6-K

TURQUOISE HILL RESOURCES LTD.

Date: August 4, 2022

/s/ Dustin S. Isaacs

Dustin S. Isaacs

Corporate Secretary

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

August 4, 2022

Commission File Number: 001-32403

TURQUOISE HILL RESOURCES LTD.

(Translation of Registrant’s Name into English)

Suite 3680 – 1 PLACE VILLE MARIE, MONTREAL, QUEBEC, CANADA H3B 3P2

(Address of Principal Executive Office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.


Form 20-F-		Form 40-F- X

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

EXHIBIT INDEX

99.1 30 June 2022 Quarterly Financial Statements and Notes

99.2 Management’s Discussion and Analysis

99.3 CEO and CFO certification

EX-99.1

Exhibit 99.1

LOGO

Turquoise Hill Resources Ltd.

Condensed Interim Consolidated Financial Statements

June 30, 2022

(Unaudited)

TURQUOISE HILL RESOURCES LTD.

Consolidated Statements of Income

(Stated in thousands of U.S. dollars, except share and per share amounts)

(Unaudited)


			Three Months Ended June 30,						Six Months Ended June 30,
	Note		2022			2021			2022			2021
						Restated - Note 2 (c)(i)						Restated - Note 2 (c)(i)

Revenue		4	$	402,037		$	329,800		$	804,688		$	856,346
Cost of sales		5		(219,416	)		(85,511	)		(394,427	)		(241,155	)
Gross margin				182,621			244,289			410,261			615,191

Operating expenses		6		(58,407	)		(73,276	)		(123,413	)		(129,764	)
Corporate administration expenses				(13,376	)		(8,525	)		(28,996	)		(21,568	)
Other expenses		19		(24,445	)		(14,610	)		(22,769	)		(27,787	)
Income before finance items and taxes				86,393			147,878			235,083			436,072

Finance items
Finance income		7		1,165			607			1,887			1,897
Finance costs		7		(4,017	)		(1,596	)		(6,748	)		(3,231	)
				(2,852	)		(989	)		(4,861	)		(1,334	)
Income from operations before taxes				83,541			146,889			230,222			434,738

Income and other taxes		13		9,801			(19,047	)		257,420			25,253
Income for the period			$	93,342		$	127,842		$	487,642		$	459,991

Attributable to owners of Turquoise Hill Resources Ltd.			$	82,646		$	102,859		$	357,864		$	339,574
Attributable to owner of non-controlling interest				10,696			24,983			129,778			120,417
Income for the period			$	93,342		$	127,842		$	487,642		$	459,991

Basic and diluted earnings per share attributable to owners of Turquoise Hill Resources Ltd.			$	0.41		$	0.51		$	1.78		$	1.69

Basic weighted average number of shares outstanding (000’s)				201,231			201,231			201,231			201,231

The accompanying notes are an integral part of these consolidated financial statements.

TURQUOISE HILL RESOURCES LTD.

Consolidated Statements of Comprehensive Income

(Stated in thousands of U.S. dollars)

(Unaudited)


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2022			2021		2022		2021
				Restated -				Restated -
				Note 2 (c)(i)				Note 2 (c)(i)
Income for the period	$	93,342		$	127,842	$	487,642	$	459,991

Other comprehensive income:
Items that will not be reclassified to income:
Changes in the fair value of marketable securities at FVOCI		(3,595	)		2,631		162		4,887
Other comprehensive income for the period (a)	$	(3,595	)	$	2,631	$	162	$	4,887

Total comprehensive income for the period	$	89,747		$	130,473	$	487,804	$	464,878

Attributable to owners of Turquoise Hill		79,051			105,490		358,026		344,461
Attributable to owner of non-controlling interest		10,696			24,983		129,778		120,417
Total comprehensive income for the period	$	89,747		$	130,473	$	487,804	$	464,878

(a) No tax charges and no credits arose on items recognized as other comprehensive income or loss in 2022 (2021: nil).

The accompanying notes are an integral part of these consolidated financial statements.

TURQUOISE HILL RESOURCES LTD.

Consolidated Statements of Cash Flows

(Stated in thousands of U.S. dollars)

(Unaudited)


			Three Months Ended						Six Months Ended
			June 30,						June 30,
	Note		2022			2021			2022			2021
						Restated -						Restated -
						Note 2 (c)(i)						Note 2 (c)(i)
Cash generated from operating activities before interest and tax		16	$	315,376		$	304,767		$	438,010		$	553,003

Interest received				920			678			1,469			1,853
Interest paid				(84,771	)		(84,511	)		(85,580	)		(111,022	)
Income and other taxes paid		18		(2,461	)		(2,525	)		(2,477	)		(358,648	)
Net cash generated from operating activities			$	229,064		$	218,409		$	351,422		$	85,186

Cash flows from investing activities
Expenditures on property, plant and equipment			$	(260,941	)	$	(227,356	)	$	(490,807	)	$	(477,643	)
Purchase of commodity put options				-			-			-			(29,907	)
Proceeds from pre-production revenues				-			-			-			-
Other investing cash flows				(1	)		62			(1	)		62
Cash used in investing activities			$	(260,942	)	$	(227,294	)	$	(490,808	)	$	(507,488	)

Cash flows from financing activities
Repayment of project finance facility			$	(41,826	)	$	(21,744	)	$	(41,826	)	$	(21,744	)
Proceeds from bank overdraft facility				-			-			-			8,500
Repayment of bank overdraft facility				-			(8,500	)		-			(8,500	)
Payment of lease liability				(2,740	)		(166	)		(5,152	)		(295	)
Cash used in financing activities			$	(44,566	)	$	(30,410	)	$	(46,978	)	$	(22,039	)

Effects of exchange rates on cash and cash equivalents				(116	)		(165	)		470			(207	)
Net decrease in cash and cash equivalents			$	(76,560	)	$	(39,460	)	$	(185,894	)	$	(444,548	)

Cash and cash equivalents - beginning of period			$	584,962		$	718,533		$	694,296		$	1,123,621
Cash and cash equivalents - end of period			$	508,402		$	679,073		$	508,402		$	679,073

The accompanying notes are an integral part of these consolidated financial statements.

TURQUOISE HILL RESOURCES LTD.

Consolidated Balance Sheets

(Stated in thousands of U.S. dollars)

(Unaudited)


	Note		June 30, 2022			December 31, 2021
						Restated - Note 2 (c)(i)

Current assets
Cash and cash equivalents		8	$	508,402		$	694,296
Inventories		9		293,298			290,017
Trade and other receivables				12,853			16,119
Prepaid expenses and other assets				86,524			120,715
				901,077			1,121,147

Non-current assets
Property, plant and equipment		10		12,630,001			12,049,958
Inventories		9		47,517			60,711
Prepaid expenses and other assets		18		315,192			348,671
Deferred income tax assets		13		879,557			602,862
Other financial assets				17,341			16,818
				13,889,608			13,079,020
Total assets			$	14,790,685		$	14,200,167

Current liabilities
Borrowings and other financial liabilities		11	$	713,424		$	397,421
Trade and other payables		12		467,131			384,488
Deferred revenue				172,231			149,368
				1,352,786			931,277

Non-current liabilities
Borrowings and other financial liabilities		11		3,429,669			3,785,358
Deferred income tax liabilities		13		164,585			145,434
Decommissioning obligations		14		171,404			153,662
				3,765,658			4,084,454
Total liabilities			$	5,118,444		$	5,015,731

Equity
Share capital			$	11,432,122		$	11,432,122
Contributed surplus				1,555,774			1,555,774
Accumulated other comprehensive income				4,525			4,363
Deficit				(3,881,793	)		(2,840,896	)
Equity attributable to owners of Turquoise Hill				9,110,628			10,151,363
Attributable to non-controlling interest		15		561,613			(966,927	)
Total equity			$	9,672,241		$	9,184,436
Total liabilities and equity			$	14,790,685		$	14,200,167

The accompanying notes are an integral part of these consolidated financial statements.

The financial statements were approved by the directors on August 4, 2022 and signed on their behalf by:


/s/ P. Gillin		/s/ R. Robertson
P. Gillin, Director		R. Robertson, Director

TURQUOISE HILL RESOURCES LTD.

Consolidated Statements of Equity

(Stated in thousands of U.S. dollars)

(Unaudited)


Six Months Ended June 30, 2022			Attributable to owners of Turquoise Hill
	Share capital		Contributed surplus			Accumulated other comprehensive income		Deficit			Total			Non-controlling Interest (Note 15)			Total equity

Opening balance	$	11,432,122	$	1,555,774		$	4,363	$	(2,840,895	)	$	10,151,364		$	(966,927	)	$	9,184,437
Income for the period		-		-			-		357,864			357,864			129,778			487,642
Other comprehensive income for the period		-		-			162		-			162			-			162
Waiver of non-recourse loans (Note 15)		-		-			-		(1,398,762	)		(1,398,762	)		1,398,762			-
Closing balance	$	11,432,122	$	1,555,774		$	4,525	$	(3,881,793	)	$	9,110,628		$	561,613		$	9,672,241

Six Months Ended June 30, 2021			Attributable to owners of Turquoise Hill
	Share capital		Contributed surplus			Accumulated other comprehensive income		Deficit			Total			Non-controlling Interest (Note 15)			Total equity

Opening balance	$	11,432,122	$	1,558,834		$	1,418	$	(3,415,601	)	$	9,576,773		$	(1,148,820	)	$	8,427,953
Impacts of change in accounting policy Note 2(c)(i)		-		-			-		13,630			13,630			7,022			20,652
Opening balance (Restated)	$	11,432,122	$	1,558,834		$	1,418	$	(3,401,971	)	$	9,590,403		$	(1,141,798	)	$	8,448,605
Income for the period (Restated Note 2(c)(i))		-		-			-		339,574			339,574			120,417			459,991
Other comprehensive income for the period		-		-			4,887		-			4,887			-			4,887
Employee share plans		-		(53	)		-		-			(53	)		-			(53	)
Closing balance (Restated)	$	11,432,122	$	1,558,781		$	6,305	$	(3,062,397	)	$	9,934,811		$	(1,021,381	)	$	8,913,430

The accompanying notes are an integral part of these consolidated financial statements.

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

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 June 30, 2022. On March 13, 2022 Turquoise Hill received an unsolicited non-binding proposal from Rio Tinto to acquire the approximately 49.2 per cent of the outstanding shares of Turquoise Hill held by its minority shareholders (“The Proposal”). Turquoise Hill’s board of directors has formed a Special Committee of independent directors to review and consider The Proposal.

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 condensed interim consolidated financial statements of Turquoise Hill were authorized for issue in accordance with a directors’ resolution on August 4, 2022.

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due.

As at June 30, 2022, the Company had $0.5 billion of available liquidity, consisting of consolidated cash and cash equivalents. The Company’s current liabilities exceeded current assets by $451.7 million at June 30, 2022. In addition to obligations in current liabilities, in the next 12 months, the Company has non-cancellable obligations related to power commitments of $64.0 million. 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 operations, the Company plans to access sources of funding that form part of the Second Amended and Restated Heads of Agreement (“Funding HOA”) that was signed between the Company and Rio Tinto on May 18, 2022.

The Funding HOA amends the comprehensive funding arrangement, signed between the Company and Rio Tinto on January 25, 2022 to among other things, provide a plan to address the Company’s near-term estimated funding requirements. The Funding HOA provides the Company with access to an immediately available early short-term secured advance of up to $400 million. Under the agreement, the Company expects to complete an initial equity offering of at least $650 million before December 31, 2022. The $400 million early short-term secured advance is then expected to be repaid from the proceeds of this equity offering. The Company then expects to draw on a further $300 million short-term secured advance provided for in the Funding HOA. The Company also expects to complete a re-profiling of $723.3 million in principal repayments, which are currently scheduled for repayment in December 2022 and June 2023 under its existing project finance borrowings and which are reported in current liabilities at June 30, 2022.

The timing of sustainable production is trending earlier in the first half of 2023. On achievement of sustainable production the Company expects to access the other sources of funding available under the Funding HOA, first by accessing either the remaining $450 million available from a co-lending by a member of the Rio Tinto Group to Oyu Tolgoi LLC (“Oyu Tolgoi”) or additional senior supplemental debt of up to $500 million. 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.

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

1.	Nature of operations and liquidity risk (continued)

The Company’s short-term cash flow forecasts reflect a lessening of the impact of the COVID-19 pandemic. During the three months ended June 30, 2022, COVID-19 cases identified at Oyu Tolgoi have continued at low levels. Following the recent relaxation of COVID-19 government-initiated restrictions in Mongolia, OT LLC has progressively restarted work on underground project facilities with workforce numbers approaching full capacity and onsite concentrate inventory levels have returned to target levels. The Force Majeure declared by Oyu Tolgoi LLC to project lenders in March 2020 and the Force Majeure declared by Oyu Tolgoi LLC to customers in March 2021 have now been lifted. Short-term cash flow forecasts reflect the latest estimates of capital and operating costs that are aligned with the revised 2022 outlook for capital and operating activity.

Sensitivity analyses are performed over these estimates including the impact of estimated commodity prices on cash receipts.

The short-term cash forecasts incorporate the plans that the Company will access additional sources of funding as contemplated in the Funding HOA. The Company believes that with implementation of the funding plan under the Funding HOA it has 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 condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting. These condensed interim consolidated financial statements are compliant with IAS 34 and do not include all of the information required for full annual financial statements.

These condensed interim consolidated financial statements should be read in conjunction with the Company’s annual consolidated financial statements for the year ended December 31, 2021.

(b)

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.

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

2.	Summary of significant accounting policies (continued)

(b)

Areas of judgement and estimation uncertainty (continued)

As part of the preparation of these interim consolidated financial statements, the Company assessed whether there was any change in circumstances that may lead to a material impact on the areas of judgement and estimation uncertainty that the Company disclosed in its annual consolidated financial statements for the year ended December 31, 2021. The assessment for the six months ended June 30, 2022 included any potential impact on the Company’s areas of judgement and estimation uncertainty arising from the ongoing impact of COVID-19. The Company’s assessment also considered the potential impact of milestones achieved in underground development, including firing of the first drawbell on June 17, 2022 as well as the on-going implementation of the Funding HOA and the efforts of the Special Committee established to consider The Proposal. The Company also considered completion of the 2022 Cost and Schedule update for the underground project. As previously reported, the underground development capital cost forecast increased from $6.75 billion to $7.1 billion.

As at June 30, 2022 and giving consideration for events that took place before the authorization date for the issuance of these condensed interim consolidated financial statements, the Company concluded that there were no events or transactions that materially impacted the areas of judgement and estimation uncertainty included within its annual consolidated financial statements for the year ended December 31, 2021 that could affect the reported amounts of the Company’s assets, liabilities, revenues, expenses and related disclosures.

(c)

New standards and interpretations adopted

(i)

Amendments to IAS 16, Property, Plant and Equipment - Proceeds before Intended Use

On May 14, 2020, the IASB published a narrow scope amendment to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use (“IAS 16 amendment”). This amendment prohibits entities from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while the Company is preparing the asset for its intended use. Instead, sales proceeds and the cost of producing these items will be recognized in profit or loss in the Consolidated Statement of Income. The amendment applies retrospectively, but only to items of property, plant and equipment made available for use on or after the beginning of the earliest period presented in the financial statements. The amendment is effective for annual reporting periods beginning on or after January 1, 2022, with earlier application permitted.

The Company adopted the amendment on January 1, 2022 and, accordingly, the information presented for 2021 has been restated. On initial application, $20.7 million of net proceeds from the sale of Oyu Tolgoi underground ore concentrate prior to January 1, 2021 was transferred from capital work in progress to deficit. At June 30, 2021 a further $9.0 million (December 31, 2021 -$54.8 million) of net proceeds from the sale of Oyu Tolgoi underground ore concentrate was transferred from capital work in progress to deficit related to sales and cost of sales during the period.

Revenue and cost of sales associated with Oyu Tolgoi underground ore concentrate that was sold during the three and six months ended June 30, 2021 was $12.0 million and $2.9 million, respectively.

The following tables show the changes to Consolidated Statements of Income, Comprehensive Income and Cash Flows for the three and six months ended June 30, 2021 and the consolidated balance sheet as at January 1, 2021, June 30, 2021 and December 31, 2021, upon adoption of the IAS 16 amendment:

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

2.	Summary of significant accounting policies (continued)

(c)

New standards and interpretations adopted (continued)

(i)

Amendments to IAS 16, Property, Plant and Equipment - Proceeds before Intended Use (continued)


Consolidated Statements of Income		Three Months Ended June 30, 2021									Six Months Ended June 30, 2021
(Stated in thousands of U.S. dollars, except share and per share amounts)	Note	As reported			IAS 16 amendment			Restated			As reported			IAS 16 amendment			Restated

Revenue	4	$	317,799		$	12,001		$	329,800		$	844,345		$	12,001		$	856,346
Cost of sales	5	$	(82,584	)	$	(2,927	)	$	(85,511	)	$	(238,228	)	$	(2,927	)	$	(241,155	)

Income for the period		$	118,768		$	9,074		$	127,842		$	450,917		$	9,074		$	459,991
Attributable to owners of Turquoise Hill Resources Ltd.		$	96,870		$	5,989		$	102,859		$	333,585		$	5,989		$	339,574
Attributable to owner of non-controlling interest		$	21,898		$	3,085		$	24,983		$	117,332		$	3,085		$	120,417

Basic and diluted earnings per share attributable to Turquoise Hill Resources Ltd.		$	0.48		$	0.03		$	0.51		$	1.66		$	0.03		$	1.69

Consolidated Statements of		Three Months Ended June 30, 2021									Six Months Ended June 30, 2021
Comprehensive Income (Stated in thousands of U.S. dollars,)		As reported			IAS 16 amendment			Restated			As reported			IAS 16 amendment			Restated

Total comprehensive income for the period		$	121,399		$	9,074		$	130,473		$	455,804		$	9,074		$	464,878
Attributable to owners of Turquoise Hill Resources Ltd.		$	99,501		$	5,989		$	105,490		$	338,472		$	5,989		$	344,461
Attributable to owner of non-controlling interest		$	21,898		$	3,085		$	24,983		$	117,332		$	3,085		$	120,417

Consolidated Statements of		Three Months Ended June 30, 2021									Six Months Ended June 30, 2021
Cash Flows
(Stated in thousands of U.S. dollars,)		As reported			IAS 16 amendment			Restated			As reported			IAS 16 amendment			Restated

Cash generated from operating activities before interest and tax		$	295,693		$	9,074		$	304,767		$	543,929		$	9,074		$	553,003
Cash flows from investing activities
Expenditures on property, plant and equipment			(230,283	)		2,927			(227,356	)		(480,570	)		2,927			(477,643	)
Proceeds from pre-production revenues			12,001			(12,001	)		-			12,001			(12,001	)		-
Cash used in investing activities		$	(218,220	)	$	(9,074	)	$	(227,294	)	$	(498,414	)	$	(9,074	)	$	(507,488	)

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

2.	Summary of significant accounting policies (continued)

(c)

New standards and interpretations adopted (continued)

(i)

Amendments to IAS 16, Property, Plant and Equipment - Proceeds before Intended Use (continued)


Consolidated Balance Sheets			January 1, 2021

(Stated in thousands of U.S. dollars)						IAS 16
	Note		As reported			amendment		Restated
Non-current assets
Property, plant and equipment		10	$	10,927,512		$	20,652	$	10,948,164
Equity
Deficit				(3,415,601	)		13,630		(3,401,971	)
Equity attributable to owners of Turquoise Hill				9,576,773			13,630		9,590,403
Attributable to non-controlling interest		15		(1,148,820	)		7,022		(1,141,798	)
Total Equity			$	8,427,953		$	20,652	$	8,448,605

Consolidated Balance Sheets			June 30, 2021

(Stated in thousands of U.S. dollars)						IAS 16
	Note		As reported			amendment		Restated
Non-current assets
Property, plant and equipment		10	$	11,433,861		$	29,726	$	11,463,587
Equity
Deficit				(3,082,016	)		19,619		(3,062,397	)
Equity attributable to owners of Turquoise Hill				9,915,192			19,619		9,934,811
Attributable to non-controlling interest		15		(1,031,488	)		10,107		(1,021,381	)
Total Equity			$	8,883,704		$	29,726	$	8,913,430

Consolidated Balance Sheets			December 31, 2021

(Stated in thousands of U.S. dollars)						IAS 16
	Note		As reported			amendment		Restated
Non-current assets
Property, plant and equipment		10	$	11,974,480		$	75,478	$	12,049,958
Equity
Deficit				(2,890,711	)		49,815		(2,840,896	)
Equity attributable to owners of Turquoise Hill				10,101,548			49,815		10,151,363
Attributable to non-controlling interest		15		(992,590	)		25,663		(966,927	)
Total Equity			$	9,108,958		$	75,478	$	9,184,436

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

2.	Summary of significant accounting policies (continued)

(c)

New standards and interpretations adopted (continued)

(i)

Amendments to IAS 16, Property, Plant and Equipment - Proceeds before Intended Use (continued)

The following is the Company’s new accounting policy for Property, Plant and Equipment under IAS16:

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 of producing concentrate, during the commissioning of a project are recognized in the Consolidated Statement of Income.

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.

(ii)

Other new standards, and amendments to standards and interpretations

A number of other new standards, and amendments to standards and interpretations, are effective as of January 1, 2022. None of these had a material effect on the consolidated financial statements of the Company. These include:

●

Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37)

●

Annual Improvements to IFRS Standards 2018–2020

●

Reference to the Conceptual Framework (Amendments to IFRS 3).

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

2.	Summary of significant accounting policies (continued)

(d)

New standards and interpretations not yet adopted

Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) are targeted amendments to IAS 12 Income Taxes. The amendments narrow the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary differences, such as lease and decommissioning obligations. As a result, companies may need to recognise a deferred tax asset and a deferred tax liability for temporary differences arising on initial recognition of a lease and a decommissioning provision. This amendment is effective for the Company’s annual reporting period beginning January 1, 2023, with early adoption permitted. The Company is in the process of assessing the impact of the adoption of this amendment.

A number of other new standards, and amendments to standards and interpretations, are effective as of January 1, 2023. The Company is in the process of assessing the impacts of these new standards which include:

●

Classification of Liabilities as Current or Non-current (Amendments to IAS 1)

●

IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts

●

Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)

●

Definition of Accounting Estimates (Amendments to IAS 8).

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

3.	Operating segment


	Three Months Ended June 30, 2022
	Oyu Tolgoi			Corporate and other eliminations			Consolidated

Revenue	$	402,037		$	-		$	402,037

Cost of sales		(219,416	)		-			(219,416	)

Gross margin		182,621			-			182,621

Operating (expenses) income		(68,697	)		10,290			(58,407	)

Corporate administration expenses		-			(13,376	)		(13,376	)

Other expenses		(24,067	)		(378	)		(24,445	)

Income (loss) before finance items and taxes		89,857			(3,464	)		86,393

Finance items

Finance income		731			434			1,165

Finance costs		(78,253	)		74,236			(4,017	)

Income from operations before taxes	$	12,335		$	71,206		$	83,541

Income and other taxes		19,121			(9,320	)		9,801

Income for the period	$	31,456		$	61,886		$	93,342

Depreciation and depletion	$	45,052		$	28		$	45,080

Capital additions		345,691			-			345,691

Total assets		14,857,938			(67,253	)		14,790,685

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 three months ended June 30, 2022 and 2021, 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 $86.2 million and $53.8 million (June 30, 2021 - $70.7 million, $60.4 million, $35.5 million, $35.4 million, and $31.5 million).

Substantially all long-lived assets of the Oyu Tolgoi segment, other than financial instruments and deferred tax assets, are located in Mongolia.

Revenue and cost of sales associated with underground concentrate that was sold during the three months ended June 30, 2022 were $31.4 million and $6.6 million respectively (June 30, 2021 – $12.0 million and $2.9 million).

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

3.	Operating segment (continued)


	Three Months Ended June 30, 2021
	Oyu Tolgoi			Corporate and other eliminations			Consolidated
	Restated (a)						Restated (a)

Revenue (a)	$	329,800		$	-		$	329,800

Cost of sales (a)		(85,511	)		-			(85,511	)

Gross margin		244,289			-			244,289

Operating (expenses) income		(82,728	)		9,452			(73,276	)

Corporate administration expenses		-			(8,525	)		(8,525	)

Other expenses		(582	)		(14,028	)		(14,610	)

Income (loss) before finance items and taxes		160,979			(13,101	)		147,878

Finance items

Finance income		330			277			607

Finance costs		(72,734	)		71,138			(1,596	)

Income from operations before taxes	$	88,575		$	58,314		$	146,889

Income and other taxes		(15,096	)		(3,951	)		(19,047	)

Income for the period	$	73,479		$	54,363		$	127,842

Depreciation and depletion	$	21,804		$	12		$	21,816

Capital additions (a)		300,973			-			300,973

Total assets (a)		13,512,868			369,515			13,882,383

(a)

Restated - See Note 2 (c)(i)

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

3.	Operating segment (continued)


	Six Months Ended June 30, 2022
				Corporate
				and other
	Oyu Tolgoi			eliminations			Consolidated

Revenue	$	804,688		$	-		$	804,688

Cost of sales		(394,427	)		-			(394,427	)

Gross margin		410,261			-			410,261

Operating (expenses) income		(144,262	)		20,849			(123,413	)

Corporate administration expenses		-			(28,996	)		(28,996	)

Other expenses		(22,146	)		(623	)		(22,769	)

Income (loss) before finance items and taxes		243,853			(8,770	)		235,083

Finance items

Finance income		1,237			650			1,887

Finance costs		(146,603	)		139,855			(6,748	)

Income from operations before taxes	$	98,487		$	131,735		$	230,222

Income and other taxes		283,214			(25,794	)		257,420

Income for the period	$	381,701		$	105,941		$	487,642

Depreciation and depletion	$	85,052		$	57		$	85,109

Capital additions		663,677			-			663,677

Total assets		14,857,938			(67,253	)		14,790,685

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 six months ended June 30, 2022 and 2021, 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 $145.5 million, $143.4 million, $130.2 million, and $86.1 million (June 30, 2021 - $137.4 million, $124.9 million, $122.2 million, and $114.3 million).

Substantially all long-lived assets of the Oyu Tolgoi segment, other than financial instruments and deferred tax assets, are located in Mongolia.

Revenue and cost of sales associated with underground concentrate that was sold during the six months ended June 30, 2022 were $45.0 million and $10.1 million respectively (June 30, 2021 – $12.0 million and $2.9 million).

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

3.	Operating segment (continued)


	Six Months Ended June 30, 2021
				Corporate
				and other
	Oyu Tolgoi			eliminations			Consolidated
	Restated (a)						Restated (a)

Revenue (a)	$	856,346		$	-		$	856,346
Cost of sales (a)		(241,155	)		-			(241,155	)

Gross margin		615,191			-			615,191

Operating (expenses) income		(150,441	)		20,677			(129,764	)

Corporate administration expenses		-			(21,568	)		(21,568	)

Other expenses		(988	)		(26,799	)		(27,787	)

Income (loss) before finance items and taxes		463,762			(27,690	)		436,072

Finance items

Finance income		1,151			746			1,897

Finance costs		(142,059	)		138,828			(3,231	)

Income from operations before taxes	$	322,854		$	111,884		$	434,738

Income and other taxes		31,313			(6,060	)		25,253

Income for the period	$	354,167		$	105,824		$	459,991

Depreciation and depletion	$	74,571		$	41		$	74,612

Capital additions (a)		622,335			-			622,335

Total assets (a)		13,512,868			369,515			13,882,383

(a)

Restated - See Note 2 (c)(i)

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

4.	Revenue


	Three Months Ended June 30, 2022							Six Months Ended June 30, 2022
	Revenue from contracts with customers		Other revenue (a)			Total revenue		Revenue from contracts with customers		Other revenue (a)			Total revenue
Total revenue:
Copper	$	311,647	$	(45,238	)	$	266,409	$	592,161	$	(35,307	)	$	556,854
Gold		123,996		6,532			130,528		229,997		8,553			238,550
Silver		4,840		260			5,100		9,025		259			9,284
	$	440,483	$	(38,446	)	$	402,037	$	831,183	$	(26,495	)	$	804,688

	Three Months Ended June 30, 2021							Six Months Ended June 30, 2021
	Revenue from contracts with customers		Other revenue (a)			Total revenue		Revenue from contracts with customers		Other revenue (a)			Total revenue
	Restated (b)					Restated (b)		Restated (b)					Restated (b)
Total revenue:
Copper (b)	$	180,158	$	16,853		$	197,011	$	489,303	$	41,375		$	530,678
Gold (b)		130,074		(376	)		129,698		323,251		(5,327	)		317,924
Silver (b)		2,761		330			3,091		7,949		(205	)		7,744
	$	312,993	$	16,807		$	329,800	$	820,503	$	35,843		$	856,346

(a)

Other revenue relates to gains (losses) on the revaluation of trade receivables.

(b)

Restated - See Note 2 (c)(i)

5.	Cost of sales


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
			Restated (a)				Restated (a)

Production and delivery (a)	$	174,834	$	64,288	$	310,360	$	167,738
Depreciation and depletion		44,582		21,223		84,067		73,417
	$	219,416	$	85,511	$	394,427	$	241,155

(a)

Restated - See Note 2 (c)(i)

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

6.	Operating expenses


	Three Months Ended June 30,					Six Months Ended June 30,
	2022			2021		2022		2021

Oyu Tolgoi administration expenses	$	26,632		$	46,711	$	62,247	$	80,796
Royalty expenses		28,415			22,462		53,352		45,202
Inventory write downs (reversals) (a)		(115	)		1,522		189		(3,604	)
Selling expenses		2,977			1,988		6,583		6,175
Depreciation		498			593		1,042		1,195
	$	58,407		$	73,276	$	123,413	$	129,764

(a)

Inventory write downs (reversals) include net adjustments to the carrying value of ore stockpile inventories and materials and supplies; refer to Note 9.

7.	Finance items


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021

Finance income:
Interest income	$	1,165		$	607		$	1,887		$	1,897
	$	1,165		$	607		$	1,887		$	1,897

Finance costs:

Interest expense and similar charges	$	(79,243	)	$	(75,041	)	$	(153,667	)	$	(148,773	)

Amounts capitalized to property, plant and equipment (a)		78,295			74,590			152,088			147,831

Accretion of decommissioning obligations (Note 14)		(3,069	)		(1,145	)		(5,169	)		(2,289	)
	$	(4,017	)	$	(1,596	)	$	(6,748	)	$	(3,231	)

(a)

The majority of the finance costs capitalized to property, plant and equipment were capitalized at the weighted average rate of the Company’s general borrowings of 8.0% (refer to Note 10).

8.	Cash and cash equivalents


	June 30, 2022		December 31, 2021

Cash at bank and on hand	$	203,031	$	101,745
Money market funds		40,343		193,243
Other cash equivalents		265,028		399,308
	$	508,402	$	694,296

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

9.	Inventories


	June 30, 2022			December 31, 2021
Current
Concentrate	$	116,606		$	148,270
Ore stockpiles		43,266			27,911
Materials and supplies		205,575			185,797
Provision against carrying value of materials and supplies		(72,149	)		(71,961	)
	$	293,298		$	290,017
Non-current
Ore stockpiles	$	47,517		$	60,711
	$	47,517		$	60,711

During the three and six months ended June 30, 2022, $219.4 million (2021 - $85.5 million) and $394.4 million (2021 - $241.2 million) of inventory was charged to cost of sales (Note 5).

During the three and six months ended June 30, 2022, net reversals of $0.1 million (2021 – net write down charges of $1.5 million) and net write down charges of $0.2 million (2021 – net reversals of $3.6 million) were recognized in the consolidated statement of income relating to inventory write off and movement in provisions against carrying value.

10.

Property, plant and equipment


				Oyu Tolgoi
Six Months Ended June 30, 2022	Mineral property interests			Plant and equipment			Capital works in progress			Other capital assets			Total

Net book value:

January 1, 2022	$	693,681		$	2,992,594		$	8,362,844		$	839		$	12,049,958
Additions		37,814			834			472,941			-			511,589
Interest capitalized (Note 7)		-			-			152,088			-			152,088
Changes to decommissioning obligations (Note 14)		12,573			-			-			-			12,573
Depreciation for the period		(17,598	)		(78,544	)		-			(57	)		(96,199	)
Disposals and write offs		(8	)		-			-			-			(8	)
Transfers and other movements		-			13,723			(13,723	)		-			-
June 30, 2022	$	726,462		$	2,928,607		$	8,974,150		$	782		$	12,630,001

Cost	$	1,400,610		$	5,037,559		$	9,338,857		$	1,131		$	15,778,157

Accumulated depreciation / impairment		(674,148	)		(2,108,952	)		(364,707	)		(349	)		(3,148,156	)
June 30, 2022	$	726,462		$	2,928,607		$	8,974,150		$	782		$	12,630,001

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

10.

Property, plant and equipment (continued)


				Oyu Tolgoi
Six Months Ended June 30, 2021	Mineral property interests			Plant and equipment			Capital works in progress			Other capital assets			Total
							Restated (a)

Net book value:

January 1, 2021	$	695,552		$	3,011,522		$	7,219,502		$	936		$	10,927,512
Impacts of change in accounting policy (a)		-			-			20,652			-			20,652
January 1, 2021 (Restated)	$	695,552		$	3,011,522		$	7,240,154		$	936		$	10,948,164
Additions (a)		17,737			10,205			446,563			-			474,505
Interest capitalized (Note 7)		-			-			147,831			-			147,831
Depreciation for the period		(19,980	)		(86,892	)		-			(41	)		(106,913	)
Transfers and other movements		-			102,181			(102,181	)		-			-
June 30, 2021	$	693,309		$	3,037,016		$	7,732,367		$	895		$	11,463,587

Cost (a)	$	1,320,871		$	4,970,205		$	8,097,074		$	1,131		$	14,389,281

Accumulated depreciation / impairment		(627,562	)		(1,933,189	)		(364,707	)		(236	)		(2,925,694	)
June 30, 2021	$	693,309		$	3,037,016		$	7,732,367		$	895		$	11,463,587

(a)

Restated - See Note 2 (c)(i)

11.

Borrowings and other financial liabilities


	June 30, 2022		December 31, 2021
Current liabilities:
Project finance facility (a)	$	707,396	$	387,561
Lease liabilities (b)		6,028		9,860
	$	713,424	$	397,421

Non-current liabilities:
Project finance facility (a)	$	3,416,019	$	3,769,783
Lease liabilities (b)		13,650		15,575
	$	3,429,669	$	3,785,358

(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 to 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, 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.

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

11.

Borrowings and other financial liabilities (continued)

(a)

Project finance facility (continued)

At June 30, 2022, Oyu Tolgoi has drawn down $4.3 billion of the project finance facility:

June 30, 2022

Original

Annual interest rate

Facility

Carrying Value (i)

Fair Value (i)

Term (ii)

Pre-completion

Post-completion

International Financial Institutions - A Loan

774,986

799,538

15 years

LIBOR + 3.78%

LIBOR + 4.78%

Export Credit Agencies

862,590

897,605

14 years

LIBOR + 3.65%

LIBOR + 4.65%

Loan

257,684

274,115

13 years

2.3%

MIGA Insured Loan (iii)

671,005

694,490

12 years

LIBOR + 2.65%

LIBOR + 3.65%

Commercial Banks - B Loan

1,557,150

1,631,924

12 years

LIBOR + 3.4%

Includes $50 million

LIBOR + 4.4%

15-year loan at A Loan rate

4,123,415

4,297,672

(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 June 30, 2022, these borrowings are stated net of $116.9 million unamortized transaction costs.

The Company notified its project lenders that the COVID-19 pandemic constituted a force majeure event under its project finance facilities, which would have the effect of extending the June 30, 2028 project completion longstop date under those facilities for the duration of the force majeure. The force majeure has now been lifted and longstop date has been extended to September 17, 2030.

The Company also notified the senior project finance lenders that the commencement of the undercutting for the underground mine in January 2022 may have constituted 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. On May 4, 2022 a waiver of this potential event of default was executed between OT LLC and Sumitomo Mitsui Banking Corporation, in its capacity as Intercreditor agent.

The Company and its subsidiary, Oyu Tolgoi LLC, are in compliance with all of their current covenants.

(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.

(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.

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

11.

Borrowings and other financial liabilities (continued)

(b)

As at June 30, 2022, lease liabilities are discounted at the weighted average incremental borrowing rate of 7.6% (December 31, 2021 – 7.6%).

12.

Trade and other payables


	June 30, 2022		December 31, 2021

Trade payables and accrued liabilities	$	336,951	$	320,791
Interest payable on long-term borrowings		10,693		7,280
Payable to related parties (Note 17)		118,061		54,153
Other		1,426		2,264
	$	467,131	$	384,488

13.

Deferred income taxes


	June 30, 2022		December 31, 2021

Deferred tax assets
Non-capital losses	$	195,606	$	190,203
Other temporary differences including accrued interest		683,951		412,659
	$	879,557	$	602,862

Deferred tax liabilities
Withholding tax	$	(164,585)	$	(145,434)
	$	(164,585)	$	(145,434)

Adjustments to deferred tax assets: During the six months ended June 30, 2022, the Company recorded an income statement credit of $276.7 million to increase the amount of Mongolian deferred tax assets recognized by $283.3 million, and reduce the amount of Canadian deferred tax assets recognized by $6.6 million. These deferred tax assets relate to tax operating losses, accrued but unpaid interest expense on shareholder loans and other temporary differences. Recoverability of these losses and temporary differences is assessed at each balance sheet date against an estimate of future taxable profits. Movements in the deferred tax assets result from period end reassessments of recoverability and include adjustments to either record or derecognize deferred tax assets in previous periods. The adjustment to the Mongolian deferred tax asset was primarily due to an overall increase in taxable income which have benefited from higher expected long term commodity prices and changes to the timing of interest payments expected from implementation of the comprehensive financing plan announced on January 24, 2022.

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

14.

Decommissioning obligations


	Six Months Ended June 30,
	2022		2021

Opening carrying amount	$	153,662	$	133,964
Changes in estimates		12,573		(416)
Accretion of present value discount		5,169		2,289
	$	171,404	$	135,837

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 future cash expenditures upon reclamation and closure.

As at June 30, 2022, estimated future cash expenditures of $389.9 million (December 31, 2021 - $349.7 million) have been discounted from anticipated closure dates that range from 2070 to 2101 (December 31, 2021 - 2070 to 2101) to their present value at a real rate of 1.5% (December 31, 2021 – 1.5%).

15.

Non-controlling interest


	Non-controlling Interest: Oyu Tolgoi (a) Six Months Ended June 30,
	2022		2021
			Restated (a)

Balance, January 1	$	(966,927)	$	(1,148,820)

Impacts of change in accounting policy (a)		-		7,022
Balance, January 1		(966,927)		(1,141,798)
Non-controlling interest’s share of income (a)		129,778		120,417
Common share investments funded on behalf of non-controlling interest (b)		-		20,400
Funded amounts repayable to the Company (b)		-		(20,400)
Waiver of non-recourse loans (b)		1,398,762		-
Balance, June 30	$	561,613	$	(1,021,381)

(a)

Restated - See Note 2 (c)(i)

(b)

Since 2011, the Company had funded common share investments in Oyu Tolgoi on behalf of Erdenes Oyu Tolgoi LLC (“Erdenes”) by issuing non-recourse loans. In accordance with the Amended and Restated Shareholders Agreement dated September 8, 2011, such funded amounts earned 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. Non-recourse loans advanced to Erdenes upon the issuance of additional equity interests to Erdenes were treated as transactions between owners acting in their capacity as owners and were therefore accounted for separately and recorded as an offset to noncontrolling interest in equity. Unrealised interest on the non-recourse loans to Erdenes, which was recoverable principally through dividends from Oyu Tolgoi or sale by Erdenes of its interests in Oyu Tolgoi, was to be recognized when payment of the interest could be reliably determined.

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

15.

Non-controlling interest (continued)

As part of the January 25, 2022 agreements with the Government of Mongolia, the Company waived in full the cumulative $2,363 million non-recourse loan to Erdenes. The loan comprised the amount of equity invested of $1,399 million in Oyu Tolgoi by the Company on behalf of Erdenes to date, plus $964 million of accrued interest as at January 25, 2022, the date that the waiver was formally granted to and acknowledged by Erdenes.

The forgiveness of the associated principal on cancellation of the non-recourse loans is also a transaction between owners acting in their capacity as owners and therefore was recorded as a reduction in equity (increase in Deficit) attributable to owners of Turquoise Hill with a corresponding increase in equity attributable to owners of non-controlling interests. Unrealized interest on the non-recourse loans to Erdenes had not been recognized because management had concluded that payment of the interest could not be reliably determined and, as such, no accounting entries were required for the waiver of interest.

16.

Cash flow information

(a)

Reconciliation of net income to net cash flow generated from operating activities before interest and tax


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
				Restated						Restated

Income for the period (Restated - Note 2(c)(i))	$	93,342		$	127,842		$	487,642		$	459,991

Adjustments for:
Depreciation and amortization		45,080			21,816			85,109			74,612
Finance items:
Interest income		(1,165	)		(607	)		(1,887	)		(1,897	)
Interest and accretion expense		4,017			1,596			6,748			3,231
Realized and unrealized losses on commodity put options		-			14,072			109			26,954
Unrealized foreign exchange (gains) loss		24,007			(96	)		21,375			(35	)
Inventory write downs (reversals)		(115	)		1,522			189			(3,604	)
Income and other taxes		(9,801	)		19,047			(257,420	)		(25,253	)
Other items		(306	)		675			3,966			2,647

Net change in non-cash operating working capital items:
(Increase) decrease in:
Inventories		10,384			(72,576	)		(11,548	)		(102,873	)
Trade, other receivables and prepaid expenses		28,725			36,846			(3,785	)		42,740
Increase in:
Trade and other payables		86,915			17,531			84,649			38,981
Deferred revenue		34,293			137,099			22,863			37,509
Cash generated from operating activities before interest and tax	$	315,376		$	304,767		$	438,010		$	553,003

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

16.

Cash flow information (continued)

(b)

Supplementary information regarding other non-cash transactions

The non-cash investing and financing activities not already disclosed in the consolidated statements of cash flows were as follows:


	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021

Investing activities
Change in accounts payable and accrued liabilities related to purchase of property, plant and equipment	$	(10,874)	$	(29,263)	$	(13,802)	$	(43,277)
Additons to property, plant and equipment - leased assets		833		10,204		833		10,204

17.

Related parties

As at June 30, 2022, Rio Tinto plc’s indirect equity ownership in the Company was 50.8% (December 31, 2021: 50.8%). The following tables present the condensed interim 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.


	Three Months Ended June 30,				Six Months Ended June 30,
Statements of Income	2022		2021		2022		2021

Operating and corporate administration expenses:
Cost recoveries - Turquoise Hill	$	167	$	186	$	216	$	680
Management services payment (i)		(7,159)		(5,400)		(14,412)		(11,878)
Cost recoveries - Rio Tinto (ii)		(24,133)		(15,726)		(36,047)		(28,612)

Finance costs:
Completion support fee (iii)		(27,015)		(27,312)		(53,778)		(54,347)
	$	(58,140)	$	(48,252)	$	(104,021)	$	(94,157)

	Three Months Ended June 30,				Six Months Ended June 30,
Statements of Cash Flows	2022		2021		2022		2021

Cash generated from operating activities
Interest paid (iii)	$	-	$	-	$	-	$	(26,171)

Cash flows from investing activities
Expenditures on property, plant and equipment:
Management services payment and cost recoveries - Rio Tinto (i), (ii)		(3,161)		(1,933)		(9,077)		(8,855)

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

17.

Related parties (continued)


Balance Sheets	June 30, 2022		December 31, 2021

Prepaid expenses and other assets	$	40,855	$	81,764
Trade and other payables (Note 12)
Management services payment - Rio Tinto (i)		(35,498)		(14,584)
Cost recoveries - Rio Tinto (ii)		(82,563)		(39,569)

	$	(77,206)	$	27,611

(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 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 Oyu Tolgoi.

(iii)

As part of the project finance agreements (Note 11), 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 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.

18.

Commitments and contingencies

(a)

Capital commitments

At June 30, 2022, the Company had capital expenditure commitments of $24.2 million. These commitments represent minimum non-cancellable obligations and exit costs for cancellable obligations.

At June 30, 2022, the Company had power purchase commitments of $64.0 million. These commitments represent minimum non-cancellable obligations.

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

18.

Commitments and contingencies (continued)

(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 Mongolian Tax Authority (“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 (“UDP”) and Mongolian Law. 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 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

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

18.

Commitments and contingencies (continued)

(b)

Mongolian Tax Assessments (continued)

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 three months ended March 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. 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. Initial discussions have been held between the parties but there have been no material developments in relation to the negotiations. The suspension order is due to expire on August 11, 2022. The Company remains committed to continue to work with the Government of Mongolia and Rio Tinto to finalize the outstanding tax matters whether through arbitration or negotiation.

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 June 30, 2022, a provision is not required for the amounts disputed by the Company under the suspended arbitration proceedings relating to the years 2013 through 2015. In addition, for items disputed under the suspended arbitration proceedings relating to the years 2016 through 2018, no provision is required, or any reduction to available carried forward losses or for any additional amounts related to 2019 through June 30, 2022. 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 and of negotiations during the suspension of 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.

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

18.

Commitments and contingencies (continued)

(c)

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 current and former 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. 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 condensed interim consolidated financial statements of the Company.

19.

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 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.

TURQUOISE HILL RESOURCES LTD.

Notes to the condensed interim consolidated financial statements

(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

(Unaudited)

19.

Financial instruments and fair value measurements (Continued)

●

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 June 30, 2022

	Total		Level 1		Level 2		Level 3

Money market funds (a)	$	40,343	$	40,343	$	-	$	-

Marketable securities (a)		9,485		9,485		-		-

Trade receivables (b)		9,490		-		9,490		-
	$	59,318	$	49,828	$	9,490	$	-

			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	$	-

(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)

During the first quarter of 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 price 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 for its operations and underground development. Commodity put options were included in level 2 of the fair value hierarchy as the basis of valuation uses quoted prices.

All remaining commodity put options expired in the first quarter of 2022; as such no realised or unrealised gains/losses thereon were recognized in the three months ending June 30, 2022. For the three months ending June 2021, the Company recognized a realised loss of $5.6 million and an unrealised loss of $8.5 million. For the six-months ending June 30, 2022, the Company recognized a realised loss of $0.1 million and no unrealised gain/losses. For the six months ending June 30, 2021, the Company recognised a realised loss of $5.9 million and an unrealised loss of $21.0 million. Gains/Loses on put options were recognised within Other expense in the consolidated statements of income.

EX-99.2

Exhibit 99.2

LOGO

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition

and Results of Operations

June 30, 2022

TURQUOISE HILL

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 unaudited condensed interim consolidated financial statements of Turquoise Hill Resources Ltd. and the notes thereto for the three and six months ended June 30, 2022, as well as the MD&A for the year ended December 31, 2021 dated as of March 2, 2022 and the annual audited consolidated financial statements and accompanying notes for the years ended December 31, 2021 and December 31, 2020. The interim 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 33.

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 28 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 24.

The date of this MD&A is August 4, 2022.


June 30, 2022		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			3

OPERATIONAL OUTLOOK FOR 2022			4

OUR BUSINESS			5

SELECTED FINANCIAL METRICS			6

OYU TOLGOI			8

FUNDING OF OT LLC BY TURQUOISE HILL			11

PRIVATISATION PROPOSAL RECEIVED FROM RIO TINTO			14

GOVERNMENT RELATIONS			15

CLASS ACTION COMPLAINTS			18

NOTICE OF ARBITRATION			18

CORPORATE ACTIVITIES			19

INCOME AND OTHER TAXES			19

LIQUIDITY AND CAPITAL RESOURCES			20

SHARE CAPITAL			22

COPPER, GOLD AND FOREIGN EXCHANGE MARKET COMMENTARY			22

OFF-BALANCE SHEET ARRANGEMENTS			23

CONTRACTUAL OBLIGATIONS			23

CRITICAL ACCOUNTING ESTIMATES			24

RECENT ACCOUNTING PRONOUNCEMENTS			24

RISKS AND UNCERTAINTIES			24

RELATED-PARTY TRANSACTIONS			25

SELECTED QUARTERLY DATA			27

NON-GAAP AND OTHER FINANCIAL MEASURES			28

INTERNAL CONTROL OVER FINANCIAL REPORTING AND DISCLOSURE CONTROLS AND PROCEDURES			32

QUALIFIED PERSON			32

CAUTIONARY STATEMENTS			33

FORWARD-LOOKING STATEMENTS AND FORWARD-LOOKING INFORMATION			33


June 30, 2022		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

●

Oyu Tolgoi surface operations¹ and underground workforce posted an AIFR of 0.21 per 200,000 hours worked for the six months ended June 30, 2022.

●

In Q2’22, Oyu Tolgoi produced 30.6 thousand tonnes of copper in concentrate and 47.6 thousand ounces of gold in concentrate.

●

Mill throughput of 9.69 million tonnes in Q2’22 was 1% higher than Q1’22 and 3% higher than Q2’21 in line with expectations due to higher mill availability.

●

Copper production guidance for 2022 remains within the range of 110,000 to 150,000 tonnes while 2022 gold production guidance has been revised from a range of 135,000 – 165,000 ounces to 150,000 – 170,000 ounces.

●

On-site concentrate inventory has returned to target levels.

●

Drawbells continue to be completed ahead of schedule with the first 2 drawbells successfully fired in Q2’22 and the third drawbell subsequently fired on July 29. Sustainable production continues to trend earlier than expected. It is anticipated that between 16 – 21 drawbells are required to achieve sustainable production, subject to the natural caving conditions encountered.

●

Turquoise Hill currently estimates its base case incremental funding requirement to be $3.6 billion (March 31, 2022: $3.4 billion).

●

As at June 30, 2022, Turquoise Hill had $0.5 billion of available liquidity in the form of cash and cash equivalents, which under current projections is expected to meet the Company’s requirements, including funding of underground capital expenditures, into November 2022, after which the Company is able and would be required to rely on funding available under the Funding HoA² (see – Funding of OT LLC by Turquoise Hill) to 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 June 30, 2022.

●

Revenue of $402.0 million in Q2’22 increased 21.9% from $329.8 million in Q2’21 due to an 89.3% increase in concentrate sales with the easing of COVID-19 related restrictions at the border and use of double trailers to ship concentrate and due to a 3.1% increase in average gold prices. Onsite concentrate inventory levels returned to target levels in Q2’22. Higher concentrate volumes were partially offset by a 1.8% decrease in average copper prices and by lower copper and gold head grades from the planned transition of mining to the next phase of operations and processing lower grade stockpile material.

●

Income for the period was $93.3 million in Q2’22 versus $127.8 million in Q2’21 as higher revenue and tax benefits were more than offset by the impact of higher cost of sales as the higher volumes of concentrate shipped contained lower metal in concentrate following the planned transition of mining from higher to lower grade areas of the open pit. Cost of sales has also been impacted by inflation and higher input prices. A $9.8 million tax benefit was recorded in Q2’22 versus $19.0 million charge in Q2’21. The recognition in Q2’22 was largely due to an increase in temporary differences on property, plant and equipment. Income attributable to owners of Turquoise Hill in Q2’22 was $82.6 million ($0.41 per share) versus $102.9 million ($0.51 per share) in Q2’21.

¹ Surface operations denotes open-pit operations plus on surface infrastructure benefitting both the open pit and underground including, but not limited to, the concentrator, tailings storage facility and central heating plant. Of the 19,266 thousand tonnes of material processed by the mill in H1’22, approximately 715 thousand tonnes was underground development material.

² The Funding HOA is an amendment dated May 18, 2022 to the amended and restated heads of agreement entered into between the Company and Rio Tinto on January 24, 2022. Please refer to the Section titled “Funding of OT LLC by Turquoise Hill” on page 11 of this MD&A for further information.


June 30, 2022		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 Q2’22 was $2.82 per pound of copper sold³ and C1 cash costs were $1.31 per pound of copper produced⁴. All-in sustaining costs were $2.63 per pound of copper produced⁴.

●

Total operating cash costs⁵ of $229.6 million in Q2’22 increased 7.6% from $213.4 million in Q2’21 largely due to inflationary pressures on prices for critical supplies including fuel, power, explosives and higher shipment and royalty costs from increased volumes following the easing of COVID-19 related restrictions at the border. This was partially offset by higher deferred stripping due to the planned transition of mining from Phase 4B to Phase 5A. Ore mining had been prioritised in Q2’21 due to the impact of COVID-19 related restrictions on manning and equipment usage.

●

Expenditures on property, plant and equipment⁶ in Q2’22 were $260.9 million, which included $218.2 million of capital expenditures on the underground project⁷. Capital expenditures on the underground project⁷included $85.9 million of underground sustaining capital expenditures⁷. At June 30, 2022, total capital expenditures on the underground project⁷ since January 1, 2016 was $5.8 billion, including $0.5 billion of underground sustaining capital expenditures⁷.

●

Net cash generated from operating activities of $229.1 million and cash generated from operating activities before interest and tax of $315.4 million were $10.7 million and $10.6 million higher, respectively, than in Q2’21 due to the impact of higher shipment volumes and prices on cash receipts, partially offset by inflationary pressures on operating expenditures from higher prices for critical supplies including fuel, power, explosives and higher shipment and royalty costs.

●

Oyu Tolgoi has continued to progressively increase on-site personnel numbers with the workforce in Q2’22 approaching full capacity.

●

The 2022 cost and schedule update for the underground project has been completed and incorporates the known, incremental COVID-19 cost impacts, associated taxes and an estimate of further COVID-19 management costs over the remaining development schedule, confirming total development capital expenditure expectations of $7.06 billion.

●

Oyu Tolgoi continued to build on its relationship reset in Mongolia, with the Oyu Tolgoi Board approving a $50 million, five-year funding programme to support the long-term, sustainable development of Khanbogd town, our neighbouring host community in the South Gobi region.

●

The special committee of independent directors (the Special Committee) continues to consider the unsolicited non-binding proposal from Rio Tinto International Holdings Limited (Rio Tinto) received on March 13, 2022 to acquire the approximately 49% of the outstanding shares of Turquoise Hill held by the Company’s minority shareholders for cash consideration of C$34.00 per share (the Proposal).

OPERATIONAL OUTLOOK FOR 2022

Oyu Tolgoi is expected to produce 110 to 150 thousand tonnes of copper and 150 to 170 thousand ounces of gold in concentrates in 2022 from processing ore from the open pit, underground and stockpiles. Gold production guidance has been revised upward from a previous forecast range of 135 to 165 thousand ounces due to additional mining of high-grade material at the bottom of Phase 4B in Q1’22 and better than expected

³ Cost of sales per pound of copper sold is a supplementary financial measure. Please refer to the Section titled “Non-GAAP and Other Financial Measures” on page 28 of this MD&A for further information.

⁴ 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 the Section titled “Non-GAAP and Other Financial Measures” on page 28 of this MD&A for further information.

⁵ Total operating cash costs is a non-GAAP financial measure. Please refer to the Section titled “Non-GAAP and Other Financial Measures” on page 28 of this MD&A for further information.

⁶ In this MD&A, “expenditures on property, plant and equipment is sometimes alternatively referred to as “capital expenditures on a cash basis”.

⁷ Capital expenditures on the underground project and underground sustaining capital expenditures are supplementary financial measures. Please refer to the Section titled “Non-GAAP and Other Financial Measures” on page 28 of this MD&A for further information.


June 30, 2022		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)

production from Phase 5A. Gold and copper production are forecast to be lower in 2022 compared with 2021 due to the planned transition of mining to the next phase of operations and the processing of lower grade stockpile material.

Total operating cash costs⁸ for 2022 are now expected to be in the range of $850 million to $925 million compared to original guidance of $800 million to $875 million due to higher royalties and price inflation for key raw materials, especially fuel, and lower deferred stripping. The proportion of ore to waste is now expected to be higher than originally planned in 2022 due to mine plan changes.

Capital expenditures on surface operations⁹ for 2022 are now expected to be lower than previously disclosed at approximately $140 million to $170 million due to further schedule changes impacting the timing of spend and lower deferred stripping as a result of mine plan changes over the course of the year resulting in a higher proportion of ore mining compared to waste removal. This is compared to the Company’s previous guidance of $155 million to $185 million that was provided in the MD&A for the first quarter of 2022. Capital expenditures on the underground project⁹ are now expected to be lower at $1.1 billion to $1.3 billion for 2022 compared to original guidance of $1.2 billion to $1.4 billion due to slower than expected workforce ramp-up following commencement of the undercut in January 2022. Capital expenditures on the underground project⁹ are expected to be comprised of $650 million to $750 million of underground development capital expenditures⁹ and $425 million to $525 million of underground sustaining capital expenditures⁹.

Capital expenditures on surface operations⁹ is mainly comprised of deferred stripping, equipment purchases, tailings storage facility construction and maintenance componentisation. Capital expenditures on the underground project⁹ 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 produced¹⁰, which is higher than 2021 due to lower gold production in 2022. Unit cost guidance assumes the midpoint of the expected 2022 copper and gold production ranges and a gold commodity price assumption of $1,868 per ounce.

Estimates of future production, expenditures on property, plant and equipment, total operating cash costs and C1 cash costs per pound of copper produced 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 Oyu Tolgoi LLC (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

⁸ Total operating cash costs is a non-GAAP measure that is forward-looking information. Please refer to the Section titled “Non-GAAP and Other Financial Measures” on page 28 of this MD&A for further information.

⁹ Underground development capital expenditures, underground sustaining capital expenditures, and capital expenditures on surface operations are all supplementary financial measures. Please refer to the Section titled “Non-GAAP and Other Financial Measures” on page 28 of this MD&A for further information.

¹⁰ C1 cash costs per pound of copper produced is a non-GAAP ratio. Please refer to the Section titled “Non-GAAP and Other Financial Measures” on page 28 of this MD&A for further information.


June 30, 2022		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)

currently being developed as an underground operation with production ramp up expected to commence in H1’23.

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. 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.

As at June 30, 2022, Oyu Tolgoi had a total workforce (employees and contractors), including for underground project construction, of approximately 18,100 workers, of which over 97% were Mongolian.

SELECTED FINANCIAL METRICS ⁽¹⁾


	Three months ended						Six months ended

	2Q		2Q		Change		2Q		2Q		Change
($ in millions, unless otherwise noted)
	2022		2021		%		2022		2021		%

			Restated ⁽⁶⁾						Restated ⁽⁶⁾

Revenue		402.0		329.8		21.9%		804.7		856.3		(6.0%)

Income for the period		93.3		127.8		(27.0%)		487.6		460.0		6.0%

Income attributable to owners of Turquoise Hill Resources Ltd		82.6		102.9		(19.7%)		357.9		339.6		5.4%
Basic and diluted earnings per share attributable to owners of Turquoise Hill		0.41		0.51		(19.6%)		1.78		1.69		5.3%
Resources Ltd
Revenue by metals in concentrates

Copper		266.4		197.0		35.2%		556.9		530.7		4.9%

Gold		130.5		129.7		0.6%		238.6		317.9		(24.9%)

Silver		5.1		3.1		64.5%		9.3		7.7		20.8%

Cost of sales		219.4		85.5		156.6%		394.4		241.2		63.5%

Production and delivery costs		174.8		64.3		171.9%		310.4		167.7		85.1%

Depreciation and depletion		44.6		21.2		110.4%		84.1		73.4		14.6%

Capital expenditures on cash basis ⁽²⁾		260.9		227.4		14.7%		490.8		477.6		2.8%

Underground development capital expenditures		132.3		158.6		(16.6%)		251.4		339.7		(26.0%)

Underground sustaining capital expenditures		85.9		49.9		72.1%		170.6		110.8		54.0%

Capital expenditures on surface operations		42.7		18.9		125.9%		68.8		27.2		152.9%

Royalty expenses		28.4		22.5		26.2%		53.4		45.2		18.1%

Total operating cash costs ⁽³⁾		229.6		213.4		7.6%		458.5		414.7		10.6%

Unit costs ($)

Cost of sales (per pound of copper sold) ⁽⁴⁾		2.82		1.98		42.4%		2.74		1.87		46.5%

C1 (per pound of copper produced) ⁽⁵⁾		1.31		0.85		54.1%		1.49		0.43		246.5%

All-in sustaining (per pound of copper produced) ⁽⁵⁾		2.63		1.55		69.7%		2.67		0.96		178.1%

Mining costs (per tonne of material mined) ⁽⁵⁾		2.42		2.71		(10.7%)		2.34		2.27		3.1%

Milling costs (per tonne of ore treated) ⁽⁵⁾		6.58		7.09		(7.2%)		6.84		6.66		2.7%

G&A costs (per tonne of ore treated) ⁽⁴⁾		2.75		4.98		(44.8%)		3.23		4.21		(23.3%)

Net cash generated from operating activities		229.1		218.4		4.9%		351.4		85.2		312.4%

Cash generated from operating activities before interest and tax		315.4		304.8		3.5%		438.0		553.0		(20.8%)

Interest paid		84.8		84.5		0.4%		85.6		111.0		(22.9%)

Total assets		14,791		13,903		6.4%		14,791		13,903		6.4%

Total non-current financial liabilities		3,766		4,407		(14.5%)		3,766		4,407		(14.5%)

⁽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.

⁽²⁾

Capital expenditures on a cash basis is split between underground development capital expenditures and underground sustaining capital expenditures and capital expenditures on surface operations, all supplementary financial measures. Please refer to the Section titled – “Non-GAAP and Other Financial Measures” on page 28 of this MD&A for further information.

⁽³⁾	Total operating cash costs is a non-GAAP financial measure. Please refer to the Section titled – “Non-GAAP and Other Financial Measures” on page 28 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. Please refer to the Section titled – “Non-GAAP and Other Financial Measures” on page 28 of this MD&A for further information.


June 30, 2022		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)

⁽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 the Section titled – “Non-GAAP and Other Financial Measures” on page 28 of this MD&A for further information.

⁽⁶⁾	Prior year comparatives have been restated for adoption of the IAS16 amendment to Property, Plant and Equipment: Proceeds before intended use. Please refer to the Section titled “Recent Accounting Pronouncements” on page 24 of this MD&A for further information.

Q2’22 versus Q2’21

●

Income for the period was $93.3 million in Q2’22 versus $127.8 million in Q2’21 as higher revenue and tax benefits were more than offset by the impact of higher cost of sales as the higher volumes of concentrate shipped contained lower metal in concentrate following the planned transition of mining from higher to lower grade areas of the open pit. Cost of sales has also been impacted by inflation and higher input prices. A $9.8 million tax benefit was recorded in Q2’22 versus a $19.0 million charge in Q2’21. The recognition in Q2’22 was largely due to an increase in temporary differences on property, plant and equipment. Income attributable to owners of Turquoise Hill in Q2’22 was $82.6 million ($0.41 per share) versus $102.9 million ($0.51 per share) in Q2’21.

●

Cost of sales of $219.4 million in Q2’22 increased from $85.5 million in Q2’21 due to an 89.3% increase in concentrate volumes with the easing of COVID-19 related restrictions at the border and inflationary pressures on input prices and other costs. Onsite concentrate inventory levels have returned to target levels in Q2’22.

●

Expenditures on property, plant and equipment were $260.9 million in Q2’22 versus $227.4 million in Q2’21, comprised of $218.2 million (Q2’21: $208.5 million) in capital expenditures on the underground project¹¹, including $85.9 million (Q2’21: $49.9 million) in underground sustaining capital expenditures¹¹as well as $42.7 million (Q2’21: $18.9 million) in capital expenditures on surface operations¹¹.

●

Total operating cash costs¹² of $229.6 million in Q2’22 increased 7.6% from $213.4 million in Q2’21, largely due to inflationary pressures on prices for critical supplies, including fuel, power, explosives and higher shipment and royalty costs from increased volumes following the easing of COVID-19 related restrictions at the border. This was partially offset by higher deferred stripping due to the planned transition of mining from Phase 4B to Phase 5A. Ore mining had been prioritised in Q2’21 due to the impact of COVID-19 related restrictions on manning and equipment usage.

●

Cost of sales of $2.82 per pound of copper sold¹³ in Q2’22 increased 42.4% from $1.98 per pound of copper sold in Q2’21, reflecting higher operating cash costs and an increase in unit fixed costs from lower metal production and copper head grades.

¹¹ Capital expenditures on the underground project, underground sustaining capital expenditures and capital expenditures on surface operations are supplementary financial measures. Please refer to the Section titled “Non-GAAP and Other Financial Measures” on page 28 of this MD&A for further information.

¹² Total operating cash costs is a non-GAAP financial measure. Please refer to the Section titled “Non-GAAP and Other Financial Measures” on page 28 of this MD&A for further information.

¹³ Cost of sales per pound of copper sold is a supplementary financial measure. Please refer to the Section titled “Non-GAAP and Other Financial Measures” on page 28 of this MD&A for further information.


June 30, 2022		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)

●

Oyu Tolgoi’s C1 cash costs of $1.31 per pound of copper produced¹⁴ in Q2’22 increased from $0.85 per pound of copper produced in Q2’21 due to higher operating cash costs and lower copper produced due to the planned transition of mining to the next phase of operations.

●

All-in sustaining costs of $2.63 per pound of copper produced¹⁴ in Q2’22 increased from $1.55 per pound of copper produced in Q2’21. All-in sustaining costs were impacted by the same factors as C1 cash costs as well as a $23.8 million increase in capital expenditures on surface operations due to higher maintenance componentisation, higher deferred stripping from the planned change in mine sequence and commencement of the Gashuun Sukhait (GSK) road.

●

Mining costs of $2.42 per tonne of material mined¹⁴in Q2’22 decreased 10.7% from $2.71 per tonne of material mined in Q2’21. The decrease was mainly driven by higher material mined in Q2’22 with higher haul truck usage in the open pit as the lifting of COVID-19 restrictions increased manning levels.

●

Milling costs of $6.58 per tonne of ore treated¹⁴ in Q2’22 decreased 7.2% from $7.09 per tonne of ore treated in Q2’21 due to the higher mill throughput and lower costs. The decrease in costs was mainly due to an improvement in the quality of grinding media lowering the amount of reagents used in processing concentrate and a higher proportion of softer ore in the mill feed.

●

G&A costs of $2.75 per tonne of ore treated¹⁵ in Q2’22 decreased 44.8% from $4.98 per tonne of ore treated in Q2’21. The decrease is mainly due to reduced COVID-19 related costs with the lifting of restrictions and changes to the testing and quarantine regimes.

●

OYU TOLGOI

Operations, People, Safety Performance and COVID-19 Update

The safety and wellbeing of our workers continues to be our major focus. The Oyu Tolgoi surface operations and underground workforce posted an AIFR of 0.21 per 200,000 hours worked year to date.

During Q2’22, COVID-19 cases identified at Oyu Tolgoi have continued at low levels and the testing regime has been eased. Pre-site mobilisation testing has ceased, and mask wearing has been reduced to high-risk settings only. Oyu Tolgoi has continued to progressively increase on-site personnel numbers with the workforce in Q2’22 approaching full capacity. On-site concentrate inventory has returned to target levels. Ongoing monitoring of COVID-19 cases continues, and controls will continue to be reviewed, as necessary.

The Force Majeure declared by OT LLC to project lenders in March 2020 and the Force Majeure declared by OT LLC to customers in March 2021 have both been lifted.

During Q2’22, Oyu Tolgoi, in partnership with Mandal Insurances, rolled out a Hepatitis B screening and vaccination programme to employees at site and in the Ulaanbaatar offices.

¹⁴ 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 the Section titled “Non-GAAP and Other Financial Measures” on page 28 of this MD&A for further information.

¹⁵ G&A costs per tonne of ore treated is a supplementary financial measure. Please refer to the Section titled “Non-GAAP and Other Financial Measures” on page 28 of this MD&A for further information.


June 30, 2022		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)

Selected Operational Metrics

Oyu Tolgoi Production Data

All data represents full production and sales on a 100% basis


	2Q		2Q		Change		1H		1H		Change

	2022		2021				2022		2021

Open pit material mined (‘000 tonnes)		25,550		15,829		61.4%		49,936		38,417		30.0%

Ore treated (‘000 tonnes)		9,685		9,401		3.0%		19,266		19,214		0.3%

Average mill head grades:

Copper (%)		0.40		0.47		(14.9%)		0.40		0.51		(21.6%)

Gold (g/t)		0.26		0.50		(48.0%)		0.29		0.59		(50.8%)

Silver (g/t)		1.15		1.19		(3.4%)		1.20		1.24		(3.2%)

Concentrates produced (‘000 tonnes)		146.0		173.2		(15.7%)		290.3		375.1		(22.6%)

Average concentrate grade (% Cu)		20.9		21.2		(1.4%)		21.0		21.9		(4.1%)

Production of metals in concentrates:

Copper (‘000 tonnes)		30.6		36.7		(16.6%)		60.8		82.2		(26.0%)

Gold (‘000 ounces)		48		113		(57.5%)		107		259		(58.7%)

Silver (‘000 ounces)		201		235		(14.5%)		412		490		(15.9%)

Concentrate sold (‘000 tonnes)		175.3		92.6		89.3%		323.6		278.9		16.0%

Sales of metals in concentrates:

Copper (‘000 tonnes)		35.3		19.6		80.1%		65.2		58.6		11.3%

Gold (‘000 ounces)		68		73		(6.8%)		125		183		(31.7%)

Silver (‘000 ounces)		224		106		111.3%		403		313		28.8%

Metal recovery* (%)

Copper		81.4		79.7		2.1%		79.8		83.4		(4.3%)

Gold		59.1		69.3		(14.7%)		59.3		71.0		(16.5%)

Silver		57.8		62.5		(7.5%)		56.0		64.0		(12.5%)

*Metal recovery is a function of head grade and reflects grades delivered in the quarter.

Surface Operations and Hugo North Underground

During Q2’22, the combined surface and underground operations produced 30.6 thousand tonnes of copper in concentrate and 47.6 thousand ounces of gold in concentrate. Copper production was broadly in line with Q1’22 and with 2022 guidance. Mill feed for Q2’22 included approximately 453 thousand tonnes with 0.66% copper and 0.28g/t head grade of underground ore. The remaining 9.23 million tonnes of mill feed was sourced from open-pit low grade stockpiles and Phase 5. Mill head grades will remain low through the remainder of 2022 as direct mill feed will continue to be supplemented by low grade stockpiles.

As previously disclosed, the open-pit optimisation work to improve near term value continues and is expected to be incorporated into an updated mine plan in Q3’22.

During Q2’22, the underground project achieved a significant milestone with the blasting of the first two drawbells in Panel 0 ahead of schedule. Drawbells continue to be completed ahead of schedule and broadly aligned with the 2020 Oyu Tolgoi Technical Report (2020 OTTR) with the third drawbell subsequently fired on


June 30, 2022		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)

July 29. Sustainable production continues to trend earlier than expected. It is anticipated that between 16 – 21 drawbells are required to achieve sustainable production, subject to the natural caving conditions encountered.

Underground production activities, including undercut blasting and on-footprint construction work such as roadways and steel set construction, continue to progress well. During Q2’22, a total of 26,098 metres of undercut drilling, 2,071 metres of drawbell drilling and 8,061 square metres of undercut blasting were completed. In addition, underground material hoisted from Shafts 1 and 2 was above expectations.

Shaft sinking rates for Shaft 3 and Shaft 4 improved during Q2’22 due to the continuation of an optimisation programme commenced in Q1’22. As of July 3, 2022, the Shaft 3 sinking level was at 183 metres below ground level and Shaft 4 was at 288 metres below ground level.

The table below provides the Company’s estimated key milestone dates compared to the 2020 OTTR.


Milestone	2020 OTTR	Q1 2022 MD&A	Actual or Currently Projected Dates⁽³⁾
Start Undercut blasting	July 2021	January 2022 (Actual)	January 2022 (Actual)
MHS 1 (including Crusher 1) commissioning	Q4’21	February 2022 (Actual)	February 2022 (Actual)
First drawbell blasted ⁽¹⁾	May 2022	Q3’22	June 2022 (Actual)
Sustainable Production (sustainable cave propagation)	February 2023 (~30 drawbells active⁽²⁾)	H1’23 (~21 drawbells active⁽²⁾)	H1’23 (~21 drawbells active⁽²⁾)
Shaft 3 commissioned	H1’22	H1’24⁽³⁾	H1’24⁽³⁾
Shaft 4 commissioned	H1’22	H1’24⁽³⁾	H1’24⁽³⁾
First drawbell Panel 2	Q4’24	H1’26	H1’26⁽⁴⁾
First drawbell Panel 1	H2’26	H1’27	H1’27⁽⁴⁾

⁽¹⁾	Despite an approximate 6-month delay to Undercut commencement, first drawbell timing remained broadly in line with the 2020TR.

⁽²⁾

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 between 16 and 21 drawbells.

⁽³⁾	Shaft 3 and 4 progress continues to be closely monitored against the 2022 schedule update.

⁽⁴⁾	The impact of the additional shaft delays on the commencement of Panel 1 and Panel 2 is under assessment and expected to be known during Q3’22.

At the end of June 2022, cumulative underground capital development is 70,939 equivalent metres (eqm) and cumulative Conveyor to Surface advancement is 16,088 eqm.

During Q2’22, the underground project completed the 2022 cost and schedule reforecast (2022 Reforecast). The 2022 Reforecast reconfirmed total development capital expenditures of $7.06 billion for the underground project, incorporating known and future incremental COVID-19 costs of $227 million, escalation of $72 million, associated taxes and minor impacts of changes in labour laws. The COVID-19 impacts incorporated are based on a regime of reduced controls from July 1, 2022. As at June 30, 2022, underground development capital commitments stood at approximately $5.8 billion with $5.3 billion of underground development capital incurred, leaving underground development capital committed of approximately $1.3 billion and $1.8 billion of underground development capital incurred remaining¹⁶. The 2022 Reforecast identified an approximate 15-month delay versus the Definitive Estimate¹⁷ milestones in the commissioning of Shaft 3 and Shaft 4, which are now expected in H1’24. The impact of the additional shaft delays on the commencement of Panel 1 and Panel 2 is under assessment and expected to be known during Q3’22¹⁸.

¹⁶ Underground development capital incurred and underground development capital committed are supplementary financial measures. Please refer to the Section titled “Non-GAAP and Other Financial Measures” on page 28 of this MD&A for further information.

¹⁷ The confirmatory analysis of the underground project costs and schedule contained in the 2020 statutory study required pursuant to, and prepared by OT LLC in accordance with, Mongolian laws and filed with the Mongolian Minerals Council in 2021.

¹⁸ The 2022 Reforecast assumes that there are no new COVID-19 related impacts beyond the end of Q2’22.


June 30, 2022		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)

OT LLC spent $218.2 million on capital expenditures on the underground project¹⁹ during Q2’22, including $85.9 million of underground sustaining capital expenditures¹⁹. Total capital expenditures on the underground project¹⁹from January 1, 2016 to June 30, 2022 was approximately $5.8 billion, including $0.5 billion of underground sustaining capital expenditures¹⁹. Capital expenditures on the underground project¹⁹ includes VAT and capitalised management services payments but excludes capitalised interest. In addition, OT LLC had contractual obligations²⁰ of $0.5 billion as at June 30, 2022. From the restart of project development in 2016 through June 30, 2022, the Oyu Tolgoi underground project has committed over $4.3 billion to Mongolian vendors and contractors.

Hugo North Design Refinements

Design optimisation work for Lift 1 continues with the aim of minimising risk and maximising productivity. During Q2’22, updated designs for Panel 2 north were completed and these are expected to be incorporated into an updated mine plan in Q3’22.

To support ongoing mining studies, additional data continues to be collected from the surface and underground drilling programmes. During Q2’22, drilling was focussed on the northern part of Panel 1, the southern part of Panel 2 and Lift 2. For H1’22, approximately 2,000 metres has been drilled into Panel 1, 1,500 metres into Panel 2 and 3,600 metres into Lift 2, which is in line with the 5-year drill plan. For the remainder of 2022, the drilling programme is designed to target Lift 2 and future mining areas in the Lift 1 horizon, which are currently excluded from the Mineral Reserve.

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 June 30, 2022, the aggregate outstanding balance of shareholder loans extended by subsidiaries of the Company to OT LLC was $8.6 billion, including accrued interest of $2.5 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 had previously funded the common share investments in OT LLC on behalf of state-owned Erdenes. These funded amounts, also referred to as carry account loans, 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 announced on January 24, 2022, the Company waived in full the cumulative $2.4 billion in non-recourse carry account loans to Erdenes. The loans comprised $1.4 billion of equity invested in OT LLC by the Company on behalf of Erdenes plus $1.0 billion of unrecognised interest as at January 25, 2022, the date that the waiver was formally granted to and acknowledged by Erdenes.

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 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.

¹⁹ Capital expenditures on the underground project and underground sustaining capital expenditures are supplementary financial measures. Please refer to the Section titled “Non-GAAP and Other Financial Measures” on page 28 of this MD&A for further information.

²⁰ Contractual obligations is a non-GAAP financial measure. Please refer to the Section titled “Non-GAAP and Other Financial Measures” on page 28 of this MD&A for further information.


June 30, 2022		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)

As at June 30, 2022, Turquoise Hill had $0.5 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 an Amended and Restated Heads of Agreement dated May 18, 2022 between the Company and Rio Tinto (the Funding HoA), 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 June 30, 2022.

The Funding HoA amends, restates and supersedes the Amended and Restated Heads of Agreement signed between the Company and Rio Tinto dated January 24, 2022, which itself replaced the prior Heads of Agreement entered into on April 9, 2021. The prior Heads of Agreement replaced the non-binding Memorandum of Understanding that Rio Tinto and Turquoise Hill entered into on September 9, 2020.

The key elements of the Funding HoA include:

●

A commitment by the Company to conduct one or more equity offerings for aggregate proceeds of at least US$650 million (the Initial Equity Offering) by December 31, 2022;

●

A commitment by Rio Tinto to provide additional short-term bridge financing directly to the Company by way of one or more secured advances of up to US$400 million (Early Advance) expected to be made available to the Company subject to satisfaction or waiver of certain conditions precedent, and which is to be repaid out of the proceeds of the Initial Equity Offering;

●

Given that Rio Tinto had not publicly withdrawn the Proposal prior to June 30, 2022, the condition that the Company have completed the Initial Equity Offering prior to drawing the short-term secured advance of up to US$300 million (RT Advance) provided for was automatically removed in the Funding HoA. Previously, Rio Tinto had committed to provide the RT Advance directly to the Company to be available during the debt funding restriction period identified in Resolution 103 and to be indirectly repaid out of the proceeds of the $750 million Co-Lending Facility;

●

Pursuing the rescheduling of principal repayments of existing debt (Re-profiling) to potentially reduce the base case incremental funding requirement by up to $1.7 billion;

●

Seeking to raise up to $500 million of additional senior supplemental debt (SSD); and

●

A commitment by Rio Tinto 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.

Further, the Funding HoA provides that, if necessary, Turquoise Hill would 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 Funding 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 Funding 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 Funding 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 Funding 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, OT LLC’s estimated funding requirements are expected to be addressed by cash on hand at OT LLC, the Re-profiling and an OT Board approved pre-paid copper concentrate sale arrangement between Turquoise Hill and OT LLC.

At June 30, 2022, the Company estimates its base case incremental funding requirement to be $3.6 billion, an increase of $0.2 billion from its March 31, 2022 estimate of $3.4 billion. Significant contributors to this increase include updated commodity pricing and other market-based assumptions, including LIBOR and inflation. Given


June 30, 2022		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)

this increase, and assuming successful completion of the other elements of the Funding HoA, the Company currently estimates it could need to raise incremental equity proceeds of approximately $0.4 billion, which would be in addition to the Initial Equity Offering of $650 million required by December 31, 2022, to fully address its estimated incremental funding requirement within the timing framework of the Funding 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. Any changes in key assumptions may impact the incremental funding requirement and, as a result, the actual quantum of incremental equity required may be greater or less than this $0.4 billion estimate. The issuance of any additional equity beyond the Initial Equity Offering, as well as the estimated timing of its issuance would take into account the expected timing and completion of all other funding elements of the Funding HoA, which are expected to provide the Company with sufficient liquidity and resources to meet its minimum obligations for at least twelve months from the balance sheet date of June 30, 2022. In the event there is a residual funding requirement after implementing the elements of the Funding HoA, the Company would consider all funding options available to it at that time.

Successful implementation of the Funding 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. Non-fulfilment of any of the conditions precedent identified in the Funding 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 Funding HoA. The Company is in discussions with Rio Tinto and other relevant stakeholders regarding implementation of the Funding HoA as well as its residual funding requirements.

The Funding HoA and the timing of the execution of its various components could also be affected by Rio Tinto’s Proposal to acquire the approximately 49% of the outstanding shares of Turquoise Hill held by the Company’s minority shareholders for cash consideration of C$34.00 per share. Rio Tinto has stated that its Proposal is conditional on, among other things, Turquoise Hill not raising additional equity capital, including through a rights offering, bought deal or other share placement, pending completion of the proposed transaction.

Given the uncertainties outlined above, the Company is currently assessing alternatives in the event that the timeline as outlined in the Funding HoA is not achieved or in the event the Rio Tinto Proposal is not ultimately consummated or the parties do not sign a definitive transaction agreement.

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 Funding HoA;

●

Changes in commodity prices and other market-based assumptions (including LIBOR and inflation);

●

Surface operations performance as well as the successful implementation (or otherwise) of ongoing optimisation efforts;

●

Any further changes to underground mine cost and schedule in addition to those identified in the 2022 Reforecast;

●

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;

●

Further and/or unanticipated impacts on operations and underground development related to global supply chain issues;

●

Rio Tinto’s Proposal to acquire the outstanding shares of the Company it does not already own; 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 “Renewed Partnership with 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 $3.6 billion (March 31, 2022: $3.4 billion), taking into consideration:


June 30, 2022		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)

●

Metal price assumptions for copper and gold over the incremental funding period, as delineated in the table below;

●

The 2022 Reforecast;

●

The current forecast of sustainable production for Panel 0;

●

The current forecast of delays to Shafts 3 and 4 (for further information, see the “Surface Operations and Hugo North Underground” section of this MD&A above); and

●

Any updates or changes to the mine plan of either the open pit or underground mines (for further information, see the “Surface 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	3.64	1,857
2023	4.06	1,789
2024	3.96	1,768

Within the base case funding requirement are $1.8 billion of scheduled principal repayments, which the Company is attempting to re-profile.

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 potential further revisions to the amount of underground development capital required or revisions to schedule;

●

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 “Surface 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 “Renewed Partnership with Government of Mongolia” section of this MD&A below;

●

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, LIBOR, inflation 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 may impact the incremental funding requirement and, as a result, the actual quantum of incremental funding required may be greater or less than the $3.6 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.

PRIVATISATION PROPOSAL RECEIVED FROM RIO TINTO

On March 13, 2022, the Company’s board of directors (the Board) received a non-binding proposal from Rio Tinto, the Company’s majority shareholder, to acquire the approximately 49% of the outstanding common shares of Turquoise Hill held by the Company’s minority shareholders (approximately 99 million common shares) for cash consideration of C$34.00 per share. Rio Tinto has stated that the Proposal is conditional on, among other things, Turquoise Hill not raising additional equity capital, including through a rights offering, bought deal or other share placement, pending completion of the proposed transaction. The Proposal does not amend the terms of the amended and restated


June 30, 2022		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)

Heads of Agreement entered into by Turquoise Hill and Rio Tinto on January 24, 2022 which establishes a binding funding plan for the completion of the Oyu Tolgoi underground mine.

In response to the Proposal, the Board formed a Special Committee of independent directors comprised of Maryse Saint-Laurent (Chair), George Burns, Peter Gillin, Russel Robertson and Caroline Donally. The Special Committee has retained BMO Nesbitt Burns Inc. as its financial advisor and Blake, Cassels & Graydon LLP as its legal counsel. In addition, the Special Committee has retained TD Securities as an independent valuator to prepare a formal valuation of the common shares of the Company in accordance with Multilateral Instrument 61-101– Protection of Minority Shareholders in Special Transactions.

In addition to responsibility for reviewing and considering the Proposal, the Special Committee’s mandate includes responsibility for considering the Company’s liquidity needs and financing options pending the Company’s consideration of the Proposal.

In light of Rio Tinto’s condition in its Proposal that its offer is subject to Turquoise Hill not raising additional equity capital, Rio Tinto invited Turquoise Hill to propose terms for an interim funding facility that would satisfy Turquoise Hill’s funding requirements pending the Company’s consideration of the Proposal. Following careful consideration by the Special Committee of the financing options available to the Company, including a potential equity offering, on the recommendation of the Special Committee the Company entered into the Funding HoA on May 18, 2022. See the section of this MD&A titled “Funding of OT LLC by Turquoise Hill”.

In furtherance of its mandate, the Special Committee will continue to consider the Company’s liquidity needs and financing options, including potential equity offerings. The Funding HoA does not prohibit the Company from raising additional capital by way of an equity offering, including pending the Company’s consideration of the Proposal. However, Rio Tinto has advised the Special Committee that, should the Company proceed with an equity offering, Rio Tinto intends to withdraw the Proposal. Rio Tinto has also advised that if Turquoise Hill proceeds with an equity offering, Rio Tinto intends to exercise its pre-emptive rights to maintain its pro rata interest.

The Proposal is non-binding on Turquoise Hill. There can be no assurance that a transaction will result from the Proposal, and if a transaction does result, whether such transaction will be completed or on what terms. Turquoise Hill does not intend to comment on or disclose further developments regarding the Special Committee’s evaluation of the Proposal unless and until it deems further disclosure is appropriate or required.

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 Board, 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.


June 30, 2022		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)

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.

Renewed Partnership with Government of Mongolia

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 on January 25, 2022 that started the Oyu Tolgoi underground mine production and the full Definitive Estimate underground development budget.

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 Electricity Supply Agreement entered into by OT LLC (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.

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 expiring in July 2023.

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 Government of Mongolia in December 2018 (and as amended in June 2020) provides a binding framework and pathway for long-term power supply to the Oyu Tolgoi mine.

OT LLC entered into the ESA on January 26, 2022, with, amongst others, Southern Region Electricity Distribution Network to provide OT LLC with power from the Mongolian grid. Power will be delivered under the ESA once certain technical conditions are satisfied, and the Mongolian grid becomes capable of providing electricity to meet OT LLC’s total power requirements on a long-term basis. 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, followed by two, two-year extensions to up to 2030, if required, with NPTG having an early termination right after July 2028 by giving at least six months prior notice on or after January 4, 2028. The ESA has a term of 20 years from the date on which the current power import agreements terminate and domestic supply commences which provides a pathway to meeting OT LLC’s long-term power requirement from domestic sources.


June 30, 2022		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)

The outstanding commercial terms are in the process of being finalised by a dedicated working group established by Ministry of Energy which includes representatives from OT LLC, NPTG and Ministry of Energy.

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 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 were addressed in local Mongolian tax courts. As there was less certainty with respect to the resolution of these matters, the Company 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.


June 30, 2022		Page\| 17

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

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. 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.

Regarding previously disclosed tax assessments of OT LLC, 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 OT LLC or the Government of Mongolia to terminate the suspension. Initial discussions have been held between the parties but there have been no material developments in relation to the negotiations. The suspension order is due to expire on August 11, 2022. The Company remains committed to continue to work with the Government of Mongolia and Rio Tinto to finalise the outstanding tax matters whether through arbitration or negotiation.

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.

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 current and former 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. The 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.

NOTICE OF ARBITRATION

In May 2022, the Company received a notice of arbitration from Entrée Resources Ltd. in connection with the earn-in-agreement with Entrée.


June 30, 2022		Page\| 18

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 disputes the characterisations made by Entrée in its news release dated May 26, 2022 announcing the initiation of arbitration proceedings. Turquoise Hill has been in discussions with Entrée in order to resolve certain commercial disagreements in connection with the Earn-in Agreement. The Company reserves all of its rights and will vigorously defend itself.

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 the Company’s MD&A for the year ended December 31, 2021.

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.

During Q2’22, the exploration team completed planned 2022 field activities at Khatavch. The work included mapping, sampling and a ground magnetic survey. The mapping and sampling programme was undertaken to further enhance the geological map created in 2021 and to aid in the definition of lithological contacts. The magnetic survey included 398.4-line kilometres on 50 metres spaced north-south lines and 41.2-line kilometres on 7 east-west tie lines, for a total of 439.6-line kilometres. The results from the magnetic survey are currently being interpreted and will be shared in H2’22. As part of the field work at Khatavch, the exploration team conducted stakeholder meetings with Mandakh soum officials, local herders, and management personnel from the neighbouring coal mine. At completion of the field programme, the camp site was rehabilitated, and an environmental inspection was completed by the Alkhanteeg Bag Leader.

During Q2’22, the exploration team conducted administrative activities and stakeholder consultations in preparation for field activities at Bag. During the field season, the team is planning to complete two diamond drill holes at Bag for a total of approximately 1,200 metres. The contract for drilling and core cutting services has been awarded and mobilisation occurred in late July.

The Turquoise Hill exploration team continues to monitor any opportunities to grow their portfolio through acquiring new land. The next land release by the Mineral Resources and Petroleum Authority of Mongolia is not expected until Q1’23.

Board Appointment

On May 11, 2022, Turquoise Hill announced the appointment of Caroline Donally to the Company’s Board of Directors as an independent director.

INCOME AND OTHER TAXES

The Company recorded an income statement credit of $9.8 million for income and other taxes during Q2’22, compared with an income statement charge of $19.0 million in Q2’21. 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 a credit within income and other taxes for Q2’22 of $20.1 million. During Q2’22, there was an $19.2 million increase to the amount of Mongolian and $0.9 million increase to the amount of Canadian deferred tax assets recognised.


June 30, 2022		Page\| 19

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

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 Q2’22 included an increase of $16.4 million in the recognised deferred tax asset on temporary differences related to property, plant and equipment and other temporary differences and a decrease of $4.2 million for prior year losses. Accrued but unpaid interest expense incurred by OT LLC during Q2’22 increased the recognised deferred tax assets by $7.0 million.

A negative tax rate of approximately 12% during Q2’22 arose as the Company reported income from continuing operations before tax of $83.5 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 $9.8 million.

During Q2’21, adjustments to deferred tax assets resulted in income statement charges within income and other taxes were $10.5 million. There was a decrease to the amount of Mongolian deferred tax assets recognised of $15.0 million and an increase to Canadian deferred tax assets of $4.5 million.

The adjustment to the Mongolian deferred tax assets in Q2’21 represented a decrease of $22.6 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 Oyu Tolgoi during Q2’21 increased the recognised deferred tax assets by $7.6 million.

An effective tax rate of approximately 13% during Q2’21 arose as the Company reported income from continuing operations before tax of $146.9 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 $19.0 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 +/- 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.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow

Operating activities. Net cash generated from operating activities was $229.1 million in Q2’22 versus $218.4 million in Q2’21. Cash generated from operating activities before interest and tax was $315.4 million in Q2’22 versus $304.8 million in Q2’21, resulting from higher cash receipts from higher shipments associated with the easing of COVID-19 related restrictions at the border and from the use of double trailers to ship concentrate. The higher cash receipts were partially offset by higher operating costs, which were impacted by inflationary pressures on prices for critical supplies, including fuel, power, explosives and higher shipment and royalty costs as a result of the higher volumes of concentrate delivered to customers.

Interest paid in Q2’22 was $84.8 million versus $84.5 million in Q2’21 and mainly represents bi-annual payments of interest on the project finance facility at Oyu Tolgoi. Interest received in Q2’22 was $0.9 million versus $0.7 million in Q2’21. $2.5 million of income and other taxes were paid in Q2’21. This was in line with the $2.5 million paid in Q2’22 and relates to taxes withheld on interest payments made to project finance lenders.

Investing activities. Cash used in investing activities was $260.9 million in Q2’22 versus $227.3 million in Q2’21. Cash used in investing activities in both years reflects expenditures on property, plant and equipment.


June 30, 2022		Page\| 20

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

Financing activities. Cash used in financing activities in Q2’22 was $44.6 million, compared to $30.4 million in Q2’21. Cash used in financing activities in Q2’22 is comprised of $41.8 million in principal repayments made on the project finance facility and $2.7 million in payments made in relation to lease liabilities. Cash used in financing activities in Q2’21 principally relates to $21.7 million in principal repayments made on the project finance facility, an $8.5 million repayment of amounts drawn by Oyu Tolgoi on its overdraft facility during Q1’21 and $0.2 million in payments made in relation to lease liabilities.

Liquidity

As at June 30, 2022, Turquoise Hill had consolidated cash and cash equivalents of approximately $0.5 billion (December 31, 2021: $0.7 billion) and consolidated working capital²¹ of negative $148.9 million (December 31, 2021: negative $68.8 million). The movement in consolidated working capital during Q2’22 was primarily driven by the decrease in concentrate inventories and trade and other receivables and an increase in trade and other payables. COVID-19 control measures and restrictions eased during Q2’22, and, with improved shipments, onsite concentrate inventory levels returned to target levels. The decrease in receivables was mainly due to the impact of lower metal prices on provisional price adjustments at the end of the quarter, which also resulted in payables to customers. Consolidated working capital is expected to remain negative while expenditures 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 June 30, 2022 also gave consideration to:

●

Known and future incremental impacts of the COVID-19 pandemic, including the $227 million increase to the estimate of underground development capital expenditures²² identified in the 2022 Reforecast;

●

The impact of other increases to underground development capital expenditures²² required to complete the underground development as identified in the 2022 Reforecast;

●

The expected timing of sustainable production for Panel 0 in H1’23;

●

The impact of higher inflation on cash operating costs over the liquidity period; and

●

Plans to access additional sources of funding under the Funding HoA where management considers implementation of those plans to be probable.

Sensitivity analyses were performed over the short-term cash flow forecasts, including the impact of estimated commodity prices on cash receipts. Liquidity forecasts reflect additional sources of funding available under the Funding HoA. The additional funding needed until June 30, 2023 is expected to be provided through proceeds from the Initial Equity Offering, the Early Advance and RT Advance as well as the benefits of the Re-profiling. In Q3’22, the Company is expected to access the Early Advance of $400 million, which will eventually be repaid from the proceeds of the Initial Equity Offering. In Q1’23, the Company is also expected to access the committed RT Advance of $300 million, which will eventually be repaid from the proceeds of the Co-lending Facility. On achievement of sustainable production in H1’23, the Company expects to access the remaining $450 million of the Co-lending Facility and SSD of at least $500 million. Management considers execution of these funding options to be sufficiently probable to support the Company’s belief that its $0.5 billion of available liquidity as at June 30, 2022, together with the various sources of funding available to the Company under the Funding 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 June 30, 2022, including its operations and capital expenditures, over the same period. Turquoise Hill also expects to access the incremental financing available to it under the Funding HoA to sustain its operations and underground development beyond this period (see “Funding of OT LLC by Turquoise Hill” of this MD&A).

²¹ Consolidated working capital is a non-GAAP financial measure. Please refer to the Section titled “Non-GAAP and Other Financial Measures” on page 28 of this MD&A for further information.

²² Underground development capital expenditures is a supplementary financial measure. Please refer to the Section titled “Non-GAAP and Other Financial Measures” on page 28 of this MD&A for further information.


June 30, 2022		Page\| 21

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

Capital Resources

The Company considers its capital to be share capital and third-party borrowings. To effectively manage its 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 June 30, 2022, the full original net proceeds of $4.2 billion had been advanced to OT LLC²³. As of June 30, 2022, cumulative principal repayments of $108.6 million had been made to project finance lenders.

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. The restrictions imposed by Resolution 103 on additional third party funding at OT LLC mean that SSD would not be drawn until after sustainable production is achieved, though related negotiations with the project finance lenders can start prior to this.

OT LLC notified the senior project finance lenders that the commencement of the undercutting for the underground mine in January 2022 may have constituted 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, which could indirectly result in Oyu Tolgoi’s inability to meet the original project completion longstop date specified in the project finance agreements. On May 4, 2022 a waiver of this potential event of default was executed between OT LLC and Sumitomo Mitsui Banking Corporation, in its capacity as Intercreditor agent.

The Company’s accumulated deficit as at June 30, 2022 was $3.9 billion, compared to $2.8 billion²⁴ as at December 31, 2021. This increase includes the $1.4 billion waiver of carry account loans made on behalf of Erdenes as part of the agreement with the Government of Mongolia on January 25, 2022, which is partially offset by $0.4 billion in income for the year to date attributable to the owners of Turquoise Hill.

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 June 30, 2022, 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

Following the strong upward move in copper prices in Q1’22 that reached record-highs of $10,730/t in early March, prices declined sharply in Q2’22. There were two phases of decline. The first between mid-April and mid-May where prices fell to levels just above $9,000/t. Prices then recovered to levels just above $9,500/t until

²³ Please refer to the Section titled “Our Business” on page 5 and to the Section titled “Related-party Transactions” on page 25 of this MD&A.

²⁴ Prior year comparative numbers have been restated for adoption of the IAS16 amendment to Property, Plant and Equipment: Proceeds before intended Use. Please refer to the Section titled “Recent Accounting Pronouncements” on page 24 of this MD&A for further information.


June 30, 2022		Page\| 22

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

mid-June when the second wave of selling took prices lower to just above $8,200/t levels by end of June and to levels hovering around $7,000/t in July. With inflation concerns giving way to recessionary fears from interest rate hikes, commodity trading advisors (CTA) are increasingly placing short bets on the commodity markets. China’s demand was extremely sluggish in Q2’22, as COVID-19 lockdowns in April and May saw its economy registering the sharpest contraction since the onset of the pandemic. China’s Q2 GDP was down 2.6% quarter over quarter and only up 0.4% year over year, missing market expectations. The Chinese government is responding by front-loading infrastructure projects to stimulate the economy in hopes of boosting the economy in the latter half of the year. Demand in North America and Europe was robust in the first half of 2022, but both regions are seeing macroeconomic indicators softening as inflation erodes consumer sentiment. Europe is especially vulnerable to a downturn, as it also faces threats from energy shortages. Copper prices were down more than 20% by the end of Q2’22.

Smelter disruptions in the first quarter supported a rise in spot treatment charges and refining charges (TC/RCs) into April, peaking at $80.7/t & 8.07c/lb by the end of the month. The rise in spot terms were capped by increased demand from the restart of the Q1 distressed smelters in May and the return of smelters from maintenances. TC/RCs continued to fall in June as smelters looked to restock before the next period of maintenance in H2. Spot TC/RCs ended the quarter at $72.4/t & 7.24c/lb.

Having rallied to a near record-high of $2,039/oz in Q1’22 on the Russia-Ukraine conflict, gold price trended downwards in Q2’22 despite intensifying global inflation pressures and the ongoing geopolitical crisis. As the Federal Reserve increasingly pursues a hawkish monetary policy to quell inflation pressures, this increases the opportunity cost of holding a non-yielding asset such as gold. Gold prices ended Q2’22 at $1,815/oz.

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 June 30, 2022, 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.

CONTRACTUAL OBLIGATIONS

The following table summarises Turquoise Hill’s contractual obligations²⁵ as at June 30, 2022.


(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⁾		723,318		1,369,348		1,190,134		957,516		4,240,316
Purchase obligations ⁽²⁾		475,117		53,371		-		-		528,488
Other obligations ⁽³⁾		440,769		-		-		-		440,769
Power commitments		127,969		1,032		-		-		129,001
Lease liabilities		6,280		17,421		932		-		24,633
Decommissioning obligations		-		-		-		389,889		389,889
Total		1,773,453		1,441,172		1,191,066		1,347,405		5,753,096

²⁵ Contractual obligations is a non-GAAP financial measure. Please refer to the Section titled – “Non-GAAP and Other Financial Measures” – on page 28 of this MD&A for further information.


June 30, 2022		Page\| 23

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⁾	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 June 30, 2023; 24 months between July 1, 2023 and June 30, 2025; 24 months between July 1, 2025 and June 30, 2027; Beyond July 1, 2027.

The total of non-derivative financial liabilities is $4,610 million as at June 30, 2022 (December 31, 2021: $4,567million). The total reported financial liabilities represents obligations that are non-cancellable.

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, 2021.

RECENT ACCOUNTING PRONOUNCEMENTS

A number of new standards, and amendments to standards and interpretations, are effective as of January 1, 2022, and have been applied in preparing these consolidated financial statements.

Property, Plant and Equipment: Proceeds before Intended Use (Amendments to International Accounting Standards (IAS 16)): This amendment prohibits entities from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while the Company is preparing the asset for its intended use. Instead, sales proceeds and the cost of producing these items will be recognised in profit or loss in the Consolidated Statement of Income. The amendment applies retrospectively, but only to items of property, plant and equipment made available for use on or after the beginning of the earliest period presented in the financial statements. The amendment is effective for annual reporting periods beginning on or after January 1, 2022, with earlier application permitted.

The Company adopted the amendment on January 1, 2022 and, accordingly, the information presented for 2021 has been restated. On initial application, $21 million of net proceeds from the sale of Oyu Tolgoi underground ore concentrate prior to January 1, 2021 was transferred from capital work in progress to deficit. At June 30, 2021 a further $9 million (December 31, 2021 $55 million) of net proceeds from the sale of Oyu Tolgoi underground ore concentrate was transferred from capital work in progress to deficit related to sales and cost of sales during the period.

Revenue and cost of sales associated with Oyu Tolgoi underground ore concentrate that was sold during the three and six months ended June 30, 2021 was $12 million and $3 million, respectively.

The Company is in the process of assessing the impacts of the remaining standards and amendments to standards and interpretations, which have been issued but are not yet effective.

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 and are substantially unchanged from those disclosed in its MD&A for the year ended December 31, 2021 and in the AIF in respect of such period, except as supplemented below. See, in particular, the sections in this MD&A titled


June 30, 2022		Page\| 24

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)

“OPERATIONAL OUTLOOK FOR 2022”, “OYU TOLGOI – Surface 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. 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 following risk factors supplement the risk factors disclosed and described in the Company’s annual MD&A and AIF:

The ongoing Russia-Ukraine conflict is causing certain supply disruptions of oil and gas to the Oyu Tolgoi project and may have an adverse effect on the Company’s business, financial conditions and results of operations.

Russia’s invasion of Ukraine in February 2022 has led to economic sanctions and export control measures being levied against Russia by the international community and may result in additional sanctions, export control measures or other international action, which have and could in the future result in, among other things, severe or complete restrictions on exports and other commerce and business dealings involving Russia, certain regions of Ukraine, and/or particular entities and individuals, any of which may lead to increased inflation and have a destabilising effect on commodity prices, supply chains and global economies more broadly. While the Company does not have any operations in Russia or Ukraine, the ongoing military conflict between Russia and Ukraine has the potential to cause volatility in commodity prices and supply chain disruptions, including the supply of oil and gas from the region, which the Company utilises in connection with its operations, all of which may adversely affect the Company’s business, financial condition and results of operations. The extent and duration of the current Russia-Ukraine conflict and related international action cannot be accurately predicted at this time and the effects of such conflict may magnify the impact of other risk factors relevant to the Company, including those relating to commodity price volatility and supply chain. The situation is rapidly changing and unforeseeable impacts may materialise and may have an adverse effect on the Company’s business, financial condition and results of operations.

Multinational companies and businesses may in the future be subject to a minimum corporate tax rate and other new tax measures under evolving global initiatives.

Members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting have endorsed a “Two-Pillar Solution” designed in part to ensure that in-scope multinational enterprises are subject to a minimum tax rate of 15%, building on its previous work on tax avoidance which targets, among other things, certain “base eroding” payments. The Company continues to monitor the ongoing implementation of such initiatives by countries where the Company is present. The Company is unable to predict when and how such initiatives will be enacted into law in all such countries. It is possible that implementation of such initiatives, including the global minimum corporate tax rate, could have a material effect on the Company’s liability for corporate taxes and its consolidated effective tax rate, which could in turn have a material effect, even a material adverse effect, on the Company’s financial position.

RELATED-PARTY TRANSACTIONS

As at June 30, 2022, Rio Tinto’s equity ownership in the Company was 50.8%, which was unchanged from December 31, 2021. The following tables present the consolidated financial statement line items within which transactions with Rio Tinto are reported.


June 30, 2022		Page\| 25

Turquoise Hill Resources Ltd.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Stated in U.S. dollars, except where noted)


Statements of Income	Three Months Ended June 30,						Six Months Ended June 30,
(Stated in $000’s of dollars)	2022			2021			2022			2021

Operating and corporate administration expenses:
Cost recoveries - Turquoise Hill		167			186			216			680
Management services payment (i)		(7,159	)		(5,400	)		(14,412	)		(11,878	)
Cost recoveries - Rio Tinto (ii)		(24,133	)		(15,726	)		(36,047	)		(28,612	)

Finance costs:
Completion support fee (iii)		(27,015	)		(27,312	)		(53,778	)		(54,347	)
		(58,140	)		(48,252	)		(104,021	)		(94,157	)

Statement of Cash Flows	Three Months Ended June 30,						Six Months Ended June 30,
(Stated in $000’s of dollars)	2022			2021			2022			2021

Cash generated from operating activities
Interest paid (iii)		-			-			-			(26,171	)

Cash flows from investing activities
Expenditures on property, plant and equipment:
Management services payment and cost recoveries - Rio Tinto (i), (ii)		(3,161	)		(1,933	)		(9,077	)		(8,855	)

Balance sheets							June 30,			December 31,
(Stated in $000’s of dollars)							2022			2021

Prepaid expenses and other assets								40,855			81,764
Trade and other payables:
Management services payment - Rio Tinto (i)								(35,498	)		(14,584	)
Cost recoveries - Rio Tinto (ii)								(82,563	)		(39,569	)
Total								(77,206	)		27,611

(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 Oyu Tolgoi from March 31, 2010 onwards. After signing the UDP on May 18, 2015, the management services payment to Rio Tinto is 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 the Oyu Tolgoi project.

(iii)

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, the Company is required to pay Rio Tinto annually a completion support fee equal to 2.5% of the amounts drawn under the facility. This fee is accounted for as a borrowing cost and included within interest expense and similar charges. The fee payment obligation will terminate on the date Rio Tinto’s CSU obligations to the project lenders terminate.


June 30, 2022		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)

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
	Jun-30 2022		Mar-31 2022		Dec-31 2021 Restated (b)		Sep-30 2021 Restated (b)

Revenue		402.0		402.7		522.3		662.1

Income for the period		93.3		394.3		221.6		54.4

Income attributable to owners of Turquoise Hill Resources Ltd		82.6		275.2		165.8		55.7

Basic and diluted earnings per share attributable to owners of Turquoise Hill Resources Ltd (a)		0.41		1.37		0.82		0.28
		Quarter Ended
	Jun-30 2021 Restated (b)		Mar-31 2021		Dec-31 2020		Sep-30 2020 Restated (b)

Revenue		329.8		526.5		405.1		283.0

Income for the period		127.8		332.1		241.6		177.8

Income attributable to owners of Turquoise Hill Resources Ltd		102.9		236.7		159.9		139.2

Basic and diluted earnings per share attributable to owners of Turquoise Hill Resources Ltd (a)		0.51		1.18		0.79		0.69

(a)	Basic and diluted earnings per share has been recalculated pursuant to the share consolidation completed on October 23, 2020 for all periods presented.

(b)	Comparatives have been restated for adoption of the IAS16 amendment to Property, Plant and Equipment: Proceeds before intended Use. Please refer to the Section titled “Recent Accounting Pronouncements” on page 24 of this MD&A for further information.

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 Q2’22 and Q1’22 was lower than in the previous two quarters and than in Q1’21 due to the planned transition of mining to the next phase of operations. Revenue in Q3’20 was lower due to lower sales volumes impacted by lower gold and copper production as the mine transitioned to Phase 4B. Q2’21 revenue was lower due to the COVID related border restrictions that resulted in force majeure being declared on concentrate shipments. 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 the higher grade gold areas of Phase 4B. Revenue in Q2’21 remained impacted by the force majeure declared by the OT LCC from March 30, 2021. The impacts of the force majeure had been partially mitigated by Q3’21 through the introduction of COVID-19 control measures and increased shipping capacity, but some border disruptions had continued into Q1’22. These restrictions eased during Q2’22, and, with improved shipments, onsite concentrate inventory levels returned 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 in Q1’22, Q2’22 and for the three consecutive quarters ended March 31, 2021 was impacted by deferred tax asset recognition adjustments of $256.6 million (Q1’22), $20.1 million (Q2’22), $131.1 million (Q3’20), $86.1 million (Q4’20) and $52.3 million (Q1’21), respectively. Income in three consecutive quarters ended December 31, 2021 was negatively impacted by deferred tax asset de- recognition adjustments of $10.5 million (Q2’21), $299.9 million (Q3’21) and $19.7 million (Q4’21), respectively.


June 30, 2022		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)

The recognition in Q2’22 was largely due to an increase in temporary differences 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, when required, a calculation of each measure is given below. Such measures 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.

Non-GAAP financial measures

Non-GAAP financial measure is 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. 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 of total 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.


June 30, 2022		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)

A reconciliation of consolidated working capital to the financial statements and notes is provided below.


Consolidated working capital	June 30,			December 31,
(Stated in $000’s of dollars)	2022			2021

Inventories (current)		293,298			290,017

Trade and other receivables		12,853			16,119

Trade and other payables:

- trade payables and accrued liabilities		(336,951	)		(320,791	)

- payable to related parties		(118,061	)		(54,153	)

		(148,861	)		(68,808	)

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 June 30, 2022 to the relevant line items from among the current assets and liabilities in the consolidated financial statements and notes is provided below.


	Project Finance Facility			Purchase obligations			Other Obligations		Power commitments			Lease liabilities			Decommissioning obligations

(Stated in $000’s of dollars)

Commitments (MD&A)		4,240,316			528,488			440,769		129,001			24,633			389,889
Cancellable obligations (net of exit costs)		-			(477,940	)		-		(65,017	)		-			-
Accrued capital expenditure		-			(26,362	)		26,362		-			-			-
Discounting and other adjustments		(116,901	)		-			-		-			(4,955	)		(218,485	)
Financial statement amount		4,123,415			24,186			467,131		63,984			19,678			171,404

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. The most comparable financial measure that is disclosed in the primary financial statements for total operating costs is “Cost of sales”.


June 30, 2022		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)

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 expenditures 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)		(Six Months Ended)
*C1 costs (Stated in $000’s of dollars)*	June 30, 2022	June 30, 2021	June 30, 2022	June 30, 2021
		(Restated)⁽¹⁾		(Restated)⁽¹⁾
Cost of sales	219,416	85,511	394,427	241,155
Cost of sales: $/lb of copper sold	2.82	1.98	2.74	1.87
Depreciation and depletion	(44,582)	(21,223)	(84,067)	(73,417)
Change in inventory	(10,384)	72,576	11,548	102,873
Other operating expenses	58,407	73,276	123,413	129,764
Less:
- Inventory (write-down) reversal	115	(1,522)	(189)	3,604
- Depreciation	(498)	(593)	(1,042)	(1,195)
Management services payment to Turquoise Hill	7,159	5,400	14,412	11,878
Total operating cash costs	229,633	213,425	458,501	414,662
Total operating cash costs: $/lb of copper produced	3.40	2.63	3.41	2.29
Adjustments to total operating cash costs⁽²⁾	(5,485)	(11,302)	(11,179)	(11,510)
Less: Gold and silver revenues	(135,628)	(132,789)	(247,834)	(325,668)
C1 costs ($‘000)	88,520	69,334	199,488	77,484
C1 costs: $/lb of copper produced	1.31	0.85	1.49	0.43

*All-in sustaining costs (Stated in $000’s of dollars)*
Corporate administration	13,376	8,525	28,996	21,568
Asset retirement expense	3,423	1,388	5,855	2,983
Royalty expenses	28,415	22,462	53,352	45,202
Ore stockpile and stores write-down (reversal)	(115)	1,522	189	(3,604)
Other expenses	1,025	552	2,199	806
Sustaining cash capital including deferred stripping	42,738	21,804	68,833	30,100
All-in sustaining costs ($‘000)	177,382	125,587	358,912	174,539


All-in sustaining costs: $/lb of copper produced	2.63	1.55	2.67	0.96

⁽¹⁾	Prior year comparatives have been restated for adoption of the IAS16 amendment to Property, Plant and Equipment: Proceeds before intended Use. Please refer to the Section titled “Recent Accounting Pronouncements” on page 24 of this MD&A for further information.

⁽²⁾	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.

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.

Mining costs per tonne of material mined

Mining costs per tonne of material mined for the three and six months ended June 30, 2022 are calculated by reference to total mining costs, respectively, of $61.9 million and $116.8 million (Q2’21: $42.9 million and $87.3 million) and total material mined of 25.6 million and 49.9 million tonnes (Q2’21: 15.8 million and 38.4 million tonnes).


June 30, 2022		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)

Milling costs per tonne of ore treated

Milling costs per tonne of ore treated for the three and six months ended June 30, 2022 are calculated by reference to total milling costs, respectively, of $63.7 million and $131.7 million (Q2’21: $66.7 million and 128.0 million) and total ore treated of 9.7 million and 19.3 million tonnes (Q2’21: 9.4 million and 19.2 million tonnes).

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 expenditures

These measures are derived from and comprise sustaining and development expenditures on property, plant and equipment in the cash flow statement.

Capital expenditures on surface operations

Capital expenditures on surface operations comprise investment in the above ground assets and infrastructure that now support both operation of the open pit and processing of underground material. This includes the expenditures related to the open pit, including deferred stripping, the concentrator and tailings storage.

ii.

Capital expenditures on the underground project

Capital expenditures on the underground project comprise underground sustaining capital expenditures and underground development capital expenditures.

Underground sustaining capital expenditures

Underground sustaining capital expenditures represent cash spent on assets lasting for more than one year that support lateral development of the underground system, including drawpoint construction. This measure is used to support management’s objective of effective and efficient capital allocation as the Company needs to invest in sustaining capital assets in order to optimise productive capacity, including during the period from undercut commencement in January 2022 through to sustainable production, currently anticipated in H1’2023, and into the future.

Underground development capital expenditures

Underground development capital expenditures reflect spending required to complete the underground project, including on the underground materials handling and ventilation infrastructure. It includes construction of the shafts, primary crushers, material handling systems and the surface to conveyor system. This measure is used to support management’s objective of delivering growth through completion of development on the underground project.


June 30, 2022		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)

iii.

Underground development capital incurred

Underground development capital incurred reflects the value of work completed, usually equal to amounts invoiced or accrued, where goods or services have been delivered but the invoice has not been received or processed. Amounts incurred, on being invoiced and paid will become underground development capital expenditures.

iv.

Underground development capital committed

Underground development capital committed reflects the value of the work awarded to a vendor or contractor, including the work of the owners teams required to support awarded contracts. Amounts committed, once the scope of the contract packages have been delivered will become underground development capital incurred.

Underground development capital incurred and underground development capital committed provide information on the delivery of the project to date both in terms of commitments made with vendors and scope delivered. These measures are useful since they illustrate how much of the project remains to be delivered, which is increasingly important to management as we approach completion of the project.

These measures are used to support management’s objective of effective and efficient capital allocation as the Company needs to invest in sustaining existing assets across our operations in order to maintain and improve productive capacity, and to deliver growth through completion of development on the underground project.

G&A costs per tonne of ore treated

G&A costs per tonne of ore treated for the three and six months ended June 30, 2022 are calculated by reference to total general & administrative costs. General & administrative costs are equivalent to Oyu Tolgoi administrative expenses and totalled, respectively, $26.6 million and $62.2 million (Q2’21: $46.8 million and $80.9 million). Total ore treated for those periods were 9.7 million and 19.3 million tonnes (Q2’21: 9.4 million and 19.2 million tonnes). G&A is used to promote cost effectiveness through measurement of the overhead required to support the business.

INTERNAL CONTROL OVER FINANCIAL REPORTING AND DISCLOSURE CONTROLS AND PROCEDURES

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 three months ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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 CEO and CFO, on a timely basis so that appropriate decisions can be made regarding public disclosures. There were no changes in the Company’s disclosure controls and procedures during the three months ended June 30, 2022.

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” within the meaning of National Instrument 43-101 – Standards of Disclosure for Mineral Projects (NI 43-101).


June 30, 2022		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)

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 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 key agreements entered into with the Government of Mongolia announced on January 24, 2022 (the GoM Agreements) are implemented along with the implementation of Resolution 103, the resolution passed by the Parliament of Mongolia in December 2021 to resolve the outstanding issues among the Company, Rio Tinto and the Government of Mongolia in relation to the implementation of Resolution 92, the 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; 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 terms and conditions of the Proposal and its review and evaluation by the Special Committee; the implementation and successful execution of the updated funding plan that is the subject of the Funding 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 Funding HoA, as well as potential delays in the ability of the Company and OT LLC to proceed with the funding elements contemplated by the Funding 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


June 30, 2022		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)

secured advance to be provided by Rio Tinto to the Company under the Funding 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 Funding 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; the timing and progress of the sinking of Shafts 3 and 4 and any delays in that regard in addition to previously announced delays; 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 amended, as well as power purchase agreements and extensions thereto; the finalisation 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 licence to operate in Mongolia; capital and operating cost estimates, including inflationary pressures thereon resulting in cost escalation; the content of the Definitive Estimate; mill and concentrator throughput; anticipated business activities, planned expenditures, corporate strategies; supply disruptions of oil and gas to the Oyu Tolgoi project caused by the ongoing Russia-Ukraine conflict; 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 possibility that the Company and Rio Tinto are unable to come to an agreement on the terms and conditions of a going-private transaction or that the terms and conditions of a definitive agreement between the Company and Rio Tinto in respect of a going private transaction will differ from those that are currently contemplated by the Proposal; 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; finalisation 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 Funding 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


June 30, 2022		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)

volatility; discrepancies between actual and estimated production; mineral reserves and resources and metallurgical recoveries; development plans for processing resources; the accuracy of the Definitive Estimate; 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; inflationary pressures on prices for critical supplies for Oyu Tolgoi including fuel, power, explosives and grinding media resulting in cost escalation; defective title to mineral claims or property; human rights requirements; international conflicts such as the ongoing Russia-Ukraine conflict; and new tax measures, such as a minimum corporate tax rate, that might be implemented as a result of evolving global initiatives. 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 Funding 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 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; production estimates and the anticipated yearly production of copper, gold and silver at Oyu Tolgoi; inflationary pressures on prices for critical supplies for Oyu Tolgoi, including fuel, power, explosives and grinding media resulting in cost escalation; and


June 30, 2022		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)

the potential impact of the ongoing Russia-Ukraine conflict, including supply disruptions of oil and gas to the Oyu Tolgoi project caused thereby.

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 mineralisation 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, mineralisation 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.

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


June 30, 2022		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)

results to differ from these forward-looking statements are included in the “Risk Factors” section in the AIF, as supplemented by the “Risks and Uncertainties” section in this MD&A.

Readers are further cautioned that the list of factors enumerated in the “Risk Factors” section in the AIF and 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.


/s/ Steve Thibeault				/s/ Luke Colton

Steve Thibeault				Luke Colton
Interim Chief Executive Officer				Chief Financial Officer

August 4, 2022
Montreal, QC, Canada


June 30, 2022		Page\| 37

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-99.3

Exhibit 99.3

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE

I, Steve Thibeault, Interim Chief Executive Officer of Turquoise Hill Resources Ltd., certify the following:

1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Turquoise Hill Resources Ltd. (the “issuer”) for the interim period ended June 30, 2022.

2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in Regulation 52-109 respecting Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

II.

information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

designed ICFR, or caused it 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 the issuer’s GAAP.

5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

5.2 N/A

5.3 N/A

6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on April 1, 2022 and ended on June 30, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date: August 4, 2022

/s/ Steve Thibeault

Steve Thibeault

Interim Chief Executive Officer

Turquoise Hill Resources Ltd.

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE

I, Luke Colton, Chief Financial Officer of Turquoise Hill Resources Ltd., certify the following:

designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

II.

5.2 N/A

5.3 N/A

Date: August 4, 2022

/s/ Luke Colton

Luke Colton

Chief Financial Officer

Turquoise Hill Resources Ltd.