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Block Caving Mining-related Surface Impacts Identified at Oyu Tolgoi Mine, Mongolia:

Overview of Block Caving Mining, Extent of Surface Subsidence Projected for the Mine and Compilation of Statements from Key Oyu Tolgoi-Produced Documents with Brief Comments

Compiled December 17, 2012

by

Paul Robinson Research Director

Southwest Research and Information Center PO Box 4524

Albuquerque, New Mexico, USA 87196 sricpaul@earthlink.net

This report compiles and provides brief commentary on statements related to the large permanent collapse and subsidence zone projected to develop over the Hugo North underground mine under development for ore production using the block caving mining method at the Oyu Tolgoi mine licence area in Omnogobi Aimag [South Gobi Province], Mongolia. An overview of the Block Caving mining method from Oyu Tolgoi sources and others is included to introduce the nature and extent of surface impacts of that mining method. Surface collapse and subsidence similar to that projected at the Hugo North mine is likely to occur if the block caving mining method is used at the Heruga deposit in the Oyu Tolgoi mine license area as proposed by the operating company in 2010, though development of that deposit is ignored in the key documents reviewed in this report. Statements from the key Oyu Tolgoi documents reflecting the author’s emphasis are in bold and underlined. Key Oyu Tolgoi Documents Reviewed in this Report Integrated Development and Operation Plan and Technical Report, March 2012 (“IDOP 2012”) http://www.turquoisehill.com/s/oyu_tolgoi.asp?ReportID=518703 Integrated Development Plan and Technical Report, June 2010 (“IDP 2010”) - http://www.turquoisehill.com/s/oyu_tolgoi.asp?ReportID=379192 Environmental and Social Impact Assessment, 2012 (“ESIA 2012”) - http://ot.mn/en/node/2679

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Introduction What is the block caving mining method and why is it projected to have significant and permanent environmental and hydrologic impacts in the Oyu Tolgoi project area? Oyu Tolgoi’s ESIA 2012 provides an “Overview of Block Caving” in its Project Description as follows: P. 21 of 77 - “An Overview of Block Caving “Block caving is a high-tonnage underground bulk mining method generally applied to large homogeneous ore deposits. Ideally, the ore to be caved should be structurally weak, and the waste overburden should be weak enough to collapse over the ore without inducement as the ore is extracted. “Block caving involves excavation of natural support from beneath the ore, causing the structure of the ore body to fail and collapse into the excavated void under the force of gravity and local geo-mechanical stresses. The broken ore is then pulled out from under the caved section through a drawpoint arrangement, subsequently removing support from ore and overburden at increasing height above the initial excavation, and eventually extending the cave upward to the surface. “The attractive aspect of block caving is that only a relatively small portion of the ore must be drilled and blasted prior to extraction. Once the cave initiates, production continues without further primary drilling and blasting until the ore column above is exhausted. “The block cave mining sequence begins with access and infrastructure development, followed by excavation of the extraction level, and undercutting the ore. The sequence culminates in steady-state production from individual drawpoints. “Ore in the column is diluted by material in adjacent columns and ultimately by overburden and adjacent waste rock. When the column drawdown is complete and drawpoint grade drops below a minimum value, the drawpoint is abandoned. Great care is taken in establishing uniform draw practices throughout the mine to maximise drawpoint life and minimise dilution and stress loading from underground workings. “Block caving is a capital-intensive mining method, requiring significant investment early in the mine life for infrastructure and primary development. Once in place, the method’s high up-front costs are offset by high production rates and low operating costs (relative to other underground methods) over a considerable length of time, resulting in a low overall cost per tonne. Block cave mining is among the least costly of all underground mining methods per tonne of ore extracted. “Block caving has a number of positive attributes including no waste rock storage on the surface and no large open pits. One consequence of block cave mining, however, is the potential for surface subsidence or settling. Surface subsidence is caused as the material above the ore body gradually moves downward to replace the ore that has been mined.

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Using industry standard engineering practices, it is possible to predict both the cave and subsidence zones based on ore body knowledge gained during exploratory geological investigations. However, the best understanding of caving and subsidence will come once mining begins.” A very brief description of the block caving mining method and its environmental impacts from a 2011 issue of “Mining Magazine” states; “One of the primary disadvantages of block caving is that it removes much of the supporting rock from underneath the overburden, which often leads to subsidence of the surface. Caving induced subsidence may endanger mine infrastructure and is a major concern for operational safety. Changes to surface landforms brought about by subsidence can be dramatic and may lead to a pronounced environmental impact. Therefore, the ability to predict subsidence has become increasingly important for operational hazard and environmental impact assessments.” – “Ore Body Access” Publication Date 03 May 2011 at http://www.miningmagazine.com/equipment/orebody-access2?SQ_DESIGN_NAME=print_friendly Mining Magazine identifies operating and proposed block caving mines owned in whole or in part by Rio Tinto, current majority owner of the Oyu Tolgoi operating company as: - Northparkes copper and gold mine, Central New South Wales, Australia – 80% Rio Tinto,

20% - Sumitomo; - Palabora copper mine, Limpopo Province, South Africa – 57% Rio Tinto, 26% public, 17%

Anglo-American; - Deep Ore Zone block cave mine, Grasberg Mine, Papua, Indonesia – 40% Rio Tinto, 60% PT

Freeport Indonesia; - Hugo Dummett North and South deposits, Oyu Tolgoi gold and copper project, South Gobi

Region, Mongolia; and - Resolution Copper project, Superior, Arizona, US – 55% Rio Tinto, 45% BHP Billiton.

A description of the block caving mining method including descriptions of the open cave zone and surrounding subsidence zone at operating mines at 30 block cave mines around the world, including images of collapse and subsidence zone at 18 block caving mines, around the work is available in “Characterization and empirical analysis of block caving induced surface subsidence and

macro deformations,” Woo, K., et al, ROCKENG09: Proceedings of the 3rd CANUS Rock Mechanics Symposium, Toronto, May 2009, (Woo 2009) at: http://www.geogroup.utoronto.ca/rockeng09/proceedings/innerFrames/PDF/Session19/4044%20PAPER.pdf

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Woo 2009 includes an illustration of block cave mining identifies three zones of surface impact from block caving, an inner “Caved Zone, A surrounding “Fractured Zone” “Subsidence” zone surrounding the inner zone of greater surface deformation.

Fig. 1 “Definition of block caving subsidence zones and its quantification with respect to angles ex- tending from the undercut” (Woo 2009) The illustration from Woo 2009 is similar to the illustration of block caving in Oyu Tolgoi’s IDOP 2012

Figure 2 – “Definition of Subsidence Zone (after MMT – Permission from Rio Tinto)” from Oyu Tolgoi IDOP 2012, P. 325, - Figure 16.22

As Figures 1 and 2 demonstrate, block caving mining impacts to the land surface above and surrounding the ore extraction zone including: - a “caved zone” directly above the block caving mining area, the “caved zone” where the

surface collapses into the void below the surface from which ore has been extracted; - a “fractured zone” over the area around the “caved zone” affected by the collapse over the

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ore body where “tension cracks” develop at the surface and below the surface; and - a “continuous subsidence zone” where surface disruption and instability is likely to occur.

The extent of the “caved zone” defined by an “cave angle” or “angle of break”; the extent of the fracture zone is defined by an “angle of fracture initiation,” and the extent of the continuous subsidence zone is defined by an “angle of subsidence.” The Caved, Fractured and Subsidence Zones at Oyu Tolgoi’s Hugo North Underground Block Caving Mine are projected to exceed eight kilometers square.

The projected extent of the caved, fractured and subsidence zone at the Hugo North mine site identified by Oyu Tolgoi operators increased substantially in the IDOP 2012 from that projected in IDP 2010. The IDP 2010 projection of the caved, fracture and subsidence zone below shows the “shaft farm” area – the site shaft 2 – outside the projected continuous subsidence zone.

Figure 3 – Projected Subsidence Zone from Oyu Tolgoi IDP 2010, P. 373 (P. 398 of 629) The projected Hugo North mine subsidence zone presented in IDOP 2012, shown in Figure 4, has expanded more 500 meters resulting in the “Caved Zone” including the “Shaft Farm” area the Shaft 2 site and other infrastructure features well inside the inner ring – the projected “caved zone” of the subsidence zone – in addition to Shaft 1.

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Figure 4 - Projected Subsidence Zone from IDOP 2012 – “The projection shown in Figure 16.33 merely illustrates the extent of surface area that the generalized subsidence projections encompass. Further study is required to more accurately predict actual cave propagation.” IDOP 2012, p. 358 Propagation of the “Caved Zone” to include the Shaft Farm Area – the Shaft 2, Shaft 1 and other infrastructure features is also illustrated in the Project Description portion of the ESIA, as shown in Figure 5, below.

Figure 5 – Project Block Cave Subsidence Zone, ESIA Project Description p. 23 of 77.

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Oyu Tolgoi’s IDP 2010 acknowledged the severity of the impact of the caved zone on Shaft 1 noting, “The subsidence zone from the extraction level to the surface in projected at 60o, per SRK’s Recommendation [Figure 3 in this report](Figure 23.8.8). All planned infrastructure is outside this zone, except for Shaft No. 1. Shaft No. 1 is located inside the 60 o subsidence area at the edge of 65o subsidence line. It is assumed that Shaft No. 1 will be stripped of all conveyances once full production is achieved and will be used for ventilation only.” Oyu Tolgoi’s IDOP 2012 illustration of the project caved, fractured and subsidence zone, Figure 4 in this Report, shows that the extent of the 60o subsidence area has expanded to include Shaft No. 2 and most of the Shaft Farm area. The 60o subsidence line indicated in IDOP 2012 is approximately 500 meters west of the location of the 60o subsidence line in IDP 2010, engulfing the Shaft No. 2 site. Neither the IDOP 2012 nor the ESIA 2012 address consequences of the projected cave, fracture and subsidence zones on shaft No. 2 or the other infrastructure identified as within the projected subsidence zone. As the IDP 2010 asserted that all infrastructure other than Shaft No. 1 were to be located outside the 60o angle of subsidence zone to prevent impacts of caving, fracturing and subsidence, The lack of attention to the impacts of subsidence on areas within the 60o subsidence angle as projected in IDOP 2012 to include Shaft No. 2, the Shaft Farm area and other infrastructure appears to be a significant defect in the 2012 documents. The ESIA 2012 , in its discussion of the ‘Nature of the Impact” of proposed Oyu Tolgoi mine, in “SECTION C: IMPACT ASSESSMENT CHAPTER C4: TOPOGRAPHY, LANDSCAPE, GEOLOGY & TOPSOILS (“ESIA 2012 C4”, filename - “ESIA_OT_C4_Topography_EN.pdf”) projects the full area of the projected caved, fractured and subsidence zone above the Hugo North mine is projected as more than 8 square kilometers. ESIA – C4 at 10 of 18 states, “[T[he removal of ore through the block caving is likely to result in a subsidence zone later in the mine life as the caving propagates to the surface. Initial estimates are that this subsidence zone will cover an area of over 8 km2 and be characterised by a depression surrounded by a circular cliff- like feature with an overall cliff height in excess of 20 m, which might be manifest as a single cliff or multiple smaller cliffs. Depending on the nature of the surface manifestation of this feature, the impact will be on topography and landscape; and also on hydrogeology and hydrology (see Section C5), and potentially present a potential community safety issue if cliffs are unstable once herders are allowed back into the area following mine closure and restoration.” The full extent of the subsidence zone is projected to more than three times the size of the open pit mine planned at the site, projected to be 2 km2, at ESIA 2012, C4 p. 10. Heruga Deposit Underground Block Caving Mine Eliminated identified in Oyu Tolgoi IDP 2010 from Evaluation in IDOP 2102 and ESIA 2012 An Heruga Deposit underground block caving mine was identified as part of the Oyu Tolgoi project in the IDP 2010, as illustrated Figure 6 shows the location of that deposit.

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Figure 6 – “Idealized Profile of Southern Oyu, Hugo Dummett and Heruga Deposits (Section Looking West)” – IDP 2010, p. 15 – Figure 1.4.1.

The Underground Block Caving Mine proposed for the Heruga Deposit has been eliminated from the Project considered in the 2012 Environmental and Social Impact Assessment (ESIA 2012) as shown in the Figure 4.5 -“Profile of Ore Bodies” in the Project Description shown below as Figure 7.

Figure 7 – “Profile of Ore Bodies” - ESIA Project Description P. 16 - ESIA_OT_A4_PD_EN.pdf

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Statements Regarding Block Cave Mining-related Impacts at the Oyu Tolgoi Mine in Key Documents Associated with the Project

[Comments by the author is enclosed in brackets] Integrated Develop and Operation Plan and Technical Report, March 2012 (IDOP 2012) P. 344 ( p. 367 of 513) “The advantages of using the block caving method for Hugo North include the following: - High productivity. - Low unit cost. - High production rate. - Inherent safety (no large openings standing). The disadvantages of using the block caving method for Hugo North include the following: - High up-front capital requirements. - Long lead time to develop, construct, and commission the mine. - Intermittently high secondary breaking requirements, which may result in: - Increased personnel exposure to open drawpoints. - Increased number of production interruptions. - Increased repairs due to the blast damage. - Negative impact on draw control. - Possible ore loss and dilution if overburden fragmentation is finer than expected. - Impact on surface facilities due to subsidence. - Cave management and control issues related to the numerous high-angle structures that transect the deposit. - Possible loss of developed production areas due to cave management and geologic structure problems.” P. 345 - “Several subsidence predictions for Hugo North have been completed in the past. Initial subsidence estimates used Laubscher’s empirical approach. In 2005, SRK developed 2D FLAC analyses on selected sections and in 2008 Itasca undertook 3DEC modelling. SRK preliminary guidelines based on empirical design and simplified FLAC 2D sections recommended situating important structures no less than 60° from the footprint; the results of subsidence modelling suggested a range of 63° to 75°.” P. 346 - “Block caving involves excavation of natural support from beneath the ore, causing the ore to fail and collapse into the excavated void under the force of gravity and local geomechanical stresses. The broken ore is then pulled out from under the caved section through a drawpoint arrangement, subsequently removing support from ore and overburden at increasing height above the initial excavation, and eventually extending the cave upward to the surface.”

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P. 348 - “It is not known precisely at what angle the cave at Oyu Tolgoi will propagate. A 60° subsidence design line projected from the undercut level of all mining areas is used to locate surface infrastructure. To reduce the risk of affecting Shaft No. 1, a 65° cone from the collar is used to limit the footprint boundaries. Further study is required to more accurately predict actual caving propagation.” P. 356 - “16.4.1.7 Subsidence Evaluation The subsidence zone from the extraction level to surface was originally projected at 60°, per SRK’s recommendation (Figure 16.33 [-see below]). All planned infrastructure is outside this zone except Shaft No. 1, which is located inside the 60° subsidence area at the edge of the 65o subsidence line. It is assumed that Shaft No. 1 will be stripped of all conveyances once full production is achieved and will be used for ventilation only. Subsequent work by OTLLC and Rio Tinto have indicated that 50° is a more appropriate subsidence angle.” P. 358

P. 386 - “16.4.3.4 Water Management The risk of substantial inflows is believed to be low because no major shallow aquifers exist to drain into the underground. What aquifers do exist are likely to be substantially dewatered by the open pit development prior to any subsidence. The low rainfall, together with diversion of surface water, will further limit surface water inflow risks. Barring the interception of large aquifers, OT LLC identified the greatest risk of large water inflows is from a significant rainfall event draining into the cave after the cave has propagated to the surface.”

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Oyu Tolgoi’ s Environmental and Social Impact Assessment, June 2012 (ESIA 2012)

SECTION A: INTRODUCTION AND BACKGROUND CHAPTER A4: PROJECT DESCRIPTION [Filename - "ESIA_OT_A4_PD_EN.pdf"]

P. 14 of 77 - “Layout Some of the underground workings and the associated area of surface subsidence (due to the underground “collapse zone”) will extend north out of mining licence 6709A into Entrée Gold Inc’s Shivee Tolgoi JV Property mining licence area (see Figure 4.10 [see below]).” P. 21 of 77 - “An Overview of Block Caving Block caving is a high-tonnage underground bulk mining method generally applied to large homogeneous ore deposits. Ideally, the ore to be caved should be structurally weak, and the waste overburden should be weak enough to collapse over the ore without inducement as the ore is extracted. Block caving involves excavation of natural support from beneath the ore, causing the structure of the ore body to fail and collapse into the excavated void under the force of gravity and local geo- mechanical stresses. The broken ore is then pulled out from under the caved section through a drawpoint arrangement, subsequently removing support from ore and overburden at increasing height above the initial excavation, and eventually extending the cave upward to the surface. The attractive aspect of block caving is that only a relatively small portion of the ore must be drilled and blasted prior to extraction. Once the cave initiates, production continues without further primary drilling and blasting until the ore column above is exhausted. The block cave mining sequence begins with access and infrastructure development, followed by excavation of the extraction level, and undercutting the ore. The sequence culminates in steady-state production from individual drawpoints. Ore in the column is diluted by material in adjacent columns and ultimately by overburden and adjacent waste rock. When the column drawdown is complete and drawpoint grade drops below a minimum value, the drawpoint is abandoned. Great care is taken in establishing uniform draw practices throughout the mine to maximise drawpoint life and minimise dilution and stress loading from underground workings. Block caving is a capital-intensive mining method, requiring significant investment early in the mine life for infrastructure and primary development. Once in place, the method’s high up-front costs are offset by high production rates and low operating costs (relative to other underground methods) over a considerable length of time, resulting in a low overall cost per tonne. Block cave mining is among the least costly of all underground mining methods per tonne of ore extracted.”

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P. 21 (continued) “Block caving has a number of positive attributes including no waste rock storage on the surface and no large open pits. One consequence of block cave mining, however, is the potential for surface subsidence or settling. Surface subsidence is caused as the material above the ore body gradually moves downward to replace the ore that has been mined. Using industry standard engineering practices, it is possible to predict both the cave and subsidence zones based on ore body knowledge gained during exploratory geological investigations. However, the best understanding of caving and subsidence will come once mining begins.” P. 23 of 77 - “Subsidence Evaluation The subsidence zone from the extraction level to surface is projected to develop at an angle of 60o

as set out in Figure 4.10. All planned infrastructure is outside this zone, except for Shaft No. 1, which is located inside the 60o subsidence area at the edge of the 65o subsidence line. It is assumed that Shaft No. 1 will be stripped of all conveyances once full production is achieved and will be used for ventilation only. Subsequent work by Oyu Tolgoi and Rio Tinto in 2010/11 has indicated that 50o is a more representative subsidence angle and this has been factored into detailed engineering and design planning. It is not known precisely how the cave will propagate and be expressed as a surface depression with significant uncertainty with regards the shape of the subsidence zone and the character of any surface expression (cliffs or steep slope). The projection shown in Figure 4.10 merely illustrates the extent of surface area that the generalized subsidence projections set out. The main uncertainties lie in the structural integrity and fragmentation of the ore body once block caving commences. The on-going underground development programme, including underground excavation and drilling, will allow this model to be refined. In practice the subsidence zone will be irregular and strongly influenced by fractures, fault lines and geological boundaries within the underground ore body. It is likely to have an elongated rather than circular shape. The drainage of any groundwater within the vicinity of the subsidence zone will be strongly influenced by the size of the subsidence zone and the surrounding zone of drawdown within which surface and groundwater will drain into the block cave. Any groundwater contamination from the oxidation of rock that is exposed to air and water will be captured within the zone of drawdown and subsidence zone. Further information and assessment of this issue are included in the baseline Chapter B5: Topography, Landscape, Geology and Soils and the impact assessment Chapter C4: Topography, Landscape, Geology and Soils.”

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P. 23 - [The size of the Project Block Caving Subsidence Zone is shown in Figure 4.10 on p 23 of 77 of the ESIA Project Description - "ESIA_OT_A4_PD_EN.pdf".]

[The cave subsidence zone is the size of downtown Ulaanbaatar – roughly three kilometers by four kilometers as the location grid on Figure 4.10 shows a five- kilometer, 5000-meter spacing.] [The cave zone is unreclaimable as it is not physically stable enough for backfilling or reclamation. The large open unreclaimable cave is the part of plan at OT most likely to create a permanent "moonscape", a concern expressed by herders about the true long-term legacy of OT.] P. 46 - “Mine Dewatering “During the period of underground mining, once the fracture system generated by the subsidence above the block caving intersects the surface water bearing formations, the drawdown point for groundwater is expected to drop below the base of open pits. As an interim measure, before the revised model is available, the current model has been rerun with more appropriate hydraulic conductivities. This model rerun indicates that the drawdown (>1m) around the underground mining and the open pit will extend out to a maximum of 5 km from the pit and the subsidence zone. After mining, the underground mines will flood, but evaporative losses from the open pits will cause a long-term zone of drawdown approximately 300 m deep at the Southwest pit, with the 1 m drawdown level extending up to 5 km. The likely cone of depression will be better understood once the new model is developed; as this will take account of the variable hydraulic conductivities in the different sedimentary and bedrock lithologies, as well as barrier effects (such as the dykes

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and faults). The actual cone of depression is expected to be less than the predicted 5 km (for the 1 m contour). Given the low groundwater recharge in the region, it is likely to take at least 300 years before steady-state conditions to develop.” P. 49 - “Plant Site The selected plant site is close to the open pit and underground mines and provides a compact layout. The site is generally flat, with some relief to about 6 m height, and includes a bedrock plateau where the SAG and ball mills will be founded. All facilities are located beyond the estimated underground mine subsidence zone outline, as defined in IDP10.”

SECTION C: IMPACT ASSESSMENT CHAPTER C4: TOPOGRAPHY, LANDSCAPE, GEOLOGY & TOPSOILS

[filename - “ESIA_OT_C4_Topography_EN.pdf”]

P. 2 – “Introduction The pit, WRD [waste rock dumps], block cave subsidence and TSF [tailings storage facility] will all result in changes to the local topography.” P. 3 – “Summary of Assessment Actual and potential impacts on the topography, landscape, geology and topsoil arising from the construction, operation and closure of the Project are as follows [include]: - Construction of mine infrastructure including tailing storage facilities (TSF) and waste rock dump (WRD); - Impacts associated with open pit; - Block caving mining activities resulting in a surface subsidence zone; [among others impacts listed].” P. 10 of 18 - “Source of Impact During the operational phase, primary impacts will be on the landscape, topography and geology and will be centered on the open pit. The operational phase is unlikely to involve any major additional earthworks therefore impacts on topsoil are likely to be negligible or minor at the most. The key activities associated with the mining activities are: - Lowering of the local land surface through the development of the open pit; - Block caving and ultimately the creation of a subsidence zone over the block cave area; and - Removal of the mineral resource. Nature of Impact The operation of the mine will result in the opening up of the large permanent pit which will cover an area of over 2 km2 and extend to a depth of 800 m in 15 m high benches. These will impact the local topography and landscape; although only be visible in close proximity to the pit. To the north of this, the removal of ore through the block caving is likely to result in a subsidence zone later in the mine life as the caving propagates to the surface. Initial estimates are that this

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subsidence zone will cover an area of over 8 km2 and be characterised by a depression surrounded by a circular cliff- like feature with an overall cliff height in excess of 20 m, which might be manifest as a single cliff or multiple smaller cliffs. Depending on the nature of the surface manifestation of this feature, the impact will be on topography and landscape; and also on hydrogeology and hydrology (see Section C5), and potentially present a potential community safety issue if cliffs are unstable once herders are allowed back into the area following mine closure and restoration. Excavation of the pit and the underground mine will remove the geological resources from these areas as well as some surrounding host rock. This is a permanent and irreversible impact which is essentially balanced by the positive impact on the Mongolia economy of the Project. The resources being mined are heavily faulted and are located at the eastern distal end of a faulting zone along which some seismic activity has been recorded (see Chapter B5, Section 5.7). Given the distance from the main faults, and the lack of any significant seismicity in the area, mining activities are considered unlikely to result in any significant movement on this fault system (e.g. movement resulting in a seismic event greater than the background levels expected for this area). Mitigation Measures A detailed Mine Closure and Rehabilitation Framework to meet the Rio Tinto Closure standard and in line with the IFC mine closure guidance set out in the Sectoral Mining EHS Guidelines and the EU Mine Waste Directive (2006/21/EC) is currently being developed and is planned to be completed during 2012. This will include a funding mechanism for mine closure cost coverage in line with international good practice (see Chapter D21: Mine Closure Framework). This will include consideration of the topography and landscape and the management of the surface manifestation of the subsidence over the area of block caving. The detailed Mine Closure and Rehabilitation Framework will be submitted to, and approved by the Ministry of Nature Environment and Tourism and the Ministry of Mineral Resources and Energy.” [No information is available in the ESIA when the Detailed Mine Closure and Rehabiliation Framework will be submitted to the Mongolian Ministries identified. In most jurisdictions where detailed reclamation plans support by full financial assurance are required; the detailed reclamation plan are subject to review and approval before license to construct and operate can be issued as a matter of law and the full financial assurance is in place prior to the start of construction. At Oyu Tolgoi, the mine nearing full scale operation an no detailed mine closure and rehabilitation plan have been submitted for review, much less approved, and no financial guarantee is in place to insure completion of that detailed closure and rehabilitation plan.] P. 14 – “Nature of Impact “Following decommissioning, the main features remaining on the site will comprise the open pit, block cave subsidence area, and closed WRD and TSF. The closure of the mining operations will include the removal of the majority of the equipment and steel- framed buildings. The degree to which the concrete foundations are removed and the

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area landscaped will be subject to agreement with the local government (soum administration). All unpaved areas will be cleared and prepared (scarified) prior to topsoil being reinstated on them. Areas such as the waste disposal site will be closed, capped, and covered with subsoil and then topsoil during restoration. The open pit, upper slopes of the waste rock dumps and cliffs of the subsidence zone will be too steep to enable topsoil restoration as wind and water erosion would rapidly remove the topsoil. The top of the tailings storage facility will be restored as will the majority of the banks. P. 15 – “Impact Significance “The impact of the open pit, waste rock dumps and cliffs of the subsidence zone being too steep to enable topsoil restoration will be residual and permanent.” [emphasis in original].

SECTION C: IMPACT ASSESSMENT CHAPTER C5: WATER

[Filename – “ESIA_OT_C5_Water_EN.pdf”] P. 6 of 65 - “5.3.2. Technical Scope “Impacts during closure will relate to legacy issues associated with the long-term groundwater drawdown around the open pit and the block cave subsidence zone, the local influences on surface flows, and the drawdown in the Gunii Hooloi Cretaceous aquifer at the end of the Project’s water abstraction period.” C5 fails to provide a figures which identifies the block cave subsidence zone P. 9 – “Undai Diversion around Open Pit” does not identify extend of “cave-in” zone above block cave mine and diversions proposed to address its impacts. P. 12 Mitigation and Management Measures Minor Drainages in Mine License Area “The surface water flows collected and diverted via the diversion channel around the TSF will re-join the Budaa ephemeral watercourse below the TSF seepage collection system. Storm water run-off collected in the pit, will be used for dust suppression around the mine area. As required depending on the area affected by the block cave subsidence, local ephemeral watercourses will be diverted to minimise the run- off into the area of subsidence. The design of the diversions will be developed during the operational phase as the subsidence zone is defined.” P. 13 Closure “The internally draining area caused by the subsidence over the block caving is not anticipated to

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contain any surface water except potentially after a significant rainfall event, after which it will evaporate. This internally draining basin may, if seasonal rainfall is sufficiently consistent, provide a new habitat in the area being able to sustain more groundwater dependent plants.” [Note: “cave-in zone” above block caving underground mine will create a central “collapse zone” and surrounding “subsidence zone” feature a large open hole – “glory hole” – in the collapse zone and extensive and deep surface fractures in the “subsidence zone” preventing groundwater from collecting at the near surface to provide “new habitat” whether “seasonal rainfall is [ever] sufficiently consistent.” P. 39 Groundwater and Surface Water Contamination – Mitigation Measure “During the construction phase a permanent waste management facility (WMF) will be constructed in the north-eastern part of the mining Licence, outside of the anticipated subsidence zone associated with the block caving operations.” p. 62 “Summary of Water Resource Impacts” [Table -2nd page] Impact [of ] “Degradation or losses of surface water resources in the Undai and Budaa due to the diversions” [is associated with] Design and Mitigation Measures of “Detailed engineering solutions to the diversions to ensure that they are robust and sustainable, and ensure that surface water resources are not degraded, but passed effectively around Oyu Tolgoi’s operations, including the subsidence zone.” [No detailed design of diversions around subsidence zone provided in ESIA]

SECTION D: ENVIRONMENTAL AND SOCIAL CONSTRUCTION MANAGEMENT PLANS CHAPTER D21 – MINE CLOSURE FRAMEWORK

(Filename - ESIA_OT_D21_Mine_Closure_and_Reclamation_Plan_EN.pdf) P. 6 of 10 - “Cost Provisions for Final Mine Closure [includes, among other commitments] “A commitment to comply with the following applicable environmental and mine closure requirements under Mongolian law: - Article 37 of the Minerals Law of Mongolia (2006) outlines the restoration and management obligations of mining licence holders for the closure of a mine. These obligations include the requirement to develop mine reclamation plans within the Environmental Protection Plan (EPP). The EPP must include measures to minimise environmental impacts and reclamation including backfilling, re-grading and re-vegetation to achieve designated post-mining uses and the EPP must be approved by the applicable Mongolian authorities; and” [Neither ESIA 2012 nor IDOP 2012 mention backfill of open pits or underground mines r consequences of inability to re-grade or re-vegetate subsidence zone at block cave mines proposed.]

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P. 7 of 10 – “PREPARATION OF THE MINE CLOSURE MANAGEMENT PLAN “A previous (and preliminary) version of the Mine Closure Management Plan was prepared as part of the Mongolian Feasibility study in 2009. In addition to this, Oyu Tolgoi prepares a quarterly closure cost estimate as part of the financial reporting requirements for the parent company, Ivanhoe Mines Ltd as a Canadian listed company. Oyu Tolgoi has commissioned AMEC to prepare an updated Mine Closure Management Plan as part of the Detailed Integrated Development and Operations Plan (DIDOP). This will update the plan included in the Mongolian Feasibility Study, incorporate the most recent mine planning data and integrate Mongolian regulatory requirements, Rio Tinto standards and practices and Lender requirements – specifically the EU Mine Waste Directive (2006/21/EC) and the IFC Environmental, Health and Safety Guidelines for Mining. The Mine Closure Management Plan will be prepared and submitted as part of the operations-phase management plans and will be subject to the review and the approval of the Project Lenders. [ESIA fails to mention requirement for regulatory review and approval of mine closure management plan, intent to submit mine closure management plan for regulatory review, or intent to establish mine closure and management plan related financial assurance before mine construction – now nearing completion - or operation.] p. 8 of 10 - “Mine Closure Plan Scope of Issues to be Addressed [for] Underground Mining [includes] surface subsidence area.” p. 9 – “Post-Closure Monitoring “The Mine Closure Management Plan will set out [measures for]: Physical stability monitoring: - Open pit and subsidence area; - Mine site and disturbed areas; - Waste rock dumps; - Tailings storage facility; - Undai river diversion; and - Site security features. [and] Chemical stability: - Open pit and subsidence area; - Mine site and disturbed areas; - Waste rock dumps; - Tailings storage facility; and - Undai river diversion.