MONTREAL, Jan. 11, 2021 /CNW/ - Turquoise Hill Resources
Ltd. ("Turquoise Hill" or the "Company") today announced that Oyu
Tolgoi LLC (Oyu Tolgoi) has evaluated the Tax Act ("2016-2018 Tax
Assessment") claim for approximately US$228
million from the Mongolian Tax Authority (MTA), as announced
on December 23, 2020, including the
seeking of a reduction of Oyu Tolgoi's carried-forward tax
losses by approximately US$1.5
billion.
On February 20, 2020, the Company
announced Oyu Tolgoi had been unable to reach resolution of its
previously-announced dispute with the MTA with respect to the
2013-2015 Tax Assessment and would be proceeding with the
initiation of a formal international arbitration proceeding
(Arbitration) in accordance with the dispute resolution provisions
within Chapter 14 of the Oyu Tolgoi Investment Agreement (IA)
entered into with the Government of Mongolia in 2009 and Chapter 8 of the Oyu
Tolgoi Underground Mine Development and Financing Plan (UDP)
entered into with the Government of Mongolia in 2015. The dispute resolution
provisions call for an UNCITRAL arbitration seated in London before a panel of three
arbitrators.
Oyu Tolgoi has given notice of its intention to apply to the
Tribunal in the Arbitration for leave to amend its Statement of
Claim to include the issues raised in the 2016-2018 Tax
Assessment.
As many of the matters raised in the 2016-2018 Tax Assessment
are of a similar nature to the matters raised in the 2013-2015 Tax
Assessment, Oyu Tolgoi believes amending its Statement of Claim is
an efficient and effective means of reaching resolution on both tax
assessments. Turquoise Hill remains of the view that Oyu Tolgoi LLC
has paid all taxes and charges required under the IA, the Amended
and Restated Shareholder Agreement, the UDP and Mongolian law.
In addition, the Government of Mongolia has advised Rio Tinto that it is
dissatisfied with the results of the Definitive Estimate,
which was completed and delivered by Rio Tinto and publicly
announced by the Company on December
18, 2020, and is concerned that the significant
increase in the development costs of the Oyu Tolgoi
project has eroded the economic benefits it anticipated to receive
therefrom. The Government of Mongolia has indicated that if
the Oyu Tolgoi project is not economically beneficial to the
country, it would be necessary to review and evaluate whether it
can proceed. The Government of Mongolia has stressed the importance of
achieving a comprehensive solution that addresses both
financial issues between the shareholders of Oyu Tolgoi as well as
economic and social issues of importance to Mongolia, such as water usage, tax payments,
and social issues related to employees, in order to implement
the Oyu Tolgoi project successfully. In particular, the Government
of Mongolia has expressed its
intention to initiate discussions with respect to the termination
and replacement of the UDP.
While acknowledging Oyu Tolgoi's significant contributions to
Mongolia, Turquoise Hill is
nevertheless committed to engaging immediately with the Government
of Mongolia and Rio Tinto to
address the UDP and revisit the sharing of economic benefits
arising from the Oyu Tolgoi project in the context of agreeing on a
comprehensive financing plan as well as addressing the other issues
raised.
Proposed Class Action
A legal proceeding in the Superior Court in the District of
Montreal has been served
initiating a proposed class action against the Company and certain
of its current and former officers. The claim alleges that the
defendants made material misstatements and material omissions with
respect to, among other things, the schedule, cost and progress to
completion of the development of Oyu Tolgoi in violation of, among
other things, sections 225.8, 225.9 and 225.11 of the Quebec
Securities Act. The Company believes that the complaint against
it is without merit.
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 Underground Mine
Development and Financing Plan (the Underground Plan); the
willingness and ability of the parties to the Underground Plan to
amend or replace the Underground Plan; 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 memorandum of
understanding announced on September 10,
2020 (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 and nature 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
(including the outcome of any such interactions or discussions);
the willingness and ability of the parties to the Underground Plan
to amend or replace the Underground Plan; the nature and quantum of
the current and projected economic benefits to Mongolia resulting from the continued
operation of Oyu Tolgoi; 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 complaints 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 status and nature 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
(including the outcome of any such interactions or discussions);
the willingness and ability of the parties to the Underground Plan
to amend or replace the Underground Plan; the nature and quantum of
the current and projected economic benefits to Mongolia resulting from the continued
operation of Oyu Tolgoi; 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