MONTREAL, Sept. 10, 2020 /PRNewswire/ - Turquoise Hill
Resources Ltd. ("Turquoise Hill" or the "Company") is
today providing an update on developments with respect to its
ongoing engagement with the Company's controlling shareholder, Rio
Tinto plc ("Rio Tinto"), concerning the long-term funding of
Oyu Tolgoi LLC ("Oyu Tolgoi").
On September 9, 2020, Turquoise
Hill and Rio Tinto signed a non-binding Memorandum of Understanding
(MOU) concerning the funding of Oyu Tolgoi that reflects the
parties' understanding to pursue a re-profiling of existing project
debt in line with current cash flow projections, including by
deferring scheduled principal repayments and extending tenors
(Re-profiling). The MOU also reflects the parties' understanding
with respect to the raising of supplemental senior debt (SSD), the
process for identifying and considering other funding options, and
the scope and timing for a Turquoise Hill equity offering (to the
extent required) to address any remaining funding gap with respect
to Oyu Tolgoi, all within the framework of existing agreements
between Turquoise Hill and Rio Tinto.
Turquoise Hill and Rio Tinto will jointly pursue the
Re-profiling process by engaging with Oyu Tolgoi's existing project
finance lenders, and expect that a successful Re-profiling would
reduce the currently-projected funding requirements of Oyu Tolgoi
by up to US$1.4 billion and extend
political risk mitigation.
Turquoise Hill and Rio Tinto will further seek to extend
political risk mitigation through the planned raising of SSD in the
form of amortizing term loans to Oyu Tolgoi in the aggregate amount
of up to US$500 million from selected
international financial institutions.
Turquoise Hill will continue to prioritize funding by way of
debt and/or hybrid financing over equity funding for the eventual
balance of Oyu Tolgoi's funding requirements. Turquoise Hill has
been informed by Rio Tinto that it does not currently support, or
expect to consent to, additional debt or other non-equity sources
of funding at Turquoise Hill or Oyu Tolgoi, although Rio Tinto has
committed in the MOU to consider all reasonable financing proposals
presented to it by Turquoise Hill, subject to the parties'
respective rights and obligations under the existing agreements
between them.
"We are pleased to have reached this understanding with Rio
Tinto, which establishes a pathway for advancing the funding
requirements of Oyu Tolgoi," stated Ulf Quellmann, Chief Executive
Officer of Turquoise Hill. "This MOU is a meaningful step towards
addressing the long-term funding needs of the project, and we look
forward to working together with Rio Tinto to reprofile Oyu
Tolgoi's existing debt and raising an additional US$500 million of project debt."
To the extent that the funding gap to complete the Oyu Tolgoi
underground project is not eliminated by the Re-profiling, the
raising of additional SSD, and additional debt and / or hybrid
financing, Turquoise Hill and Rio Tinto have acknowledged that the
balance of the funding gap will need to be satisfied by way of a
TRQ equity offering. In the MOU, the parties have recorded their
shared objective of ensuring that any required equity offering is
completed not less than 90 days prior to Turquoise Hill becoming
unable to meet its obligations as they become due.
If the Re-profiling is achieved and, SSD in the amount of
US$500 million is raised but no other
debt or hybrid financing option is successfully completed,
Turquoise Hill estimates that it would need to raise additional
equity of at least US$ 1.7 billion
(based on the facts, circumstances and the market environment which
formed the basis for the assumptions underlying Turquoise Hill's
most recent public disclosures). If the Re-profiling is not
achieved and no additional debt (including SSD) or hybrid financing
is completed, Turquoise Hill expects that it would need to raise
additional equity of at least US$3.6
billion (based on the same assumptions).
The Oyu Tolgoi Funding Memorandum of Understanding is now
available under Turquoise Hill's profile on SEDAR at www.sedar.com,
and will also be posted on our website at
www.turquoisehill.com.
Follow us on Twitter @TurquoiseHillRe
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 and information regarding: the expectations set out in
the 2020 Oyu Tolgoi Technical Report ("OTTR20"); the timing and
amount of future production and potential production delays;
statements in respect of the impacts of any delays on the Company's
cash flows; expected copper and gold grades; liquidity, funding
sources, funding requirements and planning and the status and
nature of the Company's ongoing discussions with Rio Tinto plc and
its subsidiaries with respect to future funding plans and
requirements (including as contemplated by the MOU and as disclosed
in this press release); the amount of any funding gap to complete
the Oyu Tolgoi underground project; the amount and potential
sources of additional funding; ; the Company's ability to
re-profile its existing project debt in line with current cash flow
projections; the amount by which a successful re-profiling of the
Company's existing debt would reduce the Company's
currently-projected funding requirements; the Company's and Rio
Tinto's understanding regarding the raising of supplemental senior
debt and the Company's ability to raise supplemental senior debt;
the Company's and Rio Tinto's understanding regarding the process
for identifying and considering other funding options; the
Company's and Rio Tinto's understanding regarding the scope and
timing for an equity offering by the Company to address any
remaining funding gap; the Company's intention to prioritize
funding by way of debt and/or hybrid financing over equity funding;
the Company's expectation of the anticipated funding gap in the
various scenarios described in this press release; the timing of
studies, announcements and analyses; status of underground
development; the mine design for Panel 0 of Hugo North Lift 1 and
the related cost and production schedule implications; the
re-design studies for Panels 1 and 2 of Hugo North Lift 1 and the
possible outcomes, content and timing thereof; expectations
regarding the possible recovery of ore in the two structural
pillars to the north and south of Panel 0; the possible progression
of a state-owned power plant ("SOPP") and related amendments to the
Power Source Framework Agreement ("PSFA") as well as power purchase
agreements; the timing of construction and commissioning of the
potential SOPP; sources of interim power; the potential impact of
COVID-19 on the Company's business, operations and financial
condition; capital and operating cost estimates, timing of
completion of the definitive estimate review and the scope thereof;
mill and concentrator throughput; the outcome of formal
international arbitration proceedings; anticipated business
activities, planned expenditures, corporate strategies, and other
statements that are not historical facts.
Forward-looking statements and information are made based upon
certain assumptions and other important factors that, if untrue,
could cause the actual results, performance or achievements of the
Company to be materially different from future results, performance
or achievements expressed or implied by such statements or
information. There can be no assurance that such statements or
information will prove to be accurate. Such statements and
information are based on numerous assumptions regarding present and
future business strategies, local and global economic conditions,
and the environment in which the Company will operate in the
future, including the price of copper, gold and silver; projected
gold, copper and silver grades; anticipated capital and operating
costs, anticipated future production and cash flows; the
anticipated location of certain infrastructure in Hugo North Lift
1;sequence of mining within and across panel boundaries; the
availability and timing of required governmental and other
approvals for the construction of the SOPP; the ability of the
Government of Mongolia to finance
and procure the SOPP within the timeframes anticipated in the PSFA,
as amended; the willingness of third parties to extend existing
power arrangements; the status of the Company's relationship and
interaction with the Government of Mongolia on the continued operation and
development of the Oyu Tolgoi mine and Oyu Tolgoi LLC internal
governance as well as the status and nature of the Company's
ongoing discussions with Rio Tinto plc and its subsidiaries with
respect to future funding plans and requirements, (including as
contemplated by the MoU). 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; the outcome of the
Definitive Estimate review; public health crises such as COVID-19;
matters relating to proposed exploration or expansion; mining
operational and development risks, including geotechnical risks and
ground conditions; litigation risks; regulatory restrictions
(including environmental regulatory restrictions and liability);
Oyu Tolgoi LLC or the Government of Mongolia's ability to deliver a domestic power
source for the Oyu Tolgoi project within the required contractual
time frame; communications with local stakeholders and community
relations; activities, actions or assessments, including tax
assessments, by governmental authorities; events or circumstances
(including strikes, blockades or similar events outside of the
Company's control) that may affect the Company's ability to deliver
its products in a timely manner; currency fluctuations; the
speculative nature of mineral exploration; the global economic
climate; dilution; share price volatility; competition; loss of key
employees; cyber security incidents; additional funding
requirements, including in respect of the development or
construction of a long-term domestic power supply for the Oyu
Tolgoi project; capital and operating costs, including with respect
to the development of additional deposits and processing
facilities; 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 reasonable and appropriate in
the circumstances. These statements, however, are subject to a
variety of risks and uncertainties and other factors that could
cause actual events or results to differ materially from those
projected in the forward-looking statements or information.
With respect to forward-looking information concerning the
continued operation and 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 domestic power source (or the availability of financing
for the Company or the Government of Mongolia to construct such a source) for Oyu
Tolgoi; the ability to secure and 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 as well as the status and nature of the Company's ongoing
discussions with Rio Tinto plc and its subsidiaries with respect to
future funding plans and requirements (including as contemplated by
the MOU); the potential impact of COVID-19; 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 OTTR20);
projected copper, gold and silver prices and their market demand;
and production estimates and the anticipated yearly production of
copper, gold and silver at Oyu Tolgoi.
The cost, timing and complexities of mine construction and
development are increased by the remote location of a property such
as Oyu Tolgoi. It is common in mining operations and in the
development or expansion of existing facilities to experience
unexpected problems and delays during development, construction and
mine start-up. Additionally, although Oyu Tolgoi has achieved
commercial production, there is no assurance that future
development activities will result in profitable mining
operations.
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 Company's annual information form for the year ended
December 31, 2019 ("AIF"), as
supplemented by the "Risks and Uncertainties" section of the
Company's second quarter 2020 MD&A.
Readers are further cautioned that the list of factors
enumerated in the "Risk Factors" section of the AIF and in the
"Risks and Uncertainties" section of the Company's second quarter
2020 MD&A that may affect future results is not exhaustive.
When relying on the Company's forward-looking statements and
information to make decisions with respect to the Company,
investors and others should carefully consider the foregoing
factors and other uncertainties and potential events. Furthermore,
the forward-looking statements and information contained herein are
made as of the date of this document and the Company does not
undertake any obligation to update or to revise any of the included
forward-looking statements or information, whether as a result of
new information, future events or otherwise, except as required by
applicable law. The forward-looking statements and information
contained herein are expressly qualified by this cautionary
statement.
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SOURCE TURQUOISE HILL RESOURCES LTD