Turquoise Hill suspends Oyu Tolgoi expansion, moves forward with $2.4 billion rights offering
Canada’s Turquoise Hill (TSX:TRQ) has suspended work on its Oyu Tolgoi project in Mongolia and says it will move forward with a $2.4 billion rights offering, as financing arrangements with the Mongolian government have so far failed.
Turquoise Hill shares lost 6% on after the announcement on Thursday, trading at $4.35 per share.
“Given uncertainties surrounding the timing of resolution of issues with the Government of Mongolia, including obtaining all required approvals and completion of the Oyu Tolgoi expansion feasibility study, Turquoise Hill is unable to complete project financing in 2013,” the company wrote in news release on Thursday.
Turquoise Hill says it will continue talks with Mongolian authorities in order to reach an agreement and has filed the initial registration for a rights offering.
“There is positive engagement between the parties and progress is being made,” the company noted.
Issues between the company and the government relate mainly to the financing of a $5 billion underground expansion of the project in which the Asian country holds a 34% stake.
The rights offering will help the company repay a bridge loan and a $1.8 billion interim funding facility.
Production at Oyu Tolgoi’s open pit began this year and the mine is now operating at nameplate capacity of 100,000 tonnes of ore processed per day. As operations continue to ramp up, copper concentrate output is expected to reach between 72,000 and 77,000 tonnes this year.
The giant copper mine is set to contribute as much as a third of the nation’s economy if the underground expansion goes through.
In the third quarter Turquoise Hill recorded a net loss of $94 million compared with net income of $112 million in the third quarter last year.