SailingStone Capital Partners Writes Open Letter to Turquoise Hill Board Commending Them on Initial Steps to Improve Corporate Governance at Oyu Tolgoi

SailingStone Capital Partners (“SailingStone”), a large, long-time owner of Turquoise Hill Resources Ltd. (“Turquoise Hill,” “TRQ” or the “Company”) (TSX:TRQ) (NYSE:TRQ), has written the attached letter to the Turquoise Hill Board of Directors:

Dear Members of the Board of Turquoise Hill Resources Ltd.,

As a large, long-time shareholder of Turquoise Hill, SailingStone Capital Partners would like to commend Turquoise Hill and the Government of Mongolia (the “Government”) for the recent collective efforts to increase transparency, improve alignment, and reduce uncertainty related to the development and financing of Oyu Tolgoi’s (“OT”) immense underground copper and gold reserves. It is in the interest of all stakeholders to bring this world-class mine into production as safely and expeditiously as possible.

Trust, proper corporate governance, and a clear understanding of roles and responsibilities sit at the core of any partnership. Since there appears to be some confusion about the relationship between TRQ, the Government of Mongolia and Rio Tinto (“Rio”), please indulge our effort to set the record straight. Turquoise Hill owns 66% of Oyu Tolgoi, with the remaining 34% held by the Government of Mongolia. Turquoise Hill has agreed to fund the Government’s equity stake and pro-rata share of development capital which is to be repaid from future cash flows once the underground mine is commissioned. Rio Tinto has been hired to operate and develop the mine. In addition, Rio has provided completion guarantees as a means to facilitate a project finance facility which efficiently allocates risk based on capabilities. Sovereign risk is absorbed by the international lending syndicate while Rio Tinto, a self-proclaimed “leading global mining group,” accepts the risk of mine development. To be clear, Rio is compensated for their completion guarantee in the form of incremental support fees above and beyond the $850 million in cost recoveries and management services payments received since 2011. Rio Tinto is also the majority shareholder of Turquoise Hill, having paid approximately $6.3 billion for its 51% ownership stake.

Over the last decade, Rio has received more than $1.5 billion in compensation for its work at Oyu Tolgoi and related financings. While that sum may seem de minimis for a global mining conglomerate, it is important to note that ex-iron ore and Oyu Tolgoi, Rio has generated approximately $15 billion in negative free cash flow over the same time frame. ¹ Turquoise Hill, meanwhile, has invested just over $10 billion into the project², while OT paid the Government approximately $2.6 billion in taxes and royalties between 2010 and 2019, directly employs almost 8,200 Mongolian nationals and worked with more than 560 Mongolian businesses in 2019.³ By some estimates, Oyu Tolgoi will represent more than 30% of Mongolian GDP when the underground is at full capacity and clearly is the most important proxy for foreign direct investment into Mongolia.