2017 Form 40-F

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 40-F

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

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

For the fiscal year ended December 31, 2016 Commission File Number: 001-32403

TURQUOISE HILL RESOURCES LTD. (Exact name of Registrant as specified in its charter)

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

Suite 354 – 200 Granville Street, Vancouver, British Columbia, Canada, V6C 1S4, (604) 688-5755 (Address and telephone number of registrant’s principal executive offices)

CT Corporation System 111 Eighth Avenue New York, New York 10011 (212) 894-8700 (Name, address and telephone number of agent for service in the United States)

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

New York Stock Exchange Common Shares without par value Nasdaq (Title of Class) (Exchanges)

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

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

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

☒ Annual Information Form ☒ Audited Annual Financial Statements

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 2,012,314,469 Common Shares outstanding as of December 31, 2016

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

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).

Yes ☒ No ☐

The Annual Report on Form 40-F shall be incorporated by reference into, or as an exhibit to, as applicable, the Registrant’s Registration Statement on Form S-8 (File No. 333-160783) under the Securities Act of 1933, as amended.

PRINCIPAL DOCUMENTS

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

A. Annual Information Form For the Annual Information Form (“AIF”) of Turquoise Hill Resources Ltd. (the “Corporation”) for the year ended December 31, 2016, see Exhibit 99.1 of this Annual Report on Form 40-F. The AIF included as Exhibit 99.1 is incorporated by reference into this Annual Report on Form 40-F.

B. Audited Annual Financial Statements For the Corporation’s Audited Consolidated Financial Statements for the years ended December 31, 2016 and 2015, including the report of the independent auditor with respect thereto, see Exhibit 99.2 of this Annual Report on Form 40-F. The Audited Consolidated Financial Statements included as Exhibit 99.2 are incorporated by reference into this Annual Report on Form 40-F.

C. Management’s Discussion and Analysis For the Corporation’s Management’s Discussion and Analysis for the year ended December 31, 2016 (the “MD&A”), see Exhibit 99.3 of this Annual Report on Form 40-F. The MD&A included as Exhibit 99.3 is incorporated by reference into this Annual Report on Form 40-F.

FORWARD-LOOKING STATEMENTS

Certain statements made herein, including statements relating to matters that are not historical facts and statements of the Corporation’s beliefs, intentions and expectations about developments, results and events which will or may occur in the future, constitute “forward-looking information” within the meaning of applicable Canadian securities legislation and “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements and information relate to future events or future performance, reflect current expectations or beliefs regarding future events and are typically identified by words such as “anticipate,” “could,” “should,” “expect,” “seek,” “may,” “intend,” “likely,” “plan,” “estimate,” “will,” “believe” and similar expressions suggesting future outcomes or statements regarding an outlook. These include, but are not limited to, statements respecting anticipated business activities, planned expenditures, corporate strategies, and other statements that are not historical facts.

Certain important factors that could cause actual results, performance or achievements to differ materially from those in the forward- looking statements and information include, among others, copper, gold and silver price volatility; discrepancies between actual and estimated production, mineral reserves and resources and metallurgical recoveries; development plans for processing resources; matters relating to proposed exploration or expansion; mining operational and development risks; litigation risks; regulatory restrictions (including environmental regulatory restrictions and liability); communications with local stakeholders and community relations; activities, actions or assessments by governmental authorities; events or circumstances that may affect the Corporation’s ability to deliver its products in a timely manner; currency fluctuations; the speculative nature of mineral exploration; the global economic climate; dilution; share price volatility; competition; loss of key employees; additional funding requirements; capital and operating costs, including with respect to the development of additional deposits and processing facilities; and defective title to mineral claims or property. Although the Corporation has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements and information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. All such forward-looking statements and information are based on certain assumptions and analyses made by the Corporation’s management in light of their experience and perception of historical trends, current conditions and expected future developments, as well as other factors management believes are 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 development of Oyu Tolgoi, the Corporation has based its assumptions and analyses on certain factors which are inherently uncertain. Uncertainties and assumptions include, among others: the timing and cost of the construction and expansion of mining and processing facilities; the timing and availability of a long- term power source (or availability of finance for the Corporation to construct such a source) for Oyu Tolgoi; the ability to draw down on the supplemental debt under the Project Finance Facility (as defined in the AIF) and the availability of additional financing on terms reasonably acceptable to Oyu Tolgoi LLC, Rio Tinto plc (together with its affiliates, “Rio Tinto”) and the Corporation to further develop Oyu Tolgoi; 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, in the development of the underground mine (which could significantly exceed the costs projected in the Statutory Feasibility Study and the 2016 OTTR (as defined in the section entitled “Definitions” in the AIF)); projected copper, gold and silver prices and demand; and production estimates and the anticipated yearly production of copper, gold and silver at Oyu Tolgoi.

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

This Annual Report on Form 40-F also contains references to estimates of mineral reserves and mineral resources. The estimation of reserves and resources is inherently uncertain and involves subjective judgments about many relevant factors. The mineral resource estimates contained in this Annual Report on Form 40-F are inclusive 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 realized), 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 continuity and character of the deposits will only be determined once significant additional drilling and sampling has been completed and analyzed. Actual mineralization or formations may be different from those predicted. It may also take many years from the initial phase of drilling before production is possible, and during that time the economic feasibility of exploiting a deposit may change. Reserve and resource estimates are materially dependent on prevailing metal prices and the cost of recovering and processing minerals at the individual mine sites. Market fluctuations in the price of metals or increases in the costs to recover metals from the Corporation’s mining projects may render mining of ore reserves uneconomic and affect the Corporation’s operations in a materially adverse manner. Moreover, various short-term operating factors may cause a mining operation to be unprofitable in any particular accounting period;

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

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

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

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

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

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

CAUTIONARY NOTE TO UNITED STATES INVESTORS

The documents filed as part of this Annual Report on Form 40-F have been prepared in accordance with the requirements of Canadian securities laws, which differ from the requirements of U.S. securities laws. Unless otherwise indicated, all reserve and resource estimates included in this Annual Report on Form 40-F have been prepared in accordance with Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”), and the Canadian Institute of Mining, Metallurgy and Petroleum 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.

Canadian standards, including NI 43-101, differ significantly from the requirements of the U.S. Securities and Exchange Commission (the “SEC”), and reserve and resource information contained in this Annual Report on Form 40-F may not be comparable to similar information

4 disclosed by U.S. companies. In particular, and without limiting the generality of the foregoing, the term “resource” does not equate to the term “reserve.” Under U.S. standards, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. Among other things, all necessary permits would be required to be in hand or issuance imminent in order to classify mineralized material as reserves under the SEC standards. The SEC’s disclosure standards normally do not permit the inclusion of information concerning “Measured mineral resources,” “Indicated mineral resources” or “Inferred mineral resources” or other descriptions of the amount of mineralization in mineral deposits that do not constitute “reserves” by U.S. standards in documents filed with the SEC. U.S. investors should also understand that “Inferred mineral resources” have an even greater amount of uncertainty as to their existence and an even greater uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an “Inferred mineral resource” will ever be upgraded to a higher category. Under NI 43-101, estimated “Inferred mineral resources” generally may not form the basis of feasibility or pre-feasibility studies except in rare cases. Investors are cautioned not to assume that all or any part of an “Inferred mineral resource” exists or is economically or legally mineable. Disclosure of “contained pounds” or “contained ounces” of metal in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC standards as in-place tonnage and grade without reference to unit measures. The requirements of NI 43-101 for identification of “reserves” are also not the same as those of the SEC, and reserves reported by the Corporation in compliance with NI 43-101 may not qualify as “reserves” under SEC standards. Accordingly, information concerning mineral deposits set forth herein may not be comparable with information made public by companies that report in accordance with U.S. standards.

ADDITIONAL DISCLOSURE

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

As of the end of the Corporation’s fiscal year ended December 31, 2016, an evaluation of the effectiveness of the Corporation’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) was carried out by the Corporation’s management with the participation of the principal executive officer and principal financial officer. Based upon that evaluation, the Corporation’s principal executive officer and principal financial officer have concluded that as of the end of that fiscal year, the Corporation’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Corporation in reports that it files or submits under the Exchange Act is: (i) recorded, processed, summarized and reported within the

5 time periods specified in SEC rules and forms; and (ii) accumulated and communicated to the Corporation’s management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

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

Management’s Report on Internal Control over Financial Reporting The required disclosure is included in the MD&A, contained in Exhibit 99.3 of this Annual Report on Form 40-F and incorporated by reference herein.

Changes in Internal Control over Financial Reporting There were no changes in the Corporation’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the year ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

ATTESTATION REPORT OF THE REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP (“PwC”) has issued an unqualified opinion on the Corporation’s internal control over financial reporting which accompanies the Corporation’s Audited Consolidated Financial Statements as at December 31, 2016 included as Exhibit 99.2 of this Annual Report on Form 40-F.

NOTICES PURSUANT TO REGULATION BTR None.

AUDIT COMMITTEE The Corporation’s board of directors (the “Board”) has a separately-designated standing Audit Committee as defined by Section 3(a) (58)(A) of the Exchange Act for the purpose of overseeing

6 the accounting and financial reporting processes of the Corporation and audits of the Corporation’s annual consolidated financial statements. As of the date of this Annual Report on Form 40-F, the members of the Audit Committee are Ms. Maryse Saint-Laurent, Mr. Russel C. Robertson and Dr. James W. Gill. Mr. Robertson has been Chair of the Audit Committee since January 1, 2015.

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

AUDIT COMMITTEE FINANCIAL EXPERT The Board has determined that Mr. Robertson is an “audit committee financial expert” (as defined in paragraph 8(b) of General Instruction B to Form 40-F). In addition, each of Ms. Saint-Laurent, Mr. Robertson and Dr. Gill is independent, as that term is defined by the SEC and the NYSE and Nasdaq listing standards. Mr. Robertson is a Chartered Professional Accountant and a Fellow of the Institute of Chartered Professional Accountants (Ontario) and has worked as an accounting professional for over 35 years.

CODE OF BUSINESS CONDUCT AND ETHICS The Corporation has adopted a written “code of ethics” (defined in paragraph 9(b) of General Instruction B to Form 40-F), entitled “The way we work” (the “Code of Ethics”), which applies to all of the Corporation’s employees, executive officers and directors, including the Corporation’s principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. The Code of Ethics includes, among other things, written standards for the Corporation’s principal executive officer, principal financial officer and principal accounting officer that are required by the SEC for a code of ethics applicable to such officers. To review or obtain a copy of the Code of Ethics, see “Citizenship – The way we work and Ethics Point” posted on the Corporation’s website, www.turquoisehill.com. The Code of Ethics is also available in print to any shareholder who requests it. Requests for copies of the Code of Ethics should be made by contacting: Turquoise Hill Resources Ltd., Suite 354 – 200 Granville Street, Vancouver, British Columbia, V6C 1S4.

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

PRINCIPAL ACCOUNTANT FEES AND SERVICES PwC has been the Corporation’s independent auditor since April 2, 2012.

The aggregate fees billed by PwC and its affiliates in fiscal 2016 and fiscal 2015 are detailed below (rounded).

7 (Cdn$) 2016 2015 Audit Fees (a) $1,686,000 $1,474,000 Audit Related Fees (b) $ 319,000 $ 409,000 Tax Fees (c) $ 87,000 $ 17,000 Other Fees $0 $0

Total $2,092,000 $1,900,000

(a) Fees for audit services billed or expected to be billed relating to fiscal 2016 and 2015 consist of:

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

• audit of the Corporation’s subsidiaries Oyu Tolgoi Netherlands B.V., Heruga Exploration LLC and Asia Gold Mongolia

LLC.

In addition, in 2016 and 2015 fees were paid for services provided pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, applicable Canadian securities laws and the required attestations relating to the effectiveness of the Corporation’s internal controls on financial reporting.

(b) Fees for audit-related services provided during fiscal 2016 and 2015 consist of:

• translation services;

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

• comfort letters, consents, and other services related to SEC, Canadian and other securities regulatory authorities’ matters.

The Audit Committee’s Charter requires the pre-approval by the Audit Committee of all audit and non-audit services provided by the external auditor. In March 2013, the Board adopted a resolution pursuant to which the Audit Committee is required to pre-approveall audit and non-audit services above $250,000 provided by the external auditor. Pre-approval from the Audit Committee can be sought for planned engagements based on budgeted or committed fees. No further approval is required to pay pre-approved fees. Additional pre-approval is required for any increase in scope or in final fees.

Pursuant to these procedures, 100% of each of the services provided by the Corporation’s external auditor relating to the fees reported as audit, audit-related, tax and other fees were approved by the Audit Committee.

8 OFF-BALANCE SHEET ARRANGEMENTS During the year ended December 31, 2016, the Corporation was not a party to any off-balance-sheet arrangements that have, or are reasonably likely to have, a current or future effect on the results of operations, financial condition, revenues or expenses, liquidity, capital expenditures or capital resources of the Corporation.

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS The required information is provided under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations,” contained in Exhibit 99.3 to this Annual Report on Form 40-F and incorporated by reference herein.

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

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

Presiding Director at Meetings of Independent Directors The Board holds regular annual and quarterly meetings. Between the quarterly meetings, the Board meets as required, generally by means of telephone conferencing facilities. As part of the quarterly meetings, the Corporation’s “independent directors” (as that term is defined in the rules of the NYSE) also have the opportunity to meet separate from management. If required, between regularly scheduled board meetings, a meeting of independent directors is held by

9 teleconference to update the directors on corporate or other developments since the last Board meeting. Management also communicates informally with members of the Board on a regular basis, and solicits the advice of Board members on matters falling within their special knowledge or experience. Jill Gardiner, a former director and the Corporation’s Chair from January 2015 until December 2016, served as the presiding director at such meetings of independent directors during the year ended December 31, 2016. Mr. Gillin was appointed the Corporation’s Chairman in January 2017.

Communication with Independent Directors Shareholders may send communications to the Corporation’s independent directors by writing to the Chairman, c/o Turquoise Hill Resources Ltd., Suite 354 – 200 Granville Street, Vancouver, British Columbia, V6C 1S4. Communications will be referred to the Chairman for appropriate action. The status of all outstanding concerns addressed to the Chairman will be reported to the Board as appropriate.

Corporate Governance Guidelines According to Rule 303A.09 of the NYSE Listed Company Manual and Rule 5610 of the Nasdaq Marketplace Rules, a listed company must adopt and disclose a set of corporate governance guidelines with respect to specified topics. Such guidelines are required to be posted on the listed company’s website. The Corporation has adopted the required guidelines and has posted them on its website at www.turquoisehill.com. The required guidelines are available in print to any shareholder who requests them. Requests for copies of these documents should be made by contacting: Turquoise Hill Resources Ltd., Suite 354 – 200 Granville Street, Vancouver, British Columbia, V6C 1S4.

Board Committee Mandates The Mandates of the Corporation’s Audit Committee, Compensation Committee, NCG Committee and Health, Safety and Environment Committee are each available for viewing on the Corporation’s website at www.turquoisehill.com, and are available in print to any shareholder who requests them. Requests for copies of these documents should be made by contacting: Turquoise Hill Resources Ltd., Suite 354 – 200 Granville Street, Vancouver, British Columbia, V6C 1S4.

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

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

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

DISCLOSURE PURSUANT TO SECTION 13(r) OF THE EXCHANGE ACT Pursuant to the Iran Threat Reduction and Syria Human Rights Act of 2012 and Section 13(r) of the Exchange Act, the Corporation is required to disclose certain activities of the Corporation and any of the Corporation’s affiliates (as defined in Rule 12b-2 of the Exchange Act) related to the Islamic Republic of Iran. On December 31, 2016, Rio Tinto International Holdings Limited, together with other Rio Tinto affiliates, beneficially owned approximately 50.8% of our Common Shares and therefore is considered the Corporation’s affiliate as defined in Rule 12b-2 of the Exchange Act. As a result, we are including in this Annual Report on Form 40-F the information relating to Rio Tinto set forth below, which is contained in the Annual Report on Form 20-F for the year ended December 31, 2016 filed by Rio Tinto plc and Rio Tinto Limited with the SEC on March 2, 2017.

“Rio Tinto acquired its interest in Namibia-based Rössing Uranium Limited (Rössing) in 1970. The Iranian Foreign Investments Company (IFIC) acquired its original minority shareholding in Rössing in 1975. IFIC’s interest predates the establishment of the Islamic Republic of Iran and the U.S. economic sanctions targeting Iran’s nuclear, energy and ballistic missile programs. IFIC acquired and continues to own a minority shareholding in Rössing in accordance with Namibian law.

Rössing is neither a business partnership nor joint venture between Rio Tinto and IFIC. Rössing is a Namibian limited liability company with a large number of shareholders, including Rio Tinto with 68.62 per cent, IFIC with 15.29 per cent, the Industrial Development Corporation of South Africa with 10.22 per cent, local individual shareholders with a combined interest of 2.45 per cent and the Government of the Republic of Namibia with 3.42 per cent but with an additional 50.07 per cent vote at a general meeting of Rössing on matters of national interest.

As a shareholder in Rössing, Rio Tinto has no power or authority to divest IFIC’s holding in Rössing. However, Rössing and the Namibian Government have taken several recent steps to limit IFIC’s future involvement in Rössing.

On 1 October 2010, Namibia reported to the United Nations, pursuant to Article 31 of the United Nations Security Council Resolution 1929 (UN SCR 1929), that it had reached an agreement with the Islamic Republic of Iran that IFIC will not participate in any future investments nor will it acquire any further shares in Rössing. It was also agreed that the Government of Iran will not acquire interests in any commercial activity in Namibia involving uranium mining, production, or use of nuclear materials and technology, as required under UN SCR1929, until such time as the United Nations Security Council determines that the objectives of the Resolution have been met.

11 The Rössing board also took steps in 2012 to terminate IFIC’s involvement in the governance of Rössing. As a shareholder in Rössing, IFIC was entitled under Namibian law to attend annual general meetings of Rössing, which they do attend. IFIC was previously represented on the board of Rössing by two directors. While this level of board representation did not provide IFIC with the ability to influence the conduct of Rössing’s business on its own, the Rössing board nonetheless determined that, in light of international economic sanctions, it would be in the best interest of Rössing to terminate IFIC’s involvement in board activity. Therefore, on 4 June 2012, at the annual general meeting of Rössing, the shareholders of the company, including Rio Tinto, voted not to re-elect the two IFIC board members. This ended IFIC’s participation in Rössing board activities. IFIC accordingly is not represented on the Rössing board, nor does it have the right to attend board meetings or receive any board information.

Dividends While IFIC is entitled to its pro rata share of any dividend that the majority of the board may declare for all shareholders in Rössing, IFIC has not received such monies since early 2008. Simply by maintaining its own shareholding in Rössing, Rio Tinto is not engaging in any activity intended or designed to confer any direct or indirect financial support for IFIC. A dividend was declared for 2015 in March 2016 and an interim 2016 dividend declared in August 2016 with amounts payable to Skeleton Coast Diamonds Limited on 31 March 2016 and 15 September 2016 respectively. On 16 January 2016 the International Atomic Energy Authority (IAEA) confirmed that Iran has carried out its commitments under the Joint Comprehensive Plan of Action (JCPOA, also called the “Iran Deal”) limiting its nuclear program. This date is called “Implementation Day” under the JCPOA and renders effective (i) the relevant EU regulations terminating Iranian sanctions measures; and (ii) U.S. waivers of certain statutory sanctions provisions applicable to non-US persons. As a result, US$18.8 million of previously withheld dividends were paid to IFIC during 2016.

Uranium Off-Take and Technology Rössing is one of the world’s largest and longest-operating uranium mines. All of the uranium produced by Rössing is sold to Rio Tinto Marketing Pte. Ltd, (doing business as Rio Tinto Uranium), which re-sells this product to electric utilities in North America, Asia and Europe. As a minority shareholder, IFIC has no uranium product off-take rights. Neither IFIC nor other Government of Iran entities have any supply contracts in place with Rössing and nor receive any uranium from Rössing. IFIC also does not have access to any technology through its investment in Rössing or rights to such technology.

While Rio Tinto does not view itself as actively transacting or entering into business dealings with an instrumentality of the Government of Iran, this information has been provided to ensure transparency regarding the passive, minority shareholding in Rössing currently held by IFIC. Rio Tinto has disclosed the IFIC shareholding matter to the United States Government and has periodically updated the U.S. Department of State as to the same.”

12 SIGNATURE

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

Dated: March 27, 2017

TURQUOISE HILL RESOURCES LTD.

By: /s/ Steeve Thibeault Name: Steeve Thibeault Title: Chief Financial Officer EXHIBIT INDEX

Exhibit Number Document 99.1 Annual Information Form for the year ended December 31, 2016. 99.2 Audited Consolidated Financial Statements of Turquoise Hill Resources Ltd., including the notes thereto, as of and for the years ended December 31, 2016 and 2015, together with the report thereon of the Independent Auditor. 99.3 Management’s Discussion and Analysis of Financial Condition and Results of Operations. 99.4 Consent of PricewaterhouseCoopers LLP, Independent Auditor. 99.5 Consent of Bernard Peters. 99.6 Consent of Sharron Sylvester. 99.7 Consent of OreWin Pty Ltd. 99.8 Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934. 99.9 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934. 99.10 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350. 99.11 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

TURQUOISE HILL RESOURCES LTD.

Annual Information Form

For the year ended December 31, 2016

Dated March 23, 2017

TABLE OF CONTENTS

PRESENTATION OF INFORMATION 1 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 1 CAUTIONARY NOTE TO U.S. INVESTORS 4 INTERPRETATION INFORMATION 5

CURRENCY AND EXCHANGE RATES 5 DEFINITIONS 6 CONVERSION FACTORS 9 GLOSSARY OF TECHNICAL TERMS AND ABBREVIATIONS 9 CORPORATE STRUCTURE 10

NAME, ADDRESS AND INCORPORATION 10 INTER-CORPORATE RELATIONSHIPS 10 GENERAL DEVELOPMENT OF THE BUSINESS 11

OVERVIEW 11 THREE YEAR HISTORY 11 AGREEMENTS WITH RIO TINTO 17 AGREEMENTS WITH THE GOVERNMENT OF MONGOLIA 20 HEALTH, SAFETY, ENVIRONMENT AND COMMUNITIES 26 RISK FACTORS 28 DESCRIPTION OF THE BUSINESS 45

QUALIFIED PERSONS 45 OVERVIEW 45 OTHER PROJECTS 77 OTHER INFORMATION 77 DIVIDENDS 78 DESCRIPTION OF CAPITAL STRUCTURE 78

COMMON SHARES 78 PREFERRED SHARES 78 MARKET FOR SECURITIES 79 DIRECTORS AND OFFICERS 80

NAME AND OCCUPATION 80 SHAREHOLDINGS OF DIRECTORS AND EXECUTIVE OFFICERS 81 COMMITTEES OF THE BOARD OF DIRECTORS 81 CONFLICTS OF INTEREST 82 AUDIT COMMITTEE INFORMATION 82 INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS 82 TRANSFER AGENT AND REGISTRAR 83 MATERIAL CONTRACTS 83 INTERESTS OF EXPERTS 84 ADDITIONAL INFORMATION 84

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PRESENTATION OF INFORMATION

Unless otherwise noted, the information contained in this annual information form (“AIF”) is given as at or for the year ended December 31, 2016. All references to the “Corporation” and to “Turquoise Hill” herein refer to Turquoise Hill Resources Ltd. and, where the context so requires, includes its subsidiaries. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements made in this AIF, including statements relating to matters that are not historical facts and statements of the Corporation’s beliefs, intentions and expectations about developments, results and events which will or may occur in the future, constitute “forward-looking information” within the meaning of applicable Canadian securities legislation and “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States (“U.S.”) Private Securities Litigation Reform Act of 1995. Forward-looking statements and information relate to future events or future performance, reflect current expectations or beliefs regarding future events and are typically identified by words such as “anticipate”, “could”, “should”, “expect”, “seek”, “may”, “intend”, “likely”, “plan”, “estimate”, “will”, “believe” and similar expressions suggesting future outcomes or statements regarding an outlook. These include, but are not limited to, statements respecting anticipated business activities, planned expenditures, corporate strategies, and other statements that are not historical facts.

Forward-looking statements and information are made based upon certain assumptions and other important factors that, if untrue, could cause the actual results, performance or achievements of the Corporation to be materially different from future results, performance or achievements expressed or implied by such statements or information. There can be no assurance that such statements or information will prove to be accurate. Such statements and information are based on numerous assumptions regarding present and future business strategies, local and global economic conditions, and the environment in which the Corporation will operate in the future, including the price of copper, gold and silver, anticipated capital and operating costs, anticipated future production and cash flows, and the status of the Corporation’s relationship and interaction with the Government of Mongolia on the continued development of Oyu Tolgoi and Oyu Tolgoi LLC internal governance. Certain important factors that could cause actual results, performance or achievements to differ materially from those in the forward-looking statements and information include, among others, copper, gold and silver price volatility; discrepancies between actual and estimated production, mineral reserves and resources and metallurgical recoveries; development plans for processing resources; matters relating to proposed exploration or expansion; mining operational and development risks; litigation risks; regulatory restrictions (including environmental regulatory restrictions and liability); communications with local stakeholders and community relations; activities, actions or assessments by governmental authorities; events or circumstances that may affect the Corporation’s ability to deliver its products in a timely manner; currency fluctuations; the speculative nature of mineral exploration; the global economic climate; dilution; share price volatility; competition; loss of key employees; additional funding requirements; capital and operating costs, including with respect to the development of additional deposits and processing facilities; and defective title to mineral claims or property. Although the Corporation has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements and information, there

- 2 - may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. All such forward- looking statements and information are based on certain assumptions and analyses made by the Corporation’s management in light of their experience and perception of historical trends, current conditions and expected future developments, as well as other factors management believes are 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 development of Oyu Tolgoi, the Corporation has based its assumptions and analyses on certain factors which are inherently uncertain. Uncertainties and assumptions include, among others: the timing and cost of the construction and expansion of mining and processing facilities; the timing and availability of a long-term power source (or availability of finance for the Corporation to construct such a source) for Oyu Tolgoi; the ability to draw down on the supplemental debt under the Project Finance Facility and the availability of additional financing on terms reasonably acceptable to Oyu Tolgoi LLC, Rio Tinto and the Corporation to further develop Oyu Tolgoi; 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, in the development of the underground mine (which could significantly exceed the costs projected in the Statutory Feasibility Study and the 2016 OTTR); projected copper, gold and silver prices and demand; and production estimates and the anticipated yearly production of copper, gold and silver at Oyu Tolgoi.

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

This AIF also contains references to estimates of mineral reserves and mineral resources. The estimation of reserves and resources is inherently uncertain and involves subjective judgments about many relevant factors. The mineral resource estimates contained in this AIF are inclusive 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 realized), 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:

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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 from the Corporation’s mining projects may render mining of ore reserves uneconomic and affect the Corporation’s operations in a materially adverse manner. Moreover, various short-term operating factors may cause a mining operation to be unprofitable in any particular accounting period;

actual prices will be different than the prices used for such modeling (either higher or lower), and the differences could be significant; and

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

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

Readers are further cautioned that the list of factors enumerated in the “Risk Factors” section of this AIF that may affect future results is not exhaustive. When relying on the Corporation’s forward-looking statements and information to make decisions with respect to the Corporation, investors and others should carefully consider the foregoing factors and other uncertainties and

- 4 - potential events. Furthermore, the forward-looking statements and information contained in this AIF are made as of the date of this document and the Corporation does not undertake any obligation to update or to revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, except as required by applicable law. The forward-looking statements and information contained in this AIF are expressly qualified by this cautionary statement. CAUTIONARY NOTE TO U.S. INVESTORS

This AIF has been prepared in accordance with the requirements of Canadian securities laws, which differ from the requirements of U.S. securities laws. Unless otherwise indicated, all reserve and resource estimates included in this AIF have been prepared in accordance with Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”), and the Canadian Institute of Mining, Metallurgy and Petroleum 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.

Canadian standards, including NI 43-101, differ significantly from the requirements of the SEC, and reserve and resource information contained in this AIF may not be comparable to similar information disclosed by U.S. companies. In particular, and without limiting the generality of the foregoing, the term “resource” does not equate to the term “reserve”. Under U.S. standards, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. Among other things, all necessary permits would be required to be in hand or issuance imminent in order to classify mineralized material as reserves under the SEC standards. The SEC’s disclosure standards normally do not permit the inclusion of information concerning “Measured mineral resources”, “Indicated mineral resources” or “Inferred mineral resources” or other descriptions of the amount of mineralization in mineral deposits that do not constitute “reserves” by U.S. standards in documents filed with the SEC. U.S. investors should also understand that “Inferred mineral resources” have an even greater amount of uncertainty as to their existence and an even greater uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an “Inferred mineral resource” will ever be upgraded to a higher category. Under NI 43-101, estimated “Inferred mineral resources” generally may not form the basis of feasibility or pre-feasibility studies except in rare cases. Investors are cautioned not to assume that all or any part of an “Inferred mineral resource” exists or is economically or legally mineable. Disclosure of “contained pounds” or “contained ounces” of metal in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC standards as in-place tonnage and grade without reference to unit measures. The requirements of NI 43-101 for identification of “reserves” are also not the same as those of the SEC, and reserves reported by the Corporation in compliance with NI 43-101 may not qualify as “reserves” under SEC standards. Accordingly, information concerning mineral deposits set forth herein may not be comparable with information made public by companies that report in accordance with U.S. standards.

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INTERPRETATION INFORMATION

Currency and Exchange Rates

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

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

(Stated in C$)

Year Ended December 31, 2016 2015 2014 End of period 1.3427 1.3840 1.1601 High for the period 1.4589 1.3990 1.1643 Low for the period 1.2544 1.1728 1.0614 Average for the period 1.3248 1.2787 1.1045

The Bank of Canada noon exchange rate on March 23, 2017 for the conversion of U.S. dollars into Canadian dollars was US$1.00 equals C$1.33 (one Canadian dollar on that date equalled US$0.75).

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Definitions

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

“2014 OTTR” means the NI 43-101 compliant technical report titled “Oyu Tolgoi 2014 Technical Report”, prepared by OreWin Pty Ltd. with an effective date of September 20, 2014. “2016 OTTR” means the NI 43-101 compliant technical report titled “Oyu Tolgoi 2016 Technical Report”, prepared by OreWin Pty Ltd. with an effective date of October 21, 2016. “ARSHA” means the Amended and Restated Shareholders’ Agreement dated June 8, 2011 among Oyu Tolgoi LLC, THR Oyu Tolgoi Ltd. (formerly Ivanhoe Oyu Tolgoi (BVI) Ltd.), Oyu Tolgoi Netherlands B.V. and Erdenes MGL LLC. “ASX” means the Australian Stock Exchange. “Board of Directors” means the board of directors of the Corporation, as constituted from time to time. “Canadian Securities means the securities commissions or similar securities regulatory authorities in the various Authorities” provinces and territories of Canada. “Commercial means the first day of the month following the month in which regular shipments to Production” customers first occurred after achievement of 70% of planned concentrator throughput for a continuous period of 30 days, based on design capacity at that stage of construction for Oyu Tolgoi, and was achieved in September 2013. “Common Shares” means common shares in the capital of the Corporation. “Entrée Earn-in means the equity participation and earn-in agreement dated October 15, 2004, as amended on Agreement” November 9, 2004, between Entrée Gold and the Corporation. “Entrée Gold” means Entrée Gold Inc. “Entrée Gold Joint means the joint venture between Oyu Tolgoi LLC and Entrée Gold contemplated by the Venture” Entrée Earn-in Agreement in respect of a portion of the Hugo North Extension in which (i) Oyu Tolgoi LLC holds an 80% interest and Entrée Gold holds a 20% interest in minerals below 560 m, and (ii) Oyu Tolgoi LLC holds a 70% interest and Entrée Gold holds a 30% interest in minerals above 560 m. “Erdenes” means either Erdenes MGL LLC or Erdenes OT LLC, as the context requires, each a company owned by the Government of Mongolia.

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“ESIA” means Environmental and Social Impact Assessment. “Government of means the political apparatus of Mongolia at the local, regional and/or national levels, as the Mongolia” context requires. “Heruga” means the Heruga mineral deposit of Oyu Tolgoi. “Hugo Dummett means collectively, the Hugo North, the Hugo South and the Hugo North Extension mineral Deposits” deposits of Oyu Tolgoi. “Hugo North” means the Hugo North mineral deposit of Oyu Tolgoi. “Hugo North means the Hugo North Extension deposit of Oyu Tolgoi, representing the extension of the Extension” Hugo Dummett Deposits into the area that is the subject of the Entrée Gold Joint Venture. “Hugo South” means the Hugo South mineral deposit of Oyu Tolgoi. “Investment means the Investment Agreement dated October 6, 2009 among the Government of Agreement” Mongolia, Oyu Tolgoi LLC, the Corporation and RTIH in respect of Oyu Tolgoi. “LIBOR” means the London Interbank Offered Rate, the rate charged by one bank to another for lending money. “MD&A” means the Corporation’s Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2016. “NASDAQ” means the NASDAQ Stock Market. “NSR” means net smelter royalty. “NYSE” means the New York Stock Exchange. “Oyu Tolgoi LLC” means Oyu Tolgoi LLC, formerly Ivanhoe Mines Mongolia Inc. LLC. “Oyu Tolgoi” means the Corporation’s copper and gold project located in the Southern Gobi region of Mongolia, which is being developed by Oyu Tolgoi LLC, and consists of a series of deposits containing copper, gold, silver and molybdenum, including the Oyut open pit mine and/or underground development, as the context requires. “Oyu Tolgoi Project means project financing for the development of Oyu Tolgoi. Financing” “Oyu Tolgoi means THR Oyu Tolgoi Ltd. (formerly Ivanhoe Oyu Tolgoi (BVI) Ltd.) and Oyu Tolgoi Shareholder Holdcos” Netherlands B.V., the two indirect, wholly-owned subsidiaries through which the Corporation holds its interest in Oyu Tolgoi LLC. “Oyut” means the open pit at Oyu Tolgoi. “Preferred Shares” means preferred shares in the capital of the Corporation. “Rio Tinto” means, collectively, Rio Tinto plc and its affiliates or, where appropriate, one of its affiliates, excluding Turquoise Hill Group. “RTIH” means Rio Tinto International Holdings Limited, a Corporation

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incorporated under the laws of England and Wales and a member of Rio Tinto, and where the context requires, also refers to its subsidiaries, 46117 Yukon Inc. and 535630 Yukon Inc. “RTSEA” means Rio Tinto South East Asia Limited, an affiliate of RTIH. “SEC” means the United States Securities and Exchange Commission. “Statutory Feasibility means the feasibility study filed by Oyu Tolgoi LLC in March 2015, as subsequently updated Study” by Oyu Tolgoi LLC with the Mongolian Minerals Council in August 2015 and completed in May 2016. “Turquoise Hill means, collectively, Turquoise Hill and its subsidiaries or a group of subsidiaries, as the Group” context requires. “TSX” means the Toronto Stock Exchange. “Underground Plan” means the Oyu Tolgoi Underground Mine Development and Financing Plan dated May 18, 2015 among the Government of Mongolia, Erdenes, Turquoise Hill, THR Oyu Tolgoi Ltd., Oyu Tolgoi Netherlands B.V., RTIH and Oyu Tolgoi LLC. “YBCA” means the Business Corporations Act (Yukon).

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Conversion Factors

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

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

Glossary of Technical Terms and Abbreviations

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

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CORPORATE STRUCTURE

Name, Address and Incorporation

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

The Corporation’s head office is located at 354 – 200 Granville Street, Vancouver, British Columbia, Canada, V6C 1S4. The Corporation’s registered office is located at 300 - 204 Black Street, Whitehorse, Yukon, Canada, Y1A 2M9.

Inter-Corporate Relationships

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

Oyu Tolgoi LLC Group One Subsidiaries

Jurisdiction of Voting Equity Name of Subsidiary Incorporation Ownership Interest

THR Delaware Holdings, LLC (formerly Delaware 100% Ivanhoe Mines Delaware Holdings, LLC) THR Aruba Holdings LLC A.V.V. (formerly Aruba 100% Ivanhoe Mines Aruba Holdings LLC A.V.V.) THR Oyu Tolgoi Ltd. (formerly Ivanhoe British Virgin Islands 100% Oyu Tolgoi (BVI) Ltd.) Oyu Tolgoi LLC Mongolia 0.21%

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Oyu Tolgoi LLC Group Two Subsidiaries

Jurisdiction of Voting Equity Name of Subsidiary Incorporation Ownership Interest

THR Mines (BC) Ltd. (formerly Ivanhoe OT British Columbia 100% Mines Ltd.) Turquoise Hill Netherlands Coöperatief Netherlands 100% U.A. Oyu Tolgoi Netherlands B.V. Netherlands 100% Oyu Tolgoi LLC Mongolia 65.79%

Additional direct and indirect subsidiaries of the Corporation (i) holding, individually, 10% or less, and in the aggregate, 20% or less of the Corporation’s consolidated assets, and (ii) generating, individually, 10% or less, and in the aggregate, 20% or less of the Corporation’s consolidated sales and operating revenues, in each case, as at and for the year ended December 31, 2016, have been omitted. GENERAL DEVELOPMENT OF THE BUSINESS

Overview

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

Three Year History

2014

In January 2014, the Corporation completed a rights offering (the “2013 Rights Offering”), issuing a total of 1,006,116,602 Common Shares for aggregate gross proceeds of approximately $2.4 billion. Approximately 99.3% of the Common Shares were issued in the basic subscription of the 2013 Rights Offering with the balance being issued in the additional subscription. The net proceeds from the 2013 Rights Offering were primarily used to repay all outstanding amounts under the Corporation’s $1.8 billion non-revolving interim funding facility with RTSEA, as lender, and the Corporation’s secured $600 million bridge funding facility with RTSEA, as lender, and expenses associated therewith and with the 2013 Rights Offering.

In February 2014, the Corporation announced that concentrator production rates had been impacted by various post- commissioning issues including the failure of the rake blades in two tailings thickeners. This resulted in the shutdown of one line in the concentrators for a period of seven weeks to repair both thickeners.

In March 2014, the Corporation announced that it was continuing to work together with Rio Tinto and the Government of Mongolia with the aim of resolving outstanding shareholder

- 12 - matters and finalizing Oyu Tolgoi Project Financing. The Corporation stated that progress was being made and some matters had been resolved. All parties remained committed to further development of Oyu Tolgoi. As described later in this section of the AIF, the Corporation has now signed the Underground Plan which addresses the key outstanding shareholder matters. For more information on the Underground Plan, see “General Development of the Business – Agreements with the Government of Mongolia – Underground Plan”.

In May 2014, the Corporation announced that Rowena Albones, Jill Gardiner, Peter Gillin, Dr. David Klingner, Kay Priestly, Russel C. Robertson and Jeff Tygesen – being the nominees set forth in the management proxy circular dated March 26, 2014 – had been elected as directors of Turquoise Hill at the Corporation’s annual meeting of shareholders held on May 8, 2014. Directors Virginia Flood, Isabelle Hudon, Warren Goodman and Charles Lenegan did not stand for re-election.

In May 2014, the Corporation announced that Steeve Thibeault was to replace Christopher Bateman as the Chief Financial Officer of the Corporation effective June 1, 2014.

In June 2014, the Corporation announced that Oyu Tolgoi LLC had received an audit report from the Mongolian Tax Authority claiming unpaid taxes, penalties and disallowed entitlements associated with the initial development of the Oyu Tolgoi mine. The Corporation further announced that a notice of dispute with the Government of Mongolia had been filed following receipt of the audit report from the Mongolian Tax Authority. As described later in this section of the AIF, Oyu Tolgoi LLC subsequently received a written decision from the Mongolian Tax Authority reducing the amount claimed to be payable by Oyu Tolgoi LLC.

In August 2014, the Corporation announced that, following the sending of extension requests to all project finance lenders in April 2014, all of the 15 global banks participating in the Oyu Tolgoi Project Financing had agreed to extend their respective commitment letters for the financing of the underground development at Oyu Tolgoi to September 30, 2014. In addition, Export Development Canada, the European Bank of Reconstruction and Development, the International Finance Corporation, the Export-Import Bank of the United States, as well as the Australian Export Finance and Insurance Corporation, also had conditional board approvals to close the financing. As described below, Oyu Tolgoi LLC has now entered into the Project Finance Facility. For more information on the Project Finance Facility and on the material agreements entered into by the Corporation in connection therewith, see “General Description of the Business – Three Year History – 2015” and “Turquoise Hill Financing Support Agreement”, “Oyu Tolgoi Financing Support Agreement” and “Cash Management Services Agreement” under the heading “General Development of the Business – Agreements with Rio Tinto”, respectively.

In August 2014, the Corporation announced that Oyu Tolgoi LLC signed a Power Sector Cooperation Agreement with the Government of Mongolia for the exploration of a Tavan Tolgoi-based independent power producer. The agreement laid out a framework for long-term strategic cooperation between the Government of Mongolia and Oyu Tolgoi LLC to deliver a comprehensive energy plan for the South Gobi region.

In September 2014, the Corporation announced that the Oyu Tolgoi concentrator experienced a failure of the rake arms in one of the two tailings thickeners. An investigation found that operational issues combined with fabrication-quality problems led to the failure. The repair and

- 13 - re-commissioning of the tailings thickeners was completed on September 30, 2014. During the repair period, the concentrator continued to run at approximately 60% throughput.

In September 2014, the Corporation announced that Oyu Tolgoi LLC had received a written decision from the Mongolian Tax Authority. The tax ruling reduced the amount of tax, interest and penalties claimed to be payable by Oyu Tolgoi LLC from approximately $127 million to approximately $30 million. In connection with the entering into of the Underground Plan, Oyu Tolgoi has, in a separate agreement with the Government of Mongolia, agreed, without accepting liability and without creating a precedent, to pay the amount of the determination by way of settlement to resolve this tax matter. For more information on the Underground Plan, see “General Development of the Business – Agreements with the Government of Mongolia –Underground Plan”.

In September 2014, the Corporation announced that the Statutory Feasibility Study was finalized and presented to the board of directors of Oyu Tolgoi LLC, and in October 2014, the Corporation announced that it had filed the 2014 OTTR.

In October 2014, the Corporation announced the appointment of Dr. James W. Gill to the Board of Directors as an independent director effective November 1, 2014.

In November 2014, the Corporation stated that it was continuing to engage with the proposed project financing lender group and was keeping both the international financial institutions and the commercial banks informed of the status of discussions with the Government of Mongolia. Commitments from the commercial bank consortium formally expired on September 30, 2014. The Corporation indicated that timing of any lender commitment extension requests will be determined when definitive progress or resolution has been made on the shareholder matters. As described below, Oyu Tolgoi LLC has now entered into the Project Finance Facility. For more information on the Project Finance Facility and on the material agreements entered into by the Corporation in connection therewith, see “General Description of the Business – Three Year History – 2015” and “Turquoise Hill Financing Support Agreement”, “Oyu Tolgoi Financing Support Agreement” and “Cash Management Services Agreement” under the heading “General Development of the Business – Agreements with Rio Tinto”, respectively.

In November 2014, the Corporation announced the retirement of Chair Dr. David Klingner, effective January 1, 2015, and Chief Executive Officer Kay Priestly, effective December 1, 2014. Jill Gardiner and current director Jeff Tygesen were appointed Chair of the Board of Directors and Chief Executive Officer of the Corporation, respectively. Ms. Priestly remained on the Board of Directors until December 31, 2014. Effective January 1, 2015, Dr. Craig Stegman was appointed as a director to fill the vacancy following Ms. Priestly’s retirement. In addition, effective January 1, 2015, director Russel C. Robertson took over as Chair of the Corporation’s Audit Committee and Ms. Gardiner took over as Chair of the Corporation’s Nominating and Corporate Governance Committee.

In December 2014, Turquoise Hill announced that there had been a fire in one of the ball mill cyclone packs at the Oyu Tolgoi concentrator. There were no injuries. Following completed inspections, the concentrator returned to service using the other mills and cyclone packs. Repairs from the fire were completed on January 2, 2015 and the concentrator returned to full production shortly thereafter.

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In 2014, Oyu Tolgoi LLC produced 148,400 t of copper and 589,000 oz of gold in concentrates and, under International Financial Reporting Standards (“IFRS”), recorded net revenue of approximately $1.7 billion in sales on 733,700 t of concentrates, reflecting Oyu Tolgoi’s first full year of production. Recoveries improved through 2014, driven by both operational improvements and the increased ore grades as Oyu Tolgoi developed the high grade zone in the last half of 2014. Marketing and logistics improvements allowed concentrate inventories to be drawn down to normal levels by the end of 2014.

2015

In February 2015, the Corporation announced that it had entered into a sale and purchase agreement with Novel Sunrise Investments Limited (“Novel Sunrise”), pursuant to which Turquoise Hill agreed to sell 48,705,155 common shares of SouthGobi Resources Ltd. (“SouthGobi”) at a price of C$0.35 per common share. The sale was completed in April 2015. The Corporation was also granted a put option to sell to Novel Sunrise up to an additional 1,671,985 common shares at the same price of C$0.35 per common share, which put option was exercised by the Corporation in full in June 2015. Following the acquisition of certain additional common shares of SouthGobi by China Investment Corporation in November 2015 and on-market sales of common shares of SouthGobi by the Corporation between April and December, 2015, the Corporation’s ownership stake in SouthGobi was reduced to 19.2% as at December 31, 2015. As described below, the Corporation has now disposed of its remaining stake in SouthGobi and, as a result, no longer holds any shares in SouthGobi as of October 2016.

In February 2015, Oyu Tolgoi LLC produced its one millionth tonne of concentrate.

In March 2015, the Corporation announced that Oyu Tolgoi LLC had filed the Statutory Feasibility Study with the Mongolian Minerals Council.

In May 2015, the Corporation announced that Rowena Albones, Jill Gardiner, Dr. James W. Gill, Peter Gillin, Russel C. Robertson, Dr. Craig Stegman and Jeff Tygesen – being the nominees set forth in the management proxy circular dated March 20, 2015 – had been elected as directors of Turquoise Hill at the Corporation’s annual meeting of shareholders held on May 8, 2015.

In May 2015, the Corporation announced the signing of the Underground Plan by the Government of Mongolia, Turquoise Hill and Rio Tinto. The Underground Plan provides a pathway forward in addressing outstanding shareholder matters to restart underground development at Oyu Tolgoi. The Underground Plan confirmed the project cost for Oyu Tolgoi’s initial construction and development and reinforces the principles set out in the Investment Agreement and the ARSHA. The Corporation further announced that the Underground Plan and certain related agreements addressed key outstanding matters including the following specific items: tax matters, the 2% NSR, sales royalty calculation and management services payments. The agreements also address the sourcing of power for Oyu Tolgoi from within Mongolia. The overall value impact for the Corporation in connection with the agreements is less than 2% of the value of the reserve case of $7.4 billion reflected in the 2014 OTTR. For more information on the Underground Plan, see “General Development of the Business – Agreements with the Government of Mongolia – Underground Plan”.

In August 2015, the Corporation announced that Oyu Tolgoi LLC had filed revised schedules for the Statutory Feasibility Study with the Mongolian Minerals Council. The filing also aligned the

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Statutory Feasibility Study with the Underground Plan. The Mongolian Minerals Council had already tentatively accepted the Statutory Feasibility Study filed in March 2015, pending a revision of its schedules and alignment with the Underground Plan. The Corporation further announced that funding for pre-start activities had been approved, in order to ensure the project is ramped back into production as soon as possible, while not making contract commitments ahead of completing the full project approval. The funding covered work scheduled to take place before the formal notice to proceed approval, which the Corporation later announced was received by the Board of Directors and the board of directors of Rio Tinto and Oyu Tolgoi LLC in May 2016. Underground construction began in mid-2016.

In September 2015, the Corporation noted the signing by the Government of Mongolia of the request of the Multilateral Investment Guarantee Agency for host country approval with respect to guarantees to be issued by the Multilateral Investment Guarantee Agency in connection with the Oyu Tolgoi Project Financing.

In September 2015, the Corporation announced the resignation of Stewart Beckman, Senior Vice President, Operations and Technical Development, effective October 1, 2015.

In December 2015, the Corporation announced that Oyu Tolgoi LLC had signed a $4.4 billion project finance facility (the “Project Finance Facility”). The Project Finance Facility is being 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. As described further below, as of December 2016, Oyu Tolgoi LLC had drawn down approximately $4.3 billion of the Project Finance Facility. Substantially all net proceeds from the Project Finance Facility, after fees and taxes, comprising tranches drawn prior to June 30, 2016, were used by Oyu Tolgoi LLC to pay down shareholder loans payable to Turquoise Hill, and are available to be re-drawn by Oyu Tolgoi LLC for the development of the underground mine. Net proceeds not used to pay down shareholder loans, drawn down in smaller tranches after June 30, 2016, are retained by Oyu Tolgoi LLC for ongoing underground development. For information on the material agreements entered into by the Corporation in connection with the Project Finance Facility, see “Turquoise Hill Financing Support Agreement”, “Oyu Tolgoi Financing Support Agreement” and “Cash Management Services Agreement” under the heading “General Development of the Business – Agreements with Rio Tinto”.

In 2015, Oyu Tolgoi LLC produced 202,200 t of copper, exceeding the Corporation’s guidance of 175,000 to 195,000 t and produced 653,000 ounces of gold, meeting 2015 guidance of 600,000 to 700,000 ounces. It recorded net revenue of approximately $1.6 billion in sales on approximately 820,000 t of concentrates. Mill throughput increased by 23.9% compared to 2014 driven by operational improvements.

2016

In January 2016, the Corporation announced the appointment of Brendan Lane as Vice President, Operations and Development effective February 1, 2016.

In May 2016, the Corporation announced that Rowena Albones, Jill Gardiner, Dr. James W. Gill, Peter Gillin, Russel C. Robertson, Dr. Craig Stegman and Jeff Tygesen – being the nominees set forth in the management proxy circular dated March 15, 2016 – had been elected as directors of Turquoise Hill at the Corporation’s annual meeting of shareholders held on May 2, 2016.

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In May 2016, the Corporation announced that Oyu Tolgoi LLC had received the formal notice to proceed approval by the Board of Directors and each of the boards of directors of Rio Tinto and Oyu Tolgoi LLC, which was the final requirement for the re-start of underground development and, as part of that process, the Statutory Feasibility Study had been completed. The underground construction began in mid-2016.

In June 2016, Oyu Tolgoi LLC had drawn down approximately $4.3 billion of the Project Finance Facility and steps were taken to finalize the drawdown of the additional $0.1 billion. As of December 31, 2016, Oyu Tolgoi LLC had drawn down approximately $4.3 billion of the Project Finance Facility. As noted above, substantially all net project finance proceeds were used by Oyu Tolgoi LLC to pay down shareholder loans payable to Turquoise Hill, and are available to be re-drawn by Oyu Tolgoi LLC for the development of the underground mine with smaller amounts drawn under the Project Finance Facility since June 30, 2016 being retained by Oyu Tolgoi LLC for ongoing underground development. The Corporation also announced that it had signed a contract with Jacobs Engineering Group to provide engineering, procurement and construction management services for underground development, paving the way for construction to begin. For more information on the Project Finance Facility and on the material agreements entered into by the Corporation in connection therewith, see “General Description of the Business – Three Year History – 2015” and “Turquoise Hill Financing Support Agreement”, “Oyu Tolgoi Financing Support Agreement” and “Cash Management Services Agreement” under the heading “General Development of the Business – Agreements with Rio Tinto”, respectively.

In September 2016, the Corporation announced that it had disposed of 375,000 common shares of SouthGobi, bringing the Corporation’s stake in SouthGobi down to 9.9198%. The Corporation completed the sale of its remaining stake in SouthGobi in October 2016 and, as a result, no longer holds any shares in SouthGobi.

In October 2016, the Corporation announced that it had filed the 2016 OTTR, which updated the 2014 OTTR.

In November 2016 the Corporation announced the retirement of Chair Jill Gardiner effective December 31, 2016. Current director Peter Gillin was appointed as Chairman of the Board of Directors effective January 1, 2017.

In December 2016, the Corporation announced that Oyu Tolgoi LLC had stopped concentrate shipments to the Chinese border following a new requirement at the Chinese-Mongolian border to utilize one joint coal and concentrate crossing route. The new requirement had led to safety and security concerns as well as unreasonably long waiting times to cross the border. Two weeks later, the Corporation announced that Oyu Tolgoi LLC had resumed concentrate shipments and that, following engagement with the Chinese and Mongolian authorities, Oyu Tolgoi LLC will follow a new joint coal and concentrate crossing route at the Chinese-Mongolian border. Production at the Oyu Tolgoi mine was unaffected during the temporary shipment suspension.

2017 to Date

In January 2017, the Corporation announced the appointment of Maryse Saint-Laurent, ICD.D, to the Board of Directors as an independent director effective January 4, 2017.

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In February 2017, the Corporation announced the retirement of its Chief Financial Officer, Steeve Thibeault effective May 23, 2017.

Agreements with Rio Tinto

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

Private Placement Agreement

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

HoA

In December 2010, Turquoise Hill and RTIH entered into a heads of agreement (as amended, the “HoA”), whereby Turquoise Hill and RTIH agreed to, among other things, RTIH’s support and full participation in a rights offering which was completed by the Corporation in February 2011, the financing and management of Oyu Tolgoi, replacing or amending certain contractual obligations under the Private Placement Agreement and acting together diligently and in good faith to negotiate the Oyu Tolgoi Project Financing. The Corporation and RTIH further agreed to cause three nominees from each of the Corporation and RTIH to be appointed as the directors of Oyu Tolgoi LLC reserved for the Oyu Tolgoi Shareholder Holdcos under the ARSHA. These nominees must exercise their voting rights under the ARSHA in accordance with instructions given by an operating committee (the “Operating Committee”) which is comprised of two nominees from each of the Corporation and RTIH, with a RTIH nominee serving as chairman. All decisions of the Operating Committee, other than decisions in respect of certain defined special matters, require a majority vote of the members with a casting vote of the chairman in the case of a tie. Decisions in respect of certain “special matters” require a unanimous vote of the members of the Operating Committee. RTIH was also granted the right to appoint an affiliate to manage Oyu Tolgoi pursuant to the terms of a management agreement. The foregoing is a

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

2012 MoA

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

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

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

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

2013 MoA

In August 2013, the Corporation, RTIH and RTSEA entered into a memorandum of agreement, which was subsequently amended in November 2013 (as amended, the “2013 MoA”). Under the 2013 MoA, the Corporation, RTIH and RTSEA agreed to the key terms and conditions of the 2013 Rights Offering. They also reaffirmed their agreement to act together diligently and in good faith to negotiate Oyu Tolgoi Project Financing. The foregoing is a summary of certain terms of such agreement only and is qualified in its entirety by reference to the 2013 MoA, a

- 19 - copy of which has been filed with the Canadian Securities Authorities on SEDAR at www.sedar.com.

Agreements in Connection with Oyu Tolgoi Project Financing

The Corporation has entered into a number of agreements in connection with, and/or in consideration for, the Project Finance Facility and the Completion Support Undertaking, including: a financing support agreement with Rio Tinto dated December 15, 2015 (the “Turquoise Hill Financing Support Agreement”); a financing support agreement with Oyu Tolgoi LLC and Rio Tinto dated December 15, 2015 (the “Oyu Tolgoi Financing Support Agreement”); and a cash management services agreement with 9539549 Canada Inc., a wholly-owned subsidiary of Rio Tinto, and RTIH dated December 15, 2015 (the “Cash Management Services Agreement”).

Turquoise Hill Financing Support Agreement

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

The Turquoise Hill Financing Support Agreement also contains certain restrictions relating to the conduct of the Corporation’s business and operations and to the implementation of certain corporate transactions until the later of (i) the date the Completion Support Undertaking terminates, (ii) the date that all senior loan advances under the agreements entered into in connection with the Project Finance Facility are repaid in full, and (iii) the date that all subordinated debt advances by Rio Tinto have been repaid in full, which shall be deemed to be the date on which the Completion Support Undertaking terminates if, as of such date, the aggregate amount of subordinated debt advances by Rio Tinto has not exceeded $500 million.

Oyu Tolgoi Financing Support Agreement

Under the Oyu Tolgoi Financing Support Agreement, in the event a fact or circumstance occurs which affects or could reasonably be expected to affect Oyu Tolgoi LLC’s ability to meet its

- 20 - obligations under the agreements entered into in connection with the Project Finance Facility or give rise to an event of default thereunder, Rio Tinto shall have the right to require that Oyu Tolgoi LLC borrow funds from Rio Tinto (or an affiliate thereof) by way of a senior debt advance or a subordinated debt advance, or borrow funds from a third party senior lender. The proceeds of any such advances shall be used to repay amounts due and owing to the Oyu Tolgoi Project Financing lenders.

Cash Management Services Agreement

Under the Cash Management Services Agreement, the Corporation appointed 9539549 Canada Inc., a wholly-owned subsidiary of Rio Tinto, as service provider to provide post-drawdown cash management services in connection with the net proceeds from the Project Finance Facility. Such proceeds shall be deposited with 9539549 Canada Inc. and returned to the Corporation as required for purposes of funding Oyu Tolgoi. The Corporation is also entitled to the return of any outstanding balance of such managed funds upon the termination of the Completion Support Undertaking. RTIH has agreed to guarantee the obligations of the service provider under the Cash Management Services Agreement.

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

Additional Agreements

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

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

Also, a deposit agreement was entered into among Movele S.à r.l., a wholly-owned subsidiary of the Corporation, Rio Tinto Finance plc (“RTF”), RTIH and the Corporation (as an intervenant) in May 2016 (the “Movele Deposit Agreement”), which replaced the deposit agreement entered into between Movele S.à r.l. and RTF in December 2014. The Movele Deposit Agreement allows the Corporation to deposit funds with RTF, at its sole discretion, and is renewable for an additional term of 12 months.

Agreements with the Government of Mongolia

Investment Agreement

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

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Effective Date

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

Term

The Investment Agreement has an initial term of 30 years from the Effective Date (the “Initial Term”). Oyu Tolgoi LLC has the right, exercisable by notice given not less than 12 months prior to the expiry of the Initial Term and subject to the fulfillment of certain conditions, to extend the Initial Term of the Investment Agreement for an additional term of 20 years (the “Renewal Term”).

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

• having demonstrated that Oyu Tolgoi has been operated to industry best practice in terms of national and

community benefits, environment and health and safety practices;

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

• having complied in all material respects with its obligations to pay taxes under the laws of Mongolia, as

stabilized under the terms of the Investment Agreement;

• if, as part of the development of Oyu Tolgoi, Oyu Tolgoi LLC has constructed, or is constructing, a copper

smelter, Oyu Tolgoi LLC must have constructed or be constructing such smelter in Mongolia;

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

• having secured the total power requirements for Oyu Tolgoi from sources within the territory of Mongolia within

four years of Commercial Production.

Investment Protection

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

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Taxes, Royalties and Fees

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

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

Infrastructure

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

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

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

Power Supply

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

In November 2012, Oyu Tolgoi LLC, Inner Mongolia Power International Cooperation Co., Ltd. and the National Electricity Transmission Grid Company entered into an electricity purchase and sale agreement, providing for the supply of power to Oyu Tolgoi from electric power facilities in China (the “Power Purchase Agreement”).

In August 2014, the Corporation entered into a Power Sector Cooperation Agreement with the Government of Mongolia for the exploration of a Tavan Tolgoi-based independent power

- 23 - producer. The agreement lays out a framework for long-term strategic cooperation between the Government of Mongolia and Oyu Tolgoi LLC to deliver a comprehensive energy plan for the South Gobi region. Under the Power Sector Cooperation Agreement, the Government of Mongolia assumes the responsibility to import and supply power required by Oyu Tolgoi LLC until such time as the commissioning of a domestic Mongolian power source, which meets Oyu Tolgoi LLC’s power needs, is completed. See “General Development of the Business – Three Year History – 2014”.

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

Local Communities

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

Oyu Tolgoi LLC will prioritize the training, recruiting and employment of citizens from local communities for Oyu Tolgoi, giving specific preference to the citizens of Umnugovi Aimag. Given that Commercial Production has been achieved, 90% of the employees at Oyu Tolgoi must be Mongolian nationals. Oyu Tolgoi LLC must also use its best endeavours to ensure that 50% of its engineers are Mongolian nationals within five years of achieving Commercial Production (i.e. by September 2018), and increasing to 70% after ten years of achieving Commercial Production (i.e. after September 2023). Oyu Tolgoi LLC must use its best efforts to ensure that not less than 60% of its contractors’ employees are Mongolian nationals for construction work and 75% of its contractors’ employees are Mongolian nationals for mining and mining related work.

Environment

The Investment Agreement also includes environmental protection provisions, in accordance with which Oyu Tolgoi LLC will implement an environmental protection plan and provide to the Government of Mongolia an independent report on progress every three years. In 2012, the Corporation completed the ESIA and shortly thereafter such plan was submitted to the Government of Mongolia. Independent reports on progress were subsequently submitted in 2013 and 2016.

Disputes

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

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ARSHA

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

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

Ownership of Oyu Tolgoi LLC

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

Management of Oyu Tolgoi

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

Management Services Payment

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

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Election of Directors

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

Existing Shareholder Loans and Cash Calls

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

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

During the period commencing on the date Erdenes acquired its 34% interest in Oyu Tolgoi LLC and ending three years after Commercial Production (the “Funding Period”), the Oyu Tolgoi Shareholder Holdcos agreed to fund all contributions of Called Sums, including those otherwise payable by Erdenes, unless Erdenes elected to contribute to any Called Sum. Such contributions on Erdenes’ behalf (“Government Debt”) are subject to interest as set out below. All dividends payable to Erdenes must be paid by Oyu Tolgoi LLC to the Oyu Tolgoi Shareholder Holdcos (or nominated Turquoise Hill Group or Rio Tinto companies) in repayment of the principal and interest outstanding on Government Debt, but otherwise the Oyu Tolgoi Shareholder Holdcos have no recourse to Erdenes. In addition, Erdenes may elect to repay outstanding Government Debt at any time.

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

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

Payment of Dividends

All principal and interest outstanding on Shareholder Debt, Government Debt and the Existing Shareholder Loans must be paid in full to the Corporation prior to the payment of any dividends to the shareholders of Oyu Tolgoi LLC. Subject to the foregoing, if Oyu Tolgoi LLC has profits available for distribution in respect of any completed financial year, Oyu Tolgoi LLC’s board of directors will declare that all of those profits must be distributed by way of cash dividends within three months after the end of that financial year, subject to the retention of reasonable

- 26 - and proper reserves for Oyu Tolgoi LLC’s future cash requirements (including potential expansions, working capital, and the maintenance of funds for capital costs and other actual or contingent liabilities).

Transfer of Shares of Oyu Tolgoi LLC to Third Parties

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

Underground Plan

The signing of the Underground Plan provided a pathway forward in addressing outstanding shareholder matters to restart underground development at Oyu Tolgoi. The Underground Plan confirmed the project cost for Oyu Tolgoi’s initial construction and development and reinforced the principles set out in the Investment Agreement and the ARSHA. The Underground Plan and certain related agreements address key outstanding matters including the following specific items: tax matters, the 2% NSR, sales royalty calculation and management services payments. Such agreements also address the sourcing of power for Oyu Tolgoi from within Mongolia. In this regard, Turquoise Hill continues to work with Oyu Tolgoi LLC on possible support of Oyu Tolgoi LLC’s obligations under a potential power purchase arrangement from the Tavan Tolgoi power plant project.

With respect to the 2% NSR matter, Turquoise Hill conceded that it has no entitlement to receive payment of the 2% NSR it acquired in 2003 from BHP Billiton, the enforceability of which was subsequently challenged by the Assistant General Prosecutor of Mongolia under Mongolian law.

In a separate agreement with the Government of Mongolia, Oyu Tolgoi LLC agreed, without accepting liability and without creating a precedent, to pay the amount of the revised determination received from the Mongolia Tax Authority in connection with a general tax audit of Oyu Tolgoi LLC, by way of settlement to resolve the tax matter. For more information see “General Description of the Business – Three Year History – 2014”.

Under the Underground Plan, it was also agreed that Oyu Tolgoi LLC’s 5% sales royalty paid to the Government of Mongolia will be calculated on gross revenues by not allowing deductions for the costs of processing, freight differentials, penalties or payables.

Finally, notwithstanding the terms of the ARSHA, it was agreed that in calculating the management services payment, the rate applied to capital costs of the underground development is to be 3% instead of 6%, as provided by the ARSHA. The management services payment rate on operating costs and capital related to current operations remains at 6%.

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

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Health, Safety, Environment and Communities

The Corporation has a Health, Safety and Environment (“HSE”) Policy that affirms its commitment to protecting the environment and to safeguarding the health, safety and welfare of all employees, contractors and communities who are affected by Turquoise Hill or its subsidiaries. The Corporation is dedicated to performing its duties in a safe, environmentally responsible and effective manner.

The HSE Committee of the Board of Directors assists the Board of Directors in fulfilling its oversight responsibilities by ensuring the Corporation has established appropriate practices with respect to health, safety and environmental matters affecting the Corporation and its subsidiaries.

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

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

Oyu Tolgoi has had and continues to have a positive impact on the communities surrounding the property. The closest town, Khanbogd, has benefitted from a partnership involving Oyu Tolgoi which has led to the connection of the town to a permanent power supply, funding for new educational and healthcare facilities, sealing of local roads, and programmes to help improve social conditions. Construction of a water supply system and waste management facilities was completed in 2016.

Turquoise Hill operates in a manner such that it meets internationally recognized environmental standards and commitments. Disturbance of the environment is mitigated, or else minimized, reduced and remedied. Oyu Tolgoi has been designed as one of the most water-efficient mines in the world with average water use of 0.42 cubic metres of water per tonne of ore processed in 2016. The water used by Oyu Tolgoi comes from a deep and saline aquifer and has no impact on drinkable water in the region. The water used was continuously recycled at a rate of 86.16% in 2016. Oyu Tolgoi also works with international non-government agencies (NGOs) to ensure a net positive impact on biodiversity in the area of the mine. The environmental impact of the mine will be monitored and managed throughout its life.

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RISK FACTORS

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

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

The Investment Agreement and the Underground Plan impose numerous obligations and commitments upon the Government of Mongolia that provide clarity and certainty in respect of the development and operation of Oyu Tolgoi. The Investment Agreement also includes a dispute resolution clause that requires the parties to resolve disputes through international commercial arbitration procedures. Nevertheless, if and to the extent that the Government of Mongolia does not observe the terms and conditions of the Investment Agreement and the Underground Plan, there may be limitations on the Corporation’s ability to enforce the terms of the Investment Agreement and the Underground Plan against the Government of Mongolia, which is a sovereign nation, regardless of the outcome of any arbitration proceeding. If the terms of the Investment Agreement and/or the Underground Plan cannot be enforced effectively, the Corporation could be deprived of substantial rights and benefits arising from its investment in Oyu Tolgoi with little or no recourse against the Government of Mongolia for fair and reasonable compensation. Irrespective of the ultimate outcome of any potential dispute, any requirement to engage in discussions or proceedings with the Government of Mongolia, whether or not formal, would result in significant delays, expense and diversion of management’s attention. Such an outcome would have a material adverse impact on the Corporation and its share price.

The Corporation’s ability to carry on business in Mongolia is subject to legal and political risks.

Although the Corporation expects that the Investment Agreement and the Underground Plan will continue to bring significant stability and clarity to the legal, political and operating environment in which the Corporation will develop and operate Oyu Tolgoi, the Corporation remains subject to potential legal and political risks in Mongolia.

There can be no absolute assurance that the Corporation’s assets will not be subject to nationalization, requisition, expropriation or confiscation, whether legitimate or not, by any authority or body. In addition, there can be no assurance that neighbouring countries’ political and economic policies in relation to Mongolia will not have adverse economic effects on the development of the Corporation’s mining projects, including its ability to access power, transport and sell its products and access construction labour, supplies and materials.

- 29 -

There is no assurance that provisions under Mongolian law for compensation and reimbursement of losses to investors under such circumstances would be effective to restore the full value of the Corporation’s original investment or to compensate for the loss of the current value of the Mongolian projects. Insofar as the Government of Mongolia is a sovereign entity against which the terms of the Investment Agreement and the Underground Plan may take considerable time to enforce (if enforceable at all), this risk applies to Oyu Tolgoi despite the provisions of the Investment Agreement respecting nationalization and expropriation. There can be no assurance that Mongolian laws protecting foreign investments will not be amended or abolished or that existing laws will be enforced or interpreted to provide adequate protection against any or all of the risks described herein.

The legal framework in Mongolia is, in many instances, based on recent political reforms or newly enacted legislation, which may not be consistent with long-standing conventions and customs. Although legal title risks in respect of Oyu Tolgoi are believed to be significantly mitigated by the terms of the Investment Agreement, there may still be ambiguities, inconsistencies and anomalies in the other agreements, licenses and title documents through which the Corporation holds its direct or indirect interests in other mineral resource properties in Mongolia, or the underlying legislation upon which those interests are based, which are atypical of more developed legal systems and which may affect the interpretation and enforcement of the Corporation’s rights and obligations. Many laws have been enacted, but in many instances they are neither understood nor enforced and may be applied in an inconsistent, arbitrary and unfair manner, while legal remedies may be uncertain, delayed or unavailable. These laws or their enforcement by national, regional or local authorities can adversely affect, among other things, water access rights, operating costs resulting from unanticipated increases in tariff rates and overall assessment of risk. Accordingly, while the Corporation believes that it has taken the legal steps necessary to obtain and hold its property and other interests in Mongolia, there can be no guarantee that such steps will be sufficient to preserve those interests.

There can be no assurance that the Corporation will be able to secure the funding that it needs to continue development of the Oyu Tolgoi underground mine.

Additional funding may be required to complete the development of the underground mine, which could potentially include construction of a power facility at Oyu Tolgoi. If the full amount of project and other financing required to complete these developments of the underground mine is not available or obtainable on reasonable commercial terms for such purposes or funding from the Oyut open pit mine operations is insufficient, the Corporation could seek to issue Common Shares or instruments convertible into equity, including through future rights offerings, which issuances could result in dilution to the holders of Common Shares and have a material adverse effect upon the market price of Common Shares. Under the terms of the covenants forming part of the Turquoise Hill Financing Support Agreement, the Corporation is prohibited from creating, incurring or permitting to remain outstanding any indebtedness, other than certain permitted indebtedness, and from amending its constating documents to create and issue Preferred Shares. As a result of these restrictions, in seeking to raise additional capital, the Corporation may not incur indebtedness for borrowed money or issue debt securities, other securities convertible into debt securities or Preferred Shares while the covenants forming part of the Turquoise Hill Financing Support Agreement are in force and effect unless it obtains a waiver or consent from RTIH permitting the incurrence of such indebtedness or the issuance of such securities.

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

The Government of Mongolia has put in place a framework and environment for foreign direct investment. However, there are political constituencies within Mongolia that have espoused ideas that would not be regarded by the international mining industry as conducive to foreign investment if they were to become law or official government policy. There can be no assurance that the present or future Parliament will refrain from enacting legislation that undermines the Investment Agreement or otherwise adversely impacts Oyu Tolgoi or that the present or a future government will refrain from adopting government policies or seeking to renegotiate the terms of the Investment Agreement in ways that are adverse to the Corporation’s interests or that impair the Corporation’s ability to develop and operate Oyu Tolgoi or other projects on the basis presently contemplated, which may have a material adverse impact on the Corporation and its share price.

The Government of Mongolia holds a significant stake in Oyu Tolgoi.

Although the ARSHA contemplates that the Corporation will maintain a controlling interest in Oyu Tolgoi, the Government of Mongolia also holds a significant stake in Oyu Tolgoi LLC which holds the Oyu Tolgoi property. In addition, a portion of the Oyu Tolgoi property is held subject to an agreement with Entrée Gold, a Canadian exploration stage resource company in which the Corporation directly holds an 8.0% interest and RTIH directly holds a 9.7% interest. Therefore, the Corporation will be subject to risks to which shareholders are typically exposed. Such risks include the potential for disputes respecting development, operation and financing matters resulting from multiple levels of corporate and/or governmental approvals and differing sophistication in relevant business and technical matters, inequality of bargaining power and incompatible strategic and economic objectives (both in the short term and the longer term) among the shareholders.

The Investment Agreement and the Underground Plan include a number of future covenants that may be outside of the control of the Corporation to perform.

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

• Mongolian nationals must represent at least 90% of Oyu Tolgoi employees now that Commercial Production has been attained, and 50% of Oyu Tolgoi’s engineers must be Mongolian nationals within five years of achieving Commercial Production (i.e. by September 2018), and increasing to 70% after ten years of achieving

Commercial Production (i.e. expected after September 2023). Achieving or maintaining these targets is contingent upon the availability of a sufficient number of qualified personnel, which is not wholly within the Corporation’s control.

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

• Oyu Tolgoi LLC is obligated, on a priority basis, to purchase and utilize services supplied by Mongolian citizens and/or legal entities, and equipment, raw materials, other materials and spare parts manufactured in Mongolia, to the extent such services and materials are available on a competitive time, cost, quantity and quality basis, and to

give preference to Mongolian suppliers of freight and transportation services required for Oyu Tolgoi. Such services, materials and suppliers may not be available to the extent required or may be available upon commercial terms that are less advantageous than those available from other sources.

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

• The extension of the term of the Investment Agreement is subject to a number of conditions, including the Corporation having demonstrated that Oyu Tolgoi has been operated in accordance with industry best practices in terms of national and community benefits, environment and health and safety practices. The inherently subjective nature of these criteria creates the risk that the Corporation and the Government of Mongolia may disagree as to whether the conditions for extending the term of the Investment Agreement have been met.

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

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

The Investment Agreement commits Oyu Tolgoi LLC to eventually utilize Mongolian power sources. Such sources of power may not be available or may be available upon commercial terms that are less advantageous than those available from other potential power suppliers. Alternative strategies whereby the Corporation would undertake the construction of a power generating facility in Mongolia are likely to require further funding in addition to the existing project finance and proposed supplemental debt facilities; such funding remains subject to negotiation, and may not be available or may only be available on substantively different terms from existing facilities. Despite the Corporation’s best efforts, the ability to meet such an obligation is not necessarily within the Corporation’s control and non-fulfilment of such requirement may result in a default under the Investment Agreement. Such default could result in termination of the Investment Agreement or damages accruing, which may have a material adverse impact on the Corporation and its share price.

- 32 -

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

RTIH, a wholly-owned subsidiary of Rio Tinto, together with other Rio Tinto affiliates, owns a majority of the outstanding Common Shares and can exercise its voting power to elect all of the members of the Board of Directors, subject to applicable securities legislation. RTIH can also exercise its majority voting power to unilaterally pass any ordinary resolution submitted to a vote of the Corporation’s shareholders, except for resolutions in respect of which RTIH is an interested party and for which disinterested shareholder approval is required. In addition, under the HoA, RTIH was appointed as manager of Oyu Tolgoi which provides RTIH with responsibility for the management of Oyu Tolgoi. The Corporation’s Board of Directors appoints the CEO in consultation with RTIH. The CEO and the rest of the Corporation’s senior management team, are employed by affiliates of RTIH and are seconded to the Corporation.

RTIH is also able to exert a significant degree of control over the management, development and operation of Oyu Tolgoi, as well as the Corporation, through a series of governance mechanisms and restrictive covenants established under the Private Placement Agreement, the HoA and other agreements entered into with Rio Tinto. These include the Technical Committee established under the Private Placement Agreement and the Operating Committee established under the HoA, through which RTIH is able to control decisions respecting the business of Oyu Tolgoi LLC subject to a veto of the Corporation in respect of certain special matters.

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

A substantial portion of Turquoise Hill’s receivables and liquid asset deposits are with or managed by affiliates of Rio Tinto.

On December 15, 2015, the Corporation entered into the Cash Management Services Agreement with 9539549 Canada Inc., a wholly-owned subsidiary of Rio Tinto, pursuant to which the net proceeds from the Project Finance Facility are to be placed with and managed by 9539549 Canada Inc. until they are returned to Turquoise Hill for purposes of funding the underground at Oyu Tolgoi. Although RTIH has guaranteed the obligations of 9539549 Canada Inc. under the Cash Management Services Agreement, a delay in the return of such funds when requested by Turquoise Hill, or the unavailability of such funds for any reason, could result in a material adverse effect on the Corporation.

In May 2016, the Corporation and its wholly-owned subsidiary, Movele S.à r.l., entered into the Movele Deposit Agreement, pursuant to which Movele S.à r.l. deposited funds with RTF, which are invested or deposited by RTF for fixed terms. The inability of Movele S.à r.l. to access cash and cash equivalent investments on deposit with RTF under the Movele Deposit Agreement, in a timely manner or at all due to circumstances which limit RTF’s ability to return such funds to Movele S.à r.l. could have a material adverse impact on Turquoise Hill and its business.

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

The Corporation’s estimates regarding the cost of development and operation of Oyu Tolgoi are estimates only and are based on many assumptions and analyses made by the Corporation’s management in light of their experience and perception of historical trends, current conditions and expected future developments, as well as other factors management believes are appropriate in the circumstances. These estimates and the assumptions upon which they are based are subject to a variety of risks and uncertainties and other factors that could cause actual expenditures to differ materially from those estimated. If these estimates prove incorrect, the total capital expenditures required to complete development of the underground component of Oyu Tolgoi may increase, which may have a material adverse impact on the Corporation, its results of operations, financial condition and share price.

In addition to the requirements of the Investment Agreement, there are also a number of uncertainties inherent in the development and construction of any new or existing mine, including Oyu Tolgoi. These uncertainties include the timing and cost, which can be considerable, of the construction of mining and processing facilities; the availability and cost of skilled labour, the impact of fluctuations in commodity prices, process water, power and transportation, including costs of transport for the supply chain for Oyu Tolgoi, which requires routing approaches which have not been fully tested; the annual usage fees payable to the local province for sand, aggregate and water; the availability and cost of appropriate smelting and refining arrangements; and the need to obtain necessary environmental and other government permits, such permits being on reasonable terms, and the timing of those permits. The cost, timing and complexities of mine construction and development are increased by the remote location of a property such as Oyu Tolgoi.

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

Changes in laws and regulations, whether actual or the interpretation thereof, could adversely impact the Corporation’s activities.

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

Compliance with these laws and regulations increases the costs of exploring, drilling, financing, developing, constructing, operating and closing mines and other facilities. It is possible that the costs, delays and other effects associated with these laws and regulations may impact the Corporation’s decision as to whether to continue to operate in a particular jurisdiction or

- 34 - whether to proceed with exploration or development of properties and the nature of related investing and financing arrangements.

Since legal requirements change frequently, are subject to interpretation and may be enforced to varying degrees in practice, the Corporation is unable to predict the ultimate cost of compliance with these changes and their effect on operations or other business activities. Furthermore, changes in governments, regulations, interpretations, policies or practices could have an adverse impact on the Corporation’s future cash flows, earnings or results of operations and financial condition, which may have a material adverse impact on the Corporation and its share price.

The Corporation is exposed to risks of changing political stability and government regulation in the countries in which it carries out its activities.

The Corporation carries out its activities in countries which may be affected in varying degrees by political stability, government regulations (including but not restricted to those related to the mining industry) and domestic or foreign investment therein, and by the policies of other nations in respect of these countries. Any changes in regulations or shifts in political conditions are beyond the control of the Corporation and may adversely affect its business. The Corporation’s mining, exploration and financing activities may be affected to varying degrees by government regulations, or other political and administrative undertakings, including those with respect to restrictions on production, price controls, export controls, income and other taxes, expropriation of property, employment, land use, water use, environmental legislation and mine safety. The Corporation may be subject to disputes or issues with customs officials affecting the shipment of the Corporation’s products in jurisdictions in which it operates, and the ability of its customers to collect such products may arise and could have an adverse effect on the Corporation’s ability to collect and/or recognize revenue. In addition, in the various jurisdictions where the Corporation operates and finances its business activities (including Mongolia, Canada and Europe), it may from time to time be subject to disputes with tax authorities over the interpretation and application of existing tax legislation and face risks regarding future changes in the tax laws of such jurisdictions (and future changes in the way such tax authorities interpret and apply existing tax legislation) that could increase the amount of taxes owing in later years. The Corporation’s activities may also be affected to varying degrees by political and economic instability, economic, investment or other sanctions imposed by other nations, terrorism, military repression, crime, extreme fluctuations in currency exchange rates and high inflation.

In certain areas where the Corporation is active, the regulatory environment is in a state of continuing change, and new laws, interpretations, regulations and requirements may be retroactive in their effect and implementation. The laws of certain of the countries in which the Corporation carries out its activities also have the potential to be applied in an inconsistent manner due to the substantial administrative discretion granted to the responsible government officials or agencies. As such, even the Corporation’s best efforts to comply with the laws and regulations may not result in effective compliance in the determination of government bureaucrats, which may have a material adverse impact on the Corporation and its share price.

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A breach by the Corporation of its contractual agreements could have a material adverse effect on the Corporation and its business.

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

The disclosed resource and reserve estimates are estimates only and are subject to change based on a variety of factors, some of which are beyond the Corporation’s control. The Corporation’s actual production, revenues and capital expenditures may differ materially from these estimates.

The disclosed estimates of reserves and resources in this AIF, including the anticipated tonnages and grades that are expected to be achieved or the indicated level of recovery that will be realized, are estimates and no assurances can be given as to their accuracy. Such estimates are, in large part, based on interpretations of geological data obtained from drill holes and other sampling techniques, and large-scale continuity and character of the deposits will only be determined once significant additional drilling and sampling has been completed and analyzed. Actual mineralization or formations may be different from those predicted. Reserve and resource estimates are materially dependent on prevailing metal prices and the cost of recovering and processing minerals at the individual mine sites. Market fluctuations in the price of metals or increases in the costs to recover metals from the Corporation’s mining projects may render mining of ore reserves uneconomical and affect the Corporation’s operations in a materially adverse manner. Moreover, various short- term operating factors may cause a mining operation to be unprofitable in any particular accounting period.

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

The Corporation uses prices reflecting market pricing projections in the financial modeling 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.

There are numerous uncertainties inherent in estimating quantities of mineral reserves and resources. The estimates referenced in this AIF are based on various assumptions relating to

- 36 - commodity prices and exchange rates during the expected life of production, mineralization of the area to be mined, the projected cost of mining, and the results of additional planned development work. Actual future production rates and amounts, revenues, taxes, operating expenses, environmental and regulatory compliance expenditures, development expenditures, and recovery rates may vary substantially from those assumed in the estimates. Many of the projections and estimates are based on subjective views and assumptions. Any significant change in these assumptions, including changes that result from variances between projected and actual results, could result in material downward revision to current estimates, which may have a material adverse impact on the Corporation and its share price.

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

Mining projects are sensitive to the volatility of metal prices.

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

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

The following table sets forth for the periods indicated: (i) the London Metals Exchange’s high, low and average settlement prices for copper in U.S. dollars per pound; (ii) the high, low and average London afternoon fixing prices for gold in U.S. dollars per ounce; and (iii) the high, low and average London afternoon fixing prices for silver in U.S. dollars per ounce.

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Year Copper Gold Silver High Low Average High Low Average High Low Average 2012 $3.93 $3.29 $3.61 $1,792 $1,540 $1,669 $37.23 $26.67 $31.15 2013 $3.77 $3.04 $3.34 $1,694 $1,192 $1,411 $32.23 $18.61 $23.79 2014 $3.37 $2.84 $3.10 $1,385 $1,142 $1,266 $22.05 $15.28 $19.08 2015 $2.94 $2.04 $2.49 $1,296 $1,049 $1,160 $18.36 $13.67 $15.66 2016 $2.69 $1.96 $2.21 $1,366 $1,077 $1,251 $20.71 $13.58 $17.16

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

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

Most of the areas designated for State special needs are subject to existing mineral exploration and mining licenses issued by the Government of Mongolia to third parties and, in certain cases, a mineral resource has been declared and registered with the applicable governmental authorities in respect of such licenses. Oyu Tolgoi LLC has entered into certain consensual arrangements with some of the affected third parties; however, such arrangements have not been completed with all affected third parties. If Oyu Tolgoi LLC cannot enter into consensual arrangements with an affected third party and such third party’s rights to use and access the subject land area are ultimately adversely affected by application of Resolution No. 175, the Government of Mongolia will be responsible for compensating such third parties in accordance with the terms of Resolution No. 175 and the Minerals Law (2006).

It is not clear at this time whether the Government of Mongolia will expect any compensation that may be payable to such third parties to be borne by Oyu Tolgoi LLC.

To the extent that consensual arrangements are not entered into with affected third parties and the Government of Mongolia seeks contribution or reimbursement from Oyu Tolgoi LLC for compensation it provides such third parties, the amount of such contribution or reimbursement is not presently quantifiable but may be significant. The description of Resolution No. 175 has been provided by Oyu Tolgoi LLC and has been relied on under Item 3 of NI 43-101 Reliance on Other Experts.

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

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

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

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

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

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

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

The Corporation has received exemptions from liability from relevant governmental authorities for environmental damage caused by previous mining operations at former mining projects. There is a risk, however, that, if an environmental accident occurred at those sites, it may be difficult or impossible to assess the extent to which environmental damage was caused by the Corporation’s activities or the activities of other operators. In that event, the liability exemptions

- 39 - could be ineffective and possibly worthless, which may have a material adverse impact on the Corporation and its share price.

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

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

The Corporation is subject to anti-corruption legislation.

The Corporation is subject to the United States’ Foreign Corrupt Practices Act and other similar legislation, such as, but not necessarily limited to, Canada’s Corruption of Foreign Public Officials Act (collectively, “Anti-Corruption Legislation”), which prohibits the Corporation or any director, officer, employee, consultant or agent of the Corporation or any shareholder of the Corporation acting on its behalf from giving, paying, offering to give or pay, or authorizing the giving or payment of any reward, advantage, benefit or anything of value to any foreign government or public official, government staff member, political party, or political candidate in an attempt to obtain or retain business, obtain an advantage in the course of business, or to otherwise induce or influence a person working in an official capacity. The Anti-Corruption Legislation also requires public companies to make and keep books and records that accurately and fairly reflect their transactions and to devise and maintain an adequate system of internal accounting controls. The Corporation’s international activities create the risk of unauthorized payments or offers of payments by its employees, consultants or agents, even though they may not always be subject to its control. The Corporation strictly prohibits these practices by its employees, consultants and agents. However, the Corporation’s existing safeguards and any future improvements may prove to be less than effective, and its employees, consultants or agents may engage in conduct for which the Corporation might be held responsible. Any failure by the Corporation to adopt appropriate compliance procedures and ensure that its employees, consultants and agents comply with the Anti-Corruption Legislation and applicable laws and regulations in foreign jurisdictions could result in substantial penalties or restrictions on its ability to conduct its business, which may have a material adverse impact on the Corporation and its share price.

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

The Corporation at one time conducted exploration and mining operations in a number of jurisdictions and, as a result of such activities and operations or current or future activities and operations, may be subject to governmental or regulatory investigations and claims in or regarding those jurisdictions in which it is not currently active. A serious allegation or formal investigation by regulatory authorities (regardless of the ultimate decision) could have a material adverse impact on the Corporation, its reputation and its share price. There may also be considerable cost and disruption in responding to allegations or investigations and taking any remedial action.

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

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

The Corporation is currently engaged in an SEC comment letter process relating to revenue recognition accounting treatment regarding certain sales of coal by SouthGobi, which process could result in a requirement to file future supplements to or further restatements of the Corporation’s financial disclosure.

The Corporation has received comment letters from the staff (the “Staff”) of the SEC relating to the Annual Report on Form 40-F for the year ended December 31, 2012 filed with the SEC on March 25, 2013. The Staff’s comments addressed accounting and disclosure matters primarily related to revenue recognition accounting under U.S. Generally Accepted Accounting Principles in respect of certain sales of coal by the Corporation’s then majority-owned subsidiary, SouthGobi. On November 14, 2013, the Corporation filed restated management’s discussion and analysis and consolidated financial statements for the year ended December 31, 2012 and has concluded that such restatement appropriately addresses the timing of revenue recognition for these transactions. However, as of the date of this AIF, the Staff’s comments remain unresolved, and until these comments are resolved, the Corporation cannot predict whether the Staff will agree with the Corporation’s conclusion. The Corporation completed the sale of its remaining stake in SouthGobi in October 2016 and, as a result, no longer holds any shares in SouthGobi. For more information, see “General Description of the Business – Three Year History – 2015” and “General Description of the Business – Three Year History – 2016”.

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

The Corporation has not paid any dividends on its Common Shares to date, nor will it contemplate a declaration of payment of dividends until its operations generate sufficient excess cash flow for distribution as it anticipates that it will reinvest the majority of, if not all, future earnings, if any, in the development and growth of Oyu Tolgoi and its business generally.

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Therefore, investors may not receive any funds unless they sell their Common Shares, and investors may be unable to sell their Common Shares on favourable terms or at all. The Corporation cannot give any assurance of a positive return on investment or that investors will not lose the entire amount of their investment in Common Shares. Prospective investors seeking or needing dividend income or liquidity are discouraged from purchasing Common Shares.

There is no assurance that the Corporation will be capable of consistently producing positive operating cash flows.

Oyu Tolgoi LLC generated positive operating cash flows in 2016. However, there is no assurance that the Corporation will be capable of producing positive cash flow on a consistent basis or for a sustained period of time or arranging for additional capital, whether through project debt financing or otherwise, if required, to continue open-pit operations as currently planned or in respect of additional funding requirements for the underground mine. If such additional capital is required but not available on commercially reasonable terms or at all, it may have a material adverse impact on the value of Oyu Tolgoi and, consequently, on the Corporation and its share price.

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

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

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

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

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

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

The loss of, or a substantial decline in sales to, a top customer could have a material adverse effect on the Corporation’s revenues and profitability.

A reduction or delay in orders from leading customers, including reductions or delays due to market, economic or competitive conditions, could have a material adverse effect upon the Corporation’s results of operations. Customers that previously accounted for significant revenue may not necessarily generate similar levels of or any revenue in any future period. The failure to obtain new customers or repeat orders from existing customers may materially affect the Corporation’s operating results. The Corporation anticipates that its exposure to a group of key customers in any given fiscal year will continue for the foreseeable future. There is a risk that existing customers will elect not to do business with the Corporation in the future or will experience financial or other difficulties.

The Corporation faces risks associated with enforcement of its contractual rights.

Enforcement of existing and future laws and contracts in jurisdictions in which the Corporation carries out its activities is subject to uncertainty, and the implementation and interpretation of them may be inconsistent. The promulgation of new laws and changes to existing laws may adversely affect foreign companies, such as the Corporation, with activities in or contracts with counterparties in such jurisdictions. These uncertainties could limit the legal protections available to the Corporation. The Corporation’s inability to enforce its contractual rights could have a material adverse effect on its business and profitability. In addition, the Corporation is exposed to risks of political instability and government regulation in the countries in which it carries out its activities. See also the risk factor titled “The Corporation may be limited in its ability to enforce the Investment Agreement and the Underground Plan against Mongolia, a sovereign government”.

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

Recruiting and retaining qualified personnel is critical to the Corporation’s success. The number of persons skilled in the acquisition, development and exploration of mining properties is limited and competition for such persons is intense. The Corporation believes that it has been successful in recruiting the necessary personnel to meet its corporate objectives but, as the Corporation’s business activity grows, it will require additional key financial, operational, mining and management personnel, as well as additional staff on the operations side. The Corporation is also dependent on Rio Tinto for the secondment of skilled labour at Oyu Tolgoi, particularly in

- 43 - the construction and development phases. Although the Corporation believes that it will be successful in attracting and retaining qualified personnel, including qualified secondees from Rio Tinto, there can be no assurance of such success.

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

Capital markets are volatile, and capital may not at all times be available on terms acceptable to the Corporation or at all.

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

If the Corporation is required to access credit markets to carry out its development objectives, the state of domestic and international credit markets and other financial systems could affect the Corporation’s access to, and cost of, capital. If these credit markets were significantly disrupted, such disruptions could make it more difficult for the Corporation to obtain, or increase its cost of obtaining, capital and financing for its operations. Such capital may not be available on terms acceptable to the Corporation or at all, which may have a material adverse impact on the Corporation and its share price.

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

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

- 44 - of time sensitive business objectives that require access to such funds or such an event could, in extreme circumstances, result in the loss of some or all of such funds.

The Corporation’s business could be materially and adversely affected by litigation proceedings.

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

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

Based on the scope of its past, current and projected operations, the Corporation does not believe that it was a PFIC for the 2016 tax year. However, the determination of the Corporation’s PFIC status for any year is very fact-specific, and there can be no assurance in this regard for future years. If the Corporation is classified as a PFIC, U.S. holders of Common Shares could be subject to adverse U.S. federal income tax consequences, including increased tax liabilities and possible additional reporting requirements, which may have a material adverse impact on the Corporation and its share price.

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DESCRIPTION OF THE BUSINESS

Qualified Persons

The 2016 OTTR is the current Technical Report for Oyu Tolgoi and related projects. Disclosure of a scientific or technical nature in this AIF in respect of the 2016 OTTR was prepared by the following qualified persons: Bernard Peters, B. Eng. (Mining), FAusIMM, Technical Director – Mining of OreWin Pty Ltd. (“OreWin”), who was responsible for the overall preparation of the report and the mineral reserves estimate of the report and Sharron Sylvester, B.Sc. Geology, MAIG (RPGeo), Technical Director – Geology of OreWin, who was responsible for preparation of the mineral resources estimate of the report, both of whom are “qualified persons” for the purposes of NI 43-101.

Overview

Oyu Tolgoi has been identified as a mineral project on a property that is material to Turquoise Hill.

Oyu Tolgoi

The information in this section is based on the 2016 OTTR, which has an effective date of October 14, 2016 and was prepared in accordance with the requirements of NI 43-101. The following is a summary of certain of the information contained in the 2016 OTTR, a copy of which was filed with the Canadian Securities Authorities on October 21, 2016 and is available on SEDAR at www.sedar.com.

Summary of Project Development

Oyu Tolgoi is located in the Southern Gobi region of Mongolia and is being developed by Oyu Tolgoi LLC. Oyu Tolgoi consists of a series of deposits containing copper, gold, silver, and molybdenum. The deposits lie in a structural corridor where mineralization has been discovered over a 26 km strike length. The Oyu Tolgoi deposits stretch over 12 km, from the Hugo North deposit in the north through the adjacent Hugo South, down to the Oyut deposit (formerly known as Southern Oyu Tolgoi (“SOT”)) and extending to the Heruga deposit in the south as shown in the illustration below.

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Oyu Tolgoi Projected Long Section

After accounting for depletion due to mining up until December 31, 2015, the series of deposits contain an estimated Measured and Indicated mineral resource of 45.9 billion pounds of contained copper and 23.5 million ounces of contained gold and an estimated Inferred mineral resource of 51.5 billion pounds of contained copper and 36.0 million ounces of contained gold. The Oyu Tolgoi trend is still open to the north and south and the deposits have not been closed off at depth.

Oyu Tolgoi LLC is 66% owned by the Corporation and 34% owned by Erdenes. Rio Tinto owns 50.8% of the Corporation and Erdenes is owned by the Government of Mongolia. RTIH is also the appointed manager of Oyu Tolgoi.

Over time, there is expected to be multiple investment decisions made for Oyu Tolgoi and an evaluation of each development option, as and when it is required, ensuring that the commitments it makes represent the optimum use of capital to develop Oyu Tolgoi.

The initial investment decision was made in 2010 to construct Phase 1 of Oyu Tolgoi. Phase 1 consisted of the Oyut open pit mine, a concentrator and supporting infrastructure. These facilities are complete and the operation has commenced. Processing operations have been in production since December 2012, Commercial Production was achieved in September 2013, and first concentrate exported in October 2013.

Part of the initial investment decision included continued investment into the development of the Hugo North underground mine in parallel with mining the open pit. Lift 1 of Hugo North is the most significant value driver for the project. The Phase 2 scope, which includes the Hugo North underground block cave, supporting conveyor decline and shafts, concentrator conversion, and supporting infrastructure expansion has now commenced development.

The 2016 OTTR project scope from the Statutory Feasibility Study that has been used for the mineral reserves evaluation is the 2016 Reserve Case. A summary of the production and financial results for the 2016 Reserve Case are shown in the table below.

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2016 Reserve Case Description Units Mineral Reserves Total Processed bt 1.4 Cu Grade % 0.86 Au Grade g/t 0.30 Ag Grade g/t 1.95 Copper Recoverable Billion lb 23.9 Gold Recoverable Moz 10.4 Silver Recoverable Moz 74.3 Life Years 38 Expansion Capital US$B 4.63 NPV8% After Tax US$B 6.94 IRR After Tax % 21% Payback Period Years 8 Notes:

1. NPV8% is Net Present Value (“NPV”) at a discount rate of 8% for all years.

2. IRR is Internal Rate of Return.

3. Metal prices used for calculating the financial analysis were as follows: long-term copper at $3.00/lb; gold at $1,300/oz; and silver at $19.00/oz. The analysis has been calculated with

assumptions for smelter refining and treatment charges, deductions and payment terms, concentrate transport, metallurgical recoveries and royalties.

4. For mine planning the metal prices used to calculate block model NSR were copper at $3.01/lb; gold at $1,250/oz; and silver at $20.37/oz. For the open pit processing and general administration, the following operating costs have been used to determine cut-off grades: Southwest at $8.37/t, Central Chalcocite, Central Covellite, and Central Chalcopyrite at $7.25/t and the underground costs were based on $15.34/t.

5. For the underground block cave, all mineral resources within the shell have been converted to mineral reserves. This includes low grade Indicated mineral resources. It also includes Inferred mineral resources, which have been assigned a zero grade and treated as dilution. The Oyut mineral reserves were mineral reserves in the pit at January 1, 2014. It does not include stockpiles.

6. The Oyut open pit mineral reserves are the mineral reserves in the pit at December 31, 2015.

The mineral reserves do not include stockpiles as at that date.

7. For Oyut, only Measured mineral resources were used to report Proven mineral reserves and

only Indicated mineral resources were used to report Probable mineral reserves.

8. For Hugo North Measured and Indicated mineral resources were used to report Probable

mineral reserves.

9. The mineral reserves reported above are not additive to the mineral resources.

10. Economic analysis has been calculated from the start of 2017 and exclude $0.46b expansion capital from 2016. Costs shown are real costs not nominal costs. Expansion capital includes only direct project costs and

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exclude interest expense, capitalized interest, debt repayment, tax pre-payments and forex adjustments.

The 2016 OTTR updated the project status since the 2014 OTTR. The key differences are as follows:

• Reserves and resources have only changed to the extent of mining depletion from open-pit operations.

• Assumes a January 1, 2017 start date for production schedules and accommodates for the delayed mid-2016

underground project restart.

• Assumes processing of 1.4 billion tonnes of ore, mined from the Oyut open pit and the first lift in the Hugo

North underground block cave.

• Plant capacity remains at an average production rate of 40 million tonnes per annum (Mt/a).

• Underground mine remains at targeted full production rate of 95,000 tonnes per day.

• Updates to expansion capital and NPV range analysis.

Oyu Tolgoi has a large mineral resource providing management with flexibility in studying alternative paths for mine development to match future economic conditions. Ongoing planning work using Inferred mineral resources has identified the potential for further expansions.

The 2016 OTTR includes mineral resources from Oyu Tolgoi (wholly owned by Oyu Tolgoi LLC) and Entrée Gold Joint Venture license areas. The Shivee Tolgoi License and the Javkhlant License are held by Entrée Gold. The Shivee Tolgoi License and the Javkhlant License are planned to be operated by Oyu Tolgoi LLC. Oyu Tolgoi LLC will receive 80% of cash flows after capital and operating costs for material originating below 560 m, and 70% above this depth.

Four deposits have been identified in the mineral resources at Oyu Tolgoi; they are Oyut, Hugo Dummett, comprising Hugo North and Hugo South, and Heruga. Heruga is a separate deposit south of the Oyut deposit. The mine planning work to date suggests the following relative ranking for overall return from each deposit, from highest value to lowest:

• Hugo North

• Oyut

- Southwest Zone

- Central Zone

• Hugo South

• Heruga

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Currently and in the initial years, the predominant source of ore is the Oyut open pit. In parallel to this surface works, underground infrastructure and mine development is ongoing for the Hugo North underground block cave. Stockpiling allows the higher grade ore from Hugo North to gradually displace the open-pit ore as the underground production ramps-up to reach 95 ktpd.

Ore is processed through the existing concentrator using conventional crushing, grinding, and flotation circuits. The concentrate produced is trucked to smelters and traders in China.

Oyu Tolgoi is a remote brownfields project and extensive infrastructure has been constructed in addition to the concentrating facilities. The major initial infrastructure elements include:

• Water Borefields;

• Water Treatment;

• Housing;

• Airport;

• Supporting Facilities; and

• Power Transmission Lines, Sub-Station.

Development of the resource is the objective of stakeholders and over the life of Oyu Tolgoi, Oyu Tolgoi LLC will continue to progress its understanding of these resources and ultimately make decisions on development of the resource.

Oyu Tolgoi’s large resource base represents outstanding opportunities for production expansion. The figure below shows an example of the decision tree for the possible development options at Oyu Tolgoi. This has been updated to include options that take advantage of productivity improvements in plant throughput that have begun to be recognized in the process plant. The decision tree shows options assuming that continuous improvements in plant productivity are achieved over the next five years. Then there would be key decision points for plant expansion and the development of new mines at Hugo North Lift 2, Hugo South, and eventually Heruga. This provides an opportunity as Oyu Tolgoi LLC will have the benefit of incorporating actual performance of the operating mine into the study before the next investment decisions are required. Oyu Tolgoi LLC plans to continue to evaluate alternative production cases in order to define the relative ranking and timing requirements for overall development options.

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Oyu Tolgoi Development Options

Project Description and Location

The majority of the identified mineralization at Oyu Tolgoi occurs within the mining license MV-006709 (“Oyu Tolgoi License”) at the Hugo Dummett Deposits and the Oyut deposit. Oyu Tolgoi LLC holds its rights to Oyu Tolgoi through the Oyu Tolgoi License, which comprises approximately 8,496 ha. The Government of Mongolia granted the Oyu Tolgoi License to Oyu Tolgoi LLC in 2003, along with mining licenses for three other properties, identified as MV-006708, MV-006710, and MV-006711. Subsequently, MV-006711 has been relinquished.

The Oyu Tolgoi License includes the right to explore, develop mining infrastructure and facilities, and conduct mining operations at Oyu Tolgoi. In 2006, the Mongolian Parliament passed new mining legislation and changed the term of mining licenses to a 30-year term with two 20-year extensions. The first figure below shows the location of Oyu Tolgoi regionally relative to the Mongolian-Chinese border and the second figure below shows the deposits and license boundaries.

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Project Location

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The Oyu Tolgoi Licenses

Oyu Tolgoi LLC has an economic interest in MV-015225 (Javkhlant) and MV-015226 (Shivee Tolgoi) pursuant to the Entrée Earn-in Agreement. This agreement contemplates the establishment of the Entrée Gold Joint Venture which provides for Oyu Tolgoi LLC to hold legal title in MV-015225 and MV-015226, subject to the terms of the agreement, and to Oyu Tolgoi LLC meeting prescribed earn-in expenditures. While a formal joint venture agreement has not been entered into, the earn-in requirements have been met, and Oyu Tolgoi LLC’s participating interest in such joint venture (including the licenses) consists of:

• In respect of the proceeds from mining from the surface to 560 m below the surface: 70%; and

• In respect of the proceeds from mining from depths beneath 560 m: 80%.

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The northernmost extension of the Hugo Dummett deposit (Hugo North) crosses onto the Shivee Tolgoi Property. The Heruga deposit lies almost entirely within the Javkhlant Property, with only the northern extreme passing into MV-006709. There are numerous exploration targets across MV-006708, MV-006709, MV-006710, MV-015225, and MV-015226.

The Oyu Tolgoi License property was surveyed by an independent consultant in 2002 and by a qualified Mongolian Land Surveyor in 2004 and again in 2011 after the Government of Mongolia ordered a re-survey to establish the legal boundaries of the Oyu Tolgoi License concession.

Environmental and Social Impact Assessment

Oyu Tolgoi LLC has completed a comprehensive ESIA for Oyu Tolgoi. The ESIA undertaken as part of the project finance process was publically disclosed in August 2012. The culmination of nearly ten years of independent work and research carried out by both international and Mongolian experts, the ESIA identifies and assesses the potential environmental and social impacts of the project, including cumulative impacts, focusing on key areas such as biodiversity, water resources, cultural heritage, and resettlement.

The ESIA also sets out measures through all project phases to avoid, minimize, mitigate, and manage potential adverse impacts to acceptable levels established by Mongolian regulatory requirements and good international industry practice, as defined by the requirements of the Equator Principles, and the standards and policies of the International Finance Corporation (“IFC”), European Bank for Reconstruction and Development (“EBRD”), and other financing institutions.

Corporate commitment to sound environmental and social planning for the project is based on the Corporation’s values, responsibilities and support for human rights, social justice, and sound environment management, including the United Nations Universal Declaration of Human Rights (1948); and is described in “The Way We Work”, Rio Tinto’s global code of business conduct that defines the way Rio Tinto manages the economic, social, and environmental challenges of its global operations.

Oyu Tolgoi LLC has implemented and audited an environmental management system (“EMS”) that conforms to the requirements of ISO 14001:2004. Implementation of the EMS during the construction phases focuses on the environmental policy; significant environmental aspects and impacts and their risks prioritization; legal and other requirements; environmental performance objectives and targets; environmental management programmes; and environmental incident reporting. The Oyu Tolgoi ESIA builds upon an extensive body of studies and reports, and Detailed Environmental Impact Assessments (“DEIAs”) that have been prepared for project design and development purposes, and for Mongolian approvals under the following laws:

• The Environmental Protection Law (1995);

• The Law on Environmental Impact Assessment (1998, as amended in 2001); and

• The Minerals Law (2006).

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These initial studies, reports, and DEIAs were prepared over a six-year period between 2002 and 2008, primarily by the Mongolian company Eco-Trade LLC, with input from Aquaterra on water issues.

The original DEIAs provided baseline information for both social and environmental issues. These DEIAs covered impact assessments for different project areas, and were prepared as separate components to facilitate technical review as requested by the Government of Mongolia.

The original DEIAs were in accordance with Mongolian standards and while they incorporated World Bank and IFC guidelines, they were not intended to comprehensively address overarching IFC policies such as the IFC Policy on Social and Environmental Sustainability, or the EBRD Environmental and Social Policy.

Following submission and approval of the initial DEIAs, the Government of Mongolia requested that Oyu Tolgoi LLC prepare an updated, comprehensive ESIA whereby the discussion of impacts and mitigation measures was project-wide and based on the latest project design. The ESIA was also to address social issues, meet Government of Mongolia legal requirements, and comply with current IFC good practice.

For the ESIA, the baseline information from the original DEIAs was updated with recent monitoring and survey data. In addition, a social analysis was completed through the commissioning of a Socio-Economic Baseline Study and the preparation of a Social Impact Assessment (SIA) for the project.

The requested ESIA, completed in 2012, combines the DEIAs, the project SIA, and other studies and activities that have been prepared and undertaken by and for Oyu Tolgoi LLC. Independent reports on progress were subsequently submitted in 2013 and 2016.

Government and Community Relations

Resolution No. 175

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It is not clear at this time whether the Government of Mongolia will expect any compensation that may be payable to such third parties to be borne by Oyu Tolgoi LLC.

Accessibility, Climate, Local Resources and Physiography

Oyu Tolgoi is located in the South Gobi region of Mongolia, approximately 550 km south of the capital city, Ulaanbaatar. Access to the property from the Mongolian capital, Ulaanbaatar, is possible either by:

• Driving an unpaved road, via Mandalgovi, which is a 12-hour drive under good conditions, or

• Flying, with in-air travel time of less than two hours.

A permanent domestic airport has been constructed at Oyu Tolgoi to support the transportation of people and goods to the site from Ulaanbaatar. It further serves as the regional airport for Khanbogd soum.

The permanent airport is 11 km north of the Oyu Tolgoi camp area. It is a non-precision approach, visual flight rules (VFR) facility. The runway surface is concrete 3,250 m long x 45 m wide, with a concrete apron at the terminal building. The runway has been aligned to the prevailing north-west–south-east wind direction to minimize cross-wind conditions and facilitate optimal landing and take-off conditions. The design is set to service commercial aircraft up to the Boeing 737-800 series aircraft.

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

The Government of Mongolia may construct or facilitate the construction and management of a railway in the vicinity of the project to the China-Mongolia border. The Government of Mongolia will consult with Oyu Tolgoi LLC on the location and route of the railway, and, if the railway is constructed, then it will be made available to Oyu Tolgoi LLC on commercial and non-discriminatory terms. Energy Resources is currently constructing a single-track heavy-haul rail

- 56 - from its Ukhaa Khudag coal mine (approximately 120 km to the north-west of Oyu Tolgoi) to Gashuun Sukhait, ultimately to be interconnected with the Chinese rail network at Ganqimaodao on the Chinese side of the border. Once constructed, the South Gobi Rail alignment would pass within 10 km of the Oyu Tolgoi area and therefore represents an opportunity for eventual connection of Oyu Tolgoi to the rail network.

The Chinese Government has upgraded 226 km of road from Ganqimaodao to Wuyuan, providing a direct road link between the Mongolian border crossing at Gashuun Sukhait, 80 km south of Oyu Tolgoi, and the Trans-China Railway system. A 105 km sealed road is being constructed to the Mongolian-Chinese border crossing at Gashuun Sukhait. There is 23 km of road that remains to be sealed.

Ulaanbaatar has an international airport, and Mandalgovi and Dalanzadgad have regional airports. There is currently charter air service between Oyu Tolgoi and Ulaanbaatar. The closest regional airport in China is at Hohhot. There are no airport facilities at Wuyuan or Bayan Ovoo.

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

The Port of Tianjin is the largest port in northern China and one of the largest in the world. At the end of 2012, it covered more than 121 km2 and had in excess of 32 km of quay shoreline and 159 production berths. As at 2012, the main channel had been dredged to a depth of 21 m, allowing 300,000 DWT ships at high tide. The port is supervised and regulated by the Tianjin Municipality People’s Government, which has set up a Port Services Office to coordinate port services. Given the port’s ability to handle large tonnages and containers, it will not be a limiting factor in logistics planning for the project.

The South Gobi region has a continental, semi-desert climate with cool springs and autumns, hot summers, and cold winters. The average annual precipitation is approximately 57 mm, 90% of which falls in the form of rain with the remainder as snow. Temperatures range from an extreme maximum of about 50° Celsius to an extreme minimum below - 34° Celsius. The area occasionally receives very high winds accompanied by sand storms that often severely reduce visibility for several hours at a time. Oyu Tolgoi LLC conducts mining operations year-round.

The property comprising Oyu Tolgoi ranges in elevation from 1,140 m to 1,215 m above sea level. The local region is covered by sparse semi-desert vegetation and is used by nomadic herders who tend camels, goats and sheep. The topography largely consists of gravel-covered plains, with low hills along the northern and western borders. Scattered, small rock outcrops and colluvial talus are widespread within the northern, western and southern parts of the property. The topography is amenable to the construction of infrastructure for mining operations. Seismicity studies related to the property have been conducted and Oyu Tolgoi LLC has determined that the seismicity of the area comprising Oyu Tolgoi is generally low.

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The Mongolian Constitution (1992) sets out the personal rights and freedoms of the people of Mongolia, including the right to a healthy and safe environment and protection against environmental pollution and ecological imbalance (Article 16.1.2). It also describes the system of government and allocates powers and responsibilities to each branch of government.

In general, national laws are introduced and enforced by the central government. The Ministry of Environment and Green Development has legal authority for environmental protection legislation and regulations. The Ministry of Natural Resources and Mines has legal authority for mining legislation and regulations. The central government delegates some powers to provincial (aimag) and regional (soum) levels.

The ESIA provides a good overview of the applicable environmental legislation and regulations currently applicable to the project.

History

Project Exploration History

Oyu Tolgoi License

The existence of copper in the Oyu Tolgoi area has been recognized since the Bronze Age, but contemporary exploration for mineral resources did not begin until the 1980s, when a joint Mongolian and Russian geochemical survey team identified a molybdenum anomaly over the Central zone. Evidence of alteration and copper mineralization at the South zone was first noted by geologist Garamjav in 1983, during a regional reconnaissance of the area. In September 1996, Garamjav guided geologists from Magma Copper Company (“Magma”) to the area. These geologists identified a porphyry-copper leached cap over what is known as the Central zone of the Oyut deposit and quickly moved to secure exploration tenements. Magma was subsequently acquired by BHP (“BHP”), later BHP-Billiton. The target at Oyu Tolgoi was a large supergene-enriched porphyry.

Geophysical surveying at Oyu Tolgoi was first initiated by BHP in 1997. An airborne magnetometer survey was flown at a height of approximately 100 m on 300 m spaced, east-west oriented lines over approximately 1,120 km2 of BHP’s mineral concession. The survey provided good resolution of the magnetic features to facilitate geological and structural interpretation across the concession areas. BHP also undertook an induced polarization (“IP”) survey using a single gradient array with a 2,000 m AB electrode spacing and a ground magnetometer survey. The first survey was conducted on north-south oriented lines and produced data that were difficult to reconcile to the then-known geology. A later survey by the Corporation in 2001 was conducted on east-west oriented lines and therefore perpendicular to the structural trend. This immediately showed the close correlation between mineralization and chargeable response, which has proven to be highly successful in further exploration. Both IP datasets were surveyed by a local Mongolian surveying team at 250 m line spacing. The surveys covered the Southern zone, Southwest zone, Central zone, and North zone exploration targets but did not extend into the Far North region that ultimately became the Hugo Dummett Deposits.

BHP carried out geological, geochemical (stream sediment and soil), and geophysical surveys and diamond drilling programs (23 drillholes in total) in the Central and South zones in 1997

- 58 - and 1998. Copper and gold values were encountered at depths from 20–70 m below surface, and a supergene-enriched, chalcocite blanket was encountered in one drillhole (OT-3). Based on the results of this drilling, BHP performed a mineral resources estimate in 1998, but the resulting tonnage and grade estimate was considered too small to meet BHP corporate objectives, and BHP elected to offer the property for joint venture. The Corporation visited Oyu Tolgoi in May 1999 and agreed to acquire 100% interest in the property, subject to a 2.0% NSR royalty. In 2000, the Corporation, through its subsidiary, Oyu Tolgoi LLC, completed 8,000 m of reverse circulation (RC) drilling, mainly at the Central zone, to explore the chalcocite blanket discovered earlier by BHP. Based on this drilling, Oyu Tolgoi LLC updated the mineral resources estimates.

In 2001, Oyu Tolgoi LLC continued RC drilling, mostly in the South zone area, to test for additional supergene copper mineralization, and then drilled three core holes to test the deep hypogene copper–gold potential. One of these holes, OTRCD150, drilled over Southwest zone, intersected 508 m of chalcopyrite mineralization from a depth of 70 m, grading 0.81% Cu and 1.17 g/t Au. This marked the discovery of the Oyut deposit. The Oyut deposit was formerly known as SOT.

These results encouraged the Corporation to mount a major follow-up drill program. In late 2002, drilling in the far northern section of the property intersected 638 m of bornite–chalcopyrite-rich mineralization in drillhole OTD270, starting at a depth of 222 m. This hole marked the discovery of the Hugo Dummett Deposits.

The first mineral resource was reported on the Oyut deposit in 2003. A first-time mineral resources estimate for the deposit was prepared in 2004 on Hugo South (formerly called Far North), and the Hugo Dummett mineral resources were updated in 2005 to include Hugo North. In 2007 and 2014 the Hugo North mineral resources were updated.

In 2004, a NI 43-101 Preliminary Economic Analysis (“PEA”) was completed on the economics of open pit mining the Oyut. The Integrated Development Plan 2005 (IDP05) was also a PEA. IDP05 presented open-pit mining on the Oyut deposit, two block caves on Hugo North and one block cave on Hugo South, the plant capacity examined was 25.5 Mt/a with an expansion to 51 Mt/a. In 2006 a NI 43-101 Feasibility Study presented the open pit Oyut mineral reserves as an open-pit only scenario.

The Shaft 1 headframe, hoisting plant, and associated infrastructure were completed in January 2006. The shaft had been sunk to a depth of 1,385 m by January 2008. Development from the shaft has enabled additional delineation drilling and rock characterization for proposed mining operations.

In 2009, the Investment Agreement was agreed with the Government of Mongolia, which thereby became a 34% shareholder in Oyu Tolgoi LLC through the immediate issue of Oyu Tolgoi LLC’s common shares to a shareholding company owned by the Government of Mongolia. As part of the process of agreement, Oyu Tolgoi LLC presented a Mongolian Feasibility Study (“MFS09”) to the Government of Mongolia. The MFS09 included mining scenarios of the open pit on the Oyut deposit and underground mining by block caving on Hugo North, Hugo South, and Heruga. The plant capacity examined was 36.5 Mt/a with an expansion to 58 Mt/a.

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The Integrated Development Plan 2010 (“IDP10”) was a NI 43-101 Technical Report released in 2010 and included mineral reserves for open-pit mining of the Oyut deposit and block caving of Hugo North Lift 1. The plant capacity examined was 36.5 Mt/a with an expansion to 58 Mt/a.

In 2011, Oyu Tolgoi LLC completed the Integrated Development and Operating Plan (“IDOP”) that updated IDP10 using the same production scenario. A NI 43-101 Technical Report was released on IDOP. Sinking of Shaft 2 commenced in 2011.

In 2012, the Detailed Integrated Development and Operating Plan (DIDOP) was prepared examining the project scenario of open-pit mining on Oyut and underground block caving on Hugo North Lift 1 without a plant expansion. DIDOP was released in the NI 43-101 2013 Oyu Tolgoi Technical Report.

In August 2013, development of the underground mine was delayed to allow matters, including the tax dispute, approval of the project feasibility study by Oyu Tolgoi LLC’s shareholders and acceptance by the Mongolian Minerals Council, agreement of a comprehensive funding plan including Oyu Tolgoi Project Financing, and receipt of all necessary permits, to be resolved between the parties to the Investment Agreement (the Corporation, Oyu Tolgoi LLC, Rio Tinto, and the Government of Mongolia).

In 2014, Oyu Tolgoi LLC submitted the Statutory Feasibility Study to the Government of Mongolia. The Statutory Feasibility Study included a Reserves Case (open pit mining on Oyut and underground block caving on Hugo North Lift 1) and a Resources Case (open pit mining on Oyut and underground block caving on Hugo North Lift 1 and Lift 2, Hugo South and Heruga). Both cases were at the plant rate of 36.5 Mt/a without expansion. The 2014 Reserves Case in the Statutory Feasibility Study was released by the Corporation in the 2014 OTTR.

During the course of 2013–2014, many of the matters between the parties to the Investment Agreement were resolved or progressed. The Mongolian Reserves and Resources in the Statutory Feasibility Study were submitted to the Government of Mongolia to update the Mongolia State Reserves in 2014. Further submissions in the Statutory Feasibility Study based on modifications thereto, were made to the Government of Mongolia and accepted by the Mongolian Minerals Council. The Underground Plan, signed on May 18, 2015, addressed the key outstanding shareholder matters and set out an agreed basis for the funding of the project. The Statutory Feasibility Study, as updated in 2016, incorporated matters resolved between the shareholders and was approved by the Oyu Tolgoi LLC board of directors and shareholders.

Joint Venture Licenses

Oyu Tolgoi LLC initiated exploration work on the Shivee Tolgoi and Javkhlant licenses in November 2004, following the signing of an earn-in agreement with Entrée Gold.

Before that time, Entrée had undertaken soil geochemical surveys, ground magnetics, Bouguer gravity and pole-dipole geophysical surveying, and geological mapping, but had failed to locate any mineralization of significance.

Starting at the northern boundary of the Oyu Tolgoi License, an IP survey was run on 100 m spaced lines oriented east- west to trace the northern projection of the Hugo North deposit. This initial IP survey used gradient array with 11,000 m AB electrode spacing and covered an area

- 60 - extending 5.6 km north of the boundary and 10 km in width. Subsequent IP surveys covering smaller areas within the larger area were carried out with gradient arrays.

The IP surveys resulted in the delineation of a significant chargeability feature being traced for approximately 4.0 km north along strike of the Hugo North deposit. Additional IP chargeability targets were also revealed 2.5–3.0 km west of the Hugo North trend and are referred to as the Eagle anomalies.

The Corporation commenced drilling northward from the northern boundary of the Oyu Tolgoi License in 2005. A first- time resource estimate for the Hugo North Extension deposit was completed in 2006. Underground mining plans for Hugo North Extension Reserve and Life of Mine Sensitivity case were included in technical reports after 2010.

In 2005 and 2006, Oyu Tolgoi LLC conducted IP surveying on 100 m spaced, east-west lines across Entrée Gold’s Javkhlant license to the south of the Oyut mineral resource area. This resulted in the discovery of three significant chargeability IP anomalies subsequently named the Sparrow South, Castle Rock, and Southwest Magnetic anomalies. Core drilling was initiated to test these IP anomalies in early 2007. A series of successful drillholes in the area supported a first-time mineral resources estimate over what is now known as the Heruga deposit (formerly the Sparrow South anomaly) in 2008.

Geology and Mineralization

The Oyu Tolgoi porphyry deposits are hosted within the Gurvansaikhan Terrane, part of the Central Asian Orogenic Belt, rocks of which now comprise the South Gobi region of Mongolia.

Development of the Central Asian Orogenic Belt consisted of Palaeozoic age accretionary episodes that assembled a number of island and continental margin magmatic arcs, rifted basins, accretionary wedges, and continental margins; arc development ceased by about the Permian. During the Late Jurassic to Cretaceous, north-south extension occurred, accompanied by the intrusion of granitoid bodies, unroofing of metamorphic core complexes, and formation of extensional and transpressional sedimentary basins. North-east–south-west shortening is superimposed on the earlier units and is associated with major strike-slip faulting and folding within the Mesozoic sedimentary basins.

The Gurvansaikhan Terrane is interpreted to be a juvenile island arc assemblage that consists of highly deformed accretionary complexes and volcanic arc assemblages dominated by imbricate thrust sheets, dismembered blocks, mélanges, and high-strain zones. Lithologies identified to date in the Gurvansaikhan Terrane include Silurian to Carboniferous terrigenous sediments, volcanic-rich sediments, carbonates, and intermediate to felsic volcanic rocks. Sedimentary and volcanic units have been intruded by Devonian granitoids and Permo-Carboniferous diorite, monzodiorite, granite, granodiorite, and syenite bodies, which can range size from dykes to batholiths.

Major structures to the west of the Gurvansaikhan Terrane include the Gobi-Tien Shan sinistral strike-slip fault system that splits eastward into a number of splays in the Oyu Tolgoi area, and the Gobi Altai Fault system, which forms a complex zone of sedimentary basins over-thrust by basement blocks to the north and north-west of Oyu Tolgoi. To the east of the Gurvansaikhan Terrane, regional structures are dominated by the north-east striking East Mongolian Fault Zone,

- 61 - which forms the south-east boundary of the terrane. This regional fault may have formed as a major suture during Late Palaeozoic terrane assembly, with Mesozoic reactivation leading to the formation of north-east elongate sedimentary basins along the fault trace.

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

Two major stratigraphic sequences are recognized in the project area:

• Tuffs, basaltic rocks, and sedimentary strata of probable island-arc affinity, assigned to the Upper Devonian

Alagbayan Group; and

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

Formation. The two sequences are separated by a regional unconformity that, in the Oyu Tolgoi area, is associated with a time gap of about 10–15 Ma.

The volcanic and sedimentary rocks are cut by several phases of intrusive rocks ranging from batholithic intrusions to narrow discontinuous dykes and sills. Compositional and textural characteristics vary.

A thin covering of gently dipping to horizontal Cretaceous stratified clay and clay-rich gravel overlies the Palaeozoic sequence, infilling paleo-channels and small fault-controlled basins.

The Oyu Tolgoi area is underlain by complex networks of poorly exposed faults, folds, and shear zones. These structures influence the distribution of mineralization by both controlling the original position and form of mineralized bodies, and modifying them during post-mineral deformation events.

The Oyu Tolgoi copper–gold deposits currently comprise, from north to south:

• Hugo Dummett (includes the Hugo North Extension zone, which is the extension of the Hugo North deposit onto

the joint venture ground);

• Hugo South;

• Oyut (includes the Southwest, South, Wedge, Central, Bridge, Western, and Far South zones). The Oyut deposit

was formerly known as SOT; and

• Heruga.

The surface traces and surface projection of the distinct porphyry centres define a north–north-east trending mineralized corridor underlain by east dipping panels of Upper Devonian or older layered sequences intruded by quartz-monzodiorite and granodiorite stocks and dykes.

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Mineral Deposits

The deposits that are incorporated in the current mine plan are the Oyut and Hugo North (Lift 1). The Hugo North (Lift 2), Hugo South, and Heruga deposits are currently outside the mine plan but are included in the alternative production cases of the 2016 OTTR.

The Oyut deposit has historically been treated as a number of separate zones; however, for mining purposes, the one pit (or potential future underground beneath the pit) will extract all Oyut mineralization, and therefore the descriptors in this section have taken the approach that the orebody comprises a number of mineralized zones within an overall single deposit framework.

Oyut Deposit

The Oyut deposit includes the main Southwest, South, Wedge, and Central zones and a number of smaller, fault-bounded zones, described in the following subsections. The planned open pit will incorporate the majority of these zones. The Oyut deposit was formerly known as SOT. The zones form contiguous sectors of mineralization representing multiple mineralizing centres, each with distinct styles of mineralization, alteration, and host rock lithology. The boundaries between the individual deposits and zones coincide with major faults. Faulting has resulted in different erosional histories for the zones, depending on the depth to which a zone has been down-faulted or uplifted relative to neighbouring zones.

Hugo Dummett Deposits

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

Early technical reports filed by the Corporation on the project refer to the Far North zone; this was the initial name for the Hugo Dummett area, and its use has been discontinued. Part of the Hugo North deposit extends onto the Shivee Tolgoi mining license. This area is known as the Hugo North Extension and is referred to as the Copper Flats deposit in technical reports filed by Entrée Gold.

Heruga Deposit

The Heruga deposit is the most southerly of the currently known deposits at Oyu Tolgoi. The deposit is a copper–gold– molybdenum porphyry deposit and is zoned with a molybdenum-rich carapace at higher elevations overlying gold-rich mineralization at depth. The top of the mineralization starts 500–600 m below the present ground surface.

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The deposit has been drilled over a 2.3 km length, is elongated in a north–north-east direction, and plunges to the north. Exploration of the down-plunge extension is open but not active. The northern boundary of the mineralization is assumed to be the Solongo Fault, which marks the southern boundary of the planned Oyut open pit.

Quartz-monzodiorite intrusions intrude the Devonian augite basalts as elsewhere in the district, and again are considered to be the progenitors of mineralization and alteration. Within Heruga itself, quartz-monzodiorite intrusions are small compared to the stocks present in the Hugo Dummett and Oyut areas, perhaps explaining the lower grade of the Heruga deposit. Non-mineralized dykes, which make up about 15% of the volume of the deposit, cut all other rock types. However, the quartz-monzonite body appears to flare to the east and forms a large stock within the Heruga North area of interest.

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

Mineralized veins have a much lower density at Heruga than in the more northerly Oyut and Hugo Dummett deposits. High-grade copper and gold intersections show a strong spatial association with contacts of the mineralized quartz-monzodiorite porphyry intrusion in the southern part of the deposit, occurring both within the outer portion of the intrusion and in adjacent enclosing basaltic country rock.

At deeper levels, mineralization consists of chalcopyrite and pyrite in veins and disseminated within biotite–chlorite– albite–actinolite-altered basalt or sericite–albite-altered quartz-monzodiorite. The higher levels of the orebody are overprinted by strong quartz–sericite–tourmaline–pyrite alteration where mineralization consists of disseminated and vein-controlled pyrite, chalcopyrite, and molybdenite.

There is no oxide zone at Heruga. No high-sulfidation style mineralization has been identified to date.

Exploration

Oyu Tolgoi LLC’s exploration strategy is focused on developing a project pipeline prioritized in areas that can impact the current development of the Oyu Tolgoi orebodies, seeking low-cost development options and continuing assessment of legacy datasets to enable future discovery. Hugo West Shallow, West Oyu, Castle Rock, Airport, West Mag and South East IP have been identified as priority targets that will be the focus of the future exploration program. There are also several deep targets that warrant further investigation including those west and north of the West Bat Fault.

Infill drilling to increase resource confidence and geotechnical orebody knowledge is part of a longer-term strategy to add incremental resource tonnes and convert resources to reserves at the Hugo Dummett deposits, particularly around Lift 1 Panels 3–5, Lift 2, and Hugo South.

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Mineral Resources and Mineral Reserves

The following persons, both of whom are “qualified persons” for the purposes of NI 43-101, were responsible for the preparation of the 2016 OTTR:

• Bernard Peters, BEng (Mining), FAusIMM (201743), employed by OreWin as Technical Director – Mining, was

responsible for the overall preparation of the report and the mineral reserve estimates.

• Sharron Sylvester, BSc (Geol), RPGeo AIG (10125), employed by OreWin as Technical Director – Geology,

was responsible for the preparation of the mineral resources.

Mineral Resources

The total mineral resources for Oyu Tolgoi are shown in the table beginning on page 72, titled “Oyu Tolgoi Mineral Resource Summary, December 31, 2015”. An idealized profile of Oyu Tolgoi deposits is shown on page 71.

Mongolia has its own system for reporting mineral reserves and mineral resources. Oyu Tolgoi LLC registered a mineral reserve with the Government of Mongolia in 2009. A key difference between the two standards is the classification of material contained in Hugo North Lift 2, Hugo South, and Heruga under Mongolian standards as reserves. This contrasts to the NI 43-101 definitions, which include only Oyut and Hugo North Lift 1 in the mineral reserve category.

The base case copper equivalent (CuEq) cut-off grade assumptions for each deposit were determined using cut-off grades applicable to mining operations exploiting similar deposits. The CuEq cut-off applied for the underground was 0.37% CuEq and the CuEq cut-off applied to the open pit was 0.22% CuEq.

2014 CuEq Formula Derivation

The 2014 copper equivalence formulae incorporate copper, gold, and silver, and also molybdenum for Heruga. The assumed metal prices are $3.01/lb for copper, $1,250/oz for gold, $20.37/oz for silver, and $11.90/lb for molybdenum.

Copper estimates are expressed in the form of percentages (%), gold and silver are expressed in grams per tonne (g/t), and molybdenum is expressed in parts per million (ppm).

Metallurgical recovery for gold, silver, and molybdenum are expressed as a percentage relative to copper recovery.

The unit conversions used in the calculation are as follows: g/t to oz/t = 31.103477 lb/kg = 2.20462 tonne to lb = 2204.62

g/t to tonne = 1x10–6

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This leads to a base formula of:

CuEq14 = Cu + ((Au x AuRev) + (Ag x AgRev) + (Mo x MoRev)†) / CuRev † Mo and MoRev are only incorporated into CuEq calculations for Heruga

Where: CuRev = (3.01 x 22.0462) AuRev = (1,250 / 31.103477 x RecAu) AgRev = (20.37 / 31.103477 x RecAg) MoRev = (11.90 x 0.00220462 x RecMo) RecAu = Au Recovery / Cu Recovery RecAg = Ag Recovery / Cu Recovery RecMo = Mo Recovery / Cu Recovery

Different metallurgical recovery assumptions lead to slightly different copper equivalent formulas for each of the deposits; these are outlined in the following tables for Oyut, Hugo North, Hugo North Extension, Hugo South, and Heruga. In all cases, the metallurgical recovery assumptions are based on metallurgical testwork. For Oyut, actual mill performance has been used to further refine the recovery assumptions over the life-of-mine. Recoveries are relative to copper because copper contributes the most to the equivalence calculation.

All elements included in the copper equivalent calculation have a reasonable potential to be recovered and sold, except for molybdenum. Molybdenum grades are only considered high enough to support construction of a molybdenum recovery circuit for Heruga mineralization; hence the recoveries of molybdenum are assumed to be zero for the other deposits.

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Copper equivalence assumptions and calculations for the various deposits are shown in the tables below.

Oyut – Copper Equivalence Assumptions and Calculation based on Average Grades

Cu Au Ag Mo Metal Price (US$) $3.01/lb $1,250/oz $20.37/oz $11.9/lb Recovery 0.794 0.704 0.754 0 Recovery Relative to Cu 1 0.887 0.949 0 Conversion Factor 22.0462 0.0321507 0.0321507 0.0022046

% Cu g/t Au g/t Ag ppm Mo CuEq $/t Cu Credit 1 1 66.36 Au Credit 1 0.537 35.63 Ag Credit 1 0.009 0.62 Mo Credit 1 0 0.03 Cu Grade 0.45 0.45 29.86 Au Grade 0.31 0.166 11.05 Ag Grade 1.23 0.012 0.76 Mo Grade 0 0 – CuEq Grade & 0.45 0.31 1.23 0. 0.628 41.67 Revenue

From the table above, the base formula is adjusted for Oyut as follows:

CuEq14(SOT) = Cu + ((Au x 1,250 x 0.0321507 x 0.887) + (Ag x 20.37 x 0.0321507 x 0.949)) / (3.01 x 22.0462)

Assumed Grade Average Grade of Deposit

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Hugo North – Copper Equivalence Assumptions and Calculation based on Average Grades

Cu Au Ag Mo Metal Price (US$) $3.01/lb $1,250/oz $20.37/oz $11.9/lb Recovery 0.92 0.83 0.86 0 Recovery Relative 1 0.906 0.941 0 to Cu Conversion Factor 22.0462 0.0321507 0.0321507 0.0022046

ppm % Cu g/t Au g/t Ag Mo CuEq $/t Cu Credit 1 1 66.36 Au Credit 1 0.549 36.43 Ag Credit 1 0.009 0.62 Mo Credit 1 0 0.03 Cu Grade 1.66 1.66 110.16 Au Grade 0.34 0.187 12.38 Ag Grade 3.37 0.031 2.08 Mo Grade 27.43 0 – CuEq Grade & Revenue 1.66 0.34 3.37 27.43 1.878 124.62

From the table above, the base formula is adjusted for Hugo North as follows:

CuEq14(HN) = Cu + ((Au x 1,250 x 0.0321507 x 0.906) + (Ag x 20.37 x 0.0321507 x 0.941)) / (3.01 x 22.0462)

Assumed Grade Average Grade of Deposit

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Hugo North Extension – Copper Equivalence Assumptions and Calculation based on Average Grades

Cu Au Ag Mo Metal Price (US$) $3.01/lb $1,250/oz $20.37/oz $11.9/lb Recovery 0.92 0.84 0.86 0.00 Recovery Relative 1.00 0.913 0.942 0 to Cu Conversion Factor 22.0462 0.0321507 0.0321507 0.0022046

% Cu g/t Au g/t Ag ppm Mo CuEq $/t Cu Credit 1 1 66.36 Au Credit 1 0.553 36.69 Ag Credit 1 0.009 0.62 Mo Credit 1 0 0.03 Cu Grade 1.59 1.59 105.51 Au Grade 0.55 0.304 20.18 Ag Grade 3.72 0.035 2.29 Mo Grade 25.65 0 – CuEq Grade & Revenue 1.59 0.55 3.72 25.65 1.929 127.98

From the table above, the base formula is adjusted for Hugo North Extension as follows:

CuEq14(HNE) = Cu + ((Au x 1,250 x 0.0321507 x 0.913) + (Ag x 20.37 x 0.0321507 x 0.942)) / (3.01 x 22.0462)

Assumed Grade Average Grade of Deposit

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Hugo South – Copper Equivalence Assumptions and Calculation based on Average Grades

Cu Au Ag Mo Metal Price (US$) $3.01/lb $1,250/oz $20.37/oz $11.9/lb Recovery 0.89 0.81 0.85 0 Recovery Relative 1 0.909 0.945 0 to Cu Conversion Factor 22.0462 0.0321507 0.0321507 0.0022046

% Cu g/t Au g/t Ag ppm Mo CuEq $/t Cu Credit 1 1 66.36 Au Credit 1 0.551 36.54 Ag Credit 1 0.009 0.62 Mo Credit 1 0 0.03 Cu Grade 1.07 1.07 71.00 Au Grade 0.06 0.033 2.19 Ag Grade 2.07 0.019 1.28 Mo Grade 0 – CuEq Grade & 1.07 0.06 2.07 1.122 74.48 Revenue

From the table above, the base formula is adjusted for Hugo South as follows:

CuEq14(HS) = Cu + ((Au x 1,250 x 0.0321507 x 0.909) + (Ag x 20.37 x 0.0321507 x 0.945)) / (3.01 x 22.0462)

Assumed Grade Average Grade of Deposit

- 70 -

Heruga – Copper Equivalence Assumptions and Calculation based on Average Grades

Cu Au Ag Mo Metal Price (US$) $3.01/lb $1,250/oz $20.37/oz $11.9/lb Recovery 0.86 0.79 0.82 0.635 Recovery Relative 1 0.911 0.949 0.736 to Cu Conversion Factor 22.0462 0.0321507 0.0321507 0.0022046

% Cu g/t Au g/t Ag ppm Mo CuEq $/t Cu Credit 1 1 66.36 Au Credit 1 0.552 36.61 Ag Credit 1 0.009 0.62 Mo Credit 1 0 0.03 Cu Grade 0.42 0.42 27.87 Au Grade 0.41 0.226 15.01 Ag Grade 1.47 0.014 0.91 Mo Grade 138.47 0.055 2.67 CuEq Grade & Revenue 0.42 0.41 1.47 138.47 0.70 46.47

From the table above, the base formula is adjusted for Heruga as follows:

CuEq14(HERUGA) = Cu + ((Au x 1,250 x 0.0321507 x 0.911) + (Ag x 20.37 x 0.0321507 x 0.949) + (Mo x 11.9 x 0.0022046 x 0.736)) / (3.01 x 22.0462)

Assumed Grade Average Grade of Deposit

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Idealized Profile of Oyut, Hugo Dummett, and the Heruga Deposit (Section Looking West)

- 72 -

Oyu Tolgoi Mineral Resource Summary, December 31, 2015

Contained Metal Tonnage Cu Au Ag Mo CuEq Classification Deposit Cu Au Ag Mo CuEq (Mt) (%) (g/t) (g/t) (ppm) (%) (Mlb) (koz) (koz) (Mlb) (Mlb) Oyut Deposit – Open Pit (0.22% CuEq Cut-Off) (Excludes material mined up to December 31, 2015) Measured 377 0.52 0.35 1.35 53.9 0.72 4,335 4,038 15,804 45 5,947 Indicated 715 0.38 0.23 1.11 56.4 0.51 6,039 5,082 24,705 89 8,110 Measured + Indicated 1,092 0.43 0.27 1.19 55.5 0.58 10,374 9,120 40,509 134 14,057 Inferred 389 0.29 0.16 0.86 44.2 0.38 2,461 1,888 10,381 37 3,247 Oyut Deposit – Underground (0.37% CuEq Cut-Off) (Unchanged since the 2014 OTTR) Measured 140.40 0.78 1.15 38.8 0.83 121342 509 1.2 250 Indicated 93 0.35 0.59 1.19 34.3 0.67 713 1,766 3,562 7.1 1,386 Measured + Indicated 107 0.35 0.61 1.18 34.8 0.69 833 2,108 4,072 8.2 1,636 Inferred 159 0.39 0.32 0.85 25.4 0.56 1,354 1,638 4,382 8.9 1,985 Hugo Dummett Deposits (0.37% CuEq Cut-Off) (Unchanged since the 2014 OTTR) OT LLC 98 1.97 0.46 4.48 30.3 2.26 4,231 1,446 14,046 6.5 4,865 Measured EJV 1 1.43 0.12 2.86 39.4 1.52 35 4 103 0.1 38 All Hugo North 99 1.96 0.46 4.46 30.4 2.25 4,267 1,450 14,149 6.6 4,902 OT LLC 749 1.56 0.34 3.35 34.3 1.78 25,737 8,268 80,718 57 29,362 Indicated EJV 128 1.65 0.55 4.12 33.6 1.99 4,663 2,271 16,988 10 5,633 All Hugo North 877 1.57 0.37 3.46 34.2 1.81 30,400 10,539 97,707 66 34,994 OT LLC 847 1.61 0.36 3.48 33.85 1.83 29,968 9,714 94,764 63 34,226 Measured + EJV 129 1.65 0.55 4.11 33.70 1.99 4,698 2,276 17,091 10 5,670 Indicated All Hugo North 976 1.61 0.38 3.56 33.83 1.85 34,667 11,989 111,856 73 39,897 OT LLC 811 0.77 0.27 2.34 34.8 0.94 13,807 7,058 60,964 62 16,851 Inferred EJV 179 0.99 0.34 2.68 25.4 1.20 3,887 1,963 15,418 10 4,730 All Hugo North 990 0.81 0.28 2.40 33.1 0.99 17,695 9,021 76,382 72 21,581

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Contained Metal Tonnage Cu Au Ag Mo CuEq Classification Deposit Cu Au Ag Mo CuEq (Mt) (%) (g/t) (g/t) (ppm) (%) (Mlb) (koz) (koz) (Mlb) (Mlb) Inferred Hugo South 845 0.77 0.07 1.78 66.4 0.83 14,372 1,861 48,406 124 15,384 Heruga Deposit (0.37% CuEq Cut-Off) (Unchanged since the 2014 OTTR) Inferred Heruga Javkhlant EJV 1,700 0.39 0.37 1.39 113.2 0.64 14,610 20,428 75,955 424 24,061 Inferred Heruga Oyu Tolgoi LLC 116 0.41 0.29 1.56 109.8 0.61 1,037 1,080 5,819 28 1,565 Inferred (All Heruga) 1,8160.39 0.37 1.40 113.0 0.64 15,647 21,508 81,774 453 25,626 Oyu Tolgoi All Deposits Grand Total (Excludes material mined up to December 31, 2015) Measured 4890.81 0.38 1.97 48.7 1.03 8,722 5,971 30,996 53 11,098 Indicated 1,686 1.00 0.32 2.34 43.6 1.20 37,152 17,572 126,797 162 44,486 Measured + Indicated 2,175 0.96 0.34 2.26 44.8 1.16 45,875 23,543 157,792 215 55,584 Inferred 4,200 0.56 0.27 1.64 75.1 0.73 51,531 35,980 221,670 695 67,821 Notes:

1. The mineral resources include mineral reserves.

2. The contained gold and copper estimates in the tables have not been adjusted for metallurgical recoveries.

3. The 0.22% CuEq cut-off is equivalent to the open pit mineral reserve cut-off determined by Oyu Tolgoi LLC.

4. The 0.37% CuEq cut-off is equivalent to the underground mineral reserve cut-off determined by Oyu Tolgoi LLC.

5. Oyut open pit mineral resources exclude material mined in the open pit as at December 31, 2015.

6. CuEq has been calculated using assumed metal prices ($3.01/lb for copper, $1,250/oz for gold, $20.37/oz for silver, and $11.90/lb for molybdenum). Mo grades outside of Heruga

are assumed to be zero for CuEq calculations.

• Oyut CuEq% = Cu% + (( Au (g/t) x 1,250 x 0.0321507 x 0.887) + ( Ag (g/t) x 20.37 x 0.0321507 x 0.949)) / (3.01 x 22.0462)

• HN (Oyu Tolgoi LLC) CuEq% = Cu% + (( Au (g/t) x 1,250 x 0.0321507 x 0.906) + ( Ag (g/t) x 20.37 x 0.0321507 x 0. 941)) / (3.01 x 22.0462)

• HN (EJV) CuEq% = Cu% + (( Au (g/t) x 1,250 x 0.0321507 x 0.913) + ( Ag (g/t) x 20.37 x 0.0321507 x 0. 942)) / (3.01 x 22.0462)

• HS CuEq% = Cu% + (( Au (g/t) x 1,250 x 0.0321507 x 0.909) + ( Ag (g/t) x 20.37 x 0.0321507 x 0. 945)) / (3.01 x 22.0462)

• Heruga CuEq% = Cu% + (( Au (g/t) x 1,250 x 0.0321507 x 0.911) + ( Ag (g/t) x 20.37 x 0.0321507 x 0. 949) + (Mo

(ppm) x 11.9 x 0.0022046 x 0.736)) / (3.01 x 22.0462)

7. Totals may not match due to rounding.

8. OT LLC is Oyu Tolgoi LLC. EJV is the Entrée Gold Joint Venture. The Shivee Tolgoi and Javkhlant licenses are held by Entrée Gold. The Shivee Tolgoi and EJV Javkhlant Licenses are planned to be operated by Oyu Tolgoi LLC. Oyu Tolgoi LLC will receive 80% of cash flows after capital and operating costs for material originating below 560 m, and 70% above this depth.

9. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

10. The Oyut deposit was formerly known as SOT.

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Mineral resources are not mineral reserves until they have demonstrated economic viability based on a feasibility study or pre-feasibility study. Although the resource classifications of Measured, Indicated and Inferred are mineral resource classification confidence categories defined by the Canadian Institute of Mining, Metallurgy and Petroleum that are recognized and required to be disclosed by NI 43-101, the SEC does not recognize them. Disclosure of the terms in the table above is permitted under NI 43-101; however, the SEC permits mineralization that does not constitute “reserves” by SEC standards to be reported only as tonnage and grade. See “Cautionary Note to U.S. Investors”.

Mineral Reserves

The mineral reserves for the project have been estimated using the Oyut (formerly SOT) and Hugo North mineral resources. Total mineral reserves for the project and the Oyu Tolgoi LLC and Entrée Gold Joint Venture mineral reserves for the open pit and underground components of the project are shown in the table below. The mineral reserves for the 2016 OTTR are based on mine planning work prepared by Oyu Tolgoi LLC in the Statutory Feasibility Study.

The mineral reserves for the Oyut open pit are based on the same modifying parameters and mineral resources, the change since the 2014 OTTR has been the mining depletion. The Hugo North mineral reserves in the 2016 OTTR are the same as the mineral reserves in the 2014 OTTR. The Hugo North mineral reserve contains ore that is on the Oyu Tolgoi License and on the Entrée Gold Joint Venture Shivee Tolgoi License.

The 2016 OTTR mineral reserves are reported as at December 31, 2015. This date was selected for reporting of the mineral reserves to remain consistent with the Statutory Feasibility Study. The metal prices and assumptions used for the cut-off grades were denominated in NSR US$/t and are the same as those used for cut-off grade determination in the 2014 OTTR. The economic analysis has been updated with current long-term metal prices and assumptions. For information and illustrative purposes, the depletion and depleted Mineral Reserve is provided for reference in Schedule C.

Oyu Tolgoi LLC undertook pit surveys and reported the depletion from the Oyut mineral reserves. The Oyut mineral reserves shown in the table below are the Proven and Probable remaining in the pit. Stockpiles have not been included in the 2016 OTTR Oyut mineral reserves reporting as they will include some inferred and unclassified materials as well as low grade Measured and Indicated mineral resources.

The 2016 OTTR only considers mineral resources in the Measured and Indicated categories, and engineering that has been carried out to a feasibility level or better to estimate the open pit and underground mineral reserves. Mine designs were prepared using industry-standard mining software, assumed metal prices as described in the notes to the mineral reserves, and smelter terms as set forth in Section 22 of the 2016 OTTR.

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Oyu Tolgoi 2016 Mineral Reserve, December 31, 2015

Ore Ag Recovered Metal (Mt) Cu Au (g/t) Deposit by Classification (%) (g/t) Cu Au Ag (Mlb) (koz) (koz) Oyut Mineral Reserves Proven 353 0.54 0.35 1.40 3,226 2,775 11,837 Probable 598 0.39 0.23 1.11 4,058 3,103 15,977 Oyut Total (Proven + Probable) 951 0.45 0.28 1.22 7,325 5,878 27,814 Hugo North Mineral Reserves Probable (Oyu Tolgoi LLC) 464 1.66 0.34 3.37 15,592 4,199 43,479 Probable (EJV) 35 1.59 0.55 3.72 1,121 519 3,591 Hugo North Total (Probable) 499 1.66 0.35 3.40 16,713 4,717 47,070 Total Mineral Reserves Proven 353 0.54 0.35 1.40 3,266 2,775 11,837 Probable 1,097 0.97 0.29 2.15 20,771 7,820 63,047 Total (Proven + Probable) 1,450 0.86 0.30 1.97 24,037 10,595 74,884 Notes:

1. Metal prices used for calculating the financial analysis were as follows: long term copper at $3.00/lb; gold at $1,300/oz; and silver at $19.00/oz. The analysis has been calculated with assumptions for smelter refining and treatment charges, deductions and payment terms, concentrate transport, metallurgical recoveries and royalties.

2. For mine planning the metal prices used to calculate block model NSR were copper at $3.01/lb; gold at $1,250/oz; and silver at $20.37/oz.

3. For the open pit processing and general administration, the following operating costs have been used to determine cut-off grades: Southwest at $8.37/t,

Central Chalcocite, Central Covellite, and Central Chalcopyrite at $7.25/t and the underground (including some mining costs) costs were based on $15.34/t.

4. For the underground block cave, all mineral resources within the shell have been converted to mineral reserves. This includes Indicated mineral resources

below the resource cut-off grade. It also includes Inferred mineral resources, which have been assigned a zero grade and treated as dilution.

5. The Oyut open pit mineral reserves are the mineral reserves in the pit at December 31, 2015. It does not include stockpiles.

6. For Oyut, only Measured mineral resources were used to report Proven mineral reserves and only Indicated mineral resources were used to report Probable

mineral reserves.

7. For Hugo North, Measured and Indicated mineral resources were used to report Probable mineral reserves.

8. EJV is the Entrée Gold Joint Venture. The Shivee Tolgoi License and the Javkhlant License are held by Entrée. The Shivee Tolgoi License and the Javkhlant License are planned to be operated by Oyu Tolgoi LLC. Oyu Tolgoi LLC will receive 80% of cash flows after capital and operating costs for material originating below 560 m, and 70% above this depth.

9. The mineral reserves reported above were not additive to the mineral resources.

10. Totals may not match due to rounding.

11. The Oyut deposit was formerly known as SOT.

Human Resources and Training Strategy

Oyu Tolgoi LLC has stated that its human resource and training strategy is key to a corporate vision of ensuring that all Oyu Tolgoi staff and contractors meet and exceed international best practice standards. The human resources and training strategy provides a framework of policies, procedures, and processes that are well defined and aligned to support the achievement of the

- 76 - overall business objectives of the company. Oyu Tolgoi LLC is working in partnership with relevant Mongolian government agencies and NGOs to ensure that a suitably qualified workforce is available to meet the requirements of Oyu Tolgoi. Oyu Tolgoi LLC’s policies and procedures for human resources and training meet all applicable Mongolian Labour and Social Security Laws and regulations, including those contained within the Labour Law of Mongolia (July 1999). International conventions and standards, including applicable International Labour Organisation (ILO) conventions, IFC Performance Standards, and the EBRD, guide the human resources and training strategy and activities.

Oyu Tolgoi LLC prioritizes employment of local residents from the soums within the Project Area of Influence— Khanbogd, Manlai, Bayan Ovoo, and Dalanzadgad—as well as from other areas in the South Gobi region. Oyu Tolgoi LLC has a requirement that not less than 90% of its employees consists of citizens of Mongolia. Oyu Tolgoi LLC meets this requirement.

Occupational Health, Hygiene and Safety

Oyu Tolgoi LLC’s HSE management system (“HSE MS”) has been implemented and been audited as compliant against AS/NZS ISO 14001:2004 Environmental Management System and OHSAS 18001:2007 Occupational Health and Safety management system. The HSE MS was developed to provide management with clear direction on HSE management, means to ensure compliance, and a basis for driving improvements. The Oyu Tolgoi HSE MS applies to all persons working for or on behalf of Oyu Tolgoi LLC, including contractors, suppliers, the general public, special interest groups, and government representatives, and covers the health, safety, and environmental management of all Oyu Tolgoi LLC’s activities, assets, products, and services. Oyu Tolgoi LLC achieved an excellent safety performance for 2016 with an All Injury Frequency Rate of 0.22 per 200 kh (thousand hours) worked.

The HSE policy has been developed and is regularly reviewed in consultation with key stakeholders. Such policy is intended to reflect a best practice approach to health, safety, and environment with the underlying principle that all people are accountable for health and safety.

The HSE policy is seen as an enabler for the entire HSE MS. It provides high-level principles that are intended to be implemented through the application of all parts of the HSE MS. The HSE policy is endorsed by the chief executive officer of Oyu Tolgoi LLC to ensure the appropriate priority is placed on implementation and compliance.

Mining Operations

Mining is in progress at the Oyut open pit. Oyu Tolgoi has a nominal design capacity of 100 ktpd of ore and has three key components:

• an open pit mine;

• a concentrator; and

• infrastructure to support the construction and the operations.

The open pit uses a conventional drill, blast load and haul. Electric and diesel drill and shovels and diesel haul trucks. Oyu Tolgoi employs a conventional SAG mill / ball mill / grinding circuit (SABC) followed by flotation. The major initial infrastructure elements include: water borefields; water

- 77 - treatment; housing; airport; supporting facilities, and power transmission lines, sub-station. Concentrate is sold free-on-board at a bonded yard on the Chinese side of the border in Ganqimaodao.

Part of the initial investment decision included an ongoing investment into the development of the Hugo North underground mine. Lift 1 of Hugo North is the most significant value driver for Oyu Tolgoi. The current investment decision for Oyu Tolgoi LLC is the continued development of the underground mine in parallel with open pit operations as outlined in the 2016 OTTR.

To support the continued underground development program, Oyu Tolgoi LLC entered into the Project Finance Facility in December 2015. The Oyu Tolgoi Project Financing base case is the nominal 100 ktpd capacity of the initial concentrator fed by the Oyut open pit mine initially which would be gradually displaced by the more valuable Hugo North underground ore.

Other Projects

Turquoise Hill, through its wholly-owned subsidiaries, Asia Gold Mongolia LLC, Heruga Exploration LLC and SGLS LLC, operates an exploration program in Mongolia on licenses that are not part of Oyu Tolgoi. The exploration program in 2016 continued to review Mongolian licenses that at year-end covered an approximate total of 35,600 ha through six separate licenses.

During 2016 the Mineral Resource Authority of Mongolia advised that the Ulaan Khud mining application submitted in 2014 will not be granted due to Resolution No. 175. An application for the grant of a mining license on a lease held by SGLS LLC had also been previously declined pursuant to Resolution No. 175. The ultimate impact on these two licenses is still not clear. For more information on Resolution No. 175, see “Description of the Business – Oyu Tolgoi – Government and Community Relations” in this AIF.

Other Information

Equity Investments

Turquoise Hill holds equity investments in two publicly traded, non-subsidiary mineral exploration and development companies. The following table outlines the equity investments held by the Turquoise Hill Group and, in respect of each such equity investment involving securities that are listed on a stock exchange, their quoted market value as at December 31, 2016:

Company Number of Shares Value Entrée Gold Inc. (TSX) 13,799,333 C$5.8 million

Intec Limited (ASX) 4,117,484 A$65.9 thousand

Employees

As at December 31, 2016, Turquoise Hill and Oyu Tolgoi LLC collectively had a total of 2,530 employees.

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DIVIDENDS

Turquoise Hill has not declared or paid any dividends on its outstanding Common Shares since its incorporation and does not anticipate that it will do so in the foreseeable future. The declaration of dividends on the Common Shares is, subject to certain statutory restrictions described below, within the discretion of the Board of Directors based on their assessment of, among other factors, Turquoise Hill’s earnings or lack thereof, its capital and operating expenditure requirements and its overall financial condition. Under the YBCA, the discretion of the Board of Directors to declare or pay a dividend on the Common Shares is restricted if reasonable grounds exist to conclude that Turquoise Hill is, or after payment of the dividend would be, unable to pay its liabilities as they become due or that the realizable value of its assets would, as a result of the dividend, be less than the aggregate sum of its liabilities and the stated capital of the Common Shares. DESCRIPTION OF CAPITAL STRUCTURE

The authorized share capital of Turquoise Hill consists of an unlimited number of Common Shares without par value and an unlimited number of Preferred Shares. As of the date hereof, there are 2,012,314,469 Common Shares and no Preferred Shares issued and outstanding. Rights and restrictions in respect of the Common Shares and the Preferred Shares are set out in Turquoise Hill’s articles of continuance, Turquoise Hill’s by-laws and in the YBCA and its regulations.

Common Shares

The holders of Common Shares are entitled to one vote per Common Share at all meetings of shareholders except meetings at which only holders of another specified class or series of shares of Turquoise Hill are entitled to vote separately as a class or series. Subject to the prior rights of the holders of Preferred Shares, the holders of Common Shares are entitled to receive dividends as and when declared by the directors, and to receive a pro rata share of the remaining property and assets of Turquoise Hill in the event of liquidation, dissolution or winding up of Turquoise Hill. The Common Shares have no pre-emptive, redemption, purchase or conversion rights. Neither the YBCA nor the constating documents of Turquoise Hill impose restrictions on the transfer of Common Shares on the register of Turquoise Hill, provided that Turquoise Hill receives the certificate representing the Common Shares to be transferred together with a duly endorsed instrument of transfer and payment of any fees and taxes which may be prescribed by the Board of Directors from time to time. There are no sinking fund provisions in relation to the Common Shares and they are not liable to further calls or to assessment by Turquoise Hill. The YBCA provides that the rights and provisions attached to any class of shares may not be modified, amended or varied unless consented to by special resolution passed by a majority of not less than two-thirds of the votes cast in person or by proxy by holders of shares of that class.

Preferred Shares

The Preferred Shares are issuable in one or more series, each consisting of such number of Preferred Shares as may be fixed by Turquoise Hill’s directors. Turquoise Hill’s directors may from time to time, by resolution passed before the issue of any Preferred Shares of any particular series, alter the constating documents of Turquoise Hill to determine the designation of the Preferred Shares of that series, to fix the number of Preferred Shares therein and alter the constating documents to create, define and attach special rights and restrictions to the shares of that series

- 79 - including, without limitation, the following: (i) the nature, rate or amount of dividends and the dates, places and currencies of payment thereof; (ii) the consideration for, and the terms and conditions of, any purchase of the Preferred Shares for cancellation or redemption; (iii) conversion or exchange rights; (iv) the terms and conditions of any share purchase plan or sinking fund; and (v) voting rights and restrictions.

Under the terms of the restrictive covenants contained in the Turquoise Hill Financing Support Agreement, the Corporation is prohibited from amending its constating documents to create and issue Preferred Shares without the prior written consent of Rio Tinto.

Registered holders of both the Preferred Shares and Common Shares are entitled, at their option, to a certificate representing their shares of Turquoise Hill. MARKET FOR SECURITIES

The Common Shares of Turquoise Hill are traded in Canada on the TSX, and in the U.S. on the NYSE and the NASDAQ. The closing price of Turquoise Hill’s Common Shares on the TSX on March 23, 2017 was C$4.12. The closing price listed on the NYSE on March 23, 2017 was $3.08, and the closing price listed on the NASDAQ on March 23, 2017 was $3.08.

The following table indicates the monthly range of high and low closing prices of a Common Share and the total monthly volumes traded on the TSX, the NYSE and the NASDAQ during the period beginning on January 1, 2016 and ending on December 31, 2016:

NYSE/NASDAQ(1) TSX(2)

High Low Volume High Low Volume

US$ US$ C$ C$ 2016 January $2.46 $1.72 39,129,683 $3.43 $2.45 54,744,548 February $2.23 $1.93 58,790,335 $3.05 $2.69 46,622,743 March $2.95 $2.32 73,509,565 $3.86 $3.12 55,674,169 April $3.00 $2.46 46,144,606 $3.78 $3.24 33,823,818 May $2.94 $2.62 50,727,811 $3.72 $3.37 48,997,485 June $3.46 $2.83 82,074,729 $4.43 $3.68 54,760,009 July $3.63 $3.43 47,543,667 $4.68 $4.46 29,929,675 August $3.46 $3.06 61,533,056 $4.55 $3.93 45,669,825 September $3.16 $2.94 44,146,698 $4.09 $3.87 46,135,238 October $3.12 $2.88 36,232,328 $4.18 $3.82 36,177,242 November $3.61 $2.93 77,677,284 $4.92 $3.92 66,493,254 December $3.54 $3.15 54,910,854 $4.67 $4.26 43,286,039

(1) Information is presented on a consolidated basis for all of the U.S. as reported by Bloomberg under “TRQ US”. (2) Information is presented on a consolidated basis for all of Canada as reported by Bloomberg under “TRQ CN”.

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DIRECTORS AND OFFICERS

Name and Occupation

The name, province or state, and country of residence of each director and executive officer of Turquoise Hill, as of the date hereof (except as otherwise disclosed), as well as their respective positions and offices held with Turquoise Hill and their respective principal occupations during the immediately preceding five years is as follows:

Name and Municipality of Position with Turquoise Principal Occupation Residence Hill During Past Five Years ROWENA ALBONES Director Chief Financial Officer, Growth & Innovation, Rio Brisbane, Australia (since October 2013) Tinto (2016 to present), Chief Financial Officer, Copper & Coal, Rio Tinto (2012 to 2016); Group Advisor, Reporting and Analysis, Rio Tinto (2009 to 2012). JAMES W. GILL Director Director, Toromont Industries Ltd (2015 to present); Toronto, Ontario, Canada (since November 2014) Technical Advisor, Asset Chile’s Fenex Fund (2012 to present); Mining Consultant (2007 to present); Non-Executive Chairman and Director, Thundermin Resources Ltd. (1986 to 2016). R. PETER GILLIN Director and Chairman Director, Sherritt International Corp. (2010 to Toronto, Ontario, Canada (Director since May present); Director, TD Mutual Funds Corporate 2012 and Chairman since Class Ltd. (2010 to present); Lead Director, Dundee January 2017) Precious Metals Inc. (2009 to present); Director, Silver Wheaton Corp. (2004 to present). BRENDAN LANE Vice President, Vice President, Operations and Development, Sandy, Utah, USA Operations and Turquoise Hill (2016 to present), Finance Director Development MEL & Grasberg, Rio Tinto (2013 to 2016), (since February 2016) Manager Business Analysis Copper, Rio Tinto (2011 to 2013). RUSSEL C. Director Director, Valeant Pharmaceuticals International ROBERTSON (since June 2012) (2016 to present), Executive Vice-President, and Toronto, Ontario, Canada Head, Anti-Money Laundering, BMO Financial Group (2013 to 2016); Director, Virtus Investment Partners Inc. (2013 to 2016); Executive Vice- President, Business Integration, BMO Financial Group and Vice-Chair, BMO Financial Corp. (2011 to 2013).

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Name and Municipality of Position with Turquoise Principal Occupation Residence Hill During Past Five Years MARYSE SAINT- Director Board member, Alberta Securities Commission LAURENT (since January 2017) (2016 to present); Vice-President Legal and Calgary, Alberta, Canada Corporate Secretary (General Counsel), TransAlta Renewables Inc. (2013 to 2015); Vice-President Legal and Corporate Secretary, TransAlta Corporation (2008 to 2015). CRAIG STEGMAN Director Chief Growth & Innovation Officer, Copper & Cottonwood Heights, (since January 2015) Coal, Rio Tinto (2013 to present); Managing Utah, USA Director, Copper Major Projects, Rio Tinto (2012 to 2013); Managing Director, Northparkes Mines, Rio Tinto (2009 to 2012). STEEVE THIBEAULT Chief Financial Officer Chief Financial Officer, Turquoise Hill (2014 to Cottonwood Heights, (since June 2014) present); Chief Finance Officer, Energy Resources Utah, USA of Australia (2009 to 2014). JEFF TYGESEN Director and Chief Sandy, Utah, USA Executive Officer (Director since August Chief Executive Officer, Turquoise Hill (2014 to 2012 and Chief present); Vice-President, Copper Development, Rio Executive Officer since Tinto Copper Group (2011 to 2014); Mining December 2014) Executive, Rio Tinto Copper Group (2009 to 2011).

Each director’s term of office expires at the next annual general meeting of Turquoise Hill.

Shareholdings of Directors and Executive Officers

As of the date hereof, the directors and executive officers, as a group, own, directly or indirectly, 120,000 Common Shares, which represents 0.006% of the Corporation’s Common Shares.

Committees of the Board of Directors

The committees of the Board of Directors consist of the following standing committees: Audit Committee, Compensation and Benefits Committee, Nominating and Corporate Governance Committee and Health, Safety and Environment Committee. The current members of the Audit Committee are Russel C. Robertson (Chair), James W. Gill and Maryse Saint-Laurent. The current members of the Compensation and Benefits Committee are Peter Gillin (Chair), Russel C. Robertson and Rowena Albones. The current members of the Nominating and Corporate Governance Committee are Maryse Saint-Laurent (Chair), James W. Gill and Rowena Albones. The current members of the Health, Safety and Environment Committee are Jeff Tygesen (Chair), James W. Gill and Craig Stegman.

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Conflicts of Interest

Certain directors and executive officers of Turquoise Hill and its subsidiaries are associated with other reporting issuers or other corporations. These relationships may give rise to conflicts of interest from time to time. For example, Ms. Albones and Dr. Stegman are also officers of Rio Tinto, and Messrs. Tygesen, Thibeault, and Lane are seconded employees of Rio Tinto, which has a controlling interest in the Corporation. Ms. Albones, Mr. Tygesen and Dr. Stegman are nominated by RTIH to act as directors of the Corporation.

The Corporation’s commitment to diversity and inclusion aligns with its values of accountability, respect, teamwork and integrity and is reflected in its Code of Business Conduct, which is modeled on Rio Tinto’s global code of business conduct titled The Way We Work. The Code of Business Conduct is applicable to all employees, consultants, officers and directors regardless of their position in the organization, at all times and everywhere the Corporation does business. The Code of Business Conduct provides that the Corporation’s employees, consultants, officers and directors will uphold its commitment to a culture of honesty, integrity and accountability and the Corporation requires the highest standards of professional and ethical conduct from its employees, consultants, officers and directors. The Corporation takes any violation of applicable Anti-Corruption Legislation very seriously and any employee who violates these laws will be subject to disciplinary measures up to and including termination of employment.

The Corporation believes that its Code of Business Conduct is responsive to the potential issues such policies are meant to address and clearly demonstrates the Corporation’s full commitment to all of its stakeholders to act at all times as a responsible social and corporate citizen.

The Corporation has a confidential whistleblower program. Employees are encouraged to report any suspicion of unethical or illegal practices.

Audit Committee Information

Information concerning the Audit Committee of Turquoise Hill, as required by National Instrument 52-110 – Audit Committees, is provided in Schedule A to this AIF. INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

Other than as disclosed below or elsewhere in this AIF, no director or executive officer of the Corporation, or person or company that beneficially owns, or controls or directs, directly or indirectly, more than 10% of the issued and outstanding Common Shares, nor any associate or affiliate of the foregoing, has any material interest, direct or indirect, in any transaction within the Corporation’s three most recently completed financial years, or during the current financial year, that has materially affected, or is reasonably expected to materially affect, the Corporation.

RTIH, together with its affiliates, is the Corporation’s majority shareholder, holding 50.8% of the issued and outstanding Common Shares. Within the Corporation’s three most recently completed financial years, and within the current financial year, Rio Tinto has been party to a series of transactions that have materially affected, or could materially affect, the Corporation. See “General Development of the Business – Agreements with Rio Tinto”. During the year ended December 31,

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2016, Rio Tinto provided services to the Corporation for Oyu Tolgoi on a cost-recovery basis which amounted to $74.6 (2015 - $49.3 million and 2014 – $78.6 million). In addition, various other transactions were entered into between the Corporation and Rio Tinto in fiscal 2016, as further described under Item 13 of the Corporation’s MD&A. TRANSFER AGENT AND REGISTRAR

The registrar and transfer agent for the Common Shares in Canada is CST Trust Company at its principal offices in Vancouver, Toronto and Montreal. MATERIAL CONTRACTS

Material contracts under National Instrument 51-102 Continuous Disclosure Obligations are contracts, other than contracts entered into in the ordinary course of the Corporation’s business, that are material to the Corporation. The following is a list of: (i) material contracts entered into since January 1, 2016; and (ii) material contracts entered into prior to January 1, 2016 but after January 1, 2002 that remain in effect:

1. Entrée Earn-in Agreement.1 See “Description of the Business – Summary of Project Development – Project Description and Location”.

2. Private Placement Agreement. See “General Development of the Business – Agreements with Rio Tinto – Private Placement Agreement”.

3. Investment Agreement. See “General Development of the Business – Agreements with the Government of Mongolia – Investment Agreement”.

4. ARSHA. See “General Development of the Business – Agreements with the Government of Mongolia – ARSHA”.

5. HoA. See “General Development of the Business – Agreements with Rio Tinto – HoA”.

6. 2012 MoA. See “General Development of the Business – Agreements with Rio Tinto – 2012 MoA”.

7. Power Purchase Agreement. See “General Development of the Business – Agreements with the Government of Mongolia – Power Supply”.

8. 2013 MoA. See “General Development of the Business – Agreements with Rio Tinto – 2013 MoA”.

9. Underground Plan. See “General Development of the Business – Agreements with the Government of Mongolia – Underground Plan”.

1 Under the terms of the Investment Agreement, Turquoise Hill agreed to transfer its interest in the Entrée Gold Joint Venture to Oyu Tolgoi LLC.

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10. Turquoise Hill Financing Support Agreement. See “General Development of the Business – Agreements with Rio Tinto – Agreements in Connection with Oyu Tolgoi Project Financing”.

11. Oyu Tolgoi Financing Support Agreement. See “General Development of the Business – Agreements with Rio Tinto – Agreements in Connection with Oyu Tolgoi Project Financing”.

12. Cash Management Services Agreement. See “General Development of the Business – Agreements with Rio Tinto – Agreements in Connection with Oyu Tolgoi Project Financing”.

13. Sponsor Debt Service Undertaking. See “General Development of the Business – Agreements with Rio Tinto – Agreements in Connection with Oyu Tolgoi Project Financing”. INTERESTS OF EXPERTS

PricewaterhouseCoopers LLP has been the auditor of the Corporation since April 2, 2012 and Deloitte LLP was the auditor of the Corporation from January 1995 until April 2, 2012. PricewaterhouseCoopers LLP is independent within the meaning of the Code of Professional Conduct of the Institute of Chartered Professional Accountants of British Columbia.

Turquoise Hill has relied on the work of the qualified persons listed in the section of this AIF titled “Description of the Business – Qualified Persons” in connection with the scientific and technical information presented in this AIF in respect of its material mineral property, Oyu Tolgoi, which is based upon the 2016 OTTR, which report is available for review on SEDAR at www.sedar.com.

To the knowledge of Turquoise Hill, none of the qualified persons listed in the section of this AIF titled “Description of the Business – Qualified Persons” who prepared or contributed to the preparation of the 2016 OTTR, nor any of the companies listed therein that employ those individuals, hold Common Shares or securities exercisable to acquire Common Shares equal to or greater than 1% of the issued and outstanding Common Shares. ADDITIONAL INFORMATION

Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of Turquoise Hill securities and options to purchase Common Shares is contained in the management proxy circular for the annual general meeting of Turquoise Hill to be held on May 12, 2017, which will be filed on SEDAR at www.sedar.com concurrently with the filing of this AIF. Additional financial information is contained in Turquoise Hill’s comparative financial statements and MD&A as at and for the years ended December 31, 2016 and 2015. Copies of the management proxy circular, financial statements and MD&A (when filed) are available on SEDAR at www.sedar.com, and may also be obtained upon request from Turquoise Hill at 354 – 200 Granville Street, Vancouver, British Columbia, V6C 1S4.

Additional information relating to Turquoise Hill may be found on SEDAR at www.sedar.com. SCHEDULE A

AUDIT COMMITTEE INFORMATION

Composition of Audit Committee

Turquoise Hill’s Audit Committee consists of Russel C. Robertson, James W. Gill and Maryse Saint-Laurent. Mr. Robertson has been Chair of the Audit Committee since January 1, 2015. The Board of Directors has determined that all members of the Audit Committee satisfy the independence, financial literacy, expertise and financial experience requirements under applicable securities laws, rules and regulations, stock exchange and any other regulatory requirements applicable to Turquoise Hill. In addition, in accordance with the Sarbanes-Oxley Act, the Board of Directors has determined that Russel C. Robertson is an audit committee financial expert.

Relevant Education and Experience

Russel C. Robertson

Mr. Robertson holds a Bachelor of Arts degree (Honours) from the Richard Ivey School of Business at the University of Western Ontario, is a Chartered Professional Accountant (FCPA, FPA) and a Fellow of the Institute of Chartered Professional Accountants (Ontario). He is a member of the Institute of Corporate Directors. From June, 2013 to August, 2016, Mr. Robertson served as Executive Vice-President, and Head, Anti-Money Laundering at BMO Financial Group. Mr. Robertson previously held various senior positions with two major accounting firms, including holding the positions of Vice-Chair, Deloitte & Touche LLP (Canada), and Canadian Managing Partner, Arthur Andersen LLP (Canada).

James W. Gill

Dr. Gill holds a Honours Bachelor of Science and Masters of Science Degrees from McGill University as well as a Ph.D Degree in Economic Geology from Carleton University. In 1981 he founded Aur Resources Inc., a mining company, and was the President and CEO for 26 years during which time Aur developed and operated eight mines in Canada and Chile. As CEO of Aur Dr. Gill was intimately involved in the financing, financial management and reporting, operations and business development activities of the company as well as serving on its board of directors and board committees. Dr. Gill also served on the board of a number of public company boards and is currently a director of Toromont Industries Ltd. and serves on its audit committee and human resources committee.

Maryse Saint-Laurent

Ms. Saint-Laurent holds a Bachelor of Laws from the University of Alberta, a Master of Laws from Osgoode Hall, York University in securities and finance law, and is a member designate of the Institute of Corporate Directors (ICD.D). Ms. Saint-Laurent has provided legal, disclosure, corporate, financing and transactional advice to public companies over the course of her career. Since November 2015, she provides governance and corporate legal advisory services to boards, law firms and corporations. From 2005 to 2015, she was Vice-President Legal and Corporate Secretary for TransAlta Corporation, a publicly traded power generation company with mining

- ii - operations situated both domestically and internationally. She also served, from 2013 to 2015, as Vice-President Legal, and Corporate Secretary (General Counsel) for TransAlta Renewables Inc. a publicly traded renewable and gas fired power generating company, majority-held by TransAlta Corporation.

Audit Fees

PricewaterhouseCoopers LLP have been the Corporation’s auditor since April 2, 2012. Deloitte LLP was the Corporation’s auditor from January 1995 to April 2012.

The aggregate fees billed by PricewaterhouseCoopers LLP and its affiliates in fiscal 2016 and fiscal 2015 are detailed below (rounded).

PwC (Canadian $) 2016 2015 Audit Fees (a) $1,686,000 $1,474,000 Audit Related Fees (b) $319,000 $409,000 Tax Fees (c) $87,000 17,000 Other Fees Nil Nil Total $ 2,092,000 $ 1,900,000

(a) Fees for audit services billed or expected to be billed relating to fiscal 2016 and 2015 consist of:

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

• audit of the Corporation’s subsidiaries Oyu Tolgoi Netherlands B.V., Heruga Exploration LLC and

Asia Gold Mongolia LLC.

In addition, in 2016 and 2015 fees were paid for services provided pursuant to section 404 of the Sarbanes-Oxley Act, applicable Canadian securities laws and the required attestations relating to the effectiveness of the Corporation’s internal controls on financial reporting.

(b) Fees for audit-related services provided during fiscal 2016 and 2015 consist of:

• translation services;

• reviews of Turquoise Hill’s interim financial statements; and

• comfort letters, consents, and other services related to SEC, Canadian and other securities regulatory

authorities’ matters.

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The Audit Committee’s charter requires the pre-approval by the Audit Committee of all audit and non-audit services provided by the external auditor. In March 2013, the Board of Directors adopted a resolution pursuant to which the Audit Committee is required to pre-approve all audit and non-audit services above $250,000 provided by the external auditor. Pre-approval from the Audit Committee can be sought for planned engagements based on budgeted or committed fees. No further approval is required to pay pre-approved fees. Additional pre-approval is required for any increase in scope or in final fees.

Audit Committee Charter

1Purpose

The primary objective of the Audit Committee (the “Committee”) of Turquoise Hill Resources Ltd. (the “Corporation”) is to act as a liaison between the Board of Directors of the Corporation (the “Board”) and the Corporation’s independent auditors (the “Auditors”) and to assist the Board in fulfilling its oversight responsibilities with respect to: (a) the accounting and financial reporting processes of the Corporation, including the integrity of the financial statements and other financial information provided by the Corporation to its shareholders, the public and others, (b) the Corporation’s compliance with legal and regulatory requirements, (c) the audit of the Corporation’s financial statements, (d) the qualifications, independence and performance of the Auditors, (e) the Corporation’s risk management and internal financial and accounting controls, and management information systems, including the performance of the Corporation’s internal audit function, and (f) such other matters as shall be mandated under applicable laws, rules and regulations.

2 Organization of the Audit Committee

The Committee shall consist of three or more directors and shall satisfy the independence, financial literacy, expertise and financial experience requirements of applicable securities laws, stock exchanges and any other regulatory requirements.

The members of the Committee shall be appointed by the Board on the recommendation of the Nominating and Corporate Governance Committee and may be removed by the Board at any time. A majority of the members of the Committee shall constitute a quorum.

Members of the Committee must be financially literate as the Board interprets such qualification in accordance with applicable Canadian and U.S. securities legislation and regulations, as well as the New York Stock Exchange (“NYSE”) standards relating to corporate governance and Nasdaq Capital Market (“Nasdaq”) standards relating to corporate governance.

No member of the Committee may serve simultaneously on the audit committees of more than three public companies, including the Corporation, unless the Board determines that such simultaneous service would not limit or impair the ability of such members to effectively serve on the Committee. The basis for such determination shall be disclosed as required by law or stock exchange regulation.

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The Committee has at all times a direct line of communication with the internal auditors and the Auditors.

3 Meetings of the Audit Committee

The Committee shall meet as many times as the Committee deems necessary to carry out its duties effectively, but not less frequently than four times per year. The Committee will meet with management, the Corporation’s internal auditors and the Auditors in separate executive sessions to discuss any matters that the Committee or each of these groups believe should be discussed privately.

The Board, or failing such selection, the members of the Committee, shall select a chair who will preside at each meeting of the Committee.

The chair of the Committee shall ensure that the agenda for each upcoming meeting of the Committee is circulated to each member of the Committee on a timely basis in advance of such meeting.

The Corporation’s internal auditors shall attend any meeting when requested to do so by the chair of the Committee.

4 Responsibilities of the Committee

The Committee shall have the following responsibilities:

(a) With respect to the Auditors

• Be directly responsible for the appointment, compensation, retention (including termination) and oversight of the work of any independent registered public accounting firm engaged by the Corporation (including for the purposes of preparing or issuing an audit report or performing other audit, review or attestation services or other work for the Corporation and including the resolution of disagreements between management and the Corporation’s independent registered public accounting firm regarding financial reporting) and ensure that such firm shall report directly to it; recommend to the Board the independent auditors to be nominated for appointment as Auditors of the Corporation at the Corporation’s annual meeting, the remuneration to be paid to the Auditors for services performed during the preceding year; and recommend to the Board and the shareholders the termination of the appointment of the Auditors, if and when advisable. The Committee shall have the sole authority to determine the terms of engagement and the extent of funding necessary (and to be provided by the Corporation) for payment of compensation to the Auditors retained to advise the Committee and ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.

• Review the Auditor’s audit plan with the Auditor and management and approve the scope, extent and

schedule of such audit plan.

• Review on an annual basis the performance of the Auditors, including the lead audit partner.

• Take reasonable steps to confirm the independence of the Auditors, which include:

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○ Reviewing the annual written statement of the Auditors regarding all of their relationships with the Corporation and discussing any relationships or services that may impact on their objectivity or independence;

○ Approving and overseeing the disclosure of all audit services provided by the external advisors to the Corporation or any of its subsidiaries, pre-approving all non-audit services provided by the

Auditors and, exceptionally, approving and overseeing the disclosure of permitted non-audit services to be performed by the Auditors; and

○ As necessary, taking or recommending that the Board take appropriate action to oversee the

independence of the Auditors.

• Review and approve any disclosures required to be included in periodic reports under applicable securities laws, rules and regulations and stock exchange and other regulatory requirements with respect to non-audit services.

• Consider the tenure of the lead audit partner on the engagement in light of applicable securities laws,

stock exchange or applicable regulatory requirements.

• Review all reports required to be submitted by the Auditors to the Committee under applicable securities

laws, rules and regulations and stock exchange or other regulatory requirements.

• Review and approve policies for the hiring of employees, partners, former employees or former partners

of the Auditors or the Corporation’s former independent auditors.

(b) With respect to accounting and financial reporting

• Review and discuss with management, the financial and accounting officer(s) and the Auditors, the Corporation’s annual audited financial statements and accompanying notes, the Auditors’ report thereon and the related press release, including disclosures made in management’s discussion and analysis, and obtain explanations from management on all significant variances with comparative periods, prior to recommending approval by the Board and the release thereof.

• Review and discuss with management, the financial and accounting officer(s) and the Auditors, the Corporation’s interim and annual financial statements (and the interim or annual profit or loss press

release associated therewith), management’s discussion and analysis and the Auditor’s review thereof, before recommending the approval by the Board and the release thereof.

• Be satisfied that adequate procedures are in place for the review of the Corporation’s disclosure of financial information extracted or derived from the Corporation’s financial statements and periodically assess the adequacy of these procedures.

• Review with management and the Auditors the quality and not just the acceptability of the Corporation’s accounting policies and any changes that are proposed to be made thereto, including: (i) all critical accounting policies and practices used, (ii) any alternative treatments of financial information that have been discussed with management, the ramification of their use and the Auditors’ preferred treatment, and (iii) any other material communications with management with respect thereto, and reviewing the disclosure and impact of contingencies and the reasonableness of the provisions, reserves and estimates that may have a material impact on financial reporting.

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• Discuss with the Auditors the matters required to be discussed by applicable auditing standards

requirements relating to the conduct of the audit.

• Discuss with management and the Auditors major issues regarding accounting principles used in the preparation of the Corporation’s financial statements, including any significant changes in the Corporation’s selection or application of accounting principles. Review and discuss analyses prepared by

management and/or the Auditors setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative approaches under generally accepted accounting principles.

• Take all reasonable measures to ensure that management has designed and implemented effective systems of risk management and internal controls and, at least annually, review the effectiveness of the implementation of such systems. In consultation with the Auditors and the internal audit group, review the adequacy of the Corporation’s internal controls and its procedures designed to ensure compliance with laws and regulations, and any special audit steps adopted in light of material control deficiencies.

• Establish procedures for (a) the receipt, retention and treatment of complaints received by the Corporation with respect to any matter, including accounting, internal accounting controls or auditing matters and

(b) the confidential, anonymous submission by employees of the Corporation of concerns respecting any aspect of the Corporation’s business, including questionable accounting or auditing matters.

(d) With respect to the internal auditors

• Monitor the qualifications of the internal auditors.

• Maintain a direct report relationship with the internal auditors and review: (i) the internal control reports prepared by management, including management’s assessment of the effectiveness of the Corporation’s

internal control structure and procedures for financial reporting; and (ii) the performance of the internal auditors on an annual basis.

• Review the internal audit plan periodically and monitor its execution.

(e) With respect to the Committee

• Review and assess annually its own performance and the adequacy of this Charter and recommend to the Nominating and Corporate Governance Committee any changes to this Charter deemed appropriate by the Committee.

In fulfilling its duties and responsibilities under this Charter, the Committee will be entitled to reasonably rely on (a) the integrity of those persons within the Corporation and of the professionals and experts (such as the Auditors) from which it receives information, (b) the accuracy of the financial and other information provided to the Committee by such persons, professionals or experts, and (c) the representations made by the Auditors as to any services provided by it to the Corporation.

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5 Reporting

The chair of the Committee reports regularly to the Board on the business of the Committee as well as at such time and in such manner as the Board may otherwise require.

The Committee shall review with the full Board any issues that have arisen with respect to the quality or integrity of the Corporation’s financial statements, the Corporation’s compliance with legal or regulatory requirements, the performance or independence of the Auditors or the performance of the Corporation’s financial and accounting group.

6 Retention of Independent Advisors

In performing its responsibilities, the Committee may, as required and subject to advising the chairman of the Board, engage an outside advisor for advice and assistance at the expense of the Corporation.

7 Additional

Note that the Corporation is subject to the requirements set forth in the following agreements which may affect the above:

• The Private Placement Agreement dated October 18, 2006 among the Corporation and Rio Tinto

International Holdings Limited;

• The Heads of Agreement dated December 8, 2010 among the Corporation and Rio Tinto International

Holdings Limited;

• The Memorandum of Agreement dated April 17, 2012 among the Corporation, Rio Tinto International Holdings Limited and Rio Tinto South East Asia Limited, as amended pursuant to an Amending Agreement dated May 22, 2012;

• The Memorandum of Agreement dated August 23, 2013 among the Corporation, Rio Tinto International Holdings Limited and Rio Tinto South East Asia Limited, as amended pursuant to an Amending Agreement dated November 14, 2013; and

• The Financing Support Agreement dated December 15, 2015 among the Corporation and Rio Tinto plc.

Nothing contained in this Charter is intended to expand applicable standards of conduct under statutory, regulatory or exchange requirements for the directors of the Corporation or the members of the Committee. SCHEDULE B

GLOSSARY OF TECHNICAL TERMS AND ABBREVIATIONS

Ag: silver. A metal element of economic interest. albite: a triclinic mineral of the feldspar group. A member of the plagioclase and the alkali feldspar series. A common rock-forming mineral in granite, intermediate to felsic igneous rocks, low-temperature metamorphic rocks, and hydrothermal cavities and veins. anomaly: a departure from the norm which may indicate the presence of mineralization in the underlying bedrock.

Au: gold. A metal element of economic interest. augite: a monoclinic mineral of the pyroxene group. It appears dark-green to black with prismatic cleavage. It is a common rock-forming mineral in igneous and metamorphic rocks. basalt: a dark-coloured mafic igneous rocks, commonly extrusive but locally intrusive (e.g., as dikes). It is composed chiefly of calcic plagioclase and clinopyroxene. Nepheline, olivine, orthopyroxene, or quartz may be present in the rocks. biotite: a monoclinic mineral of the mica group. It is dark brown, dark green, black and is a common rock-forming mineral in crystalline rocks, either as an original crystal in igneous rocks or as a metamorphic product in gneisses and schists. bornite: an isometric mineral which is metallic. It appears brownish bronze tarnishing to iridescent blue and purple. It is a valuable source of copper. chalcocite: a form of copper mineral ore that generally contains a high copper content. chalcopyrite: a form of copper mineral ore that generally contains a low copper content. colluvial talus: a sloping mass of earth material that has accumulated at the base of a hill, through the action of gravity. concentrate: a product containing valuable metal from which most of the waste material in the ore has been eliminated. concentrator: a plant for recovery of valuable minerals from ore in the form of concentrate. The concentrate must then be treated in some other type of plant, such as a smelter, to effect recovery of the pure metal. covellite: a supergene mineral found in copper deposits; a source of copper.

Cu: copper. A metal element of economic interest.

CuEq: a copper equivalent grade, calculated using assumed metal prices for copper, gold and, where applicable, molybdenum.

- ii - cut-off grade: the lowest grade of mineral resources considered economic; used in the calculation of reserves and resources in a given deposit. dacite: a light gray volcanic rock containing a mixture of plagioclase and other crystalline minerals in glassy silica, similar in appearance to rhyolite. dyke: a tabular igneous intrusion that cuts across the bedding or foliation of the country rock.

DWT: deadweight tonnage; a measure of how much a ship is carrying or can carry. fault: a fracture in rock along which the adjacent rock surfaces are differentially displaced. feasibility study: a comprehensive technical and economic study of the selected development option for a mineral project that includes appropriately detailed assessments of applicable Modifying Factors together with any other relevant operational factors and detailed financial analysis that are necessary to demonstrate, at the time of reporting, that extraction is reasonably justified (economically mineable). The results of the study may reasonably serve as the basis for a final decision by a proponent or financial institution to proceed with, or finance, the development of the project. The confidence level of the study will be higher than that of a Pre-Feasibility Study. fold: a curve or bend of a planar structure such as rock strata, bedding planes, foliation, or cleavage. A fold is a product of deformation, although its definition is descriptive and not genetic and may include primary structures. g: SI unit symbol for gram (one one-thousandth of a kilogram). gangue: valueless rock or mineral in ore. granodiorite: a group of coarse-grained plutonic rocks intermediate in composition between quartz diorite and quartz monzonite, containing quartz, plagioclase (oligoclase or andesine), and potassium feldspar, with biotite, hornblende, or, more rarely, pyroxene, as the mafic components. g/t: grams per tonne.

Ha: SI symbol for hectare. hypogene: primary mineralization formed by mineralizing solutions emanating up from a deep magnetic source.

Indicated mineral resource: that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of modifying factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence is derived from adequately detailed and reliable exploration, sampling and testing and is sufficient to assume geological and grade or quality continuity between points of observation. An indicated mineral resource has a lower level of confidence than that applying to a measured mineral resource and may only be converted to a probable mineral reserve.

- iii -

Inferred mineral resource: that part of a mineral resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade or quality continuity. An inferred mineral resource has a lower level of confidence than that applying to an Indicated mineral resource and must not be converted to a mineral reserve. It is reasonably expected that the majority of inferred mineral resources could be upgraded to indicated mineral resources with continued exploration. intrusive: rock which while molten, penetrated into or between other rocks but solidified before reaching the surface.

IP: induced polarization. km: SI unit symbol for kilometre. koz: thousand ounces. ktpd: thousand tonnes per day. lb: pound (mass). leach: to dissolve minerals or metals out of ore with chemicals. lithology: the general physical characteristics of rocks in a particular area. m: SI unit symbol for metre.

Measured mineral resource: that part of a mineral resource for which quantity, grade or quality, densities, shape, and physical characteristics are estimated with confidence sufficient to allow the application of modifying factors to support detailed mine planning and final evaluation of the economic viability of the deposit. Geological evidence is derived from detailed and reliable exploration, sampling and testing and is sufficient to confirm geological and grade or quality continuity between points of observation. A measured mineral resource has a higher level of confidence than that applying to either an indicated mineral resource or an inferred mineral resource. It may be converted to a proven mineral reserve or to a probable mineral reserve. mineral project: any exploration, development or production activity, including a royalty or similar interest in these activities, in respect of diamonds, natural solid inorganic material, or natural solid fossilized organic material including base and precious metals, coal, and industrial minerals. mineral reserve: the economically mineable part of a measured or indicated mineral resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at pre-feasibility or feasibility level as appropriate that include application of modifying factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified. The reference point at which mineral reserves are defined, usually the point where the ore is delivered to the processing plant, must be stated. mineral resource: is a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade or quality and quantity that there are reasonable

- iv - prospects for eventual economic extraction. The location, quantity, grade or quality, continuity and other geological characteristics of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling.

Mlb: million pounds. mm: SI symbol for millimetre.

Mo: molybdenum. A metal element of economic interest. modifying factors: considerations used to convert mineral resources to mineral reserves. These include, but are not restricted to, mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and governmental factors. monzodiorite: a coarse-grained igneous rock consisting of essential plagioclase feldspar, orthoclase feldspar, hornblende, and biotite, with or without pyroxene.

Moz: million troy ounces.

Mt: million tonnes. muscovite: a monoclinic mineral of the mica group. It is a common rock-forming mineral in silicic plutonic rocks, mica schists, gneisses, and commercially in pegmatites. oz: troy ounce (mass). porphyry: any igneous rock in which relatively large, conspicuous crystals (called phenocrysts) set in a fine-grained ground mass. ppm: parts per million. preliminary economic assessment: means a study, other than a pre-feasibility or feasibility study, that includes an economic analysis of the potential viability of mineral resources. preliminary feasibility study and pre-feasibility study: a comprehensive study of the of a range of options for the technical and economic viability of a mineral project that has advanced to a stage where a preferred mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, is established and an effective method of mineral processing is determined. It includes a financial analysis based on reasonable assumptions on the modifying factors and the evaluation of any other relevant factors which are sufficient for a qualified person, acting reasonably, to determine if all or part of the mineral resource may be converted to a mineral reserve at the time of reporting. A pre-feasibility study is at a lower confidence level than a feasibility study. probable mineral reserve: the economically mineable part of an indicated, and in some circumstances, a measured mineral resource. The confidence in the modifying factors applying to a probable mineral reserve is lower than that applying to a proven mineral reserve. proven mineral reserve and proved mineral reserve: the economically mineable part of a measured mineral resource. A proven mineral reserve implies a high degree of confidence in the modifying factors.

- v - pyrite: an isometric mineral. It is an accessory in igneous rocks, and in metamorphic rocks, in sedimentary rocks including coal seams and is a source of sulphur which may have included gold. pyroclastic: produced by explosive or aerial ejection of ash, fragments, and glassy material from a volcanic vent. Applied to the rocks and rock layers as well as to the textures so formed. qualified person: an individual who:

(a) is an engineer or geoscientist with a university degree, or equivalent accreditation, in an area of geoscience, or

engineering, relating to mineral exploration or mining;

(b) has at least five years of experience in mineral exploration, mine development or operation, or mineral project

assessment, or any combination of these, that is relevant to his or her professional degree or area of practice;

(d) is in good standing with a professional association; and (e) in the case of a professional association in a foreign

jurisdiction, has amembership designation that

(i) requires attainment of a position of responsibility in their profession that requires the exercise of independent

judgment; and

(ii) requires

A. a favourable confidential peer evaluation of the individual’s character, professional judgement,

experience, and ethical fitness; or

B. a recommendation for membership by at least two peers, and demonstrated prominence or expertise in

the field of mineral exploration or mining. quartz: a general term for a variety of cryptocrystalline varieties of silica.

RC: reverse circulation method of drilling. rhyolite: a group of extrusive igneous rocks, typically porphyritic and commonly exhibiting flow texture, with phenocrysts of quartz and alkali feldspar in a glassy to cryptocrystalline groundmass and also refers to any rock in that group. Rhyolite grades into rhyodacite with decreasing alkali feldspar content and into trachyte with a decrease in quartz. seismicity: measure of frequency and magnitudes of earthquakes in a given area. sericite: a white, fine-grained potassium mica occurring in small scales as an alteration product of various aluminosilicate minerals, having a silky luster, and found in various metamorphic rocks (esp. in schists and phyllites) or in the wall rocks, fault gouge, and vein fillings of many ore deposits. It is commonly muscovite or very close to muscovite in composition, but may also include paragonite and illite.

- vi - shear zones: volumes of rock deformed by shearing stress under brittle-ductile or ductile conditions, typically in subduction zones at depths down to 10-20 km. stratigraphic sequence: a chronologic succession of sedimentary rocks from older below to younger above, essentially without interruption. strike: the direction, or course or bearing, of a vein or rock formation measured on a level surface. sulphides: compounds of sulphur with other metallic elements. supergene: ore minerals that have been formed by the effects (usually oxidization and secondary sulphide enrichment) of descending ground water. t: metric tonne (1000kg). tailings: the gangue and other refuse material resulting from the washing, concentration, or treatment of ground ore. technical report: a report prepared and filed in accordance with this Instrument and Form 43-101F1 technical report that includes, in summary form, all material scientific and technical information in respect of the subject property as of the effective date of the technical report. tpd: tonnes per day. tuff: consolidated pyroclastic rocks. vein: a zone or belt of mineralized rock lying within boundaries clearly separating it from neighbouring rock. It includes all deposits of mineral matter found through a mineralized zone or belt coming from the same source, impressed with the same forms and appearing to have been created by the same processes. SCHEDULE C

DEPLETION FROM THE MINERAL RESERVE TO DECEMBER 31, 2016

For information purposes the following tables showing the depletion from the mineral reserve to 31 December 2016 have been included:

Depleted Oyu Tolgoi Mineral Reserve, December 31, 2016

Recovered Metal Ore Cu Au Ag Estimate Cu Au Ag (Mt) (%) (g/t) (g/t) (Mlb) (koz) (koz) Oyut Proven 333 0.53% 0.35 1.38 3,007 2,552 10,914 Probable 579 0.39% 0.23 1.10 3,880 2,998 15,165 Oyut (Proven + Probable) 912 0.44% 0.28 1.20 6,887 5,550 26,079 Hugo Dummett Probable (Hugo North – OT LLC) 464 1.66% 0.34 3.37 15,592 4,199 43,479 Probable (Hugo North – EJV) 35 1.59% 0.55 3.72 1,121 517 3,591 Hugo North Mineral Reserve (Probable) 499 1.66% 0.35 3.40 16,713 4,716 47,070 Oyu Tolgoi All Deposits Mineral Reserve Proven 333 0.53% 0.35 1.38 3,007 2,552 10,914 Probable 1,078 0.98% 0.29 2.16 20,593 7,715 62,235 Total Mineral Reserve (Proven + Probable) 1,411 0.87% 0.30 1.98 23,600 10,266 73,149 Notes: 1. Metal prices used for calculating the financial analysis are as follows: long-term copper at US$3.00/lb; gold at US$1,300/oz; and silver at US$19.00/oz. The analysis has been calculated with assumptions for smelter refining and treatment charges, deductions and payment terms, concentrate transport, metallurgical recoveries and royalties.

2. For mine planning the metal prices used to calculate block model NSR were copper at US$3.01/lb; gold at US$1,250/oz;

and silver at US$20.37/oz.

3. The Net Smelter Return (NSR) is used to define the mineral reserve cut-offs at Oyu Tolgoi, therefore cut-off is denominated in US$/t. By definition the cut-off is the point at which the costs are equal to the NSR. For the open pit processing and general administration, the following operating costs have been used to determine cut-off grades: Southwest at US$8.37/t, Central Chalcocite, Central Covellite, and Central Chalcopyrite at US$7.25/t and the underground (including some mining costs) costs were based on US$15.34/t.

4. For the underground block cave, all mineral resources within the shell have been converted to Mineral Reserves. This includes Indicated Mineral Resources below the resource cut-off grade. It also includes Inferred Mineral Resources, which have been assigned a zero grade and treated as dilution.

5. The Oyut open pit mineral reserves are the mineral reserves in the pit at 31 December 2016 after

- ii -

depletion of the 31 December 2015 mineral reserve mined during 2016. The mineral reserves do not include

stockpiles as at that date.

6. For Oyut, only measured mineral resources were used to report proven mineral reserves and only indicated

mineral resources were used to report probable mineral reserves.

7. For Hugo North, measured and indicated mineral resources were used to report probable mineral reserves.

8. EJV is the Entrée Gold Joint Venture. The Shivee Tolgoi and Javkhlant licenses are held by Entrée. The Shivee Tolgoi and Javkhlant licenses are planned to be operated by Oyu Tolgoi LLC. Oyu Tolgoi LLC will receive 80%

of cash flows after capital and operating costs for material originating below 560 m, and 70% above this depth. See Section – “Description of the Business – Joint Venture Licenses” of this AIF.

9. The mineral reserves reported above were not additive to the mineral resources.

10. Totals may not match due to rounding.

11. The Oyut deposit was formerly known as Southern Oyu Tolgoi (SOT).

Oyu Tolgoi Mineral Reserve Depletion to December 31, 2016

Ore Cu Au Ag Recovered Metal Estimate (Mt) (%) (g/t) (g/t) Cu (Mlb) Au (koz) Ag (koz) Oyut Proven 19 0.75% 0.44 1.73 260 223 923 Probable 19 0.51% 0.21 1.51 178 105 812 Oyut (Proven + Probable) 39 0.63% 0.32 1.62 438 328 1,735 Hugo Dummett Probable (Hugo North – OT LLC) — — — — — — — Probable (Hugo North – EJV) — — — — — — — Hugo North Mineral Reserve (Probable) — — — — — — — Oyu Tolgoi All Deposits Mineral Reserve Proven 19 0.75% 0.44 1.73 260 223 923 Probable 19 0.51% 0.21 1.51 178 105 812 Total Mineral Reserve (Proven + 39 0.63% 0.32 1.62 438 328 1,735 Probable) Notes:

1. Depletion is a result of production to December 31, 2016

2. Totals may not match due to rounding. Exhibit 99.2

Independent Auditor’s Report and Consolidated Financial Statements

December 31, 2016 and 2015 Independent Auditor’s Report

To the Shareholders of Turquoise Hill Resources Ltd.

We have completed integrated audits of Turquoise Hill Resources Ltd.’s December 31, 2016 and December 31, 2015 consolidated financial statements and its internal control over financial reporting as at December 31, 2016. Our opinions, based on our audits are presented below.

Report on the consolidated financial statements We have audited the accompanying consolidated financial statements of Turquoise Hill Resources Ltd. (the “Company”), which comprise the consolidated balance sheets as at December 31, 2016 and December 31, 2015 and the consolidated statements of income, comprehensive income, cash flows and equity for the years then ended, and the related notes, which comprise a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the consolidated financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. Canadian generally accepted auditing standards also require that we comply with ethical requirements.

An audit involves performing procedures to obtain audit evidence, on a test basis, about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting principles and policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion on the consolidated financial statements.

Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Turquoise Hill Resources Ltd. as at December 31, 2016 and December 31, 2015 and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

2 Report on internal control over financial reporting We have also audited Turquoise Hill Resources Ltd.’s internal control over financial reporting as at December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Management’s responsibility for internal control over financial reporting Management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in Management’s Report on Internal Controls over Financial Reporting.

Auditor’s responsibility Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control, based on the assessed risk, and performing such other procedures as we consider necessary in the circumstances.

We believe that our audit provides a reasonable basis for our audit opinion on the Company’s internal control over financial reporting.

Definition of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Inherent limitations Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

3 Opinion In our opinion, Turquoise Hill Resources Ltd. maintained, in all material respects, effective internal control over financial reporting as at December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

/s/ PricewaterhouseCoopers LLP

Chartered Professional Accountants

Vancouver, British Columbia March 27, 2017

4 TURQUOISE HILL RESOURCES LTD. Consolidated Statements of Income (Stated in thousands of U.S. dollars)

Year Ended December 31, Note 2016 2015 Continuing operations Revenue 4 $ 1,203,282 $1,634,762 Cost of sales 5 (861,757) (974,956)

Gross margin 341,525 659,806 Operating expenses 6 (307,719) (452,539) Corporate administration expenses (23,606) (17,193) Other income (expenses) 7 10,765 (46,164)

Income before finance items and taxes 20,965 143,910 Finance items Finance income 8 91,234 3,164 Finance costs 8 (115,868) (8,354)

(24,634) (5,190)

Income (loss) from continuing operations before taxes (3,669) 138,720

Income and other taxes 18 110,291 166,086

Income from continuing operations 106,622 304,806

Discontinued operations Income after tax from discontinued operations - 2,284

Income for the year $ 106,622 $307,090

Attributable to owners of Turquoise Hill Resources Ltd. 210,605 313,303 Attributable to owners of non-controlling interests (103,983) (6,213)

Income for the year $ 106,622 $ 307,090

Income (loss) attributable to owners of Turquoise Hill Resources Ltd. Continuing operations $ 210,605 $ 340,654 Discontinued operations - (27,351)

$ 210,605 $ 313,303

Basic and diluted earnings (loss) per share attributable to Turquoise Hill Resources Ltd. Continuing operations 23 $ 0.10 $ 0.17 Discontinued operations - (0.01)

Income for the year $ 0.10 $ 0.16

Basic weighted average number of shares outstanding (000’s) 2,012,314 2,012,306

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

5 TURQUOISE HILL RESOURCES LTD. Consolidated Statements of Comprehensive Income (Stated in thousands of U.S. dollars)

Year Ended December 31, 2016 2015 Income for the year $ 106,622 $ 307,090

Other comprehensive income (loss): Items that have been / may be classified subsequently to income or loss: Fair value movements: Losses on revaluation of available for sale investments (Note 20) (1,572) (6,940) Losses on revaluation of available for sale investments transferred to the statement of income (Note 20) 1,184 11,431

Other comprehensive income (loss) for the year (a) $ (388) $ 4,491

Total comprehensive income for the year $ 106,234 $ 311,581

Attributable to owners of Turquoise Hill $ 210,217 $317,794 Attributable to owners of non-controlling interests (103,983) (6,213)

Total comprehensive income for the year $ 106,234 $311,581

(a) No tax charges and credits arose on items recognized as other comprehensive income or loss in 2016 (2015: nil).

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

6 TURQUOISE HILL RESOURCES LTD. Consolidated Statements of Cash Flows (Stated in thousands of U.S. dollars)

Year Ended December 31, Note 2016 2015 Cash generated from operating activities before interest and tax 22 $ 399,160 $ 650,518

Interest received 20,503 2,289 Interest paid (118,304) (3,676) Income and other taxes paid (70,710) (66,650)

Net cash generated from operating activities 230,649 582,481

Cash flows from investing activities Receivable from related party: amounts deposited 24 (4,156,284) - Receivable from related party: amounts withdrawn 24 180,000 - Expenditures on property, plant and equipment (326,336) (116,211) Proceeds from sale of discontinued operations - 11,867 Proceeds from sale and redemption of financial assets 12,986 20,023 Proceeds from sales of mineral property rights and other assets 2,800 1,237 Other investing cash flows 363 1,645

Cash used in investing activities of continuing operations (4,286,471) (81,439) Cash used in investing activities of discontinued operations - (114)

Cash used in investing activities (4,286,471) (81,553)

Cash flows from financing activities Net proceeds from project finance facility 16 4,287,924 - Payment of project finance fees (159,292) (26,263) Issue of share capital 19 - 34

Cash from (used in) financing activities of continuing operations 4,128,632 (26,229) Cash from financing activities of discontinued operations - 3,500

Cash from (used in) financing activities 4,128,632 (22,729)

Effects of exchange rates on cash and cash equivalents 1,066 (864)

Net increase in cash and cash equivalents 73,876 477,335

Cash and cash equivalents - beginning of year $ 1,343,878 $866,543 Cash and cash equivalents - end of year 1,417,754 1,343,878

Cash and cash equivalents as presented on the balance sheets $ 1,417,754 $1,343,878

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

7 TURQUOISE HILL RESOURCES LTD. Consolidated Balance Sheets (Stated in thousands of U.S. dollars)

December 31, December 31, Note 2016 2015 Current assets Cash and cash equivalents 9 $ 1,417,754 $1,343,878 Inventories 10 260,668 321,409 Trade and other receivables 11 42,557 15,833 Prepaid expenses and other assets 12 23,456 53,375 Receivable from related party 13 979,544 -

2,723,979 1,734,495 Non-current assets Property, plant and equipment 14 6,417,031 6,319,983 Inventories 10 20,783 539 Deferred income tax assets 18 296,399 165,000 Receivable from related party and other financial assets 13 3,002,019 20,078

9,736,232 6,505,600

Total assets $12,460,211 $8,240,095

Current liabilities Trade and other payables 15 $ 253,405 $201,567 Deferred revenue 36,702 72,004

290,107 273,571 Non-current liabilities Borrowings and other financial liabilities 16 4,139,143 13,574 Deferred income tax liabilities 18 8,072 52,916 Decommissioning obligations 17 118,903 104,421

4,266,118 170,911

Total liabilities $ 4,556,225 $444,482

Equity Share capital 19 11,432,122 11,432,122 Contributed surplus 1,557,913 1,555,774 Accumulated other comprehensive loss 20 (402) (14) Deficit (4,262,755) (4,473,360)

Equity attributable to owners of Turquoise Hill 8,726,878 8,514,522 Attributable to non-controlling interests 21 (822,892) (718,909)

Total equity 7,903,986 7,795,613

Total liabilities and equity $12,460,211 $8,240,095

Commitments and contingencies (Note 25)

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

The financial statements were approved by the directors on March 23, 2017 and signed on their behalf by:

/s/ P. Gillin /s/ R. Robertson

P. Gillin, Director R. Robertson, Director

8 TURQUOISE HILL RESOURCES LTD. Consolidated Statements of Equity (Stated in thousands of U.S. dollars)

Year Ended December 31, 2016 Attributable to owners of Turquoise Hill Accumulated other Non- comprehensive controlling Share capital Contributed loss Interests (Note 19) surplus (Note 20) Deficit Total (Note 21) Total equity Opening balance $11,432,122 $ 1,555,774 $ (14) $ (4,473,360) $ 8,514,522 $ (718,909) $ 7,795,613

Income for the year - - - 210,605 210,605 (103,983) 106,622 Other comprehensive loss for the year - - (388) - (388) - (388) Employee share plans and other share based payment adjustments (a) - 2,139 - - 2,139 - 2,139

Closing balance $11,432,122 $ 1,557,913 $ (402) $ (4,262,755) $ 8,726,878 $ (822,892) $ 7,903,986

Year Ended December 31, 2015 Attributable to owners of Turquoise Hill Accumulated other Non- comprehensive controlling Share capital Contributed loss Interests (Note 19) surplus (Note 20) Deficit Total (Note 21) Total equity

Opening balance $11,432,060 $ 1,555,721 $ (4,505) $ (4,788,340) $ 8,194,936 $ (626,471) $ 7,568,465

Income for the year - - - 313,303 313,303 (6,213) 307,090 Other comprehensive income for the year - - 4,491 - 4,491 - 4,491 Equity issued to holders of non-controlling interests - - - 1,677 1,677 1,823 3,500 Employee share plans 62 53 - - 115 - 115 Other decrease in non-controlling interests (Note 21) - - - - - (88,048) (88,048)

Closing balance $11,432,122 $ 1,555,774 $ (14) $ (4,473,360) $ 8,514,522 $ (718,909) $ 7,795,613

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

(a) Includes adjustments for charges relating to Rio Tinto share plans available to employees of Turquoise Hill, which were not recognized in previous periods.

9 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

1. Nature of operations

The consolidated financial statements of Turquoise Hill Resources Ltd. (“Turquoise Hill”) were authorized for issue in accordance with a directors’ resolution on March 23, 2017. Rio Tinto plc is the ultimate parent company and indirectly owns a 50.8% majority interest in Turquoise Hill as at December 31, 2016.

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 354-200 Granville Street, Vancouver, British Columbia, Canada, V6C 1S4. 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 secondary listings in the U.S. on the New York Stock Exchange and the NASDAQ.

2. Summary of significant accounting policies

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

These consolidated financial statements have been prepared on a going concern basis, and in making the assessment that the Company is a going concern, management have taken into account all available future information, which is at least, twelve months from December 31, 2016.

(b) Use of estimates and judgments

The preparation of financial statements requires management to make assumptions and estimates that affect the reported amounts and other disclosures in these consolidated financial statements. Actual results may differ materially from the amounts included in the consolidated financial statements as the result of changes to the assumptions and inputs upon which estimates and judgments are based.

Areas in which significant estimates and judgments are used in the preparation of these consolidated financial statements include: reserves and resources; recoverable amount of property, plant and equipment; borrowing costs; depletion and depreciation of property, plant and equipment; decommissioning obligations; deferred stripping; deferred income taxes; and the net realizable value of inventories. Estimates and judgments that are not explained elsewhere in these consolidated financial statements, which could result in a material effect in the next financial year on the carrying amounts of assets and liabilities, are outlined below.

10 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(b) Use of estimates and judgments (continued)

Reserves and resources

Estimated recoverable reserves and resources are used to determine the depreciation of property, plant and equipment at each operating mine area; to account for capitalized deferred stripping costs; to perform when required, formal assessments of the recoverable amount of property, plant and equipment; as an input to the projection of future taxable profits which support assessments of deferred income tax recoverability; and to forecast the timing of the payment of decommissioning obligations.

Recoverable amount of property, plant and equipment

Property, plant and equipment are tested for impairment when events or changes in circumstance indicate that the carrying value may be higher than the recoverable amount. Judgment is required in assessing whether certain factors would be considered an indicator of impairment. Management considers both internal and external information to determine whether there is an indicator of impairment.

When an impairment review is undertaken, the recoverable amount is assessed by reference to the higher of value in use and fair value less costs of disposal (“FVLCD”). FVLCD is estimated either from the value obtained from an active market where applicable, or by using discounted cash flow techniques based on detailed life-of- mine and/or production plans. Inputs used in the discounted cash flow represent management’s best estimate of what an independent market participant would consider appropriate, and include an assessment of commodity price forecasts and discount rate derived from market data relating to a range of industry participants.

The estimates used by management in arriving at its estimate of recoverable amount are subject to various risks and uncertainties. It is reasonably possible that changes in estimates could occur which may affect the expected recoverability of the Company’s investments in property, plant and equipment.

11 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(b) Use of estimates and judgments (continued)

Borrowing costs

Capitalization of borrowing costs related to construction or development of a qualifying asset requires management to make a determination as to whether funds have been borrowed specifically to finance the asset, or form part of the Company’s general borrowings. This determination requires management to exercise judgment based on the characteristics of third party debt facilities, and the usage of related funds drawn over the life of these facilities. Factors upon which management bases its judgment include: the estimated duration over which drawn funds are invested prior to utilization for capital expenditure; the quantum and timing of debt drawdown relative to that of expenditure on qualifying assets; and the impact of borrowings at the subsidiary entity level (for example whether such arrangements constitute a refinancing arrangement). Amounts capitalized in relation to general borrowings differ from amounts that would be capitalized in the event of the same borrowings being determined as asset specific.

Depletion and depreciation of property, plant and equipment

Property, plant and equipment is the largest component of the Company’s assets and, as such, the depreciation of these assets has a significant effect on the Company’s financial statements.

Mining plant and equipment and other capital assets are depreciated over their expected economic lives using either the units of production method or the straight-line method. Depletion of each mineral property interest is provided on the units of production basis using estimated proven and probable reserves as the depletion basis. Significant judgment is involved in the determination of the useful lives of long-lived assets. A change in the estimated useful life or residual value of a long-lived asset would result in a change in the rate of depreciation for that asset.

For long-lived assets that are depleted or depreciated over proven and probable reserves using the units of production method, a change in the original estimate of proven and probable reserves would result in a change in the rate of depletion or depreciation.

Decommissioning obligations

The estimate of decommissioning obligations is based on future expectations in the determination of closure provisions. Management makes a number of assumptions and

12 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(b) Use of estimates and judgments (continued)

judgments including: estimating the amount of future reclamation costs and their timing, inflation rates and risk- free discount rates. The closure provisions are more uncertain the further into the future the mine closure activities are to be carried out. Actual costs incurred in future periods in relation to the remediation of the Company’s existing assets could differ materially from their estimated undiscounted future value.

Income taxes

The Company must make significant estimates in respect of the provision for income taxes and the composition of its deferred income tax assets and deferred income tax liabilities. The Company’s operations are, in part, subject to foreign tax laws where interpretations, regulations and legislation are complex and continually changing. As a result, there are usually some tax matters in question which may, on resolution in the future, result in adjustments to the amount of deferred income tax assets and deferred income tax liabilities, and those adjustments may be material to the Company’s balance sheet and results of operations.

The Company computes the provision for deferred income taxes under the liability method. Deferred taxes arise from the recognition of the tax consequences of temporary differences by applying statutory tax rates applicable to future years to differences between the financial statement’s carrying amounts and the tax bases of certain assets and liabilities. The Company recognizes deferred tax assets for unused tax losses, tax credits and deductible temporary differences, only to the extent it is probable that future taxable profits will be available against which they can be utilized.

The determination of the ability of the Company to utilize tax losses carried forward to offset income taxes payable in the future requires management to exercise judgment and make assumptions about the Company’s future performance. Management is required to assess whether the Company is more likely than not able to benefit from these tax losses. Changes in the timing of project completion, economic conditions, metal prices and other factors having an impact on future taxable income streams could result in revisions to the estimates of benefits to be realized or the Company’s assessments of its ability to utilize tax losses before expiry. These revisions could result in material adjustments to the financial statements.

Net realizable value of inventories

Inventory, including stockpiles of ore, are valued at the lower of weighted average cost and net realizable value (“NRV”). If ore stockpiles are not expected to be processed within the 12 months after the balance sheet date, they are included within non-current assets and net realizable value is calculated on a discounted cash flow over the planned processing timeframe

13 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(b) Use of estimates and judgments (continued)

for such ore. Evaluating NRV requires management judgment in the selection of estimates for, among other inputs, discount rate, price assumptions, timing of processing, and costs to complete.

The financial statements consist of the consolidation of the accounts of Turquoise Hill and its respective subsidiaries. All intercompany transactions and balances between Turquoise Hill and its subsidiaries have been eliminated on consolidation. Where necessary, adjustments are made to assets, liabilities, and results of subsidiaries to bring their accounting policies into line with those used by the Company. Subsidiaries are entities controlled by Turquoise Hill. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The Company controls an entity if it has power to direct the activities of the entity that significantly affects its returns (“the relevant activities”), has exposure or rights to variable returns from its involvement with the entity and has the ability to use its power to affect those returns.

The Company consolidates all subsidiaries. The Company’s principal operating subsidiary is Oyu Tolgoi LLC (“Oyu Tolgoi”). Wholly-owned subsidiaries of Turquoise Hill together hold a 66.0% interest in Oyu Tolgoi, whose principal asset is the Oyu Tolgoi copper-gold mine located in Southern Mongolia. The remaining 34% non-controlling interest in Oyu Tolgoi is owned by Erdenes Oyu Tolgoi LLC (“Erdenes”), a company controlled by the Mongolian government. The Company has historically funded 100% of the Oyu Tolgoi copper-gold mine’s exploration and development costs via equity and debt investments in Oyu Tolgoi and non-recourse loans to Erdenes. Income or loss of Oyu Tolgoi is attributed to the controlling and non-controlling shareholders based on ownership percentage. Non-recourse loans advanced to Erdenes upon the issuance of additional equity interests to Erdenes are accounted for separately and recorded as an offset to non-controlling interest in equity. Unrealized interest on the non-recourse loans to Erdenes, which are recoverable principally through dividends from Oyu Tolgoi or sale by Erdenes of its interests in Oyu Tolgoi, is recognized when right to repayment of the interest becomes probable.

(d) Currency translation and foreign exchange

The Company has determined the U.S. dollar to be the functional currency of Turquoise Hill and its significant subsidiaries as it is the currency of the primary economic environment in which Turquoise Hill and all of its significant subsidiaries operate. Accordingly, monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rate in

14 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(d) Currency translation and foreign exchange (continued)

effect at the date of the balance sheet and non-monetary assets and liabilities are translated at the time of acquisition or issue. Revenues and expenses are translated at rates approximating the exchange rates in effect at the date of the transaction. All exchange gains and losses are included in the consolidated statement of income during the year.

(e) Sales revenue

The Company’s primary source of revenue is from the sale of concentrate containing copper, gold and silver. Sales revenue is only recognized on individual sales when all of the following criteria are met: ● the Company has transferred to the buyer the significant risks and rewards of ownership of the product; ● the Company retains neither continuing managerial involvement to the degree usually associated with

ownership, nor effective control over the goods sold; ● the amount of revenue can be measured reliably; ● it is probable that the economic benefits associated with the sale will flow to the Company; and ● the costs incurred or to be incurred in respect of the sale can be measured reliably.

These conditions are generally satisfied and sales revenue recognized when the product is delivered as specified by the customer, which is typically upon loading of the product to the customer’s truck, train or vessel. The Company recognizes deferred revenue in the event it receives payment from a customer before a sales transaction meets all the criteria for revenue recognition.

Sales revenue is subject to adjustment based on the final determination of contained metal. In such cases, sales revenue is initially recognized on a provisional basis using the Company’s best estimate of contained metal and subsequently adjusted.

Copper concentrate is “provisionally priced” whereby the selling price is subject to final adjustment at the end of a period normally ranging from 30 to 180 days after delivery to the customer as defined in the sales contract. The final price is based on the market price at the relevant quotation point stipulated in the contract which gives rise to an embedded derivative that is required to be bifurcated from the host contract. The host contract is the receivable from the sale of product based on relevant forward market prices at the time of sale. At each reporting date, the provisionally priced embedded derivative is marked to market based on the forward selling price for the quotation period stipulated in the contract. For this purpose, the selling price can be measured reliably for those products, such as copper, gold, and silver, for which there exists an active and freely traded commodity market such as the London Metals

15 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(e) Sales revenue (continued)

Exchange and the value of product sold by the Company is directly linked to the form in which it is traded on that market. The marking to market of the embedded derivative is classified as a component of sales revenue.

Mining royalties are included in operating expenses.

(f) Exploration and evaluation

All direct costs related to the acquisition of mineral property interests are capitalized in the period incurred.

Exploration and evaluation costs are charged to operations in the period incurred until such time as it has been determined that a mineral property has proven and probable reserves and the property is economically viable, in which case subsequent evaluation costs incurred to develop a mineral property are capitalized. Exploration and evaluation costs include value-added taxes incurred in foreign jurisdictions when recoverability of those taxes is uncertain.

(g) Property, plant and equipment

Property, plant and equipment are recorded at cost, less accumulated depletion and depreciation and accumulated impairment losses. The cost of property, plant and equipment includes the estimated close down and restoration costs associated with the asset.

Once an undeveloped mining project has been established as commercially viable, including that it has established proven and probable reserves and approval to mine has been given, expenditure other than that 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 continue to 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.

Costs which are incurred during the commissioning phase, and are necessary for the successful commissioning of new assets, are capitalized. Development costs incurred after the

16 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(g) Property, plant and equipment (continued)

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. 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.

(h) Deferred stripping

In open pit mining operations, it is necessary to remove overburden and other waste materials to access ore from which minerals can be extracted economically. The process of mining overburden and waste materials is referred to as stripping.

During the development of an open pit mine, before production commences, stripping costs are capitalized as part of mineral property interests and are subsequently amortized over the life of the mine on a units of production basis.

During the production phase, stripping activity is undertaken for the dual purpose of extracting inventory for current production as well as improving access to the ore body.

Stripping costs incurred for the purpose of extracting current inventories are included in the costs of inventory produced during the period the stripping costs are incurred.

In order for production phase stripping costs to qualify for capitalization as a stripping activity asset, three criteria must be met: ● it must be probable that economic benefit will be realized in a future accounting period as a result of

improved access to the ore body created by the stripping activity; ● it must be possible to identify the “component” of the ore body for which access has been improved; and ● it must be possible to reliably measure the costs that relate to the stripping activity.

When the cost of stripping related to development which has a future benefit is not distinguishable from the cost of producing current inventories, the stripping costs are allocated to each activity based on a relevant production measure. Generally, the measure would be calculated based on a ratio obtained by dividing the tonnage of waste mined for the component for the period by the quantity of ore mined for the component. Stripping costs incurred in the period related to the component are deferred to the extent that the current period ratio exceeds the life of component ratio.

17 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(h) Deferred stripping (continued)

The stripping activity asset is depreciated on a units of production basis based on expected production of ore over the life of the components benefited. The life of component ratios are based on proven and probable reserves based on the mine plan; they are a function of the mine design and therefore changes to that design will generally result in changes to the ratios. Changes in other technical or economic parameters that impact reserves may also impact the life of component ratios. Changes to the life of component ratios are accounted for prospectively.

Deferred stripping costs are included in “Mineral property interests” within property, plant and equipment and are amortized on a units of production basis over the useful life of the component that has been made more accessible as a result of the stripping activity. Amortization of deferred stripping costs is included as a cost of production in the period.

(i) Depreciation and depletion

Property, plant and equipment is depreciated over its useful life, or over the remaining life of the mine if that is shorter and there is no alternative use for the asset.

The useful lives of the major assets of a cash-generating unit are often dependent on the life of the ore body to which they relate. Where this is the case, the lives of mining properties, and their associated concentrators and other long lived processing equipment generally relate to the expected life of the ore body. The life of the ore body, in turn, is estimated on the basis of the life-of-mine plan. In applying the units of production method, depreciation is calculated using the metal content of the ore extracted from the mine in the period as a percentage of the total metal content of the ore to be extracted in current and future periods based on proved and probable reserves.

Development costs that relate to a discrete section of an ore body, and which only provide benefit over the life of those reserves, are depreciated over the estimated life of that discrete section. Development costs incurred that relate to the entire ore body are depreciated over the estimated life of the entire ore body.

Assets within operations for which production is not expected to fluctuate significantly from one year to another or which have a physical life shorter than the mine are depreciated on a straight line basis. Depreciation commences when an asset is available for use.

(j) Impairment of non-current assets

Property, plant and equipment is reviewed for impairment when events or changes in circumstances indicate that the full carrying amount may not be recoverable.

18 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(j) Impairment of non-current assets (continued)

Impairment is assessed at the level of cash-generating units which are identified as the smallest identifiable group of assets capable of generating cash inflows which are largely independent of the cash inflows from other assets. When an impairment review is undertaken, the recoverable amount is assessed by reference to the higher of value in use and FVLCD.

The value in use is the net present value of expected future pre-tax cash flows from the relevant cash-generating unit in its current condition, both from continuing use and ultimate disposal. For value in use, recent cost levels are considered, together with expected changes in costs that are compatible with the current condition of the business and which meet the requirements of IFRS.

The best evidence of FVLCD is often the value obtained from an active market or binding sale agreement. Where this is not the case, or where neither an active market nor a binding sale agreement exists, FVLCD is based on the best information available to reflect the amount a market participant would pay for the cash- generating unit in an arm’s length transaction. This is often estimated using discounted post tax cash flow techniques based on detailed life-of-mine and/or production plans.

The cash flow forecasts are based on management’s best estimates of expected future revenues and costs, including the future cash costs of production, capital expenditure, closure, restoration and environmental clean- up, which for FVLCD purposes management believe approximate those of a market participant.

Forecast cash flows for impairment purposes are generally based on management’s price forecasts of commodity prices, which assume short term observable market prices will revert to the Company’s assessment of the long term price, generally over a period of three to five years. These long-term forecast commodity prices are derived from industry analyst consensus.

The discount rates applied to the future cash flow forecasts represent an estimate of the rate the market would apply having regard to the time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted.

Non-current assets that have previously been impaired are tested for possible reversal of the impairment whenever events or changes in circumstances indicate that the impairment may have reversed.

(k) Decommissioning obligations

The Company recognizes liabilities for statutory, contractual, legal or constructive obligations associated with the retirement of property, plant and equipment, when those obligations result

19 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(k) Decommissioning obligations (continued)

from the acquisition, construction, development or normal operation of the assets. Initially, a provision for a decommissioning obligation is recognized at its net present value in the period in which it is incurred, using a discounted cash flow technique with market-based risk-free discount rates and estimates of the timing and amount of the settlement of the obligation.

Upon initial recognition of the liability, the corresponding decommissioning cost is added to the carrying amount of the related asset. Following initial recognition of the decommissioning obligation, the carrying amount of the liability is increased for the passage of time and adjusted for changes to significant estimates including the current discount rate, the amount or timing of the underlying cash flows needed to settle the obligation and the requirements of the relevant legal and regulatory framework. Subsequent changes in the provisions resulting from new disturbance, updated cost estimates, changes to estimated lives of operations and revisions to discount rates are also capitalized to the related property, plant and equipment. Amounts capitalized to the related property, plant and equipment are depreciated over the lives of the assets to which they relate. The amortization or unwinding of the discount applied in establishing the net present value of provisions is charged to expense and is included within Finance costs in the consolidated statement of income.

(l) Inventories

Concentrate inventory is valued at the lower of weighted average cost and net realizable value. Cost comprises production and processing costs, which includes direct and indirect labour, operating materials and supplies, applicable transportation costs and apportionment of operating overheads, including depreciation and depletion. Net realizable value is the expected average selling price of the concentrate inventory less applicable selling and transportation costs.

Stockpiles represent ore that has been extracted and is available for further processing. Stockpiles are valued at the lower of weighted average production cost and net realizable value. Production cost includes direct and indirect labour, operating materials and supplies, applicable transportation costs, and apportionment of operating overheads, including depreciation and depletion.

Net realizable value is the expected average selling price of the finished product less the costs to get the product into saleable form and to the selling location. If the ore will not be processed and sold within the 12 months after the consolidated balance sheet date it is included within non-current assets and net realizable value is calculated on a discounted cash flow basis over the planned processing of such ore.

20 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(l) Inventories (continued)

Mine stores and supplies are valued at the lower of the weighted average cost and net realizable value.

(m) Taxation

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in the consolidated statement of income except to the extent that they relate to items recognized directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date.

Deferred tax is recognized in respect of unused tax losses and credits, as well as temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on enacted or substantively enacted laws at the reporting date.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, only to the extent that it is probable that future taxable profits will be available against which they can be utilized. Future taxable profits are estimated using an income forecast derived from cash flow projections, based on detailed life- of-mine plans and corporate forecasts. Where applicable, the probability of utilizing tax losses or credits is evaluated by considering risks relevant to future cash flows, and the expiry dates after which these losses or credits can no longer be utilized.

Deferred tax is not recognized for the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries, associates and joint arrangements to the extent that it is probable that they will not reverse in the foreseeable future.

The Company is subject to assessments by various taxation authorities, who may interpret tax legislation differently from the Company. The final amount of taxes to be paid depends on a number of factors, including the outcomes of audits, appeals or negotiated settlements. Such differences are accounted for based on management’s best estimate of the probable outcome of these matters.

The Company must make significant estimates and judgments in respect of its provision for income taxes and the composition and measurement of its deferred income tax assets and

21 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(m) Taxation (continued)

liabilities. The Company’s operations are, in part, subject to foreign tax laws where interpretations, regulations and legislation are complex and continually changing. As a result, there are usually some tax matters in question that may, upon resolution in the future, result in adjustments to the amount of deferred income tax assets and liabilities; those adjustments may be material.

(n) Employee benefits

Wages, salaries, contributions to government pension and social insurance funds, compensated absences and bonuses are accrued in the year in which the employees render the associated services.

(o) Cash and cash equivalents

For the purposes of the consolidated balance sheet, cash and cash equivalents comprise cash on hand, demand deposits and short term, highly liquid investments with an initial maturity of three months or less that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

(p) Financial instruments

(i) Financial assets

The Company categorizes its financial assets in the following categories: at fair value through profit or loss, loans and receivables, available for sale or held-to-maturity investments. The classification depends on the purpose for which the financial assets were acquired.

Management determines the classification of the Company’s non-derivative financial assets at initial recognition. The Company has no financial assets categorized at fair value through profit or loss or held-to- maturity.

a) Loans and receivables

Loans and receivables comprise non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, with the exception of items for which the Company may not recover substantially all of its investment for reasons other than credit deterioration, which are classified as available for sale. Such assets are recognized initially at fair value plus any directly attributable transaction

22 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(p) Financial instruments (continued)

costs. Subsequent to initial recognition loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses.

b) Available for sale financial assets

Available for sale financial assets are non-derivatives that are either designated as available for sale or not classified in any of the other categories. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences on available for sale debt instruments, are recognized in other comprehensive income. When an investment is derecognized, the cumulative gain or loss in accumulated other comprehensive income is transferred to the consolidated statement of income.

The Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available for sale, an evaluation is made as to whether a decline in fair value is “significant” or “prolonged”. Impairment losses are recorded in the consolidated statement of income.

(ii) Financial liabilities

Borrowings and other financial liabilities (including trade payables but excluding embedded derivatives) are recognized initially at fair value, net of transaction costs incurred and are subsequently stated at amortized cost. Any difference between the amounts originally received for borrowings and other financial liabilities (net of transaction costs) and the redemption value is recognized in the consolidated statement of income over the period to maturity using the effective interest method.

(iii) Derivative financial instruments

Derivatives are initially recognized at their fair value on the date the derivative contract is entered into and transaction costs are expensed in the consolidated statement of income. The Company’s derivatives are subsequently re-measured at their fair value at each consolidated balance sheet date with changes in fair value recognized in the consolidated statement of income.

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to their host contracts.

23 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(q) Share based payments

The Company has an Employees’ and Directors’ Equity Incentive Plan, a Performance Share Unit (“PSU”) Plan and a Director Deferred Share Unit (“DDSU”) Plan.

The fair value of stock options at the date of grant is charged to operations over the vesting period, with an offsetting credit to contributed surplus. If and when the stock options are ultimately exercised, the applicable amounts of contributed surplus are transferred to share capital.

The PSUs and DDSUs are accounted for at fair value upon issuance and remeasured each reporting period, based on the fair market value of a common share of the Company, and recognized as an expense on a straight-line basis over the vesting period.

(r) Issued rights

Rights to acquire equity instruments for a fixed amount of any currency are accounted for as equity instruments if they are issued on a pro rata basis to existing owners of the same class of non-derivative equity instruments.

(s) Segment reporting

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components. Operating segments are reported consistently with internal information provided to the chief operating decision maker (“CODM”). The CODM, who is responsible for allocating resources and assessing performance, has been identified as Turquoise Hill’s Chief Executive Officer. Based upon management’s assessment of the above criteria, the Company has one operating segment, Oyu Tolgoi with its copper-gold mine in southern Mongolia.

(t) New standards and interpretations not yet adopted

A number of new standards, and amendments to standards and interpretations, are not yet effective for the year ending December 31, 2016, and have not been applied in preparing these consolidated financial statements. The following standards may have a potential effect on the consolidated financial statements of the Company:

(i) IFRS 9, Financial Instruments, is mandatorily effective for the Company’s consolidated financial

statements for the year ending December 31, 2018. IFRS 9 brings together the

24 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(t) New standards and interpretations not yet adopted (continued)

classification and measurement, impairment and hedge accounting phases of the IASB’s project to replace IAS 39, Financial Instruments: Recognition and Measurement. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortized cost; fair value through profit and loss; and fair value through other comprehensive income. IFRS 9 introduces the expected credit loss model for impairment of financial assets which replaces the incurred loss model used in IAS 39. IFRS 9 amends the rules on hedge accounting to align the accounting treatment with the risk management practices of the business. Lastly, IFRS 9 amends some of the requirements of IFRS 7, Financial Instruments: Disclosures, including added disclosures about investments in equity instruments measured at fair value in other comprehensive income, and guidance on financial liabilities and derecognition of financial instruments. A detailed review will be completed during 2017 but the Company does not currently expect the impact of these changes to be material.

(ii) IFRS 15, Revenue from Contracts with Customers, which will replace IAS 18, Revenue, is effective for the Company’s fiscal year ending December 31, 2018 and is available for early adoption. The standard contains a single model that applies to contracts with customers. Revenue is recognized as control is passed to the customer, either at a point in time or over time. New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue recognized. To date, a limited review of contracts has been conducted with a further review being undertaken during 2017. At present, no material measurement differences have been identified between IAS 18 and IFRS 15.

(iii) IFRS 16, Leases, which will replace IAS 17, Leases, is effective for the Company’s fiscal year ending December 31, 2019 and is available for early adoption. The objective of the new standard is to report all

leases on the consolidated balance sheet and to define how leases and liabilities are measured. Under the new standard, a lessee is in essence required to:

a. Recognize all lease assets and liabilities (including those currently classed as operating leases) on

the balance sheet, initially measured at the present value of unavoidable lease payments; b. Recognize amortization of lease assets and interest on lease liabilities in the statement of income

over the lease term; and c. Separate the total amount of cash paid into a principal portion (presented within financing activities) and interest (which companies can choose to present within operating or financing activities consistent with presentation of any other interest paid) in the statement of cash flows.

25 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

2. Summary of significant accounting policies (continued)

(t) New standards and interpretations not yet adopted (continued)

The Company is currently evaluating the impact of IFRS 16. Generally, it is expected that under IFRS 16, the present value of most lease commitments will be shown as a liability on the balance sheet together with an asset representing the right of use, including those classified as operating leases under the existing standard. Information on the undiscounted amount of the Company’s operating lease commitments at December 31, 2016 under IAS 17, the current lease standard, is disclosed within Note 25.

To date, work has focussed on the identification of the provisions of the standard which will mostly impact the Company. In 2017, work on these issues and their resolution will continue and work on detailed review of contracts and financial reporting impacts will commence as well as assessment of likely changes to systems.

None of the remaining standards and amendments to standards and interpretations are expected to have a significant effect on the consolidated financial statements of the Company.

26 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

3. Operating segment - continuing operations

Year Ended December 31, 2016 Corporate and other Oyu Tolgoi eliminations Consolidated Revenue $ 1,203,282 $ - $ 1,203,282 Cost of sales (861,757) - (861,757)

Gross margin 341,525 - 341,525 Operating expenses (343,536) 35,817 (307,719) Corporate administration expenses - (23,606) (23,606) Other income (expenses) 11,068 (302) 10,766

Income before finance items and taxes 9,057 11,909 20,966

Finance items Finance income 49,284 41,950 91,234 Finance costs (452,526) 336,658 (115,868)

Income (loss) from continuing operations before taxes $ (394,185) $ 390,517 $ (3,668)

Income and other taxes 88,356 21,935 110,291

Income (loss) from continuing operations $ (305,829) $ 412,452 $ 106,623

Depreciation and depletion 364,968 376 365,344 Capital expenditures 521,004 - 521,004 Current assets 402,709 2,321,270 2,723,979 Non-current assets 6,691,143 3,045,089 9,736,232 Current liabilities 266,567 23,540 290,107 Non-current liabilities 7,712,611 (3,446,493) 4,266,118 Net increase (decrease) in cash (6,209) 80,085 73,876

(a) Revenue by geographic destination is based on the ultimate country of destination, if known. If the destination of the copper concentrate sold through traders is not known, then revenue is allocated to the location of the copper concentrate at the time when revenue is recognized. During the year ended December 31, 2016, all of Oyu Tolgoi’s revenue arose from copper-gold concentrate sales to customers in China and revenue from individual customers in excess of 10% of Oyu Tolgoi’s revenue was $272.8 million, $237.1 million, $222.8 million and $197.6 million (December 31, 2015 - $341.8 million, $318.4 million, $241.3 million, $187.1 million and $171.9 million). All long-lived assets of the Oyu Tolgoi segment, other than financial instruments, are located in Mongolia.

27 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

3. Operating segment - continuing operations (continued)

Year Ended December 31, 2015 Corporate and other Oyu Tolgoi eliminations Consolidated Revenue $ 1,634,762 $ - $ 1,634,762 Cost of sales (974,956) - (974,956)

Gross margin 659,806 - 659,806 Operating expenses (442,603) (9,936) (452,539) Corporate administration expenses - (17,193) (17,193) Other income (expenses) 4,069 (50,233) (46,164)

Income (loss) before finance items and taxes 221,272 (77,362) 143,910

Finance items Finance income 902 2,262 3,164 Finance costs (458,411) 450,057 (8,354)

Income (loss) from continuing operations before taxes $ (236,237) $ 374,957 $ 138,720

Income and other taxes 164,868 1,218 166,086

Income (loss) from continuing operations $ (71,369) $ 376,175 $ 304,806

Depreciation and depletion 356,144 99 356,243 Capital expenditures 136,255 - 136,255 Current assets 490,495 1,244,000 1,734,495 Non-current assets 6,485,256 20,344 6,505,600 Current liabilities 259,084 14,487 273,571 Non-current liabilities 7,296,164 (7,125,253) 170,911 Net increase (decrease) in cash (32,794) 510,129 477,335

28 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

4. Revenue

Year Ended December 31, 2016 2015 Copper-gold concentrate Copper $ 762,613 $829,601 Gold 419,895 788,949 Silver 20,774 16,212

$ 1,203,282 $ 1,634,762

5. Cost of sales

Year Ended December 31, 2016 2015 Production and delivery $ 513,862 $ 630,413 Depreciation and depletion 345,868 344,543 Provision against carrying value of copper-gold concentrate (Note 10) 2,027 -

$ 861,757 $ 974,956

6. Operating expenses by nature

Year Ended December 31, 2016 2015 Oyu Tolgoi administration expenses $ 167,065 $ 167,235 Royalty expenses 68,142 120,795 Inventory write downs (a) 12,509 103,236 Selling expenses 28,202 24,762 Care and maintenance and underground remobilization costs (b) 6,945 23,280 Depreciation 19,476 11,700 Other 5,380 1,531

$ 307,719 $ 452,539

(a) Inventory write downs include adjustments to the carrying value of copper-gold stockpile inventories, and

materials and supplies; refer to Note 10.

(b) Remobilization costs include pre-start activities on the underground project in 2015.

29 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

7. Other income (expenses)

Year Ended December 31, 2016 2015 Realized losses on disposal of available for sale investments (Note 20) $ (1,184) $ (11,431) Foreign exchange gains 11,822 3,137 Write off of property, plant and equipment (a) - (36,794) Other, including exploration and evaluation 127 (1,076)

$ 10,765 $ (46,164)

(a) Following signature of the Oyu Tolgoi Underground Mine Development and Financing Plan (“UDP”) on May 18, 2015, a net smelter royalty, purchased in 2003 from BHP Billiton and included in property, plant and

equipment at a carrying value of $36.8 million, was written off as the Company conceded that it has no entitlement to receive payment.

8. Finance income and finance costs

Year Ended December 31, 2016 2015 Finance income: Bank deposits, short-term investments and related party receivable (a) $ 91,234 $ 3,164

$ 91,234 $ 3,164

Finance costs: Interest expense and similar charges $ (200,229) $ (4,616) Amounts capitalized to property, plant and equipment (b) 88,441 - Accretion of decommissioning obligations (Note 17) (4,080) (3,738)

$ (115,868) $ (8,354)

(a) Finance income on related party receivable relates to amounts placed with Rio Tinto under an agreement for cash

management services in connection with net proceeds from the project finance facility (refer to Note 24).

(b) During the year, the Company has capitalized borrowing costs of $88.4 million on qualifying assets. The

majority of these were capitalized at the weighted average rate of the Company’s general borrowings of 7.5%.

30 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

9. Cash and cash equivalents

December 31, December 31, 2016 2015 Cash at bank and on hand $ 124,484 $ 123,557 Money market funds and other cash equivalents (a) 1,293,270 1,220,321

$ 1,417,754 $ 1,343,878

(a) At December 31, 2016, short-term liquid investments of $741.7 million (December 31, 2015 - $740.5 million)

have been placed with Rio Tinto (refer to Note 24).

10. Inventories

December 31, December 31, 2016 2015 Current Copper-gold concentrate $ 86,023 $ 66,716 Provision against carrying value of copper-gold concentrate (8,091) - Copper-gold stockpiles 81,833 38,905 Provision against carrying value of copper-gold stockpiles (41,403) - Materials and supplies 208,866 259,521 Provision against carrying value of materials and supplies (66,560) (43,733)

$ 260,668 $321,409

Non-current Copper-gold stockpiles $ 73,356 $124,621 Provision against carrying value (52,573) (124,082)

$ 20,783 $ 539

During the year ended December 31, 2016, $861.8 million (December 31, 2014 - $975.0 million) of inventory was charged to cost of sales (Note 5).

During the year ended December 31, 2016, net charges of $14.5 million (2015 - $103.2 million), relating to inventory write off, increase in and reversal of provisions against carrying value, were recognized in the consolidated statement of income. During the year ended December 31, 2016, inventory on which there was a provision against carrying value of $13.7 million (2015 – nil) was sold and recognized in cost of sales for the period.

11. Trade and other receivables

December 31, December 31, 2016 2015 Trade receivables and other $ 31,651 $ 12,210 Due from related parties (Note 24) 10,906 3,623

$ 42,557 $ 15,833

31 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

12. Prepaid expenses and other assets

December 31, December 31, 2016 2015 Mongolian tax prepayments (a) $ - $ 20,758 Prepaid expenses (b) 12,303 32,617 Amounts prepaid to related parties (Note 24) 11,153 -

$ 23,456 $53,375

(a) During the year ended December 31, 2016, the Company offset $20.8 million (2015 - $60.0 million) of tax

prepayments against Mongolian taxes and recognized $0.1 million (2015 - $0.9 million) of interest income.

(b) At December 31, 2015, prepaid expenses included $26.3 million fees paid in relation to the Oyu Tolgoi project

finance facility signed on December 14, 2015 (refer to Note 16).

13. Receivable from related party and other non-current financial assets

December 31, December 31, 2016 2015 Current assets: Receivable from related party (Note 24) $ 979,544 $-

$ 979,544 $ -

December 31, December 31, 2016 2015 Receivable from related party and other non-current financial assets: Receivable from related party (Note 24) $ 2,996,740 $- Available for sale investments (a) 4,344 18,902 Other 935 1,176

$ 3,002,019 $ 20,078

32 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

13. Receivable from related party and other non-current financial assets (continued)

(a) Available for sale equity securities

December 31, 2016 December 31, 2015 Equity Cost Unrealized Fair Equity Cost Unrealized Fair Interest Basis Gain (Loss) Value Interest Basis Gain (Loss) Value Entrée Gold Inc. 9.0% $ 4,723 $ (427) $ 4,296 9.4% $ 4,723 $ (1,840) $ 2,883 Other - 23 25 48 - 50 (18) 32 SouthGobi Resources (i) - - - - 19.2% 11,059 3,398 14,457 Ivanhoe Mines Ltd. (ii) - - - - 0.5% 3,191 (1,661) 1,530

$ 4,746 $ (402) $ 4,344 $ 19,023 $ (121) $ 18,902

(i) In the year ended December 31, 2016, Turquoise Hill disposed of 49.3 million shares (2015 – 2.0 million) in SouthGobi Resources Ltd. at a weighted average price of Cdn$0.31 per share resulting in a realized gain on disposal of $0.4 million (2015 - $0.1 million loss).

(ii) In the year ended December 31, 2016, Turquoise Hill disposed of 3.5 million shares (2015 – 33.7 million) in Ivanhoe Mines Ltd. at a weighted average price of Cdn$0.63 per share resulting in a realized loss on disposal of $1.6 million (2015 - $11.4 million loss).

33 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

14. Property, plant and equipment

Oyu Tolgoi

Mineral Capital Other Year Ended property Plant and works in capital December 31, 2016 interests equipment progress assets Total

Net book value: January 1, 2016 $ 848,753 $ 3,493,017 $ 1,977,997 $ 216 $ 6,319,983 Additions 67,204 - 365,422 (63) 432,563 Interest capitalized (Note 8) - - 88,441 - 88,441 Depreciation for the year (93,943) (320,936) - (121) (415,000) Disposals and write offs - (3,548) (2,228) - (5,776) Transfers and other movements 32,075 226,415 (261,670) - (3,180)

December 31, 2016 $ 854,089 $ 3,394,948 $ 2,167,962 $ 32 $ 6,417,031

Cost 1,178,838 4,487,740 2,167,962 1,215 7,835,755 Accumulated depreciation / impairment (324,749) (1,092,792) - (1,183) (1,418,724)

December 31, 2016 $ 854,089 $ 3,394,948 $ 2,167,962 $ 32 $ 6,417,031

Non-current assets pledged as security (a) $ 854,089 $ 3,393,333 $ 2,167,832 $ - $ 6,415,254

Oyu Tolgoi

Mineral Capital Other Year Ended property Plant and works in capital December 31, 2015 interests equipment progress assets Total

Net book value: January 1, 2015 $ 948,372 $ 3,695,939 $ 1,952,772 $ 312 $ 6,597,395 Additions 49,561 156 86,538 - 136,255 Depreciation for the year (112,386) (265,535) - (92) (378,013) Disposals and write offs (36,794) (1,958) - - (38,752) Transfers and other movements - 64,415 (61,313) (4) 3,098

December 31, 2015 $ 848,753 $ 3,493,017 $ 1,977,997 $ 216 $ 6,319,983

Cost 1,079,559 4,277,529 1,977,997 3,783 7,338,868 Accumulated depreciation / impairment (230,806) (784,512) - (3,567) (1,018,885)

December 31, 2015 $ 848,753 $ 3,493,017 $ 1,977,997 $ 216 $ 6,319,983

(a) Excludes assets held under finance leases with a net book value of $1.6 million. In addition to property, plant and equipment, current and non-current inventory of $260.7 million and $20.8 million respectively are pledged as

security as at December 31, 2016. At December 31, 2015, no amounts had been drawn down under the project financing facility in respect of which these assets are pledged.

34 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

15. Trade and other payables

December 31, December 31, 2016 2015

Trade payables and accrued liabilities $ 196,716 $ 165,393 Interest payable on long-term borrowings 9,279 - Payable to related parties (Note 24) 37,248 34,801 Other 10,162 1,373

$ 253,405 $ 201,567

16. Borrowings and other financial liabilities

December 31, December 31, 2016 2015

Project finance facility (a) $ 4,126,117 $ - Finance lease payable 13,026 13,574

$ 4,139,143 $ 13,574

(a) Project finance facility

On December 14, 2015, Oyu Tolgoi signed a $4.4 billion project finance facility. The facility is provided by a syndicate of international financial institutions and export credit agencies representing the governments of Canada, the United States and Australia, along with 15 commercial banks. The project finance lenders have agreed a debt cap of $6.0 billion. In addition to the funding drawn down to date there is an additional $0.1 billion available, subject to certain conditions, 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 future.

At December 31, 2016, Oyu Tolgoi has drawn down $4.3 billion of the project finance facility:

December 31, 2016 Annual interest rate Facility Carrying Value (i) Fair Value (i) Term (ii) Pre-completion Post-completion International Financial Institutions - A Loan $ 754,303 $ 866,879 15 years LIBOR + 3.78% LIBOR + 4.78%

Export Credit Agencies 866,300 973,660 14 years LIBOR + 3.65% LIBOR + 4.65% Loan 246,730 279,830 13 years 2.3% 2.3%

MIGA Insured Loan (iii) 671,122 755,461 12 years LIBOR + 2.65% LIBOR + 3.65%

Commercial Banks 1,587,662 1,771,072 12 years LIBOR + 3.4% LIBOR + 4.4% - B Loan Includes $50 million 15-year loan at A Loan rate

$ 4,126,117 $ 4,646,902

35 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

16. Borrowings and other financial liabilities (continued)

(a) Project finance facility (continued)

(i) The carrying value of borrowings under the project finance facility differs from fair value due to amortized transaction costs, and changes in the estimate of fair value between the initial recognition date and the balance sheet date. Project finance borrowings were initially recognized at fair value on the relevant draw down dates, with aggregate initial fair value being $4,323.2 million before transaction costs. At December 31, 2016, these borrowings are stated net of $197.1 million amortized transaction costs.

At December 31, 2016, the fair value of the Company’s borrowings has been estimated with reference to a market yield, the variability of which is considered a reasonable indicator, over the pre-completion period, of movements in the fair value of amounts drawn under the project finance facility. Post completion, the fair value has been estimated with reference to the annual interest rate on each tranche of the facility, and consideration of factors that could indicate a change in the credit assessment of Oyu Tolgoi LLC as a counterparty to project finance. These considerations include in-country risk relating to the Oyu Tolgoi project, and the assumed date of transition from pre-completion to post-completion. This is considered a level 3 fair value measurement. Refer to Note 24 (a) (iii) for a description of Rio Tinto guarantee arrangements with respect to project finance borrowings.

(ii) The project finance facility provides for interest only payments for the first five years followed by minimum repayments according to a stepped amortization schedule for the remaining life of the facility. The term disclosed above reflects the final repayment date.

(iii) The Multilateral Investment Guarantee Agency (“MIGA”) provides political risk insurance for commercial banks. The Company is required to pay an annual insurance premium of 1.4% of the MIGA Insured Loan for the remaining life of the facility.

(b) Revolving credit facility

In March 2016, Oyu Tolgoi signed an amendment to extend the existing secured $200.0 million revolving credit facility with five banks that was scheduled to mature on March 19, 2016. Amounts under the credit facility were required to be used by Oyu Tolgoi for working capital purposes. The credit facility expired on draw down under the project finance facility described in (a) above.

36 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

17. Decommissioning obligations

Year Ended December 31, 2016 2015 Opening carrying amount $ 104,421 $ 93,004 Changes in estimates and new estimated cash flows 10,402 7,679 Accretion of present value discount 4,080 3,738

$ 118,903 $ 104,421

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.

Estimated future cash expenditures of $257.4 million (2015 - $230.6 million) have been discounted from an anticipated closure date of 2055 to their present value at a real rate of 2.0% (December 31, 2015 – 2.0%).

18. Income taxes

(a) Tax expense / (benefit)

Year Ended December 31, 2016 2015 Current (i) $ 65,952 $ 68,440 Deferred Temporary differences related to tax losses and accrued interest (ii) (131,399) (165,000) Withholding taxes (iii) (44,844) (69,526)

$ (176,243) $ (234,526)

Net income statement (benefit) expense for income taxes $ (110,291) $ (166,086)

(i) Current taxes

In 2016, a cash payment of $70.2 million (2015 - $65.8 million) was made in respect of withholding tax, mostly related to payment of interest charged on repayment of shareholder loans, in addition to other current taxes payable. Deferred tax liabilities for withholding taxes are reclassified to current tax prior to settlement.

37 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

18. Income taxes (continued)

(a) Tax expense / (benefit) (continued)

(ii) Deferred tax assets

2016

Total deferred tax assets of $296.4 million have been recognized at December 31, 2016, comprising $253.4 million in relation to tax losses and accrued but unpaid interest expense in Mongolia which are subject to an eight year carry-forward limit, and $43.0 million in relation to tax losses in Canada which are subject to a 20 year carry-forward limit. Deferred tax assets at December 31, 2016 have been recognized to the extent that recovery is considered probable. In assessing the probability of recovery, taxable profit projections, derived from cash flows based on detailed life-of-mine and production plans and corporate forecasts, were evaluated with reference to commodity price sensitivities, operating cost assumptions, and carry-forward limits. Recognition of these deferred tax assets includes adjustments to previously unrecognized amounts and is based on Oyu Tolgoi LLC’s income tax rate in Mongolia and Turquoise Hill’s rate in Canada.

Additional deferred tax assets were recognized at December 31, 2016 in relation to Mongolian tax expenses and losses, following a change in estimate of the probable quantum of future taxable profit which the Company believes will be available before expiry of tax losses carried forward. The change in estimate was carried out as part of the Company’s reassessment of unrecognized deferred tax assets at the balance sheet date, and review for recoverability of the previously recognized deferred tax asset of $165.0 million. The change in estimate at December 31, 2016 resulted from an increased probable future benefit expectation which is based on stronger taxable income projections driven by improved long-term commodity price projections, and updated technical and operating assumptions in the final quarter of 2016.

A deferred tax asset of $43.0 million was initially recognized at December 31, 2016 in relation to non-capital Canadian tax losses carried forward. Previously, no deferred tax had been recognized based on assessments of recoverability which concluded, based on all available evidence, that future benefit from non-capital Canadian tax losses carried forward was not probable. The available evidence included the history of non-capital losses in Canada which is strong evidence that future tax profits might not be available. The evidence also included consideration of the management services payment expected to be received from Oyu Tolgoi LLC, by Turquoise Hill in the future.

The realization of taxable income in Canada during 2016 was considered a meaningful indicator of increased probability that future taxable income will be available before expiry. The increased probability of recovery is also evidenced by increased confidence and precedent from management services payment receipts and interest income which impact the future profitability in Canada.

38 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

18. Income taxes (continued)

(a) Tax expense / (benefit) (continued)

(ii) Deferred tax assets (continued)

2015

A deferred tax asset of $165.0 million was initially recognized at December 31, 2015, in relation to accrued but unpaid interest expense following a reassessment of recoverability. No deferred tax had been recognized in previous periods, following assessments of recoverability which considered the likelihood and timing of restarting underground mine development at Oyu Tolgoi.

On December 14, 2015, Oyu Tolgoi signed a $4.4 billion finance facility which, together with the signing of the Oyu Tolgoi Underground Mine Development and Financing Plan on May 18, 2015, resolved matters prerequisite to establishing the probability of future taxable profits against which to utilize deductible temporary differences related to the accrued but unpaid interest expense. The reassessment concluded that, in view of increased certainty of underground development proceeding, it was now probable that future taxable profit would be available before the deductible temporary differences expired, resulting in $165.0 million of deductible temporary differences meeting the IAS 12 “probable” criterion for recognition.

In assessing the probability of recovery, taxable profit projections, derived from cash flow projections based on detailed life-of-mine and production plans, were evaluated with reference to commodity price sensitivities and the eight year carry-forward limit to which the deductible temporary differences were subject.

(iii) Withholding taxes

Withholding tax is accrued and recognized within deferred tax liabilities. Following agreement with the Government of Mongolia in 2015, adjustments were made to prior period withholding tax obligations in order to reflect them in proportion to Turquoise Hill’s 66% ownership of Oyu Tolgoi LLC.

39 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

18. Income taxes (continued)

(b) Reconciliation of income taxes calculated at the statutory rates to the actual tax provision

Year Ended December 31, 2016 2015 Income (loss) from continuing operations before taxes $ (3,669) $ 138,720 Tax at Canadian combined federal and provincial income tax rate (26%) (954) 36,067 Tax effect of: Change in deferred tax not recognized (54,541) (126,683) Difference in tax rates and treatment in foreign jurisdictions (89,660) (112,973) Withholding taxes 22,457 30,694 Non deductible losses and expense 12,407 6,809

$ (110,291) $ (166,086)

Deferred tax assets and liabilities are shown in the table below together with unrecognized amounts of deferred tax assets at December 31, 2016:

Recognized Unrecognized December 31, December 31, December 31, 2016 2015 2016 Deferred tax assets Non-capital losses (i) $ 278,767 - $ 334,747 Capital losses - - 107,347 Other temporary differences including accrued interest (i) 17,632 165,000 232,822 Deferred tax liabilities (ii) Withholding tax (8,072) (52,916) -

$ 288,327 $ 112,084 $ 674,916

(i) Unrecognized deferred tax assets relating to non-capital losses and accrued interest expense, for which

recovery is not considered probable as at December 31, 2016, expire between 2020 to 2036.

(ii) Deferred tax is not recognized on the unremitted earnings of subsidiaries where the Company is able to control the timing of the remittance and it is probable that there will be no remittance in the foreseeable

future. At December 31, 2016, there were no unremitted earnings for which deferred tax liabilities had not been recognized (2015: nil).

40 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

18. Income taxes (continued)

In addition to the above, the Company has $790.9 million of investment tax credits at December 31, 2016; no deferred tax has been recognized in respect of these credits, in accordance with the initial recognition exception in IAS 12 Income taxes for transactions that are not a part of a business combination.

19. Share capital

Year Ended December 31, 2016 2015 Number of Number of Common Shares Amount Common Shares Amount Balances, January 1 2,012,314,469 $11,432,122 2,012,298,797 $11,432,060 Shares issued for: Exercise of stock options (a) - - 15,672 62

Balances, December 31 2,012,314,469 $11,432,122 2,012,314,469 $11,432,122

(a) Share Options

During the year ended December 31, 2016, no options were exercised, 1,242,028 options expired, no options were cancelled and no options were granted.

The authorized share capital of Turquoise Hill consists of an unlimited number of Common Shares without par value and an unlimited number of Preferred Shares. As at December 31, 2016, there are 2,012,314,469 Common Shares and no Preferred Shares issued and outstanding.

20. Accumulated other comprehensive loss

Year Ended December 31, 2016 2015 Unrealized Gain (Loss) Unrealized Gain (Loss) on Available For Sale on Available For Sale Equity Securities Equity Securities Balance, January 1 $ (14) $ (4,505) Change in other comprehensive loss before reclassifications (1,572) (6,940) Reclassifications from accumulated other comprehensive income (Note 13 (a)) 1,184 11,431

Net other comprehensive income (loss) (388) 4,491

Balance, December 31 $ (402) $ (14)

41 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

21. Non-controlling interests

At December 31, 2016, there were non-controlling interests in subsidiaries as follows:

Non-controlling Interests Oyu Tolgoi (a) Total Balance, January 1, 2016 $ (718,909) $ (718,909) Non-controlling interests’ share of loss (103,983) (103,983)

Balance, December 31, 2016 $ (822,892) $ (822,892)

Non-controlling Interests SouthGobi Oyu Tolgoi (a) Total Balance, January 1, 2015 $ 56,590 $ (683,061) $ (626,471) Non-controlling interests’ share of income (loss) 29,635 (35,848) (6,213) Changes in equity interests held by Turquoise Hill 1,823 - 1,823 Disposal of noncontrolling interest in subsidiary (88,048) - (88,048)

Balance, December 31, 2015 $ - $ (718,909) $ (718,909)

(a) Common share investments funded on behalf of non-controlling interests

Since 2011, the Company has funded common share investments in Oyu Tolgoi on behalf of Erdenes Oyu Tolgoi LLC (“Erdenes”). In accordance with the Amended and Restated Shareholders Agreement dated June 8, 2011, such funded amounts earn interest at an effective annual rate of LIBOR plus 6.5% and are repayable to the Company via a pledge over Erdenes’ share of future Oyu Tolgoi common share dividends. Erdenes also has the right to reduce the outstanding balance by making payments directly to the Company.

Common share investments funded on behalf of Erdenes are recorded as a reduction to the net carrying value of non-controlling interest. As at December 31, 2016, the cumulative amount of such funding was $751.1 million (December 31, 2015 - $751.1 million). Accrued interest of $302.9 million (December 31, 2015 - $231.1 million), has not been recognized in these consolidated financial statements, as payment will be triggered on common share dividend distribution by Oyu Tolgoi, the timing of which cannot currently be reliably determined.

42 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

22. Cash flow information

(a) Reconciliation of net income to net cash flow generated from operating activities

Year Ended December 31, 2016 2015 Income from continuing operations $ 106,622 $ 304,806

Adjustments for: Depreciation and amortization 365,344 356,243 Finance items: Interest income (91,234) (3,164) Interest and accretion expense 115,868 8,354 Realized and unrealized losses on financial instruments 1,184 11,431 Unrealized foreign exchange (gains) losses (1,066) 913 Inventory write downs 14,536 103,236 Write down of carrying value of property, plant and equipment 5,380 38,341 Tax prepayment offset 20,802 60,000 Income and other taxes (110,291) (166,086) Other items 3,340 779

Net change in non-cash operating working capital items: (Increase) decrease in: Inventories 47,166 29,444 Trade, other receivables and prepaid expenses (20,113) 21,866 Decrease in: Trade and other payables (23,076) (41,603) Deferred revenue (35,302) (68,131)

Cash generated from operating activities of continuing operations before interest and tax 399,160 656,429

Cash used in operating activities of discontinued operations before interest and tax - (5,911)

Cash generated from operating activities before interest and tax $ 399,160 $ 650,518

43 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

22. Cash flow information (continued)

(b) Supplementary information regarding other non-cash transactions

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

Year Ended December 31, 2016 2015 Investing activities Tax prepayment (Note 12) $ 20,802 $ 60,000 Change in accounts payable and accrued liabilities related to purchase of property, plant and equipment 106,227 20,044

23. Earnings per share

The basic earnings per share is computed by dividing the net income attributable to common stock by the weighted average number of common shares outstanding during the period. All stock options and share purchase warrants outstanding at each period end have been excluded from the weighted average share calculation.

As at December 31, 2016, the potentially dilutive shares excluded from the earnings per share calculation due to anti- dilution are 984,369 (2015 – 1,384,103).

24. Related parties

(a) Related party transactions with Rio Tinto

As at December 31, 2016, Rio Tinto plc’s indirect equity ownership in the Company was 50.8% (December 31, 2015: 50.8%). The following tables present the consolidated financial statements line items within which transactions with a Rio Tinto entity or entities (“Rio Tinto”) are reported. Rio Tinto entities comprise Rio Tinto plc, Rio Tinto Limited and their respective subsidiaries other than Turquoise Hill Resources and its subsidiaries.

44 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

24. Related parties (continued)

(a) Related party transactions with Rio Tinto (continued)

Year Ended December 31, Statements of Income 2016 2015 Finance income: Cash and cash equivalents (i) $ 7,276 $ 1,393 Receivable from Rio Tinto (ii) 79,384 - Cost recoveries - Turquoise Hill 3,074 3,723

Finance costs: Completion support fee (iii) (65,100) - Management services payment (iv) (32,821) (24,054) Cost recoveries - Rio Tinto (v) (44,537) (49,322)

$ (52,724) $ (68,260)

Year Ended December 31, Cash flows from investing activities 2016 2015 Expenditures on property, plant and equipment: Management services payment and cost recoveries - Rio Tinto $ (22,755) $-

December 31, December 31, Balance sheets 2016 2015 Cash and cash equivalents (i) $ 741,711 $ 740,537 Trade and other receivables (Note 11) 10,906 3,623 Prepaid expenses and other assets (Note 12) 11,153 - Receivable from related party and other non-current financial assets (ii) (Note 13) 3,976,284 - Trade and other payables (Note 15) Management service payments (iv) (7,839) (5,972) Cost recoveries (v) (29,409) (28,829)

$ 4,702,806 $ 709,359

45 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

24. Related parties (continued)

(a) Related party transactions with Rio Tinto (continued)

of liquid resources. At December 31, 2016, cash equivalents deposited with wholly owned subsidiaries of Rio Tinto totalled $741.7 million, earning interest at rates equivalent to those offered by financial institutions or short-term corporate debt.

(ii) As part of project finance (Note 16), Turquoise Hill appointed 9539549 Canada Inc., a wholly owned subsidiary of Rio Tinto, as service provider to provide post-drawdown cash management services in connection with net proceeds from the project finance facility, which shall be placed with 9539549 Canada Inc. and returned to Turquoise Hill as required for purposes of Oyu Tolgoi underground mine development and funding. Rio Tinto International Holdings Limited, a wholly owned subsidiary of Rio Tinto, agreed to guarantee the obligations of the service provider under this agreement. At December 31, 2016, the resulting receivable from 9539549 Canada Inc. totalled $3,976.3 million, earning interest at an effective annual rate

of LIBOR plus 2.45%. The interest rate reflects: interest receivable at LIBOR minus 0.05%; plus a benefit of 2.5% arising on amounts receivable from 9539549 Canada Inc. under the Cash Management Services Agreement, which are net settled with the 2.5% completion support fee described in (iii) below. At December 31, 2016, the fair value of the receivable approximates its carrying value. The fair value has been estimated with reference to a market yield, the variability of which is considered a reasonable indicator, over the projected timeframe for returning funds to Turquoise Hill, of movements in the fair value of the receivable. This is considered a level 3 fair value measurement.

(iii) As part of the project finance agreements (Note 16), 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 8). The fee is settled net of a benefit arising on amounts receivable from 9539549 Canada Inc. under the Cash Management Services Agreement described in (ii) above. The fee payment obligation will terminate on the date Rio Tinto’s CSU obligations to the project lenders terminate.

46 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

24. Related parties (continued)

(a) Related party transactions with Rio Tinto (continued)

(iv) 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 UDP on May 18, 2015, the management services payment to Rio Tinto is calculated as 1.5% applied to underground development capital costs, and 3% applied to operating costs and capital related to current operations.

(v) 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.

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.

(b) Related party transactions with SouthGobi

The following table summarizes transactions with SouthGobi which were primarily incurred on a cost-recovery basis with companies related by way of directors, officers or shareholders in common:

Year Ended December 31, 2016 2015 SouthGobi - from April 23, 2015 to November 30, 2015 $ - $ 436

$- $436

25. Commitments and contingencies

(a) Capital commitments

At December 31, 2016, the Company had capital expenditure commitments after the balance sheet date of $42.0 million. These commitments represent minimum non-cancellable obligations, inclusive of exit costs.

47 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

25. Commitments and contingencies (continued)

(b) Operating lease commitments

The following table presents the future aggregate minimum lease payments under non-cancellable operating leases as at December 31, 2016:

Year Ended December 31, 2016 2015 Less than one year $ 54,491 $ 120,196 1 to 5 years 3,927 60,123 More than 5 years 4,099 -

$ 62,517 $ 180,319

Due to the size, complexity and nature of Turquoise Hill’s operations, various legal and tax matters arise in the ordinary course of business. Turquoise Hill recognizes a liability with respect to such matters when an outflow of economic resources is assessed as probable and the amount can be reliably estimated. In the opinion of management, these matters will not have a material effect on the consolidated financial statements of the Company.

26. 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 trade and other receivables, trade payables and other financial assets measured at amortized cost approximates their fair value because of the demand nature or short-term maturity of these instruments.

The following tables provide an analysis of the Company’s financial assets that are measured subsequent to initial recognition at fair value on a recurring basis, grouped into Level 1 to 3 based on the degree to which the significant inputs used to determine the fair value are observable.

● Level 1 fair value measurements are those derived from quoted prices in active markets for identical assets or

liabilities. ● Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1,

that are observable either directly or indirectly. ● Level 3 fair value measurements are those derived from valuation techniques that include inputs that are not

based on observable market data.

48 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

26. Financial instruments and fair value measurements (continued)

Fair Value at December 31, 2016 Total Level 1 Level 2 Level 3 Assets: Provisional pricing embedded derivatives (a) $ 11,141 $ - $ 11,141 $ - Available for sale investments (b) 4,344 4,344 - -

$ 15,485 $ 4,344 $ 11,141 $-

Fair Value at December 31, 2015 Total Level 1 Level 2 Level 3 Assets: Available for sale investments (b) $ 18,902 $ 17,579 $ 1,323 $ -

$ 18,902 $ 17,579 $ 1,323 $ -

Liabilities: Provisional pricing embedded derivatives (a) $ 15,587 $ - $ 15,587 $ -

$ 15,587 $- $ 15,587 $-

(a) Trade and other receivables and trade and other payables include provisionally priced receivables and payables relating to sales contracts where selling price is determined after delivery to the customer, based on the market price at the relevant quotation point stipulated in the contract. Revenue is recognized on provisionally priced sales based on the forward selling price for the period in the contract and also includes changes in the fair value of the provisional pricing embedded derivatives.

(b) The Company’s freely tradable available for sale investments are classified within level 1 of the fair value

hierarchy as they are valued using quoted market prices in active markets.

Financial risk management

Certain of the Company’s activities expose it to a number of financial risks, which include liquidity risk, foreign exchange risk, interest rate risk, credit risk and commodity price risk. The Company does not currently have in place any active hedging or derivative trading policies to manage these risks, since in the opinion of management, the potential exposure is not significant.

49 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

26. Financial instruments and fair value measurements (continued)

Financial risk management (continued)

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations as they fall due. The Company manages liquidity by maintaining cash and cash equivalent balances available to meet its anticipated operational and financing needs. Liquidity requirements are managed based upon expected cash flow to ensure that there is adequate capital to meet short-term and long-term obligations. At December 31, 2016, the Company’s third party project finance borrowings were $4.1 billion, and the Company’s trade and other payables were $214.3 million which are due for payment within twelve months. In addition, the Company has a finance lease payable of $13.0 million. 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 remainder of the facility - refer to Note 16.

Foreign exchange risk

The Company operates on an international basis and therefore foreign exchange risk exposures arise from transactions not denominated in U.S. dollars, its functional currency. The Company is only exposed to foreign exchange risk on its trade payables and accrued liabilities not denominated in U.S. dollars. As at December 31, 2016, the effect in income for the year of a 10% strengthening in the Mongolian Tugrik against the U.S. dollar, with all other variables held constant, would be a charge of $11.0 million (2015 - $7.1 million).

Interest rate risk

Interest rate risk is the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to changes in market interest rates. The Company is exposed to interest rate risk on its third party project finance borrowings and cash and cash equivalents, the majority of which are at variable rates. As at December 31, 2016, the effect on income for the year of a 100 basis point increase in LIBOR interest rates, with all other variables held constant, would be a charge of $25.5 million (2015 – nil). Cash and cash equivalents have limited interest rate risk due to their short-term nature and receive interest based upon market interest rates or rates equivalent to those offered by financial institutions.

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily from customer receivables) and from its financing activities, including deposits with (and / or receivables from) banks, other financial institutions

50 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

26. Financial instruments and fair value measurements (continued)

Financial risk management (continued)

and Rio Tinto (in its capacity as a counterparty to various deposit and cash management arrangements, and the project finance completion support undertaking – see Note 24), other short term liquid investments and other financial instruments.

The Company manages its customer credit risk subject to the Company’s established policy, procedures and controls relating to customer credit risk management. Credit limits are established for all customers based on internal or external rating criteria. The Company deposits its cash and cash equivalents with high credit quality counterparties as referenced by ratings agencies. The Company’s maximum balance sheet exposure to credit risk at December 31, 2016 is the carrying value of its cash and cash equivalents, project finance receivable from related party, and its trade and other receivables.

Commodity price risk

The Company is exposed to commodity price risk from fluctuations in market prices of the commodities that the Company produces. Copper concentrate is “provisionally priced” whereby the selling price is subject to final adjustment at the end of a period normally ranging from 30 to 180 days after delivery to the customer as defined in the sales contract. Revenue is recognized on provisionally priced sales based on estimates of fair value of the consideration receivable which is based upon forward market prices. At each reporting date, the provisionally priced embedded derivative is marked to market based on the forward selling price for the period stipulated in the contract. As at December 31, 2016, the Company had 25 thousand tonnes of copper in concentrate sales that were provisionally priced. The Company does not have a material exposure to commodity price risk on its provisionally priced copper in concentrate sales at December 31, 2016.

Capital risk management

The Company’s objectives when managing capital risk are to safeguard its ability to continue as a going concern, to provide an adequate return to shareholders and to support any growth plans.

The Company considers its capital to be share capital and third party borrowings. To effectively manage capital requirements, the Company has in place a planning and budgeting process to help determine the funds required to ensure the Company has the appropriate liquidity to meet its operating needs. The Company seeks to ensure that there is sufficient borrowing capacity and cash to meet its short term business requirements, taking into account its anticipated cash flows from operations and its holdings of cash, cash equivalents and receivable from related party.

51 TURQUOISE HILL RESOURCES LTD. Notes to the consolidated financial statements (Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands unless otherwise noted)

27. Key management compensation

The compensation for key management, which comprises Turquoise Hill’s directors, Chief Financial Officer, and Vice President, Operations and Development, in respect of employee services is as follows:

Year Ended December 31, 2016 2015 Salaries, director fees and other short term benefits $ 2,043 $ 2,252 Post-employment benefits 89 82 Share based payment 1,074 650

$ 3,206 $2,984

52 Exhibit 99.3

Turquoise Hill Resources Ltd.

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

December 31, 2016

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 discussion and analysis of the financial condition and results of operations (MD&A) of Turquoise Hill Resources Ltd. should be read in conjunction with the audited consolidated financial statements of Turquoise Hill Resources Ltd. and the notes thereto for the year ended December 31, 2016. These 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 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 (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 contains certain forward-looking statements and certain forward-looking information. Please refer to the cautionary language commencing on page 40.

All readers of this MD&A are advised to review and consider the risk factors discussed under the heading “Risk and Uncertainties” in this MD&A commencing on page 22.

The effective date of this MD&A is March 23, 2017.

December 31, 2016 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)

TABLE OF CONTENTS

Page 1. Selected Annual Financial Information 4 2. Review of Operations 4 A. Oyu Tolgoi 6 B. Corporate Activities 13 C. Corporate Administrative Expenses 13 3. Selected Quarterly Data 13 4. Liquidity and Capital Resources 14 5. Share Capital 16 6. Outlook 16 7. Off-Balance Sheet Arrangements 17 8. Contractual Obligations 17 9. Changes in Accounting Policies 18 10. Critical Accounting Estimates 18 11. Recent Accounting Pronouncements 20 12. Risk and Uncertainties 22 13. Related-Party Transactions 36 14. Non-GAAP Measures 37 15. Disclosure Controls and Procedures 39 16. Management’s Report on Internal Control over Financial Reporting 40 17. Oversight of the Audit Committee 40 18. Qualified Person 40 19. Cautionary Statements 40 20. Forward-Looking Statements and Forward-Looking Information 41 21. Management’s Report to Shareholders 44

December 31, 2016 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)

1. SELECTED ANNUAL FINANCIAL INFORMATION

($ in millions, except per share information) Year Ended December 31 2016 2015 2014 Revenue Copper-gold concentrate $ 1,203.3 $ 1,634.8 $ 1,735.6 Total revenue $ 1,203.3 $ 1,634.8 $ 1,735.6

Net income from continuing operations attributable to owners of Turquoise Hill $ 210.6 $ 340.7 $ 198.8 Loss from discontinued operations attributable to owners of Turquoise Hill - (27.4) (171.9) Net income attributable to owners of Turquoise Hill $ 210.6 $ 313.3 $ 26.9

Basic income (loss) per share attributable to owners of Turquoise Hill Continuing operations $ 0.10 $ 0.17 $ 0.10 Discontinued operations - (0.01) (0.09) Total $ 0.10 $ 0.16 $ 0.01 Diluted income (loss) per share attributable to owners of Turquoise Hill Continuing operations $ 0.10 $ 0.17 $ 0.10 Discontinued operations - (0.01) (0.09) Total $ 0.10 $ 0.16 $ 0.01

Total assets $ 12,460.2 $ 8,240.1 $ 8,299.0 Long-term liabilities Borrowings and other financial liabilities $ 4,139.1 $ 13.6 $ 14.1 Decommissioning obligations and deferred income tax liabilities $ 127.0 $ 157.3 $ 215.8

Note: Financial information has been extracted from the audited financial statements of Turquoise Hill Resources, which are prepared in accordance with IFRS.

2. REVIEW OF OPERATIONS

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

In 2016, the Company recorded net income attributable to owners of Turquoise Hill of $210.6 million or $0.10 per share compared with net income of $313.3 million or $0.16 per share in 2015. The decrease is mainly attributable to reduced gold sales volumes due to lower production and copper prices, partly offset by cost reductions and adjustment to deferred tax assets.

Cost of sales for 2016 were $861.8 million compared to $975.0 million in 2015 reflecting lower sales of metals in concentrate and reduced cost of production as a result of cost savings. Operating cash flows before interest and taxes in 2016 were $399.2 million compared with $650.5 million in 2015 mainly reflecting the impact of reduced gold production and lower copper prices.

Capital expenditure on property, plant and equipment was $326.3 million on a cash basis in 2016 compared to $116.2 million in 2015, attributed to both underground and open-pit capital activities.

Turquoise Hill’s cash and cash equivalents at December 31, 2016 were $1.4 billion.

Financial and operational highlights for 2016

Full year 2016

• Oyu Tolgoi achieved an industry-leading safety performance with an All Injury Frequency Rate of 0.22 per 200,000 hours worked for the year ended December 31, 2016.

December 31, 2016 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)

• On May 5, 2016, Oyu Tolgoi received the formal notice to proceed for underground development by the boards of Turquoise Hill, Rio Tinto and Oyu Tolgoi LLC.

• On October 21, 2016, Turquoise Hill filed the updated Oyu Tolgoi Technical Report.

• At the end of 2016, 1.6 equivalent kilometres of underground lateral development had been completed for the year.

• In 2016, progress was made on the sinking of Shafts 2 and 5 with final depth for both shafts expected to be reached in 2017.

• During 2016, the bulk excavation component of the convey-to-surface system was completed, followed by the commencement of the decline tunnel work in January 2017.

• Oyu Tolgoi recorded revenue of $1.2 billion in 2016 on record concentrate sales of 828,600 tonnes.

• For 2016, the Company recorded net income from continuing operations attributable to owners of Turquoise Hill of $210.6 million.

• Turquoise Hill generated operating cash flow before interest and taxes of $399.2 million in 2016.

• For 2016, Oyu Tolgoi’s cost of sales was $2.07 per pound of copper sold, C1 cash costs were $1.02 per pound of copper produced and all-in sustaining costs were $1.48 per pound of copper produced.1

• Operating cash costs1 of $775.3 million in 2016 was below the Company’s guidance.

• Turquoise Hill’s cash and cash equivalents at December 31, 2016 were approximately $1.4 billion.

• In June 2016, Oyu Tolgoi drew down approximately $4.3 billion of the project finance facility and used all net proceeds to pay down shareholder loans payable by Oyu Tolgoi to Turquoise Hill.

• Oyu Tolgoi operated at record levels for material mined and ore treated; concentrator throughput exceeded nameplate capacity by year end.

• Copper production of 201,300 tonnes and gold production of 300,000 ounces exceeded the Company’s guidance.

• Compared to 2015 results, material mined for 2016 increased 5.6%, concentrator throughput increased 10.5%, copper production was similar and, as expected, gold production decreased 54.1%.

Fourth quarter 2016

• Revenue of $224.6 million in Q4’16 was slightly lower than Q3’16 reflecting lower concentrate sales.

• For Q4’16, Turquoise Hill reported net income from continuing operations attributable to owners of $93.3 million.

• Turquoise Hill generated operating cash flow before interest and taxes of $18.2 million in Q4’16.

• In Q4’16, concentrator throughput increased 7.4% over Q3’16 resulting in an average daily rate of 106,700 tonnes for the quarter, which was a quarterly high to date.

1 Please refer to Section 14 – NON-GAAP MEASURES – on page 37 of this MD&A for reconciliation of these metrics to the financial statements.

December 31, 2016 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)

• Copper production in Q4’16 was broadly consistent with Q3’16; Q4’16 copper grades were as expected with mining focused mainly on Phases 4 and 6 of the open pit.

• Gold production in Q4’16 increased 32.4% over Q3’16 due to the final processing of Phase 2 ore.

Outlook for 2017

• Oyu Tolgoi is expected to produce 130,000 to 160,000 tonnes of copper and 100,000 to 140,000 ounces of gold in concentrates for 2017.

• Sales contracts have been agreed for a significant majority of Oyu Tolgoi’s expected 2017 concentrate production.

A. OYU TOLGOI

The Oyu Tolgoi mine is approximately 550 kilometres south of Ulaanbaatar, Mongolia’s capital city, and 80 kilometres north of the Mongolia-China border. Mineralization on the property consists of porphyry-style copper, gold, silver and molybdenum contained in a linear structural trend (the Oyu Tolgoi Trend) of deposits throughout this trend. They include, from south to north, the Heruga Deposit, the Oyut deposit and the Hugo Dummett deposits (Hugo South, Hugo North and Hugo North Extension).

The Oyu Tolgoi mine was initially developed as an open-pit operation. The copper concentrator plant, with related facilities and necessary infrastructure, was established at 110,000 tonnes of ore per day with the 2016 Oyu Tolgoi Technical Report (2016 OTTR). The concentrator was initially constructed to process ore mined from the Oyut open pit. In August 2013, development of the underground mine was suspended pending resolution of matters with the Government of Mongolia. Following signing of the Oyu Tolgoi Underground Mine Development and Financing Plan (Underground Plan) in May 2015 and the signing of a $4.4 billion project finance facility in December 2015, Oyu Tolgoi received the formal notice to proceed approval by the boards of Turquoise Hill, Rio Tinto and Oyu Tolgoi LLC on May 5, 2016, which was the final requirement for the re-start of underground development. Underground construction recommenced in mid-2016.

At peak production, Oyu Tolgoi is expected to be the world’s third-largest copper mine with average production between 2025 to 2030 of more than 550,000 tonnes of copper a year. Copper production is expected to increase more than 300% between 2017 and 2025 (peak production year for Hugo North Lift 1).

Underground development progress

Major underground development programs currently underway include underground lateral development, sinking of Shafts 2 and 5, support infrastructure and the convey-to-surface system. At the end of 2016, the underground project workforce had grown to more than 2,000 people with continued growth expected to peak in 2018.

Prior to suspending underground construction in August 2013, underground lateral development at Hugo North Lift 1 had advanced approximately 16 kilometres off Shaft 1 with a total of 65 kilometres of lateral development expected to be complete by the first draw bell in mid-2020. At the end of 2016, underground lateral development was ahead of schedule with 1.6 equivalent kilometres completed. A further increase in underground lateral development capability is expected in the second half of 2017 due to the installation of a new 3,500 tonne per day crusher, which will replace the existing crusher.

In 2016, progress was made on the sinking of Shafts 2 and 5 with final depth for both shafts expected to be reached in 2017. During 2016, Shaft 2 was connected to the underground workings enabling a second independent means of egress, increased materials delivery capacity and additional ventilation. Shaft 2 activity in 2017 is focused on the fit-out of the 1,202 metre level connections to the underground workings

December 31, 2016 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) before sinking to the final depth of 1,284 metres. When completed, Shaft 5 will be dedicated to ventilation thereby increasing the capacity for underground activities. The following table outlines the shafts for underground development as at year end 2016.

Shaft 1 Shaft 2 Shaft 5 Shaft 3 Shaft 4 (early development (production and (ventilation) (ventilation) (ventilation) and ventilation) ventilation) Total Depth 1,385 metres 1,284 metres 1,178 metres 1,148 metres 1,149 metres Diameter 6.7 metres 10 metres 6.7 metres 10 metres 11 metres Completion 2008 Expected 2017 Expected 2017 Expected 2021 Expected 2021 Remaining Complete ~85 metres ~840 metres Not started Not started

Infrastructure needed to support underground development progressed during 2016 in areas such as material handling (crushing and conveying), ventilation and water handling equipment, power distribution and maintenance and storage facilities. Some areas began slower than anticipated but did not impact lateral advancement rates.

During 2016, the bulk excavation component of the convey-to-surface system was completed, followed by the commencement of decline tunnel work in January 2017. The convey-to-surface system is the eventual route of the full 95,000 tonne per day underground ore delivery system to the concentrator; however it is not a critical path item for first drawbell planned in 2020. Expected completion of the convey-to-surface system is 2022, which will facilitate the ramp up to full production by 2027.

During 2016, Oyu Tolgoi spent $226.8 million on underground expansion, including $61.9 million of pre-start activities initiated prior to the notice to proceed in May 2016. In addition, Oyu Tolgoi had further capital commitments of $638.8 million2 at the end of 2016.

Full-year 2016 and Q4’16 open-pit operations performance

Safety is a major focus throughout Oyu Tolgoi’s operations and the mine’s management is committed to reducing risk and injury. Oyu Tolgoi achieved an industry-leading safety performance with a combined All Injury Frequency Rate of 0.22 for open-pit operations and the underground project per 200,000 hours worked for the year ended December 31, 2016.

2 Please refer to Section 14 – NON-GAAP MEASURES – on page 37 of this MD&A for reconciliation of this metric to the financial statements.

December 31, 2016 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)

Key financial metrics for 2016 and Q4’16 are as follows:

Oyu Tolgoi Key Financial Metrics(1)

4Q 1Q(4) 2Q 3Q 4Q Full Year Full Year ($ in millions, unless otherwise noted) 2015 2016 2016 2016 2016 2016 2015

Revenue 355.6 422.7 329.7 226.3 224.6 1,203.3 1,634.8 Concentrates sold (‘000 tonnes) 236.2 213.1 227.4 206.2 181.9 828.6 819.8 Revenue by metals in concentrates Copper 194.6 202.0 207.9 174.2 178.5 762.6 829.6 Gold 156.4 216.2 115.1 45.8 42.8 419.9 788.9 Silver 4.6 4.5 6.7 6.3 3.3 20.8 16.2 Cost of sales 239.2 207.9 237.1 232.5 184.3 861.8 975.0 Production and delivery costs 149.7 125.9 141.2 134.3 112.5 513.9 630.4 Depreciation and depletion 89.6 82.0 95.9 88.5 79.5 345.9 344.5 Capital expenditure on cash basis 27.5 55.9 53.3 74.4 142.7 326.3 116.2 Underground 7.3 22.6 36.5 46.7 121.0 226.8 10.3 Open pit(2) 20.2 33.3 16.8 27.7 21.7 99.5 105.9 Royalties 25.0 22.7 18.5 13.9 13.0 68.1 120.8 Operating cash costs(3)(4) 236.6 196.6 215.5 187.8 175.4 775.3 962.6 Unit costs ($) Cost of sales (per pound of copper sold) 1.98 1.84 1.98 2.31 2.22 2.07 2.20 C1 (per pound of copper produced)(3)(4) 0.88 0.06 1.12 1.56 1.57 1.02 0.57 All-in sustaining (per pound of copper produced)(3)(4) 1.56 0.66 1.55 2.00 1.90 1.48 1.37

(1) Any financial information in this MD&A should be reviewed in conjunction with the Company‘s consolidated financial statements or condensed interim consolidated financial statements for the reporting periods indicated. (2) Open-pit capital expenditure includes both sustaining and non-underground development activities. (3) Please refer to Section 14 – NON-GAAP MEASURES – on page 37 of this MD&A for reconciliation of these metrics to the financial statements. (4) Operating cash costs, C1 and all-in sustaining unit costs for the three months ended March 31, 2016 have been revised to correctly reflect the change in inventory as reported in the Company’s reconciliation of net income (loss) to net cash flow generated from operating activities.

Full year 2016

Revenue of $1.2 billion in 2016 decreased 26.4% over 2015 mainly reflecting reduced gold sales and lower copper prices partially offset by higher gold prices. Concentrate sold in 2016 of 828,600 tonnes increased 1.1% over 2015 reaching an all-time annual high.

Production and delivery costs include primarily the cash costs in inventory sold as well as allocated mine administration costs. Depreciation and depletion includes the depreciation and depletion in inventory sold as well as any depreciation of assets used in the selling and delivery process, including the depreciation of capitalized production phase stripping costs. Cost of sales for 2016 were $861.8 million compared to $975.0 million in 2015 reflecting lower sales of metals in concentrate and reduced cost of production as a result of cost savings.

Capital expenditure, on a cash basis, for 2016 was $326.3 million compared to $116.2 million in 2015, comprising amounts attributed to the underground project and open-pit activities of $226.8 million and $99.5 million, respectively. Open-pit capital expenditure includes deferred stripping of $30.9 million and tailings storage facility spending of $22.0 million.

Total operating cash costs at Oyu Tolgoi were $775.3 million in 2016 compared to $962.6 million in 2015 and below the Company’s guidance of $840 million. Lower operating cash costs in 2016 reflect mining and production efficiencies, cost reduction programs and reduced royalty expense as 2015 included one-off adjustments made upon agreement of the Underground Plan. Operating cash costs include the 5% royalty payable to the Government of Mongolia and exclude deferred stripping costs.

Cost of sales were $2.07 per pound of copper sold in 2016, compared with $2.20 per pound in 2015, reflecting reduced cost of production as the results of cost savings. This new metric has been included as

December 31, 2016 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) a measure of cost per pound of copper sold for comparison with C1 and all-in sustaining costs (AISC) per pound of copper produced.

Oyu Tolgoi’s C1 costs in 2016 were $1.02 per pound of copper produced, compared with $0.57 per pound of copper produced in 2015, and are presented net of revenues from gold and silver sales. The increase was mainly due to lower gold sales, reflecting the grade impact from the completion of Phase 2 mining.

AISC in 2016 were $1.48 per pound of copper produced, compared with $1.37 per pound of copper produced in 2015. The increase was mainly due to lower gold revenues.

Fourth quarter 2016

Revenue of $224.6 million in Q4’16 was slightly lower than Q3’16 reflecting lower concentrate sales. Fourth quarter concentrate sold of 182,000 tonnes decreased 11.8% over Q3’16 as a result of limited rail availability into China due to increased coal shipments.

Q4’16 cost of sales were $184.3 million compared to $232.5 million in Q3’16 reflecting lower sales of copper in concentrate and a reduction to net charges for finished goods inventory write-down as a result of higher Copper prices at year end.

Capital expenditure, on a cash basis, for Q4’16 was $142.7 million compared to $74.4 million in Q3’16, attributed to the underground project and open-pit activities of $121.0 million and $21.7 million, respectively. Open-pit capital expenditure includes deferred stripping of $3.1 million and tailings storage facility spending of $4.8 million.

Total operating cash costs at Oyu Tolgoi were $175.4 million in Q4’16 compared to $187.8 million in Q3’16 due to lower operating expenses, including selling costs, in the fourth quarter. Operating cash costs include the 5% royalty payable to the Government of Mongolia and exclude deferred stripping costs.

Cost of sales were $2.22 per pound of copper sold in Q4’16, compared with $2.31 per pound of copper sold in Q3’16, reflecting a reduction to net charges for finished goods inventory write-down as a result of higher prices at year end.

Oyu Tolgoi’s C1 costs in Q4’16 were $1.57 per pound of copper produced, a slight increase from Q3’16 of $1.56 per pound of copper produced, due to the net impact of reduced operating cash costs, offset by lower gold sales and decreased production volumes.

AISC in Q4’16 were $1.90 per pound of copper produced, compared with $2.00 per pound of copper produced in Q3’16, mainly due to the lower net charges for inventory write-down.

December 31, 2016 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)

Key operational metrics for 2016 and Q4’16 are as follows:

Oyu Tolgoi Production Data All data represents full production and sales on a 100% basis

4Q 1Q 2Q 3Q 4Q Full Year Full Year 2015 2016 2016 2016 2016 2016 2015

Open pit material mined (‘000 tonnes) 23,708 22,867 22,716 25,739 25,615 96,938 91,771 Ore treated (‘000 tonnes) 9,369 9,662 9,525 9,146 9,819 38,152 34,537 Average mill head grades: Copper (%) 0.69 0.70 0.64 0.66 0.61 0.65 0.67 Gold (g/t) 0.92 0.63 0.33 0.21 0.25 0.36 0.78 Silver (g/t) 1.67 1.92 1.92 1.99 1.50 1.83 1.56 Concentrates produced (‘000 tonnes) 231.8 229.5 207.1 203.2 206.7 846.6 788.5 Average concentrate grade (% Cu) 24.7 25.1 24.9 22.9 22.0 23.8 25.6 Production of metals in concentrates: Copper (‘000 tonnes) 57.3 57.6 51.7 46.6 45.5 201.3 202.2 Gold (‘000 ounces) 207 144 70 37 49 300 653 Silver (‘000 ounces) 355 395 391 361 273 1,420 1,223 Sales of metals in concentrates: Copper (‘000 tonnes) 54.7 51.2 54.4 45.7 37.6 188.9 201.3 Gold (‘000 ounces) 160 175 95 38 39 347 737 Silver (‘000 ounces) 360 305 395 341 239 1,280 1,158 Metal recovery (%) Copper 88.4 85.6 83.3 78.0 76.6 81.0 87.6 Gold 74.2 72.2 69.3 62.0 63.4 68.5 74.4 Silver 70.8 66.4 65.9 61.7 57.2 63.1 69.9

Full year 2016

Oyu Tolgoi operated at record levels in 2016. Productivity improvements in the concentrator implemented throughout the year led to throughput exceeding nameplate capacity by year end. Copper production of 201,300 tonnes for 2016 exceeded the Company’s guidance of 175,000 to 195,000 tonnes and annual gold production of 300,000 ounces exceeded 2016 guidance of 255,000 to 285,000 ounces. Compared to 2015 results, mined production for 2016 increased 5.6%, concentrator throughput increased 10.5%, copper production was similar and, as expected, gold production decreased 54.1%. Decreased gold production for 2016 reflects the grade impact from the completion of Phase 2 mining in the second half of the year.

Fourth quarter 2016

Oyu Tolgoi performed well during Q4’16 as open-pit operations focused mainly on Phases 4 and 6. Q4’16 concentrator throughput increased 7.4% over Q3’16 resulting in an average daily rate of 106,700 tonnes for the quarter, which was a quarterly high. Copper production in Q4’16 was broadly consistent with Q3’16 while gold production increased 32.4% over Q3’16 due to the final processing of Phase 2 ore. Copper grades in Q4’16 were as expected as operations focused mainly on Phase 6 of the open pit.

Operational outlook

Oyu Tolgoi is expected to produce 130,000 to 160,000 tonnes of copper and 100,000 to 140,000 ounces of gold in concentrates for 2017. Open-pit operations are expected to mine in Phases 4 and 6 during the year. In addition, stockpiled ore will be processed during the year. The lower production when compared to 2016 is primarily the result of approximately one-quarter less copper head grade and approximately one-half less gold head grade. During 2016, the mine plan for Phase 4 was divided into two stages, referred to as Phases 4A and 4B, in expectation of reaching the high-grade gold zone of Phase 4 around mid-2018. Accordingly, mine stripping for 2017 will focus on Phase 4A.

December 31, 2016 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)

Operating cash costs for 2017 are expected to be approximately $720 million compared to $775 million in 2016. The reduction reflects cost improvements and the impact of lower logistics costs from decreased production.

Capital expenditures for 2017 on a cash-basis are expected to be approximately $100 million for open-pit operations and $825 million to $925 million for underground development.

Underground development capital includes both expansion capital and VAT. In an effort to encourage bidding by Mongolian suppliers, Oyu Tolgoi has incorporated longer tendering periods resulting in a slightly longer capital deployment process. The Company continues to expect production from the first underground draw bell in mid-2020 and first sustainable production beginning in early 2021.

Open-pit capital includes approximately $40 million of deferred stripping and reflects lower maintenance costs, reduced deferred stripping costs due to optimization and improved tailings storage costs.

Sales contracts have been agreed for a significant majority of Oyu Tolgoi’s expected 2017 concentrate production.

Funding of Oyu Tolgoi by Turquoise Hill

In accordance with the Amended and Restated Shareholders’ Agreement (ARSHA) dated June 8, 2011, Turquoise Hill has funded Oyu Tolgoi’s cash requirements beyond internally generated cash flows by a combination of equity investment and shareholder debt.

For amounts funded by debt, Oyu Tolgoi must repay such amounts, including accrued interest, before it can pay common share dividends. At December 31, 2016, the aggregate outstanding balance of shareholder loans extended by subsidiaries of the Company to Oyu Tolgoi was $3.0 billion, including accrued interest of $103.9 million. These loans bear interest at an effective annual rate of LIBOR plus 6.5%.

In accordance with the ARSHA, a subsidiary of the Company has funded the common share investments in Oyu Tolgoi on behalf of Erdenes. These funded amounts earn interest at an effective annual rate of LIBOR plus 6.5% and are repayable, by Erdenes to a subsidiary of the Company, via a pledge over Erdenes’ share of Oyu Tolgoi common share dividends. Erdenes also has the right to reduce the outstanding balance by making cash payments at any time. As of December 31, 2016, the cumulative amount of such funding was $751.1 million, representing 34% of invested common share equity; unrecognized interest on the funding amounted to $302.9 million.

Updated technical report

On October 21, 2016, Turquoise Hill filed an updated compliant independently-prepared technical report under National Instrument 43-101 – Standards of Disclosure for Mineral Projects (NI 43-101) relating to the Oyu Tolgoi Project (Project). Prepared by OreWin Pty Ltd. (OreWin), the 2016 OTTR updates the Oyu Tolgoi Technical Report dated September 20, 2014 (2014 OTTR). On May 5, 2016, Turquoise Hill announced that the 2016 Oyu Tolgoi Feasibility Study (OTFS16) had been finalized and presented to the Board of Directors of Oyu Tolgoi LLC. The 2016 OTTR updates the 2014 Reserve Case to the 2016 Reserves Case based on OTFS16 and includes four Preliminary Economic Assessments with regard to the Oyu Tolgoi resources.

Highlights of the 2016 OTTR Reserves Case compared to the 2014 OTTR are as follows:

• Reserves and resources have only changed to the extent of mining depletion from open-pit operations. • Assumes a January 1, 2017 start date for production schedules and accommodates for the delayed mid-2016 underground project

restart.

December 31, 2016 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)

• Assumes processing of 1.4 billion tonnes of ore, mined from the Oyut open pit and the first lift in the Hugo North underground

block cave. • Assumes plant capacity remains at an average production rate of 40 million tonnes per annum (Mt/a). • Underground mine remains at targeted full production rate of 95,000 tonnes per day. • Updates to expansion capital and Net Present Value (NPV) range analysis.

For a more complete summary of production and financial results for the 2016 Reserves Case and a description of the Alternative Production Cases, please refer to the 2016 OTTR filed on October 21, 2016 under the Company’s profile on SEDAR at www.sedar.com.

Updated mineral reserve estimates based on the 2016 OTTR are provided in the table below.

Oyu Tolgoi Mineral Reserves 2016

Recovered Metal Ore Cu Au Ag Cu Au Ag Deposit by Classification (Mt) (%) (g/t) (g/t) (Mlb) (koz) (koz) Oyut Mineral Reserve Proven 353 0.54 0.35 1.40 3,266 2,775 11,837 Probable 598 0.39 0.23 1.11 4,058 3,103 15,977 Oyut Total (Proven and Probable) Mineral Reserve 951 0.45 0.28 1.22 7,325 5,878 27,814 Hugo North Mineral Reserve Probable (Hugo North – OT LLC) 464 1.66 0.34 3.37 15,592 4,199 43,479 Probable (Hugo North – EJV) 35 1.59 0.55 3.72 1,121 519 3,591 Hugo North Total (Probable) 499 1.66 0.35 3.40 16,713 4,717 47,070 Mineral Reserve Oyu Tolgoi Mineral Reserve Proven 353 0.54 0.35 1.40 3,266 2,775 11,837 Probable 1,097 0.97 0.29 2.15 20,771 7,820 63,047 Total Mineral Reserve 1,450 0.86 0.30 1.97 24,037 10,595 74,884

Notes: 1. Metal prices used for calculating the financial analysis are as follows: long-term copper at $3.00/lb; gold at $1,300/oz; and silver at $19.00/oz. The analysis has been calculated with

assumptions for smelter refining and treatment charges, deductions and payment terms, concentrate transport, metallurgical recoveries and royalties.

2. For mine planning, the metal prices used to calculate block model Net Smelter Return (NSR) were copper at $3.01/lb; gold at $1,250/oz; and silver at $20.37/oz.

3. The NSR is used to define the Mineral Reserve cut-offs at Oyu Tolgoi, therefore cut-off is denominated in $/t. By definition the cut-off is the point at which the costs are equal to the NSR. For the open pit processing and general administration, the following operating costs have been used to determine cut-off grades: Southwest at $8.37/t, Central Chalcocite, Central Covellite, and Central Chalcopyrite at $7.25/t and the underground (including some mining costs) costs were based on $15.34/t.

4. For the underground block cave, all Mineral Resources within the shell have been converted to Mineral Reserves. This includes Indicated Mineral Resources below the resource cut-off

grade. It also includes Inferred Mineral Resources, which have been assigned a zero grade and treated as dilution.

5. The Oyut open pit Mineral Reserves are the Mineral Reserves in the pit at the effective date of December 31, 2015. The Mineral Reserves do not include stockpiles as at that date.

6. For Oyut, only Measured Mineral Resources were used to report Proven Mineral Reserves and only Indicated Mineral Resources were used to report Probable Mineral Reserves.

7. For Hugo North, Measured and Indicated Mineral Resources were used to report Probable Mineral Reserves.

8. EJV is the Entrée–OT LLC Joint Venture. The Shivee Tolgoi and Javkhlant licenses are held by Entrée. The Shivee Tolgoi and Javkhlant licenses are planned to be operated by OT

LLC. OT LLC will receive 80% of cash flows after capital and operating costs for material originating below 560 m, and 70% above this depth.

9. The Mineral Reserves reported above were not additive to the Mineral Resources.

10. Totals may not match due to rounding.

11. The Oyut deposit was formerly known as Southern Oyu Tolgoi (SOT).

December 31, 2016 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)

Disclosure of a scientific or technical nature in respect of the 2016 OTTR was prepared by the following qualified persons: Bernard Peters, B. Eng. (Mining), FAusIMM of OreWin, who was responsible for the overall preparation of the report and the mineral reserves estimate of the report, as well as the preparation of the geotechnical sections and the sections related to and including processing, and Sharron Sylvester, B.Sc Geology, MAIG (RPGeo), of OreWin, who was responsible for preparation of the mineral resources estimate of the report, both of whom are “qualified persons” for the purposes of NI 43-101.

B. CORPORATE ACTIVITIES

Management changes

In January 2016, Turquoise Hill announced the appointment of Brendan Lane as Vice President, Operations and Development effective February 1, 2016. Mr. Lane brings 25-years of industry experience including metallurgical, mine engineering and commercial roles at Rio Tinto, Anglo American and BHP Billiton.

In February 2017, Turquoise Hill announced the retirement of Steeve Thibeault, the Company’s Chief Financial Officer, effective May 23, 2017. Turquoise Hill is conducting a search for Mr. Thibeault’s successor.

Disposal of SouthGobi Resources shares

On September 22, 2016, the Company announced it had disposed of 375,000 common shares of SouthGobi Resources Ltd. (SouthGobi) and beneficially owned or controlled less than 10% of SouthGobi’s issued and outstanding common shares. On October 12, 2016, the Company completed the sale of its remaining stake in SouthGobi.

Board changes

Effective December 31, 2016, Jill Gardiner retired from the Board of Directors of the Company. Independent director Peter Gillin, who has served as a director of Turquoise Hill since May 2012, was appointed Chairman effective January 1, 2017. Mr. Gillin has extensive experience both in the resources sector and as a corporate director.

Effective January 4, 2017, Maryse Saint-Laurent, ICD.D, was appointed to the Company’s Board as an independent director. Ms. Saint-Laurent is an accomplished legal executive, corporate director and senior advisor to boards and management teams with almost 20 years of experience in the energy and electricity sectors.

C. CORPORATE ADMINISTRATIVE EXPENSES

Corporate administrative costs in 2016 were $23.6 million, an increase of $6.4 million from 2015. The increase is principally due to professional and advisory fees relating to project finance completion and consultancy costs to simplify information technology arrangements following divestment of non-core operations.

3. SELECTED QUARTERLY DATA

The Company’s interim financial statements are reported under IFRS applicable to interim financial statements, including International Accounting Standard (IAS) 34 Interim Financial Reporting. The following table sets forth selected unaudited quarterly financial information derived from financial information for each of the eight most recent quarters.

December 31, 2016 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)

($ in millions, except per share information) Quarter Ended Dec-31 Sep-30 Jun-30 Mar-31 2016 2016 2016 2016 Revenue Copper-gold concentrate $ 224.6 $ 226.3 $ 329.7 $ 422.7

Total revenue $ 224.6 $ 226.3 $ 329.7 $ 422.7

Net income (loss) from continuing operations attributable to owners $ 93.3 $ (31.4) $ 29.8 $ 118.9

Loss from discontinued operations attributable to owners - - - -

Net income (loss) attributable to owners of Turquoise Hill $ 93.3 $ (31.4) $ 29.8 $ 118.9

Basic income (loss) per share attributable to owners of Turquoise Hill

Continuing operations $ 0.05 $ (0.02) $ 0.01 $ 0.06

Discontinued operations - - - -

Total $ 0.05 $ (0.02) $ 0.01 $ 0.06

Diluted income (loss) per share attributable to owners of Turquoise Hill

Continuing operations $ 0.05 $ (0.02) $ 0.01 $ 0.06

Discontinued operations - - - -

Total $ 0.05 $ (0.02) $ 0.01 $ 0.06

Dec-31 Sep-30 Jun-30 Mar-31 2015 2015 2015 2015 Revenue

Copper-gold concentrate $ 355.6 $ 431.7 $ 421.3 $ 426.2

Total revenue $ 355.6 $ 431.7 $ 421.3 $ 426.2

Net income from continuing operations attributable to owners $ 179.7 $ 44.0 $ 49.9 $ 67.1

Income (loss) from discontinued operations attributable to owners (8.7) (22.8) (25.0) 29.1

Net income attributable to owners of Turquoise Hill $ 171.0 $ 21.2 $ 24.9 $ 96.2

Basic income (loss) per share attributable to owners of Turquoise Hill

Continuing operations $ 0.09 $ 0.02 $ 0.02 $ 0.03

Discontinued operations - (0.01) (0.01) 0.01

Total $ 0.09 $ 0.01 $ 0.01 $ 0.04

Diluted income (loss) per share attributable to owners of Turquoise Hill

Continuing operations $ 0.09 $ 0.02 $ 0.02 $ 0.03

Discontinued operations - (0.01) (0.01) 0.01

Total $ 0.09 $ 0.01 $ 0.01 $ 0.04

4. LIQUIDITY AND CAPITAL RESOURCES

Cash flow

Operating activities. A total of $399.2 million of cash was generated from operating activities before interest and tax in 2016 compared with $650.5 million in 2015, reflecting primarily the impact of lower gold revenues, partly offset by production cost savings and decreased royalty expense.

Investing activities. Cash used in investing activities totalled $4.3 billion in 2016, compared with $81.6 million in 2015. Under the Cash Management Services Agreement, entered into on December 15, 2015 as part of Project Finance, amounts totalling $4.2 billion were placed with 9539549 Canada Inc., a wholly owned subsidiary of Rio Tinto, during 2016. The resulting receivables, which represented substantially all of the net proceeds received on drawdown of the project finance facility in 2016, are returned to Turquoise Hill as required for purposes of Oyu Tolgoi underground mine development and financing. As

December 31, 2016 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) of December 31, 2016, amounts totalling $180 million have been withdrawn and provided to Oyu Tolgoi.3 In 2016, property, plant and equipment purchases of $326.3 million related to both the Oyu Tolgoi underground project and open-pit activities (including deferred stripping and construction of tailings storage facility).

Financing activities. Cash generated from financing activities was $4.1 billion in 2016. Net proceeds from the project finance facility of $4.3 billion were partially offset by the payment of $0.2 billion of project finance fees.

Liquidity

At December 31, 2016, Turquoise Hill held consolidated cash and cash equivalents of approximately $1.4 billion (2015: $1.3 billion) and consolidated working capital4 of $69.3 million (2015: $137.0 million). Working capital fell during 2016 as the combined result of reduced inventory levels and a rise in payables associated with underground development. A $4.2 billion related-party receivable with a Rio Tinto subsidiary was recorded in 2016, representing net proceeds (after settlement of withholding taxes and transaction costs) from project finance tranches drawn down before June 30, 2016 in accordance with the Cash Management Services Agreement. Turquoise Hill draws upon this related-party receivable as required in order to fund development and financing of the underground mine. At December 31, 2016, $180 million had been re-drawn from this related-party receivable, leaving a balance of $4.0 billion.

Turquoise Hill believes that, based on its current cash position and the net project finance proceeds available to be re-drawn from the related-party receivable, it will have sufficient funds to meet its minimum obligations, including general corporate activities, for at least the next 12 months.

Capital resources

The Company considers its capital to be share capital and third-party borrowings. To effectively manage capital requirements, the Company has in place a planning and budgeting process to help determine the funds required to ensure the Company has the appropriate liquidity to meet its operating needs.

In December 2015, Oyu Tolgoi 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 at December 31, 2016. In addition to the $4.3 billion already drawn down, 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. The project finance lenders have agreed a debt cap of $6.0 billion thus allowing the potential for an additional $1.6 billion of supplemental debt in the future.

The Company’s accumulated deficit at December 31, 2016 was $4.3 billion (2015: $4.5 billion).

In March 2016, Oyu Tolgoi signed an amendment to extend the secured $200.0 million revolving credit facility with five banks that was scheduled to mature on March 19, 2016. Amounts under the credit facility were required to be used by Oyu Tolgoi for working capital purposes. The credit facility expired on drawdown under the project finance facility.

3 Please refer to Section 2.A – OYU TOLGOI – on page 6 and to Section 13 – RELATED-PARTY TRANSACTIONS – on page 36 of this MD&A. 4 The Company has revised its definition of working capital as of December 31, 2016 to reflect the operating and non-financing nature of this metric. Please refer to Section 14 – NON-GAAP MEASURES – on page 37 of this MD&A for a reconciliation of this metric to the financial statements.

December 31, 2016 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)

Financial instruments

The carrying value of Turquoise Hill’s financial instruments was as follows:

December 31, December 31, (Stated in $000’s of dollars) 2016 2015

Financial Assets Cash and cash equivalents $ 1,417,754 $ 1,343,878

Available for sale: Long-term investments 4,344 18,902

Cost method: Long-term investments 115 115

Loans and receivables:

Trade and other receivables 31,651 12,210

Due from related parties 10,906 3,623

Receivable from related party 3,976,284 -

Financial Liabilities

Trade and other payables 206,878 166,766

Payable to related parties 37,248 34,801

Borrowings (project finance facility) 4,126,117 -

Interest payable on long-term borrowings 9,279 -

Long-term investments are carried at fair value. Fair values were determined by reference to published market quotations, which may not be reflective of future values. Fair values of long-term investments with trading restrictions have been determined by applying a liquidity discount to published market quotations, which may not be reflective of future values.

Turquoise Hill is exposed to credit risk with respect to its accounts receivable, other long-term investments and cash and cash equivalents, and other financial assets including related party balances. The significant concentrations of credit risk are with counterparties situated in Mongolia, China, Canada and Europe.

Turquoise Hill is exposed to U.S. and LIBOR interest-rate risk with respect to the variable rates of interest on its third-party project finance borrowings, receivable from related party, and cash equivalents, the majority of which are at variable rates.

5. SHARE CAPITAL

As at March 23, 2017, the Company had a total of:

• 2,012,314,469 common shares outstanding;

• 529,937 incentive stock options outstanding, with a weighted average exercise price of C$12.30 per share. Each option is

exercisable to purchase a common share of the Company at prices ranging from C$6.83 to C$23.75 per share.

6. OUTLOOK

The information below is in addition to disclosures already contained in this report regarding the Company’s operations and activities.

Turquoise Hill’s financial performance and its ability to advance its future operations and development plans are heavily dependent on the availability of funding, base and precious metal prices and foreign-exchange rates. Volatility in these markets continues to be high.

December 31, 2016 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)

Funding

For further details on the Company’s financing plans, please refer to Section 4 – LIQUIDITY AND CAPITAL RESOURCES – on page 14 of this MD&A.

Copper and gold markets

In mid-February 2016, copper prices hit a 21-month high of $2.79 per pound on news of production suspensions at two major copper mines in Chile and Indonesia. By early March 2016, copper prices had eased back to $2.60 per pound on a stronger U.S. dollar and a jump in London Metal Exchange (LME) stocks. Copper prices face downside risks given the likely rise in U.S. interest rates and the eventual restart of suspended production. Copper demand indicators point to continued improvement in industrial activity. The global manufacturing Purchasing Managers’ Index rose for the sixth consecutive month in February 2016. LME stocks in Asia increased by 120,000 to 220,000 tonnes in the first half of March 2016 as large inflows reached warehouses in Singapore, Busan and Kaohsiung. Stocks in the U.S. remained broadly flat in March 2016. Chinese stocks continued to rise in advance of expected seasonal demand improvements in Q2’17. Spot treatment charges edged down in February 2016 to $75-$85 per tonne (compared to $85-$90 per tonne in January 2016) as smelters were seeking material to replace lost shipments from suspended production. Gold prices climbed to $1,262 per ounce in late February 2016, but have since retreated to approximately $1,200 per ounce on the back of a strong U.S. dollar.

Foreign exchange rates

Oyu Tolgoi’s sales are 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.

7. OFF-BALANCE SHEET ARRANGEMENTS

During the year ended December 31, 2016, 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 operations, financial condition, revenues or expenses, liquidity, capital expenditures or capital resources of the Company.

8. CONTRACTUAL OBLIGATIONS

The following table summarizes Turquoise Hill’s contractual obligations as at December 31, 2016.5

(Stated in $000’s of dollars) Payments Due by Period Less than 1 1 - 3 years 4 - 5 years After 5 years Total year Purchase obligations (1) $ 409,947 $ 126,934 $ 87,338 $ 14,554 $ 638,773 Operating leases 54,491 1,979 1,948 4,099 62,517 Finance leases 12,737 - - - 12,737 Decommissioning obligations - - - 257,396 257,396

Total 477,175 128,913 89,286 276,049 971,423

(1) These amounts mainly represent various long-term contracts that include commitments for future operating payments for supply of power, drilling, engineering, equipment rentals and

other arrangements.

5 Please refer to Section 14 – NON-GAAP MEASURES – on page 37 of this MD&A for a reconciliation of these metrics to the financial statements.

December 31, 2016 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)

9. CHANGES IN ACCOUNTING POLICIES

There were no changes in Turquoise Hill’s accounting policies during 2016.

10. 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.

A detailed summary of all of the Company’s significant accounting policies and the estimates derived therefrom is included in Note 2 to the annual consolidated financial statements for the year ended December 31, 2016. While all of the significant accounting policies are important to the Company’s consolidated financial statements, the following accounting policies and the estimates derived therefrom have been identified as being critical:

• Reserves and resources; • Recoverable amount of property, plant and equipment; • Depletion and depreciation of property, plant and equipment; • Decommissioning obligations • Deferred stripping • Income taxes; and • Net realizable value of inventories.

Reserves and resources

Mineral reserve and resource estimates are based on various assumptions relating to operating matters set forth in National Instrument 43-101. These include production costs, mining and processing recoveries, cut-off grades, long-term commodity prices, inflation rates and the costs and availability of treatment and refining services for the metals mined. Cost estimates are based on feasibility study estimates or operating history, and estimates are prepared by appropriately qualified persons (as defined in National Instrument 43-101). Estimated recoverable reserves and resources are used to determine the depreciation of property, plant and equipment at each operating mine area; to account for capitalized deferred stripping costs; to perform when required, formal assessments of the recoverable amount of property, plant and equipment; and to forecast the timing of the payment of decommissioning obligations.

Recoverable amount of property, plant and equipment

Recoverable amount is assessed at the level of the cash-generating units, which are identified as the smallest identifiable group of assets capable of generating cash inflows, which are largely independent from the cash inflows from other assets. When an impairment review is undertaken, the recoverable amount is estimated by reference to the higher of value in use and fair value less costs of disposal (FVLCD). FVLCD is usually estimated either from the value obtained from an active market where applicable, or by using discounted cash flow techniques based on detailed life-of-mine and/or production plans.

December 31, 2016 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 estimates used by management in arriving at its estimate of recoverable amount are subject to various risks and uncertainties. It is reasonably possible that changes in estimates could occur which may affect the expected recoverability of Turquoise Hill’s investments in property, plant and equipment.

Depletion and depreciation of property, plant and equipment

Property, plant and equipment comprise one of the largest components of Turquoise Hill’s assets and, as such, the amortization of these assets has a significant effect on Turquoise Hill’s financial statements.

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. Mining plant and equipment and other capital assets are depreciated over their expected economic lives using either the units-of-production method or the straight-line method. Depletion of each mineral property interest is provided on the units-of-production basis using estimated proven and probable reserves as the depletion basis.

Significant judgment is involved in the determination of the useful lives and residual values of long-lived assets. A change in the estimated useful life or residual value of a long-lived asset would result in a change in the rate of depreciation for that asset. For long- lived assets that are depleted or depreciated over proven and probable reserves using the units-of-production method, a change in the original estimate of proven and probable reserves would result in a change in the rate of depletion or deprecation.

Decommissioning obligations

Turquoise Hill has obligations for site restoration and decommissioning related to its mining properties. Turquoise Hill, using mine closure plans or other similar studies that outline the requirements planned to be carried out, estimates the future obligations for mine closure activities. Because the obligations are dependent on the laws and regulations of the countries in which the mines operate, the requirements could change as a result of amendments in those laws and regulations relating to environmental protection and other legislation affecting resource companies. In addition, the estimate includes liabilities arising from constructive obligations made by the Company. Such obligations may arise from established patterns or practice by Turquoise Hill or its affiliates (including other member companies of the Rio Tinto Group), published policies or statements of intent, or other commitments, whether contractual or informal. As a result of future reviews of its constructive obligations with respect to asset retirement, there could be adjustments to the Company’s accounting provision for site restoration and decommissioning affecting future results.

Turquoise Hill recognizes liabilities for statutory, contractual, legal and constructive obligations associated with the retirement of property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, a liability for an asset retirement obligation is recognized at its fair value in the period in which it is incurred. Upon initial recognition of the liability, the corresponding asset retirement cost is added to the carrying amount of that asset and the cost is amortized as an expense over the economic life of the related asset. Following the initial recognition of the asset retirement obligation, the carrying amount of the liability is increased for the passage of time and adjusted for changes to the amount or timing of the underlying cash flows needed to settle the obligation.

Because the estimate of obligations is based on future expectations in the determination of closure provisions, management makes a number of assumptions and judgments including estimating the amount of future reclamation costs and their timing, inflation rates and risk-free discount rates. The closure provisions are more uncertain the further into the future the mine closure activities are to be carried out. Actual costs incurred in future periods in relation to the remediation of Turquoise Hill’s existing assets could differ materially from their estimated undiscounted future value.

December 31, 2016 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 stripping

Stripping of waste material takes place throughout the production phase of a surface mine or pit. Identification of components within a mine and of life of component strip ratios is dependent on the mine’s design. Changes to that design may introduce new components and/or change the life of component strip ratios. Changes in other technical or economic parameters having an impact on ore reserves may also have an impact on the life of component strip ratios even if they do not affect the mine’s design. Changes to the life of component strip ratio are accounted for prospectively.

Income taxes

Turquoise Hill must make significant estimates in respect of the provision for income taxes and the composition of its deferred income tax assets and deferred income tax liabilities. Turquoise Hill’s operations are, in part, subject to foreign tax laws where interpretations, regulations and legislation are complex and continually changing. As a result, there are usually some tax matters in question which may, on resolution in the future, result in adjustments to the amount of deferred income tax assets and deferred income tax liabilities, and those adjustments may be material to Turquoise Hill’s financial position and results of operations.

Turquoise Hill computes the provision for deferred income taxes under the liability method. Deferred taxes arise from the recognition of the tax consequences of temporary differences by applying statutory tax rates applicable to future years to differences between the financial statement’s carrying amounts and the tax bases of certain assets and liabilities. Turquoise Hill recognizes deferred tax assets for unused tax losses, tax credits and deductible temporary differences, only to the extent it is probable that future taxable profits will be available against which they can be utilized.

The determination of the ability of Turquoise Hill to utilize tax losses carried forward to offset income taxes payable in the future requires management to exercise judgment and make assumptions about Turquoise Hill’s future performance. Management is required to assess whether Turquoise Hill is more likely than not able to benefit from these tax losses. Changes in economic conditions, metal prices, timing of taxable income streams and other factors could result in revisions to the estimates of the benefits to be realized or the timing of utilizing the losses.

Net realizable value of inventories

Inventory, including stockpiles of ore, are valued at the lower of weighted average cost and net realizable value. If ore stockpiles are not expected to be processed within the 12 months after the balance sheet date, they are included within non-current assets and net realizable value is calculated on a discounted cash flow over the planned processing timeframe for such ore. Evaluating net realizable value requires management judgment in the selection of estimates for, among other inputs, discount rate, price assumptions, timing of processing, and associated costs.

11. RECENT ACCOUNTING PRONOUNCEMENTS

A number of new standards, amendments to standards and interpretations were not yet effective, or were not mandatory for adoption, for the year ended December 31, 2016 and have therefore not been applied in preparing the annual consolidated financial statements.

The following standards may have a potential effect on the consolidated financial statements of the Company:

(i) IFRS 9, Financial Instruments, is mandatorily effective for the Company’s consolidated financial statements for the year ending December 31, 2018. IFRS 9 brings together the classification and measurement, impairment and

hedge accounting phases of the IASB’s project to replace IAS 39, Financial Instruments: Recognition and Measurement. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary

December 31, 2016 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)

measurement categories for financial assets: amortized cost; fair value through profit and loss; and fair value through other comprehensive income. IFRS 9 introduces the expected credit loss model for impairment of financial assets which replaces the incurred loss model used in IAS 39. IFRS 9 amends the rules on hedge accounting to align the accounting treatment with the risk management practices of the business. Lastly, IFRS 9

amends some of the requirements of IFRS 7, Financial Instruments: Disclosures, including added disclosures about investments in equity instruments measured at fair value in other comprehensive income, and guidance on financial liabilities and derecognition of financial instruments. A detailed review will be completed during 2017 but the Company does not currently expect the impact of these changes to be material.

the consolidated balance sheet and to define how leases and liabilities are measured. Under the new standard, a lessee is in essence required to:

a. Recognize all lease assets and liabilities (including those currently classed as operating leases) on the balance sheet, initially measured at the present value of unavoidable lease payments; b. Recognize amortization of lease assets and interest on lease liabilities in the statement of

income over the lease term; and c. Separate the total amount of cash paid into a principal portion (presented within financing activities) and interest (which companies can choose to present within operating or

financing activities consistent with presentation of any other interest paid) in the statement of cash flows.

None of the remaining standards and amendments to standards and interpretations are expected to have a significant effect on the consolidated financial statements of the Company.

December 31, 2016 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)

12. RISK 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 following is a summary description of the material risks and uncertainties to which Turquoise Hill is subject. Some of the following statements are forward-looking and actual results may differ materially from the results anticipated in these forward-looking statements. Please refer to Section 20 – FORWARD- LOOKING STATEMENTS AND FORWARD-LOOKING INFORMATION – on page 41 of this MD&A. If any of such risks or risks not currently known to Turquoise Hill actually occurs or materializes, Turquoise Hill’s business, financial condition or results of operations could be adversely affected, even materially adversely affected.

The Company may be limited in its ability to enforce the Oyu Tolgoi Investment Agreement (Investment Agreement) and the Underground Plan against Mongolia, a sovereign government.

The Investment Agreement and the Underground Plan impose numerous obligations and commitments upon the Government of Mongolia that provide clarity and certainty in respect of the development and operation of Oyu Tolgoi. The Investment Agreement also includes a dispute resolution clause that requires the parties to resolve disputes through international commercial arbitration procedures. Nevertheless, if and to the extent that the Government of Mongolia does not observe the terms and conditions of the Investment Agreement and the Underground Plan, there may be limitations on the Company’s ability to enforce the terms of the Investment Agreement and the Underground Plan against the Government of Mongolia, which is a sovereign nation, regardless of the outcome of any arbitration proceeding. If the terms of the Investment Agreement and/or the Underground Plan cannot be enforced effectively, the Company could be deprived of substantial rights and benefits arising from its investment in Oyu Tolgoi with little or no recourse against the Government of Mongolia for fair and reasonable compensation. Irrespective of the ultimate outcome of any potential dispute, any requirement to engage in discussions or proceedings with the Government of Mongolia, whether or not formal, would result in significant delays, expense and diversion of management’s attention. Such an outcome would have a material adverse impact on the Company and its share price.

Turquoise Hill’s ability to carry on business in Mongolia is subject to legal and political risks.

Although the Company expects that the Investment Agreement and the Underground Plan will continue to bring significant stability and clarity to the legal, political and operating environment in which Turquoise Hill will develop and operate Oyu Tolgoi, the Company remains subject to potential legal and political risks in Mongolia.

There can be no absolute assurance that the Company’s assets will not be subject to nationalization, requisition, expropriation or confiscation, whether legitimate or not, by any authority or body. In addition, there can be no assurance that neighbouring countries’ political and economic policies in relation to Mongolia will not have adverse economic effects on the development of the Company’s mining projects, including its ability to access power, transport and sell its products and access construction labour, supplies and materials.

There is no assurance that provisions under Mongolian law for compensation and reimbursement of losses to investors under such circumstances would be effective to restore the full value of the Company’s original investment or to compensate for the loss of the current value of the Mongolian projects. Insofar as the Government of Mongolia is a sovereign entity against which the terms of the Investment Agreement and the Underground Plan may take considerable time to enforce (if enforceable at all), this risk applies to Oyu Tolgoi despite the provisions of the Investment Agreement respecting nationalization and expropriation. There can be no assurance that Mongolian laws protecting foreign investments will not be amended or abolished or that existing laws will be enforced or interpreted to provide adequate protection against any or all of the risks described herein.

December 31, 2016 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)

The legal framework in Mongolia is, in many instances, based on recent political reforms or newly enacted legislation, which may not be consistent with long-standing conventions and customs. Although legal title risks in respect of Oyu Tolgoi are believed to be significantly mitigated by the terms of the Investment Agreement, there may still be ambiguities, inconsistencies and anomalies in the other agreements, licenses and title documents through which the Company holds its direct or indirect interests in other mineral resource properties in Mongolia, or the underlying legislation upon which those interests are based, which are atypical of more developed legal systems and which may affect the interpretation and enforcement of the Company’s rights and obligations. Many laws have been enacted, but in many instances they are neither understood nor enforced and may be applied in an inconsistent, arbitrary and unfair manner, while legal remedies may be uncertain, delayed or unavailable. These laws or their enforcement by national, regional or local authorities can adversely affect, among other things, water access rights, operating costs resulting from unanticipated increases in tariff rates and overall assessment of risk. Accordingly, while the Company believes that it has taken the legal steps necessary to obtain and hold its property and other interests in Mongolia, there can be no guarantee that such steps will be sufficient to preserve those interests.

There can be no assurance that Turquoise Hill will be able to secure the funding that it needs to continue development of the Oyu Tolgoi underground mine.

Additional funding may be required to complete the development of the underground mine, which could potentially include construction of a power facility at Oyu Tolgoi. If the full amount of project and other financing required to complete these developments of the underground mine is not available or obtainable on reasonable commercial terms for such purposes or funding from the Oyut open pit mine operations is insufficient, the Company could seek to issue Common Shares or instruments convertible into equity, including through future rights offerings, which issuances could result in dilution to the holders of Common Shares and have a material adverse effect upon the market price of Common Shares. Under the terms of the covenants forming part of the Turquoise Hill Financing Support Agreement, the Company is prohibited from creating, incurring or permitting to remain outstanding any indebtedness, other than certain permitted indebtedness, and from amending its constating documents to create and issue Preferred Shares. As a result of these restrictions, in seeking to raise additional capital, the Company may not incur indebtedness for borrowed money or issue debt securities, other securities convertible into debt securities or Preferred Shares while the covenants forming part of the Turquoise Hill Financing Support Agreement are in force and effect unless it obtains a waiver or consent from Rio Tinto International Holdings Limited (RTIH) permitting the incurrence of such indebtedness or the issuance of such securities.

Recent and future amendments to Mongolian laws could adversely affect the Company’s mining rights in Oyu Tolgoi, or make it more difficult or expensive to develop such project and carry out mining in Mongolia.

The Government of Mongolia has put in place a framework and environment for foreign direct investment. However, there are political constituencies within Mongolia that have espoused ideas that would not be regarded by the international mining industry as conducive to foreign investment if they were to become law or official government policy. There can be no assurance that the present or future Parliament will refrain from enacting legislation that undermines the Investment Agreement or otherwise adversely impacts Oyu Tolgoi or that the present or a future government will refrain from adopting government policies or seeking to renegotiate the terms of the Investment Agreement in ways that are adverse to the Company’s interests or that impair the Company’s ability to develop and operate Oyu Tolgoi or other projects on the basis presently contemplated, which may have a material adverse impact on the Company and its share price.

The Government of Mongolia holds a significant stake in Oyu Tolgoi.

Although the ARSHA contemplates that the Company will maintain a controlling interest in Oyu Tolgoi, the Government of Mongolia also holds a significant stake in Oyu Tolgoi LLC which holds the Oyu Tolgoi property. In addition, a portion of the Oyu Tolgoi property is held subject to an agreement with Entrée

December 31, 2016 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)

Gold, a Canadian exploration stage resource company in which the Company directly holds an 8.0% interest and RTIH directly holds a 9.7% interest. Therefore, the Company will be subject to risks to which shareholders are typically exposed. Such risks include the potential for disputes respecting development, operation and financing matters resulting from multiple levels of corporate and/or governmental approvals and differing sophistication in relevant business and technical matters, inequality of bargaining power and incompatible strategic and economic objectives (both in the short term and the longer term) among the shareholders.

The Investment Agreement and the Underground Plan include a number of future covenants that may be outside of the control of the Company to perform.

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

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

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

suppliers of freight and transportation services required for Oyu Tolgoi. Such services, materials and suppliers may not be available to the extent required or may be available upon commercial terms that are less advantageous than those available from other sources.

• The extension of the term of the Investment Agreement is subject to a number of conditions, including the Company having demonstrated that Oyu Tolgoi has been operated in accordance with industry best practices in terms of national and community benefits, environment and health and safety practices. The inherently subjective nature of these criteria creates the risk that the Company and the Government of Mongolia may disagree as to whether the conditions for extending the term of the Investment Agreement have been met.

Despite the Company’s best efforts, such provisions are not necessarily within its control and non-fulfilment of any such provision may result in a default or breach under the Investment Agreement and the Underground Plan. Such a default or breach could result in termination of the Investment Agreement and

December 31, 2016 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) the Underground Plan or damages accruing, which may have a material adverse impact on the Company and its share price.

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

The Investment Agreement commits Oyu Tolgoi LLC to eventually utilize Mongolian power sources. Such sources of power may not be available or may be available upon commercial terms that are less advantageous than those available from other potential power suppliers. Alternative strategies whereby the Company would undertake the construction of a power generating facility in Mongolia are likely to require further funding in addition to the existing project finance and proposed supplemental debt facilities; such funding remains subject to negotiation, and may not be available or may only be available on substantively different terms from existing facilities. Despite the Company’s best efforts, the ability to meet such an obligation is not necessarily within the Company’s control and non-fulfilment of such requirement may result in a default under the Investment Agreement. Such default could result in termination of the Investment Agreement or damages accruing, which may have a material adverse impact on the Company and its share price.

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

RTIH, a wholly-owned subsidiary of Rio Tinto, together with other Rio Tinto affiliates, owns a majority of the outstanding Common Shares and can exercise its voting power to elect all of the members of the Board of Directors, subject to applicable securities legislation. RTIH can also exercise its majority voting power to unilaterally pass any ordinary resolution submitted to a vote of the Company’s shareholders, except for resolutions in respect of which RTIH is an interested party and for which disinterested shareholder approval is required. In addition, under the December 2010 heads of agreement (HoA), RTIH was appointed as manager of Oyu Tolgoi which provides RTIH with responsibility for the management of Oyu Tolgoi. The Company’s Board of Directors appoints the Chief Executive Officer in consultation with RTIH. The Chief Executive Officer and the rest of the Company’s senior management team, are employed by affiliates of RTIH and are seconded to the Company.

RTIH is also able to exert a significant degree of control over the management, development and operation of Oyu Tolgoi, as well as the Company, through a series of governance mechanisms and restrictive covenants established under the October 2006 private placement agreement (Private Placement Agreement), the HoA and other agreements entered into with Rio Tinto. These include the Technical Committee established under the Private Placement Agreement and the Operating Committee established under the HoA, through which RTIH is able to control decisions respecting the business of Oyu Tolgoi LLC subject to a veto of the Company in respect of certain special matters.

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

A substantial portion of Turquoise Hill’s receivables and liquid asset deposits are with or managed by affiliates of Rio Tinto.

On December 15, 2015, the Company entered into the Cash Management Services Agreement with 9539549 Canada Inc., a wholly- owned subsidiary of Rio Tinto, pursuant to which the net proceeds from the Project Finance Facility are to be placed with and managed by 9539549 Canada Inc. until they are returned to Turquoise Hill for purposes of funding the underground at Oyu Tolgoi. Although RTIH has guaranteed the obligations of 9539549 Canada Inc. under the Cash Management Services Agreement, a delay in the return of such funds when requested by Turquoise Hill, or the unavailability of such funds for any reason, could result in a material adverse effect on the Company.

December 31, 2016 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)

In May 2016, the Company and its wholly-owned subsidiary, Movele S.à r.l., entered into the Movele Deposit Agreement, pursuant to which Movele S.à r.l. deposited funds with Rio Tinto Finance plc (RTF), which are invested or deposited by RTF for fixed terms. The inability of Movele S.à r.l. to access cash and cash equivalent investments on deposit with RTF under the Movele Deposit Agreement, in a timely manner or at all due to circumstances which limit RTF’s ability to return such funds to Movele S.à r.l. could have a material adverse impact on Turquoise Hill and its business.

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

The Company’s estimates regarding the cost of development and operation of Oyu Tolgoi are estimates only and are based on many assumptions and analyses made by the Company’s management in light of their experience and perception of historical trends, current conditions and expected future developments, as well as other factors management believes are appropriate in the circumstances. These estimates and the assumptions upon which they are based are subject to a variety of risks and uncertainties and other factors that could cause actual expenditures to differ materially from those estimated. If these estimates prove incorrect, the total capital expenditures required to complete development of the underground component of Oyu Tolgoi may increase, which may have a material adverse impact on the Company, its results of operations, financial condition and share price.

Changes in laws and regulations, whether actual or the interpretation thereof, could adversely impact the Company’s activities.

Compliance with these laws and regulations increases the costs of exploring, drilling, financing, developing, constructing, operating and closing mines and other facilities. It is possible that the costs, delays and other effects associated with these laws and regulations may impact the Company’s decision as to whether to continue to operate in a particular jurisdiction or whether to proceed with exploration or development of properties and the nature of related investing and financing arrangements.

December 31, 2016 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)

Since legal requirements change frequently, are subject to interpretation and may be enforced to varying degrees in practice, the Company is unable to predict the ultimate cost of compliance with these changes and their effect on operations or other business activities. Furthermore, changes in governments, regulations, interpretations, policies or practices could have an adverse impact on the Company’s future cash flows, earnings or results of operations and financial condition, which may have a material adverse impact on the Company and its share price.

Turquoise Hill is exposed to risks of changing political stability and government regulation in the countries in which it carries out its activities.

The Company carries out its activities in countries which may be affected in varying degrees by political stability, government regulations (including but not restricted to those related to the mining industry) and domestic or foreign investment therein, and by the policies of other nations in respect of these countries. Any changes in regulations or shifts in political conditions are beyond the control of the Company and may adversely affect its business. The Company’s mining, exploration and financing activities may be affected to varying degrees by government regulations, or other political and administrative undertakings, including those with respect to restrictions on production, price controls, export controls, income and other taxes, expropriation of property, employment, land use, water use, environmental legislation and mine safety. The Company may be subject to disputes or issues with customs officials affecting the shipment of the Company’s products in jurisdictions in which it operates, and the ability of its customers to collect such products may arise and could have an adverse effect on the Company’s ability to collect and/or recognize revenue. In addition, in the various jurisdictions where the Company operates and finances its business activities (including Mongolia, Canada and Europe), it may from time to time be subject to disputes with tax authorities over the interpretation and application of existing tax legislation and face risks regarding future changes in the tax laws of such jurisdictions (and future changes in the way such tax authorities interpret and apply existing tax legislation) that could increase the amount of taxes owing in later years. The Company’s activities may also be affected to varying degrees by political and economic instability, economic, investment or other sanctions imposed by other nations, terrorism, military repression, crime, extreme fluctuations in currency exchange rates and high inflation.

In certain areas where the Company is active, the regulatory environment is in a state of continuing change, and new laws, interpretations, regulations and requirements may be retroactive in their effect and implementation. The laws of certain of the countries in which the Company carries out its activities also have the potential to be applied in an inconsistent manner due to the substantial administrative discretion granted to the responsible government officials or agencies. As such, even the Company’s best efforts to comply with the laws and regulations may not result in effective compliance in the determination of government bureaucrats, which may have a material adverse impact on the Company and its share price.

A breach by the Company of its contractual agreements could have a material adverse effect on Turquoise Hill and its business.

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

The disclosed resource and reserve estimates are estimates only and are subject to change based on a variety of factors, some of which are beyond the Company’s control. Turquoise Hill’s actual production, revenues and capital expenditures may differ materially from these estimates.

The disclosed estimates of reserves and resources in the Annual Information Form (AIF) for December 31, 2016, including the anticipated tonnages and grades that are expected to be achieved or the indicated level of recovery that will be realized, are estimates and no assurances can be given as to their accuracy.

December 31, 2016 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)

Such estimates are, in large part, based on interpretations of geological data obtained from drill holes and other sampling techniques, and large-scale continuity and character of the deposits will only be determined once significant additional drilling and sampling has been completed and analyzed. Actual mineralization or formations may be different from those predicted. Reserve and resource estimates are materially dependent on prevailing metal prices and the cost of recovering and processing minerals at the individual mine sites. Market fluctuations in the price of metals or increases in the costs to recover metals from the Company’s mining projects may render mining of ore reserves uneconomical and affect the Company’s operations in a materially adverse manner. Moreover, various short-term operating factors may cause a mining operation to be unprofitable in any particular accounting period.

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

The Company uses prices reflecting market pricing projections in the financial modeling 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.

There are numerous uncertainties inherent in estimating quantities of mineral reserves and resources. The estimates referenced in this AIF are based on various assumptions relating to commodity prices and exchange rates during the expected life of production, mineralization of the area to be mined, the projected cost of mining, and the results of additional planned development work. Actual future production rates and amounts, revenues, taxes, operating expenses, environmental and regulatory compliance expenditures, development expenditures, and recovery rates may vary substantially from those assumed in the estimates. Many of the projections and estimates are based on subjective views and assumptions. Any significant change in these assumptions, including changes that result from variances between projected and actual results, could result in material downward revision to current estimates, which may have a material adverse impact on the Company and its share price.

Mining projects are sensitive to the volatility of metal prices.

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

December 31, 2016 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) and planned mining operations for an extended period, losses may be sustained and, under certain circumstances, there may be a curtailment or suspension of some or all of the Company’s mining, development and exploration activities. The Company would also have to assess the economic impact of any sustained lower metal prices on recoverability and, therefore, the cut-off grade and level of the Company’s reserves and resources. These factors could have an adverse impact on the Company’s future cash flows, earnings, results of operations, stated reserves and financial condition, which may have a material adverse impact on the Company and its share price.

Copper Gold Silver Year High Low Average High Low Average High Low Average

2012 $3.93 $3.29 $3.61 $1,792 $1,540 $1,669 $37.23 $26.67 $31.15

2013 $3.77 $3.04 $3.34 $1,694 $1,192 $1,411 $32.23 $18.61 $23.79

2014 $3.37 $2.84 $3.10 $1,385 $1,142 $1,266 $22.05 $15.28 $19.08

2015 $2.94 $2.04 $2.49 $1,296 $1,049 $1,160 $18.36 $13.67 $15.66

2016 $2.69 $1.96 $2.21 $1,366 $1,077 $1,251 $20.71 $13.58 $17.16

It is not clear at this time whether the Government of Mongolia will expect any compensation that may be payable to such third parties to be borne by Oyu Tolgoi LLC.

December 31, 2016 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) the validity and justification for Resolution No. 175 and that Resolution No. 175 will not be modified or revoked.

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

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

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

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

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

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

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

The Company conducts its operations through subsidiaries. Its ability to obtain dividends or other distributions from its subsidiaries may be subject to restrictions on dividends or repatriation of earnings

December 31, 2016 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) under applicable local law, including any tax obligations, monetary transfer restrictions and foreign currency exchange regulations in the jurisdictions in which the subsidiaries operate or are incorporated. The ability of the Company’s subsidiaries to pay dividends or to make other distributions to the Company is also subject to their having sufficient funds to do so. If its subsidiaries are unable to pay dividends or to make other distributions, the Company’s growth may be inhibited unless it is able to obtain additional equity or debt financing on acceptable terms. In the event of a subsidiary’s liquidation, the Company may lose all or a portion of its investment in that subsidiary. The Company expects to be able to rely on the terms of the Investment Agreement to pay dividends out of Mongolia, subject to certain restrictions contained in the Investment Agreement, but will be unable to do so in respect of projects that are not covered by the terms of the Investment Agreement, which may have a material adverse impact on the Company and its share price.

Turquoise Hill is subject to anti-corruption legislation.

The Company is subject to the United States’ Foreign Corrupt Practices Act and other similar legislation, such as, but not necessarily limited to, Canada’s Corruption of Foreign Public Officials Act (collectively, Anti-Corruption Legislation), which prohibits the Company or any director, officer, employee, consultant or agent of the Company or any shareholder of the Company acting on its behalf from giving, paying, offering to give or pay, or authorizing the giving or payment of any reward, advantage, benefit or anything of value to any foreign government or public official, government staff member, political party, or political candidate in an attempt to obtain or retain business, obtain an advantage in the course of business, or to otherwise induce or influence a person working in an official capacity. The Anti-Corruption Legislation also requires public companies to make and keep books and records that accurately and fairly reflect their transactions and to devise and maintain an adequate system of internal accounting controls. The Company’s international activities create the risk of unauthorized payments or offers of payments by its employees, consultants or agents, even though they may not always be subject to its control. The Company strictly prohibits these practices by its employees, consultants and agents. However, the Company’s existing safeguards and any future improvements may prove to be less than effective, and its employees, consultants or agents may engage in conduct for which the Company might be held responsible. Any failure by the Company to adopt appropriate compliance procedures and ensure that its employees, consultants and agents comply with the Anti-Corruption Legislation and applicable laws and regulations in foreign jurisdictions could result in substantial penalties or restrictions on its ability to conduct its business, which may have a material adverse impact on the Company and its share price.

Turquoise Hill may be subject to public allegations or regulatory investigations that could materially and adversely affect the Company’s business.

The Company at one time conducted exploration and mining operations in a number of jurisdictions and, as a result of such activities and operations or current or future activities and operations, may be subject to governmental or regulatory investigations and claims in or regarding those jurisdictions in which it is not currently active. A serious allegation or formal investigation by regulatory authorities (regardless of the ultimate decision) could have a material adverse impact on the Company, its reputation and its share price. There may also be considerable cost and disruption in responding to allegations or investigations and taking any remedial action.

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

The Company has investigated its rights to exploit and explore its various properties and, to the best of its knowledge, those rights are in good standing, but no assurance can be given that such rights will not be revoked, or significantly altered, to the detriment of the Company. There can also be no assurance that the Company’s rights will not be challenged or impugned by third parties. The Company has also applied for rights to explore various properties, but there is no certainty that such rights, or any additional rights

December 31, 2016 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) applied for, will be granted on terms satisfactory to the Company or at all, which may have a material adverse impact on the Company and its share price.

The Company is currently engaged in a U.S. Securities and Exchange Commission (SEC) comment letter process relating to revenue recognition accounting treatment regarding certain sales of coal by SouthGobi, which process could result in a requirement to file future supplements to or further restatements of the Company’s financial disclosure.

The Company has received comment letters from the staff (the Staff) of the SEC relating to the Annual Report on Form 40-F for the year ended December 31, 2012 filed with the SEC on March 25, 2013. The Staff’s comments addressed accounting and disclosure matters primarily related to revenue recognition accounting under U.S. Generally Accepted Accounting Principles in respect of certain sales of coal by the Company’s then majority-owned subsidiary, SouthGobi. On November 14, 2013, the Company filed restated management’s discussion and analysis and consolidated financial statements for the year ended December 31, 2012 and has concluded that such restatement appropriately addresses the timing of revenue recognition for these transactions. However, as of the date of the AIF, the Staff’s comments remain unresolved, and until these comments are resolved, the Company cannot predict whether the Staff will agree with the Company’s conclusion. The Company completed the sale of its remaining stake in SouthGobi in October 2016 and, as a result, no longer holds any shares in SouthGobi.

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

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

There is no assurance that the Company will be capable of consistently producing positive operating cash flows.

Oyu Tolgoi LLC generated positive operating cash flows in 2016. However, there is no assurance that the Company will be capable of producing positive cash flow on a consistent basis or for a sustained period of time or arranging for additional capital, whether through project debt financing or otherwise, if required, to continue open-pit operations as currently planned or in respect of additional funding requirements for the underground mine. If such additional capital is required but not available on commercially reasonable terms or at all, it may have a material adverse impact on the value of Oyu Tolgoi and, consequently, on the Company and its share price.

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

Development of a mineral property is contingent upon obtaining satisfactory exploration results. Mineral exploration and development involves substantial expenses and a high degree of risk, which even a combination of experience, knowledge and careful evaluation may not be able to adequately mitigate. There is no assurance that additional commercial quantities of ore will be discovered on any of the Company’s exploration properties. There is also no assurance that, even if commercial quantities of ore are discovered, a mineral property will be brought into commercial production. The discovery of mineral deposits is dependent upon a number of factors, not the least of which is the technical skill of the exploration personnel involved. The commercial viability of a mineral deposit, once discovered, is also dependent upon a number of factors, some of which are the particular attributes of the deposit, such as size, grade and proximity to infrastructure, metal prices and government regulations, including regulations

December 31, 2016 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) relating to royalties, allowable production, importing and exporting of minerals, and environmental protection. In addition, assuming discovery of a commercial ore body, depending on the type of mining operation involved, several years can elapse from the initial phase of drilling until commercial operations are commenced. Most of the above factors are beyond the control of the Company.

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

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

The loss of, or a substantial decline in sales to, a top customer could have a material adverse effect on the Company’s revenues and profitability.

A reduction or delay in orders from leading customers, including reductions or delays due to market, economic or competitive conditions, could have a material adverse effect upon the Company’s results of operations. Customers that previously accounted for significant revenue may not necessarily generate similar levels of or any revenue in any future period. The failure to obtain new customers or repeat orders from existing customers may materially affect the Company’s operating results. The Company anticipates that its exposure to a group of key customers in any given fiscal year will continue for the foreseeable future. There is a risk that existing customers will elect not to do business with the Company in the future or will experience financial or other difficulties.

The Company faces risks associated with enforcement of its contractual rights.

Enforcement of existing and future laws and contracts in jurisdictions in which the Company carries out its activities is subject to uncertainty, and the implementation and interpretation of them may be inconsistent. The promulgation of new laws and changes to existing laws may adversely affect foreign companies, such as the Company, with activities in or contracts with counterparties in such jurisdictions. These uncertainties could limit the legal protections available to the Company. The Company’s inability to enforce its contractual rights could have a material adverse effect on its business and profitability. In addition, the Company is exposed to risks of political instability and government regulation in the countries in which it carries out its activities. See also the risk factor titled The Company may be limited in its ability to enforce the Investment Agreement and the Underground Plan against Mongolia, a sovereign government.

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

Recruiting and retaining qualified personnel is critical to the Company’s success. The number of persons skilled in the acquisition, development and exploration of mining properties is limited and competition for such persons is intense. The Company believes that it has been successful in recruiting the necessary personnel to meet its corporate objectives but, as the Company’s business activity grows, it will require additional key financial, operational,

December 31, 2016 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) mining and management personnel, as well as additional staff on the operations side. The Company is also dependent on Rio Tinto for the secondment of skilled labour at Oyu Tolgoi, particularly in the construction and development phases. Although the Company believes that it will be successful in attracting and retaining qualified personnel, including qualified secondees from Rio Tinto, there can be no assurance of such success.

Capital markets are volatile, and capital may not at all times be available on terms acceptable to the Company or at all.

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

If the Company is required to access credit markets to carry out its development objectives, the state of domestic and international credit markets and other financial systems could affect the Company’s access to, and cost of, capital. If these credit markets were significantly disrupted, such disruptions could make it more difficult for the Company to obtain, or increase its cost of obtaining, capital and financing for its operations. Such capital may not be available on terms acceptable to the Company or at all, which may have a material adverse impact on the Company and its share price.

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

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

The Company’s business could be materially and adversely affected by litigation proceedings.

December 31, 2016 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)

The Company is subject to litigation risks. All industries, including the mining industry, are subject to legal claims, with and without merit. The Company may be required to defend against any such claims that are asserted against it, or may deem it necessary or advisable to initiate legal proceedings to protect its rights. The expense and distraction of any claims or proceedings, even with respect to claims that have no merit and whether or not resolved in the Company’s favour, could materially and adversely affect its business, operating results, and financial condition. Further, if a claim or proceeding were resolved against the Company or if it were to settle any such dispute, the Company may be required to pay damages and costs or refrain from certain activities, any of which could have a material adverse impact on the Company’s business, operating results, and financial condition.

The Company may be a passive foreign investment corporation (PFIC), which could have adverse U.S. federal income tax consequences to U.S. holders of Turquoise Hill’s common shares.

Based on the scope of its past, current and projected operations, the Company does not believe that it was a PFIC for the 2016 tax year. However, the determination of the Company’s PFIC status for any year is very fact-specific, and there can be no assurance in this regard for future years. If the Company is classified as a PFIC, U.S. holders of Common Shares could be subject to adverse U.S. federal income tax consequences, including increased tax liabilities and possible additional reporting requirements, which may have a material adverse impact on the Company and its share price.

December 31, 2016 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)

13. RELATED-PARTY TRANSACTIONS

As at December 31, 2016, Rio Tinto’s equity ownership in the Company was 50.8% (December 31, 2015: 50.8%).

The following tables present the consolidated financial statement line items within which transactions with Rio Tinto are reported.

Statements of Income Year Ended December 31, (Stated in $000’s of dollars) 2016 2015 Finance income: Cash and cash equivalents (i) $ 7,276 $ 1,393 Receivable from related party (ii) 79,384 - Cost recoveries - Turquoise Hill 3,074 3,723 Finance costs: Completion support fee (iii) (65,100) - Management services payment (iv) (32,821) (24,054) Cost recoveries - Rio Tinto (v) (44,537) (49,322) Total $ (52,724) $ (68,260)

Cash flows from investing activities Year Ended December 31, (Stated in $000’s of dollars) 2016 2015 Expenditures on property, plant and equipment: Management services payment and cost recoveries - Rio Tinto (iv),(v) $ (22,755) $ -

Balance sheets December 31, December 31, (Stated in $000’s of dollars) 2016 2015 Cash and cash equivalents (i) $ 741,711 $ 740,537 Trade and other receivables 10,906 3,623 Prepaid expenses and other assets 11,153 - Receivable from related party and other non-current financial assets (ii) 3,976,284 - Trade and other payables: Management services payment (iv) (7,839) (5,972) Cost recoveries (v) (29,409) (28,829) Total $ 4,702,806 $ 709,359

(i) In addition to placing cash and cash equivalents on deposit with banks or investing funds with other financial institutions, Turquoise Hill may deposit cash and cash equivalents with Rio Tinto in accordance with an agreed upon policy and strategy for the management of liquid resources. At December 31, 2016, cash equivalents deposited with wholly-owned subsidiaries of Rio Tinto totalled $741.7 million, earning interest at rates equivalent to those offered by financial institutions or short-term corporate debt.

(ii) As part of project finance, Turquoise Hill appointed 9539549 Canada Inc., a wholly owned subsidiary of Rio Tinto, as service provider to provide post-drawdown cash management services in connection with net proceeds from the project finance facility, which shall be placed with 9539549 Canada Inc. and returned to Turquoise Hill as required for purposes of Oyu Tolgoi underground mine development and funding. Rio Tinto International Holdings Limited, a wholly-owned subsidiary of Rio Tinto, has guaranteed the obligations of the service provider under this agreement. At December 31, 2016, amounts due from 9539549 Canada Inc. totalled $3,976.3 million, earning interest at an effective annual rate of LIBOR plus 2.45%. The interest rate reflects: interest receivable at LIBOR minus 0.05%; plus a benefit of 2.5% arising on amounts receivable from 9539549 Canada Inc. under the Cash Management Services Agreement, which are net settled with the 2.5% completion support fee described in (v) below.

December 31, 2016 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)

(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, Turquoise Hill is required to pay Rio Tinto a fee equal to 2.5% of the amounts drawn under the facility. The annual completion support fee of 2.5% on amounts drawn under the facility is accounted for as a borrowing cost and included within interest expense and similar charges. The fee is settled net of a benefit arising on amounts receivable from 9539549 Canada Inc. under the Cash Management Services Agreement described in (ii) above. The fee payment obligation will terminate on the date Rio Tinto’s CSU obligations to the project lenders terminate.

(iv) 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 of the Underground 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.

14. NON-GAAP MEASURES

The Company presents and refers to the following non-GAAP measures, which are not defined in IFRS. A description and calculation of each measure is given below and may differ from similarly named measures provided by other issuers. These measures are presented in order to provide investors and other stakeholders with additional understanding of performance and operations at Oyu Tolgoi.

Operating cash costs

The measure of 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.

C1 cash costs

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. It 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 Oyu Tolgoi 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 as a result of selling these products.

All-in sustaining costs

AISC is an extended cash based cost metric providing further information on the aggregate cash, capital and overhead outlay per unit and is intended to reflect the costs of producing the Company’s principal metal product, copper, in both the short term and over the life-cycle of its operations; as a result, sustaining capital expenditure on a cash basis is included rather than depreciation. As the measure seeks to present a full cost of copper production associated with sustaining current operations, development project capital is not included. AISC allows Turquoise Hill to assess the ability of Oyu Tolgoi to support sustaining capital expenditures for future production from the generation of operating cash flows.

December 31, 2016 Page | 37 XTurquoise 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 total operating cash costs, C1 cash costs and all-in sustaining costs is provided below.

Operating and unit costs (Three Months Ended) (Years Ended) C1 costs (Stated in $000’s of dollars) December 31, 2016 September 30, 2016 December 31, 2016 December 31, 2015 Cost of sales 184,224 232,490 861,757 974,956 Cost of sales: $/lb of copper sold 2.22 2.31 2.07 2.20 Depreciation and depletion (79,507) (88,505) (345,868) (344,543) Provision against carrying value of copper-gold concentrate 7,679 (9,706) (2,027) - Change in inventory (1,275) (27,584) (47,166) (29,444) Other operating expenses 64,517 75,871 307,719 452,539 Less: - Reversal (impairment / write-down of inventory) 10,911 (1,512) (12,509) (103,236) - Depreciation (15,114) (561) (19,476) (11,700) Management services payment to Turquoise Hill 3,927 7,335 32,821 24,054

Operating cash costs 175,362 187,828 775,251 962,626 Operating cash costs: $/lb of copper produced 1.75 1.83 1.75 2.16 Adjustments to operating cash costs (1) 28,308 24,180 118,020 98,054 Less: Gold and silver revenues (45,986) (52,163) (440,669) (805,162)

C1 costs ($‘000) 157,684 159,845 452,602 255,518

C1 costs: $/lb of copper produced 1.57 1.56 1.02 0.57

All-in sustaining costs (Stated in $000’s of dollars) Corporate administration 10,110 4,836 23,606 17,193 Asset retirement expense 1,786 1,372 6,078 5,280 Royalty expenses 13,059 13,887 68,142 120,795 Non-current stockpile and stores write-down (reversal) (10,911) 1,512 12,509 103,236 Other expenses (403) 2,771 5,253 2,607 Sustaining cash capital including deferred stripping 18,999 21,454 87,891 105,808

All-in sustaining costs ($‘000) 190,324 205,677 656,081 610,437

All-in sustaining costs: $/lb of copper produced 1.90 2.00 1.48 1.37

(1) Adjustments to 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 cost.

Working capital

Consolidated working capital6 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 sustaining of the business, working capital excludes: non-trade receivables and payables (other than accruals and payables relating to capital expenditure); financing items; cash and cash equivalents; deferred revenue and non-current inventory.

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

Working capital December 31, December 31, (Stated in $000’s of dollars) 2016 2015 Inventories (current) $ 260,668 $ 321,409 Trade and other receivables 42,557 15,833 Trade and other payables: - trade payables and accrued liabilities (196,716) (165,393) - payable to related parties (37,248) (34,801) Consolidated working capital 69,261 137,048

6 The Company previously reported consolidated working capital as the net amount of current assets and current liabilities in accordance with generally accepted accounting principles in the United States (U.S. GAAP). Beginning December 31, 2016, the Company has revised the calculation of consolidated working capital, as shown in the table above, to reflect the operational and cash generating context in which this metric is presented.

December 31, 2016 Page | 38 Turquoise Hill Resources Ltd. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Stated in U.S. dollars, except where noted)

Contractual obligations

Section 8 of this MD&A discloses contractual obligations in relation to the Company’s lease, purchase and asset retirement obligations. Amounts relating to these obligations are calculated on the basis 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 at December 31, 2016 to the financial statements and notes is provided below.

Purchase Operating leases Finance leases Decommissioning obligations obligations Commitments (MD&A) $ 638,773 $ 62,517 $ 12,737 $ 257,396 Cancellable purchase obligations (536,166) - - - (net of exit costs) Accrued capital expenditure (60,561) Discounting and other adjustments - - 289 (138,493) Financial statement amount $ 42,046 $ 62,517 $ 13,026 $ 118,903

15. DISCLOSURE CONTROLS AND PROCEDURES

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

As of the end of the Company’s fiscal year ended December 31, 2016, an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a – 15(e) and 15d – 15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act) and under National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109)) was carried out by the Company’s management with the participation of the CEO and CFO. Based upon that evaluation, the Company’s CEO and CFO concluded that as of the end of the fiscal year, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under applicable U.S. and Canadian securities legislation is (i) recorded, processed, summarized and reported within the time periods specified in such legislation and (ii) accumulated and communicated to the Company’s management, including its CEO and CFO, to allow timely decisions regarding required disclosure.

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

December 31, 2016 Page | 39 Turquoise Hill Resources Ltd. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Stated in U.S. dollars, except where noted)

16. MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal controls over financial reporting of the Company (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act and in NI 52-109). Internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS and the requirements of applicable U.S. and Canadian securities legislation.

The Company’s CEO and CFO have assessed the effectiveness of the Company’s internal controls over financial reporting as at December 31, 2016 in accordance with Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. Based on this assessment, the Company’s CEO and CFO have determined that the Company’s internal controls over financial reporting were effective as of December 31, 2016 and have certified the Company’s annual filings with the U.S. Securities and Exchange Commission on Form 40-F as required by the U.S. Sarbanes- Oxley Act and with Canadian securities regulatory authorities.

Management reviewed the results of management’s assessment with the Audit Committee of the Company’s Board of Directors. PricewaterhouseCoopers LLP, independent auditor, has been engaged to audit and provide independent opinions on the Company’s consolidated financial statements and the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016. PricewaterhouseCoopers LLP has expressed an unqualified opinion on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting as of December 31, 2016.

Changes in internal controls over financial reporting

There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the year ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

17. OVERSIGHT OF THE AUDIT COMMITTEE

The Audit Committee reviews, with management and the external auditors, the Company’s MD&A and related consolidated financial statements and approves the release of such information to shareholders. For each audit or quarterly review, the external auditors prepare a report for members of the Audit Committee summarizing key areas, significant issues and material internal control weaknesses encountered, if any.

18. QUALIFIED PERSON

Disclosure of a scientific or technical nature in this MD&A in respect of the Oyu Tolgoi mine was prepared under the supervision of Bernard Peters, Technical Director – Mining, OreWin Pty Ltd., B. Eng. (Mining), FAusIMM (201743), and Sharron Sylvester, Technical Director – Geology, OreWin Pty Ltd., BSc (Geol.), RPGeo AIG (10125). Each of these individuals is a “qualified person” as that term is defined in National Instrument Standards of Disclosure for Mineral Projects (NI 43-101).

19. 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 Mineral Resources and Mineral Reserves, readers should refer to the AIF of the Company for the year ended December 31, 2016, and other continuous disclosure documents filed by the Company since January 1, 2017 under Turquoise Hill’s profile on SEDAR at www.sedar.com.

December 31, 2016 Page | 40 Turquoise Hill Resources Ltd. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Stated in U.S. dollars, except where noted)

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 United States (U.S.) securities laws. Unless otherwise indicated, all reserve and resource estimates included in this document have been prepared in accordance with 43-101, and the Canadian Institute of Mining, Metallurgy and Petroleum 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.

Canadian standards, including NI 43-101, differ significantly from the requirements of the SEC, and reserve and resource information contained in this document may not be comparable to similar information disclosed by U.S. companies. In particular, and without limiting the generality of the foregoing, the term “resource” does not equate to the term “reserve”. Under U.S. standards, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. Among other things, all necessary permits would be required to be in hand or issuance imminent in order to classify mineralized material as reserves under the SEC standards. The SEC’s disclosure standards normally do not permit the inclusion of information concerning “Measured mineral resources”, “Indicated mineral resources” or “Inferred mineral resources” or other descriptions of the amount of mineralization in mineral deposits that do not constitute “reserves” by U.S. standards in documents filed with the SEC. U.S. investors should also understand that “Inferred mineral resources” have an even greater amount of uncertainty as to their existence and an even greater uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an “Inferred mineral resource” will ever be upgraded to a higher category. Under NI 43-101, estimated “Inferred mineral resources” generally may not form the basis of feasibility or pre-feasibility studies except in rare cases. Investors are cautioned not to assume that all or any part of an “Inferred mineral resource” exists or is economically or legally mineable. Disclosure of “contained pounds” or “contained ounces” of metal in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC standards as in-place tonnage and grade without reference to unit measures. The requirements of NI 43-101 for identification of “reserves” are also not the same as those of the SEC, and reserves reported by the Company in compliance with NI 43-101 may not qualify as “reserves” under SEC standards. Accordingly, information concerning mineral deposits set forth herein may not be comparable with information made public by companies that report in accordance with U.S. standards.

20. 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 harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements and information relate to future events or future performance, reflect current expectations or beliefs regarding future events and are typically identified by words such as “anticipate”, “could”, “should”, “expect”, “seek”, “may”, “intend”, “likely”, “plan”, “estimate”, “will”, “believe” and similar expressions suggesting future outcomes or statements regarding an outlook. These include, but are not limited to, statements respecting anticipated business activities, planned expenditures, corporate strategies, and other statements that are not historical facts.

December 31, 2016 Page | 41 Turquoise Hill Resources Ltd. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Stated in U.S. dollars, except where noted) 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, anticipated capital and operating costs, anticipated future production and cash flows, and the status of the Company’s relationship and interaction with the Government of Mongolia on the continued development of Oyu Tolgoi and Oyu Tolgoi LLC internal governance. Certain important factors that could cause actual results, performance or achievements to differ materially from those in the forward-looking statements and information include, among others, copper, gold and silver price volatility; discrepancies between actual and estimated production, mineral reserves and resources and metallurgical recoveries; development plans for processing resources; matters relating to proposed exploration or expansion; mining operational and development risks; litigation risks; regulatory restrictions (including environmental regulatory restrictions and liability); communications with local stakeholders and community relations; activities, actions or assessments by governmental authorities; events or circumstances 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; dilution; share price volatility; competition; loss of key employees; additional funding requirements; capital and operating costs, including with respect to the development of additional deposits and processing facilities; and defective title to mineral claims or property. 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 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 development of Oyu Tolgoi, the Company has based its assumptions and analyses on certain factors which are inherently uncertain. Uncertainties and assumptions include, among others: the timing and cost of the construction and expansion of mining and processing facilities; the timing and availability of a long-term power source (or availability of finance for the Company to construct such a source) for Oyu Tolgoi; the ability to draw down on the supplemental debt under the Oyu Tolgoi project financing facility and the availability of additional financing on terms reasonably acceptable to Oyu Tolgoi LLC, Rio Tinto and the Company to further develop Oyu Tolgoi; 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, in the development of the underground mine (which could significantly exceed the costs projected in the OTFS16 and the 2016 OTTR); projected copper, gold and silver prices and demand; and production estimates and the anticipated yearly production of copper, gold and silver at Oyu Tolgoi.

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

This MD&A also contains references to estimates of mineral reserves and mineral resources. The estimation of reserves and resources is inherently uncertain and involves subjective judgments about many relevant factors. The mineral resource estimates contained in this MD&A are inclusive 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 realized), 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

December 31, 2016 Page | 42 Turquoise Hill Resources Ltd. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Stated in U.S. dollars, except where noted) be mined or processed profitably. See the discussion under the headings “Language Regarding Reserves and Resources” and “Note to United States Investors Concerning Estimates of Measured, Indicated and Inferred Resources” in Section 16 of this MD&A. Such estimates are, in large part, based on the following:

• Interpretations of geological data obtained from drill holes and other sampling techniques. Large scale continuity and character of the deposits will only be determined once significant additional drilling and sampling has been completed and analyzed. Actual mineralization or formations may be different from those predicted. It may also take many years from the initial phase of drilling before production is possible, and during that time the economic feasibility of exploiting a deposit may change. Reserve and resource estimates are materially dependent on prevailing metal prices and the cost of recovering and processing minerals at the individual mine sites. Market fluctuations in the price of metals or increases in the costs to recover metals from the Company’s mining projects may render mining of ore 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;

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 modeling for Oyu Tolgoi which are subjective in nature. It should be expected that actual prices will be different than the prices used for such modeling (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 results to differ from these forward-looking statements are included in the “Risk Factors” section in the Company’s Annual Information Form dated as of March 23, 2017 in respect of the year ended December 31, 2016 (the “AIF”).

Readers are further cautioned that the list of factors enumerated in the “Risk Factors” section of the AIF that may affect future results is not exhaustive. When relying on the 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 in this MD&A 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 in this MD&A are expressly qualified by this cautionary statement.

December 31, 2016 Page | 43 Turquoise Hill Resources Ltd. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Stated in U.S. dollars, except where noted)

21. MANAGEMENT’S REPORT TO SHAREHOLDERS

The consolidated financial statements and management’s discussion and analysis of financial condition and results of operations (MD&A) are the responsibility of the management of Turquoise Hill Resources Ltd. The financial statements and the MD&A have been prepared by management in accordance with IFRS and regulatory requirements, respectively, using management’s best estimates and judgment of all information available up to March 23, 2017.

The Board of Directors has approved the information contained in the consolidated financial statements and the MD&A. The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal controls. The Audit Committee of the Board of Directors, consisting solely of outside directors, meets regularly during the year with financial officers of the Company and the external auditors to satisfy itself that management is properly discharging its financial reporting responsibilities to the Directors who approve the consolidated financial statements.

The financial statements included in the MD&A have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the accounting policies summarized in Note 2 to the consolidated financial statements.

The consolidated financial statements have been audited by PricewaterhouseCoopers LLP, independent auditor, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). They have full and unrestricted access to the Audit Committee.

/s/ Jeff Tygesen /s/ Steeve Thibeault

Jeff Tygesen Steeve Thibeault Chief Executive Officer Chief Financial Officer

March 23, 2017 Vancouver, BC, Canada

December 31, 2016 Page | 44 Exhibit 99.4

CONSENT OF INDEPENDENT AUDITOR

We hereby consent to the incorporation by reference in this Annual Report on Form 40-F (No. 001-32403) for the year ended December 31, 2016 of Turquoise Hill Resources Ltd. of our report dated March 27, 2017, relating to the consolidated financial statements and the effectiveness of internal control over financial reporting, which appears in Exhibit 99.2 incorporated by reference in this Annual Report.

We also consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-160783) of Turquoise Hill Resources Ltd. of our report dated March 27, 2017 referred to above.

/s/ PricewaterhouseCoopers LLP Chartered Professional Accountants Vancouver, British Columbia March 27, 2017 Exhibit 99.5 CONSENT OF EXPERT

I hereby consent (i) to the use of and reference to my name as a qualified person for the Oyu Tolgoi 2016 Technical Report with an effective date of October 14, 2016, and to the use of and reference to my name, in the Company’s Annual Information Form for the year ended December 31, 2016, dated March 23, 2017, and the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations, dated March 23, 2017, in each case which form part of the 40-F, and (ii) to the incorporation by reference of such information into the Company’s Registration Statement on Form S-8 (333-160783).

Sincerely,

/s/ Bernard Peters Name: Bernard Peters Title: Technical Director – Mining Company: OreWin Pty Ltd.

Date: March 27, 2017 Exhibit 99.6 CONSENT OF EXPERT

Sincerely,

/s/ Sharron Sylvester Name: Sharron Sylvester Title: Technical Director – Geology Company: OreWin Pty Ltd.

Date: March 27, 2017 Exhibit 99.7 CONSENT OF EXPERT

Reference is made to the Annual Report on Form 40-F (the “40-F”) of Turquoise Hill Resources Ltd. (the “Company”) to be filed with the United States Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, and to the Oyu Tolgoi 2016 Technical Report with an effective date as of October 14, 2016 (the “Report”).

I, Bernard Peters, on behalf of OreWin Pty Ltd., consent to the use of our name and references to the Report, or portions thereof, as described in the 40-F and documents filed as part of the 40-F, and to the incorporation by reference of such information in the Company’s Registration Statement on Form S-8 (333-160783).

Sincerely,

/s/ Bernard Peters Name: Bernard Peters Title: Technical Director – Mining Company: OreWin Pty Ltd.

Date: March 27, 2017 Exhibit 99.8

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13A-14(A) OR 15D-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934

I, Jeff Tygesen, certify that:

1. I have reviewed this annual report on Form 40-F of Turquoise Hill Resources Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

4. The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

5. The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the

issuer’s internal control over financial reporting.

Date: March 27, 2017

By: /s/ Jeff Tygesen Chief Executive Officer Exhibit 99.9

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13A-14(A) OR 15D-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934

I, Steeve Thibeault, certify that:

1. I have reviewed this annual report on Form 40-F of Turquoise Hill Resources Ltd.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the

issuer’s internal control over financial reporting.

Date: March 27, 2017

By: /s/ Steeve Thibeault Chief Financial Officer Exhibit 99.10

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350

In connection with this annual report of Turquoise Hill Resources Ltd. (the “Company”) on Form 40-F for the fiscal year ended December 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeff Tygesen, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 27, 2017

By: /s/ Jeff Tygesen Chief Executive Officer Exhibit 99.11

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350

In connection with this annual report of Turquoise Hill Resources Ltd. (the “Company”) on Form 40-F for the fiscal year ended December 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steeve Thibeault, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 27, 2017

By: /s/ Steeve Thibeault Chief Financial Officer