Diversified major Rio Tinto will seek to raise up to
$500-million in additional lending under existing project financing
for the Oyu Tolgoi underground project,
The company owns Oyu Tolgoi through its
majority ownership in Toronto-listed Turquoise Hill, which has a 66% interest
in the Oyu Tolgoi copper/gold mine.
In a statement announcing a memorandum of understanding (MoU) on
funding, Rio Tinto and Turquoise Hill said that they would pursue reprofiling
of principle debt repayments with lenders under existing project finance
arrangements to better align with the revised mine plan, project timing
and cash flows.
Turquoise Hill would also continue to
explore other options for additional debt funding, but Rio Tinto did not expect
to consent to any additional debt or sources of funding.
The companies stated that any balance of the funding required for Oyu
Tolgoi to achieve completion of the underground mine
would need to be met by way of a Turquoise Hill equity offering.
"The MOU agreed today with Turquoise
Hill provides a clear funding pathway for the completion of the Oyu
Tolgoi underground project,”
said Rio Tinto copper and diamonds CE Arnaud Soirat.
Rio Tinto in July confirmed that the underground project would
cost between $1.3-billionand $1.8-billion more than the original $5.3-billion
capital estimate. First sustainable production had also been delayed by between
21 and 29 months, compared with the 2016 feasibility study guidance.
The cost estimate adjustments followed an
updated feasibility study, which incorporated a new mine design for Panel 0,
which would be the first panel for mining at the underground project.
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