products and access construction labour, supplies and materials. There is no assurance that provisions under Mongolian law for compensation and reimbursement of losses to investors under such circumstances would be effective to restore the full value of the Company’s original investment or to compensate for the loss of the current value of the Mongolian projects. Insofar as the Government of Mongolia is a sovereign entity against which the terms of the Investment Agreement (and the UDP, to the extent such agreement remains enforceable) may take considerable time to enforce (if enforceable at all), this risk applies to Oyu Tolgoi despite the provisions of the Investment Agreement respecting nationalisation and expropriation. There can be no assurance that Mongolian laws protecting foreign investments will not be amended or abolished or that existing laws will be enforced or interpreted to provide adequate protection against any or all of the risks described herein, or that the principles agreed to under the GoM Agreements will be adhered to, including the principle that debt financing at the OT LLC level would be permitted after achievement of sustainable production for Panel 0 (currently expected in the first half of 2023). There can be no assurance that there would not be disputes resulting from multiple levels of corporate and/or governmental approvals and differing sophistication in relevant business and technical matters, inequality of bargaining power and incompatible strategic and economic objectives (both in the short term and the longer term) among the shareholders of OT LLC which could have a material adverse impact on the Company’s business prospects, results of operations and financial condition.

The Company carries out its activities in countries which may be affected in varying degrees by political stability, government regulations (including but not restricted to those related to the mining industry) and domestic or foreign investment therein, and by the policies of other nations in respect of these countries. Any changes in regulations, shifts in political conditions, outbreak of war or other hostilities are beyond the control of the Company and may adversely affect its business. The Company’s mining, exploration and financing activities may be affected to varying degrees by government regulations, or other political and administrative undertakings, including those with respect to restrictions on production, price controls, export controls, income and other taxes, expropriation of property, employment, land use, water use, environmental legislation and mine safety. The Company may be subject to disputes or issues with customs officials or border crossings affecting the shipment of the Company’s products in jurisdictions in which it operates, and the ability of its customers to collect such products may arise and could have an adverse effect on the Company’s ability to collect and/or recognise revenue. In addition, in the various jurisdictions where the Company operates and finances its business activities (including Mongolia, China, U.S., Canada and Europe), the Company is subject to taxes (including income taxes and mining taxes) and it may from time to time be subject to disputes with tax authorities over the interpretation and application of existing tax legislation and/or computation of taxes owing to such jurisdictions. The Company also faces risks regarding future changes in the tax laws of such jurisdictions (and future changes in the way such tax authorities interpret and apply existing tax legislation) that could increase the amount of taxes owing. In this regard, in October 2021, members of the OECD/G20 Inclusive Framework on BEPS endorsed a “Two-Pillar Solution” designed to ensure that in-scope multinational enterprises are subject to a minimum tax rate of 15% and targeting certain “base-eroding” payments made in respect of developing countries. These proposals are not yet fully developed and their potential impact on the Company cannot be determined at this time. The Company’s activities may also be affected to varying degrees by terrorism, military repression, crime, extreme fluctuations in currency exchange rates and high inflation.

Moreover, the legal framework in Mongolia is, in many instances, based on recent political reforms or newly enacted legislation, which may not be consistent with long-standing conventions and customs. Although legal title risks in respect of Oyu Tolgoi are believed to be significantly mitigated by the terms of the Investment Agreement, there may still be ambiguities, inconsistencies and anomalies in the other agreements, licences and title documents through which the Company holds its direct or indirect interests in other mineral resource properties in Mongolia, or the underlying legislation upon which those interests are based, which are atypical of more developed legal systems and which may affect the interpretation and enforcement of the Company’s rights and obligations. Many laws of certain of the countries in which the Company carries out its activities have been

December 31, 2021 Page |  32        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

enacted, but in many instances they are neither understood nor enforced and may be applied in an inconsistent, arbitrary and unfair manner due to the substantial administrative discretion granted to the responsible government officials or agencies, while legal remedies may be uncertain, delayed or unavailable. These laws or their enforcement by national, regional or local authorities can adversely affect, among other things, water access rights, operating costs resulting from unanticipated increases in tariff rates and overall assessment of risk. These uncertainties could limit the legal protections available to the Company. Even the Company’s best efforts to comply with applicable laws and regulations may not result in effective compliance in the determination of government representatives, which may have a material adverse impact on the Company and its share price. Accordingly, while the Company believes that it has taken the legal steps necessary to obtain and hold its property and other interests in Mongolia, there can be no guarantee that such steps will be sufficient to preserve those interests.

The Company may be limited in its ability to enforce the Investment Agreement and the ARSHA against Mongolia, a sovereign government.

The Investment Agreement imposes numerous obligations and commitments upon the Government of Mongolia that provide clarity and certainty in respect of the development and operation of Oyu Tolgoi, while the ARSHA sets out, among other things, certain rights and obligations of Erdenes and the Shareholder Holdcos, with respect to their ownership in, and the management of, OT LLC. Each of the Investment Agreement and the ARSHA include a dispute resolution clause that requires the parties to resolve disputes through international commercial arbitration procedures. Nevertheless, if and to the extent that the Government of Mongolia does not observe the terms and conditions of the Investment Agreement and the ARSHA, there may be limitations on the Company’s ability to enforce the terms of the Investment Agreement and the ARSHA against the Government of Mongolia, which is a sovereign nation, regardless of the outcome of any arbitration proceeding.

Resolution 92, approved by the Mongolian Parliament in November 2019, mandated the Government of Mongolia to take necessary measures to ensure the benefits to Mongolia of Oyu Tolgoi, including comprehensive measures to improve the implementation of the Investment Agreement. Resolution 103 was approved by the Mongolian Parliament in December 2021 to resolve outstanding issues between the Company, Rio Tinto and the Government of Mongolia in connection with the implementation of Resolution 92. On January 24, 2022, the Company announced that it had successfully reached a mutual understanding of a renewed partnership with the Government of Mongolia and that the OT LLC Board had unanimously approved commencement of the undercut. The Company further announced the entering into of the GoM Agreements, which address the majority of the measures contemplated by Resolution 92.

If the terms of the Investment Agreement and/or the ARSHA cannot be enforced, Turquoise Hill would be limited in its ability to enforce its contractual rights and could be deprived of substantial rights and benefits arising from its investment in Oyu Tolgoi with little or no recourse against the Government of Mongolia for fair and reasonable compensation. Similarly, if the arrangements concluded pursuant to the GoM Agreements cannot be effectively enforced or if the Government of Mongolia does not abide by the terms of the GoM Agreements or wishes to revise their terms in a manner that is not in the best interests of the Company, it would be limited in its ability to enforce its contractual rights. Irrespective of the ultimate outcome of any potential dispute, any requirement to engage in discussions or proceedings with the Government of Mongolia, whether or not formal, would result in significant delays, expense and diversion of management’s attention. Such an outcome would have a material adverse impact on the Company and its share price.

Resolution 103 may not be considered by the Government of Mongolia as resolving all outstanding issues in a manner and on terms that are satisfactory to the Company.

Resolution 103 was approved by the Mongolian Parliament in December 2021 to resolve outstanding issues between the Company, Rio Tinto and the Government of Mongolia in connection with the implementation of Resolution 92. Resolution 92 was approved by the Mongolian Parliament in November 2019 and mandated the Government of Mongolia to take necessary measures to ensure the benefits to Mongolia of Oyu Tolgoi.

On January 24, 2022, the Company announced the entering into of the GoM Agreements, which address the majority of the measures to be completed for Resolution 92 to be considered formally implemented, including the write off of the carry account loan, improved cooperation with Erdenes in monitoring underground

December 31, 2021 Page |  33        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

development and enhancing ESG matters, the approval of the ESA, and the establishment of a funding at OT LLC that does not incur additional loan financing prior to sustainable production for Panel 0. The Company stated that it continues to work with the Government of Mongolia and Rio Tinto to finalise the remaining outstanding measures of Resolution 103, including the formal termination of the UDP and the resolution of the outstanding tax arbitration. As of the date hereof, the UDP has not been formally terminated and remains in effect.

If Resolution 103 is not deemed by the Government of Mongolia to resolve outstanding issues in a manner and/or on terms that are satisfactory to the Company, the Company could be limited in its ability to enforce its contractual rights. For example, if the UDP remains in effect (because it is not terminated in a manner and on terms that are satisfactory to the Company, or otherwise) but is not capable of being enforced, Turquoise Hill would be limited in its ability to enforce its contractual rights and could be deprived of substantial rights and benefits arising from its investment in Oyu Tolgoi with little or no recourse against the Government of Mongolia for fair and reasonable compensation. Similarly, the Company or OT LLC may not agree with the manner in which the Government of Mongolia may propose to enhance monitoring of underground development or ESG considerations. The Company’s ability to influence such outcomes may be limited. Further, any requirement to engage in discussions or proceedings with the Government of Mongolia, whether or not formal, including the continuation of the ongoing tax arbitration, would result in significant delays, expense and diversion of management’s attention. Such an outcome would have a material adverse impact on the Company and its share price.

There can be no assurance that the Company will be able to secure the funding that it needs, whether under the Amended HoA or otherwise, to continue development of the Oyu Tolgoi underground mine.

Additional funding will be required to complete the development of the underground mine, which could potentially include securing and funding alternative power options pursuant to the amended PSFA. While the Amended HoA is a binding agreement which sets out a comprehensive funding arrangement to address the Company’s base case incremental funding requirements, there can be no assurance that all key elements of the Amended HoA, including the re-profiling of existing senior debt or obtaining senior supplemental debt, can be secured within the timeframes set out in the Amended HoA or on terms acceptable to Rio Tinto and the Company, or at all. In addition, there can be no assurance that the conditions precedent to the obligation of RTIH under the Amended HoA to provide the Co-Lending Facility and make the US$300 million short-term bridge financing available will be satisfied, which could all result in delays to the project development schedule.

As part of the GoM Agreements, OT LLC entered into the ESA to provide Oyu Tolgoi with a long-term source of power from the Mongolian grid, once certain technical conditions are satisfied. While the Mongolian grid prepares to connect to Oyu Tolgoi, OT LLC will continue to import its power from Inner Mongolia, China, under an agreement between NPTG and IMPIC. However, there can be no assurance that the conditions to the implementation of the ESA will be satisfied in a timely manner, or that the required extensions to the power import agreements will be obtained, which could result in delays in securing a reliable domestic power source for Oyu Tolgoi and additional funding costs. Any such additional funding may not be available or available on reasonable commercial terms.

If the full amount of funding under the funding elements set out in the Amended HoA is not available or obtainable on reasonable commercial terms, or if the Company’s base case incremental funding requirement increases beyond the scope of the funding contemplated by the Amended HoA, the Company may be required to issue Common Shares or instruments convertible into equity, including through future rights offerings, which issuances could result in dilution to the holders of Common Shares and have a material adverse effect upon the market price of Common Shares. Under the terms of the covenants forming part of a financing support agreement between the Company and Rio Tinto dated December 15, 2015 (the Turquoise Hill Financing Support Agreement), the Company is prohibited from creating, incurring or permitting to remain outstanding any indebtedness, other than certain permitted indebtedness, and from amending its constating documents to create and issue Preferred Shares. As a result of these restrictions, in seeking to raise additional capital, the Company may not incur indebtedness for borrowed money or issue debt securities, other securities convertible into debt securities or Preferred Shares while the covenants forming part of the Turquoise Hill Financing Support Agreement are in force and effect unless it obtains a waiver or consent from RTIH permitting the incurrence of such indebtedness or the issuance of such securities. In addition, the GoM Agreements include a principle that

December 31, 2021 Page |  34        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

debt financing at the OT LLC level would be permitted only after achievement of sustainable production for Panel 0 (expected in the first half of 2023). The ability of the Company to implement all of the funding elements contemplated by the Amended HoA depends in part upon the adherence to that principle by the Government of Mongolia.

RTIH, as the holder of a majority of the Common Shares and as manager of Oyu Tolgoi, has the ability to exert a significant degree of control over the Company, OT LLC and Oyu Tolgoi.

RTIH, a wholly-owned subsidiary of Rio Tinto, together with other Rio Tinto affiliates, owns a majority of the outstanding Common Shares and can exercise its voting power to elect all of the members of the Board of Directors, subject to applicable securities legislation. RTIH can also exercise its majority voting power to unilaterally pass any ordinary resolution submitted to a vote of the Company’s shareholders, except for resolutions in respect of which RTIH is an interested party and for which disinterested shareholder approval is required, and RTIH also effectively has the power to block or vote down any other matter proposed by the Company or any minority shareholder. In addition, under the heads of agreement entered into between Turquoise Hill and RTIH in December 2010 (as amended, the 2010 HoA) and a management agreement between an affiliate of RTIH and OT LLC entered into in June 2015, such affiliate of RTIH was appointed as manager of Oyu Tolgoi which provides such affiliate of RTIH with responsibility for the management of Oyu Tolgoi.

RTIH is also able to exert a significant degree of control over the management, development and operation of Oyu Tolgoi, as well as the Company, through a series of governance mechanisms and restrictive covenants established under the private placement agreement between the Company and RTIH in October 2006 (the Private Placement Agreement), the 2010 HoA and other agreements entered into with Rio Tinto. These include a technical committee established under the Private Placement Agreement and an operating committee established under the 2010 HoA (the Operating Committee), through which RTIH is able to control decisions respecting the business of OT LLC subject to a veto of the Company in respect of certain special matters. The Operating Committee is comprised of two nominees from each of the Company and RTIH, with an RTIH nominee serving as chairman. All decisions of the Operating Committee, other than decisions in respect of certain defined special matters, require a majority vote of the members with a casting vote of the chair in the case of a tie. Decisions in respect of “special matters”, such “special matters” being set out in the 2010 HoA, require a unanimous vote of the members of the Operating Committee, giving the Company a veto in such matters. The Operating Committee meets in advance of each meeting of the OT LLC             Board to make decisions with respect to all matters to be adopted by resolution at such meetings, and the nominees of RTIH and the Company to the OT LLC Board must exercise their voting rights under the ARSHA in accordance with the instructions given by the Operating Committee. The 2010 HoA contains provisions regarding the calling of meetings of the Operating Committee, the establishment of quorum and related procedural matters.

The interests of RTIH and the interests of the Company’s other shareholders may not necessarily be aligned in all respects and there can be no assurance that RTIH, together with other Rio Tinto affiliates, will exercise its rights as the Company’s majority shareholder and its other contractual rights under the Private Placement Agreement, the 2010 HoA and other agreements entered into with Rio Tinto in a manner that is consistent with the best interests of either the Company or the Company’s other shareholders.

The actual cost of developing Oyu Tolgoi may differ materially from the Company’s estimates, and development may involve unexpected problems or delays.

The Company’s estimates regarding the cost of development and operation of Oyu Tolgoi are estimates only and are based on many assumptions and analyses made by the Company’s management in light of their experience and perception of historical trends, current conditions and expected future developments, as well as other factors management believes are appropriate in the circumstances. These estimates and the assumptions upon which they are based are subject to a variety of risks and uncertainties and other factors that could cause actual expenditures to differ materially from those estimated. If these estimates prove incorrect, the total capital expenditures required to complete development of the underground components of Oyu Tolgoi may increase, which may have a material adverse impact on the Company, its results of operations, financial condition and share price. Specifically, the estimated schedule and cost for the completion of the underground development, including in respect of timing of sustainable first production and the development capital spend for the project,

December 31, 2021 Page |  35        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

may differ materially from what was announced following completion of the Definitive Estimate review and further technical work to be conducted in connection therewith.

In October 2021, the Company announced that previously disclosed underground delays and open-pit metal deferrals had caused an increase in the Company’s base case estimated incremental funding requirement to $3.6 billion. In October 2021, the Company also announced that COVID-19 restrictions had adversely impacted both open-pit operations and underground development, which, through the end of the third quarter of 2021, had resulted in a cumulative increase of $140 million to the estimate of underground development capital included in the Definitive Estimate.

Further, in November 2021, the Company elaborated that it then expected sustainable production for Panel 0 to be delayed to the first half of 2023, broadly in line with the then forecast 6-month delay to undercut commencement, and that the previously announced 9-month delay on Shafts 3 and 4, in combination with the COVID-related reduced underground development progress and expected changes to mining scope, would result in delays to the start of Panel 2 by approximately 14-16 months compared to the Definitive Estimate, and to the start of Panel 1 by approximately 11 months compared to the Definitive Estimate.

On January 24, 2022 in connection with the announcement of the GoM Agreements and the entering into of the Amended HoA, the Company announced that its estimated base case incremental funding requirement was US$3.4 billion as of December 31, 2021, prior to giving effect to the funding elements in the Amended HoA. The Company further announced that the OT LLC Board had unanimously approved the commencement of the undercut and that, as a result of that decision, Turquoise Hill continued to expect that sustainable production for Panel 0 would be achieved in the first half of 2023. However, there can be no assurance that all key elements of the Amended HoA, including the Re-profiling of existing senior debt or obtaining SSD can be secured within the timeframes set out in the Amended HoA or on terms acceptable to Rio Tinto and the Company, or at all. In addition, there can be no assurance that the conditions precedent to the obligation of RTIH under the Amended HoA to provide the Co-Lending Facility and make the US$300 million short-term bridge financing available will be satisfied, which could all result in delays to the project development schedule. Further, in such circumstances, the Company could be required to issue significant amounts of additional equity.

In addition to the requirements of the Investment Agreement, there are also a number of uncertainties inherent in the development and construction of any new or existing mine, including Oyu Tolgoi. These uncertainties include the timing and cost, which can be considerable, of the construction of mining and processing facilities; the availability and cost of skilled labour; the ongoing impacts of COVID-19 on both open-pit operations and underground development; ground and rock mass conditions and stability, the impact of fluctuations in commodity prices, process water, power and transportation, including costs of transport for the supply chain for Oyu Tolgoi, which requires routing approaches which have not been fully tested; the annual usage fees payable to the local province for sand, aggregate and water; the availability and cost of appropriate smelting and refining arrangements; and the need to obtain necessary environmental and other government permits, such permits being on reasonable terms, and the timing of those permits. The cost, timing and complexities of mine construction and development are increased by the remote location of a property such as Oyu Tolgoi.

It is common in mining operations and in the development, construction or expansion of existing facilities to experience unexpected problems and delays during such activities, which may cause delays in the commencement or expansion of mineral production or sustainable production. Such delays could have unforeseen impacts on disclosed project economics. Accordingly, there is no assurance that the current or future development, construction or expansion activities will be successfully completed within cost estimates, on schedule or at all and, if completed, there is no assurance that such activities will result in profitable mining operations.

The mineral resource and mineral reserve estimates are estimates only and are subject to change based on a variety of factors, some of which are beyond the Company’s control.

The estimates of mineral reserves and mineral resources in the AIF, including the anticipated tonnages and grades that are expected to be achieved or the indicated level of recovery that will be realised, are estimates and no assurances can be given as to their accuracy. Such estimates are, in large part, based on interpretations of geological data obtained from drill holes and other sampling techniques and modelling assumptions and

December 31, 2021 Page |  36        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

parameters. Large-scale continuity and character of the Company’s deposits will only be determined once significant additional drilling and sampling have been completed and analysed. Actual mineralisation or formations may be different from those predicted. Reserve and resource estimates are materially dependent on prevailing metal prices and the cost of recovering and processing minerals at the individual mine sites.

The estimated mineral resources and mineral reserves described in the AIF should not be interpreted as assurances of commercial viability or potential or of the profitability of any future operations. Investors are cautioned not to place undue reliance on these estimates.

In addition, inferred mineral resources are quoted in the AIF. Inferred mineral resources have a great amount of uncertainty as to their existence, and economic and legal feasibility. Accordingly, there is no assurance that inferred mineral resources will ever be upgraded to a higher category. Investors are cautioned not to assume that part or all of an inferred mineral resource exists, or is economically or legally mineable.

There are numerous uncertainties inherent in estimating quantities of mineral reserves and resources. The estimates referenced in the AIF are based on various assumptions relating to commodity prices and exchange rates during the expected life of production, mineralisation of the area to be mined and the sequencing of mining of various areas, changes or updates to the mine design or mine plan for underground development, the projected cost of mining, and the results of additional planned development work. Actual future production rates and amounts, revenues, taxes, operating expenses, environmental and regulatory compliance expenditures, development expenditures, and recovery rates may vary substantially from those assumed in the estimates. Many of the projections and estimates are based on subjective views and assumptions. Any significant change in these assumptions, including changes that result from variances between projected and actual results, could result in material downward revision to current estimates, which may have a material adverse impact on the Company and its share price.

The Company’s actual production, revenues and capital expenditures may differ materially from mineral reserve estimates.

Market fluctuations in the price of metals or increases in the costs to recover metals from the Company’s mining projects may render mining of ore reserves uneconomical and affect the Company’s operations in a materially adverse manner. Moreover, various short-term operating factors, or changes, revisions or updates to the mine design or mine plan, may cause a mining operation to be unprofitable in any particular accounting period or to be worth less over the long term on a net present value (NPV) basis.

Prolonged declines in the market price of metals may render reserves containing relatively lower grades of mineralisation uneconomic to exploit and could materially reduce the Company’s reserves and resources. Should such reductions occur, material write-downs of the Company’s investments in mining properties or the discontinuation of development or production might be required, and there could be cancellations of or material delays in the development of new projects, increased net losses and reduced cash flow. The estimates of mineral reserves and resources attributable to a specific property are based on internationally accepted engineering and evaluation principles. The estimated amount of contained metals in proven mineral reserves and probable mineral reserves does not necessarily represent an estimate of a fair market value of the evaluated properties.

The Company uses prices reflecting market pricing projections in the financial modelling for Oyu Tolgoi which are subjective in nature. It should be expected that actual prices will be different than the prices used for such modelling (either higher or lower), and the differences could be significant.

A number of the uncertainties relate to the costs and availability of smelting services for the metals mined from Oyu Tolgoi, which require arrangements with third parties and involve the potential for fluctuating costs to transport the metals and fluctuating costs and availability of such services. These costs can be significantly impacted by a variety of industry-specific and also regional and global economic factors (including, among others, those which affect commodity prices). Many of these factors are beyond the Company’s control.

December 31, 2021 Page |  37        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

While Mineral Reserves remain stable, ongoing studies designed to optimise grade while minimising production risk in response to geotechnical conditions and other constraints on Hugo North Lift 1 may impact, either negatively or positively, the timing of metal production over the mine life.

Recent and future amendments to Mongolian laws and regulations, whether actual or the interpretation thereof, could adversely affect the Company’s activities, its mining rights in Oyu Tolgoi, or make it more difficult or expensive to develop such project and carry out mining in Mongolia.

The Government of Mongolia has put in place a legislative framework and environment for foreign direct investment, including constitutional amendments, laws and policies specific to the resource sector. However, there are political constituencies within Mongolia that have espoused ideas that would not be regarded by the international mining industry as conducive to foreign investment if they were to become law or official government policy, such as amendments relating to the purpose and principles surrounding the use of Mongolian natural resources, which could impact the distribution and allocation of social and economic benefits from mineral deposits of strategic importance in Mongolia, including the deposits of Oyu Tolgoi.

As such, it is not possible to know when, if ever, and in what form these amendments could be adopted and there can be no assurance that the present or future Parliament will refrain from enacting legislation, including constitutional amendments, that undermines the Investment Agreement or otherwise adversely impacts Oyu Tolgoi or the interests held by the Company in its mining, development and exploration properties. There can also be no assurance that the present or a future government will refrain from adopting government policies or seeking to renegotiate the terms of the Investment Agreement in ways that are adverse to the Company’s interests or that impair the Company’s ability to develop and operate Oyu Tolgoi or other projects on the basis presently contemplated, which may have a material adverse impact on the Company and its share price.

In addition, mining operations, exploration and related financing activities are subject to extensive laws and regulations. These relate to production, development, exploration, exports, imports, taxes and royalties, labour standards, occupational health, waste disposal, protection and remediation of the environment, access to water, mine decommissioning and reclamation, mine safety, toxic substances, transportation safety and emergency response and other matters.

Compliance with these laws and regulations increases the costs of exploring, drilling, financing, developing, constructing, operating and closing mines and other facilities. It is possible that the costs, delays and other effects associated with these laws and regulations may impact the Company’s decision as to whether to continue to operate in a particular jurisdiction or whether to proceed with exploration or development of properties and the nature of related investing and financing arrangements.

Since legal requirements change frequently, are subject to interpretation and may be enforced to varying degrees in practice, the Company is unable to predict the ultimate cost of compliance with these changes and their effect on operations or other business activities. Furthermore, changes in governments, regulations, interpretations, policies or practices could have an adverse impact on the Company’s future cash flows, earnings or results of operations and financial condition, which may have a material adverse impact on the Company and its share price.

The Investment Agreement commits OT LLC to eventually utilise only Mongolian power sources.

The Investment Agreement commits OT LLC to eventually utilise only Mongolian power sources. In June 2020, OT LLC entered into an amendment to the PSFA with the Government of Mongolia, which reflected a joint prioritisation and progression of a state-owned power plant (SOPP) in accordance with various agreed milestones, and which envisages that the Government of Mongolia would fund and construct a SOPP at Tavan Tolgoi. None of the milestones under the amended PSFA have been met. The Ministry of Energy formally notified Rio Tinto and OT LLC on February 25, 2021 that the Government of Mongolia’s preference is to supply power to the Oyu Tolgoi mine from the Central Energy System through a Mongolian grid electricity supply agreement.

On January 24, 2022, the Company announced that, in connection with the GoM Agreements, the OT LLC Board had approved the signing of the ESA to provide Oyu Tolgoi with a long-term source of power from the

December 31, 2021 Page |  38        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

Mongolian grid on terms fully agreed with the Government of Mongolia, and on January 26, 2022, OT LLC entered into the ESA with, among others, Southern Region Electricity Distribution Network, pursuant to which power will be delivered to the Oyu Tolgoi mine subject to the fulfilment of certain technical conditions. While the Mongolian grid prepares to connect to Oyu Tolgoi, OT LLC will continue to import its power from Inner Mongolia, China under an agreement between NPTG and IMPIC.

However, there is no certainty that technical conditions underlying the ESA will be satisfied, that the required extensions to the power import agreements between NPTG and IMPIC will be obtained, or that any alternative power plant or arrangement for power under the amended PSFA will be sufficient to meet the Company’s future needs or be available in a timely manner. Despite the Company’s best efforts, the ability to meet its obligations under the Investment Agreement, the amended PSFA or any future agreement committing the Company to use Mongolian power sources is an obligation not necessarily within the Company’s control and non-fulfilment of this requirement may result in a default under the Investment Agreement. Such default could result in termination of the Investment Agreement or damages accruing, which may have a material adverse impact on the Company and its share price.

The Investment Agreement and the UDP (to the extent enforceable) include a number of future covenants that may be outside of the control of the Company to perform, a breach of which could have a material adverse effect on the Company and its business.

The Investment Agreement and the UDP, to the extent it remains enforceable, commit the Company to perform many obligations in respect of the development and operation of Oyu Tolgoi. While performance of many of these obligations is within the effective control of the Company, the scope of certain obligations may be open to interpretation. Further, the performance of other obligations may require cooperation from third parties or may be dependent upon circumstances that are not necessarily within the control of the Company. For example:

• Mongolian nationals must represent at least 90% of Oyu Tolgoi employees now that commercial production has been attained in September 2013 (Commercial Production), and 50% of Oyu Tolgoi’s engineers must be Mongolian nationals within five years of achieving Commercial Production (i.e. by September 2018), which targets are achieved, and increasing to 70% after ten years of achieving Commercial Production (i.e. expected after September 2023). Achieving or maintaining these targets is contingent upon the availability of a sufficient number of qualified personnel, which is not wholly within the Company’s control.

• Although OT LLC has achieved Commercial Production, there is a risk that unforeseen mining or processing difficulties may be encountered that could prevent OT LLC from maintaining the required Commercial Production levels.

• OT LLC is obligated, on a priority basis, to purchase and utilise services supplied by Mongolian citizens and/or legal entities, and equipment, raw materials, other materials and spare parts manufactured in Mongolia, to the extent such services and materials are available on a competitive time, cost, quantity and quality basis, and to give preference to Mongolian suppliers of freight and transportation services required for Oyu Tolgoi. Such services, materials and suppliers may not be available to the extent required or may be available upon commercial terms that are less advantageous than those available from other sources.

• OT LLC has community development commitments and social responsibility obligations. There is a risk that OT LLC will be unable to meet the expectations or demands of relevant community stakeholders to the extent contemplated to allow OT LLC to meet its commitments under the Investment Agreement.

• The extension of the term of the Investment Agreement is subject to a number of conditions, including the Company having demonstrated that Oyu Tolgoi has been operated in accordance with industry best practices in terms of national and community benefits, environment and health and safety practices. The inherently subjective nature of these criteria creates the risk that the Company and the Government of Mongolia may disagree as to whether the conditions for extending the term of the Investment Agreement have been met.

December 31, 2021 Page |  39        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

Despite the Company’s best efforts, such provisions are not necessarily within its control and non-fulfilment of any such provision may result in a default or breach under the Investment Agreement (and the UDP, to the extent it remains enforceable). Such a default or breach could result in termination of the Investment Agreement (and the UDP) or damages accruing, which may have a material adverse impact on the Company and its share price.

In addition to the Investment Agreement (and the UDP), the Company is party to a number of other material contractual agreements with a number of third parties, including the Government of Mongolia and Rio Tinto. Should the Company breach any of these agreements, it could face consequences that could have an adverse effect on its share price and/or on the operations of Oyu Tolgoi, the Company’s main asset. Rio Tinto, as the Company’s majority shareholder and as manager of Oyu Tolgoi, could materially affect the business of the Company if it were to claim damages for a breach of an agreement against the Company or require specific performance of an obligation that the Company is unable to comply with.

There are risks associated with mining companies operating sustainably, their community relations and their social licence to operate.

Mining companies are increasingly required to operate in a sustainable manner and to provide benefits to affected communities, including as described in greater detail in the preceding risk factor, and there are risks associated with the Company failing to maintain a “social licence” to operate Oyu Tolgoi. “Social licence” does not refer to a specific permit or licence, but rather is a broad term used to describe community and even governmental acceptance of a company’s plans and activities related to exploration, development or operations on its mineral projects.

The Company places a high priority on its community relationships and responsibilities. Despite its best efforts, there are factors that may affect the Company’s efforts to maintain social licence for Oyu Tolgoi, including national or local changes in sentiment toward mining, evolving social concerns, changing economic conditions and challenges, and the influence of opposition toward mining on local support. There can be no guarantee that social licence can be maintained by the Company, and without strong community support, the ability to secure necessary permits, obtain project financing, and/or move a project into development or operation may be compromised or precluded. Delays attributable to a lack of community support or other community-related disruptions or delays can translate directly into a decrease in the value of a project or into an inability to bring the project to, or maintain, production. The cost of measures and other issues relating to the sustainable development of mining operations may result in additional operating costs, higher capital expenditures, reputational damage, active community opposition and other unforeseeable consequences.

Public health crises, including the ongoing COVID-19 pandemic, have adversely affected the Company’s business, and may continue to do so in the future.

The Company’s business, operations and financial condition have been, and may continue to be in the future adversely, and possibly materially adversely, affected by the outbreak of epidemics or pandemics or other health crises.

The COVID-19 pandemic has significantly disrupted, and continues to significantly disrupt, global health, economic and market conditions, which have already and may again trigger an indeterminate period of slowdown in the global economy and recessions. Despite differing levels of business and commercial re-openings throughout the world, the availability of vaccines and ongoing vaccination programmes in some geographies, the pandemic has had and continues to have adverse (and potentially material adverse) repercussions in the jurisdictions where the Company operates. This is especially the case given the emergence of new variants of the SARS-CoV-2 virus which raise uncertainties regarding the efficacy of existing vaccines. As such, the full impact of the ongoing COVID-19 pandemic, including the impact of the sweeping preventative and mitigating measures that the Company, other businesses and governments, including the Government of Mongolia, have taken and continue to take to combat the spread of the disease, continues to rapidly evolve, creating significant volatility and negative pressure on virtually all national economies as well as financial and commodity markets. Although from time to time there has been an easing of restrictions in certain jurisdictions, some of these restrictions have been reinstated in other jurisdictions, or could be reinstated in the future, to manage a resurgence or new outbreak of COVID-19, including in connection with new variants or mutations of

December 31, 2021 Page |  40        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

the virus. As such, at the present time, it is not possible to predict the duration, severity or scope of the pandemic, and it is extremely challenging for the Company to accurately predict or quantify the extent to which COVID-19 will impact its business, including its operations, the market for its securities and the ability of the Oyu Tolgoi team to advance the project, or the businesses of its vendors, suppliers, construction companies and other counterparties that the Company relies on. The COVID-19 pandemic has adversely affected the ability of the Oyu Tolgoi team to advance the project and it is possible that it may affect, even materially, the Company’s financial condition, liquidity, and future results of operations and outlook due to, among other factors:

• Action taken by governmental and non-governmental bodies, including the Government of Mongolia, to curtail activity in an effort to help slow the spread of COVID-19, including restrictions on both travel and the movement of goods and people within and across borders, and restrictions on the types of businesses that may continue to operate, have caused and are likely to continue to cause significant business interruptions. While work on the underground project continues, the Company’s operations have been and will likely continue in the near and medium terms (and possibly longer) to be disrupted in varying degrees, including as a result of (i) access restrictions, which are preventing teams from OT LLC, Rio Tinto and the Company’s construction partners, who are required to oversee development and provide essential specialist technical services at Oyu Tolgoi, from accessing the site; although some expatriates returned to Mongolia in 2021, and further flights are planned in order to return the required specialists to site continued interruptions to flights are possible as the authorities endeavour to minimise COVID-19 case numbers in Mongolia; and (ii) delays resulting from various measures implemented to slow the spread of COVID-19, including restrictions on the movement of goods within and across borders and curtailed operations in certain jurisdictions, including Mongolia and China, which may, in each case, cause schedule and cost delays, slowdown or temporary suspensions in operations, decreased sales and may expose the Company to penalties or sanctions for breach of contracts or customer agreements, business interruption claims, or even the cancellation or termination of contracts altogether. Since the initial confirmation of COVID-19 cases in Ulaanbaatar and on site and in response to the spread of new COVID-19 variants in Mongolia, local authorities have implemented and continue to implement additional steps to minimise the risk of transmission, which may amplify the aforementioned impacts.

• The spread of COVID-19 has caused and may continue to cause delays to the Company’s announced key project milestones and increases in development capital costs. A number of work fronts have been and continue to be directly impacted by quarantine requirements and international travel restrictions related to COVID-19, including the delay of expected sustainable production for Panel 0 announced by the Company in November 2021 until the first half of 2023, and the 9-month delay to Shafts 3 and 4, which in turn will result in delays to the start of Panels 1 and 2. There were significant COVID-19 related challenges at Oyu Tolgoi in 2021 and into 2022, causing the site to operate at less than 50% of its planned personnel for all of 2021, although 2021 production targets were met and there was progress on underground development. Ongoing impacts to domestic and international movement have and could continue to impact key project milestones.

• Effects of the COVID-19 pandemic, including ongoing restrictions in place to curtail its spread, may adversely impact the Company’s ability to secure on a timely basis a long-term domestic source of power for the mine as required under the Investment Agreement.

• Suppliers have declared and may continue to declare force majeure on their contracts with the Company. In addition, the continued impacts of the COVID-19 pandemic may force the Company to declare force majeure on contracts, due to the inability to meet contractual obligations. As an example, Oyu Tolgoi has notified its project lenders that the COVID-19 pandemic constitutes a force majeure event under its project finance facilities, which will have the effect of extending the June 30, 2028 project longstop date under those facilities for the duration of the force majeure. Additionally, in March 2021, the Company announced that OT LLC had declared force majeure in connection with customer contracts for concentrate as a result of Oyu Tolgoi shipments of concentrate to its Chinese customers being suspended due to COVID-19 health and safety precautions related to Chinese-Mongolian border crossings. While these shipments resumed in April 2021, the transport team is continually adapting to the changing precautionary measures against COVID-19 transmission risks and the force majeure will remain in place until sustained volumes of convoys are crossing the border to ensure Oyu Tolgoi’s

December 31, 2021 Page |  41        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

ability to meet its ongoing commitments to customers and to return onsite concentrate inventory to target levels.

• The ongoing pandemic has, and likely will continue to, adversely affect global economies and financial markets resulting in an economic downturn that has had, and likely will continue to have, an adverse effect on the demand for base metals and Turquoise Hill’s future prospects, including significant fluctuations in copper prices and the concentrate market. Financial difficulties for smelters as a result of the COVID-19 pandemic and logistics disruptions in China have prevented, and may continue to prevent, smelters from taking feed and shipping acid out. Unstable market conditions have led market participants to flee to cash, causing significant fluctuations in gold prices.

• The continued spread of COVID-19, including the emergence of variants and further resurgences of the SARS-CoV-2 virus, has impacted, and may continue to impact, the health of the Company’s personnel, partners and contractors, including members of its management team and the availability of industry experts and personnel crucial to the continued operation and development of Oyu Tolgoi. The ongoing pandemic may also make it difficult to recruit, attract and retain skilled personnel, reducing the availability of its workforce, as well as its productivity, and causing human impact that may, in turn, negatively affect its business. These impacts may be compounded by other seasonal illnesses, such as the seasonal flu.

• Increased health risks associated with continued operations during the ongoing COVID-19 pandemic may result in the Company incurring increased medical costs for its personnel that continue to work during this time, and may result in increases in insurance premiums payable by the Company.

• Unstable market conditions have caused, and the resurgence or continued spread of the pandemic in various countries across the world may once again cause, significant volatility or decline in the trading price of the Company’s securities. The Company may have difficulty accessing debt and equity capital on attractive terms, or at all, given severe disruption or instability in the global financial markets and deteriorations in credit and financing conditions. Further, this could adversely impact the Company’s ability to secure the significant incremental funding it will require to sustain its underground development over and above its available liquidity.

• The emergence and spread of new COVID-19 variants including, but not limited to, the Omicron variant, may contribute to and worsen the above-listed factors if the mutations underlying such variants adversely impact the virus’s properties, such as how easily it spreads, the associated disease severity and the performance of vaccines, therapeutic medicines and diagnostic tools, and by resulting in the prolonging of, or imposition of additional, restrictive public health and social measures.

Due to the unprecedented and ongoing nature of the COVID-19 pandemic and the fact that the response to the pandemic is evolving in real time, estimates of the economic impacts of the COVID-19 pandemic remain inherently highly uncertain and speculative. While the open-pit at Oyu Tolgoi has continued to operate despite the ongoing COVID-19 pandemic, and the Company has made efforts to manage and mitigate the aforementioned risks, such efforts may not sufficiently mitigate the negative impacts of COVID-19 on the business and the effectiveness of these efforts and the extent to which the COVID-19 pandemic affects the Company’s business will depend on factors beyond its control, including the duration, severity and scope of the pandemic and current resurgences of the virus, the likelihood, timing, duration and scope of further resurgences or accelerating spread of COVID-19, the measures taken or necessary to contain the spread of such outbreaks, the timing, development and distribution of effective vaccines and/or effective therapeutic treatments for COVID-19, and the prolonged effects on different members of the Company’s supply chain. Even after the COVID-19 pandemic is over, the Company may continue to experience material adverse effects to its business, financial condition and prospects as a result of the continued disruption in the global economy and any resulting recession, the effects of which may persist beyond that time.

The Company may be subject to public allegations, regulatory investigations or litigation that could materially and adversely affect the Company’s business.

December 31, 2021 Page |  42        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

The Company at one time conducted exploration and mining operations in a number of jurisdictions and, as a result of such activities and operations or current or future activities and operations, including, without limitation, jurisdictions subject to various sanctions regimes, may be subject to governmental or regulatory investigations and claims in or regarding those jurisdictions, including jurisdictions in which it is not currently active. A serious allegation, formal investigation by regulatory authorities or other legal claim (in each case, regardless of the ultimate decision) could have a material adverse impact on the Company, its reputation and its share price.

All industries, including the mining industry, are subject to legal claims, with and without merit. The Company may be required to defend against any such public allegations, regulatory investigations or other claims that are asserted against it, or may deem it necessary or advisable to initiate legal proceedings to protect its rights. The expense and distraction of any such public allegations, regulatory investigations or other claims or proceedings, even with respect to claims that have no merit and whether or not resolved in the Company’s favour, could materially and adversely affect its business, operating results, and financial condition. There may also be considerable cost and disruption in responding to allegations, investigations or claims and taking any remedial action. Further, if an investigation, claim or proceeding were resolved against the Company or if it were to settle any such dispute, the Company may be required to pay damages and costs or refrain from certain activities, any of which could have a material adverse impact on the Company’s business, operating results, and financial condition.

Securities class action litigation is also becoming more prevalent and is often brought against companies following periods of volatility in the market price of their securities. In October 2020, a class action complaint was filed in the U.S. District Court, Southern District of New York against the Company, certain of its current and former officers as well as Rio Tinto and certain of its officers, which complaint was first amended on March 16, 2021 and again on September 16, 2021. Further, in January 2021, a proposed class action was initiated in the Superior Court in the District of Montréal against the Company and certain of its current and former officers, which complaint was first amended on July 27, 2021 and again on January 7, 2022. See “Class Action Complaints” of this MD&A.

A successful class action lawsuit, by its nature, could result in a sizable damage award that could negatively affect the Company’s financial or operating results. The Company cannot predict the outcome of pending or threatened proceedings or actions or any other litigation, which proceedings could result in substantial costs and diversion of management’s attention and resources. If the Company cannot resolve disputes favourably, or if there is significant reputational damage as a result of any real or frivolous claim, the Company may face increased costs or liabilities to third parties, impairment of assets, lost revenues and the Company’s activities and operations, financial condition, results of operations, future prospects and share price may be adversely affected.

The Company is subject to anti-corruption legislation.

The Company is subject to the United States’ Foreign Corrupt Practices Act and other similar legislation, such as, but not necessarily limited to, Canada’s Corruption of Foreign Public Officials Act (collectively, Anti-Corruption Legislation), which prohibits the Company or any director, officer, employee, consultant or agent of the Company or any shareholder of the Company acting on its behalf from giving, paying, offering to give or pay, or authorising the giving or payment of any reward, advantage, benefit or anything of value to any foreign government or public official, government staff member, government employee, employee of any international public organisation, political party, or political candidate in an attempt to obtain or retain business, obtain an advantage in the course of business, or to otherwise induce or influence a person working in an official capacity. The Anti-Corruption Legislation also requires public companies to make and keep books and records that accurately and fairly reflect their transactions and to devise and maintain an adequate system of internal accounting controls. The Company’s international activities create the risk of unauthorised payments or offers of payments by its directors, officers, employees, consultants or agents, even though they may not always be subject to its control. The Company strictly prohibits these practices by its directors, officers, employees, consultants and agents. However, the Company’s existing safeguards and any future improvements may prove to be less than effective, and its directors, officers, employees, consultants or agents may engage, or may previously have engaged, in conduct for which the Company might be held responsible. Any failure by the Company to adopt appropriate compliance procedures and ensure that its directors, officers, employees, consultants and agents comply with the Anti-Corruption Legislation and applicable laws and regulations in

December 31, 2021 Page |  43        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

foreign jurisdictions could result in substantial penalties or restrictions on its ability to conduct its business, which may have a material adverse impact on the Company and its share price.

Mining projects are sensitive to the volatility of metal prices.

The long-term viability of Oyu Tolgoi depends in large part on the world market prices of copper, gold and silver. The market prices for these metals are volatile and are affected by numerous factors beyond the Company’s control. These factors include international economic and political trends, expectations of inflation, global and regional demand, currency exchange fluctuations, interest rates and global or regional consumption patterns, speculative activities, increased production due to improved mining and production methods and optimisation of existing mine designs or mine plans, and economic events, including the performance of Asia’s economies. Ongoing worldwide economic uncertainty could lead to prolonged recessions in many markets which may, in turn, result in reduced demand for commodities, including base and precious metals. It is anticipated that there will be continued volatility in metal prices.

The aggregate effect of these factors on metal prices in the medium or long term is impossible to predict. Should prevailing metal prices be depressed or below variable production costs of the Company’s current and planned mining operations for an extended period, losses may be sustained and, under certain circumstances, there may be a curtailment or suspension of some or all of the Company’s mining, development and exploration activities. The Company would also have to assess the economic impact of any sustained lower metal prices on recoverability and, therefore, the cut-off grade and level of the Company’s reserves and resources. These factors could have an adverse impact on the Company’s future cash flows, earnings, results of operations, stated reserves and financial condition, which may have a material adverse impact on the Company and its share price.

There is no guarantee that any exploration or development activity will result in additional commercial production.

Development of a mineral property is contingent upon obtaining satisfactory exploration results. Mineral exploration and development involve substantial expenses and a high degree of risk, which even a combination of experience, knowledge and careful evaluation may not be able to adequately mitigate. There is no assurance that additional commercial quantities of ore will be discovered on any of the Company’s properties, including Hugo North Lift 2, Hugo South and Heruga. There is also no assurance that, even if commercial quantities of ore are discovered, a mineral property will be brought into commercial production. The discovery of mineral deposits is dependent upon a number of factors, not the least of which is the technical skill of the exploration personnel involved. The commercial viability of a mineral deposit, once discovered, is also dependent upon a number of factors, some of which are the particular attributes of the deposit, such as size, grade and proximity to infrastructure, metal prices and government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection. In addition, assuming discovery of a commercial ore body, depending on the type of mining operation involved, several years can elapse from the initial phase of drilling until commercial operations are commenced. Most of the above factors are beyond the control of the Company.

Under Mongolia’s Resolution No. 175, the Government of Mongolia may seek contribution or reimbursement from OT LLC for compensation it provides to third parties adversely affected by Resolution No. 175.

On June 8, 2011, the Government of Mongolia passed Resolution No.175, the purpose of which is to authorise the designation of certain land areas for “State special needs” with certain defined areas in proximity to Oyu Tolgoi. These State special needs areas are to be used for infrastructure facilities for the development of Oyu Tolgoi.

Most of the areas designated for State special needs are subject to existing mineral exploration and mining licences issued by the Government of Mongolia to third parties and, in certain cases, a mineral resource has been declared and registered with the applicable governmental authorities in respect of such licences.

December 31, 2021 Page |  44        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

In accordance with the terms of Resolution No. 175 and the Minerals Law (2006), the Government of Mongolia will be responsible for compensating third parties whose right to use and access the subject land area is adversely affected by the application of Resolution No. 175. The Minerals Law specifically encourages non-monetary compensation where the Government of Mongolia issues to such third parties a mineral exploration or mining licence in land areas of which mineral resources are identified by a geological study or exploration works with state funding, if it reaches agreement with the third parties.

To the extent that agreement for non-monetary compensation are not reached with affected third parties, it is not clear at this time whether the Government of Mongolia will expect any compensation that may be payable to such third parties to be borne by OT LLC. If the Government of Mongolia seeks contribution or reimbursement from OT LLC for compensation it provides such third parties, the amount of such contribution or reimbursement is not presently quantifiable but may be significant. The description of Resolution No. 175 has been provided by OT LLC and has been relied on under Item 3 of NI 43-101 Reliance on Other Experts.

In April 2015, the Standing Committee of the Parliament of Mongolia requested the Government of Mongolia to modify Resolution No. 175 due to an alleged inconsistency between Resolution No. 175 and the Minerals Law and Land Law. OT LLC understands that the Government of Mongolia supports the validity and justification for Resolution No. 175 and that Resolution No. 175 will not be modified or revoked.

In September 2016, one of the affected third parties challenged the validity of Resolution No.175 before an administrative court of Mongolia, and claimed that Resolution No.175 be resolved to be “obviously illegal”. The Government of Mongolia, as a defendant, attended the litigation. In June 2017, the Supreme Court of Mongolia resolved that there is no legal ground under which Resolution No.175 may be deemed to be “obviously illegal.” Resolution 92 resolved nonetheless to revise Resolution No.175 to reflect consideration of the groundwater usage conditions in the Gobi region. Resolution 103 does not make reference to the revision of Resolution No. 175 as one of the required steps to implement Resolution 92 and instead includes a general reference to cooperating on the improvement of water usage.

There can be no assurance that the interests held by the Company in its mining, development and exploration properties are free from defects or that material contractual arrangements between the Company and entities owned or controlled by foreign governments will not be unilaterally altered or revoked.

The Company has investigated its rights to exploit and explore its various properties and, to the best of its knowledge, those rights are in good standing, but no assurance can be given that such rights will not be revoked, or significantly altered, to the detriment of the Company. There can also be no assurance that the Company’s rights will not be challenged or impugned by third parties. The Company has also applied for rights to explore various properties, but there is no certainty that such rights, or any additional rights applied for, will be granted on terms satisfactory to the Company or at all, which may have a material adverse impact on the Company and its share price.

The Company is subject to substantial environmental and other regulatory requirements and such regulations are becoming more stringent. Non-compliance with such regulations, either through current or future operations or a pre-existing condition, could materially adversely affect the Company.

All phases of the Company’s operations are subject to environmental regulations in the various jurisdictions in which it operates and has operated. For example, Oyu Tolgoi is subject to a requirement to meet environmental protection obligations. The Company must complete an environmental protection plan for approval by the Government of Mongolia and complete a report prepared by an independent expert on environmental compliance every three years.

Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.

December 31, 2021 Page |  45        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

Environmental legislation is evolving in a manner which will likely require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their directors, officers and employees. There is no assurance that future changes in environmental regulation, if any, will not adversely affect the Company’s operations. Environmental hazards may exist on the properties in which the Company holds interests which are presently unknown to the Company and which have been caused by previous or existing third-party owners or operators of the properties. Government approvals and permits are also often required in connection with various aspects of the Company’s operations. To the extent such approvals are required and not obtained, the Company may be delayed or prevented from proceeding with planned development or exploration of its mineral properties, which may have a material adverse impact on the Company and its share price.

Amendments to current laws, regulations and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases in capital expenditures or production costs or reductions in levels of production at producing properties or require abandonment or delays in development of new mining properties, which may have a material adverse impact on the Company and its share price.

Previous mining operations may have caused environmental damage at former mining projects of the Company, and if the Company cannot prove that such damage was caused by other operators, its indemnities and exemptions from liability may not be effective.

The Company has received exemptions from liability from relevant governmental authorities for environmental damage caused by previous mining operations at former mining projects. There is a risk, however, that, if an environmental accident occurred at those sites, including with respect to tailings or water contamination, it may be difficult or impossible to assess the extent to which environmental damage was caused by the Company’s activities or the activities of other operators. In that event, the liability exemptions could be ineffective and possibly worthless, which may have a material adverse impact on the Company and its share price.

The Company cannot insure against all of the risks associated with mining.

Production, development and exploration operations on mineral properties involve numerous risks and hazards, including rock bursts, slides, fires, earthquakes or other adverse environmental occurrences; industrial accidents; labour disputes; political and social instability; technical difficulties due to unusual or unexpected geological formations; failures of pit walls, shafts, head frames, and/or underground workings; and flooding and periodic interruptions due to inclement or hazardous weather conditions.

These risks can result in, among other things, damage to, and destruction of, mineral properties or production facilities; personal injury (and even loss of life); environmental damage including resulting from the presence of tailings or water contamination; delays in mining; monetary losses; and legal liability.

It is not always possible to obtain insurance (or to fully insure) against all such risks and the Company may not be insured against certain or any of these risks as a result of high premiums or other reasons. The occurrence of an event that is not fully covered or covered at all, by insurance, could have a material adverse effect on the Company’s financial condition, results of operations and cash flows and could lead to a decline in the value of the securities of the Company. The Company does not maintain general insurance against political or environmental risks, which may have a material adverse impact on the Company and its share price.

Global climate change

Global climate change could exacerbate certain of the threats facing the Company’s business, including the frequency and severity of weather-related events, resource shortages, changes in rainfall and storm patterns and intensities, water shortages, rising water levels and changing temperatures which can disrupt the Company’s operations, damage its infrastructure or properties, create financial risk to the business of the Company or otherwise have a material adverse effect on the Company’s results of operations, financial position or liquidity. These may result in substantial costs to respond during the event, to recover from the event and possibly to modify existing or future infrastructure requirements to prevent recurrence. Climate change could

December 31, 2021 Page |  46        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

also disrupt the operations of the Company by impacting the availability and cost of materials needed for mining operations and could increase insurance and other operating costs.

Global climate change also results in regulatory risks which vary according to the national and local requirements implemented by each jurisdiction where the Company is present. There continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty. Increased public awareness and concern regarding global climate change may result in more legislative and/or regulatory requirements to reduce or mitigate the effects of greenhouse gas emissions.

The Company does not expect to pay dividends for the foreseeable future.

The Company has not paid any dividends on its Common Shares to date, nor does it contemplate a declaration of payment of dividends until its operations generate sufficient excess cash flow for distribution as it anticipates that it will reinvest the majority of, if not all, future earnings, if any, in the development and growth of Oyu Tolgoi and its business generally. Therefore, investors may not receive any funds unless they sell their Common Shares, and investors may be unable to sell their Common Shares on favourable terms or at all. The Company cannot give any assurance of a positive return on investment or that investors will not lose the entire amount of their investment in Common Shares. Prospective investors seeking or needing dividend income or liquidity are discouraged from purchasing Common Shares.

The Company’s ability to obtain dividends or other distributions from its subsidiaries may be subject to restrictions imposed by law, foreign currency exchange regulations and financing arrangements.

The Company conducts its operations through subsidiaries. Its ability to obtain dividends or other distributions from its subsidiaries may be subject to restrictions or costs on dividends or repatriation of earnings under applicable local law, including any tax obligations, monetary transfer restrictions and foreign currency exchange regulations in the jurisdictions in which the subsidiaries operate or are incorporated. The ability of the Company’s subsidiaries to pay dividends or to make other distributions to the Company is also subject to their having sufficient funds to do so. If its subsidiaries are unable to pay dividends or to make other distributions, the Company’s growth may be inhibited unless it is able to obtain additional equity or debt financing on acceptable terms. In the event of a subsidiary’s liquidation, the Company may lose all or a portion of its investment in that subsidiary. The Company expects to be able to rely on the terms of the Investment Agreement to pay dividends out of Mongolia, subject to certain restrictions contained in the Investment Agreement, but will be unable to do so in respect of projects that are not covered by the terms of the Investment Agreement, which may have a material adverse impact on the Company and its share price.

There is no assurance that the Company will be capable of consistently producing positive operating cash flows, failing which capital may not at all times be available on terms acceptable to the Company or at all.

OT LLC generated positive operating cash flows in 2021. However, there is no assurance that the Company will be capable of producing positive cash flow on a consistent basis or for a sustained period of time. For instance, a reduction or delay in orders from leading customers could have a material adverse effect upon the Company’s results of operations, including operating cash flows. Such reduction or delay in orders from leading customers may be due to market, economic or competitive conditions and customers that previously accounted for significant revenue may not necessarily generate similar levels of or any revenue in any future period. The failure to obtain new customers or repeat orders from existing customers may materially affect the Company’s operating results, including operating cash flows. The Company anticipates that its exposure to a group of key customers in any given fiscal year will continue for the foreseeable future. There is a risk that existing customers will elect not to do business with the Company in the future or will experience financial or other difficulties. In addition, suppliers have declared and may continue to declare force majeure on their contracts with the Company, and continued impacts of the COVID-19 pandemic may force the Company to declare force majeure on customer contracts due to the inability to meet contractual obligations. In March 2021, the Company announced that OT LLC had declared force majeure in connection with customer contracts for concentrate as a result of Oyu Tolgoi shipments of concentrate to its Chinese customers being suspended due to COVID-19 health and safety precautions related to Chinese-Mongolian border crossings. While these shipments resumed

December 31, 2021 Page |  47        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

in April 2021, changing precautionary measures against COVID-19 transmission risks may continue to significantly disrupt shipments of concentrate to customers.

If as a result of these or other factors the Company’s estimated base case incremental funding requirement of US$3.4 billion as of December 31, 2021, prior to giving effect to the funding elements in the Amended HoA, increases significantly and is not capable of being addressed within the framework of the Amended HoA, the Company may be required to make arrangements for additional capital, whether through project debt financing or otherwise, to continue open-pit operations as currently planned or in respect of additional funding requirements for the underground mine or for the power plant.

If such additional capital is required, the Company may be required to access securities markets. Such markets throughout the world are cyclical and, over time, tend to undergo high levels of price and volume volatility, and the market price of securities of many companies, particularly those in the resource sector, can experience wide fluctuations which are not necessarily related to the operating performance, underlying asset values or prospects of such companies. Increased levels of volatility and resulting market turmoil could adversely impact the Company and its share price. In addition, in the past, following periods of volatility in the market price of a particular company’s securities, securities class action litigation has often been brought against that company. The Company cannot provide assurance that similar litigation will not occur in the future with respect to it. Such litigation could result in substantial costs and a diversion of management’s attention and resources, which could have a material adverse effect upon the Company’s business, operating results, and financial condition.

If the Company is required to access credit markets to carry out its development objectives, the state of domestic and international credit markets and other financial systems could affect the Company’s access to, and cost of, capital. If these credit markets were significantly disrupted, such disruptions could make it more difficult for the Company to obtain, or increase its cost of obtaining, capital and financing for its operations. Such capital may not be available on terms acceptable to the Company or at all, which may have a material adverse impact on the value of Oyu Tolgoi and, consequently, on the Company and its share price. In addition, as part of the GoM Agreements, the Company has agreed not to incur additional debt financing at the OT LLC level prior to sustainable production for Panel 0 being achieved, currently expected in the first half of 2023.

The Company’s prospects depend on its ability to attract and retain key personnel.

Recruiting and retaining appropriately qualified personnel is critical to the Company’s success. The number of persons skilled in the construction, operation, development and exploration of mining properties is limited and competition for such persons is intense. The ongoing COVID-19 pandemic may also make it difficult to recruit, attract and retain skilled personnel, reducing the availability of its workforce, as well as its productivity, and causing health and safety impact that may, in turn, negatively affect its business. The Company believes that it has been successful in recruiting the necessary personnel to meet its corporate objectives but, as the Company’s business activity grows, it will require additional key financial, operational, technical, mining and management personnel, as well as additional staff on the operations side. The Company is also dependent on Rio Tinto for the secondment of skilled labour at Oyu Tolgoi, particularly in the construction and development phases. Although the Company believes that it will be successful in attracting and retaining qualified personnel, including qualified secondees on a timely basis from Rio Tinto, there can be no assurance of such success.

In addition, pursuant to the terms of the Investment Agreement, OT LLC is obligated to hire a specific number of Mongolian nationals following the achievement of Commercial Production. Among other obligations, OT LLC must use its best endeavours to ensure that 50% of its engineers are Mongolian nationals within five years of achieving Commercial Production (i.e. by September 2018), which target is achieved, and increasing to 70% after ten years of achieving Commercial Production (i.e. after September 2023) (and failure to meet these levels will result in financial penalties).

The Company may from time to time hold substantial funds in cash, cash equivalents, loans and receivables, and other deposits and there is a risk that financial market turmoil or other extraordinary events could prevent the Company from obtaining timely access to such funds or result in the loss of such funds.

December 31, 2021 Page |  48        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

The Company may from time to time hold substantial funds in cash, cash equivalents and other deposits, including treasury bills, money market funds, liquidity funds, bank deposits, and receivables and deposits with related parties. Management has adopted a conservative investment policy with respect to such funds, as the Company may require that these funds be used on short notice to support its business objectives. Nevertheless, there is a risk that an extraordinary event in financial markets generally or with respect to an obligor under an investment individually will occur that prevents the Company from accessing its funds. Such an event could, in the case of delayed liquidity, have a negative impact on the implementation of time sensitive business objectives that require access to such funds or such an event could, in extreme circumstances, result in the loss of some or all of such funds.

The Company may experience cybersecurity threats, which could result in disruptions in business operations and adverse operating results.

The Company relies on secure and adequate operations of information technology systems in the conduct of its operations. Access to and security of the information technology systems are critical to the Company’s operations. To the Company’s knowledge, it has not experienced any material losses relating to disruptions to its information technology systems. The Company has implemented ongoing policies, controls and practices to manage and safeguard the Company and its stakeholders from internal and external cybersecurity threats and to comply with changing legal requirements and industry practice. The Company is also dependent on Rio Tinto to manage the information technology systems of Oyu Tolgoi. Given that cyber risks cannot be fully mitigated and the evolving nature of these threats, the Company may not have the resources or technical sophistication to anticipate, prevent, or recover from cyber attacks and cannot assure that its information technology systems are fully protected from cybercrime or that the systems will not be inadvertently compromised, or without failures or defects. Disruptions to the Company’s information technology systems, including, without limitation, security breaches, power loss, theft, computer viruses, cyber-attacks, natural disasters, and non-compliance by third-party service providers and inadequate levels of cybersecurity expertise and safeguards of third-party information technology service providers, may adversely affect the operations of the Company as well as present significant costs and risks including, without limitation, loss or disclosure of confidential, proprietary, personal or sensitive information and third-party data, material adverse effect on its financial performance, compliance with its contractual obligations, compliance with applicable laws, damaged reputation, remediation costs, potential litigation, regulatory enforcement proceedings and heightened regulatory scrutiny.

The Company may be a passive foreign investment corporation (PFIC), which could have adverse U.S. federal income tax consequences to U.S. holders of Common Shares.

If the Company were to constitute a PFIC within the meaning of Section 1297 of the United States Internal Revenue Code of 1986, as amended for any year during a U.S. holder’s holding period, then certain potentially adverse U.S. federal income tax rules would affect the U.S. federal income tax consequences to such U.S. holder resulting from the acquisition, ownership and disposition of Common Shares.

The U.S. Treasury Department has not issued specific guidance on how the income and assets of a non-U.S. corporation such as the Company will be treated under the PFIC rules. Based on financial information for 2021, the Company believes that it was not a PFIC for its tax year ended December 31, 2021, and, based on its current and anticipated business activities and financial expectations, the Company expects that it will not be a PFIC for its current tax year and for the foreseeable future.

The determination as to whether a corporation is, or will be, a PFIC for a particular tax year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations and uncertainty. In addition, there is limited authority on the application of the relevant PFIC rules to entities such as the Company. Accordingly, there can be no assurance that the Internal Revenue Service will not challenge the views of the Company concerning its PFIC status. In addition, whether any corporation will be a PFIC for any tax year depends on its assets and income over the course of such tax year, and, as a result, the Company’s PFIC status for its current tax year and any future tax year cannot be predicted with certainty. Each U.S. holder should consult its own tax advisor regarding the PFIC status of the Company.

The Company may be subject to emerging regulatory and legislative requirements and scrutiny with respect to human rights.

December 31, 2021 Page |  49        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

The Company and its operations may be subject to emerging regulations and legislation globally with respect to human rights issues, including forced labour, child labour and other slavery-like practices, and the Company may face heightened scrutiny from investors, shareholders and other stakeholders regarding such matters. Although the Company supports and respects human rights consistent with the Universal Declaration of Human Rights and seeks to ensure it is not complicit in human rights abuses committed by others, as described in the Company’s Code of Business Conduct, as well as in Rio Tinto’s global code of business conduct that defines the way Rio Tinto manages the economic, social, and environmental challenges of its global operations and in Rio Tinto’s “Modern Slavery & Human Trafficking” statement, the mining industry faces increasing scrutiny by human rights groups and is particularly prone to complaints and/or legal disputes in connection with human rights risks associated with adverse environmental impacts, health and safety, the use of migrant labour, child labour, forced labour and Indigenous peoples.

Compliance with emerging modern slavery, human trafficking and forced labour reporting, training and due diligence regulations and laws could increase the Company’s operating costs. Further, if the Company fails to appropriately identify and respond to human rights abuses or allegations thereof, either internally or externally or through third party business relationships, it could face costly and disruptive enforcement actions, potential litigation, investor and stakeholder dissatisfaction and reputational damage.

RELATED-PARTY TRANSACTIONS

As at December 31, 2021, Rio Tinto’s equity ownership in the Company was 50.8%, which was unchanged from December 31, 2020. The following tables present the consolidated financial statement line items within which transactions with Rio Tinto are reported.

Statements of Income	Year Ended December 31,
(Stated in $000’s of dollars)	2021			2020
Operating and corporate administration expenses:
Cost recoveries - Turquoise Hill		1,151			2,803
Management services payment (i)		(29,706	)		(28,305	)
Cost recoveries - Rio Tinto (ii)		(66,362	)		(38,213	)
Finance income:
Cash and cash equivalents (iii)		-			2,329
Receivable from Rio Tinto (iv)		-			2,123
Finance costs:
Completion support fee (v)		(109,315	)		(110,054	)
Total		(204,232	)		(169,317	)
Statement of Cash Flows	Year Ended December 31,
(Stated in $000’s of dollars)	2021			2020
Cash generated from operating activities
Interest received (iii, iv)		-			9,848
Interest paid (v)		(107,896	)		(107,948	)
Cash flows from investing activities
Receivable from related party: amounts withdrawn (iv)		-			511,284
Expenditures on property, plant and equipment:
Management services payment and cost recoveries - Rio Tinto (i), (ii)		(37,302	)		(75,470	)

December 31, 2021 Page |  50        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

Balance sheets	December 31,
(Stated in $000’s of dollars)	2021			2020
Trade and other receivables		39			852
Prepaid expenses and other assets		81,725			83,144
Trade and other payables:
Management services payment - Rio Tinto (i)		(14,584	)		(13,137	)
Cost recoveries - Rio Tinto (ii)		(39,569	)		(52,415	)
Total		27,611			18,444

(i) In accordance with the ARSHA, which was signed on June 8, 2011, and other related agreements, Turquoise Hill is required to make a management services payment to Rio Tinto equal to a percentage of all capital costs and operating costs incurred by OT LLC from March 31, 2010 onwards. After signing of the UDP on May 18, 2015, the management services payment to Rio Tinto is calculated as 1.5% applied to underground development capital costs, and 3% applied to operating costs and capital related to current operations.

(ii) Rio Tinto recovers the costs of providing general corporate support services and mine management services to Turquoise Hill. Mine management services are provided by Rio Tinto in its capacity as the manager of the Oyu Tolgoi project.

(iii) In addition to placing cash and cash equivalents on deposit with banks or investing funds with other financial institutions, Turquoise Hill may deposit cash and cash equivalents with Rio Tinto in accordance with an agreed upon policy and strategy for the management of liquid resources. At December 31, 2021, no funds were deposited with wholly owned subsidiaries of Rio Tinto. Funds that had been previously deposited earned interest at rates equivalent to those offered by financial institutions or short-term corporate debt.

(iv) As part of project finance, Turquoise Hill appointed 9539549 Canada Inc., a wholly owned subsidiary of Rio Tinto, as service provider to provide post-drawdown cash management services in connection with net proceeds from the project finance facility, which were placed with 9539549 Canada Inc. and returned to Turquoise Hill as required for purposes of Oyu Tolgoi underground mine development and funding. Rio Tinto International Holdings Limited, a wholly owned subsidiary of Rio Tinto, has guaranteed the obligations of the service provider under this agreement. At December 31, 2021, there were no amounts due from 9539549 Canada Inc. Amounts due had earned interest at an effective annual rate of LIBOR plus 2.45%. The interest rate reflected interest receivable at LIBOR minus 0.05% plus a benefit of 2.5% arising on amounts receivable from 9539549 Canada Inc. under the CMSA, which were net settled with the 2.5% completion support fee described in (v) below.

(v) As part of the project finance agreements, Rio Tinto agreed to provide a guarantee, known as the completion support undertaking (CSU) in favour of the commercial banks and the export credit agencies. In consideration for providing the CSU, Turquoise Hill is required to pay Rio Tinto a fee equal to 2.5% of the amounts drawn under the facility. The annual completion support fee of 2.5% on amounts drawn under the facility is accounted for as a borrowing cost and included within interest expense and similar charges. The fee has been settled net of a benefit arising on amounts receivable from 9539549 Canada Inc. under the CMSA described in (iv) above. The fee payment obligation will terminate on the date Rio Tinto’s CSU obligations to the project lenders terminate.

SELECTED QUARTERLY DATA

The Company’s interim financial statements are reported under IFRS applicable to interim financial statements, including IAS 34 Interim Financial Reporting.

($ in millions, except per share information)	Quarter Ended
	Dec-31		Sep-30		Jun-30		Mar-31
	2021		2021		2021		2021
Revenue		503.9		622.8		317.8		526.5
Income for the period		207.3		22.9		118.8		332.1
Income (loss) attributable to owners of Turquoise Hill Resources Ltd		156.4		34.9		96.9		236.7
Basic and diluted earnings per share attributable to owners of Turquoise Hill Resources Ltd (a)		0.78		0.17		0.48		1.18
	Quarter Ended
	Dec-31		Sep-30		Jun-30		Mar-31
	2020		2020		2020		2020
Revenue		405.1		264.4		278.0		130.7
Income for the period		241.6		161.7		72.3		19.0
Income (loss) attributable to owners of Turquoise Hill Resources Ltd		159.9		128.6		72.6		45.2
Basic and diluted earnings per share attributable to owners of Turquoise Hill Resources Ltd (a)		0.79		0.64		0.36		0.22

December 31, 2021 Page |  51        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

(a) Basic and diluted earnings income per share has been recalculated pursuant to the share consolidation completed on October 23, 2020, for all periods presented.

(b) During 2020, the Company determined that it had incorrectly accounted for the impact of capitalised intragroup borrowings in the calculation of non-controlling interests, thereby understating the income attributable to the non-controlling interest in each of the periods ended March 31, 2020, and June 30, 2020. As a result of these adjustments, income attributable to owners of Turquoise Hill decreased by $10.2 million and $12.3 million in the three-month periods ended March 31, 2020, and June 30, 2020, respectively.

Factors necessary to understand general trends in the select unaudited quarterly financial information are summarised below.

Changes in revenue over the periods presented have resulted mainly from variable metal prices combined with changes in sales volume. Revenue in the three consecutive quarters ended September 30, 2021 was lower due to lower sales volumes impacted by lower gold and copper production as the mine transitioned to Phase 4B. Revenue in Q1’20 was negatively impacted by a lower average price of copper as an immediate reaction to the ongoing COVID-19 pandemic. The five consecutive quarters ended December 31, 2021 benefitted from increasing average copper and gold prices together with increased copper and gold production, reflecting the scheduled move to mining higher grade gold areas of Phase 4B. Revenue in Q2’21 was negatively impacted by the force majeure announced by the Company on March 30, 2021; its impacts in Q3’21 had been partially mitigated through the introduction of COVID-19 control measures and increased shipping capacity, but border disruptions have continued into Q4’21 and the force majeure will remain in place until there are sufficiently sustained volumes of convoys crossing the border to ensure OT LLC’s ability to meet its ongoing commitments to customers and to return onsite concentrate inventory to target levels.

Changes in income over the periods presented resulted mainly from the changes in revenue noted above and adjustments made to deferred tax assets. Income for the period in the five consecutive quarters ended March 31, 2021, was positively impacted by deferred tax asset recognition adjustments of $82.0 million, $47.4 million, $131.1 million, $86.1 million and $52.3 million, respectively. Income in Q2’21, Q3’21 and Q4’21 was negatively impacted by deferred tax asset de-recognition adjustments of $10.5 million, $299.9 million and $19.7 million, respectively. The adjustment in Q4’21 was due to the partial utilisation of 2016 losses against Q4’21 income, offset by an increase in temporary differences that relates primarily to tax depreciation on property, plant and equipment.

NON-GAAP AND OTHER FINANCIAL MEASURES

The Company presents and refers to the following non-GAAP financial measures, non-GAAP ratios and supplementary financial measures, which are not defined in IFRS. A description and calculation of each measure is given below and may differ from similarly named measures provided by other issuers. These measures are presented in order to provide investors and other stakeholders with additional understanding of performance and operations at the Oyu Tolgoi mine and are not intended to be used in isolation from, or as a replacement for, measures prepared in accordance with IFRS. These measures and ratios are not standard and therefore may not be comparable to other issuers.

Non-GAAP financial measures

Non-GAAP financial measures are defined in National Instrument 52-112 – Non-GAAP and Other Financial Measures Disclosure (NI 52-112) as a financial measure disclosed that (a) depicts the historical or expected future financial performance, financial position or cash flow of an entity, (b) with respect to its composition, excludes an amount that is included in, or includes an amount that is excluded from, the composition of the most directly comparable financial measure disclosed in the primary financial statements of the entity, (c) is not disclosed in the financial statements of the entity, and (d) is not a ratio, fraction, percentage or similar representation.

Total operating cash costs

The measure of total operating cash costs excludes: depreciation and depletion; exploration and evaluation; charges for asset write-down (including write-down of materials and supplies inventory) and includes management services payments to Rio Tinto and management services payments to Turquoise Hill, which are eliminated in the consolidated financial statements of the Company.

December 31, 2021 Page |  52        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

Total operating cash costs is used internally by management to assess the performance of the business in effectively allocating and managing costs and is provided in order to provide investors and other stakeholders with additional information about the underlying cash costs of OT LLC. Total operating cash costs are relevant to the understanding of the Company’s operating profitability and ability to generate cash flows. The most comparable financial measure that is disclosed in the primary financial statements for total operating costs is “Cost of sales”. A reconciliation operating cash costs for its current and comparative period is presented under “Non-GAAP Ratios” herein below.

Consolidated working capital

Consolidated working capital comprises those components of current assets and liabilities which support and result from the Company’s ongoing running of its current operations. It is provided in order to give a quantifiable indication of the Company’s short-term cash generation ability and business efficiency. As a measure linked to current operations and the sustainability of the business, the Company’s definition of consolidated working capital excludes: non-trade receivables and payables; financing items; cash and cash equivalents; deferred revenue and non-current inventory. Management and investors consider movements in consolidated working capital to understand the company’s cash flow generated from operating activities before interest and tax.

A reconciliation of consolidated working capital to the financial statements and notes is provided below.

Consolidated working capital	December 31,			December 31,
(Stated in $000’s of dollars)	2021			2020
Inventories (current)	$	290,017		$	197,962
Trade and other receivables		16,119			60,012
Trade and other payables:
- trade payables and accrued liabilities		(320,791	)		(315,570	)
- payable to related parties		(54,153	)		(65,552	)
Consolidated working capital	$	(68,808	)	$	(123,148	)

Contractual obligations

The following section of this MD&A discloses contractual obligations in relation to the Company’s project finance, lease, purchase, power and asset retirement obligations. Amounts relating to these obligations are calculated on the assumptions of the Company carrying out its future business activities and operations as planned at the period end. As such, contractual obligations presented in this MD&A will differ from amounts presented in the financial statements, which are prepared on the basis of minimum uncancellable commitments to pay in the event of contract termination. The MD&A presentation of contractual obligations is provided in order to give an indication of future expenditure, for the disclosed categories, arising from the Company’s continuing operations and development projects.

A reconciliation of contractual obligations as at December 31, 2021 to the relevant line items from among the current assets and liabilities in the consolidated financial statements and notes is provided below.

	Project Finance		Purchase		Other Obligations		Power commitments		Lease		Decommissioning
	Facility		obligations						liabilities		obligations
(Stated in $000’s of dollars)
Commitments (MD&A)		4,282,140		383,505		343,768		188,814		31,785		349,666
Cancellable obligations		-		(316,832)		-		(126,014)		-		-
(net of exit costs)
Accrued capital expenditure		-		(40,720)		40,720		-		-		-
Discounting and other adjustments		(124,796)		-		-		-		(6,350)		(196,004)
Financial statement amount		4,157,344		25,953		384,488		62,800		25,435		153,662

December 31, 2021 Page |  53        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

Contractual obligations is used to present contractual and other obligations that are both cancellable or non-cancellable.

Non-GAAP ratios

A non-GAAP ratio is defined by NI 52-112 as a financial measure disclosed that (a) is in the form of a ratio, fraction, percentage or similar representation, (b) has a non-GAAP financial measure as one or more of its components, and (c) is not disclosed in the financial statements. The non-GAAP financial measures used to calculate the non-GAAP ratios below are C1 cash costs, all-in sustaining costs, mining costs and milling costs.

C1 cash costs per pound of copper produced

C1 cash costs is a metric representing the cash cost per unit of extracting and processing the Company’s principal metal product, copper, to a condition in which it may be delivered to customers net of gold and silver credits from concentrates sold. This metric is provided in order to support peer group comparability and to provide investors and other stakeholders with additional information about the underlying cash costs of OT LLC and the impact of gold and silver credits on the operations’ cost structure. C1 cash costs are relevant to understanding the Company’s operating profitability and ability to generate cash flow. When calculating costs associated with producing a pound of copper, the Company deducts gold and silver revenue credits as the production cost is reduced by selling these products.

All-in sustaining costs per pound of copper produced

All-in sustaining costs (AISC) is an extended cash-based cost metric providing further information on the aggregate cash, capital and overhead outlay per unit and is intended to reflect the costs of producing the Company’s principal metal product, copper, in both the short term and over the life-cycle of its operations. As a result, sustaining capital expenditure on a cash basis is included rather than depreciation. As the measure seeks to present a full cost of copper production associated with sustaining current operations, development project capital is not included. AISC allows Turquoise Hill to assess the ability of OT LLC to support sustaining capital expenditures for future production from the generation of operating cash flows.

A reconciliation of total operating cash costs, C1 cash costs and AISC is provided below.

	(Three Months Ended)		(Twelve Months Ended)
C1 costs (Stated in $000’s of dollars)	December 31, 2021	December 31, 2020	December 31, 2021	December 31, 2020
Cost of sales	181,411	173,523	622,329	669,394
Cost of sales: $/lb of copper sold	2.39	2.08	2.02	2.20
Depreciation and depletion	(39,459)	(47,684)	(163,007)	(176,024)
Change in inventory	28,405	8,352	109,212	26,534
Other operating expenses	68,181	57,558	275,487	202,271
Less:
- Inventory (write-down) reversal	(133)	92	3,465	2,703
- Depreciation	(584)	(657)	(2,359)	(5,236)
Management services payment to Turquoise Hill	9,125	6,466	29,706	28,305
Total operating cash costs	246,947	197,650	874,834	747,947
Total operating cash costs: $/lb of copper produced	2.88	2.16	2.43	2.27
Adjustments to total operating cash costs(1)	(1,512)	(3,290)	(30,458)	12,442
Less: Gold and silver revenues	(183,162)	(125,105)	(766,524)	(280,895)
C1 costs ($‘000)	62,273	69,255	77,852	479,494
C1 costs: $/lb of copper produced	0.73	0.76	0.22	1.45
All-in sustaining costs (Stated in $000’s of dollars)
Corporate administration	10,876	9,534	37,699	30,602
Asset retirement expense	2,042	4,752	7,482	4,607
Royalty expenses	22,605	23,460	105,399	63,420
Ore stockpile and stores write-down (reversal)	133	(92)	(3,465)	(2,703)
Other expenses	3,884	316	5,598	4,385
Sustaining cash capital including deferred stripping	40,263	25,413	83,648	59,326
All-in sustaining costs ($‘000)	142,076	132,638	314,213	639,131
All-in sustaining costs: $/lb of copper produced	1.66	1.45	0.87	1.94

⁽¹⁾ Adjustments to total operating cash costs include: treatment, refining and freight differential charges less the 5% Government of Mongolia royalty and other expenses not applicable to the definition of C1 cash cost.

December 31, 2021 Page |  54        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

Mining costs per tonne of material mined

Mining costs per tonne of material mined for the three and twelve months ended December 31, 2021 are calculated by reference to total mining costs of $56.5 million and $190.7 million (Q4’20: $44.2 million and $175.9 million) respectively and total material mined of 24.0 million and 85.0 million tonnes (Q4’20: 23.8 million and 97.7 million tonnes) respectively.

Cost of sales is the most comparable measure for mining and milling costs. Mining and milling costs represent total operating cash costs of Oyu Tolgoi’s open-pit mining and concentrator operations.

Mining, milling and G&A costs per tonne ratios are used internally by management and investors to assess the performance of the business by providing information on cost efficiency across the important components of Oyu Tolgoi’s operations - its open-pit mine, concentrator and support functions.

Milling costs per tonne of ore treated

Milling costs per tonne of ore treated for the three and twelve months ended December 31, 2021 are calculated by reference to total milling costs of $76.1 million and $278.9 million (Q4’20: $69.9 million and $255.4 million) respectively and total ore treated of 10.6 million and 39.1 million tonnes (Q4’20: 9.6 million and 40.2 million tonnes) respectively.

Supplementary financial measures

Supplementary financial measures are defined under NI 52-112 as financial measures (a) which are neither non-GAAP financial measures nor non-GAAP ratios, (b) that are not presented in the financial statements and (c) that are, or are intended to be, disclosed periodically to depict the historical or expected future financial performance, financial position or cash flow. The below are supplementary financial measures that the Company uses to depict its financial performance, financial position or cash flows.

Cost of sales per pound of copper sold

Cost of sales is reported in the consolidated income statement. Cost of sales per pound of copper sold supports management’s objective of efficient cost allocation and is used by management and investors to understand operating profitability.

Capital expenditure on a cash basis for underground-development/underground-sustaining/open-pit

Capital expenditure comprises sustaining and development expenditure on property, plant and equipment, and on intangible assets. This is equivalent to “Expenditures on property, plant and equipment” in the cash flow statement. Capital expenditures have been further disaggregated to reflect the open-pit operations, underground and tailings storage.

This measure is used to support management’s objective of effective and efficient capital allocation as the Company needs to invest in existing assets across our operations in order to maintain and improve productive capacity, and to deliver growth through completion of the underground project.

Total underground spend is not an annual measure but represents total underground capital expenditure on the underground project since January 1, 2016.

G&A costs per tonne of ore treated

G&A costs per tonne of ore treated for the three and twelve months ended December 31, 2021 are calculated by reference to total general & administrative costs. General & administrative costs are equivalent to Oyu Tolgoi administrative expenses of $41.3 million and $156.1 million (Q4’20: $31.5 million and $124.9 million) respectively. Total ore treated for those periods was 10.6 million and 39.1 million tonnes respectively (Q4’20: 9.6 million and 40.2 million tonnes). G&A is used to promote cost effectiveness through measurement of the overhead required to support the business.

December 31, 2021 Page |  55        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

INTERNAL CONTROL OVER FINANCIAL REPORTING AND DISCLOSURE CONTROLS AND PROCEDURES

Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by the Company under applicable securities legislation is gathered and reported to senior management, including the Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), on a timely basis so that appropriate decisions can be made regarding public disclosures.

At the end of the Company’s fiscal year ended December 31, 2021, an evaluation of effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a – 15(e) and 15d – 15(e) of the Exchange Act and under National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109)) was carried out by the Company’s management with the participation of the CEO and CFO. Based upon that evaluation, the Company’s CEO and CFO concluded that as of the end of the fiscal year, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under applicable U.S. and Canadian securities legislation is (i) recorded, processed, summarised and reported within the time periods specified in such legislation and (ii) accumulated and communicated to the Company’s management, including its CEO and CFO, to allow timely decisions regarding required disclosure.

The Company’s management, including the CEO and CFO, believe that any disclosure controls and procedures or internal control over financial reporting, no matter how well conceived and operated, can provide only a reasonable and not absolute assurance that the objectives of the control system are met. Further, the design of a control system reflects the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorised override of the control. The design of any systems of controls is also based in part on certain assumptions about the likelihood of certain events, and there can be no assurance that any design can achieve its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal controls over financial reporting of the Company (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act and in NI 52-109). Internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS and the requirements of applicable U.S. and Canadian securities legislation.

The Company’s CEO and CFO have assessed the effectiveness of the Company’s internal controls over financial reporting as at December 31, 2021 in accordance with Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. Based on this assessment, the Company’s CEO and CFO have determined that the Company’s internal controls over financial reporting were effective as of December 31, 2021 and have certified the Company’s annual filings with the U.S. Securities and Exchange Commission on Form 40-F as required by the U.S. Sarbanes-Oxley Act and with Canadian securities regulatory authorities.

Management reviewed the results of management’s assessment with the Audit Committee of the Company’s Board of Directors. KPMG LLP, independent auditor, has been engaged to audit and provide independent opinions on the Company’s consolidated financial statements and the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. KPMG LLP has expressed an unqualified opinion on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting as of December 31, 2021.

December 31, 2021 Page |  56        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

Changes in internal control over financial reporting

There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the year ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

AUDIT COMMITTEE OVERSIGHT

The Audit Committee reviews, with management and the external auditors, the Company’s MD&A and related consolidated financial statements and approves the release of such information to shareholders. For each audit or quarterly review, the external auditors prepare a report for members of the Audit Committee summarising key areas, significant issues and material internal control weaknesses encountered, if any.

QUALIFIED PERSON

Disclosure of information of a scientific or technical nature in this MD&A in respect of the Oyu Tolgoi mine was approved by Jo-Anne Dudley (FAusIMM(CP)), Chief Operating Officer of the Company. Jo-Anne Dudley is a “qualified person” as that term is defined in NI 43-101.

CAUTIONARY STATEMENTS

Language regarding reserves and resources

Readers are advised that NI 43-101 requires that each category of mineral reserves and mineral resources be reported separately. For detailed information related to Company’s mineral resources and mineral reserves, readers should refer to the AIF of the Company for the year ended December 31, 2021, and other continuous disclosure documents filed by the Company since January 1, 2022 under Turquoise Hill’s profile on SEDAR at www.sedar.com.

Note to United States investors concerning estimates of measured, indicated and inferred resources

This document has been prepared in accordance with the requirements of Canadian securities laws, which differ from the requirements of U.S. securities laws. Unless otherwise indicated, all reserve and resource estimates included in this document have been prepared in accordance with NI 43-101, and the CIM Definition Standards for mineral resources and mineral reserves. NI 43-101 is a rule developed by the Canadian Securities Authorities that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. NI 43-101 differs significantly from the disclosure requirements of the SEC generally applicable to U.S. companies. For example, the terms “mineral reserve”, “proven mineral reserve”, “probable mineral reserve”, “mineral resource”, “measured mineral resource”, “indicated mineral resource”, and “inferred mineral resource” are defined in NI 43-101. These definitions differ from the definitions in the disclosure requirements promulgated by the SEC. Accordingly, information concerning mineral deposits set forth herein may not be comparable with information made public by companies that report in accordance with SEC disclosure requirements.

FORWARD-LOOKING STATEMENTS AND FORWARD-LOOKING INFORMATION

Certain statements made herein, including statements relating to matters that are not historical facts and statements of the Company’s beliefs, intentions and expectations about developments, results and events which will or may occur in the future, constitute “forward-looking information” within the meaning of applicable Canadian securities legislation and “forward-looking statements” within the meaning of the “safe harbour” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements

December 31, 2021 Page |  57        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

and information relate to future events or future performance, reflect current expectations or beliefs regarding future events and are typically identified by words such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “likely”, “may”, “plan”, “seek”, “should”, “will” and similar expressions suggesting future outcomes or statements regarding an outlook. These include, but are not limited to, statements and information regarding: the nature of the Company’s ongoing relationship and interaction with the Government of Mongolia with respect to the continued operation and development of Oyu Tolgoi as and when the GoM Agreements are implemented along with the implementation of Resolution 103; the continuation of undercutting in accordance with the mine plan and design; the actual timing of first sustainable production as well as the lifting of restrictions by the Government of Mongolia on the ability of OT LLC to incur any additional indebtedness; the implementation and successful execution of the updated funding plan that is the subject of the Amended HoA, as such agreement may be further amended or restated, and the amount of any additional future funding gap to complete the Oyu Tolgoi project and the availability and amount of potential sources of additional funding required therefor, all as contemplated by the Amended HoA, as well as potential delays in the ability of the Company and OT LLC to proceed with the funding elements contemplated by the Amended HoA; liquidity, funding sources and funding requirements in general, in particular until sustainable first production is achieved, including the Company’s ability to reach agreement with project finance lenders on the re-profiling of existing debt payments in line with current cash flow projections, as well as the Company (or a wholly-owned subsidiary) and OT LLC entering into a pre-paid copper concentrate sale arrangement; the availability and amount of potential sources of additional funding, including the short-term secured advance to be provided by Rio Tinto to the Company under the Amended HoA; the amount by which a successful re-profiling of the Company’s existing debt would reduce the Company’s currently projected funding requirements; the Company’s ability to conduct one or more equity offerings as contemplated by the Amended HoA in light of future and then prevailing market conditions; the expectations set out in the 2020 OTTR; the timing and amount of future production and potential production delays; statements in respect of the impacts of any delays on achieving first sustainable production and on the Company’s cash flows; expected copper and gold grades; the merits of the class action complaints filed against the Company in October 2020 and January 2021, respectively; the merits of the defence and counterclaim filed by the Government of Mongolia in the international tax arbitration brought by OT LLC and the likelihood of the parties being able to amicably resolve the ongoing tax issues; the timing of studies, announcements and analyses; the status of underground development, including any slowdown of work; the causes of the increase in costs and schedule extension of the underground development; the mine design for Panel 0 of Hugo North Lift 1 and the related cost and production schedule implications; the re-design studies for Panels 1 and 2 of Hugo North Lift 1 and the possible outcomes, content and timing thereof; expectations regarding the possible recovery of ore in the two structural pillars, to the north and south of Panel 0; the possible progression of a SOPP and related amendments to the PSFA, as amended, as well as power purchase agreements and extensions thereto; finalization of an agreement with IMPIC on extension of the current power import arrangements; the timing of construction and commissioning of the potential SOPP; sources of interim power; the continuing impact of COVID-19, including any restrictions imposed by health or governmental authorities relating thereto on the Company’s business, operations and financial condition, as well as delays and the development cost impacts of delays caused by the COVID-19 pandemic; the Company’s ability to operate sustainably, its community relations and its social license to operate in Mongolia; capital and operating cost estimates; mill and concentrator throughput; anticipated business activities, planned expenditures, corporate strategies, and other statements that are not historical facts.

Forward-looking statements and information are made based upon certain assumptions and other important factors that, if untrue, could cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such statements or information. There can be no assurance that such statements or information will prove to be accurate. Such statements and information are based on numerous assumptions regarding present and future business strategies, local and global economic conditions, and the environment in which the Company will operate in the future, including: the price of copper, gold and silver; projected gold, copper and silver grades; anticipated capital and operating costs; anticipated future production and cash flows; the anticipated location of certain infrastructure in Hugo North Lift 1 and sequence of mining within and across panel boundaries; the nature of the Company’s ongoing relationship and interaction with the Government of Mongolia with respect to the continued operation and development of Oyu Tolgoi as and when the GoM Agreements are implemented along with the implementation of Resolution 103; the continuation of undercutting in accordance with the mine plan and design; the actual timing of first sustainable production as well as the lifting of restrictions by the Government of Mongolia on the ability of OT LLC to incur any additional indebtedness; the availability and timing of required

December 31, 2021 Page |  58        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

governmental and other approvals for the construction of the SOPP; the ability of the Government of Mongolia to finance and procure the SOPP within the timeframes anticipated in the PSFA, as amended, subject to ongoing discussions relating to a standstill period; finalization of an agreement with IMPIC on an extension of the current power import arrangements; the eventual pre-payment arrangement between the Company (or a wholly-owned subsidiary) and OT LLC; the implementation and successful execution of the updated funding plan that is the subject of the Amended HoA, as such agreement may be further amended and restated; the Company’s ability to operate sustainably, its community relations and its social licence to operate in Mongolia; and the amount of any additional future funding gap to complete the Oyu Tolgoi project and the availability and amount of potential sources of additional funding required therefor.

Certain important factors that could cause actual results, performance or achievements to differ materially from those in the forward-looking statements and information include, among others: copper, gold and silver price volatility; discrepancies between actual and estimated production; mineral reserves and resources and metallurgical recoveries; development plans for processing resources; public health crises such as COVID-19; matters relating to proposed exploration or expansion; mining operational and development risks, including geotechnical risks and ground conditions; litigation risks, including the outcome of the class action complaints filed against the Company; the outcome of the international arbitration proceedings, including the likelihood of the parties being able to amicably resolve the ongoing tax issues; regulatory restrictions (including environmental regulatory restrictions and liability); OT LLC or the Government of Mongolia’s ability to deliver a domestic power source for the Oyu Tolgoi project within the required contractual time frame; the Company’s ability to operate sustainably, its community relations, and its social licence to operate in Mongolia; activities, actions or assessments, including tax assessments, by governmental authorities; events or circumstances (including public health crises strikes, blockades or similar events outside of the Company’s control) that may affect the Company’s ability to deliver its products in a timely manner; currency fluctuations; the speculative nature of mineral exploration; the global economic climate; global climate change; dilution; share price volatility; competition; loss of key employees; cyber security incidents; additional funding requirements, including in respect of the development or construction of a long-term domestic power supply for the Oyu Tolgoi project; capital and operating costs, including with respect to the development of additional deposits and processing facilities; defective title to mineral claims or property; and human rights requirements. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements and information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. All such forward-looking statements and information are based on certain assumptions and analyses made by the Company’s management in light of their experience and perception of historical trends, current conditions and expected future developments, as well as other factors management believes are reasonable and appropriate in the circumstances. These statements, however, are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements or information.

With respect to specific forward-looking information concerning the continued operation and development of the Oyu Tolgoi project, the Company has based its assumptions and analyses on certain factors which are inherently uncertain. Uncertainties and assumptions include, among others: the nature of the Company’s ongoing relationship and interaction with the Government of Mongolia with respect to the continued operation and development of Oyu Tolgoi as and when the GoM Agreements are implemented along with the implementation of Resolution 103; the continuation of undercutting in accordance with the mine plan and design; the approval or non-approval by the OT LLC Board of any future necessary additional investment, and the likely consequences on the timing and overall economic value of the Oyu Tolgoi project, including slowdown on the underground development and significant delays to first sustainable production; the timing and cost of the construction and expansion of mining and processing facilities; the timing and availability of a long-term domestic power source (or the availability of financing for the Company or the Government of Mongolia to construct such a source) for Oyu Tolgoi; the implementation and successful execution of the updated funding plan that is the subject of the Amended HoA, as such agreement may be further amended or restated, and the amount of any additional future funding gap to complete the Oyu Tolgoi project and the availability and amount of potential sources of additional funding required therefor the eventual pre-payment arrangement between the Company (or a wholly-owned subsidiary) and OT LLC; the potential impact of COVID-19, including any restrictions imposed by health and governmental authorities relating thereto, as well as the development cost impacts of delays caused by the COVID-19 pandemic; the Company’s ability to operate sustainably, its community relations and its social licence to operate in Mongolia; the impact of changes in, changes in

December 31, 2021 Page |  59        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

interpretation to or changes in enforcement of, laws, regulations and government practices in Mongolia; the availability and cost of skilled labour and transportation; the obtaining of (and the terms and timing of obtaining) necessary environmental and other government approvals, consents and permits; delays and the costs which would result from delays, including delays caused by COVID-19 restrictions and impacts and related factors, in the development of the underground mine (which could significantly exceed the costs projected in the 2020 OTTR); projected copper, gold and silver prices and their market demand; and production estimates and the anticipated yearly production of copper, gold and silver at Oyu Tolgoi.

The cost, timing and complexities of mine construction and development are increased by the remote location of a property such as Oyu Tolgoi. It is common in mining operations and in the development or expansion of existing facilities to experience unexpected problems and delays during development, construction and mine start-up. Additionally, although Oyu Tolgoi has achieved commercial production, there is no assurance that future development activities will result in profitable mining operations.

This MD&A also contains references to estimates of mineral reserves and mineral resources. The estimation of reserves and resources is inherently uncertain and involves subjective judgments about many relevant factors. The mineral resource estimates contained in this MD&A are exclusive of mineral reserves. Further, mineral resources that are not mineral reserves do not have demonstrated economic viability. The accuracy of any such estimates is a function of the quantity and quality of available data, and of the assumptions made and judgments used in engineering and geological interpretation (including future production from Oyu Tolgoi, the anticipated tonnages and grades that will be achieved or the indicated level of recovery that will be realised), which may prove to be unreliable. There can be no assurance that these estimates will be accurate or that such mineral reserves and mineral resources can be mined or processed profitably. Such estimates are, in large part, based on the following:

• Interpretations of geological data obtained from drill holes and other sampling techniques. Large scale mineral continuity and character of the deposits can be improved with additional drilling and sampling; actual mineralization or formations may be different from those predicted. It may also take many years from the initial phase of drilling before production is possible, and during that time the economic feasibility of exploiting a deposit may change. Reserve and resource estimates are materially dependent on prevailing metal prices and the cost of recovering and processing minerals at the individual mine sites. Market fluctuations in the price of metals or increases in the costs to recover metals or the actual recovery percentage of the metal(s) from the Company’s mining projects may render mining of mineral reserves uneconomic and affect the Company’s operations in a materially adverse manner. Moreover, various short-term operating factors may cause a mining operation to be unprofitable in any particular accounting period;

• Assumptions relating to commodity prices and exchange rates during the expected life of production, mineralization of the area to be mined, the projected cost of mining, and the results of additional planned development work. Actual future production rates and amounts, revenues, taxes, operating expenses, environmental and regulatory compliance expenditures, development expenditures, and recovery rates may vary substantially from those assumed in the estimates. Any significant change in these assumptions, including changes that result from variances between projected and actual results, could result in material downward revision to current estimates;

• Assumptions relating to projected future metal prices. The Company uses prices reflecting market pricing projections in the financial modelling for Oyu Tolgoi which are subjective in nature. It should be expected that actual prices will be different than the prices used for such modelling (either higher or lower), and the differences could be significant; and

• Assumptions relating to the costs and availability of treatment and refining services for the metals mined from Oyu Tolgoi, which require arrangements with third parties and involve the potential for fluctuating costs to transport the metals and fluctuating costs and availability of refining services. These costs can be significantly impacted by a variety of industry-specific as well as regional and global economic factors (including, among others, those which affect commodity prices). Many of these factors are beyond the Company’s control.

December 31, 2021 Page |  60        

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

Readers are cautioned not to place undue reliance on forward-looking information or statements. By their nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, which contribute to the possibility that the predicted outcomes will not occur. Events or circumstances could cause the Company’s actual results to differ materially from those estimated or projected and expressed in, or implied by, these forward-looking statements. Important factors that could cause actual results to differ from these forward-looking statements are included in the “Risks and Uncertainties” section in this MD&A.

Readers are further cautioned that the list of factors enumerated in the “Risks and Uncertainties” section of this MD&A that may affect future results is not exhaustive. When relying on the Company’s forward-looking statements and information to make decisions with respect to the Company, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Furthermore, the forward-looking statements and information contained herein are made as of the date of this document and the Company does not undertake any obligation to update or to revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, except as required by applicable law. The forward-looking statements and information contained herein are expressly qualified by this cautionary statement.

MANAGEMENT’S REPORT TO SHAREHOLDERS

The consolidated financial statements and MD&A are the responsibility of the management of Turquoise Hill. The financial statements and the MD&A have been prepared by management in accordance with IFRS and regulatory requirements, respectively, using management’s best estimates and judgment of all information available up to March 2, 2022.

The Board of Directors has approved the information contained in the consolidated financial statements and the MD&A. The Board of Directors is responsible for ensuring that management fulfils its responsibilities for financial reporting and internal controls. The Audit Committee of the Board of Directors, consisting solely of outside directors, meets regularly during the year with financial officers of the Company and the external auditors to satisfy itself that management is properly discharging its financial reporting responsibilities to the Directors who approve the consolidated financial statements.

The financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the accounting policies summarised in Note 2 to the consolidated financial statements.

The consolidated financial statements have been audited by KPMG LLP, independent auditor, in accordance with the standards of the Public Company Accounting Oversight Board (United States). They have full and unrestricted access to the Audit Committee.

/s/ Steve Thibeault	/s/ Luke Colton
Steve Thibeault	Luke Colton
Interim Chief Executive Officer	Chief Financial Officer

March 2, 2022

Montreal, QC, Canada

December 31, 2021 Page |  61        

turquoisehill.com

Turquoise Hill Resources Ltd.

Suite 3680,1 Place Ville- Marie

Montreal Quebec, Canada

H3B 3P2

TRQ : TSX & NYSE

Turquoise  Hill   is  an  international  mining

company   focused   on  the  operation  and

development of the Oyu Tolgoi copper-gold

mine in southern Mongolia.

EX-99.4

Exhibit 99.4

KPMG LLP	Telephone     (604) 691-3000
Chartered Professional Accountants PO Box 10426 777 Dunsmuir Street Vancouver BC V7Y 1K3	Fax                (604) 691-3031 Internet          www.kpmg.ca
Canada

Consent of Independent Registered Public Accounting Firm

We consent to the use of our report dated March 2, 2022, on the consolidated financial statements of Turquoise Hill Resources Ltd., which comprise the consolidated balance sheets as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, cash flows, and equity for each of the years in the two-year period ended December 31, 2021, and the related notes, and our report dated March 2, 2022 on the effectiveness of internal control over financial reporting as of December 31, 2021 which are included in this Annual Report on Form 40-F of Turquoise Hill Resources Ltd.

We also consent to the incorporation by reference of such reports in the Registration Statement (No. 333-261156) on Form F-10/A of Turquoise Hill Resources Ltd.

//s// KPMG LLP

Chartered Professional Accountants

Vancouver, Canada

March 2, 2022

^© 2021 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

EX-99.5

Exhibit 99.5

CONSENT OF EXPERT

Reference is made to the Annual Report on Form 40-F (the “40-F”) of Turquoise Hill Resources Ltd. (the “Company”) to be filed with the United States Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

I hereby consent to the use of and reference to my name as a qualified person for the Oyu Tolgoi 2020 Technical Report with an effective date of June 30, 2020 and to the use of and reference to my name in the Company’s Annual Information Form for the year ended December 31, 2021, dated March 2, 2022, and the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations, dated March 2, 2022, in each case which forms part of the 40-F.

Sincerely,

/s/ Michael Thomas

Name: Michael Thomas

Title: Principal Mining Consultant

Company: AMC Consultants Pty Ltd

Date: March 2, 2022

EX-99.6

Exhibit 99.6

CONSENT OF EXPERT

Reference is made to the Annual Report on Form 40-F (the “40-F”) of Turquoise Hill Resources Ltd. (the “Company”) to be filed with the United States Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

I hereby consent to the use of and reference to my name as a qualified person for the Oyu Tolgoi 2020 Technical Report with an effective date of June 30, 2020 and to the use of and reference to my name in the Company’s Annual Information Form for the year ended December 31, 2021, dated March 2, 2022, and the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations, dated March 2, 2022, in each case which forms part of the 40-F.

Sincerely,

/s/ Roderick Carlson

Name: Roderick Carlson

Title: Principal Geologist

Company: AMC Consultants Pty Ltd

Date: March 2, 2022

EX-99.7

Exhibit 99.7

CONSENT OF EXPERT

Reference is made to the Annual Report on Form 40-F (the “40-F”) of Turquoise Hill Resources Ltd. (the “Company”) to be filed with the United States Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

I hereby consent to the use of and reference to my name as a qualified person for the Oyu Tolgoi 2020 Technical Report with an effective date of June 30, 2020 and to the use of and reference to my name in the Company’s Annual Information Form for the year ended December 31, 2021, dated March 2, 2022, and the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations, dated March 2, 2022, in each case which forms part of the 40-F.

Sincerely,

/s/ Jo-Anne Dudley

Name: Jo-Anne Dudley

Title: Chief Operating Officer

Company: Turquoise Hill Resources Ltd.

Date: March 2, 2022

EX-99.8

Exhibit 99.8

CONSENT OF EXPERT

Reference is made to the Annual Report on Form 40-F (the “40-F”) of Turquoise Hill Resources Ltd. (the “Company”) to be filed with the United States Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

I hereby consent to the use of and reference to my name as a qualified person for the Oyu Tolgoi 2020 Technical Report with an effective date of June 30, 2020 and to the use of and reference to my name in the Company’s Annual Information Form for the year ended December 31, 2021, dated March 2, 2022, and the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations, dated March 2, 2022, in each case which forms part of the 40-F.

Sincerely,

/s/ Racquel Kolkert

Name: Racquel Kolkert

Title: Director, Resources & Exploration

Company: Turquoise Hill Resources Ltd.

Date: March 2, 2022

EX-99.9

Exhibit 99.9

CERTIFICATION OF THE INTERIM CHIEF EXECUTIVE OFFICER PURSUANT TO

RULE 13A-14(A) OR 15D-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934

I, Steve Thibeault, certify that:

1. I have reviewed this annual report on Form 40-F of Turquoise Hill Resources Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

4. The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

5. The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.

Date: March 2, 2022
By:	/s/ Steve Thibeault
	Interim Chief Executive Officer

EX-99.10

Exhibit 99.10

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO

RULE 13A-14(A) OR 15D-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934

I, Luke Colton, certify that:

1. I have reviewed this annual report on Form 40-F of Turquoise Hill Resources Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

4. The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

5. The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.

Date: March 2, 2022
By:	/s/ Luke Colton
	Chief Financial Officer

EX-99.11

Exhibit 99.11

CERTIFICATION OF THE INTERIM CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with this annual report of Turquoise Hill Resources Ltd. (the “Company”) on Form 40-F for the fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steve Thibeault, Interim Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 2, 2022
By:	/s/ Steve Thibeault
	Interim Chief Executive Officer

EX-99.12

Exhibit 99.12

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with this annual report of Turquoise Hill Resources Ltd. (the “Company”) on Form 40-F for the fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Luke Colton, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 2, 2022
By:	/s/ Luke Colton
	Chief Financial Officer

XML

Cover Page	12 Months Ended
	Dec. 31, 2021 shares
Document Information [Line Items]
Document Type	40-F
Amendment Flag	false
Document Period End Date	Dec. 31, 2021
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	FY
Trading Symbol	TRQ
Entity Registrant Name	TURQUOISE HILL RESOURCES LTD.
Entity Central Index Key	0001158041
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding	201,231,446
Entity Interactive Data Current	Yes
Entity File Number	001-32403
Entity Incorporation, State or Country Code	B0
Entity Address, Address Line One	Suite 3680 – 1 Place Ville Marie
Entity Address, Address Line Two	Montreal
Entity Address, City or Town	Quebec
Entity Address, Postal Zip Code	H3B 3P2
City Area Code	514
Local Phone Number	848-1567
Document Annual Report	true
Annual Information Form	true
Audited Annual Financial Statements	true
Document Registration Statement	false
Entity Address, Country	CA
Title of 12(b) Security	Common Shares without par value
Security Exchange Name	NYSE
ICFR Auditor Attestation Flag	true
Auditor Name	KPMG LLP
Auditor Location	Vancouver, British Columbia, Canada
Auditor Firm ID	85
Business Contact [Member]
Document Information [Line Items]
Contact Personnel Name	CT Corporation System
Entity Address, Address Line One	28 Liberty St 42nd Floor
Entity Address, City or Town	New York
Entity Address, Postal Zip Code	10005
City Area Code	212
Local Phone Number	894-8700
Entity Address, State or Province	NY

XML

Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Profit or loss [abstract]
Revenue	$ 1,971,042	$ 1,078,192
Cost of sales	(622,329)	(669,394)
Gross margin	1,348,713	408,798
Operating expenses	(275,487)	(202,271)
Corporate administration expenses	(37,699)	(30,602)
Other (expenses) income	(37,577)	482
Income before finance items and taxes	997,950	176,407
Finance items
Finance income	2,998	17,349
Finance costs	(8,036)	(5,510)
Finance income (cost)	(5,038)	11,839
Income from operations before taxes	992,912	188,246
Income and other taxes	(311,792)	306,396
Income for the year	681,120	494,642
Attributable to owners of Turquoise Hill Resources Ltd.	524,890	406,288
Attributable to owner of non-controlling interest	156,230	88,354
Income for the year	$ 681,120	$ 494,642
Basic and diluted earnings per share attributable to Turquoise Hill Resources Ltd.	$ 2.61	$ 2.02
Basic weighted average number of shares outstanding (000's)	201,231	201,231

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Statement of comprehensive income [abstract]
Income for the year	$ 681,120	$ 494,642
Other comprehensive income:
Changes in the fair value of marketable securities at FVOCI	2,945	2,231
Other comprehensive income for the year	2,945	2,231
Total comprehensive income for the year	684,065	496,873
Attributable to owners of Turquoise Hill	527,835	408,519
Attributable to owner of non-controlling interest	156,230	88,354
Total comprehensive income for the year	$ 684,065	$ 496,873

XML

Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Statement of comprehensive income [abstract]
Tax charges and credits	$ 0	$ 0

XML

Consolidated Statements of Cash Flow - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Statement of cash flows [abstract]
Cash generated from operating activities before interest and tax	$ 1,210,790	$ 371,169
Interest received	2,735	20,407
Interest paid	(276,392)	(316,778)
Income and other taxes paid	(361,040)	(33,855)
Net cash generated from operating activities	576,093	40,943
Cash flows from investing activities
Receivable from related party: amounts withdrawn	0	511,284
Expenditures on property, plant and equipment	(996,917)	(1,080,516)
Pre-production sales proceeds	69,726	26,091
Purchase of other financial assets	(206)	(399)
Purchase of put options	(29,907)	0
Other investing cash flows	63	1,106
Cash used in investing activities	(957,241)	(542,434)
Cash flows from financing activities
Repayment of project finance facility	(43,489)	(23,289)
Payment of lease liability	(4,085)	(4,344)
Cash used in financing activities	(47,574)	(27,633)
Effects of exchange rates on cash and cash equivalents	(603)	760
Net decrease in cash and cash equivalents	(429,325)	(528,364)
Cash and cash equivalents - beginning of year	1,123,621	1,651,985
Cash and cash equivalents - end of year	694,296	1,123,621
Cash and cash equivalents as presented in the consolidated balance sheets	$ 694,296	$ 1,123,621

XML

Consolidated Statements of Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Current assets
Cash and cash equivalents	$ 694,296	$ 1,123,621
Inventories	290,017	197,962
Trade and other receivables	16,119	60,012
Prepaid expenses and other assets	120,606	127,274
Other financial assets	109	0
Current assets	1,121,147	1,508,869
Non-current assets
Property, plant and equipment	11,974,480	10,927,512
Inventories	60,711	37,557
Prepaid expenses	348,671	0
Deferred income tax assets	602,862	880,705
Other financial assets	16,818	14,118
Non-current assets	13,003,542	11,859,892
Total assets	14,124,689	13,368,761
Current liabilities
Borrowings and other financial liabilities	397,421	28,288
Trade and other payables	384,488	390,059
Deferred revenue	149,368	103,289
Current liabilities	931,277	521,636
Non-current liabilities
Borrowings and other financial liabilities	3,785,358	4,173,491
Deferred income tax liabilities	145,434	111,717
Decommissioning obligations	153,662	133,964
Non-current liabilities	4,084,454	4,419,172	[1]
Total liabilities	5,015,731	4,940,808
Equity
Share capital	11,432,122	11,432,122
Contributed surplus	1,555,774	1,558,834
Accumulated other comprehensive income	4,363	1,418
Deficit	(2,890,711)	(3,415,601)
Equity attributable to owners of Turquoise Hill	10,101,548	9,576,773
Attributable to non-controlling interest	(992,590)	(1,148,820)
Total equity	9,108,958	8,427,953
Total liabilities and equity	$ 14,124,689	$ 13,368,761

[1] The Oyu Tolgoi segment’s non-current liabilities includes $7.3 billion of shareholder loan and accrued interest liability and the Corporate and other elimination segment’s non-current liabilities includes $7.3 billion of shareholder loan and accrued interest asset at December 31, 2020.

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Consolidated Statements of Equity - USD ($) $ in Thousands	Total	Share capital [member]	Contributed surplus [member]	Accumulated other comprehensive income (loss) [member]	Deficit [member]	Attributable to owners of Turquoise Hill [member]	Non-controlling interest [member]
Beginning balance at Dec. 31, 2019	$ 7,931,057	$ 11,432,122	$ 1,558,811	$ (813)	$ (3,821,889)	$ 9,168,231	$ (1,237,174)
Income for the year	494,642				406,288	406,288	88,354
Other comprehensive income for the year	2,231			2,231		2,231
Employee share plans	23		23			23
Ending balance at Dec. 31, 2020	8,427,953	11,432,122	1,558,834	1,418	(3,415,601)	9,576,773	(1,148,820)
Income for the year	681,120				524,890	524,890	156,230
Other comprehensive income for the year	2,945			2,945		2,945
Employee share plans	(3,060)		(3,060)			(3,060)
Ending balance at Dec. 31, 2021	$ 9,108,958	$ 11,432,122	$ 1,555,774	$ 4,363	$ (2,890,711)	$ 10,101,548	$ (992,590)

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Nature of operations and liquidity risk

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Nature of operations and liquidity risk

1. Nature of operations and liquidity risk

Rio Tinto plc is the ultimate parent company and indirectly owned a 50.8% majority interest in Turquoise Hill Resources Ltd. (“Turquoise Hill”), as at December 31, 2021. 

Turquoise Hill, together with its subsidiaries (collectively referred to as “the Company”), is an international mining company focused principally on the operation and further development of the Oyu Tolgoi copper-gold mine in Southern Mongolia. Turquoise Hill’s head office is located at 1 Place Ville Marie, Suite 3680, Montreal, Quebec, Canada, H3B 3P2. Turquoise Hill’s registered office is located at 300-204 Black Street, Whitehorse, Yukon, Canada, Y1A 2M9.

Turquoise Hill has its primary listing in Canada on the Toronto Stock Exchange and a secondary listing in the U.S. on the New York Stock Exchange.

The consolidated financial statements of Turquoise Hill were authorized for issue in accordance with a directors’ resolution on March 2, 2022.

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages liquidity risk by the preparation of internally generated short-term cash flow forecasts and taking measures in response to the review of forecasts. These short-term cash flow forecasts consider estimation of future operating costs, financing costs, sustaining and development capital, tax payments and cash receipts from sales revenue. Sensitivity analyses are performed over these estimates including the impact of estimated commodity prices on cash receipts.

As at December 31, 2021, the Company had $0.7 billion of available liquidity, consisting of consolidated cash and cash equivalents. The Company’s current assets exceeded current liabilities by $0.2 billion at December 31, 2021. The Company’s short-term cash flow forecasts indicate that additional financing will be required to fund its planned activities. In addition to the Company’s liquidity position and cash flow generated from its existing open pit operations, the Company plans to access sources of funding that form part of the Amended and Restated Heads of Agreement (“Amended HOA”) that was signed between the Company and Rio Tinto on January 25, 2022. Access to these sources of funding is considered probable with an equity offering of at least $650 million expected to be completed by August 31, 2022. The Amended HOA also provides the Company with access to a $300 million short-term secured advance from Rio Tinto, in the period to achievement of sustainable production, which is expected in the first half of 2023. The Company also expects to complete re-profiling of its scheduled December 2022 principal repayment under its existing project finance borrowings. The Company continues to review its near-term plans and continues to take steps to achieve operating efficiencies to maximize cash flows from its operations.

In addition, these short-term cash flow forecasts include the possible impact of the COVID-19 pandemic. Mongolia continued to experience a significant number of cases of COVID-19 through to the end of the year, which continued to impact manning levels at Oyu Tolgoi, where average workforce numbers remained below planned levels. COVID-19 restrictions continued to adversely impact open pit operations and underground development, which, through the end of 2021, resulted in a cumulative increase of $175 million to the estimate of underground development capital included in the Definitive Estimate. This increase includes the currently known, incremental, time-related costs of COVID-19 restrictions.

The short-term cash flow forecasts at December 31, 2021 included the impact of the previously reported delay to sustainable production for Panel 0 until the first half of 2023, as announced by the Company on October 14, 2021. Forecasts reflect the expected cash requirements at Oyu Tolgoi LLC (“Oyu Tolgoi”) based on the approved 2022 capital and operating plan and assumes cash inflows from the drawdown of concentrate inventories to target levels at some point during 2022.

The short-term cash forecasts at December 31, 2021 include the assessment of the estimated impact on the timing of cash receipts resulting from the ongoing force majeure that was first announced by the Company on March 30, 2021. Oyu Tolgoi concentrate inventory levels increased towards the end of the year as a result of interruptions to shipments across the border as a result of COVID-19 restrictions. Oyu Tolgoi continues to work closely with Mongolian and Chinese authorities to manage any supply chain disruptions. The force majeure will remain in place until there are sufficiently sustained volumes of convoys crossing the border to ensure Oyu Tolgoi’s ability to meet its on-going commitments to customers and to return on-site concentrate inventory to target levels. Turquoise Hill and Oyu Tolgoi continue to deploy a range of contingency plans to manage short-term liquidity and the expected ongoing COVID-19 impacts on site operations and concentrate shipments.

On January 24, 2022 the Company announced that it had successfully concluded the negotiations with various Mongolian governmental bodies to resolve the remaining outstanding non-technical undercut criteria that were necessary to announce the start of underground mine operations at Oyu Tolgoi, a renewed partnership with the Government of Mongolia and the Amended HOA agreement with Rio Tinto – refer to Note 26 – Subsequent events. The board of directors of Oyu Tolgoi also approved the start of formal negotiations with project finance lenders in relation to the Amended HOA.

The Company believes the funding available under the amended HOA provides sufficient liquidity to meet its minimum obligations for a period of at least 12 months from the balance sheet date, and to meet requirements of the Company, including its operations and capital expenditures, over the same period.

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Summary of significant accounting policies

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Summary of significant accounting policies

2. Summary of significant accounting policies

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

These consolidated financial statements have been prepared on a going concern basis, and in making the assessment that the Company is a going concern, management have taken into account all available future information, which extends for a period of at least 12 months from December 31, 2021. Refer to Note 1.

(b) Change in accounting policies

A number of new standards, and amendments to standards and interpretations, are effective as of January 1, 2021, and have been applied in preparing these consolidated financial statements. None of these standards and amendments to standards and interpretations had a significant effect on the consolidated financial statements of the Company.

(c) Areas of judgement and estimation uncertainty

The preparation of consolidated financial statements in accordance with IFRS often requires management to make estimates about, and apply assumptions or subjective judgement to, future events and other matters that affect the reported amounts of the Company’s assets, liabilities, revenues, expenses and related disclosures. Assumptions, estimates and judgements are based on historical experience, expectations, current trends and other factors that management believes to be relevant at the time the Company’s consolidated financial statements are prepared.

With the emergence of the new and more transmissible Omicron variant in Mongolia and elsewhere, COVID-19 continues to create significant volatility and negative pressures on international economies, as well as financial and commodity markets. At December 31, 2021, it is still not possible to predict the duration, severity, or scope of the pandemic’s impact on the Company or to predict the steps that governmental and non-governmental agencies may be required to take in response to COVID-19.

By their very nature, COVID-19 related judgements and estimates made for the purposes of preparing the consolidated financial statements relate to matters that are inherently uncertain. However, the Company is closely monitoring the changing conditions and their impacts.

(i) Sources of estimation uncertainty

Key sources of estimation uncertainty that have a risk of resulting in a material adjustment to the carrying amount of assets and liabilities within the next twelve months are summarized below:

Going concern assessment

The Company has made judgements, based on an internally generated short-term cash flow forecast, in concluding that there are no material uncertainties related to events or conditions that may cast significant doubt upon the Company’s ability to continue as a going concern. The short term cashflow forecast includes plans to access additional sources of funding under the amended HOA where management consider implementation of those plans to be probable. Judgements and estimates are made in forming assumptions of future activities, future cash flows and timing of those cash flows, including cash flows relating to the financing plans for re-profiling of project finance debt, the short-term secured advance from Rio Tinto and equity offering in the Amended HOA whose implementation is probable in the next twelve months. Significant assumptions used in preparing the short-term cash flow forecast include, but are not limited to, short-term commodity prices, production volumes, reserves, operating costs, financing costs, development capital, and the announced equity offering. Changes to these assumptions could affect the estimate of the Company’s available liquidity and conclusion as to whether there are material uncertainties related to events or conditions that may cast significant doubt upon the Company’s ability to continue as a going concern. However, the Company’s assessment of going concern did include sensitivity analyses that were performed over the significant assumptions included in the short-term cash flow forecast including the impact of estimated commodity prices on cash receipts.

Recoverable amount of property, plant and equipment

When there is an indicator of impairment or impairment reversal, the recoverable amount is assessed by reference to the higher of value in use (“VIU”) and fair value less costs of disposal (“FVLCD”). The VIU is the net present value of expected future pre-tax cash flows from the relevant cash-generating unit in its current condition, both from continuing use and ultimate disposal. FVLCD is estimated either from the value obtained from an active market where applicable, or by using a discounted post-tax cash flow model based on detailed life-of-mine and/or production plans. Significant assumptions used in the discounted cash flow model include estimates of long-term commodity prices, discount rates, reserves and resources, operating costs, development capital, and scheduling and mine design.

These inputs are based on the Company’s best estimates of what an independent market participant would consider appropriate. Changes to these inputs may alter the results of the test for impairment or impairment reversal, the amount of the impairment charge or impairment reversal recorded in the consolidated statement of income and the resulting carrying value of property, plant and equipment.

An indicator of impairment was identified during the year ended December 31, 2021, and an assessment of recoverable amount was undertaken as at December 31, 2021; refer to Note 13.

Recovery of deferred tax assets in Mongolia

The Company assesses the recoverability of deferred tax assets at each reporting period-end based on future taxable income to determine the deferred tax asset to be recognized. Significant assumptions used to determine future taxable income include estimates for commodity prices, reserves and resources, operating costs, financing costs, development capital, and scheduling and mine design. Revisions to these estimates could result in material adjustments to the financial statements.

Reserves and Resources

Estimates of mineral reserves and resources are based on various assumptions relating to operating matters set forth in National Instrument 43-101. These include production costs, mining and processing recoveries, cut-off grades, long term commodity prices and the costs and availability of treatment and refining services for the metals mined. Cost estimates are based on feasibility study estimates and operating history. The Company estimates its mineral reserves and resources based on information compiled and reviewed by qualified persons as defined in accordance with National Instrument 43-101 requirements.

Estimated mineral reserves and, in certain circumstances, resources are used to determine the depreciation of property, plant and equipment; to account for capitalized deferred stripping costs; to perform, when required, assessments of the recoverable amount of property, plant and equipment; as an input to the projection of future taxable profits which support assessments of deferred income tax recoverability; and to forecast the timing of the payment of decommissioning obligations.

Depletion and depreciation of property, plant and equipment

Property, plant and equipment is the largest component of the Company’s assets and, as such, the depreciation of these assets has a significant effect on the Company’s financial statements.

Mining plant and equipment and other capital assets are depreciated over their expected economic lives using either the units of production method or the straight-line method. Depletion of each mineral property interest is provided on the units of production basis using estimated proven and probable reserves as the depletion basis. A change in the estimated useful life or residual value of a long-lived asset would result in a change in the rate of depreciation for that asset.

For long-lived assets that are depleted or depreciated over proven and probable reserves using the units of production method, a change in the original estimate of proven and probable reserves would result in a change in the rate of depletion or depreciation.

Decommissioning Costs

The estimate of decommissioning costs is based on future expectations in the determination of closure provisions. Management makes a number of assumptions and judgements including estimating the amount of future reclamation costs and their timing, inflation rates and risk-free discount rates. These assumptions are formed based on environmental and regulatory requirements and the Company’s internal policies. The costs are more uncertain the further into the future the mine closure activities are to be carried out. Actual costs incurred in future periods in relation to the remediation of the Company’s existing assets could differ materially from their estimated undiscounted future value. Refer to Note 17 for the Company’s total decommissioning obligations recorded in the consolidated financial statements, the undiscounted values and the rate used to discount the liability.

Net realizable value of inventories

Ore stockpile inventory is valued at the lower of weighted average cost and net realizable value (“NRV”). If ore stockpiles are not expected to be processed within the 12 months after the balance sheet date, they are included within non-current assets and net realizable value is calculated on a discounted cash flow basis over the planned processing timeframe for such ore. Evaluating NRV requires management judgement in the selection of estimates for, among other inputs, discount rate, price assumptions, timing of processing and costs to complete.

(ii) Areas of judgement

Impairment indicator of property, plant and equipment

Judgement is required in assessing whether certain factors would be considered an indicator of impairment or impairment reversal. Management considers both internal and external information to determine whether there is an indicator of impairment and, accordingly, whether impairment testing is required. The information considered in assessing whether there is an indicator of impairment includes, but is not limited to, long-term commodity prices, the Company’s market capitalization relative to its net asset carrying amount, life of mine plans and changes in significant assumptions including reserves and resources, development capital estimates and scheduling and mine designs.

The Company’s assessment for the year ended December 31, 2021 considered the approval by the Oyu Tolgoi board of directors of the operating program and budget for the 2022 financial year, including over $780 million to cover capital plans relating to the Oyu Tolgoi underground project, which will allow continued progression towards undercutting.

The Company’s assessment also considered the information included within its announcement on January 17, 2022, in relation to its fourth quarter 2021 production and in which the Company provided an update on the Oyu Tolgoi mine and the status of negotiations with the Government of Mongolia as at December 31, 2021.

The Company’s assessment also considered the information included within its January 17, 2022 announcement regarding the ongoing COVID-19 restrictions continuing to adversely impact both open pit operations and underground development. Further, consideration was given to the COVID-19 situation in Mongolia, as well as the schedule delays and delayed commitments caused by the Definitive Estimate not having received the unanimous support of all the directors of the Oyu Tolgoi board as at December 31, 2021, which delayed the Company’s expected timing for initiating the undercut. In addition, consideration was given to the information in the January 17, 2022 announcement regarding updates on the progress of Shaft 4 sinking activities and Shaft 3 readiness work. The announcement confirmed that Panels 1 and 2 are expected to be delayed due to COVID-19 related work restrictions impacting both Shafts 3 and 4 and underground development progress as well as changes to mining scope previously disclosed.

The Company’s assessment also considered the status of negotiations between the Company, Rio Tinto and the Government of Mongolia as at December 31, 2021. On December 30, 2021, the Mongolian Parliament passed Parliamentary Resolution 103 to authorize the Government of Mongolia to take certain measures in connection with Oyu Tolgoi, restricting additional shareholder or third-party debt financing at the Oyu Tolgoi level until commencement of sustainable production. The effect of the resolution required key negotiations to continue into 2022. Despite the positive progress made through the negotiations in 2021, management concluded that the potential for further delays and the resulting uncertainty as to the timing of underground project completion constituted an indicator of impairment at the Oyu Tolgoi cash generating unit level at December 31, 2021.

Subsequent to year-end, on January 24, 2022, the Company announced that it had successfully concluded the negotiations with Rio Tinto and the Government of Mongolia that were necessary for the board of directors of Oyu Tolgoi to unanimously approve the start of underground mine operations at Oyu Tolgoi as well as signing of the Amended HOA with Rio Tinto; refer to Note 26. As these events occurred after the balance sheet date, they do not form part of management’s assessment of potential indicators of impairment or impairment reversal as at December 31, 2021.

Income taxes - provision for income taxes and composition of deferred income tax assets and liabilities

The Company must make significant estimates in respect of the provision for income taxes and the composition of its deferred income tax assets and deferred income tax liabilities. The Company’s operations are, in part, subject to foreign tax laws where interpretations, regulations and legislation are complex and can be subject to change. As a result, there are usually some tax matters in question which may, on resolution in the future, result in adjustments to the amount of current or deferred income tax assets or liabilities, and those adjustments may be material to the Company’s balance sheet and results of operations.

The Company recognizes potential liabilities and records tax liabilities for uncertain tax positions based on its judgement of whether, and the extent to which, additional taxes will be due. Consistent with IFRIC 23, Uncertainty Over Income Tax Treatments, the Company first considers if it is probable that a taxation authority will accept an uncertain tax treatment. If it is concluded that it is not probable, a probability-weighted approach is to be taken for issues for which there are a wide range of possible outcomes. For tax issues with a binary outcome, the most likely amount method still remains. The Company adjusts these liabilities as facts and circumstances change. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate, which could result in material adjustments to the consolidated financial statements. Refer to Note 23 for further information on tax matters between Oyu Tolgoi and the Mongolian Tax Authority.

Income taxes – utilization of tax losses carried forward

The determination of the ability of the Company to utilize tax losses carried forward to offset income taxes payable in the future and to utilize temporary differences which will reverse in the future requires management to exercise judgement and make assumptions about the Company’s future performance. Management is required to assess whether it is probable that the Company is able to benefit from these tax losses and temporary differences.

(d) Basis of consolidation

The financial statements consist of the consolidation of the accounts of Turquoise Hill and its respective subsidiaries. All intercompany transactions and balances between Turquoise Hill and its subsidiaries have been eliminated on consolidation. Where necessary, adjustments are made to assets, liabilities, and results of subsidiaries to bring their accounting policies into line with those used by the Company.

Subsidiaries are entities controlled by Turquoise Hill. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The Company controls an entity if it has power to direct the activities of the entity in a manner that significantly affects its returns, has exposure or rights to variable returns from its involvement with the entity and has the ability to use its power to affect those returns.

The Company consolidates all subsidiaries. The Company’s principal operating subsidiary is Oyu Tolgoi. Wholly owned subsidiaries of Turquoise Hill together hold a 66.0% interest in Oyu Tolgoi, whose principal asset is the Oyu Tolgoi copper-gold mine located in Southern Mongolia. The remaining 34% non-controlling interest in Oyu Tolgoi is owned by Erdenes Oyu Tolgoi LLC (“Erdenes”), a company controlled by the Mongolian government. The Company has historically funded 100% of the Oyu Tolgoi copper-gold mine’s exploration and development costs via equity and debt investments in Oyu Tolgoi and non-recourse loans to Erdenes. Income or loss of Oyu Tolgoi is attributed to the controlling and non-controlling shareholders based on ownership percentage. Non-recourse loans advanced to Erdenes upon the issuance of additional equity interests to Erdenes are accounted for separately and recorded as an offset to non-controlling interest in equity. Unrealized interest on the non-recourse loans to Erdenes, which are recoverable principally through dividends from Oyu Tolgoi or sale by Erdenes of its interests in Oyu Tolgoi, is recognized when payment of the interest can be reliably determined. Subsequent to December 31, 2021, the Company waived these non-recourse loans and unrealized interest in full. Refer to Note 26 - Subsequent events.

(e) Currency translation and foreign exchange

The Company has determined the U.S. dollar to be the functional currency of Turquoise Hill and its significant subsidiaries as it is the currency of the primary economic environment in which Turquoise Hill and all of its significant subsidiaries operate. Accordingly, monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect at the date of the balance sheet and non-monetary assets and liabilities are translated at the time of acquisition or issue. Revenues and expenses are translated at rates approximating the exchange rates in effect at the date of the transaction. All exchange gains and losses are included in the consolidated statement of income during the year.

(f) Revenue

The Company generates revenue from the sale of concentrate containing copper, gold and silver. Sales revenue is recognized on individual sales to depict the transfer of promised goods to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods. The Company considers five steps in assessing whether all of the revenue recognition criteria are met:

· identify the contract with a customer;

· identify the performance obligations in the contract;

· determine the transaction price;

· allocate the transaction price to performance obligations; and

· recognize revenue when or as a performance obligation is satisfied.

The Company satisfies its performance obligation and sales revenue is recognized at the point in time when the product is delivered as specified by the customer, which is typically upon loading of the product to the customer’s truck, train or vessel. The Company considers that control has passed when there is a present obligation to pay from the customer’s perspective; physical possession, legal title and the risks and rewards of ownership have all passed to the customer; and the customer has accepted the concentrate. The Company recognizes deferred revenue in the event it receives payment from a customer before a sales transaction meets all the criteria for revenue recognition.

Concentrate is provisionally priced whereby the selling price is subject to final adjustment at the end of a period normally ranging from 30 to 180 days after delivery to the customer as defined in the sales contract. The final price is based on the market price at the relevant quotation point stipulated in the contract. At each reporting date, the receivable is marked to fair value based on the forward selling price for the quotation period stipulated in the contract. The change in fair value of the receivable subsequent to the date of revenue recognition is recognized within ‘Revenue’ on the face of the statements of income and is shown separately as ‘other revenue’ in the notes to the consolidated financial statements.

Mining royalties paid to the government of Mongolia are included in operating expenses.

(g) Exploration and evaluation

All direct costs related to the acquisition of mineral property interests are capitalized in the period incurred.

Exploration and evaluation costs are charged to operations in the period incurred until such time as it has been determined that a mineral property has proven and probable reserves and the property is economically viable, in which case subsequent evaluation costs incurred to develop a mineral property are capitalized. Exploration and evaluation costs include value-added taxes incurred in foreign jurisdictions when recoverability of those taxes is uncertain.

(h) Property, plant and equipment

Property, plant and equipment are recorded at cost, less accumulated depletion and depreciation and accumulated impairment losses. The cost of property, plant and equipment includes the estimated close down and restoration costs associated with the asset.

Once an undeveloped mining project has been established as commercially viable, including that it has established proven and probable reserves and approval to mine by governmental authorities has been given, expenditure (including qualifying exploration and evaluation costs) other than on land, buildings, plant and equipment is capitalized under “Mineral property interests.” Ore reserves may be declared for an undeveloped mining project before its commercial viability has been fully determined and approval to mine has been given. Evaluation costs may be capitalized during the period between declaration of reserves and approval to mine as further work is undertaken in order to refine the development case to maximize the project’s return.

Project development expenditures, including costs to acquire and construct buildings and equipment are capitalized under “Capital works in progress” provided that the project has been established as commercially viable. Capital works in progress are not categorized as mineral property interests, mining plant and equipment or other capital assets until the capital asset is in the condition and location necessary for its intended use.

Sales of concentrate and associated costs, which are incurred during the commissioning phase, that are necessary for the successful commissioning of new assets, are capitalized. Development costs incurred after the commencement of production are capitalized to the extent they are expected to give rise to a future economic benefit. Borrowing costs related to construction or development of a qualifying asset are capitalized until the point when substantially all the activities that are necessary to make the asset ready for its intended use are complete. Where funds have been borrowed specifically to finance an asset, the amount capitalized is the actual interest on borrowings incurred, net of any returns on invested funds. Where the funds used to finance an asset form part of general borrowings, the amount capitalized is calculated using a weighted average of rates applicable to relevant general borrowings of the Company during the period.

(i) Deferred stripping

In open pit mining operations, it is necessary to remove overburden and other waste materials to access ore from which minerals can be extracted economically. The process of mining overburden and waste materials is referred to as stripping.

During the development of an open pit mine, before production commences, stripping costs are capitalized as part of mineral property interests and are subsequently amortized over the life of the mine on a units of production basis.

During the production phase, stripping activity is undertaken for the dual purpose of extracting inventory for current production as well as improving access to the ore body.

Stripping costs incurred for the purpose of extracting current inventories are included in the costs of inventory produced during the period the stripping costs are incurred.

In order for production phase stripping costs to qualify for capitalization as a stripping activity asset, three criteria must be met:

· it must be probable that economic benefit will be realized in a future accounting period as a result of improved access to the ore body created by the stripping activity;

· it must be possible to identify the “component” of the ore body for which access has been improved; and

· it must be possible to reliably measure the costs that relate to the stripping activity.

When the cost of stripping related to development which has a future benefit is not distinguishable from the cost of producing current inventories, the stripping costs are allocated to each activity based on a relevant production measure. Generally, the measure would be calculated based on a ratio obtained by dividing the tonnage of waste mined for the component for the period by the quantity of ore mined for the component. Stripping costs incurred in the period related to the component are deferred to the extent that the current period ratio exceeds the historical life of component ratio. The stripping activity asset is depreciated on a units of production basis based on expected production of ore over the useful life of the component that has been made more accessible as a result of the stripping activity. The life of component ratios are based on proven and probable reserves based on the mine plan; they are a function of the mine design and therefore changes to that design will generally result in changes to the ratios. Changes in other technical or economic parameters that impact reserves may also impact the life of component ratios. Changes to the life of component ratios are accounted for prospectively.

Deferred stripping costs are included in “Mineral property interests” within property, plant and equipment.    Amortization of deferred stripping costs is included as a cost of production in the period.

(j) Depreciation and depletion

Property, plant and equipment is depreciated over its useful life, or over the remaining life of the mine if that is shorter.

The useful lives of the major assets of a cash-generating unit are often dependent on the life of the ore body to which they relate. Where this is the case, the lives of mining properties, and their associated concentrators and other long lived processing equipment generally relate to the expected life of the ore body. The life of the ore body, in turn, is estimated on the basis of the life-of-mine plan. In applying the units of production method, depreciation is calculated using the copper content of the ore extracted from the mine in the period as a percentage of the total metal content of the ore to be extracted in current and future periods based on proven and probable reserves.

Development costs that relate to a discrete section of an ore body, and which only provide benefit over the life of those reserves, are depreciated over the estimated life of that discrete section. Development costs incurred that relate to the entire ore body are depreciated over the estimated life of the entire ore body.

Assets within operations for which production is not expected to fluctuate significantly from one year to another or which have a physical life shorter than the mine are depreciated on a straight-line basis. Depreciation commences when an asset is available for use.

(k) Impairment of non-current assets

Property, plant and equipment is reviewed for impairment when events or changes in circumstances indicate that the full carrying amount may not be recoverable. Non-current assets that have previously been impaired are tested for possible reversal of the impairment whenever events or changes in circumstances indicate that the impairment may have reversed.

Impairment is assessed at the level of cash-generating units which are identified as the smallest identifiable group of assets capable of generating cash inflows which are largely independent of the cash inflows from other assets. When an impairment review is undertaken, the recoverable amount is assessed by reference to the higher of VIU and FVLCD.

The VIU is the net present value of expected future pre-tax cash flows from the relevant cash-generating unit in its current condition, both from continuing use and ultimate disposal. For VIU, recent cost levels are considered, together with expected changes in costs that are compatible with the current condition of the business and which meet the requirements of IFRS.

The best evidence of FVLCD is often the value obtained from an active market or binding sale agreement. Where this is not the case, or where neither an active market nor a binding sale agreement exists, FVLCD is based on the best information available to reflect the amount a market participant would pay for the cash-generating unit in an arm’s length transaction. This is often estimated using discounted post tax cash flow techniques based on detailed life-of-mine and/or production plans.

The cash flow forecasts are based on management’s best estimates of expected future revenues and costs, including the future cash costs of production and capital expenditure, which for FVLCD purposes management believe approximate those of a market participant.

Forecast cash flows for impairment purposes are generally based on management’s price forecasts of commodity prices, which assume short term observable market prices will revert to the Company’s assessment of the long term price, generally over a period of three to five years. These long-term forecast commodity prices are derived from industry analyst consensus.

The discount rates applied to the future cash flow forecasts represent an estimate of the rate the market would apply having regard to the time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted.

(l) Decommissioning obligations

The Company recognizes liabilities for statutory, contractual, legal or constructive obligations associated with the retirement of property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, a provision for a decommissioning obligation is recognized at its net present value in the period in which it is incurred, using a discounted cash flow technique with market-based risk-free discount rates and estimates of the timing and amount of the settlement of the obligation. Upon initial recognition of the liability, the corresponding decommissioning cost is added to the carrying amount of the related asset.

Following initial recognition of the decommissioning obligation, the carrying amount of the liability is increased for the passage of time and adjusted for changes to significant estimates including the current discount rate, the amount or timing of the underlying cash flows needed to settle the obligation and the requirements of the relevant legal and regulatory framework. Subsequent changes in the provisions resulting from new disturbance, updated cost estimates, changes to estimated lives of operations and revisions to discount rates are also capitalized to the related property, plant and equipment. Amounts capitalized to the related property, plant and equipment are depreciated over the lives of the assets to which they relate. The amortization or unwinding of the discount applied in establishing the net present value of provisions is charged to expense and is included within finance costs in the consolidated statement of income.

(m) Inventories

Concentrate inventory is valued at the lower of weighted average cost and net realizable value. Cost comprises production and processing costs, which includes direct and indirect labour, operating materials and supplies, applicable transportation costs and apportionment of operating overheads, including depreciation and depletion. Net realizable value is the expected average selling price of the concentrate inventory less applicable selling and transportation costs.

Stockpiles represent ore that has been extracted and is available for further processing. Stockpiles are valued at the lower of weighted average production cost and net realizable value. Production cost includes direct and indirect labour, operating materials and supplies, applicable transportation costs, and apportionment of operating overheads, including depreciation and depletion. Net realizable value is the expected average selling price of the finished product less the costs to get the product into saleable form and to the selling location. If the ore will not be processed and sold within 12 months after the consolidated balance sheet date it is included within non-current assets and net realizable value is calculated on a discounted cash flow basis over the planned period within which the ore is estimated to be processed.

Mine stores and supplies are valued at the lower of the weighted average cost and net realizable value.

(n) Taxation

Income tax expense comprises current and deferred tax. Current tax and deferred taxes are recognized in the consolidated statement of income except to the extent that they relate to items recognized directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date.

Deferred tax is recognized in respect of unused tax losses and credits, as well as temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.    Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on enacted or substantively enacted laws at the reporting date.    

The Company computes the provision for deferred income taxes under the liability method. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, only to the extent that it is probable that future taxable profits will be available against which they can be utilized. Future taxable profits are estimated using an income forecast derived from cash flow projections, based on detailed life-of-mine plans and corporate forecasts. Where applicable, the probability of utilizing tax losses or credits is evaluated by considering risks relevant to future cash flows, and the expiry dates after which these losses or credits can no longer be utilized.

Deferred tax is not recognized for the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries, associates and joint arrangements to the extent that it is probable that they will not reverse in the foreseeable future.

The Company is subject to assessments by various taxation authorities, who may interpret tax legislation differently from the Company. The final amount of taxes to be paid depends on a number of factors, including the outcomes of audits, appeals or negotiated settlements. Such differences are accounted for based on management’s best estimate of the probable outcome of these matters.

The Company must make significant estimates and judgements in respect of its provision for income taxes and the composition and measurement of its deferred income tax assets and liabilities. The Company’s operations are, in part, subject to foreign tax laws where interpretations, regulations and legislation are complex and subject to change. As a result, there are some tax matters in question that may, upon resolution in the future, result in adjustments to the amount of deferred income tax assets and liabilities; those adjustments may be material.

(o) Employee benefits

Wages, salaries, contributions to government pension and social insurance funds, compensated absences and bonuses are accrued in the year in which the employees render the associated services.

(p) Cash and cash equivalents

For the purposes of the consolidated balance sheet, cash and cash equivalents comprise cash on hand, demand deposits and short term, highly liquid investments with an initial maturity of three months or less that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

(q) Financial instruments

The Company classifies its financial instruments in the following categories: at fair value through profit or loss, fair value through other comprehensive income or at amortized cost.

Classification

The Company determines the classification of financial instruments at initial recognition.

The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. A debt instrument is measured at amortized cost if the objective of the business model is to hold the debt instrument for the collection of contractual cash flows, and the asset’s contractual cash flows are comprised solely of payments of principal and interest (“SPPI”).

A debt instrument held under a business model under which financial assets may be either held to collect contractual cash flows or sold is classified as held at fair value through other comprehensive income if the SPPI criteria are met. Any other financial assets are classified at fair value through profit or loss.

Debt instruments held to maturity are classified as current or non-current assets based upon their maturity date. Equity instruments that are held for trading are classified as fair value through profit or loss. For other equity instruments, on the day of acquisition, the Company is able to make an irrevocable election (on an instrument-by-instrument basis) to designate them as at fair value through other comprehensive income.

Financial liabilities are measured at amortized cost, unless they are required to be measured at fair value through profit or loss (such as instruments held for trading or derivatives) or where the Company has opted to measure at fair value through profit or loss.

Measurement

(i) Financial assets and liabilities at fair value through profit or loss

Financial assets and liabilities at fair value through profit or loss are initially recognized at fair value and transaction costs are expensed in the consolidated statements of income. Realized and unrealized gains and losses arising from changes in fair value are included in the consolidated statement of income in the period in which they arise. Where the Company has elected to recognize a financial liability at fair value through profit or loss, any changes associated with the Company’s own credit risk will be recognized in other comprehensive income.

(ii) Financial assets at fair value through other comprehensive income

Investments in equity instruments at fair value through other comprehensive income are initially recognized at fair value plus transaction costs. Subsequent to initial recognition, they are measured at fair value, with gains and losses recognized in other comprehensive income.

(iii) Financial assets and liabilities at amortized cost

Financial assets and liabilities at amortized cost are initially recognized at fair value net of transaction costs, and subsequently carried at amortized cost less any impairment charges.

(iv) Derivative financial instruments

Derivatives are classified as fair value through profit or loss. Derivatives embedded in financial liabilities are treated as separate derivatives when their risks and characteristics are not closely related to their host contracts. Commodity-based derivatives resulting from provisionally priced concentrate are classified as fair value through profit or loss with changes in value recognized in revenue.

Impairment of financial assets

The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost.

At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the 12 month expected credit loss for performing assets and the lifetime expected credit loss if the credit risk on the financial asset has increased significantly since initial recognition. For financial assets that are credit impaired at inception, the Company recognizes the expected lifetime credit loss allowance and any interest income is calculated on the net carrying amount.

Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the expected credit losses are reversed after the impairment was recognized.

Derecognition

Financial assets are derecognized when the investments mature or are sold, and substantially all the risks and rewards of ownership have been transferred. A financial liability is derecognized when the obligation under the liability is discharged, canceled or expired. Gains and losses on derecognition are recognized within finance income and finance costs, respectively. Gains or losses on equity instruments designated as fair value through other comprehensive income remain within accumulated other comprehensive income.

(r) Share based payments

The Company has a Performance Share Unit (“PSU”) Plan, a Restricted Share Unit (“RSU”) plan, and a Director Deferred Share Unit (“DDSU”) Plan.

The PSUs, RSUs, and DDSUs are accounted for at fair value upon issuance and remeasured each reporting period, based on the fair market value of a common share of the Company, and recognized as an expense on a straight-line basis over the vesting period.

(s) Segment reporting

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components. Operating segments are reported consistently with internal information provided to the chief operating decision maker (“CODM”). The CODM, who is responsible for allocating resources and assessing performance, has been identified as Turquoise Hill’s Chief Executive Officer. Based upon management’s assessment of the above criteria, the Company has one operating segment, Oyu Tolgoi, with its copper-gold mine in Southern Mongolia.

(t) Leases

At inception of the contract, the Company assesses whether a contract is, or contains, a lease. The contract contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

To assess this, the Company considers whether:

– The contract involves the use of an identified asset;

– the Company has the right to obtain substantially all the economic benefits from use of the asset throughout the period of use; and

– the Company has the right to direct the use of the asset.

The Company recognizes a right of use asset and a lease liability at the lease commencement date. The right of use asset is initially measured at cost. The right of use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the useful life or the end of the lease term. The estimated useful lives of right of use assets are determined on the same basis as those of property, plant and equipment. In addition, they are periodically reduced by any impairment losses and adjusted for certain re-measurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted at the weighted average incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise: fixed payments; variable lease payments that depend on an index or a rate; amounts expected to be payable under any residual value guarantee, and the exercise price under any purchase option that the Company would be reasonably certain to exercise; lease payments in any optional renewal period if the Company is reasonably certain to exercise an extension option; and penalties for any early termination of a lease unless the Company is reasonably certain not to terminate early.

The lease liability is measured at amortized cost using the effective interest rate method. It is re-measured when there is a change in future lease payments arising from a change in index payment or rate, if there is a change in the Company’s estimate of the amount expected to be payable under any residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension, or termination option.

When the lease liability is re-measured in this way, a corresponding adjustment is made to the carrying amount of the right of use asset or is recorded in the consolidated statement of income if the carrying amount of the asset has been reduced to nil.

The Company presents right of use assets in Property, plant, and equipment and lease liabilities in Borrowings and other financial liabilities in the consolidated balance sheet.

(u) New standards and interpretations not yet adopted

IAS 16, Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) is effective for the Company’s fiscal year ending December 31, 2022. This narrow-scope amendment to IAS 16 prohibits an entity from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Under the amendment, the Company will be required to recognise the proceeds from selling such items, and the cost of producing them, in the Consolidated Statement of Income.

This amendment is effective for the Company’s annual reporting periods beginning January 1, 2022 with retrospective application required as it relates to items of property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after January 1, 2021. IAS 2 Inventories will apply to the identification and measurement of inventory produced. Identifying the related cost may require significant estimation and judgment in the selection of an appropriate method for allocating development expenditure to such inventory.

The impact of adjustments to amounts recorded within opening balances at January 1, 2021 are expected to decrease the deficit reported within equity by $21 million and to increase capital work in progress within property, plant and equipment by $21 million. Upon adoption of the amendment for reporting periods starting from January 1, 2022, the restatement of the Company’s Consolidated Statement of Income and Consolidated Balance Sheet as at and for the year ended December 31, 2021 will result in a $70 million increase to revenue, a $15 million increase in cost of sales and a $55 million increase to capital work in progress within property, plant and equipment.

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Operating segment

12 Months Ended

Dec. 31, 2021

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Operating segment

3. Operating segment

	Year Ended December 31, 2021
				Corporate
				and other
	Oyu Tolgoi			eliminations			Consolidated
Revenue	$	1,971,042		$	-		$	1,971,042
Cost of sales		(622,329	)		-			(622,329	)
Gross margin		1,348,713			-			1,348,713
Operating (expenses) income		(321,257	)		45,770			(275,487	)
Corporate administration expenses		-			(37,699	)		(37,699	)
Other expenses		(7,575	)		(30,002	)		(37,577	)
Income (loss) before finance items and taxes		1,019,881			(21,931	)		997,950
Finance items
Finance income		1,783			1,215			2,998
Finance costs		(282,606	)		274,570			(8,036	)
Income from operations before taxes	$	739,058		$	253,854		$	992,912
Income and other taxes		(279,559	)		(32,233	)		(311,792	)
Income for the year	$	459,499		$	221,621		$	681,120
Depreciation and depletion		165,269			97			165,366
Capital additions		1,263,698			-			1,263,698
Current assets		497,845			623,302			1,121,147
Non-current assets		13,375,066			(371,524	)		13,003,542
Current liabilities		909,328			21,949			931,277
Non-current liabilities (a)		12,443,023			(8,358,569	)		4,084,454
Net increase (decrease) in cash		25,245			(454,570	)		(429,325	)

(a) The Oyu Tolgoi segment’s non-current liabilities includes $8.1 billion of shareholder loan and accrued interest liability and the Corporate and other elimination segment’s non-current liabilities includes $8.1 billion of shareholder loan and accrued interest asset at December 31, 2021.

Revenue by geographic destination is based on the ultimate country of destination, if known. If the destination of the concentrate sold through traders is not known, then revenue is allocated to the location of the concentrate at the time when revenue is recognized. During the years ended December 31, 2021 and 2020, principally all of Oyu Tolgoi’s revenue arose from concentrate sales to customers in China and revenue from individual customers in excess of 10% of Oyu Tolgoi’s revenue was $234.2 million, $226.0 million, $216.9 million and $214.5 million (December 31, 2020 - $230.7 million, $177.4 million, $110.5 million and $106.2 million).

Substantially all long-lived assets of the Oyu Tolgoi segment, other than financial instruments and deferred tax assets, are located in Mongolia.

	Year Ended December 31, 2020
				Corporate
				and other
	Oyu Tolgoi			eliminations			Consolidated
Revenue	$	1,078,192		$	-		$	1,078,192
Cost of sales		(669,394	)		-			(669,394	)
Gross margin		408,798			-			408,798
Operating (expenses) income		(245,718	)		43,447			(202,271	)
Corporate administration expenses		-			(30,602	)		(30,602	)
Other income (expenses)		3,254			(2,772	)		482
Income before finance items and taxes		166,334			10,073			176,407
Finance items
Finance income		4,292			13,057			17,349
Finance costs		(257,765	)		252,255			(5,510	)
Income (loss) from operations before taxes	$	(87,139)		$	275,385		$	188,246
Income and other taxes		347,003			(40,607	)		306,396
Income for the year	$	259,864		$	234,778		$	494,642
Depreciation and depletion		181,146			114			181,260
Capital additions		1,326,274			-			1,326,274
Current assets		431,271			1,077,598			1,508,869
Non-current assets		12,025,763			(165,871	)		11,859,892
Current liabilities		501,013			20,623			521,636
Non-current liabilities (a)		11,954,961			(7,535,789	)		4,419,172
Net decrease in cash		(38,563	)		(489,801	)		(528,364	)

(a) The Oyu Tolgoi segment’s non-current liabilities includes $7.3 billion of shareholder loan and accrued interest liability and the Corporate and other elimination segment’s non-current liabilities includes $7.3 billion of shareholder loan and accrued interest asset at December 31, 2020.

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Revenue

12 Months Ended

Dec. 31, 2021

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Revenue

4. Revenue

	Year Ended December 31, 2021
	Revenue from contracts with customers		Other revenue (a)			Total revenue
Total revenue:
Copper	$	1,151,118	$	53,401		$	1,204,519
Gold		754,345		(5,763	)		748,582
Silver		18,127		(186	)		17,941
	$	1,923,590	$	47,452		$	1,971,042
	Year Ended December 31, 2020
	Revenue from contracts with customers		Other revenue (a)			Total revenue
Total revenue:
Copper	$	755,874	$	41,423		$	797,297
Gold		260,055		5,593			265,648
Silver		14,575		672			15,247
	$	1,030,504	$	47,688		$	1,078,192

(a) Other revenue relates to gains (losses) on the revaluation of trade receivables.

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Cost of sales

12 Months Ended

Dec. 31, 2021

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Cost of sales

5. Cost of sales

	Year Ended December 31,
	2021		2020
Production and delivery	$	459,322	$	493,370
Depreciation and depletion		163,007		176,024
	$	622,329	$	669,394

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Operating expenses

12 Months Ended

Dec. 31, 2021

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Operating expenses

6. Operating expenses

	Year Ended December 31,
	2021			2020
Oyu Tolgoi administration expenses	$	156,066		$	124,889
Royalty expenses		105,399			63,420
Inventory reversals (a)		(3,465	)		(2,703	)
Selling expenses		15,041			11,147
Depreciation		2,359			5,236
Other		87			282
	$	275,487		$	202,271

(a) Inventory reversals include net adjustments to the carrying value of ore stockpile inventories and materials and supplies; refer to Note 9.

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Finance items

12 Months Ended

Dec. 31, 2021

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Finance items

7. Finance items

	Year Ended December 31,
	2021			2020
Finance income:
Interest income (a)	$	2,998		$	17,349
	$	2,998		$	17,349
Finance costs:
Interest expense and similar charges	$	(299,618	)	$	(340,040	)
Amounts capitalized to property, plant and equipment (b)		297,392			337,727
Accretion of decommissioning obligations (Note 17)		(5,810	)		(3,197	)
	$	(8,036	)	$	(5,510	)

(a) Finance income for the year ended December 31, 2021 does not include interest on the related party receivable. For the year ended December 31, 2020, finance income includes $2.1 million on the related party receivable (refer to Note 22). Amounts had previously been placed with Rio Tinto under an agreement for cash management services in connection with net proceeds from the project finance facility. This was settled during the second quarter of 2020.

(b) The majority of the costs capitalized to property, plant and equipment were capitalized at the weighted average rate of the Company’s general borrowings of 8.1% (2020: 8.3%) (refer to Note 13).

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Cash and cash equivalents

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Cash and cash equivalents

8. Cash and cash equivalents

		December 31, 2021		December 31, 2020
Cash at bank and on hand	$	101,745	$	61,783
Money market funds		193,243		667,542
Other cash equivalents		399,308		394,296
	$	694,296	$	1,123,621

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Inventories

12 Months Ended

Dec. 31, 2021

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Inventories

9. Inventories

	December 31, 2021			December 31, 2020
Current
Concentrate		$    148,270			$     48,504
Ore stockpiles		27,911			44,846
Materials and supplies		185,797			180,038
Provision against carrying value of materials and supplies		(71,961	)		(75,426	)
		$    290,017			$   197,962
Non-current
Ore stockpiles		$      60,711			$     37,557
		$      60,711			$     37,557

During the year ended December 31, 2021, $622.3 million (2020 - $669.4 million) of inventory was charged to cost of sales (Note 5). 

During the year ended December 31, 2021, net reversals of $3.5 million (2020 - $2.7 million) were recognized in the consolidated statement of income relating to inventory write off and movement in provisions against carrying value. During the year ended December 31, 2021, no inventory (2020 - $0.1 million) with a provision against its carrying value was sold.

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Trade and other receivables

12 Months Ended

Dec. 31, 2021

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Trade and other receivables

10. Trade and other receivables

	December 31, 2021		December 31, 2020
Trade receivables from provisionally priced sales	$	13,645	$	50,459
Other receivables		2,435		8,701
Due from related parties (Note 22)		39		852
	$	16,119	$	60,012

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Prepaid expenses and other assets

12 Months Ended

Dec. 31, 2021

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Prepaid expenses and other assets

11. Prepaid expenses and other assets

	December 31, 2021		December 31, 2020
Current Prepaid Expenses:
Prepaid expenses	$	38,881	$	44,130
Amounts prepaid to related parties (Note 22)		81,725		83,144
	$	120,606	$	127,274
Non-current Prepaid Expenses:
Prepaid Mongolian corporate tax (Note 23)	$	348,171	$	-
Other		500		-
	$	348,671	$	-

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Other non-current financial assets

12 Months Ended

Dec. 31, 2021

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Other non-current financial assets

12. Other non-current financial assets

	December 31, 2021		December 31, 2020
Current assets:
Commodity put options	$	109	$	-
	$	109	$	-
Non-current assets:
Marketable securities	$	9,323	$	6,379
Other		7,495		7,739
	$	16,818	$	14,118

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Property, plant and equipment

12 Months Ended

Dec. 31, 2021

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Property, plant and equipment

13. Property, plant and equipment

			Oyu Tolgoi
Year Ended December 31, 2021		Mineral property interests			Plant and equipment	(c)		Capital works in progress		Other capital assets		Total
Net book value:
January 1, 2021	$	695,552		$	3,011,522		$	7,219,502	$	936	$	10,927,512
Additions (a)		33,208			13,906			919,192		-		966,306
Interest capitalized (Note 7)		-			-			297,392		-		297,392
Changes to decommissioning obligations (Note 17)		13,888			-			-		-		13,888
Depreciation for the period		(48,967)			(181,405)			-		(97)		(230,469)
Disposals and write offs		-			(149)			-		-		(149)
Transfers and other movements		-			148,720			(148,720)		-		-
December 31, 2021	$	693,681	$		2,992,594		$	8,287,366	$	839	$	11,974,480
Cost		1,350,231			5,023,101			8,652,073		1,131		15,026,536
Accumulated depreciation / impairment		(656,550)			(2,030,507	)		(364,707)		(292)		(3,052,056	)
December 31, 2021	$	693,681	$		2,992,594		$	8,287,366	$	839	$	11,974,480
Non-current assets pledged as security (b)	$	693,681	$		2,992,594		$	8,287,366	$	-	$	11,973,641
			Oyu Tolgoi
Year Ended December 31, 2020		Mineral property interests			Plant and equipment	(c)		Capital works in progress		Other capital assets		Total
Net book value:
January 1, 2020	$	723,516		$	3,126,331		$	5,931,750	$	1,050	$	9,782,647
Additions (a)		5,965			-			982,582		-		988,547
Interest capitalized (Note 7)		-			-			337,727		-		337,727
Changes to decommissioning obligations (Note 17)		26,529			-			-		-		26,529
Depreciation for the period		(60,458)			(145,979)			-		(114)		(206,551)
Disposals and write offs		-			(858)			(529)		-		(1,387)
Transfers and other movements		-			32,028			(32,028)		-		-
December 31, 2020	$	695,552	$		3,011,522		$	7,219,502	$	936	$	10,927,512
Cost		1,303,134			4,868,370			7,584,209		1,131		13,756,844
Accumulated depreciation / impairment		(607,582)			(1,856,848)			(364,707)		(195)		(2,829,332)
December 31, 2020	$	695,552	$		3,011,522		$	7,219,502	$	936	$	10,927,512
Non-current assets pledged as security (b)	$	695,552	$		3,011,522		$	7,219,502	$	-	$	10,926,576

(a) Pre-production sales proceeds of $69.7 million (2020 - $26.1 million) and associated costs of $14.9 million (2020 – $5.4 million) have been recorded as a net reduction to additions to Capital works in progress during the year ended December 31, 2021.

(b) In addition to property, plant and equipment, at December 31, 2021 current and non-current inventory of $290.0 million (December 31, 2020 - $197.9 million) and $60.7 million (December 31, 2020 - $37.6 million) respectively, and cash at bank and on hand of $72.9 million (December 31, 2020 - $47.7 million) are pledged as security for the project finance facility.

(c) Plant and equipment comprise owned and leased assets:

	December 31,			December 31,
	2021			2020
Plant and equipment owned	$	11,961,967		$	10,923,294
Right of use assets		12,513			4,218
	$	11,974,480		$	10,927,512
The Company leases certain assets including warehouse and office facilities as well as transportation equipment, substantially all at Oyu Tolgoi. Information about leases for which the Company is a lessee is presented below:
	Year Ended December 31,
Plant and equipment:	2021			2020
Opening Carrying Amount	$	4,218		$	8,710
Additions		13,945			-
Depreciation for the period		(5,650	)		(4,492	)
	$	12,513		$	4,218

(d) Impairment charges

As disclosed in the press release on December 13, 2021, Turquoise Hill and Rio Tinto made a joint offer to the Government of Mongolia to conclude negotiations over the non-technical criteria for approval to initiate the caving process, known as the undercut, at Oyu Tolgoi. Further to this offer, the Mongolian Parliament passed Parliamentary Resolution 103, on December 30, 2021, to authorize the Government of Mongolia to take certain measures in connection with the negotiations that meant that they would now continue into 2022. Resolution 103 also placed additional funding constraints on the shareholders of Oyu Tolgoi LLC until first sustainable production. The potential for further delays and the resulting uncertainty as to whether the underground project could be completed within ranges previously tested for impairment in 2019 led to the identification of an indicator of impairment and a recoverable amount assessment being undertaken at December 31, 2021.

The recoverable amount was determined by a fair value less cost of disposal (FVLCD) model using post-tax cash flows expressed in real terms, estimated based on detailed life-of-mine plans and discounted using a post-tax real discount rate of 8.0%. The long-term forecast copper price of $3.43 per pound and a long-term forecast gold price of $1,601 per ounce were used, estimated using analyst consensus forecasts. The cash flows reflected in the FVLCD model incorporated a portion of material classified as mineral resources, which contributed approximately 19% of the total recoverable amount. Other significant assumptions within the assessment of recoverable amount include operating costs, development capital, scheduling and mine design.

The Company’s assessment of recoverable amount at December 31, 2021 did not result in any additional impairment or impairment reversal being recorded at December 31, 2021.

The recoverable amount was estimated taking into account technical risks associated with the mine plan through to ramp-up of underground production over the period from 2025 to 2031. The recoverable amount estimated also reflects the inherent uncertainty of assumptions during the construction phase of a project, taking into account factors including the duration, severity and scope of impacts from COVID-19 and the potential duration and outcome of negotiations with the Government of Mongolia.

Together with operating costs, development capital, and scheduling and mine design, other significant assumptions in the determination of recoverable amount include the discount rate, long-term commodity prices and the inclusion of mineral resources (in addition to mineral reserves). Reasonably possible movements in the assumptions disclosed in Note 2 - impairment could have changed the calculated recoverable amount. An increase in the post-tax real discount rate by 1.0% to 9.0%, with all other inputs remaining constant, would reduce the recoverable amount by $1.6 billion. A 5% decrease to the long-term copper and gold prices, with all other inputs remaining constant, would reduce the recoverable amount by
$1.1 billion. A 5% increase to the long-term copper and gold prices, with all other inputs remaining constant, would increase the recoverable amount by $1.1 billion. 

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Trade and other payables

12 Months Ended

Dec. 31, 2021

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Trade and other payables

14. Trade and other payables

	December 31,		December 31,
	2021		2020
Trade payables and accrued liabilities	$	320,791	$	315,570
Interest payable on long-term borrowings		7,280		7,266
Payable to related parties (Note 22)		54,153		65,552
Other		2,264		1,671
	$	384,488	$	390,059

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Borrowings and other financial liabilities

12 Months Ended

Dec. 31, 2021

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Borrowings and other financial liabilities

15. Borrowings and other financial liabilities

	December 31,		December 31,
	2021		2020
Current liabilities:
Project finance facility (a)	$	387,561	$	27,567
Lease liabilities (b)		9,860		721
	$	397,421	$	28,288
Non-current liabilities:
Project finance facility (a)	$	3,769,783	$	4,157,344
Lease liabilities (b)		15,575		16,147
	$	3,785,358	$	4,173,491

(a) Project finance facility

On December 14, 2015, Oyu Tolgoi signed a $4.4 billion project finance facility. The facility is provided by a syndicate of international financial institutions and export credit agencies representing the governments of Canada, the United States and Australia, along with 15 commercial banks. The project finance lenders have agreed a debt cap of $6.0 billion. In addition to the funding drawn down to date there is an additional $0.1 billion available, subject to certain conditions (refer to Note 26 – Subsequent events), under the Company’s facility with the Export-Import Bank of the United States, and the potential for an additional $1.6 billion of supplemental debt in the future. Under the terms of the project finance facility held by Oyu Tolgoi, there are certain restrictions on the ability of Oyu Tolgoi to make shareholder distributions. Subsequent to December 31, 2021, Oyu Tolgoi notified its lenders of a potential event of default. Refer to Note 26.

At December 31, 2021, Oyu Tolgoi has drawn down $4.3 billion of the project finance facility:

	December 31, 2021				Original		Annual interest rate
Facility	Carrying Value (i)		Fair Value (i)		Term (ii)		Pre-completion		Post-completion
International Financial Institutions - A Loan	$	775,836	$	820,958		15 years		LIBOR + 3.78%		LIBOR + 4.78%
Export Credit Agencies		865,801		921,116		14 years		LIBOR + 3.65%		LIBOR + 4.65%
Loan		277,511		311,637		13 years		2.3%		2.3%
MIGA Insured Loan (iii)		673,248		711,980		12 years		LIBOR + 2.65%		LIBOR + 3.65%
Commercial Banks		1,564,948		1,672,455		12 years		LIBOR + 3.4%		LIBOR + 4.4%
- B Loan								Includes $50 million 15-year loan at A Loan rate
	$	4,157,344	$	4,438,146

(i) The carrying value of borrowings under the project finance facility differs from fair value due to amortized transaction costs, and changes in the estimate of fair value between the initial recognition date and the balance sheet date. Project finance borrowings were initially recognized at fair value less transaction costs on the relevant draw down dates, with aggregate initial fair value being $4,348.9 million before transaction costs. At December 31, 2021, these borrowings are stated net of $124.8 million unamortized transaction costs.

At December 31, 2021, the fair value of the Company’s borrowings has been estimated with reference to a market yield, the variability of which is considered a reasonable indicator, over the pre-completion period, of movements in the fair value of amounts drawn under the project finance facility. Post completion, the fair value has been estimated using a separate discount rate that incorporates the annual interest rate on each tranche of the facility with reference to the consideration of factors that could indicate a change in the credit assessment of Oyu Tolgoi LLC as a counterparty to project finance. These considerations include in-country risk relating to the Oyu Tolgoi project and the assumed date of transition from pre-completion to post-completion.    The transition from pre-completion to post-completion is determined by a set of tests for both completion of physical infrastructure and the ability to extract and process ore of defined grades over a defined period. This is considered a level 3 fair value measurement. Refer to Note 22 (v) for a description of Rio Tinto guarantee arrangements with respect to project finance borrowings.

(ii) The project finance facility provides for interest only payments for the first five years followed by minimum repayments according to a stepped amortization schedule for the remaining life of the facility. The maturity analysis of principal repayments is as follows:

	December 31,  2021		December 31,  2020
Maturity analysis - Project Finance facility (1)
Less than one year	$	403,483	$	43,489
One to five years		2,610,445		2,418,861
More than five years		1,268,212		1,863,279
	$	4,282,140	$	4,325,629

(1) The rows are represented in dates as follows: As at December 31, 2021: 12 months to December 31, 2022; 48 months between January 1, 2023 and December 31, 2026; Beyond January 1, 2027. As at December 31, 2020: 12 months to December 31, 2021; 48 months between January 1, 2022 and December 31, 2025; Beyond January 1, 2026.

(iii) The Multilateral Investment Guarantee Agency (“MIGA”) provides political risk insurance for commercial banks. The Company is required to pay an annual insurance premium of 1.4% of the MIGA Insured Loan for the remaining life of the facility.

(b) Lease liabilities

	December 31,  2021		December 31,  2020
Maturity analysis - contractual undiscounted cash flows (1)
Less than one year	$	10,727	$	1,121
One to five years		20,752		19,631
More than five years		306		205
Total undiscounted lease liabilities	$	31,785	$	20,957
Lease liabilities included in the Consolidated balance sheet	$	25,435	$	16,868
Current	$	9,860	$	721
Non-Current	$	15,575	$	16,147

(1) The rows are represented in dates as follows: As at December 31, 2021: 12 months to December 31, 2022; 48 months between January 1, 2023 and December 31, 2026; Beyond January 1, 2027. As at December 31, 2020: 12 months to December 31, 2021; 48 months between January 1, 2022 and December 31, 2025; Beyond January 1, 2026.

Lease liabilities are discounted at the weighted average incremental borrowing rate of 7.6% (2020: 7.8%).

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Income taxes

12 Months Ended

Dec. 31, 2021

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Income taxes

16. Income taxes

(a) Tax expense (benefit)

	Year Ended December 31,
	2021		2020
Current (i)	$	232	$	7,694
Deferred
Temporary differences including tax losses (ii)		277,843		(346,627	)
Withholding taxes (iii)		33,717		32,537
	$	311,560	$	(314,090	)
Net income statement expense (benefit) for income taxes	$	311,792	$	(306,396	)

(i) Current taxes

In 2021, a cash payment of $0.2 million (2020 - $28.3 million) was made in respect of current taxes payable. Deferred tax liabilities for withholding taxes are reclassified to current tax prior to settlement.

(ii) Deferred tax assets

2021 – Mongolia

Deferred tax assets of $561.9 million were recognized at December 31, 2021 in Mongolia, comprised of $150.7 million relating to tax losses that expire if not recovered against taxable income within eight years and $411.2 million relating to accrued but unpaid interest expense and other temporary differences. Tax losses have been calculated in accordance with the provisions of the Oyu Tolgoi Investment Agreement and Mongolian laws.

The Company recognized deferred tax assets at December 31, 2021 to the extent recovery is considered probable. In assessing the probability of recovery, future taxable income, derived from cash flows from detailed life-of-mine and production plans, was evaluated with reference to commodity price sensitivities, operating cost assumptions and carry-forward limits. Updated mine plan assumptions reflected the expected delays in sustainable production to the first half of 2023 and to shaft 3 and 4 development that were announced on October 14, 2021.

During the year ended December 31, 2021, the Company decreased its recognized Mongolian deferred tax assets by $279.4 million. The movement in the Mongolian deferred tax asset represented a decrease of $308.3 million in the recognized deferred tax asset for prior year losses and other temporary differences, mainly related to property, plant and equipment. This was partially offset by accrued but unpaid interest expense incurred by Oyu Tolgoi in the year, which increased the recognized deferred tax asset by $28.9 million.

The adjustment to the previously recognized deferred tax asset for prior year losses and other temporary differences was due in part to the utilization of prior year losses carried forward against taxable income in the year combined with the changes made to mine plan operating assumptions, which led to an increase in the amount of loss carry forwards and temporary differences estimated to expire unutilized.

2020 – Mongolia

Deferred tax assets of $841.3 million were recognized at December 31, 2020 in Mongolia, comprised of $389.3 million relating to tax losses that expire if not recovered against taxable income within eight years and $452.0 million relating to accrued but unpaid interest expense and other temporary differences. During the year ended December 31, 2020, the Company increased its recognized Mongolian deferred tax assets by $347.3 million. The movement in the Mongolian deferred tax asset represented an increase of $270.7 million in the recognized deferred tax asset for prior year losses and other temporary differences and an increase of $76.6 million related to current year activity. The adjustment to the Mongolian deferred tax was primarily due to an overall strengthening in taxable income forecasts during 2020 driven by improved commodity price projections and updated operating assumptions in mine planning and scheduling. The improvement in taxable income forecasts led to an increase in the amount of loss carry forwards and temporary differences estimated to be utilized prior to expiration.

2021 – Canada

Deferred tax assets of $41.0 million were recognized at December 31, 2021 in Canada comprised of $39.5 million relating to non-capital Canadian tax losses carried forward and $1.5 million relating to other temporary differences. The recognized deferred tax asset increased during 2021 due to the additional non-capital tax losses incurred in the year, only part of which is estimated to be utilized prior to expiration. Non-capital losses expire if not used to offset taxable income within twenty years.

2020 – Canada

Deferred tax assets at December 31, 2020 were $39.4 million, of which $38.4 million were recognized in relation to non-capital Canadian tax losses carried forward and $1.0 million relating to other temporary differences.

(iii) Withholding taxes

Withholding tax is accrued on interest owing on shareholder loans and recognized within deferred tax liabilities as interest accrues. Mongolian withholding tax will be due upon receipt of loan interest.

(b) Reconciliation of income taxes calculated at the statutory rates to the actual tax provision

	Year Ended December 31,
	2021			2020
Income (loss) from operations before taxes	$	992,912		$	188,246
Tax at Canadian combined federal and provincial income tax rate (2021: 26.5%; 2020: 26.5%)		263,122			49,885
Tax effect of:
Change in amount of deferred tax recognized		151,117			(276,945	)
Difference in tax rates and treatment in foreign jurisdictions		(140,903	)		(116,208	)
Withholding taxes		33,717			32,537
Non deductible losses and expense		4,739			4,335
	$	311,792		$	(306,396	)

(c) Recognized and unrecognized deferred tax assets and liabilities

Recognized and unrecognized deferred tax assets and liabilities are shown in the table below:

	Recognized						Unrecognized
	December 31,			December 31,			December 31,		December 31,
	2021			2020			2021		2020
Deferred tax assets
Non-capital losses (i)	$	190,203		$	427,695		$	152,853	$	281,643
Capital losses		-			-			117,517		117,945
Other temporary differences including accrued interest		412,659			453,010			319,227		63,471
	$	602,862		$	880,705		$	589,597	$	463,059
Deferred tax liabilities (ii)
Withholding tax		(145,434	)		(111,717	)		-		-
	$	(145,434	)	$	(111,717	)	$	-	$	-

(i) Unrecognized deferred tax assets relating to non-capital losses for which recovery is not considered probable as at December 31, 2021 expire between 2024 and 2041 (2020 - between 2024 and 2025).

(c) Recognized and unrecognized deferred tax assets and liabilities

(ii) At December 31, 2021, the Company has not recognized a deferred tax liability on unremitted earnings in subsidiaries of  $1,188 million (2020 - $606 million).

In addition to the above, the Company has $812.1 million of investment tax credits at December 31, 2021 (2020 – $812.1 million). No deferred tax asset has been recognized in respect of these credits, in accordance with the initial recognition exception in IAS 12 Income taxes for transactions that are not a part of a business combination and do not affect accounting or taxable profit.

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Decommissioning obligations

12 Months Ended

Dec. 31, 2021

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Decommissioning obligations

17. Decommissioning obligations

	Year Ended December 31,
	2021		2020
Opening carrying amount	$	133,964	$	104,238
Changes in estimates		13,888		26,529
Accretion of present value discount		5,810		3,197
	$	153,662	$	133,964

All decommissioning obligations relate to Oyu Tolgoi. Reclamation and closure costs have been estimated based on the Company’s interpretation of current regulatory requirements and other commitments made to stakeholders, and are measured as the net present value of estimated future cash expenditures upon reclamation and closure.

Estimated future cash expenditures of $349.7 million (2020 - $227.8 million), before discounting, have been discounted from anticipated closure dates that range from 2070 to 2101 (2020 – anticipated closure date 2055) to their present value at a real rate of 1.5% (December 31, 2020 – 1.5%).

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Share capital

12 Months Ended

Dec. 31, 2021

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Share capital

18. Share capital

The authorized share capital of Turquoise Hill consists of an unlimited number of Common Shares without par value and an unlimited number of Preferred Shares.

On October 23, 2020, the Company implemented a consolidation (or reverse stock split) of the Company’s issued and outstanding common shares at a ratio of one post-consolidation share for every ten pre-consolidation shares (“Share Consolidation”). The Share Consolidation reduced the number of issued and outstanding common shares of the Company from 2,012,314,469 shares to 201,231,446 shares. The reduction in the number of issued and outstanding common shares has been retrospectively applied to all figures presented herein.

As at December 31, 2021, there were 201,231,446 Common Shares and no Preferred Shares issued and outstanding (2020: 201,231,446 Common Shares and no Preferred Shares issued and outstanding).

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Non-controlling interests

12 Months Ended

Dec. 31, 2021

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Non-controlling interests

19. Non-controlling interests

	Non-controlling Interest: Oyu Tolgoi (a) Year Ended December 31,
	2021			2020
Balance, January 1	$	(1,148,820	)	$	(1,237,174	)
Non-controlling interest’s share of income		156,230			88,354
Common share investments funded on behalf of non-controlling interest (a)		20,400			137,700
Funded amounts repayable to the Company (a)		(20,400	)		(137,700	)
Balance, December 31	$	(992,590	)	$	(1,148,820	)

(a) Since 2011, the Company has funded common share investments in Oyu Tolgoi on behalf of Erdenes. In accordance with the Amended and Restated Shareholders Agreement dated June 8, 2011, such funded amounts earn interest at an effective annual rate of LIBOR plus 6.5% and were repayable to the Company via a pledge over Erdenes’ share of future Oyu Tolgoi common share dividends. Erdenes also had the right to reduce the outstanding balance by making payments directly to the Company.

Common share investments funded on behalf of Erdenes have been recorded as a reduction to the net carrying value of non-controlling interest. As at December 31, 2021, the cumulative amount of such funding was $1,398.9 million (December 31, 2020 - $1,378.4 million). Accrued interest of $953.4 million (December 31, 2020 - $804.4 million) relating to this funding has not been recognized in these consolidated financial statements, as payment was expected to be triggered on common share dividend distribution by Oyu Tolgoi, the certainty of which could not be reliably determined.

On January 24, 2022 the Company announced the start of underground mining operations at Oyu Tolgoi and agreements that reset the relationship with the Government of Mongolia. These agreements included a waiver of the common share investments funded on behalf of Erdenes, together with the accrued interest relating to this funding – see Note 26.

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Cash flow information

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Cash flow information

20. Cash flow information

(a) Reconciliation of net income to net cash flow generated from operating activities before interest and tax

	Year Ended December 31,
	2021			2020
Income (loss) for the year	$	681,120		$	494,642
Adjustments for:
Depreciation and amortization		165,366			181,260
Finance items:
Interest income		(2,998	)		(17,349	)
Interest and accretion expense		8,036			5,510
Unrealized foreign exchange (gain) loss		2,228			(4,297	)
Inventory write down reversals		(3,465	)		(2,703	)
Write off of property, plant and equipment		87			282
Realized and unrealized losses on commodity put options		29,797			-
Income and other taxes		311,792			(306,396	)
Other items		258			2,403
Net change in non-cash operating working capital items:
(Increase) decrease in:
Inventories		(109,212	)		(26,534	)
Trade, other receivables and prepaid expenses		52,148			(43,456	)
(Decrease) increase in:
Trade and other payables		29,554			12,414
Deferred revenue		46,079			75,393
Cash generated from operating activities before interest and tax	$	1,210,790		$	371,169

(b) Supplementary information regarding other non-cash transactions

The non-cash investing and financing activities relating to operations not already disclosed in the consolidated statements of cash flows were as follows:

	Year Ended December 31
	2021			2020
Investing activities
Change in accounts payable and accrued liabilities related to purchase of property, plant and equipment	$	(40,022	)	$	(79,879)
Additions to property, plant and equipment - leased assets		13,945			-

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Earnings per share

12 Months Ended

Dec. 31, 2021

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Earnings per share

21. Earnings per share

Basic earnings per share is computed by dividing the net income attributable to owners of Turquoise Hill by the weighted average number of common shares outstanding during the period. Pursuant to the Share Consolidation (refer to Note 18), the reduction in the number of issued and outstanding common shares was retrospectively incorporated into the determination of the basic weighted average number of shares outstanding for the purpose of calculating basic and diluted earnings per share attributable to Turquoise Hill Resources Ltd.

As of December 31, 2021 and 2020, the Company had not issued any equity instruments that are potentially dilutive to earnings per share.

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Related parties

12 Months Ended

Dec. 31, 2021

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Related parties

22. Related parties

As at December 31, 2021, Rio Tinto plc’s indirect equity ownership in the Company was 50.8% (December 31, 2020: 50.8%). The following tables present the consolidated financial statements line items within which transactions with a Rio Tinto entity or entities (“Rio Tinto”) are reported. Rio Tinto entities comprise Rio Tinto plc, Rio Tinto Limited and their respective subsidiaries other than Turquoise Hill and its subsidiaries.

	Year Ended December 31,
Statements of Income	2021			2020
Operating and corporate administration expenses:
Cost recoveries - Turquoise Hill	$	1,151		$	2,803
Management services payment (i)		(29,706	)		(28,305	)
Cost recoveries - Rio Tinto (ii)		(66,362	)		(38,213	)
Finance income:
Cash and cash equivalents (iii)		-			2,329
Receivable from Rio Tinto (iv)		-			2,123
Finance costs:
Completion support fee (v)		(109,315	)		(110,054	)
	$	(204,232	)	$	(169,317	)

	Year Ended December 31,
Statements of Cash Flows	2021			2020
Cash generated from operating activities
Interest received (iii, iv)	$	-		$	9,848
Interest paid (v)		(107,896	)		(107,948	)
Cash flows from investing activities
Receivable from related party: amounts withdrawn (iv)		-			511,284
Expenditures on property, plant and equipment:
Management services payment and cost recoveries - Rio Tinto (i), (ii)		(37,302	)		(75,470	)

Balance Sheets	December 31, 2021			December 31, 2020
Trade and other receivables (Note 10)	$	39		$	852
Prepaid expenses and other assets (Note 11)		81,725			83,144
Trade and other payables (Note 14)
Management services payment - Rio Tinto (i)		(14,584	)		(13,137	)
Cost recoveries - Rio Tinto (ii)		(39,569	)		(52,415	)
	$	27,611		$	18,444

(i) In accordance with the Amended and Restated Shareholders’ Agreement, which was signed on June 8, 2011, and other related agreements, Turquoise Hill is required to make a management services payment to Rio Tinto equal to a percentage of all capital costs and operating costs incurred by Oyu Tolgoi from March 31, 2010 onwards. After signing the Underground Mine Development and Financing Plan on May 18, 2015, the management services payment to Rio Tinto has been calculated as 1.5% applied to underground development and sustaining capital costs, and 3% applied to operating costs and capital related to current operations.

(ii) Rio Tinto recovers the costs of providing general corporate support services and mine management services to Turquoise Hill. Mine management services are provided by Rio Tinto in its capacity as the manager of Oyu Tolgoi.

(iii) In addition to placing cash and cash equivalents on deposit with banks or investing funds with other financial institutions, Turquoise Hill may deposit cash and cash equivalents with Rio Tinto in accordance with an agreed upon policy and strategy for the management of liquid resources. Funds deposited with Rio Tinto earn interest at rates equivalent to those offered by financial institutions or short-term corporate debt. At December 31, 2021 and December 31, 2020, there were no funds deposited with wholly owned subsidiaries of Rio Tinto.

(iv) As part of project finance (Note 15), Turquoise Hill appointed 9539549 Canada Inc., a wholly owned subsidiary of Rio Tinto, as service provider to provide post-drawdown cash management services in connection with net proceeds from the project finance facility, which were placed with 9539549 Canada Inc. and shall be returned to Turquoise Hill as required for purposes of Oyu Tolgoi underground mine development and funding. Rio Tinto International Holdings Limited, a wholly owned subsidiary of Rio Tinto, agreed to guarantee the obligations of the service provider under this agreement. At December 31, 2021 and December 31, 2020, there were no amounts due from 9539549 Canada Inc. Amounts due had been earning interest at an effective annual rate of LIBOR plus 2.45%. The interest rate reflected: interest receivable at LIBOR minus 0.05%; plus a benefit of 2.5% arising on amounts receivable from 9539549 Canada Inc. under the Cash Management Services Agreement, which are net settled with the 2.5% completion support fee described in (v) below.

(v) As part of the project finance agreements (Note 15), Rio Tinto agreed to provide a guarantee, known as the completion support undertaking (“CSU”) in favour of the Commercial Banks and the Export Credit Agencies. In consideration for providing the CSU, the Company is required to pay Rio Tinto a fee equal to 2.5% of the amounts drawn under the facility. The annual completion support fee of 2.5% on amounts drawn under the facility is accounted for as a borrowing cost and included within interest expense and similar charges (refer to Note 7). The fee is settled net of a benefit arising on amounts receivable from 9539549 Canada Inc. under the Cash Management Services Agreement described in (iv) above. The fee payment obligation will terminate on the date Rio Tinto’s CSU obligations to the project lenders terminate.

The above noted transactions were carried out in the normal course of operations and were measured at the transaction amount, which is the amount of consideration established and agreed to by the related parties.

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Commitments and contingencies

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Commitments and contingencies

23. Commitments and contingencies

(a) Capital commitments

At December 31, 2021, the Company had capital expenditure commitments at the balance sheet date of $26.0 million. These commitments represent minimum non-cancellable obligations and exit costs for cancellable obligations.

At December 31, 2021, the Company had power purchase commitments of $62.8 million. These commitments represent minimum non-cancellable obligations (refer to Note 26 – Subsequent events).

(b) Mongolian Tax Assessments

On January 16, 2018, the Company announced that Oyu Tolgoi received a tax assessment for approximately $155 million (which was converted from Mongolian Tugrik to U.S. dollars at the exchange rate on that date) from the “MTA” as a result of a general tax audit for the period covering 2013 through 2015 (“2013 to 2015 Tax Assessment”). In January 2018 Oyu Tolgoi paid an amount of $4.8 million to settle unpaid taxes, fines, and penalties for accepted items.

The Company was of the opinion that Oyu Tolgoi had paid all taxes and charges required under the 2009 Oyu Tolgoi Investment Agreement (“Investment Agreement”), the Amended and Restated Shareholder Agreement (“ARSHA”), the Underground Mine Development and Financing Plan and Mongolian Law (“UDP”). Following engagement with the MTA, Oyu Tolgoi was advised that the MTA could not resolve Oyu Tolgoi’s objections to the 2013 to 2015 Tax Assessment.

On February 20, 2020, the Company announced that Oyu Tolgoi had proceeded with the initiation of a formal international arbitration proceeding in accordance with the dispute resolution provisions within Chapter 14 of the Investment Agreement, entered into with the Government of Mongolia in 2009 and Chapter 8 of the UDP, entered into with the Government of Mongolia in 2015. The dispute resolution provisions call for arbitration under the United Nations Commission on International Trade Law (“UNCITRAL”) seated in London before a panel of three arbitrators. By agreeing to resolve certain matters within the 2013 to 2015 Tax Assessment dispute under UNCITRAL Arbitration Rules, both parties agreed that the arbitral award shall be final and binding on both parties and the parties shall carry out the award without delay.

On December 23, 2020, the Company announced that Oyu Tolgoi had received a tax assessment for approximately $228 million (which was converted from Mongolian Tugrik to U.S. dollars at the exchange rate on that date) from the MTA relating to an audit on taxes imposed and paid by Oyu Tolgoi between 2016 and 2018 (“2016 to 2018 Tax Assessment”). The MTA also proposed a $1.4 billion adjustment to the balance of Oyu Tolgoi’s carried forward tax losses. The adjustments are to disallow or defer certain tax deductions claimed in the 2016 to 2018 years.

On January 11, 2021, the Company announced that Oyu Tolgoi had evaluated the 2016 to 2018 Tax Assessment claim and confirmed that Oyu Tolgoi had given notice of its intention to apply to the Tribunal in the Arbitration for leave to amend its Statement of Claim to include certain matters raised in the 2016 to 2018 Tax Assessment. Most of the matters raised in respect of the 2016 to 2018 Tax Assessment are of a similar nature to the matters that were raised in the 2013 to 2015 Tax Assessment. Oyu Tolgoi’s application to include these matters in the Arbitration for the 2013 to 2015 Tax Assessment was accepted. In addition to those matters included within the Statement of Claim, there were certain limited tax matters included in the 2013 to 2015 and 2016 to 2018 Tax Assessments which were being addressed in local Mongolian tax courts. The Company has expensed certain amounts related to these matters and has also adjusted its loss carry forwards.

In February 2021, Oyu Tolgoi received notices of payment totalling $228 million (which were converted from Mongolian Tugrik to U.S. dollars at the exchange rate on the relevant dates) relating to amounts disputed under the 2016 to 2018 Tax Assessment. In March 2021, Oyu Tolgoi received notices of payment totalling $126 million (which were converted from Mongolian Tugrik to U.S. dollars at the exchange rate on the relevant dates) relating to amounts disputed under the 2013 to 2015 Tax Assessment. Under the Mongolian General Tax Law, the amounts were due and paid by Oyu Tolgoi LLC within 10 business days from the dates of the notices of payment. Under the same legislation, Oyu Tolgoi LLC would be entitled to recover the amounts, including via offset against future tax liabilities, in the event of a favourable decision from the relevant dispute resolution authorities. These payments were recorded within non-current Prepaid expenses and other assets in the consolidated balance sheet, and within Income and other taxes paid in the consolidated statement of cash flows for the twelve months ended December 31, 2021.

On May 3, 2021, the Company announced that the Government of Mongolia filed its statement of defence together with a counterclaim (“GOM Defence and Counterclaim”) in relation to the international tax arbitration proceeding brought by Oyu Tolgoi against the Government of Mongolia on February 20, 2020, as amended. Turquoise Hill was not a party to that arbitration, but the GOM Defence and Counterclaim requested that the arbitral tribunal add both Turquoise Hill and a member of the Rio Tinto Group as parties to the tax arbitration. The principal thrust of the GOM Defence and Counterclaim is to seek the rejection of Oyu Tolgoi’s tax claims in their entirety. As part of the counterclaim, the Government of Mongolia makes assertions surrounding previously reported allegations of historical improper payments made to Government of Mongolia officials and seeks unquantified damages. Also, in the event Oyu Tolgoi’s tax claims are not dismissed in their entirety, the Government of Mongolia is seeking in the counterclaim an alternative declaration that the 2009 Investment Agreement is void.

Turquoise Hill denied the allegations relating to the Company in the GOM Defence and Counterclaim and filed submissions to the arbitral tribunal to oppose the Government of Mongolia’s request that it be added to the tax arbitration. As announced by the Company on January 17, 2022, the arbitral tribunal issued a ruling deciding that Turquoise Hill not be added as a party to the arbitration.

On December 30, 2021, the Parliament of Mongolia passed a resolution (“Resolution 103”) authorizing certain measures to be completed by the Government of Mongolia in order for Resolution 92 to be considered formally implemented. As announced by the Company on January 24, 2022, the Company remains committed to continue the work with the Government of Mongolia and Rio Tinto to finalize the remaining outstanding matters of Resolution 103, including resolution of the outstanding tax arbitration. On February 11, 2022, at the request of the parties to the tax arbitration, the arbitral tribunal issued an order suspending the tax arbitration for six months or until 21 days from when the tribunal receives notice from Oyu Tolgoi LLC or the Government of Mongolia to terminate the suspension (refer to Note 26 – Subsequent events).

Management remains of the opinion that the tax positions adopted by Oyu Tolgoi in its tax filings were correct and that Oyu Tolgoi has paid all taxes and charges as required under the Investment Agreement, ARSHA, the UDP and Mongolian law. In the opinion of the Company, at December 31, 2021, a provision is not required for the amounts disputed by the Company under arbitration proceedings relating to the years 2013 through 2015. In addition, a provision is not required for the amounts disputed under the arbitration proceedings relating to the years 2016 through 2018, any reduction in available carried forward losses or any additional amounts related to 2019 through December 31, 2021. The final amount of taxes to be paid depends on a number of factors, including the outcome of discussions with the Government of Mongolia and the outcome of the international arbitration proceedings. Changes in management’s assessment of the outcome of this matter could result in material adjustments to the Company’s statements of income and financial position.

(c) Power Source Framework Agreement

Oyu Tolgoi is obliged under the 2009 Oyu Tolgoi Investment Agreement to secure a long-term domestic source of power for the Oyu Tolgoi mine. The Power Source Framework Agreement (PSFA) entered into between Oyu Tolgoi and the Government of Mongolia on December 31, 2018 provides a binding framework and pathway for long-term power supply to the Oyu Tolgoi mine. The PSFA originally contemplated the construction of a power plant at Tavan Tolgoi (TTPP), which would be majority-owned by Oyu Tolgoi and situated close to the Tavan Tolgoi coal mining district located approximately 150 kilometres from the Oyu Tolgoi mine. In April 2020, the Government of Mongolia advised that it was unwilling to support Oyu Tolgoi’s proposal to develop TTPP and announced its intention to fund and construct a State-owned Power Plant (SOPP) at Tavan Tolgoi.

On June 26, 2020, Oyu Tolgoi and the Government of Mongolia amended the PSFA (PSFA Amendment) to reflect their agreement to jointly prioritise and progress SOPP, in accordance with and subject to agreed milestones, as the domestic source of power for the Oyu Tolgoi mine. The PSFA Amendment provides that if certain agreed milestones are not met in a timely manner (subject to extension for Delay Events as defined) then Oyu Tolgoi will be entitled to select from, and implement, the alternative power solutions specified in the PSFA (as amended), comprising an Oyu Tolgoi-led coal fired power plant, supply from the Mongolian national grid and a primary renewables solution, and the Government of Mongolia would be obliged to support such decision.

In relation to the PSFA Amendment that was executed in June 2020, the first three PSFA Amendment milestones (execution of the extension of the IMPIC supply arrangements, execution of the SOPP PPA and start of SOPP construction) were not met by the original dates of March 1, 2021, March 31, 2021 and July 1, 2021 respectively.

Oyu Tolgoi continued to engage with the Ministry of Energy at a sub-working group level to discuss the long-term power solution for Oyu Tolgoi. On January 26, 2022, OT LLC entered into an Electricity Supply Agreement (ESA) with, amongst others, the Southern Region Electricity Distribution Network (SOJSC) to provide Oyu Tolgoi with power from the Mongolian grid once certain technical conditions are satisfied. (refer to Note 26 – Subsequent events)

While the Mongolian grid prepares to connect the Oyu Tolgoi mine, OT LLC expects to continue to import its power from Inner Mongolia, China.

As at December 31, 2021, the Company had no capital commitments related to the PSFA Amendment.

(d) Class Action Complaints

In October 2020, a class action complaint was filed in the U.S. District Court, Southern District of New York against the Company, certain of its current and former officers as well as Rio Tinto and certain of its officers. The complaint alleges that the defendants made material misstatements and material omissions with respect to, among other things, the schedule, cost and progress to completion of the development of Oyu Tolgoi in violation of Section 10(b) of the U.S. Securities Exchange Act of 1934, as amended (the Exchange Act) and Rule 10b-5 thereunder. Under the schedule established by the court, a first amended complaint was filed on March 16, 2021, and a second amended complaint was filed on September 16, 2021. Defendants moved to dismiss the operative amended complaint on October 19, 2021, under Rule 12(b)(6) of the Federal Rules of Civil Procedure and the Private Securities Litigation Reform Act of 1995, for failure to state a claim. As of December 17, 2021, the motion was fully briefed and pending before the Court. The Company believes that the complaint against it is without merit.

In January 2021, a proposed class action was initiated in the Superior Court in the District of Montreal against the Company and certain of its current and former officers. An amended complaint was filed on July 27, 2021 which did not substantially alter the claim. The claim alleges that the Company and its current and former officers named therein as defendants made material misstatements and material omissions with respect to, among other things, the schedule, cost and progress to completion of Oyu Tolgoi, in violation of, among other things, sections 225.8, 225.9 and 225.11 of the Securities Act (Quebec). On January 7, 2022 the plaintiff re-amended its claim to include allegations relating to developments arising since the previous amended complaint was filed. The Company and the other defendants expect to produce their evidence to contest certification of the class action in 2022. No hearing has been scheduled yet. The Company believes that the complaint against it is without merit and is preparing to defend the application for leave and certification of the proceeding.

Due to the size, complexity and nature of Turquoise Hill’s operations, various legal and tax matters arise in the ordinary course of business. Turquoise Hill recognizes a liability with respect to such matters when an outflow of economic resources is assessed as probable and the amount can be reliably estimated. In the opinion of management, these matters will not have a material effect on the consolidated financial statements of the Company.

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Financial instruments and fair value measurements

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Financial instruments and fair value measurements

24. Financial instruments and fair value measurements

Certain of the Company’s financial assets and liabilities are measured at fair value on a recurring basis and classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Certain non-financial assets and liabilities may also be measured at fair value on a non-recurring basis.

The fair value of financial assets and financial liabilities measured at amortized cost is determined in accordance with accepted pricing models based on discounted cash flow analysis or using prices from observable current market transactions. Except as otherwise specified, the Company considers that the carrying amount of cash, other receivables, trade payables and other financial assets measured at amortized cost approximates their fair value because of the demand nature or short-term maturity of these instruments.

The following tables provide an analysis of the Company’s financial assets that are measured subsequent to initial recognition at fair value on a recurring basis, grouped into Level 1 to 3 based on the degree to which the significant inputs used to determine the fair value are observable.

· Level 1 fair value measurements are those derived from quoted prices in active markets for identical assets or liabilities.

· Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1, that are observable either directly or indirectly.

· Level 3 fair value measurements are those derived from valuation techniques that include significant inputs that are not based on observable market data.

			Fair Value at December 31, 2021
	Total		Level 1		Level 2		Level 3
Money market funds (a)	$	193,243	$	193,243	$	-	$	-
Marketable securities (a)		9,323		9,323		-		-
Trade receivables (b)		13,645		-		13,645		-
Commodity put options (c)		109		-		109		-
	$	216,320	$	202,566	$	13,754	$	-
			Fair Value at December 31, 2020
	Total		Level 1		Level 2		Level 3
Money market funds (a)	$	667,542	$	667,542	$	-	$	-
Marketable securities (a)		6,379		6,379		-		-
Trade receivables (b)		50,459		-		50,459		-
	$	724,380	$	673,921	$	50,459	$	-

(a) The Company’s money market funds and marketable securities are classified within level 1 of the fair value hierarchy as they are valued using quoted market prices in active markets.

(b) Trade receivables from provisionally priced concentrate sales are included in level 2 of the fair value hierarchy as the basis of valuation uses quoted commodity prices.

(c) In 2021 the Company purchased copper and gold put options to establish a synthetic copper and gold price floor in order to provide increased certainty around the Company’s liquidity horizon. During the year ended December 31, 2021 the Company recognized a realized loss of $23.9 million and an unrealized loss of $5.9 million within Other income (expenses) in the consolidated statement of income, and a financial asset of $0.1 million within current Other financial assets in the consolidated balance sheet as at December 31, 2021. Commodity put options are included in level 2 of the fair value hierarchy as the basis of valuation uses quoted prices.

Financial risk management

Certain of the Company’s activities expose it to a number of financial risks, which include liquidity risk, foreign exchange risk, interest rate risk, credit risk and commodity price risk. During the year ended December 31, 2021, the Company purchased copper and gold put options to establish a synthetic copper and gold price floor in order to provide increased certainty around the Company’s liquidity horizon. In the event of a significant downturn in the price of copper or gold, the expected revenues to be received by the Company for either commodity would have a floor on the portion of associated production and help provide additional certainty with respect to the Company’s expectation of having sufficient liquidity to meet its requirements, including its operations and underground development.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations as they fall due. The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted and include contractual interest payments. Interest payments on variable interest rate loans reflect interest rates at the reporting date and these amounts may change as market interest rates change. Refer to additional disclosures around liquidity risk in Note 1.

			Between 1
At December 31, 2021	Less than 1 year		and 5 years		After 5 years		Total		Carrying amount
Non-derivative Financial Liabilities
Trade and other payables	$	384,488	$	-	$	-	$	384,488	$	384,488
Expected lease liability		10,727		20,752		306		31,785		25,435
Borrowings		564,742		3,059,498		1,373,049		4,997,289		4,157,344
Total	$	959,957	$	3,080,250	$	1,373,355	$	5,413,562	$	4,567,267
			Between 1
At December 31, 2020	Less than 1 year		and 5 years		After 5 years		Total			Carrying amount
Non-derivative Financial Liabilities
Trade and other payables	$	390,059	$	-	$	-	$	390,059	$	390,059
Expected lease liability		1,121		19,631		205		20,957		16,868
Borrowings		204,035		2,935,929		2,048,916		5,188,880		4,184,911
Total	$	595,215	$	2,955,560	$	2,049,121	$	5,599,896	$	4,591,838

Foreign exchange risk

The Company operates on an international basis and therefore foreign exchange risk exposures arise from transactions not denominated in U.S. dollars, its functional currency. The Company is only exposed to foreign exchange risk on its trade payables and accrued liabilities not denominated in U.S. dollars. As at December 31, 2021, the effect on income for the year of a 10% strengthening in the Mongolian Tugrik against the U.S. dollar, with all other variables held constant, would be a charge of $20.4 million (2020 - $19.2 million).

Interest rate risk

Interest rate risk is the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to changes in market interest rates. As at December 31, 2021, The Company is exposed to interest rate risk on its third-party project finance borrowings, the majority of which are at variable rates. As at December 31, 2021, the effect on income for the year of a 100 basis point increase in LIBOR interest rates, with all other variables held constant, would be a charge of $41.5 million (2020 – $40.7 million). Cash and cash equivalents have limited interest rate risk due to their short-term nature and receive interest based upon market interest rates or rates equivalent to those offered by financial institutions. As at December 31, 2021, the effect on income would not be significant. 

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily from customer receivables) and from its financing activities, including deposits with (and / or receivables from) banks and other financial institutions, other short term liquid investments and other financial instruments.

The Company manages its customer credit risk subject to the Company’s established policy, procedures and controls relating to customer credit risk management. Credit limits are established for all customers based on internal or external rating criteria. The Company deposits its cash and cash equivalents with high credit quality counterparties as referenced by ratings agencies. The Company’s maximum balance sheet exposure to credit risk at December 31, 2021 is the carrying value of its cash and cash equivalents, and its trade and other receivables (refer to Note 1).

Expected credit losses on trade and other receivables do not have a material impact on the Company’s consolidated financial statements at December 31, 2021.

Commodity price risk

The Company is exposed to commodity price risk from fluctuations in market prices of the commodities that the Company produces. Copper concentrate is “provisionally priced” whereby the selling price is subject to final adjustment at the end of a period normally ranging from 30 to 180 days after delivery to the customer as defined in the sales contract. The final price is based on the market price at the relevant quotation point stipulated in the contract. At each reporting date, the receivable is re-measured at its fair value based on the forward selling price for the quotation period stipulated in the contract. As at December 31, 2021, the Company had 21.8 thousand tonnes (2020 - 29.4 thousand tonnes) of copper in concentrate sales that were provisionally priced. The Company does not have a material exposure to commodity price risk on its provisionally priced copper in concentrate sales at December 31, 2021.

Capital risk management

The Company’s objectives when managing capital risk are to safeguard its ability to continue as a going concern, to provide an adequate return to shareholders and to support any growth plans.

The Company considers its capital to be share capital and third-party borrowings. To effectively manage capital requirements, the Company has in place a planning and budgeting process to help determine the funds required to ensure the Company has the appropriate liquidity to meet its operating needs. The Company seeks to ensure that there is sufficient borrowing capacity and cash to meet its short-term business requirements, taking into account its anticipated cash flows from operations and its holdings of cash and cash equivalents. Refer to additional disclosures around capital risk management in Note 1.

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Key management compensation

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Key management compensation

25. Key management compensation

The compensation for key management, which comprises Turquoise Hill’s directors, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, and Chief Legal Officer in respect of employee services is as follows:

	Year Ended December 31,
		2021		2020
Salaries, director fees and other short term benefits	$	6,776	$		3,186
Post-employment benefits		193			293
Share based payment		1,412			1,628
	$	8,381	$		5,107

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Subsequent Events

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Subsequent Events

26. Subsequent events

On January 24, 2022 the Company announced the start of underground mine operations at Oyu Tolgoi, a renewed partnership with the Government of Mongolia and agreement with Rio Tinto on the Amended HOA, the latter providing a comprehensive funding arrangement to address the Company’s estimated funding requirements.

In conjunction with this announcement, the board of directors of Oyu Tolgoi LLC (“Oyu Tolgoi”) unanimously approved:

● commencement of the undercut, namely commencement of blasting that will start the Oyu Tolgoi underground mine production;

● the start of formal discussions with Senior Project Finance lenders in relation to the Amended HOA; and

● signing of an Electricity Supply Agreement to provide Oyu Tolgoi with a long-term source of power from the Mongolian grid on terms fully agreed with the Government of Mongolia. 

(a) Commencement of undercutting

Following the announcements on January 24, 2022, Oyu Tolgoi started operations at the Oyu Tolgoi underground mine on January 25, 2022 with the commencement of blasting to begin caving operations and the start of Oyu Tolgoi underground mine production. With the successful completion of this milestone, the Company continues to expect that the underground mine will achieve sustainable production for Panel 0 in the first half of 2023.

Oyu Tolgoi has notified the senior project finance lenders that the commencement of undercutting the underground mine may constitute an event of default under the Common Terms Agreement as a material amendment to the Mine Plan that existed at the time project finance was secured and could indirectly result in Oyu Tolgoi’s inability to meet the original project completion longstop date specified in the project finance agreements. This potential event of default does not impact the existing repayment schedule for project finance debt but would allow the project finance lenders to restrict further drawdown of any funds that are still available – see Note 15 (a). Oyu Tolgoi has sent a waiver request in relation to this potential event of default to Sumitomo Mitsui Banking Corporation in their capacity as Intercreditor Agent.

(b) Agreement with Rio Tinto on an Amended and Restated Heads of Agreement

Turquoise Hill and Rio Tinto entered into an Amended HOA on January 24, 2022, replacing the prior Heads of Agreement dated April 9, 2021. This Amended HOA is binding and delineates a comprehensive funding arrangement to address the Company’s estimated incremental funding requirements.

Key elements of the Amended HOA include:

● pursuing the rescheduling of principal repayments of existing debt (“Re-profiling”) to potentially reduce the base case funding requirement by up to $1.7 billion;

● seeking to raise up to $500 million of senior supplemental debt (“SSD”);

● Rio Tinto committing to provide a co-lending facility, incremental to the Re-profiling and the SSD, of up to $750 million to be made available once sustainable production has been achieved;

● Rio Tinto committing to provide a short-term secured advance directly to the Company by way of one or more secured advances up to a maximum of $300 million, which would be available during the debt funding restriction period
identified in Resolution 103 and would be indirectly repaid out of the proceeds of the $750 million co-lending facility;  and

● the Company agreeing to conduct an equity offering in a form of its choosing of at least $650 million (including a Rio Tinto pro rata participation) by no later than August 31, 2022. 

● In the event that additional funding was required, the Amended HOA provides that, if necessary, Turquoise Hill could be required to raise up to a total of $1.5 billion (less the amount raised in the initial equity offering) via equity in a form of its choosing.

(c) Electricity Supply Agreement

On January 26, 2022, Oyu Tolgoi entered into an Electricity Supply Agreement (ESA) with, amongst others, Southern Region Electricity Distribution Network (SOJSC) to provide Oyu Tolgoi with power from the Mongolian grid. Power will be delivered pursuant to the ESA once certain technical conditions are satisfied.

The ESA has a term of 20 years from the date on which supply commences and provides a pathway to meeting Oyu Tolgoi’s long-term power requirements from domestic power sources.

While the Mongolian grid undergoes an upgrade to be in a position to provide stable and reliable power to the Oyu Tolgoi mine, Oyu Tolgoi will continue to import its power from Inner Mongolia, China. An agreement in-principle has been reached between the National Power Transmission Grid (NPTG) and the Inner Mongolia Power International Cooperation Company (IMPIC) for a three-year fixed term extension to 2026, potentially followed by an extension to up to 2030, if required (the current agreement expires in July 2023). The outstanding commercial terms are in the process of being finalized. 

(d) Key terms agreed with the Government of Mongolia

As part of the agreements with the Government of Mongolia, Turquoise Hill waived in full the US$2,363 million non-recourse loan to Erdenes. The loan comprised the amount of equity invested (US$1,399 million) in Oyu Tolgoi by the Company on behalf of Erdenes to date, plus US$964 million of accrued interest as at January 25, 2022, the date that the waiver was formally granted to and acknowledged by Erdenes.

Turquoise Hill’s funding of common share investments in Oyu Tolgoi on behalf of Erdenes took the form of non-recourse loans with interest; Erdenes’ obligation to repay would only have been triggered upon declaration of dividends from Oyu Tolgoi or upon certain events (such as a sale of the shares by Erdenes) at Erdenes’ sole discretion.

Further, the parties have also agreed to improve cooperation with EOT in monitoring the OT underground development and enhancing ESG matters.

(e) Suspension of tax arbitration

As announced by the Company on January 17, 2022, the arbitral tribunal issued a ruling deciding that Turquoise Hill would not be added as a party to the arbitration. On February 11, 2022, the arbitral tribunal issued a Partial Award confirming its earlier ruling that Turquoise Hill not be added as a party to the tax arbitration. On the same day, at the request of the parties to the tax arbitration, the arbitral tribunal issued an order suspending the tax arbitration for six months or until 21 days from when the tribunal receives notice from Oyu Tolgoi LLC or the Government of Mongolia to terminate the suspension.

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Summary of significant accounting policies (Policies)

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Statement of compliance

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

These consolidated financial statements have been prepared on a going concern basis, and in making the assessment that the Company is a going concern, management have taken into account all available future information, which extends for a period of at least 12 months from December 31, 2021. Refer to Note 1.

Change in accounting policies

(b) Change in accounting policies

A number of new standards, and amendments to standards and interpretations, are effective as of January 1, 2021, and have been applied in preparing these consolidated financial statements. None of these standards and amendments to standards and interpretations had a significant effect on the consolidated financial statements of the Company.

Areas of judgement and estimation uncertainty

(c) Areas of judgement and estimation uncertainty

The preparation of consolidated financial statements in accordance with IFRS often requires management to make estimates about, and apply assumptions or subjective judgement to, future events and other matters that affect the reported amounts of the Company’s assets, liabilities, revenues, expenses and related disclosures. Assumptions, estimates and judgements are based on historical experience, expectations, current trends and other factors that management believes to be relevant at the time the Company’s consolidated financial statements are prepared.

With the emergence of the new and more transmissible Omicron variant in Mongolia and elsewhere, COVID-19 continues to create significant volatility and negative pressures on international economies, as well as financial and commodity markets. At December 31, 2021, it is still not possible to predict the duration, severity, or scope of the pandemic’s impact on the Company or to predict the steps that governmental and non-governmental agencies may be required to take in response to COVID-19.

By their very nature, COVID-19 related judgements and estimates made for the purposes of preparing the consolidated financial statements relate to matters that are inherently uncertain. However, the Company is closely monitoring the changing conditions and their impacts.

(i) Sources of estimation uncertainty

Key sources of estimation uncertainty that have a risk of resulting in a material adjustment to the carrying amount of assets and liabilities within the next twelve months are summarized below:

Going concern assessment

The Company has made judgements, based on an internally generated short-term cash flow forecast, in concluding that there are no material uncertainties related to events or conditions that may cast significant doubt upon the Company’s ability to continue as a going concern. The short term cashflow forecast includes plans to access additional sources of funding under the amended HOA where management consider implementation of those plans to be probable. Judgements and estimates are made in forming assumptions of future activities, future cash flows and timing of those cash flows, including cash flows relating to the financing plans for re-profiling of project finance debt, the short-term secured advance from Rio Tinto and equity offering in the Amended HOA whose implementation is probable in the next twelve months. Significant assumptions used in preparing the short-term cash flow forecast include, but are not limited to, short-term commodity prices, production volumes, reserves, operating costs, financing costs, development capital, and the announced equity offering. Changes to these assumptions could affect the estimate of the Company’s available liquidity and conclusion as to whether there are material uncertainties related to events or conditions that may cast significant doubt upon the Company’s ability to continue as a going concern. However, the Company’s assessment of going concern did include sensitivity analyses that were performed over the significant assumptions included in the short-term cash flow forecast including the impact of estimated commodity prices on cash receipts.

Recoverable amount of property, plant and equipment

When there is an indicator of impairment or impairment reversal, the recoverable amount is assessed by reference to the higher of value in use (“VIU”) and fair value less costs of disposal (“FVLCD”). The VIU is the net present value of expected future pre-tax cash flows from the relevant cash-generating unit in its current condition, both from continuing use and ultimate disposal. FVLCD is estimated either from the value obtained from an active market where applicable, or by using a discounted post-tax cash flow model based on detailed life-of-mine and/or production plans. Significant assumptions used in the discounted cash flow model include estimates of long-term commodity prices, discount rates, reserves and resources, operating costs, development capital, and scheduling and mine design.

These inputs are based on the Company’s best estimates of what an independent market participant would consider appropriate. Changes to these inputs may alter the results of the test for impairment or impairment reversal, the amount of the impairment charge or impairment reversal recorded in the consolidated statement of income and the resulting carrying value of property, plant and equipment.

An indicator of impairment was identified during the year ended December 31, 2021, and an assessment of recoverable amount was undertaken as at December 31, 2021; refer to Note 13.

Recovery of deferred tax assets in Mongolia

The Company assesses the recoverability of deferred tax assets at each reporting period-end based on future taxable income to determine the deferred tax asset to be recognized. Significant assumptions used to determine future taxable income include estimates for commodity prices, reserves and resources, operating costs, financing costs, development capital, and scheduling and mine design. Revisions to these estimates could result in material adjustments to the financial statements.

Reserves and Resources

Estimates of mineral reserves and resources are based on various assumptions relating to operating matters set forth in National Instrument 43-101. These include production costs, mining and processing recoveries, cut-off grades, long term commodity prices and the costs and availability of treatment and refining services for the metals mined. Cost estimates are based on feasibility study estimates and operating history. The Company estimates its mineral reserves and resources based on information compiled and reviewed by qualified persons as defined in accordance with National Instrument 43-101 requirements.

Estimated mineral reserves and, in certain circumstances, resources are used to determine the depreciation of property, plant and equipment; to account for capitalized deferred stripping costs; to perform, when required, assessments of the recoverable amount of property, plant and equipment; as an input to the projection of future taxable profits which support assessments of deferred income tax recoverability; and to forecast the timing of the payment of decommissioning obligations.

Depletion and depreciation of property, plant and equipment

Property, plant and equipment is the largest component of the Company’s assets and, as such, the depreciation of these assets has a significant effect on the Company’s financial statements.

Mining plant and equipment and other capital assets are depreciated over their expected economic lives using either the units of production method or the straight-line method. Depletion of each mineral property interest is provided on the units of production basis using estimated proven and probable reserves as the depletion basis. A change in the estimated useful life or residual value of a long-lived asset would result in a change in the rate of depreciation for that asset.

For long-lived assets that are depleted or depreciated over proven and probable reserves using the units of production method, a change in the original estimate of proven and probable reserves would result in a change in the rate of depletion or depreciation.

Decommissioning Costs

The estimate of decommissioning costs is based on future expectations in the determination of closure provisions. Management makes a number of assumptions and judgements including estimating the amount of future reclamation costs and their timing, inflation rates and risk-free discount rates. These assumptions are formed based on environmental and regulatory requirements and the Company’s internal policies. The costs are more uncertain the further into the future the mine closure activities are to be carried out. Actual costs incurred in future periods in relation to the remediation of the Company’s existing assets could differ materially from their estimated undiscounted future value. Refer to Note 17 for the Company’s total decommissioning obligations recorded in the consolidated financial statements, the undiscounted values and the rate used to discount the liability.

Net realizable value of inventories

Ore stockpile inventory is valued at the lower of weighted average cost and net realizable value (“NRV”). If ore stockpiles are not expected to be processed within the 12 months after the balance sheet date, they are included within non-current assets and net realizable value is calculated on a discounted cash flow basis over the planned processing timeframe for such ore. Evaluating NRV requires management judgement in the selection of estimates for, among other inputs, discount rate, price assumptions, timing of processing and costs to complete.

(ii) Areas of judgement

Impairment indicator of property, plant and equipment

Judgement is required in assessing whether certain factors would be considered an indicator of impairment or impairment reversal. Management considers both internal and external information to determine whether there is an indicator of impairment and, accordingly, whether impairment testing is required. The information considered in assessing whether there is an indicator of impairment includes, but is not limited to, long-term commodity prices, the Company’s market capitalization relative to its net asset carrying amount, life of mine plans and changes in significant assumptions including reserves and resources, development capital estimates and scheduling and mine designs.

The Company’s assessment for the year ended December 31, 2021 considered the approval by the Oyu Tolgoi board of directors of the operating program and budget for the 2022 financial year, including over $780 million to cover capital plans relating to the Oyu Tolgoi underground project, which will allow continued progression towards undercutting.

The Company’s assessment also considered the information included within its announcement on January 17, 2022, in relation to its fourth quarter 2021 production and in which the Company provided an update on the Oyu Tolgoi mine and the status of negotiations with the Government of Mongolia as at December 31, 2021.

The Company’s assessment also considered the information included within its January 17, 2022 announcement regarding the ongoing COVID-19 restrictions continuing to adversely impact both open pit operations and underground development. Further, consideration was given to the COVID-19 situation in Mongolia, as well as the schedule delays and delayed commitments caused by the Definitive Estimate not having received the unanimous support of all the directors of the Oyu Tolgoi board as at December 31, 2021, which delayed the Company’s expected timing for initiating the undercut. In addition, consideration was given to the information in the January 17, 2022 announcement regarding updates on the progress of Shaft 4 sinking activities and Shaft 3 readiness work. The announcement confirmed that Panels 1 and 2 are expected to be delayed due to COVID-19 related work restrictions impacting both Shafts 3 and 4 and underground development progress as well as changes to mining scope previously disclosed.

The Company’s assessment also considered the status of negotiations between the Company, Rio Tinto and the Government of Mongolia as at December 31, 2021. On December 30, 2021, the Mongolian Parliament passed Parliamentary Resolution 103 to authorize the Government of Mongolia to take certain measures in connection with Oyu Tolgoi, restricting additional shareholder or third-party debt financing at the Oyu Tolgoi level until commencement of sustainable production. The effect of the resolution required key negotiations to continue into 2022. Despite the positive progress made through the negotiations in 2021, management concluded that the potential for further delays and the resulting uncertainty as to the timing of underground project completion constituted an indicator of impairment at the Oyu Tolgoi cash generating unit level at December 31, 2021.

Subsequent to year-end, on January 24, 2022, the Company announced that it had successfully concluded the negotiations with Rio Tinto and the Government of Mongolia that were necessary for the board of directors of Oyu Tolgoi to unanimously approve the start of underground mine operations at Oyu Tolgoi as well as signing of the Amended HOA with Rio Tinto; refer to Note 26. As these events occurred after the balance sheet date, they do not form part of management’s assessment of potential indicators of impairment or impairment reversal as at December 31, 2021.

Income taxes - provision for income taxes and composition of deferred income tax assets and liabilities

The Company must make significant estimates in respect of the provision for income taxes and the composition of its deferred income tax assets and deferred income tax liabilities. The Company’s operations are, in part, subject to foreign tax laws where interpretations, regulations and legislation are complex and can be subject to change. As a result, there are usually some tax matters in question which may, on resolution in the future, result in adjustments to the amount of current or deferred income tax assets or liabilities, and those adjustments may be material to the Company’s balance sheet and results of operations.

The Company recognizes potential liabilities and records tax liabilities for uncertain tax positions based on its judgement of whether, and the extent to which, additional taxes will be due. Consistent with IFRIC 23, Uncertainty Over Income Tax Treatments, the Company first considers if it is probable that a taxation authority will accept an uncertain tax treatment. If it is concluded that it is not probable, a probability-weighted approach is to be taken for issues for which there are a wide range of possible outcomes. For tax issues with a binary outcome, the most likely amount method still remains. The Company adjusts these liabilities as facts and circumstances change. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate, which could result in material adjustments to the consolidated financial statements. Refer to Note 23 for further information on tax matters between Oyu Tolgoi and the Mongolian Tax Authority.

Income taxes – utilization of tax losses carried forward

The determination of the ability of the Company to utilize tax losses carried forward to offset income taxes payable in the future and to utilize temporary differences which will reverse in the future requires management to exercise judgement and make assumptions about the Company’s future performance. Management is required to assess whether it is probable that the Company is able to benefit from these tax losses and temporary differences.

Basis of consolidation

(d) Basis of consolidation

The financial statements consist of the consolidation of the accounts of Turquoise Hill and its respective subsidiaries. All intercompany transactions and balances between Turquoise Hill and its subsidiaries have been eliminated on consolidation. Where necessary, adjustments are made to assets, liabilities, and results of subsidiaries to bring their accounting policies into line with those used by the Company.

Subsidiaries are entities controlled by Turquoise Hill. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The Company controls an entity if it has power to direct the activities of the entity in a manner that significantly affects its returns, has exposure or rights to variable returns from its involvement with the entity and has the ability to use its power to affect those returns.

The Company consolidates all subsidiaries. The Company’s principal operating subsidiary is Oyu Tolgoi. Wholly owned subsidiaries of Turquoise Hill together hold a 66.0% interest in Oyu Tolgoi, whose principal asset is the Oyu Tolgoi copper-gold mine located in Southern Mongolia. The remaining 34% non-controlling interest in Oyu Tolgoi is owned by Erdenes Oyu Tolgoi LLC (“Erdenes”), a company controlled by the Mongolian government. The Company has historically funded 100% of the Oyu Tolgoi copper-gold mine’s exploration and development costs via equity and debt investments in Oyu Tolgoi and non-recourse loans to Erdenes. Income or loss of Oyu Tolgoi is attributed to the controlling and non-controlling shareholders based on ownership percentage. Non-recourse loans advanced to Erdenes upon the issuance of additional equity interests to Erdenes are accounted for separately and recorded as an offset to non-controlling interest in equity. Unrealized interest on the non-recourse loans to Erdenes, which are recoverable principally through dividends from Oyu Tolgoi or sale by Erdenes of its interests in Oyu Tolgoi, is recognized when payment of the interest can be reliably determined. Subsequent to December 31, 2021, the Company waived these non-recourse loans and unrealized interest in full. Refer to Note 26 - Subsequent events.

Currency translation and foreign exchange

(e) Currency translation and foreign exchange

The Company has determined the U.S. dollar to be the functional currency of Turquoise Hill and its significant subsidiaries as it is the currency of the primary economic environment in which Turquoise Hill and all of its significant subsidiaries operate. Accordingly, monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect at the date of the balance sheet and non-monetary assets and liabilities are translated at the time of acquisition or issue. Revenues and expenses are translated at rates approximating the exchange rates in effect at the date of the transaction. All exchange gains and losses are included in the consolidated statement of income during the year.

Revenue

(f) Revenue

The Company generates revenue from the sale of concentrate containing copper, gold and silver. Sales revenue is recognized on individual sales to depict the transfer of promised goods to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods. The Company considers five steps in assessing whether all of the revenue recognition criteria are met:

· identify the contract with a customer;

· identify the performance obligations in the contract;

· determine the transaction price;

· allocate the transaction price to performance obligations; and

· recognize revenue when or as a performance obligation is satisfied.

The Company satisfies its performance obligation and sales revenue is recognized at the point in time when the product is delivered as specified by the customer, which is typically upon loading of the product to the customer’s truck, train or vessel. The Company considers that control has passed when there is a present obligation to pay from the customer’s perspective; physical possession, legal title and the risks and rewards of ownership have all passed to the customer; and the customer has accepted the concentrate. The Company recognizes deferred revenue in the event it receives payment from a customer before a sales transaction meets all the criteria for revenue recognition.

Concentrate is provisionally priced whereby the selling price is subject to final adjustment at the end of a period normally ranging from 30 to 180 days after delivery to the customer as defined in the sales contract. The final price is based on the market price at the relevant quotation point stipulated in the contract. At each reporting date, the receivable is marked to fair value based on the forward selling price for the quotation period stipulated in the contract. The change in fair value of the receivable subsequent to the date of revenue recognition is recognized within ‘Revenue’ on the face of the statements of income and is shown separately as ‘other revenue’ in the notes to the consolidated financial statements.

Mining royalties paid to the government of Mongolia are included in operating expenses.

Exploration and evaluation

(g) Exploration and evaluation

All direct costs related to the acquisition of mineral property interests are capitalized in the period incurred.

Exploration and evaluation costs are charged to operations in the period incurred until such time as it has been determined that a mineral property has proven and probable reserves and the property is economically viable, in which case subsequent evaluation costs incurred to develop a mineral property are capitalized. Exploration and evaluation costs include value-added taxes incurred in foreign jurisdictions when recoverability of those taxes is uncertain.

Property, plant and equipment

(h) Property, plant and equipment

Property, plant and equipment are recorded at cost, less accumulated depletion and depreciation and accumulated impairment losses. The cost of property, plant and equipment includes the estimated close down and restoration costs associated with the asset.

Once an undeveloped mining project has been established as commercially viable, including that it has established proven and probable reserves and approval to mine by governmental authorities has been given, expenditure (including qualifying exploration and evaluation costs) other than on land, buildings, plant and equipment is capitalized under “Mineral property interests.” Ore reserves may be declared for an undeveloped mining project before its commercial viability has been fully determined and approval to mine has been given. Evaluation costs may be capitalized during the period between declaration of reserves and approval to mine as further work is undertaken in order to refine the development case to maximize the project’s return.

Project development expenditures, including costs to acquire and construct buildings and equipment are capitalized under “Capital works in progress” provided that the project has been established as commercially viable. Capital works in progress are not categorized as mineral property interests, mining plant and equipment or other capital assets until the capital asset is in the condition and location necessary for its intended use.

Sales of concentrate and associated costs, which are incurred during the commissioning phase, that are necessary for the successful commissioning of new assets, are capitalized. Development costs incurred after the commencement of production are capitalized to the extent they are expected to give rise to a future economic benefit. Borrowing costs related to construction or development of a qualifying asset are capitalized until the point when substantially all the activities that are necessary to make the asset ready for its intended use are complete. Where funds have been borrowed specifically to finance an asset, the amount capitalized is the actual interest on borrowings incurred, net of any returns on invested funds. Where the funds used to finance an asset form part of general borrowings, the amount capitalized is calculated using a weighted average of rates applicable to relevant general borrowings of the Company during the period.

Deferred stripping

(i) Deferred stripping

In open pit mining operations, it is necessary to remove overburden and other waste materials to access ore from which minerals can be extracted economically. The process of mining overburden and waste materials is referred to as stripping.

During the development of an open pit mine, before production commences, stripping costs are capitalized as part of mineral property interests and are subsequently amortized over the life of the mine on a units of production basis.

During the production phase, stripping activity is undertaken for the dual purpose of extracting inventory for current production as well as improving access to the ore body.

Stripping costs incurred for the purpose of extracting current inventories are included in the costs of inventory produced during the period the stripping costs are incurred.

In order for production phase stripping costs to qualify for capitalization as a stripping activity asset, three criteria must be met:

· it must be probable that economic benefit will be realized in a future accounting period as a result of improved access to the ore body created by the stripping activity;

· it must be possible to identify the “component” of the ore body for which access has been improved; and

· it must be possible to reliably measure the costs that relate to the stripping activity.

When the cost of stripping related to development which has a future benefit is not distinguishable from the cost of producing current inventories, the stripping costs are allocated to each activity based on a relevant production measure. Generally, the measure would be calculated based on a ratio obtained by dividing the tonnage of waste mined for the component for the period by the quantity of ore mined for the component. Stripping costs incurred in the period related to the component are deferred to the extent that the current period ratio exceeds the historical life of component ratio. The stripping activity asset is depreciated on a units of production basis based on expected production of ore over the useful life of the component that has been made more accessible as a result of the stripping activity. The life of component ratios are based on proven and probable reserves based on the mine plan; they are a function of the mine design and therefore changes to that design will generally result in changes to the ratios. Changes in other technical or economic parameters that impact reserves may also impact the life of component ratios. Changes to the life of component ratios are accounted for prospectively.

Deferred stripping costs are included in “Mineral property interests” within property, plant and equipment.    Amortization of deferred stripping costs is included as a cost of production in the period.

Depreciation and depletion

(j) Depreciation and depletion

Property, plant and equipment is depreciated over its useful life, or over the remaining life of the mine if that is shorter.

The useful lives of the major assets of a cash-generating unit are often dependent on the life of the ore body to which they relate. Where this is the case, the lives of mining properties, and their associated concentrators and other long lived processing equipment generally relate to the expected life of the ore body. The life of the ore body, in turn, is estimated on the basis of the life-of-mine plan. In applying the units of production method, depreciation is calculated using the copper content of the ore extracted from the mine in the period as a percentage of the total metal content of the ore to be extracted in current and future periods based on proven and probable reserves.

Development costs that relate to a discrete section of an ore body, and which only provide benefit over the life of those reserves, are depreciated over the estimated life of that discrete section. Development costs incurred that relate to the entire ore body are depreciated over the estimated life of the entire ore body.

Assets within operations for which production is not expected to fluctuate significantly from one year to another or which have a physical life shorter than the mine are depreciated on a straight-line basis. Depreciation commences when an asset is available for use.

Impairment of non-current assets

(k) Impairment of non-current assets

Property, plant and equipment is reviewed for impairment when events or changes in circumstances indicate that the full carrying amount may not be recoverable. Non-current assets that have previously been impaired are tested for possible reversal of the impairment whenever events or changes in circumstances indicate that the impairment may have reversed.

Impairment is assessed at the level of cash-generating units which are identified as the smallest identifiable group of assets capable of generating cash inflows which are largely independent of the cash inflows from other assets. When an impairment review is undertaken, the recoverable amount is assessed by reference to the higher of VIU and FVLCD.

The VIU is the net present value of expected future pre-tax cash flows from the relevant cash-generating unit in its current condition, both from continuing use and ultimate disposal. For VIU, recent cost levels are considered, together with expected changes in costs that are compatible with the current condition of the business and which meet the requirements of IFRS.

The best evidence of FVLCD is often the value obtained from an active market or binding sale agreement. Where this is not the case, or where neither an active market nor a binding sale agreement exists, FVLCD is based on the best information available to reflect the amount a market participant would pay for the cash-generating unit in an arm’s length transaction. This is often estimated using discounted post tax cash flow techniques based on detailed life-of-mine and/or production plans.

The cash flow forecasts are based on management’s best estimates of expected future revenues and costs, including the future cash costs of production and capital expenditure, which for FVLCD purposes management believe approximate those of a market participant.

Forecast cash flows for impairment purposes are generally based on management’s price forecasts of commodity prices, which assume short term observable market prices will revert to the Company’s assessment of the long term price, generally over a period of three to five years. These long-term forecast commodity prices are derived from industry analyst consensus.

The discount rates applied to the future cash flow forecasts represent an estimate of the rate the market would apply having regard to the time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted.

Decommissioning obligations

(l) Decommissioning obligations

The Company recognizes liabilities for statutory, contractual, legal or constructive obligations associated with the retirement of property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, a provision for a decommissioning obligation is recognized at its net present value in the period in which it is incurred, using a discounted cash flow technique with market-based risk-free discount rates and estimates of the timing and amount of the settlement of the obligation. Upon initial recognition of the liability, the corresponding decommissioning cost is added to the carrying amount of the related asset.

Following initial recognition of the decommissioning obligation, the carrying amount of the liability is increased for the passage of time and adjusted for changes to significant estimates including the current discount rate, the amount or timing of the underlying cash flows needed to settle the obligation and the requirements of the relevant legal and regulatory framework. Subsequent changes in the provisions resulting from new disturbance, updated cost estimates, changes to estimated lives of operations and revisions to discount rates are also capitalized to the related property, plant and equipment. Amounts capitalized to the related property, plant and equipment are depreciated over the lives of the assets to which they relate. The amortization or unwinding of the discount applied in establishing the net present value of provisions is charged to expense and is included within finance costs in the consolidated statement of income.

Inventories

(m) Inventories

Concentrate inventory is valued at the lower of weighted average cost and net realizable value. Cost comprises production and processing costs, which includes direct and indirect labour, operating materials and supplies, applicable transportation costs and apportionment of operating overheads, including depreciation and depletion. Net realizable value is the expected average selling price of the concentrate inventory less applicable selling and transportation costs.

Stockpiles represent ore that has been extracted and is available for further processing. Stockpiles are valued at the lower of weighted average production cost and net realizable value. Production cost includes direct and indirect labour, operating materials and supplies, applicable transportation costs, and apportionment of operating overheads, including depreciation and depletion. Net realizable value is the expected average selling price of the finished product less the costs to get the product into saleable form and to the selling location. If the ore will not be processed and sold within 12 months after the consolidated balance sheet date it is included within non-current assets and net realizable value is calculated on a discounted cash flow basis over the planned period within which the ore is estimated to be processed.

Mine stores and supplies are valued at the lower of the weighted average cost and net realizable value.

Taxation

(n) Taxation

Income tax expense comprises current and deferred tax. Current tax and deferred taxes are recognized in the consolidated statement of income except to the extent that they relate to items recognized directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date.

Deferred tax is recognized in respect of unused tax losses and credits, as well as temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.    Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on enacted or substantively enacted laws at the reporting date.    

The Company computes the provision for deferred income taxes under the liability method. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, only to the extent that it is probable that future taxable profits will be available against which they can be utilized. Future taxable profits are estimated using an income forecast derived from cash flow projections, based on detailed life-of-mine plans and corporate forecasts. Where applicable, the probability of utilizing tax losses or credits is evaluated by considering risks relevant to future cash flows, and the expiry dates after which these losses or credits can no longer be utilized.

Deferred tax is not recognized for the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries, associates and joint arrangements to the extent that it is probable that they will not reverse in the foreseeable future.

The Company is subject to assessments by various taxation authorities, who may interpret tax legislation differently from the Company. The final amount of taxes to be paid depends on a number of factors, including the outcomes of audits, appeals or negotiated settlements. Such differences are accounted for based on management’s best estimate of the probable outcome of these matters.

The Company must make significant estimates and judgements in respect of its provision for income taxes and the composition and measurement of its deferred income tax assets and liabilities. The Company’s operations are, in part, subject to foreign tax laws where interpretations, regulations and legislation are complex and subject to change. As a result, there are some tax matters in question that may, upon resolution in the future, result in adjustments to the amount of deferred income tax assets and liabilities; those adjustments may be material.

Employee benefits

(o) Employee benefits

Wages, salaries, contributions to government pension and social insurance funds, compensated absences and bonuses are accrued in the year in which the employees render the associated services.

Cash and cash equivalents

(p) Cash and cash equivalents

For the purposes of the consolidated balance sheet, cash and cash equivalents comprise cash on hand, demand deposits and short term, highly liquid investments with an initial maturity of three months or less that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

Financial instruments

(q) Financial instruments

The Company classifies its financial instruments in the following categories: at fair value through profit or loss, fair value through other comprehensive income or at amortized cost.

Classification

The Company determines the classification of financial instruments at initial recognition.

The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. A debt instrument is measured at amortized cost if the objective of the business model is to hold the debt instrument for the collection of contractual cash flows, and the asset’s contractual cash flows are comprised solely of payments of principal and interest (“SPPI”).

A debt instrument held under a business model under which financial assets may be either held to collect contractual cash flows or sold is classified as held at fair value through other comprehensive income if the SPPI criteria are met. Any other financial assets are classified at fair value through profit or loss.

Debt instruments held to maturity are classified as current or non-current assets based upon their maturity date. Equity instruments that are held for trading are classified as fair value through profit or loss. For other equity instruments, on the day of acquisition, the Company is able to make an irrevocable election (on an instrument-by-instrument basis) to designate them as at fair value through other comprehensive income.

Financial liabilities are measured at amortized cost, unless they are required to be measured at fair value through profit or loss (such as instruments held for trading or derivatives) or where the Company has opted to measure at fair value through profit or loss.

Measurement

(i) Financial assets and liabilities at fair value through profit or loss

Financial assets and liabilities at fair value through profit or loss are initially recognized at fair value and transaction costs are expensed in the consolidated statements of income. Realized and unrealized gains and losses arising from changes in fair value are included in the consolidated statement of income in the period in which they arise. Where the Company has elected to recognize a financial liability at fair value through profit or loss, any changes associated with the Company’s own credit risk will be recognized in other comprehensive income.

(ii) Financial assets at fair value through other comprehensive income

Investments in equity instruments at fair value through other comprehensive income are initially recognized at fair value plus transaction costs. Subsequent to initial recognition, they are measured at fair value, with gains and losses recognized in other comprehensive income.

(iii) Financial assets and liabilities at amortized cost

Financial assets and liabilities at amortized cost are initially recognized at fair value net of transaction costs, and subsequently carried at amortized cost less any impairment charges.

(iv) Derivative financial instruments

Derivatives are classified as fair value through profit or loss. Derivatives embedded in financial liabilities are treated as separate derivatives when their risks and characteristics are not closely related to their host contracts. Commodity-based derivatives resulting from provisionally priced concentrate are classified as fair value through profit or loss with changes in value recognized in revenue.

Impairment of financial assets

The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost.

At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the 12 month expected credit loss for performing assets and the lifetime expected credit loss if the credit risk on the financial asset has increased significantly since initial recognition. For financial assets that are credit impaired at inception, the Company recognizes the expected lifetime credit loss allowance and any interest income is calculated on the net carrying amount.

Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the expected credit losses are reversed after the impairment was recognized.

Derecognition

Financial assets are derecognized when the investments mature or are sold, and substantially all the risks and rewards of ownership have been transferred. A financial liability is derecognized when the obligation under the liability is discharged, canceled or expired. Gains and losses on derecognition are recognized within finance income and finance costs, respectively. Gains or losses on equity instruments designated as fair value through other comprehensive income remain within accumulated other comprehensive income.

Share based payments

(r) Share based payments

The Company has a Performance Share Unit (“PSU”) Plan, a Restricted Share Unit (“RSU”) plan, and a Director Deferred Share Unit (“DDSU”) Plan.

The PSUs, RSUs, and DDSUs are accounted for at fair value upon issuance and remeasured each reporting period, based on the fair market value of a common share of the Company, and recognized as an expense on a straight-line basis over the vesting period.

Segment reporting

(s) Segment reporting

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components. Operating segments are reported consistently with internal information provided to the chief operating decision maker (“CODM”). The CODM, who is responsible for allocating resources and assessing performance, has been identified as Turquoise Hill’s Chief Executive Officer. Based upon management’s assessment of the above criteria, the Company has one operating segment, Oyu Tolgoi, with its copper-gold mine in Southern Mongolia.

Leases

(t) Leases

At inception of the contract, the Company assesses whether a contract is, or contains, a lease. The contract contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

To assess this, the Company considers whether:

– The contract involves the use of an identified asset;

– the Company has the right to obtain substantially all the economic benefits from use of the asset throughout the period of use; and

– the Company has the right to direct the use of the asset.

The Company recognizes a right of use asset and a lease liability at the lease commencement date. The right of use asset is initially measured at cost. The right of use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the useful life or the end of the lease term. The estimated useful lives of right of use assets are determined on the same basis as those of property, plant and equipment. In addition, they are periodically reduced by any impairment losses and adjusted for certain re-measurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted at the weighted average incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise: fixed payments; variable lease payments that depend on an index or a rate; amounts expected to be payable under any residual value guarantee, and the exercise price under any purchase option that the Company would be reasonably certain to exercise; lease payments in any optional renewal period if the Company is reasonably certain to exercise an extension option; and penalties for any early termination of a lease unless the Company is reasonably certain not to terminate early.

The lease liability is measured at amortized cost using the effective interest rate method. It is re-measured when there is a change in future lease payments arising from a change in index payment or rate, if there is a change in the Company’s estimate of the amount expected to be payable under any residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension, or termination option.

When the lease liability is re-measured in this way, a corresponding adjustment is made to the carrying amount of the right of use asset or is recorded in the consolidated statement of income if the carrying amount of the asset has been reduced to nil.

The Company presents right of use assets in Property, plant, and equipment and lease liabilities in Borrowings and other financial liabilities in the consolidated balance sheet.

New standards and interpretations not yet adopted

(u) New standards and interpretations not yet adopted

IAS 16, Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) is effective for the Company’s fiscal year ending December 31, 2022. This narrow-scope amendment to IAS 16 prohibits an entity from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Under the amendment, the Company will be required to recognise the proceeds from selling such items, and the cost of producing them, in the Consolidated Statement of Income.

This amendment is effective for the Company’s annual reporting periods beginning January 1, 2022 with retrospective application required as it relates to items of property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after January 1, 2021. IAS 2 Inventories will apply to the identification and measurement of inventory produced. Identifying the related cost may require significant estimation and judgment in the selection of an appropriate method for allocating development expenditure to such inventory.

The impact of adjustments to amounts recorded within opening balances at January 1, 2021 are expected to decrease the deficit reported within equity by $21 million and to increase capital work in progress within property, plant and equipment by $21 million. Upon adoption of the amendment for reporting periods starting from January 1, 2022, the restatement of the Company’s Consolidated Statement of Income and Consolidated Balance Sheet as at and for the year ended December 31, 2021 will result in a $70 million increase to revenue, a $15 million increase in cost of sales and a $55 million increase to capital work in progress within property, plant and equipment.

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Operating segment (Tables)

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Schedule of Operating Segments

	Year Ended December 31, 2021
				Corporate
				and other
	Oyu Tolgoi			eliminations			Consolidated
Revenue	$	1,971,042		$	-		$	1,971,042
Cost of sales		(622,329	)		-			(622,329	)
Gross margin		1,348,713			-			1,348,713
Operating (expenses) income		(321,257	)		45,770			(275,487	)
Corporate administration expenses		-			(37,699	)		(37,699	)
Other expenses		(7,575	)		(30,002	)		(37,577	)
Income (loss) before finance items and taxes		1,019,881			(21,931	)		997,950
Finance items
Finance income		1,783			1,215			2,998
Finance costs		(282,606	)		274,570			(8,036	)
Income from operations before taxes	$	739,058		$	253,854		$	992,912
Income and other taxes		(279,559	)		(32,233	)		(311,792	)
Income for the year	$	459,499		$	221,621		$	681,120
Depreciation and depletion		165,269			97			165,366
Capital additions		1,263,698			-			1,263,698
Current assets		497,845			623,302			1,121,147
Non-current assets		13,375,066			(371,524	)		13,003,542
Current liabilities		909,328			21,949			931,277
Non-current liabilities (a)		12,443,023			(8,358,569	)		4,084,454
Net increase (decrease) in cash		25,245			(454,570	)		(429,325	)

(a) The Oyu Tolgoi segment’s non-current liabilities includes $8.1 billion of shareholder loan and accrued interest liability and the Corporate and other elimination segment’s non-current liabilities includes $8.1 billion of shareholder loan and accrued interest asset at December 31, 2021.

	Year Ended December 31, 2020
				Corporate
				and other
	Oyu Tolgoi			eliminations			Consolidated
Revenue	$	1,078,192		$	-		$	1,078,192
Cost of sales		(669,394	)		-			(669,394	)
Gross margin		408,798			-			408,798
Operating (expenses) income		(245,718	)		43,447			(202,271	)
Corporate administration expenses		-			(30,602	)		(30,602	)
Other income (expenses)		3,254			(2,772	)		482
Income before finance items and taxes		166,334			10,073			176,407
Finance items
Finance income		4,292			13,057			17,349
Finance costs		(257,765	)		252,255			(5,510	)
Income (loss) from operations before taxes	$	(87,139)		$	275,385		$	188,246
Income and other taxes		347,003			(40,607	)		306,396
Income for the year	$	259,864		$	234,778		$	494,642
Depreciation and depletion		181,146			114			181,260
Capital additions		1,326,274			-			1,326,274
Current assets		431,271			1,077,598			1,508,869
Non-current assets		12,025,763			(165,871	)		11,859,892
Current liabilities		501,013			20,623			521,636
Non-current liabilities (a)		11,954,961			(7,535,789	)		4,419,172
Net decrease in cash		(38,563	)		(489,801	)		(528,364	)

(a) The Oyu Tolgoi segment’s non-current liabilities includes $7.3 billion of shareholder loan and accrued interest liability and the Corporate and other elimination segment’s non-current liabilities includes $7.3 billion of shareholder loan and accrued interest asset at December 31, 2020.

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Revenue (Tables)

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Schedule of Revenue

	Year Ended December 31, 2021
	Revenue from contracts with customers		Other revenue (a)			Total revenue
Total revenue:
Copper	$	1,151,118	$	53,401		$	1,204,519
Gold		754,345		(5,763	)		748,582
Silver		18,127		(186	)		17,941
	$	1,923,590	$	47,452		$	1,971,042
	Year Ended December 31, 2020
	Revenue from contracts with customers		Other revenue (a)			Total revenue
Total revenue:
Copper	$	755,874	$	41,423		$	797,297
Gold		260,055		5,593			265,648
Silver		14,575		672			15,247
	$	1,030,504	$	47,688		$	1,078,192

(a) Other revenue relates to gains (losses) on the revaluation of trade receivables.

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Cost of sales (Tables)

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Schedule of Cost of Sales

	Year Ended December 31,
	2021		2020
Production and delivery	$	459,322	$	493,370
Depreciation and depletion		163,007		176,024
	$	622,329	$	669,394

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Operating expenses (Tables)

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Schedule of Operating Expenses

	Year Ended December 31,
	2021			2020
Oyu Tolgoi administration expenses	$	156,066		$	124,889
Royalty expenses		105,399			63,420
Inventory reversals (a)		(3,465	)		(2,703	)
Selling expenses		15,041			11,147
Depreciation		2,359			5,236
Other		87			282
	$	275,487		$	202,271

(a) Inventory reversals include net adjustments to the carrying value of ore stockpile inventories and materials and supplies; refer to Note 9.

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Finance items (Tables)

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Schedule of Finance Items

	Year Ended December 31,
	2021			2020
Finance income:
Interest income (a)	$	2,998		$	17,349
	$	2,998		$	17,349
Finance costs:
Interest expense and similar charges	$	(299,618	)	$	(340,040	)
Amounts capitalized to property, plant and equipment (b)		297,392			337,727
Accretion of decommissioning obligations (Note 17)		(5,810	)		(3,197	)
	$	(8,036	)	$	(5,510	)

(a) Finance income for the year ended December 31, 2021 does not include interest on the related party receivable. For the year ended December 31, 2020, finance income includes $2.1 million on the related party receivable (refer to Note 22). Amounts had previously been placed with Rio Tinto under an agreement for cash management services in connection with net proceeds from the project finance facility. This was settled during the second quarter of 2020.

(b) The majority of the costs capitalized to property, plant and equipment were capitalized at the weighted average rate of the Company’s general borrowings of 8.1% (2020: 8.3%) (refer to Note 13).

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Cash and cash equivalents (Tables)

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Schedule of Cash and Cash Equivalents

		December 31, 2021		December 31, 2020
Cash at bank and on hand	$	101,745	$	61,783
Money market funds		193,243		667,542
Other cash equivalents		399,308		394,296
	$	694,296	$	1,123,621

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Inventories (Tables)

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Summary of Inventories

	December 31, 2021			December 31, 2020
Current
Concentrate		$    148,270			$     48,504
Ore stockpiles		27,911			44,846
Materials and supplies		185,797			180,038
Provision against carrying value of materials and supplies		(71,961	)		(75,426	)
		$    290,017			$   197,962
Non-current
Ore stockpiles		$      60,711			$     37,557
		$      60,711			$     37,557

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Trade and other receivables (Tables)

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Summary of Trade and Other Receivables

	December 31, 2021		December 31, 2020
Trade receivables from provisionally priced sales	$	13,645	$	50,459
Other receivables		2,435		8,701
Due from related parties (Note 22)		39		852
	$	16,119	$	60,012

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Prepaid expenses and other assets (Tables)

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Prepaid expenses and other assets

	December 31, 2021		December 31, 2020
Current Prepaid Expenses:
Prepaid expenses	$	38,881	$	44,130
Amounts prepaid to related parties (Note 22)		81,725		83,144
	$	120,606	$	127,274
Non-current Prepaid Expenses:
Prepaid Mongolian corporate tax (Note 23)	$	348,171	$	-
Other		500		-
	$	348,671	$	-

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Other non-current financial assets (Tables)

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Summary of Other non-current financial assets

	December 31, 2021		December 31, 2020
Current assets:
Commodity put options	$	109	$	-
	$	109	$	-
Non-current assets:
Marketable securities	$	9,323	$	6,379
Other		7,495		7,739
	$	16,818	$	14,118

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Property, plant and equipment (Tables)

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Summary of Property, Plant and Equipment

			Oyu Tolgoi
Year Ended December 31, 2021		Mineral property interests			Plant and equipment	(c)		Capital works in progress		Other capital assets		Total
Net book value:
January 1, 2021	$	695,552		$	3,011,522		$	7,219,502	$	936	$	10,927,512
Additions (a)		33,208			13,906			919,192		-		966,306
Interest capitalized (Note 7)		-			-			297,392		-		297,392
Changes to decommissioning obligations (Note 17)		13,888			-			-		-		13,888
Depreciation for the period		(48,967)			(181,405)			-		(97)		(230,469)
Disposals and write offs		-			(149)			-		-		(149)
Transfers and other movements		-			148,720			(148,720)		-		-
December 31, 2021	$	693,681	$		2,992,594		$	8,287,366	$	839	$	11,974,480
Cost		1,350,231			5,023,101			8,652,073		1,131		15,026,536
Accumulated depreciation / impairment		(656,550)			(2,030,507	)		(364,707)		(292)		(3,052,056	)
December 31, 2021	$	693,681	$		2,992,594		$	8,287,366	$	839	$	11,974,480
Non-current assets pledged as security (b)	$	693,681	$		2,992,594		$	8,287,366	$	-	$	11,973,641
			Oyu Tolgoi
Year Ended December 31, 2020		Mineral property interests			Plant and equipment	(c)		Capital works in progress		Other capital assets		Total
Net book value:
January 1, 2020	$	723,516		$	3,126,331		$	5,931,750	$	1,050	$	9,782,647
Additions (a)		5,965			-			982,582		-		988,547
Interest capitalized (Note 7)		-			-			337,727		-		337,727
Changes to decommissioning obligations (Note 17)		26,529			-			-		-		26,529
Depreciation for the period		(60,458)			(145,979)			-		(114)		(206,551)
Disposals and write offs		-			(858)			(529)		-		(1,387)
Transfers and other movements		-			32,028			(32,028)		-		-
December 31, 2020	$	695,552	$		3,011,522		$	7,219,502	$	936	$	10,927,512
Cost		1,303,134			4,868,370			7,584,209		1,131		13,756,844
Accumulated depreciation / impairment		(607,582)			(1,856,848)			(364,707)		(195)		(2,829,332)
December 31, 2020	$	695,552	$		3,011,522		$	7,219,502	$	936	$	10,927,512
Non-current assets pledged as security (b)	$	695,552	$		3,011,522		$	7,219,502	$	-	$	10,926,576

(a) Pre-production sales proceeds of $69.7 million (2020 - $26.1 million) and associated costs of $14.9 million (2020 – $5.4 million) have been recorded as a net reduction to additions to Capital works in progress during the year ended December 31, 2021.

(b) In addition to property, plant and equipment, at December 31, 2021 current and non-current inventory of $290.0 million (December 31, 2020 - $197.9 million) and $60.7 million (December 31, 2020 - $37.6 million) respectively, and cash at bank and on hand of $72.9 million (December 31, 2020 - $47.7 million) are pledged as security for the project finance facility.

(c) Plant and equipment comprise owned and leased assets:

Schedule of detailed information about property and plant equipment and leased assets

	December 31,			December 31,
	2021			2020
Plant and equipment owned	$	11,961,967		$	10,923,294
Right of use assets		12,513			4,218
	$	11,974,480		$	10,927,512
The Company leases certain assets including warehouse and office facilities as well as transportation equipment, substantially all at Oyu Tolgoi. Information about leases for which the Company is a lessee is presented below:
	Year Ended December 31,
Plant and equipment:	2021			2020
Opening Carrying Amount	$	4,218		$	8,710
Additions		13,945			-
Depreciation for the period		(5,650	)		(4,492	)
	$	12,513		$	4,218

Summary of quantitative information about right- of-use assets

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Trade and other payables (Tables)

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Summary of Trade and Other Payables

	December 31,		December 31,
	2021		2020
Trade payables and accrued liabilities	$	320,791	$	315,570
Interest payable on long-term borrowings		7,280		7,266
Payable to related parties (Note 22)		54,153		65,552
Other		2,264		1,671
	$	384,488	$	390,059

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Borrowings and other financial liabilities (Tables)

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Detailed Information about Borrowings and Project Finance Facility

	December 31,		December 31,
	2021		2020
Current liabilities:
Project finance facility (a)	$	387,561	$	27,567
Lease liabilities (b)		9,860		721
	$	397,421	$	28,288
Non-current liabilities:
Project finance facility (a)	$	3,769,783	$	4,157,344
Lease liabilities (b)		15,575		16,147
	$	3,785,358	$	4,173,491

(a) Project finance facility

On December 14, 2015, Oyu Tolgoi signed a $4.4 billion project finance facility. The facility is provided by a syndicate of international financial institutions and export credit agencies representing the governments of Canada, the United States and Australia, along with 15 commercial banks. The project finance lenders have agreed a debt cap of $6.0 billion. In addition to the funding drawn down to date there is an additional $0.1 billion available, subject to certain conditions (refer to Note 26 – Subsequent events), under the Company’s facility with the Export-Import Bank of the United States, and the potential for an additional $1.6 billion of supplemental debt in the future. Under the terms of the project finance facility held by Oyu Tolgoi, there are certain restrictions on the ability of Oyu Tolgoi to make shareholder distributions. Subsequent to December 31, 2021, Oyu Tolgoi notified its lenders of a potential event of default. Refer to Note 26.

At December 31, 2021, Oyu Tolgoi has drawn down $4.3 billion of the project finance facility:

	December 31, 2021				Original		Annual interest rate
Facility	Carrying Value (i)		Fair Value (i)		Term (ii)		Pre-completion		Post-completion
International Financial Institutions - A Loan	$	775,836	$	820,958		15 years		LIBOR + 3.78%		LIBOR + 4.78%
Export Credit Agencies		865,801		921,116		14 years		LIBOR + 3.65%		LIBOR + 4.65%
Loan		277,511		311,637		13 years		2.3%		2.3%
MIGA Insured Loan (iii)		673,248		711,980		12 years		LIBOR + 2.65%		LIBOR + 3.65%
Commercial Banks		1,564,948		1,672,455		12 years		LIBOR + 3.4%		LIBOR + 4.4%
- B Loan								Includes $50 million 15-year loan at A Loan rate
	$	4,157,344	$	4,438,146

(i) The carrying value of borrowings under the project finance facility differs from fair value due to amortized transaction costs, and changes in the estimate of fair value between the initial recognition date and the balance sheet date. Project finance borrowings were initially recognized at fair value less transaction costs on the relevant draw down dates, with aggregate initial fair value being $4,348.9 million before transaction costs. At December 31, 2021, these borrowings are stated net of $124.8 million unamortized transaction costs.

At December 31, 2021, the fair value of the Company’s borrowings has been estimated with reference to a market yield, the variability of which is considered a reasonable indicator, over the pre-completion period, of movements in the fair value of amounts drawn under the project finance facility. Post completion, the fair value has been estimated using a separate discount rate that incorporates the annual interest rate on each tranche of the facility with reference to the consideration of factors that could indicate a change in the credit assessment of Oyu Tolgoi LLC as a counterparty to project finance. These considerations include in-country risk relating to the Oyu Tolgoi project and the assumed date of transition from pre-completion to post-completion.    The transition from pre-completion to post-completion is determined by a set of tests for both completion of physical infrastructure and the ability to extract and process ore of defined grades over a defined period. This is considered a level 3 fair value measurement. Refer to Note 22 (v) for a description of Rio Tinto guarantee arrangements with respect to project finance borrowings.

(ii) The project finance facility provides for interest only payments for the first five years followed by minimum repayments according to a stepped amortization schedule for the remaining life of the facility. The maturity analysis of principal repayments is as follows:

	December 31,  2021		December 31,  2020
Maturity analysis - Project Finance facility (1)
Less than one year	$	403,483	$	43,489
One to five years		2,610,445		2,418,861
More than five years		1,268,212		1,863,279
	$	4,282,140	$	4,325,629

(1) The rows are represented in dates as follows: As at December 31, 2021: 12 months to December 31, 2022; 48 months between January 1, 2023 and December 31, 2026; Beyond January 1, 2027. As at December 31, 2020: 12 months to December 31, 2021; 48 months between January 1, 2022 and December 31, 2025; Beyond January 1, 2026.

(iii) The Multilateral Investment Guarantee Agency (“MIGA”) provides political risk insurance for commercial banks. The Company is required to pay an annual insurance premium of 1.4% of the MIGA Insured Loan for the remaining life of the facility.

Summary of maturity principal repayments of borrowings

The maturity analysis of principal repayments is as follows:

	December 31,  2021		December 31,  2020
Maturity analysis - Project Finance facility (1)
Less than one year	$	403,483	$	43,489
One to five years		2,610,445		2,418,861
More than five years		1,268,212		1,863,279
	$	4,282,140	$	4,325,629

(1) The rows are represented in dates as follows: As at December 31, 2021: 12 months to December 31, 2022; 48 months between January 1, 2023 and December 31, 2026; Beyond January 1, 2027. As at December 31, 2020: 12 months to December 31, 2021; 48 months between January 1, 2022 and December 31, 2025; Beyond January 1, 2026.

Schedule of Lease Liabilities

(b) Lease liabilities

	December 31,  2021		December 31,  2020
Maturity analysis - contractual undiscounted cash flows (1)
Less than one year	$	10,727	$	1,121
One to five years		20,752		19,631
More than five years		306		205
Total undiscounted lease liabilities	$	31,785	$	20,957
Lease liabilities included in the Consolidated balance sheet	$	25,435	$	16,868
Current	$	9,860	$	721
Non-Current	$	15,575	$	16,147

(1) The rows are represented in dates as follows: As at December 31, 2021: 12 months to December 31, 2022; 48 months between January 1, 2023 and December 31, 2026; Beyond January 1, 2027. As at December 31, 2020: 12 months to December 31, 2021; 48 months between January 1, 2022 and December 31, 2025; Beyond January 1, 2026.

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Income taxes (Tables)

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Summary of Components of Tax Expenses and Benefit

(i) Current taxes

In 2021, a cash payment of $0.2 million (2020 - $28.3 million) was made in respect of current taxes payable. Deferred tax liabilities for withholding taxes are reclassified to current tax prior to settlement.

(ii) Deferred tax assets

2021 – Mongolia

Deferred tax assets of $561.9 million were recognized at December 31, 2021 in Mongolia, comprised of $150.7 million relating to tax losses that expire if not recovered against taxable income within eight years and $411.2 million relating to accrued but unpaid interest expense and other temporary differences. Tax losses have been calculated in accordance with the provisions of the Oyu Tolgoi Investment Agreement and Mongolian laws.

The Company recognized deferred tax assets at December 31, 2021 to the extent recovery is considered probable. In assessing the probability of recovery, future taxable income, derived from cash flows from detailed life-of-mine and production plans, was evaluated with reference to commodity price sensitivities, operating cost assumptions and carry-forward limits. Updated mine plan assumptions reflected the expected delays in sustainable production to the first half of 2023 and to shaft 3 and 4 development that were announced on October 14, 2021.

During the year ended December 31, 2021, the Company decreased its recognized Mongolian deferred tax assets by $279.4 million. The movement in the Mongolian deferred tax asset represented a decrease of $308.3 million in the recognized deferred tax asset for prior year losses and other temporary differences, mainly related to property, plant and equipment. This was partially offset by accrued but unpaid interest expense incurred by Oyu Tolgoi in the year, which increased the recognized deferred tax asset by $28.9 million.

The adjustment to the previously recognized deferred tax asset for prior year losses and other temporary differences was due in part to the utilization of prior year losses carried forward against taxable income in the year combined with the changes made to mine plan operating assumptions, which led to an increase in the amount of loss carry forwards and temporary differences estimated to expire unutilized.

2020 – Mongolia

Deferred tax assets of $841.3 million were recognized at December 31, 2020 in Mongolia, comprised of $389.3 million relating to tax losses that expire if not recovered against taxable income within eight years and $452.0 million relating to accrued but unpaid interest expense and other temporary differences. During the year ended December 31, 2020, the Company increased its recognized Mongolian deferred tax assets by $347.3 million. The movement in the Mongolian deferred tax asset represented an increase of $270.7 million in the recognized deferred tax asset for prior year losses and other temporary differences and an increase of $76.6 million related to current year activity. The adjustment to the Mongolian deferred tax was primarily due to an overall strengthening in taxable income forecasts during 2020 driven by improved commodity price projections and updated operating assumptions in mine planning and scheduling. The improvement in taxable income forecasts led to an increase in the amount of loss carry forwards and temporary differences estimated to be utilized prior to expiration.

2021 – Canada

Deferred tax assets of $41.0 million were recognized at December 31, 2021 in Canada comprised of $39.5 million relating to non-capital Canadian tax losses carried forward and $1.5 million relating to other temporary differences. The recognized deferred tax asset increased during 2021 due to the additional non-capital tax losses incurred in the year, only part of which is estimated to be utilized prior to expiration. Non-capital losses expire if not used to offset taxable income within twenty years.

2020 – Canada

Deferred tax assets at December 31, 2020 were $39.4 million, of which $38.4 million were recognized in relation to non-capital Canadian tax losses carried forward and $1.0 million relating to other temporary differences.

(iii) Withholding taxes

Withholding tax is accrued on interest owing on shareholder loans and recognized within deferred tax liabilities as interest accrues. Mongolian withholding tax will be due upon receipt of loan interest.

Disclosure of Reconciliation of Average Effective Tax Rate and Applicable Tax Rate

(b) Reconciliation of income taxes calculated at the statutory rates to the actual tax provision

	Year Ended December 31,
	2021			2020
Income (loss) from operations before taxes	$	992,912		$	188,246
Tax at Canadian combined federal and provincial income tax rate (2021: 26.5%; 2020: 26.5%)		263,122			49,885
Tax effect of:
Change in amount of deferred tax recognized		151,117			(276,945	)
Difference in tax rates and treatment in foreign jurisdictions		(140,903	)		(116,208	)
Withholding taxes		33,717			32,537
Non deductible losses and expense		4,739			4,335
	$	311,792		$	(306,396	)

Summary of Deferred Tax Assets and Liabilities

Recognized and unrecognized deferred tax assets and liabilities are shown in the table below:

	Recognized						Unrecognized
	December 31,			December 31,			December 31,		December 31,
	2021			2020			2021		2020
Deferred tax assets
Non-capital losses (i)	$	190,203		$	427,695		$	152,853	$	281,643
Capital losses		-			-			117,517		117,945
Other temporary differences including accrued interest		412,659			453,010			319,227		63,471
	$	602,862		$	880,705		$	589,597	$	463,059
Deferred tax liabilities (ii)
Withholding tax		(145,434	)		(111,717	)		-		-
	$	(145,434	)	$	(111,717	)	$	-	$	-

(i) Unrecognized deferred tax assets relating to non-capital losses for which recovery is not considered probable as at December 31, 2021 expire between 2024 and 2041 (2020 - between 2024 and 2025).

(ii) At December 31, 2021, the Company has not recognized a deferred tax liability on unremitted earnings in subsidiaries of  $1,188 million (2020 - $606 million).

In addition to the above, the Company has $812.1 million of investment tax credits at December 31, 2021 (2020 – $812.1 million). No deferred tax asset has been recognized in respect of these credits, in accordance with the initial recognition exception in IAS 12 Income taxes for transactions that are not a part of a business combination and do not affect accounting or taxable profit.

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Decommissioning obligations (Tables)

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Detailed Information about Decommissioning Obligations

	Year Ended December 31,
	2021		2020
Opening carrying amount	$	133,964	$	104,238
Changes in estimates		13,888		26,529
Accretion of present value discount		5,810		3,197
	$	153,662	$	133,964

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Non-controlling interests (Tables)

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Summary of Non-Controlling Interests in Subsidiaries

	Non-controlling Interest: Oyu Tolgoi (a) Year Ended December 31,
	2021			2020
Balance, January 1	$	(1,148,820	)	$	(1,237,174	)
Non-controlling interest’s share of income		156,230			88,354
Common share investments funded on behalf of non-controlling interest (a)		20,400			137,700
Funded amounts repayable to the Company (a)		(20,400	)		(137,700	)
Balance, December 31	$	(992,590	)	$	(1,148,820	)

(a) Since 2011, the Company has funded common share investments in Oyu Tolgoi on behalf of Erdenes. In accordance with the Amended and Restated Shareholders Agreement dated June 8, 2011, such funded amounts earn interest at an effective annual rate of LIBOR plus 6.5% and were repayable to the Company via a pledge over Erdenes’ share of future Oyu Tolgoi common share dividends. Erdenes also had the right to reduce the outstanding balance by making payments directly to the Company.

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Cash flow information (Tables)

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Reconciliation of Net Income (Loss) to Net Cash Flow Generated from Operating Activities and Other Non-cash Transactions

(a) Reconciliation of net income to net cash flow generated from operating activities before interest and tax

	Year Ended December 31,
	2021			2020
Income (loss) for the year	$	681,120		$	494,642
Adjustments for:
Depreciation and amortization		165,366			181,260
Finance items:
Interest income		(2,998	)		(17,349	)
Interest and accretion expense		8,036			5,510
Unrealized foreign exchange (gain) loss		2,228			(4,297	)
Inventory write down reversals		(3,465	)		(2,703	)
Write off of property, plant and equipment		87			282
Realized and unrealized losses on commodity put options		29,797			-
Income and other taxes		311,792			(306,396	)
Other items		258			2,403
Net change in non-cash operating working capital items:
(Increase) decrease in:
Inventories		(109,212	)		(26,534	)
Trade, other receivables and prepaid expenses		52,148			(43,456	)
(Decrease) increase in:
Trade and other payables		29,554			12,414
Deferred revenue		46,079			75,393
Cash generated from operating activities before interest and tax	$	1,210,790		$	371,169

(b) Supplementary information regarding other non-cash transactions

The non-cash investing and financing activities relating to operations not already disclosed in the consolidated statements of cash flows were as follows:

	Year Ended December 31
	2021			2020
Investing activities
Change in accounts payable and accrued liabilities related to purchase of property, plant and equipment	$	(40,022	)	$	(79,879)
Additions to property, plant and equipment - leased assets		13,945			-

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Related parties (Tables)

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Disclosure of Related Party Transactions by Financial Statement Line Item

As at December 31, 2021, Rio Tinto plc’s indirect equity ownership in the Company was 50.8% (December 31, 2020: 50.8%). The following tables present the consolidated financial statements line items within which transactions with a Rio Tinto entity or entities (“Rio Tinto”) are reported. Rio Tinto entities comprise Rio Tinto plc, Rio Tinto Limited and their respective subsidiaries other than Turquoise Hill and its subsidiaries.

	Year Ended December 31,
Statements of Income	2021			2020
Operating and corporate administration expenses:
Cost recoveries - Turquoise Hill	$	1,151		$	2,803
Management services payment (i)		(29,706	)		(28,305	)
Cost recoveries - Rio Tinto (ii)		(66,362	)		(38,213	)
Finance income:
Cash and cash equivalents (iii)		-			2,329
Receivable from Rio Tinto (iv)		-			2,123
Finance costs:
Completion support fee (v)		(109,315	)		(110,054	)
	$	(204,232	)	$	(169,317	)

	Year Ended December 31,
Statements of Cash Flows	2021			2020
Cash generated from operating activities
Interest received (iii, iv)	$	-		$	9,848
Interest paid (v)		(107,896	)		(107,948	)
Cash flows from investing activities
Receivable from related party: amounts withdrawn (iv)		-			511,284
Expenditures on property, plant and equipment:
Management services payment and cost recoveries - Rio Tinto (i), (ii)		(37,302	)		(75,470	)

Balance Sheets	December 31, 2021			December 31, 2020
Trade and other receivables (Note 10)	$	39		$	852
Prepaid expenses and other assets (Note 11)		81,725			83,144
Trade and other payables (Note 14)
Management services payment - Rio Tinto (i)		(14,584	)		(13,137	)
Cost recoveries - Rio Tinto (ii)		(39,569	)		(52,415	)
	$	27,611		$	18,444

(i) In accordance with the Amended and Restated Shareholders’ Agreement, which was signed on June 8, 2011, and other related agreements, Turquoise Hill is required to make a management services payment to Rio Tinto equal to a percentage of all capital costs and operating costs incurred by Oyu Tolgoi from March 31, 2010 onwards. After signing the Underground Mine Development and Financing Plan on May 18, 2015, the management services payment to Rio Tinto has been calculated as 1.5% applied to underground development and sustaining capital costs, and 3% applied to operating costs and capital related to current operations.

(ii) Rio Tinto recovers the costs of providing general corporate support services and mine management services to Turquoise Hill. Mine management services are provided by Rio Tinto in its capacity as the manager of Oyu Tolgoi.

(iii) In addition to placing cash and cash equivalents on deposit with banks or investing funds with other financial institutions, Turquoise Hill may deposit cash and cash equivalents with Rio Tinto in accordance with an agreed upon policy and strategy for the management of liquid resources. Funds deposited with Rio Tinto earn interest at rates equivalent to those offered by financial institutions or short-term corporate debt. At December 31, 2021 and December 31, 2020, there were no funds deposited with wholly owned subsidiaries of Rio Tinto.

(iv) As part of project finance (Note 15), Turquoise Hill appointed 9539549 Canada Inc., a wholly owned subsidiary of Rio Tinto, as service provider to provide post-drawdown cash management services in connection with net proceeds from the project finance facility, which were placed with 9539549 Canada Inc. and shall be returned to Turquoise Hill as required for purposes of Oyu Tolgoi underground mine development and funding. Rio Tinto International Holdings Limited, a wholly owned subsidiary of Rio Tinto, agreed to guarantee the obligations of the service provider under this agreement. At December 31, 2021 and December 31, 2020, there were no amounts due from 9539549 Canada Inc. Amounts due had been earning interest at an effective annual rate of LIBOR plus 2.45%. The interest rate reflected: interest receivable at LIBOR minus 0.05%; plus a benefit of 2.5% arising on amounts receivable from 9539549 Canada Inc. under the Cash Management Services Agreement, which are net settled with the 2.5% completion support fee described in (v) below.

(v) As part of the project finance agreements (Note 15), Rio Tinto agreed to provide a guarantee, known as the completion support undertaking (“CSU”) in favour of the Commercial Banks and the Export Credit Agencies. In consideration for providing the CSU, the Company is required to pay Rio Tinto a fee equal to 2.5% of the amounts drawn under the facility. The annual completion support fee of 2.5% on amounts drawn under the facility is accounted for as a borrowing cost and included within interest expense and similar charges (refer to Note 7). The fee is settled net of a benefit arising on amounts receivable from 9539549 Canada Inc. under the Cash Management Services Agreement described in (iv) above. The fee payment obligation will terminate on the date Rio Tinto’s CSU obligations to the project lenders terminate.

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Financial instruments and fair value measurements (Tables)

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Summary of Financial Instruments and Fair Value Measurements

			Fair Value at December 31, 2021
	Total		Level 1		Level 2		Level 3
Money market funds (a)	$	193,243	$	193,243	$	-	$	-
Marketable securities (a)		9,323		9,323		-		-
Trade receivables (b)		13,645		-		13,645		-
Commodity put options (c)		109		-		109		-
	$	216,320	$	202,566	$	13,754	$	-
			Fair Value at December 31, 2020
	Total		Level 1		Level 2		Level 3
Money market funds (a)	$	667,542	$	667,542	$	-	$	-
Marketable securities (a)		6,379		6,379		-		-
Trade receivables (b)		50,459		-		50,459		-
	$	724,380	$	673,921	$	50,459	$	-

(a) The Company’s money market funds and marketable securities are classified within level 1 of the fair value hierarchy as they are valued using quoted market prices in active markets.

(b) Trade receivables from provisionally priced concentrate sales are included in level 2 of the fair value hierarchy as the basis of valuation uses quoted commodity prices.

(c) In 2021 the Company purchased copper and gold put options to establish a synthetic copper and gold price floor in order to provide increased certainty around the Company’s liquidity horizon. During the year ended December 31, 2021 the Company recognized a realized loss of $23.9 million and an unrealized loss of $5.9 million within Other income (expenses) in the consolidated statement of income, and a financial asset of $0.1 million within current Other financial assets in the consolidated balance sheet as at December 31, 2021. Commodity put options are included in level 2 of the fair value hierarchy as the basis of valuation uses quoted prices.

Summary of contractual maturities of financial liabilities

The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted and include contractual interest payments. Interest payments on variable interest rate loans reflect interest rates at the reporting date and these amounts may change as market interest rates change. Refer to additional disclosures around liquidity risk in Note 1.

			Between 1
At December 31, 2021	Less than 1 year		and 5 years		After 5 years		Total		Carrying amount
Non-derivative Financial Liabilities
Trade and other payables	$	384,488	$	-	$	-	$	384,488	$	384,488
Expected lease liability		10,727		20,752		306		31,785		25,435
Borrowings		564,742		3,059,498		1,373,049		4,997,289		4,157,344
Total	$	959,957	$	3,080,250	$	1,373,355	$	5,413,562	$	4,567,267
			Between 1
At December 31, 2020	Less than 1 year		and 5 years		After 5 years		Total			Carrying amount
Non-derivative Financial Liabilities
Trade and other payables	$	390,059	$	-	$	-	$	390,059	$	390,059
Expected lease liability		1,121		19,631		205		20,957		16,868
Borrowings		204,035		2,935,929		2,048,916		5,188,880		4,184,911
Total	$	595,215	$	2,955,560	$	2,049,121	$	5,599,896	$	4,591,838

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Key management compensation (Tables)

12 Months Ended

Dec. 31, 2021

Text block [abstract]

Schedule of Key Management Compensation

The compensation for key management, which comprises Turquoise Hill’s directors, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, and Chief Legal Officer in respect of employee services is as follows:

	Year Ended December 31,
		2021		2020
Salaries, director fees and other short term benefits	$	6,776	$		3,186
Post-employment benefits		193			293
Share based payment		1,412			1,628
	$	8,381	$		5,107

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Nature of operations and liquidity risk - Additional Information (Detail) - USD ($) $ in Millions	Dec. 31, 2021	Dec. 31, 2020
Nature of operations [line items]
Working capital balance	$ 200
Minimum Equity offering common stock subscriptions	$ 650
Estimated equity Offering Date	Aug. 31, 2022
Notional amount	$ 300
Oyu Tolgoi Copper Gold Mine Under Ground Development Project [Member]
Nature of operations [line items]
Cummulative increase to the estimate of Commited Capital	175
Cash [member]
Nature of operations [line items]
Liquidity amount available	$ 700
Rio Tinto [member]
Nature of operations [line items]
Percentage of ownership interest held by ultimate parent entity	50.80%	50.80%

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Summary of Significant Accounting Policies - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Disclosure of summary of significant accounting policies [line items]
Accumulated adjustment to equity	$ 9,108,958	$ 8,427,953	$ 7,931,057
Property, plant and equipment	11,974,480	10,927,512	9,782,647
Revenue	1,971,042	1,078,192
Cost of sales	622,329	669,394
Revision of Prior Period, Adjustment [Member]
Disclosure of summary of significant accounting policies [line items]
Revenue	70,000
Increase (decrease) due to changes in accounting policy required by IFRSs [member] | Property, Plant and Equipment-Proceeds before Intended Use [member] | Construction in progress [member]
Disclosure of summary of significant accounting policies [line items]
Property, plant and equipment	21,000
Increase Decrease Upon The Adoption Of Amendments To IAS16 [Member]
Disclosure of summary of significant accounting policies [line items]
Revenue	15,000
Cost of sales	55,000
Retained earnings [member]
Disclosure of summary of significant accounting policies [line items]
Accumulated adjustment to equity	(2,890,711)	(3,415,601)	(3,821,889)
Retained earnings [member] | Increase (decrease) due to changes in accounting policy required by IFRSs [member] | Property, Plant and Equipment-Proceeds before Intended Use [member]
Disclosure of summary of significant accounting policies [line items]
Accumulated adjustment to equity	21,000
Oyu Tolgoi [member]
Disclosure of summary of significant accounting policies [line items]
Authorised capital plans but not contracted for	$ 780,000
Percentage of ownership interest in subsidiary	66.00%
Percentage of ownership interest, held by non-controlling interest	34.00%
Percentage of fund provided for mine exploration and development costs of subsidiary	100.00%
Oyu Tolgoi [member] | Construction in progress [member]
Disclosure of summary of significant accounting policies [line items]
Property, plant and equipment	$ 8,287,366	$ 7,219,502	$ 5,931,750
Bottom of range [member]
Disclosure of summary of significant accounting policies [line items]
Final adjustment period of selling price	30 days
Top of range [member]
Disclosure of summary of significant accounting policies [line items]
Final adjustment period of selling price	180 days

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Operating Segment - Schedule of Operating Segments (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021		Dec. 31, 2020
Disclosure of operating segments [line items]
Revenue	$ 1,971,042		$ 1,078,192
Cost of sales	(622,329)		(669,394)
Gross margin	1,348,713		408,798
Operating (expenses) income	(275,487)		(202,271)
Corporate administration expenses	(37,699)		(30,602)
Other (expenses) income	(37,577)		482
Income (loss) before finance items and taxes	997,950		176,407
Finance income	2,998		17,349
Finance costs	(8,036)		(5,510)
Income from operations before taxes	992,912		188,246
Income and other taxes	(311,792)		306,396
Income for the year	681,120		494,642
Depreciation and depletion	165,366		181,260
Capital additions	1,263,698		1,326,274
Current assets	1,121,147		1,508,869
Non-current assets	13,003,542		11,859,892
Current liabilities	931,277		521,636
Non-current liabilities	4,084,454		4,419,172	[1]
Net increase (decrease) in cash	(429,325)		(528,364)
Operating segments [member] | Oyu Tolgoi [member]
Disclosure of operating segments [line items]
Revenue	1,971,042		1,078,192
Cost of sales	(622,329)		(669,394)
Gross margin	1,348,713		408,798
Operating (expenses) income	(321,257)		(245,718)
Corporate administration expenses	0
Other (expenses) income	(7,575)		3,254
Income (loss) before finance items and taxes	1,019,881		166,334
Finance income	1,783		4,292
Finance costs	(282,606)		(257,765)
Income from operations before taxes	739,058		(87,139)
Income and other taxes	(279,559)		347,003
Income for the year	459,499		259,864
Depreciation and depletion	165,269		181,146
Capital additions	1,263,698		1,326,274
Current assets	497,845		431,271
Non-current assets	13,375,066		12,025,763
Current liabilities	909,328		501,013
Non-current liabilities	12,443,023	[2]	11,954,961	[1]
Net increase (decrease) in cash	25,245		(38,563)
Corporate and other eliminations [member]
Disclosure of operating segments [line items]
Revenue	0
Cost of sales	0
Gross margin	0
Operating (expenses) income	45,770		43,447
Corporate administration expenses	(37,699)		(30,602)
Other (expenses) income	(30,002)		(2,772)
Income (loss) before finance items and taxes	(21,931)		10,073
Finance income	1,215		13,057
Finance costs	274,570		252,255
Income from operations before taxes	253,854		275,385
Income and other taxes	(32,233)		(40,607)
Income for the year	221,621		234,778
Depreciation and depletion	97		114
Capital additions	0
Current assets	623,302		1,077,598
Non-current assets	(371,524)		(165,871)
Current liabilities	21,949		20,623
Non-current liabilities	(8,358,569)	[2]	(7,535,789)	[1]
Net increase (decrease) in cash	$ (454,570)		$ (489,801)

[1] The Oyu Tolgoi segment’s non-current liabilities includes $7.3 billion of shareholder loan and accrued interest liability and the Corporate and other elimination segment’s non-current liabilities includes $7.3 billion of shareholder loan and accrued interest asset at December 31, 2020.

[2] The Oyu Tolgoi segment’s non-current liabilities includes $8.1 billion of shareholder loan and accrued interest liability and the Corporate and other elimination segment’s non-current liabilities includes $8.1 billion of shareholder loan and accrued interest asset at December 31, 2021.

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Operating Segment - Schedule of Operating Segments (Parenthetical) (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Disclosure of operating segments [line items]
Revenue	$ 1,971,042	$ 1,078,192
Material reconciling items [member]
Disclosure of operating segments [line items]
Revenue	0
Shareholders loan and accrued interest liability	8,100,000	7,300,000
Oyu Tolgoi [member] | Operating segments [member]
Disclosure of operating segments [line items]
Revenue	1,971,042	1,078,192
Shareholders loan and accrued interest liability	$ 8,100,000	$ 7,300,000
CHINA | Bottom of range [member] | Oyu Tolgoi [member] | Operating segments [member]
Disclosure of operating segments [line items]
Percentage of revenue	10.00%	10.00%
CHINA | Customer one [member] | Oyu Tolgoi [member] | Operating segments [member]
Disclosure of operating segments [line items]
Revenue	$ 234,200	$ 230,700
CHINA | Customer two [member] | Oyu Tolgoi [member] | Operating segments [member]
Disclosure of operating segments [line items]
Revenue	226,000	177,400
CHINA | Customer three [member] | Oyu Tolgoi [member] | Operating segments [member]
Disclosure of operating segments [line items]
Revenue	216,900	110,500
CHINA | Customer four [member] | Oyu Tolgoi [member] | Operating segments [member]
Disclosure of operating segments [line items]
Revenue	$ 214,500	$ 106,200

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Revenue - Schedule of Revenue (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Disclosure of revenue [line items]
Copper	$ 1,204,519	$ 797,297
Gold	748,582	265,648
Silver	17,941	15,247
Revenue	1,971,042	1,078,192
Revenue from contracts with customers [member]
Disclosure of revenue [line items]
Copper	1,151,118	755,874
Gold	754,345	260,055
Silver	18,127	14,575
Revenue	1,923,590	1,030,504
Other revenue [member]
Disclosure of revenue [line items]
Copper	53,401	41,423
Gold	(5,763)	5,593
Silver	(186)	672
Revenue	$ 47,452	$ 47,688

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Cost of Sales - Schedule of Cost of Sales (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Analysis of income and expense [abstract]
Production and delivery	$ 459,322	$ 493,370
Depreciation and depletion	163,007	176,024
Cost of sales	$ 622,329	$ 669,394

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Operating Expenses - Schedule of Operating Expenses (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Expenses by nature [abstract]
Oyu Tolgoi administration expenses	$ 156,066	$ 124,889
Royalty expenses	105,399	63,420
Inventory reversals	(3,465)	(2,703)
Selling expenses	15,041	11,147
Depreciation	2,359	5,236
Other	87	282
Total	$ 275,487	$ 202,271

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Finance Items - Schedule of Finance Income and Finance Costs (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Finance income:
Interest income	$ 2,998	$ 17,349
Finance income	2,998	17,349
Finance costs:
Interest expense and similar charges	(299,618)	(340,040)
Amounts capitalized to property, plant and equipment	297,392	337,727
Accretion of decommissioning obligations	(5,810)	(3,197)
Finance costs	$ (8,036)	$ (5,510)

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Finance Items - Schedule of Finance Income and Finance Costs (Parenthetical) (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Finance income and cost expense [Line Items]
Finance income	$ 2,998	$ 17,349
Rio Tinto Limited [Member]
Finance income and cost expense [Line Items]
Weighted average rate of general borrowings	8.10%	8.30%
Finance income	$ 0	$ 2,100

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Cash and Cash Equivalents - Schedule of Cash and Cash Equivalents (Detail) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Cash and cash equivalents [abstract]
Cash at bank and on hand	$ 101,745	$ 61,783
Money market funds	193,243	667,542
Other cash equivalents	399,308	394,296
Cash and cash equivalents	$ 694,296	$ 1,123,621	$ 1,651,985

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Inventories - Summary of Inventories (Detail) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Classes of current inventories [abstract]
Concentrate	$ 148,270	$ 48,504
Ore stockpiles	27,911	44,846
Materials and supplies	185,797	180,038
Provision against carrying value of materials and supplies	(71,961)	(75,426)
Inventories	290,017	197,962
Ore stockpiles	60,711	37,557
Inventories	$ 60,711	$ 37,557

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Inventories - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Classes of current inventories [abstract]
Cost of sales	$ 622,329	$ 669,394
Inventory write-downs, net of charges/reversals	(3,465)	(2,703)
Amount of inventories on which there was a provision against carrying value which was sold and recognized in cost of sales for the period	$ 0	$ 100

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Trade and Other Receivables - Summary of Trade and Other Receivables (Detail) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Trade and other receivables [abstract]
Trade receivables from provisionally priced sales	$ 13,645	$ 50,459
Other receivables	2,435	8,701
Total	16,119	60,012
Due from related parties (Note 22)	$ 39	$ 852

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Prepaid Expenses and Other Assets - Summary of Prepaid Expenses and Other Assets (Detail) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Current Prepaid Expenses:
Prepaid expenses	$ 38,881	$ 44,130
Amounts prepaid to related parties	81,725	83,144
Other current prepaid expenses	120,606	127,274
Non-current prepaid Expenses:
Prepaid Foreign Tax Noncurrent	348,171	0
Other	500	0
Other non-current prepaid expenses	$ 348,671	$ 0

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Other Non-current Financial Assets - Summary of Other Non-current Financial Assets (Detail) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Current assets:
Commodity put options	$ 109	$ 0
Other current financial assets	109	0
Other non-current financial assets:
Marketable securities	9,323	6,379
Other	7,495	7,739
Other non-current financial assets	$ 16,818	$ 14,118

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Property, Plant and Equipment - Summary of Property, Plant and Equipment (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment at beginning of period	$ 10,927,512	$ 9,782,647
Additions	966,306	988,547
Interest capitalized	297,392	337,727
Changes to decommissioning obligations	13,888	26,529
Depreciation for the period	(230,469)	(206,551)
Disposals and write offs	(149)	(1,387)
Property, plant and equipment at end of period	11,974,480	10,927,512
Non-current assets pledged as security	11,973,641	10,926,576
Cost [member]
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment at beginning of period	13,756,844
Property, plant and equipment at end of period	15,026,536	13,756,844
Accumulated depreciation / Impairment [member]
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment at beginning of period	(2,829,332)
Property, plant and equipment at end of period	(3,052,056)	(2,829,332)
Mining Property Interests [member] | Oyu Tolgoi [member]
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment at beginning of period	695,552	723,516
Additions	33,208	5,965
Changes to decommissioning obligations	13,888	26,529
Depreciation for the period	(48,967)	(60,458)
Property, plant and equipment at end of period	693,681	695,552
Non-current assets pledged as security	693,681	695,552
Mining Property Interests [member] | Cost [member] | Oyu Tolgoi [member]
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment at beginning of period	1,303,134
Property, plant and equipment at end of period	1,350,231	1,303,134
Mining Property Interests [member] | Accumulated depreciation / Impairment [member] | Oyu Tolgoi [member]
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment at beginning of period	(607,582)
Property, plant and equipment at end of period	(656,550)	(607,582)
Plant and equipment [member] | Oyu Tolgoi [member]
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment at beginning of period	3,011,522	3,126,331
Additions	13,906
Depreciation for the period	(181,405)	(145,979)
Disposals and write offs	(149)	(858)
Transfers and other movements	148,720	32,028
Property, plant and equipment at end of period	2,992,594	3,011,522
Non-current assets pledged as security	2,992,594	3,011,522
Plant and equipment [member] | Cost [member] | Oyu Tolgoi [member]
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment at beginning of period	4,868,370
Property, plant and equipment at end of period	5,023,101	4,868,370
Plant and equipment [member] | Accumulated depreciation / Impairment [member] | Oyu Tolgoi [member]
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment at beginning of period	(1,856,848)
Property, plant and equipment at end of period	(2,030,507)	(1,856,848)
Capital works in progress [member] | Oyu Tolgoi [member]
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment at beginning of period	7,219,502	5,931,750
Additions	919,192	982,582
Interest capitalized	297,392	337,727
Disposals and write offs		(529)
Transfers and other movements	(148,720)	(32,028)
Property, plant and equipment at end of period	8,287,366	7,219,502
Non-current assets pledged as security	8,287,366	7,219,502
Capital works in progress [member] | Cost [member] | Oyu Tolgoi [member]
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment at beginning of period	7,584,209
Property, plant and equipment at end of period	8,652,073	7,584,209
Capital works in progress [member] | Accumulated depreciation / Impairment [member] | Oyu Tolgoi [member]
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment at beginning of period	(364,707)
Property, plant and equipment at end of period	(364,707)	(364,707)
Plant and equipment [member]
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment at beginning of period	936	1,050
Depreciation for the period	(97)	(114)
Property, plant and equipment at end of period	839	936
Plant and equipment [member] | Cost [member]
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment at beginning of period	1,131
Property, plant and equipment at end of period	1,131	1,131
Plant and equipment [member] | Accumulated depreciation / Impairment [member]
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment at beginning of period	(195)
Property, plant and equipment at end of period	$ (292)	$ (195)

XML

Property, Plant and Equipment - Summary of Property, Plant and Equipment (Parenthetical) (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Disclosure of detailed information about property, plant and equipment [line items]
Preproduction revenue	$ 69.7	$ 26.1
Preproduction costs	14.9	5.4
Cash On Hand And Bank [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Assets pledged	72.9	47.7
Current Inventory [member]
Disclosure of detailed information about property, plant and equipment [line items]
Inventory pledged as security	290.0	197.9
Non-current Inventory [member]
Disclosure of detailed information about property, plant and equipment [line items]
Inventory pledged as security	$ 60.7	$ 37.6

XML

Property, plant and equipment - Schedule Of Detailed Information About Property Plant Equipment And Leased Assets (Detail) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment	$ 11,974,480	$ 10,927,512	$ 9,782,647
Plant and equipment owned [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment	11,961,967	10,923,294
Right of use assets [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment	$ 12,513	$ 4,218

XML

Property, plant and equipment - Summary Of Quantitative Information About Right Use Assets (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Disclosure of detailed information about property, plant and equipment [abstract]
Beginning Balance	$ 4,218	$ 8,710
Additions	13,945
Depreciation for the period	(5,650)	(4,492)
Ending Balance	$ 12,513	$ 4,218

XML

Property, Plant and Equipment - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2021 USD ($)
Disclosure of detailed information about property, plant and equipment [line items]
Reduction In Recoverable amount
Long term forecast copper price per pound	3.43
Percent of total recoverable amount	8.00%
Long term forecast gold price per ounce	1,601
Increase percentage of copper and gold prices	19.00%
Fair value estimate changes
Fair value estimate changes
Copper [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Fair value estimate changes, Rate	5.00%
Fair value estimate changes, Rate	5.00%
Gold [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Fair value estimate changes, Rate	5.00%
Fair value estimate changes, Rate	5.00%
Bottom of range [member]
Disclosure of detailed information about property, plant and equipment [line items]
Post-tax real discount rate	1.00%
Top of range [member]
Disclosure of detailed information about property, plant and equipment [line items]
Post-tax real discount rate	9.00%

XML

Trade and Other Payables - Summary of Trade and Other Payables (Detail) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Trade and other payables [abstract]
Trade payables and accrued liabilities	$ 320,791	$ 315,570
Interest payable on long-term borrowings	7,280	7,266
Payable to related parties	54,153	65,552
Other	2,264	1,671
Trade and other current payables	$ 384,488	$ 390,059

XML

Borrowings and Other Financial Liabilities - Detailed Information about Borrowings (Detail) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Current liabilities [abstract]
Project finance facility	$ 387,561	$ 27,567
Lease liabilities	9,860	721
Current Borrowings And Other Financial Liabilities	397,421	28,288
Non-current liabilities [abstract]
Project finance facility	3,769,783	4,157,344
Lease liabilities	15,575	16,147
Total Non-current borrowings and other financial liabilities	$ 3,785,358	$ 4,173,491

XML

Borrowings and Other Financial Liabilities - Detailed Information about Borrowings (Parenthetical) (Detail) - Oyu Tolgoi [member] $ in Billions	Dec. 15, 2015 USD ($)
Disclosure of detailed information about borrowings [line items]
Project finance facility	$ 4.4
Debt cap	6.0
Supplemental debt	1.6
Additional drawn down amount available under borrowing facility	$ 0.1

XML

Borrowings and Other Financial Liabilities - Additional Information (Detail) - Oyu Tolgoi [member] - USD ($) $ in Billions	Dec. 31, 2021	Dec. 31, 2020
Disclosure of detailed information about borrowings [line items]
Amount drawn down under project finance facility	$ 4.3
Weighted average incremental borrowing rate	7.60%	7.80%

XML

Borrowings and Other Financial Liabilities - Detailed Information about Project Finance Facility (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Disclosure of detailed information about borrowings [line items]
Carrying Value	$ 3,769,783	$ 4,157,344
Fair Value	4,282,140	$ 4,325,629
Gross carrying amount [member]
Disclosure of detailed information about borrowings [line items]
Carrying Value	4,157,344
International Financial Institutions A Loan [member]
Disclosure of detailed information about borrowings [line items]
Carrying Value	$ 775,836
Original Term	15 years
14 years export credit agencies loan [member]
Disclosure of detailed information about borrowings [line items]
Carrying Value	$ 865,801
Original Term	14 years
13 years export credit agencies loan [member]
Disclosure of detailed information about borrowings [line items]
Carrying Value	$ 277,511
Original Term	13 years
MIGA Insured Loan [member]
Disclosure of detailed information about borrowings [line items]
Carrying Value	$ 673,248
Original Term	12 years
Commercial Banks B Loan [member]
Disclosure of detailed information about borrowings [line items]
Carrying Value	$ 1,564,948
Original Term	12 years
Interest rate pre completion [member] | International Financial Institutions A Loan [member]
Disclosure of detailed information about borrowings [line items]
Annual interest rate, adjustment to basis	3.78%
Annual interest rate, basis	LIBOR
Interest rate pre completion [member] | 14 years export credit agencies loan [member]
Disclosure of detailed information about borrowings [line items]
Annual interest rate, adjustment to basis	3.65%
Annual interest rate, basis	LIBOR
Interest rate pre completion [member] | 13 years export credit agencies loan [member]
Disclosure of detailed information about borrowings [line items]
Annual interest rate	2.30%
Interest rate pre completion [member] | MIGA Insured Loan [member]
Disclosure of detailed information about borrowings [line items]
Annual interest rate, adjustment to basis	2.65%
Annual interest rate, basis	LIBOR
Interest rate pre completion [member] | Commercial Banks B Loan [member]
Disclosure of detailed information about borrowings [line items]
Annual interest rate, adjustment to basis	3.40%
Annual interest rate, basis	LIBOR
Borrowings maturity	15-year loan at A Loan rate
Interest rate post completion [member] | International Financial Institutions A Loan [member]
Disclosure of detailed information about borrowings [line items]
Annual interest rate, adjustment to basis	4.78%
Annual interest rate, basis	LIBOR
Interest rate post completion [member] | 14 years export credit agencies loan [member]
Disclosure of detailed information about borrowings [line items]
Annual interest rate, adjustment to basis	4.65%
Annual interest rate, basis	LIBOR
Interest rate post completion [member] | 13 years export credit agencies loan [member]
Disclosure of detailed information about borrowings [line items]
Annual interest rate	2.30%
Interest rate post completion [member] | MIGA Insured Loan [member]
Disclosure of detailed information about borrowings [line items]
Annual interest rate, adjustment to basis	3.65%
Annual interest rate, basis	LIBOR
Interest rate post completion [member] | Commercial Banks B Loan [member]
Disclosure of detailed information about borrowings [line items]
Carrying Value	$ 50,000
Annual interest rate, adjustment to basis	4.40%
Annual interest rate, basis	LIBOR
At fair value [member]
Disclosure of detailed information about borrowings [line items]
Fair Value	$ 4,438,146
At fair value [member] | International Financial Institutions A Loan [member]
Disclosure of detailed information about borrowings [line items]
Fair Value	820,958
At fair value [member] | 14 years export credit agencies loan [member]
Disclosure of detailed information about borrowings [line items]
Fair Value	921,116
At fair value [member] | 13 years export credit agencies loan [member]
Disclosure of detailed information about borrowings [line items]
Fair Value	311,637
At fair value [member] | MIGA Insured Loan [member]
Disclosure of detailed information about borrowings [line items]
Fair Value	711,980
At fair value [member] | Commercial Banks B Loan [member]
Disclosure of detailed information about borrowings [line items]
Fair Value	$ 1,672,455

XML

Borrowings and Other Financial Liabilities - Detailed Information about Project Finance Facility (Parenthetical) (Detail) $ in Millions	12 Months Ended
	Dec. 31, 2021 USD ($)
Oyu Tolgoi [member]
Disclosure of detailed information about borrowings [line items]
Aggregate initial fair value of borrowings less transaction costs	$ 4,348.9
Amortized transaction costs	$ 124.8
Borrowing facility, interest-only payments period	5 years
MIGA Insured Loan [member]
Disclosure of detailed information about borrowings [line items]
Annual insurance premium	1.40%

XML

Borrowings and other financial liabilities - Summary of Maturity Principal Repayments of Borrowings (Detail) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Maturity analysis - Project Finance facility
Borrowings	$ 4,282,140	$ 4,325,629
Less than one year [member]
Maturity analysis - Project Finance facility
Borrowings	403,483	43,489
1 to 5 years [member]
Maturity analysis - Project Finance facility
Borrowings	2,610,445	2,418,861
More than 5 years [member]
Maturity analysis - Project Finance facility
Borrowings	$ 1,268,212	$ 1,863,279

XML

Borrowings and other financial liabilities - Schedule Of Lease Liabilities (Detail) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Disclosure of detailed information about borrowings [line items]
Total undiscounted lease liabilities	$ 31,785	$ 20,957
Lease liabilities included in the Consolidated balance sheet	25,435	16,868
Current	9,860	721
Non-Current	15,575	16,147
Less than one year [member]
Disclosure of detailed information about borrowings [line items]
Total undiscounted lease liabilities	10,727	1,121
One to five years [Member]
Disclosure of detailed information about borrowings [line items]
Total undiscounted lease liabilities	20,752	19,631
More than 5 years [member]
Disclosure of detailed information about borrowings [line items]
Total undiscounted lease liabilities	$ 306	$ 205

XML

Income Taxes - Summary of Components of Tax Expenses and Benefit (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Major components of tax expense (income) [abstract]
Current	$ 232	$ 7,694
Deferred
Temporary differences including tax losses	277,843	(346,627)
Withholding taxes	33,717	32,537
Deferred tax expense (income)	311,560	(314,090)
Net income statement expense (benefit) for income taxes	$ 311,792	$ (306,396)

XML

Income Taxes - Summary of Components of Tax Expenses and Benefit (Parenthetical) (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Disclosure representing major components of tax expense income [line items]
Withholding tax cash payment for interest and other taxes	$ 200	$ 28,300
Deferred tax assets	602,862,000	880,705,000
Mongolia [member]
Disclosure representing major components of tax expense income [line items]
Deferred tax assets relating to tax losses that expire if not recovered against taxable profits	150,700,000
Deferred tax assets	561,900,000	841,300,000
Deferred tax assets relating to accrued but unpaid interest expense and other temporary differences	$ 411,200,000	$ 452,000,000.0

XML

Income Taxes - Summary of Prior Period Withholding Tax Obligations (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Major components of tax expense (income) [abstract]
Income (loss) from operations before taxes	$ 992,912	$ 188,246
Tax at Canadian combined federal and provincial income tax rate (2021: 26.5%; 2020: 26.5%)	263,122	49,885
Change in amount of deferred tax recognized	151,117	(276,945)
Difference in tax rates and treatment in foreign jurisdictions	(140,903)	(116,208)
Withholding taxes	33,717	32,537
Non deductible losses and expense	4,739	4,335
Net income statement expense (benefit) for income taxes	$ 311,792	$ (306,396)

XML

Income Taxes - Summary of Prior Period Withholding Tax Obligations (Parenthetical) (Detail)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Major components of tax expense (income) [abstract]
Canadian federal and provincial income tax rate	26.50%	26.50%

XML

Income Taxes - Summary of Deferred Tax Assets and Liabilities (Detail) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Deferred tax assets
Non-capital losses	$ 190,203	$ 427,695
Capital losses	0	0
Other temporary differences including accrued interest	412,659	453,010
Deferred tax assets	602,862	880,705
Deferred tax liabilities
Withholding tax	(145,434)	(111,717)
Deferred tax liabilities	(145,434)	(111,717)
Unrecognized deferred tax assets
Non-capital losses	152,853	281,643
Capital losses	117,517	117,945
Other temporary differences including accrued interest	319,227	63,471
Unrecognized deferred tax assets	589,597	463,059
Unrecognized deferred tax liabilities
Withholding tax	0	0
Unrecognized deferred tax liabilities	$ 0	$ 0

XML

Income Taxes - Summary of Deferred Tax Assets and Liabilities (Parenthetical) (Detail) - USD ($) $ in Millions	Dec. 31, 2021	Dec. 31, 2020
Deferred tax assets and liabilities [abstract]
Unremitted earnings	$ 1,188	$ 606

XML

Income Taxes - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Disclosure representing major components of tax expense income [line items]
Investment tax credits	$ 812,100,000	$ 812,100,000
Deferred tax	311,560,000	(314,090,000)
Deferred tax assets	602,862,000	880,705,000
Mongolia [member]
Disclosure representing major components of tax expense income [line items]
Increase decrease in deferred tax liability asset	279,400,000	347,300,000
Deferred tax assets	561,900,000	841,300,000
Deferred tax assets relating to accrued but unpaid interest expense and other temporary differences	411,200,000	452,000,000.0
Deferred tax assets relating to tax losses that expire if not recovered against taxable profits		389,300,000
Mongolia [member] | Additional operating losses and accrued but unpaid interest [member]
Disclosure representing major components of tax expense income [line items]
Increase decrease in deferred tax liability asset	28,900,000	76,600,000
Mongolia [member] | Temporary differences fixed assets [member]
Disclosure representing major components of tax expense income [line items]
Increase decrease in deferred tax liability asset	308,300,000	270,700,000
Canada [member]
Disclosure representing major components of tax expense income [line items]
Deferred tax assets	41,000,000.0	39,400,000
Canada [member] | Non Capital Losses
Disclosure representing major components of tax expense income [line items]
Deferred tax assets	39,500,000	38,400,000
Canada [member] | Other temporary differences
Disclosure representing major components of tax expense income [line items]
Deferred tax assets relating to accrued but unpaid interest expense and other temporary differences	1,500,000	$ 1,000,000.0
Investment tax credits [member]
Disclosure representing major components of tax expense income [line items]
Deferred tax	$ 0

XML

Decommissioning Obligations - Detailed Information about Decommissioning Obligations (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Disclosure of decommissioning liabilities [abstract]
Opening carrying amount	$ 133,964	$ 104,238
Changes in estimates	13,888	26,529
Accretion of present value discount	5,810	3,197
Closing carrying amount	$ 153,662	$ 133,964

XML

Decommissioning Obligations - Additional Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Disclosure Of Decommissioning Liabilities [line items]
Estimated future cash expenditures	$ 349.7	$ 227.8
Discount rate used in net present value of expected future cash flows	1.50%	1.50%
Oyu Tolgoi [member]
Disclosure Of Decommissioning Liabilities [line items]
Anticipated closure date	2101

XML

Share Capital - Additional Information (Detail) - shares	Oct. 23, 2020	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Disclosure of classes of share capital [line items]
Description of the reverse stock split arrangement	ratio of one post-consolidation share for every ten pre-consolidation shares
Number of shares issued			201,231,446	2,012,314,469
Number of shares outstanding			201,231,446	2,012,314,469
Common Shares [member]
Disclosure of classes of share capital [line items]
Number of shares issued		201,231,446	201,231,446
Number of shares outstanding		201,231,446	201,231,446
Preferred Shares [member]
Disclosure of classes of share capital [line items]
Number of shares issued		0	0
Number of shares outstanding		0	0

XML

Non-controlling Interests - Summary of Non-controlling Interests in Subsidiaries (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Disclosure of subsidiaries [line items]
Beginning balance	$ (1,148,820)
Non-controlling interest's share of income	156,230	$ 88,354
Ending balance	(992,590)	(1,148,820)
Oyu Tolgoi [member]
Disclosure of subsidiaries [line items]
Beginning balance	(1,148,820)	(1,237,174)
Non-controlling interest's share of income	156,230	88,354
Common share investments funded on behalf of non-controlling interest	20,400	137,700
Funded amounts repayable to the Company	(20,400)	(137,700)
Ending balance	$ (992,590)	$ (1,148,820)

XML

Non-controlling Interests - Summary of Non-controlling Interests in Subsidiaries (Parenthetical) (Detail)	12 Months Ended
	Dec. 31, 2021
Oyu Tolgoi [member]
Disclosure of subsidiaries [line items]
Interest on investments in subsidiary on behalf of noncontrolling interest, adjustment to LIBOR interest rate basis	6.50%

XML

Non-controlling Interests - Additional Information (Detail) - Oyu Tolgoi [member] - USD ($) $ in Millions	Dec. 31, 2021	Dec. 31, 2020
Disclosure of subsidiaries [line items]
Investments in subsidiary on behalf of noncontrolling interest	$ 1,398.9	$ 1,378.4
Accrued interest on Investments in subsidiary on behalf of noncontrolling interest	$ 953.4	$ 804.4

XML

Cash Flow Information - Reconciliation of Net Income (Loss) to Net Cash Flow Generated from Operating Activities and Other Non-Cash Transactions (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Disclosure of supplementary cash flow information [abstract]
Income (loss) for the year	$ 681,120	$ 494,642
Adjustments for:
Depreciation and amortization	165,366	181,260
Finance items:
Interest income	(2,998)	(17,349)
Interest and accretion expense	8,036	5,510
Unrealized foreign exchange (gain) loss	2,228	(4,297)
Inventory write down reversals	(3,465)	(2,703)
Write off of property, plant and equipment	87	282
Realized and unrealized losses on commodity put options	29,797
Income and other taxes	311,792	(306,396)
Other items	258	2,403
(Increase) decrease in:
Inventories	(109,212)	(26,534)
Trade, other receivables and prepaid expenses	52,148	(43,456)
(Decrease) increase in:
Trade and other payables	29,554	12,414
Deferred revenue	46,079	75,393
Cash generated from operating activities before interest and tax	$ 1,210,790	$ 371,169

XML

Cash Flow Information - Supplementary Information Regarding Other Non-Cash Transactions (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Investing activities
Change in accounts payable and accrued liabilities related to purchase of property, plant and equipment	$ (40,022)	$ (79,879)
Additions to property, plant and equipment - leased assets	$ 13,945

XML

Earnings Per Share - Additional Information (Detail) - shares	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Earnings per share [abstract]
Potentially dilutive shares excluded from the earnings per share calculation	0	0

XML

Related Parties - Additional Information (Detail)	Dec. 31, 2021	Dec. 31, 2020
Rio Tinto [member]
Disclosure of transactions between related parties [line items]
Ownership interest held by ultimate parent	50.80%	50.80%

XML

Related Parties - Disclosure of Related Party Transactions by Financial Statement Line Item (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Income statements [abstract]
Finance costs	$ (8,036)	$ (5,510)
Cash generated from operating activities
Interest received	2,735	20,407
Interest paid	(276,392)	(316,778)
Cash flows from investing activities
Receivable from related party: amounts withdrawn	0	511,284
Balance Sheets
Trade and other receivables	39	852
Trade and other payables	(54,153)	(65,552)
Rio Tinto [member]
Income statements [abstract]
Cost recoveries - Turquoise Hill	1,151	2,803
Management services payment	(29,706)	(28,305)
Cost recoveries - Rio Tinto	(66,362)	(38,213)
Cash and cash equivalents		2,329
Receivable from Rio Tinto		2,123
Income (loss) from transactions with related party	(204,232)	(169,317)
Cash generated from operating activities
Interest received		9,848
Interest paid	(107,896)	(107,948)
Cash flows from investing activities
Receivable from related party: amounts withdrawn		511,284
Expenditures on property, plant and equipment:
Management services payment and cost recoveries - Rio Tinto	(37,302)	75,470
Balance Sheets
Trade and other receivables	39	852
Prepaid expenses and other assets	81,725	83,144
Total	27,611	18,444
Rio Tinto [member] | Completion Support Fee [member]
Income statements [abstract]
Finance costs	(109,315)	(110,054)
Rio Tinto [member] | Management Services [member]
Balance Sheets
Trade and other payables	(14,584)	(13,137)
Rio Tinto [member] | Cost recoveries [member]
Balance Sheets
Trade and other payables	$ (39,569)	$ (52,415)

XML

Related Parties - Disclosure of Related Party Transactions by Financial Statement Line Item (Parenthetical) (Detail) - USD ($) $ in Thousands		12 Months Ended
	May 18, 2015	Dec. 31, 2021	Dec. 31, 2020
Disclosure of transactions between related parties [line items]
Management services as payment percentage applied to underground development capital costs	1.50%
Management services as payment percentage applied to operating costs and capital related to current operations	3.00%
Wholly Owned Subsidiaries of Rio Tinto [member]
Disclosure of transactions between related parties [line items]
Cash equivalents		$ 0	$ 0
Fee payable equal to amount drawn under facility percentage		2.50%
Annual completion support fee percentage		2.50%
Wholly Owned Subsidiaries of Rio Tinto [member] | 9539549 Canada Inc [member]
Disclosure of transactions between related parties [line items]
Interest rate adjustment to basis		2.45%
Interest rate basis		LIBOR
Wholly Owned Subsidiaries of Rio Tinto [member] | 9539549 Canada Inc [member] | Interest receivable [member]
Disclosure of transactions between related parties [line items]
Interest rate adjustment to basis		0.05%
Wholly Owned Subsidiaries of Rio Tinto [member] | 9539549 Canada Inc [member] | Cash management services agreement [member]
Disclosure of transactions between related parties [line items]
Interest rate adjustment to basis		2.50%

XML

Commitments and Contingencies - Additional Information (Detail) - USD ($) $ in Thousands			1 Months Ended
	Dec. 23, 2020	Jan. 16, 2018	Feb. 28, 2021	Dec. 31, 2021
Disclosure of commitments and contingencies [line items]
Capital commitments				$ 26,000
Power purchase commitments				62,800
Power Source Framework Agreement [Member]
Disclosure of commitments and contingencies [line items]
Capital commitments				$ 0
Oyu Tolgoi [member]
Disclosure of commitments and contingencies [line items]
Adjustment to carry forward tax losses	$ 1,400,000
Oyu Tolgoi [member] | Tax assessment [member]
Disclosure of commitments and contingencies [line items]
Tax assessment amount			$ 126,000
Settlement of unpaid taxes, fines and penalties for accepted items		$ 4,800
Oyu Tolgoi [member] | Tax assessment [member] | 2013 through 2015 [member]
Disclosure of commitments and contingencies [line items]
Tax assessment amount		$ 155,000
Oyu Tolgoi [member] | Tax assessment [member] | 2016 through 2018 [member]
Disclosure of commitments and contingencies [line items]
Tax assessment amount	$ 228,000
Oyu Tolgoi [member] | Tax assessment [member] | 2016 through 2018 [member] | Capital city tax department [member]
Disclosure of commitments and contingencies [line items]
Tax assessment amount			$ 228,000

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Financial Instruments and Fair Value Measurements - Summary of Financial Instruments and Fair Value Measurements (Detail) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Disclosure of fair value measurements of assets and liabilities [line items]
Assets	$ 14,124,689	$ 13,368,761
Recurring fair value measurement [member]
Disclosure of fair value measurements of assets and liabilities [line items]
Assets	216,320	724,380
Recurring fair value measurement [member] | Level 1 of fair value hierarchy [member]
Disclosure of fair value measurements of assets and liabilities [line items]
Assets	202,566	673,921
Recurring fair value measurement [member] | Level 2 of fair value hierarchy [member]
Disclosure of fair value measurements of assets and liabilities [line items]
Assets	13,754	50,459
Recurring fair value measurement [member] | Money market funds [member]
Disclosure of fair value measurements of assets and liabilities [line items]
Assets	193,243	667,542
Recurring fair value measurement [member] | Money market funds [member] | Level 1 of fair value hierarchy [member]
Disclosure of fair value measurements of assets and liabilities [line items]
Assets	193,243	667,542
Recurring fair value measurement [member] | Marketable Securities [member]
Disclosure of fair value measurements of assets and liabilities [line items]
Assets	9,323	6,379
Recurring fair value measurement [member] | Marketable Securities [member] | Level 1 of fair value hierarchy [member]
Disclosure of fair value measurements of assets and liabilities [line items]
Assets	9,323	6,379
Recurring fair value measurement [member] | Trade receivables [member]
Disclosure of fair value measurements of assets and liabilities [line items]
Assets	13,645	50,459
Recurring fair value measurement [member] | Trade receivables [member] | Level 2 of fair value hierarchy [member]
Disclosure of fair value measurements of assets and liabilities [line items]
Assets	13,645	$ 50,459
Recurring fair value measurement [member] | Commodity put options [Member]
Disclosure of fair value measurements of assets and liabilities [line items]
Assets	109
Recurring fair value measurement [member] | Commodity put options [Member] | Level 2 of fair value hierarchy [member]
Disclosure of fair value measurements of assets and liabilities [line items]
Assets	$ 109

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Financial Instruments and Fair Value Measurements - Summary of Financial Instruments and Fair Value Measurements (Parenthetical) (Detail) $ in Millions	12 Months Ended
	Dec. 31, 2021 USD ($)
Disclosure of fair value measurements of assets and liabilities [line items]
Commodity put options realized loss	$ 23.9
Commodity put options unrealized loss	5.9
Commodity Out Options [Member] | Level 2 of fair value hierarchy [member]
Disclosure of fair value measurements of assets and liabilities [line items]
Commodity Put Options Current	$ 0.1

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Financial Instruments and Fair Value Measurements - Summary of Contractual Maturities of Financial Liabilities (Detail) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Disclosure of maturity analysis for non-derivative financial liabilities [line items]
Trade and other payables	$ 384,488	$ 390,059
Expected lease liability	31,785	20,957
Borrowings	4,997,289	5,188,880
Total	5,413,562	5,599,896
Gross carrying amount [member]
Disclosure of maturity analysis for non-derivative financial liabilities [line items]
Trade and other payables	384,488	390,059
Expected lease liability	25,435	16,868
Borrowings	4,157,344	4,184,911
Total	4,567,267	4,591,838
Not later than one year [member]
Disclosure of maturity analysis for non-derivative financial liabilities [line items]
Trade and other payables	384,488	390,059
Expected lease liability	10,727	1,121
Borrowings	564,742	204,035
Total	959,957	595,215
Later than one year [member] | Later than four years and not later than five years [member]
Disclosure of maturity analysis for non-derivative financial liabilities [line items]
Trade and other payables	0	0
Expected lease liability	20,752	19,631
Borrowings	3,059,498	2,935,929
Total	3,080,250	2,955,560
Later than five years [member]
Disclosure of maturity analysis for non-derivative financial liabilities [line items]
Trade and other payables	0	0
Expected lease liability	306	205
Borrowings	1,373,049	2,048,916
Total	$ 1,373,355	$ 2,049,121

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Financial Instruments and Fair Value Measurements - Additional Information (Detail) $ in Millions	12 Months Ended
	Dec. 31, 2021 USD ($) T	Dec. 31, 2020 USD ($) T
Foreign exchange risk [member] | Mongolian Tugrik [member]
Disclosure of fair value measurement of assets [line items]
Foreign exchange gain (loss)	$ 20.4	$ 19.2
Interest rate risk [member] | London Interbank Offered Rate (LIBOR) [member]
Disclosure of fair value measurement of assets [line items]
Calculated change in net earnings due to 100 basis point increase in LIBOR interest rates	$ 41.5	$ 40.7
Commodity price risk [member]
Disclosure of fair value measurement of assets [line items]
Copper in concentrate, sales | T	21,800	29,400

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Key Management Compensation - Schedule of Key Management Compensation (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Disclosure of key management personnel compensation [abstract]
Salaries, director fees and other short term benefits	$ 6,776	$ 3,186
Post-employment benefits	193	293
Share based payment	1,412	1,628
Total	$ 8,381	$ 5,107

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Subsequent Events - Additional Information (Details) - USD ($) $ in Millions	Jan. 26, 2022	Jan. 25, 2022	Aug. 31, 2022	Jan. 24, 2022	Jan. 22, 2022
Government of Mongolia [Member]
Disclosure of non-adjusting events after reporting period [line items]
Loan waived		$ 2,363
Investments accounted for using equity method		1,399
Interest accrued		$ 964
Amended and Restated Heads of Agreement | Parent [member]
Disclosure of non-adjusting events after reporting period [line items]
Line of credit facility maximum borrowing capacity			$ 650		$ 1,700
Senior Supplemental Debt [Member] | Amended and Restated Heads of Agreement | Parent [member]
Disclosure of non-adjusting events after reporting period [line items]
Line of credit facility maximum borrowing capacity					500
Senior Supplemental Debt Co Lending Facility [Member] | Amended and Restated Heads of Agreement | Parent [member]
Disclosure of non-adjusting events after reporting period [line items]
Line of credit facility maximum borrowing capacity					$ 750
Short term Secured [Member] | Amended and Restated Heads of Agreement | Parent [member]
Disclosure of non-adjusting events after reporting period [line items]
Line of credit facility maximum borrowing capacity				$ 300
ShortTerm Secured Colending Facility [Member] | Amended and Restated Heads of Agreement | Parent [member]
Disclosure of non-adjusting events after reporting period [line items]
Line of credit facility maximum borrowing capacity				$ 750
Equity Offering [Member] | Amended and Restated Heads of Agreement | Parent [member]
Disclosure of non-adjusting events after reporting period [line items]
Line of credit facility maximum borrowing capacity			$ 1,500
Nonadjusting Events After Reporting Period [Member]
Disclosure of non-adjusting events after reporting period [line items]
Electricity supply agreement extension period	3 years
Electricity supply agreement end year	2026
Electricity supply agreement original expiration month year	2023-07