Turquoise Hill Resources Ltd. (Turquoise Hill or the Company) announced today that it is commencing arbitration proceedings seeking a declaration to clarify the provisions of certain agreements with Rio Tinto International Holdings Limited (RTIHL) and a related party relating to their role and obligations to support the Company in seeking additional financing for the Oyu Tolgoi project. The arbitration is being commenced in British Columbia in accordance with the relevant agreements between the parties.
The commencement of arbitration proceedings follows recent discussions with Rio Tinto relating to the re-profiling of Oyu Tolgoi LLC’s existing project debt which was contemplated by the memorandum of understanding (MOU) announced on September 10, 2020. Commencement of the arbitration was approved by the Special Committee of the Company’s Board.
The Special Committee concluded that Rio Tinto’s approach to the financing of the Oyu Tolgoi project is incompatible with the Company’s announced strategy to maximize debt and / or hybrid financing for the Oyu Tolgoi project so as to minimize the size, and defer the timing, of an equity rights offering (if any). The Special Committee believes that the arbitration will provide needed clarity from an independent third party as to the parties’ respective rights and obligations with respect to the financing process. The arbitration process is confidential, and it is expected to take between 3 and 5 months to reach a decision. The arbitrator’s decision will be final and binding on the parties.
As contemplated in the MOU, the Company is actively advancing its examination and evaluation of financing options for the Oyu Tolgoi project that could address its disclosed funding gap, in whole or in part. Such options include additional debt from banks or international financial institutions, an offering of global medium-term notes and a gold streaming transaction. It is expected that details of the Company’s preferred funding options will be presented to Rio Tinto for consideration in accordance with the MOU prior to December 31, 2020.