By Alex MacDonald
LONDON--Rio Tinto PLC's (RIO) has received a three-month
extension to secure a provisional financing agreement signed
earlier this year for the second phase expansion of Mongolia's
massive Oyu Tolgoi copper and gold project.
Canada-based Turquoise Hill Resources Ltd. (TRQ.T), which is
majority owned by Rio Tinto and owns 66% of Oyu Tolgoi, Monday said
the extension by 15 commercial banks until March 31, will finance
the $5.1 billion Oyu Tolgoi second phase expansion. The Mongolian
government owns the remaining 34% of Oyu Tolgoi.
Rio Tinto, the project's operator, had locked in the pricing and
terms of the financing package in April but disagreements between
the miner and the Mongolian government about scope and payback
period for the second phase meant that the financing couldn't be
completed by the year-end deadline. As a result Turquoise Hill had
to issue $2.4 billion worth of shares to pay Rio Tinto for two
interim loans that are set to expire in January.
"All parties are committed to resolving the shareholder issues
and advancing the necessary steps to restart the underground mine;
including resolution of the shareholder issues, completion of the
feasibility study, project financing, [and] permitting and
approvals," said Turquoise Hill in a statement. The study for the
second phase expansion plan is due to be completed in the first
half of 2014, the company added.
Turquoise Hill also said that Oyu Tolgoi, which began commercial
production in July, is set to produce 150,000 to 175,000 metric
tons of copper in concentrate and 700,000 to 750,000 troy ounces of
gold in concentrate next year.
Operating cash costs are forecast to reach $1 billion in 2014
and the Oyu Tolgoi's inventories should fall to more normal levels
of four to six weeks of production, it said. Inventories rose
earlier this year partly due to delays in securing Mongolian export
permits and Chinese customs clearances for its copper.
Turquoise Hill said it will "vigorously defend" itself against a
U.S. class action suit that alleges Turquoise Hill and certain
executives violated federal securities laws after Turquoise Hill
was forced to restate certain financial figures due to revised
historical revenue figures at its 56%-owned Mongolian coal miner
SouthGobi Resources Ltd. (1878.HK).
Turquoise Hill also said that it has completed the sale of a 50%
stake in privately owned Kazakh-focused gold miner Altynalmas Gold
Ltd. to Sumeru Gold BV for $235 million.
-Write to Alex MacDonald at alex.macdonald@wsj.com
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