Turquoise Hill provides an update on the Tax Arbitration and

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Algemeen advies 11/01/2021 18:11
Turquoise Hill provides an update on the Tax Arbitration and discussions with the Government of Mongolia and Proposed Class Action.

MONTREAL, January 11, 2021 - Turquoise Hill Resources Ltd. (“Turquoise Hill” or the “Company”) today announced that Oyu Tolgoi LLC (Oyu Tolgoi) has evaluated the Tax Act (“2016-2018 Taks 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 carriedforward 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.

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