Rio Tinto's Turquoise Hill Stake Unchanged
LONDON--Mining titan Rio Tinto PLC (>> Rio Tinto plc) has kept its majority stake in Turquoise Hill Resources Ltd (>> Turquoise Hill Resources Ltd) unchanged at 50.8% following the successful completion of a $2.4 billion rights issue.
Turquoise Hill, the 66% owner of Mongolia's Oyu Tolgoi copper and gold deposit, said Monday that its rights issue was over-subscribed but declined to say by how much.
Rio Tinto, Turquoise Hill's largest shareholder and Oyu Tolgoi's project operator, said it spent 1.29 billion Canadian dollars, or $1.19 billion, in order to maintain its 50.8% Turquoise Hill stake. It didn't acquire any additional shares as part of a standby agreement because the rights issue was fully subscribed, the miner said.
Rio Tinto, however, did receive anti-dilution warrants that if exercised alongside other warrants, would increase the Anglo-Australian miner's stake in Turquoise Hill to 54.2%. Rio Tinto said it has "no present intention" to exercise those warrants.
Robert Friedland, the company's founder, also fully subscribed to his share of the rights issue, a source familiar with the matter said. Mr. Friedland owns about a 10% stake in the company.
Turquoise Hill announced in November plans to issue $2.4 billion worth of shares in order to pay back an equal amount of loans due to Rio Tinto later this month.
Turquoise Hill had initially planned to pay off the loans by securing project financing in 2013 for the underground expansion of the mine, where about 70% of the project's mineral value lies. But Rio Tinto put the expansion on hold last summer after the Mongolian government unexpectedly announced that the project's financing would have to be approved first by parliament. Rio Tinto and the Mongolian government have been at loggerheads for more than a year over the project's investment terms given government concerns about escalating costs and the impact it may have on the timeline for the government's return from the project, among other things.
Turquoise Hill said last year that progress has been made in resolving the issues with the Mongolian government, which owns a 34% stake in the deposit. Rio Tinto also said it has secured a commitment from 15 commercial banks to extend the signing date for a provisional $4 billion financing package negotiated last year to the end of March.
Oyu Tolgoi is forecast to produce between 150,000 metric tons and 175,000 tons of copper in concentrate and 700,000 troy ounces to 750,000 oz of gold in concentrate this year after exporting its first copper in July.
Mr Friedland said he expects the Oyu Tolgoi to generate significant cash flow from this year onward.
"This is the first time that the mine will be debt free and in full commercial production. So there is nowhere to go but up," he told The Wall Street Journal in an interview on Dec 20 after visiting the mine.
He said that the company has about $750 million worth of copper and gold in inventory and could cover this year's forecast $1 billion in operating costs if Oyu Tolgoi were to sell its 750,000 oz. of forecast gold production at the current gold price of about $1,200/oz.
"That means you get the copper for basically nothing," he said.
Mr. Friedland said he wasn't particularly concerned about the two to three outstanding issues that he said still need to be resolved between Turquoise Hill, Rio Tinto and the Mongolian government. "All the players have stated that they are looking for a successful resolution and I think it's a virtual certainty that we will see it next year," he said.
Rio Tinto plans to unveil an updated feasibility study for the underground expansion project in the first half of this year.
Write to Alex MacDonald at alex.macdonald@wsj.com
Stocks mentioned in the article : Rio Tinto plc, Turquoise Hill Resources Ltd
Turquoise Hill, the 66% owner of Mongolia's Oyu Tolgoi copper and gold deposit, said Monday that its rights issue was over-subscribed but declined to say by how much.
Rio Tinto, Turquoise Hill's largest shareholder and Oyu Tolgoi's project operator, said it spent 1.29 billion Canadian dollars, or $1.19 billion, in order to maintain its 50.8% Turquoise Hill stake. It didn't acquire any additional shares as part of a standby agreement because the rights issue was fully subscribed, the miner said.
Rio Tinto, however, did receive anti-dilution warrants that if exercised alongside other warrants, would increase the Anglo-Australian miner's stake in Turquoise Hill to 54.2%. Rio Tinto said it has "no present intention" to exercise those warrants.
Robert Friedland, the company's founder, also fully subscribed to his share of the rights issue, a source familiar with the matter said. Mr. Friedland owns about a 10% stake in the company.
Turquoise Hill announced in November plans to issue $2.4 billion worth of shares in order to pay back an equal amount of loans due to Rio Tinto later this month.
Turquoise Hill had initially planned to pay off the loans by securing project financing in 2013 for the underground expansion of the mine, where about 70% of the project's mineral value lies. But Rio Tinto put the expansion on hold last summer after the Mongolian government unexpectedly announced that the project's financing would have to be approved first by parliament. Rio Tinto and the Mongolian government have been at loggerheads for more than a year over the project's investment terms given government concerns about escalating costs and the impact it may have on the timeline for the government's return from the project, among other things.
Turquoise Hill said last year that progress has been made in resolving the issues with the Mongolian government, which owns a 34% stake in the deposit. Rio Tinto also said it has secured a commitment from 15 commercial banks to extend the signing date for a provisional $4 billion financing package negotiated last year to the end of March.
Oyu Tolgoi is forecast to produce between 150,000 metric tons and 175,000 tons of copper in concentrate and 700,000 troy ounces to 750,000 oz of gold in concentrate this year after exporting its first copper in July.
Mr Friedland said he expects the Oyu Tolgoi to generate significant cash flow from this year onward.
"This is the first time that the mine will be debt free and in full commercial production. So there is nowhere to go but up," he told The Wall Street Journal in an interview on Dec 20 after visiting the mine.
He said that the company has about $750 million worth of copper and gold in inventory and could cover this year's forecast $1 billion in operating costs if Oyu Tolgoi were to sell its 750,000 oz. of forecast gold production at the current gold price of about $1,200/oz.
"That means you get the copper for basically nothing," he said.
Mr. Friedland said he wasn't particularly concerned about the two to three outstanding issues that he said still need to be resolved between Turquoise Hill, Rio Tinto and the Mongolian government. "All the players have stated that they are looking for a successful resolution and I think it's a virtual certainty that we will see it next year," he said.
Rio Tinto plans to unveil an updated feasibility study for the underground expansion project in the first half of this year.
Write to Alex MacDonald at alex.macdonald@wsj.com
Stocks mentioned in the article : Rio Tinto plc, Turquoise Hill Resources Ltd
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