Turquoise Hill Resources Ltd. (TSX: TRQ) (NYSE: TRQ) ("Turquoise
Hill" or the "Company") today announced that the Company and Rio
Tinto International Holdings Limited (“Rio Tinto”) have agreed to
amend the comprehensive funding arrangement to, among other things,
provide interim debt funding from Rio Tinto to address the
Company’s near-term estimated funding requirements and to extend
the date by which Turquoise Hill is required to raise additional
equity capital.
On March 14, 2022, Rio Tinto announced a non-binding proposal to
acquire the approximately 49% of the outstanding shares of
Turquoise Hill held by the Company’s minority shareholders for cash
consideration of C$34.00 per share (the “Proposal”). In response to
the Proposal, the Board of Directors of the Company formed a
special committee of independent directors (the “Special
Committee”) to review and consider the Proposal. The mandate of the
Special Committee includes responsibility for considering the
Company’s liquidity needs and financing options pending the
Company’s consideration of the Proposal.
In light of Rio Tinto’s condition in its Proposal that its offer
is subject to Turquoise Hill not raising additional equity capital,
Rio Tinto invited Turquoise Hill to propose terms for an interim
funding facility that would satisfy Turquoise Hill’s funding
requirements pending the Company’s consideration of the Proposal.
Following careful consideration by the Special Committee of the
financing options available to the Company, including a potential
equity offering, on the recommendation of the Special Committee the
Company has amended the amended and restated Heads of Agreement
dated January 24, 2022 (the “Funding HoA”).
Key terms of the amendment to the Funding HoA include:
- An extension of the date by which the Company shall have
conducted one or more equity offerings for aggregate proceeds of at
least US$650 million (the “Initial Equity Offering”) to December
31, 2022 (instead of the prior deadline of August 31, 2022);
- A commitment by Rio Tinto to provide additional short-term
bridge financing directly to the Company by way of one or more
secured advances of up to US$400 million expected to be made
available to the Company in the coming weeks subject to
satisfaction or waiver of certain conditions precedent, and which
is to be repaid out of the proceeds of the Initial Equity Offering;
and
- If Rio Tinto has not publicly withdrawn the Proposal prior to
June 30, 2022, automatic removal of the condition that the Company
have completed the Initial Equity Offering prior to drawing any
short-term secured advances of up to US$300 million (collectively,
the “Advances”) provided for in the Funding HoA.
In furtherance of its mandate, the Special Committee will
continue to consider the Company’s liquidity needs and financing
options, including potential equity offerings. The Funding HoA does
not prohibit the Company from raising additional capital by way of
an equity offering, including pending the Company’s consideration
of the Proposal. However, Rio Tinto has advised the Special
Committee that, should the Company proceed with an equity offering,
Rio Tinto intends to withdraw the Proposal. Rio Tinto has also
advised that if Turquoise Hill proceeds with an equity offering,
Rio Tinto intends to exercise its preemptive rights to maintain its
pro rata interest.
The Proposal remains non-binding in nature. There can be no
assurance that a transaction will result from the Proposal, and, if
a transaction does result, whether and when such transaction will
be completed or on what terms. Turquoise Hill does not intend to
comment on or disclose further developments regarding the Special
Committee's evaluation of the Proposal unless and until it deems
further disclosure is appropriate or required. As previously
disclosed, the Special Committee has retained BMO Capital
Markets as its financial advisor and Blake, Cassels &
Graydon LLP as its legal counsel. Also, the Special Committee has
retained TD Securities as an independent valuator to prepare a
formal valuation of the common shares of the Company in accordance
with Multilateral Instrument 61-101– Protection of Minority
Shareholders in Special Transactions.
In addition, the Company today announced that, following her
election to the Company’s Board of Directors at the Company’s
annual meeting of shareholders on May 11, 2022, the Board of
Directors appointed Caroline Donally to the Special Committee
effective May 11, 2022.
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.
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 harbour” 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”, “believe”, “could”, “estimate”, “expect”,
“intend”, “likely”, “may”, “plan”, “seek”, “should”, “will” and
similar expressions suggesting future outcomes or statements
regarding an outlook. These include, but are not limited to,
statements and information regarding: the Proposal received by the
Company from Rio Tinto, including the terms and conditions of the
Proposal and its review and evaluation by the Special Committee;
the implementation and successful execution of the updated funding
plan that is the subject of the Funding HoA, as such agreement may
be further amended or restated, and the amount of any additional
future funding gap to complete the Oyu Tolgoi project and the
availability and amount of potential sources of additional funding
required therefor, all as contemplated by the Funding HoA, as well
as potential delays in the ability of the Company and OT LLC to
proceed with the funding elements contemplated by the Funding HoA;
liquidity, funding sources and funding requirements in general, in
particular until sustainable first production is achieved,
including the Company's ability to reach agreement with project
finance lenders on the re-profiling of existing debt payments in
line with current cash flow projections, as well as the Company (or
a wholly-owned subsidiary) and OT LLC entering into a pre-paid
copper concentrate sale arrangement; the availability and amount of
potential sources of additional funding, including the short-term
secured advance to be provided by Rio Tinto to the Company under
the Funding HoA; 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 ability to conduct
one or more equity offerings as contemplated by the Funding HoA in
light of future and then prevailing market conditions; of the
Proposal and the Company’s liquidity requirements and financing
options by the Special Committee; statements regarding Rio Tinto’s
intention to withdraw its Proposal and exercise its pre-emptive
rights in the event of an equity offering by the Company; 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 possibility that the Company, its board of
directors, the Special Committee and Rio Tinto are unable to come
to an agreement on the terms and conditions of a going private
transaction or that the terms and conditions of any definitive
agreement between the Company and Rio Tinto in respect of a going
private transaction will differ from those that are currently
contemplated by the Proposal; the implementation and successful
execution of the updated funding plan that is the subject of the
Funding HoA, as such agreement may be further amended and restated;
and the amount of any additional future funding gap to complete the
Oyu Tolgoi project and the availability and amount of potential
sources of additional funding required therefor.
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 of the Company’s Annual Information Form, as supplemented
by the “Risks and Uncertainties” section of the Company’s
Management Discussion and Analysis for the first quarter ended
March 31, 2022 (“Q1 2022 MD&A”).
Readers are further cautioned that the lists of factors
enumerated in the Risk Factors section of the Company’s Annual
Information Form and the “Risks and Uncertainties” section of the
Q1 2022 MD&A that may affect future results are 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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Investors and Media Roy McDowall
roy.mcdowall@turquoisehill.com Follow us on Twitter
@TurquoiseHillRe
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