Turquoise Hill - CEO, Ulf Quellmann
CEO, Ulf Quellmann
Source: Spectris
  • Mining giant Turquoise Hill (TRQ) plunged 25 per cent this morning, after revealing a C$4.7 billion funding gap for its Oyu Tolgoi project in Mongolia
  • Due to its current cash flow projections, Turquoise Hill has been forced to negotiate a new non-binding Memorandum of Understanding with its majority shareholder ASX-listed Rio Tinto (RIO)
  • The new MOU will defer payments owed to Rio Tinto and extend the loan’s tenor, resulting in up to approximately C$1.84 billion in funding for the project
  • The MOU also reflects the need for Turquoise Hill to raise approximately $658 million in additional lending from selected international financial institutions outside of Rio Tinto
  • However, if the MOU’s $2.5 billion in outlined financing is successfully raised, Turquoise Hill will still need to source another $2.24 billion to bridge the project’s current funding gap
  • Turquoise Hill (TRQ) is down 22.45 per cent and is trading at 87 cents per share

Turquoise Hill (TRQ) plunged 25 per cent today, after revealing a C$4.7 billion funding gap for its Oyu Tolgoi project in Mongolia.

Due to its current cash flow projections, Turquoise Hill has been forced to negotiate a new non-binding Memorandum of Understanding with its majority shareholder, ASX-listed Rio Tinto (RIO), reprofiling the project’s current debt.

The new MOU will defer payments owed to Rio Tinto and extend the loan’s tenor, resulting in up to around C$1.84 billion in funding for the project.

The MOU also reflects the need for Turquoise Hill to raise approximately $658 million in additional lending selected international financial institutions outside of Rio Tinto.

Perhaps most worrying to investors, even if the extent of the MOU is reached, Turquoise Hill will still need to source a further $2.24 billion, which Rio Tinto admits will need to be met by way of a share equity offering.

Ulf Quellmann, CEO of Turquoise Hill, has remained confident and belives the MOU with its majority shareholder is a positive step forward.

“We are pleased to have reached this understanding with Rio Tinto, which establishes a pathway for advancing the funding requirements of Oyu Tolgoi.

“This MOU is a meaningful step towards addressing the long-term funding needs of the project, and we look forward to working together with Rio Tinto to reprofile Oyu Tolgoi’s existing debt,” he said.

The news comes after a minority shareholder in Turquoise Hill, Pentwater Capital, raised concerns about the project’s funding earlier this year.

At the time, Pentwater claimed a larger funding shortfall, which Turquoise Hill announced back in May, was widely inaccurate and misleading to shareholders.

Turquoise Hill (TRQ) is currently down 22.45 per cent and is trading at 87 cents per share at 11:54am EDT.

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