MONTREAL, Nov. 4, 2020 /PRNewswire/ - Turquoise Hill
Resources Ltd. (Turquoise Hill or the Company) announced today that
it is commencing arbitration proceedings seeking a declaration to
clarify the provisions of certain agreements with Rio Tinto
International Holdings Limited (RTIHL) and a related party relating
to their role and obligations to support the Company in seeking
additional financing for the Oyu Tolgoi project. The arbitration is
being commenced in British
Columbia in accordance with the relevant agreements between
the parties.
The commencement of arbitration proceedings follows recent
discussions with Rio Tinto relating to the re-profiling of Oyu
Tolgoi LLC's existing project debt which was contemplated by the
memorandum of understanding (MOU) announced on September 10, 2020. Commencement of the
arbitration was approved by the Special Committee of the Company's
Board.
The Special Committee concluded that Rio Tinto's approach to the
financing of the Oyu Tolgoi project is incompatible with the
Company's announced strategy to maximize debt and / or hybrid
financing for the Oyu Tolgoi project so as to minimize the size,
and defer the timing, of an equity rights offering (if any). The
Special Committee believes that the arbitration will provide needed
clarity from an independent third party as to the parties'
respective rights and obligations with respect to the financing
process. The arbitration process is confidential, and it is
expected to take between 3 and 5 months to reach a decision. The
arbitrator's decision will be final and binding on the parties.
As contemplated in the MOU, the Company is actively advancing
its examination and evaluation of financing options for the Oyu
Tolgoi project that could address its disclosed funding gap, in
whole or in part. Such options include additional debt from banks
or international financial institutions, an offering of global
medium-term notes and a gold streaming transaction. It is
expected that details of the Company's preferred funding options
will be presented to Rio Tinto for consideration in accordance with
the MOU prior to December 31,
2020.
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 arbitration proceedings,
including the potential benefits, timing and outcome of the
arbitration proceedings; 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 Memorandum of understanding dated
September 9, 2020 (the "MoU")); 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; 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; 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) as well as the commencement and conclusion of the
arbitration proceedings, including the potential benefits, timing
and outcome of the arbitration proceedings. 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 management's discussion and analysis
("MD&A") dated July 28, 2020.
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.
View original content to download
multimedia:http://www.prnewswire.com/news-releases/turquoise-hill-to-commence-arbitration-to-seek-clarity-with-respect-to-financing-301166706.html
SOURCE TURQUOISE HILL RESOURCES LTD