MONTREAL, Nov. 26, 2020 /CNW/ - Turquoise Hill Resources
Ltd. ("Turquoise Hill" or the "Company") today issued the following
statement regarding the published letter to Rio Tinto plc from Odey
Asset Management LLP, a short-seller in Turquoise Hill's stock and
claiming to be a shareholder of Rio Tinto who, in stark contrast
and opposition to our shareholders, profits from a decline in
Turquoise Hill's share price:
"Odey's letter to Rio Tinto contains a number of false
assumptions and misinformation about Turquoise Hill and its funding
plan. While Odey has a clear financial motive to depress Turquoise
Hill's share price, the Company is focused on executing its funding
plan and maximizing value for shareholders."
"Turquoise Hill's management team and independent directors have
previously announced a funding plan that seeks to maximize debt at
the Oyu Tolgoi LLC level and minimize (or possibly even avoid) a
rights offering, for the benefit of Turquoise Hill shareholders. We
are pursuing tangible measures to execute on that plan, including
engaging with Rio Tinto and our minority shareholders,
market-testing debt and hybrid financing alternatives and
initiating arbitration to clarify Rio Tinto's obligations to
Turquoise Hill."
"The funding Memorandum Of Understanding between Rio Tinto and
TRQ (the "funding MOU") remains in place and continues to reflect
the understandings between the parties as to funding-related
matters. Work is ongoing to implement the funding MOU in full.
Neither TRQ nor Oyu Tolgoi LLC has any intention or plan to prepay
or refinance Oyu Tolgoi LLC's existing US$4.4 billion project finance facilities (with
proceeds of a rights offering or otherwise). This facility is
expected to remain in place until its maturity. Contrary to Odey's
misleading assertions, Rio Tinto has no right to require the
prepayment, refinancing or "removal" of Oyu Tolgoi LLC's existing
project finance facilities."
"Odey mischaracterizes important aspects of the existing
financing arrangements for the Oyu Tolgoi project, including the
basis on which Rio Tinto has provided a completion support
undertaking (CSU) to the project lenders. Rio Tinto does not, in
fact, "subsidize" TRQ through the provision of this CSU or
otherwise. The CSU is a limited, contingent commitment for which
Rio Tinto is paid agreed CSU fees until "project completion," the
achievement of which is largely within Rio Tinto's control as
manager of the Oyu Tolgoi project (and in which capacity Rio Tinto
also receives management fees). From 2012 through 30 September 2020, cumulative CSU fees paid to
Rio Tinto amounted to approximately US$ 250
million, and cumulative management fees paid to Rio Tinto
amounted to approximately US$ 360
million (including approximately $115
million in cumulative management fees capitalized)."
"If the full re-profiling of Oyu Tolgoi LLC's existing project
loans is achieved and Senior Supplemental Debt in the amount of
US$500 million is raised (as
contemplated by the funding MOU), the Company then estimates an
additional US$ $1.1 billion would
need to be sourced from further bank debt, bonds or metal streaming
to fully fund Oyu Tolgoi LLC. In this scenario, no equity would be
required (based on the assumptions underlying Turquoise Hill's most
recent public disclosures). If neither the re-profiling nor any
additional debt (including Senior Supplemental Debt) or hybrid
financing is completed, Turquoise Hill expects that it would need
to raise additional equity of at least US$3.0 billion (based on the same
assumptions)."
"Contrary to Odey Asset Management's misleading assertions, in
practice, Rio Tinto's right under the 2015 financing support
agreement to initiate a process potentially leading to a mandatory
Turquoise Hill rights offering can, under the terms of the
agreement, be countered by Turquoise Hill either certifying it has
at least 180 days of cash resources or presenting a commercially
viable alternative funding proposal. As a practical matter, the
earliest time a rights offering could be triggered is estimated to
be around December 2021, being
approximately six months prior to Turquoise Hill's cash resources
being depleted. As of September 30,
2020, Turquoise Hill is forecast to have adequate cash
resources to meet the requirements of the Company, including its
operations and underground development, into Q2 2022.
Assuming successful re-profiling of the existing project debt
the Company estimates that Oyu Tolgoi will begin to generate
sufficient cash flow to fully fund its operations (including any
capital expenditure requirements requirements and assuming
successful re-profiling of existing project debt as previously
disclosed) and to meet its debt service obligations approximately
12-14 months after October 2022 (the
estimated timing for the achievement of sustainable first
production). Turquoise Hill is, consistent with its previously
announced funding strategy, actively taking steps to address its
funding gap (in whole or in part) and to extend its liquidity
depletion date by examining and evaluating various financing
options for the Oyu Tolgoi project. Such options include additional
debt from banks or international financial institutions, an
offering of global medium-term notes and a gold streaming
transaction."
"Turquoise Hill has not failed in any way to deliver the Oyu
Tolgoi project; the project is exclusively managed by a subsidiary
of Rio Tinto plc pursuant to the terms of a management
agreement."
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 (Oyu Tolgoi); Erdenes Oyu Tolgoi LLC
(Erdenes), a Mongolian state-owned entity, holds the remaining 34%
interest.
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 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 complaint filed against the Company; liquidity,
funding sources, funding requirements and planning and the status
and nature of the Company's ongoing discussions with Rio Tinto and
its subsidiaries with respect to future funding plans and
requirements (including as contemplated by the MOU); the amount of
any funding gap to complete the Oyu Tolgoi 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 prioritise 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 SOPP and related
amendments to the 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
and 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 Oyu Tolgoi and Oyu Tolgoi LLC internal governance;
the status and nature of the Company's ongoing discussions with Rio
Tinto 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, including the outcome of the class action complaint filed
against the Company; 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 specific 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 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 the Company's AIF, as supplemented by the "Risks and
Uncertainties" section of the Q3 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 Q3 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