MONTREAL, April 9, 2021 /CNW/ - Turquoise Hill Resources
Ltd. ("Turquoise Hill" or the "Company") and Rio Tinto today
announced that they have entered into a binding Heads of Agreement
(HoA) to provide an updated funding plan (the "Funding Plan") for
the completion of the Oyu Tolgoi LLC (OT) underground project in
Mongolia. The Funding Plan is
designed to address the estimated remaining funding requirement of
approximately US$2.3 billion[1] and
replaces the non-binding Memorandum of Understanding that Rio Tinto
and Turquoise Hill previously entered into on September 9, 2020.
Under the HoA, subject to securing approval by OT LLC and any
required support from the Government of Mongolia, Turquoise Hill and Rio Tinto
will:
- pursue re-profiling of existing project debt to better align
with the revised mine plan, project timing and cash flows to reduce
the currently projected funding requirements of OT by up to
US$1.4 billion; and
- seek to raise up to US$500
million in senior supplemental debt (SSD) under the existing
project financing arrangements from selected international
financial institutions.
In addition, Rio Tinto has committed to address any potential
shortfalls from the re-profiling and additional SSD of up to
US$750 million by providing a senior
co-lending facility (the "Co-Lending Facility") on the same terms
as OT's project financing, while Turquoise Hill has committed to
complete an equity offering of common shares for up to US$500 million in the form of, and at Turquoise
Hill's discretion, either (i) a rights offering of common shares or
(ii) a public offering or private placement of common shares, in
either case sufficient to satisfy any remaining funding shortfall
of up to US$500 million within six
months of the Co-Lending Facility becoming available.
"We are pleased to have reached a constructive and equitable
agreement with Rio Tinto to fund the Oyu Tolgoi underground
development," stated Steve
Thibeault, Interim Chief Executive Officer of Turquoise
Hill. "With a binding funding agreement now in place that sets out
a process along a known timeline, we will be able to move ahead as
expeditiously as possible with the development of the underground
project at Oyu Tolgoi. We remain committed to continue delivering a
benefit to all stakeholders, including Mongolia and its citizens, and to delivering
significant long-term value for Turquoise Hill as this project
progresses."
Rio Tinto Copper Chief Executive Bold Baatar said, "This
agreement and alignment with Turquoise Hill represents a major
milestone in the continued development of Oyu Tolgoi, which is
expected to become one of the world's largest copper mines and a
significant contributor to the Mongolian economy for years to come.
Commencing the re-profiling whilst concurrently listening, engaging
and resolving the concerns of the Government of Mongolia are critical steps to maintaining
momentum on the timely delivery of the Oyu Tolgoi Underground
Project."
Given the HoA sets out a collaborative and binding contractual
framework designed to address the known funding requirement in
order to complete the development of the OT underground project,
Turquoise Hill has determined that entering into the HoA addresses
the principal objectives that the arbitration instituted in
November 2020 had been initially
intended to achieve and, to that end, Turquoise Hill and Rio Tinto
have jointly agreed to obtain an order dismissing the current
arbitration on a without prejudice basis and without costs,
including an order vacating the interim measures order.
The HoA will be available under Turquoise Hill's profile on
SEDAR at www.sedar.com and will also be posted on Turquoise Hill's
website at www.turquoisehill.com.
About Turquoise Hill Resources
Turquoise Hill is an international mining company focused on the
operation and continued development of the Oyu Tolgoi copper-gold
mine in Mongolia, which is the
Company's principal and only material mineral resource property.
Turquoise Hill's ownership of the Oyu Tolgoi mine is held through a
66% interest in Oyu Tolgoi LLC); Erdenes Oyu Tolgoi LLC, a
Mongolian state-owned entity, holds the remaining 34% interest.
About Rio Tinto
Rio Tinto is a leading international mining group headquartered
in the UK, combining Rio Tinto plc, a London and New York Stock Exchange listed
company, and Rio Tinto Limited, which is listed on the Australian
Securities Exchange. Rio Tinto's business is finding, mining, and
processing mineral resources. Major products are iron ore,
aluminium, copper, molybdenum, diamonds, gold, industrial minerals
(borate, titanium dioxide and salt). Activities span the
world and are strongly represented in Australia and North
America with significant businesses in South America, Asia, Europe,
and southern Africa.
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: discussions with, and the
nature of the Company's relationship and interaction with, the
Government of Mongolia on the
continued operation and development of Oyu Tolgoi, including with
respect to the definitive estimate and the potential termination,
amendment or replacement of the Oyu Tolgoi Mine Development and
Financing Plan ("UDP"); the willingness and ability of the parties
to the UDP to amend or replace the UDP; the implementation and
successful execution of the funding plan that is the subject of the
Heads of Agreement ("HoA") described in this press release and the
amount of any additional future funding gap to complete the Oyu
Tolgoi Project as well as the amount and potential sources of
additional funding required therefor, all as contemplated by the
HoA; 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; the merits of the class action complaints filed against the
Company in October 2020 and
January 2021, respectively; 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, including any restrictions imposed by
health or governmental authorities relating thereto on the
Company's business, operations and financial condition; capital and
operating cost estimates; 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. 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 for
the year ended December 31, 2020
("AIF"), as supplemented by the "Risks and Uncertainties" section
of the Company's management's discussion and analysis for the
fourth quarter and year ended December 31,
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 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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1 The
estimated remaining funding requirement is based on the terms of
the HoA and current anticipated copper prices, among other factors,
and does not include funding, if any, which may become required for
a power plant.
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SOURCE TURQUOISE HILL RESOURCES LTD