MONTREAL–(BUSINESS WIRE)–Turquoise Hill Resources Ltd. (TSX: TRQ) (NYSE: TRQ) (“Turquoise Hill” or the “Company”) announced today that the Company and Rio Tinto International Holdings Limited (“Rio Tinto”) have agreed to amend the financing agreement global to, among other things, provide interim debt financing from Rio Tinto to meet the company’s estimated near-term funding needs and to extend the date by which Turquoise Hill must raise additional equity.
On March 14, 2022, Rio Tinto announced a non-binding proposal to acquire approximately 49% of the outstanding shares of Turquoise Hill held by minority shareholders of the Company for cash consideration of C$34.00 per share (the “ proposal “). In response to the Proposal, the Company’s Board of Directors has formed a special committee of independent directors (the “Special Committee”) to review and consider the Proposal. The Special Committee’s mandate includes the responsibility to review the Corporation’s liquidity needs and financing options pending consideration of the proposal by the Corporation.
In light of Rio Tinto’s condition in its proposal that its offer be subject to Turquoise Hill not raising additional equity, Rio Tinto has invited Turquoise Hill to propose terms for an interim financing facility that would satisfy Turquoise Hill’s financing needs pending the company’s review of the proposal. . Following careful consideration by the Special Committee of the financing options available to the Company, including a possible equity offering, on the recommendation of the Special Committee, the Company has amended the Amended and Restated Memoranda of Understanding dated dated January 24, 2022 (the “Funding HoA”).
Key terms of the funding HoA amendment include:
An extension of the date on which the Company will have completed one or more share offerings for aggregate proceeds of at least US$650 million (the “Initial Share Offering”) until December 31, 2022 (at instead of the previous deadline of August 31, 2022);
A commitment from Rio Tinto to provide additional short-term bridge financing directly to the Company through one or more secured advances of up to US$400 million which are expected to be made available to the Company in the coming weeks under subject to the satisfaction or waiver of certain conditions precedent, and which must be reimbursed from the proceeds of the initial offering of shares; and
If Rio Tinto has not publicly withdrawn the proposal by June 30, 2022, automatic removal of the condition that the company has completed the initial share offering before drawing short-term guaranteed advances of up to 300 million US dollars (collectively, the “Advances”) provided for in the Financing HoA.
As part of its mandate, the Special Committee will continue to review the Company’s liquidity needs and financing options, including potential share offerings. The Funding HoA does not prohibit the Company from raising additional capital through an equity offering, including pending consideration of the Proposal by the Company. However, Rio Tinto advised the Special Committee that, should the Company proceed with a share issue, Rio Tinto intended to withdraw the proposal. Rio Tinto has also indicated that if Turquoise Hill makes a share offering, Rio Tinto intends to exercise its preemptive rights to maintain its pro rata ownership.
The proposal remains non-binding in nature. There can be no assurance that a transaction will result from the Proposal and, if a transaction results, if and when such transaction will be completed or on what terms. Turquoise Hill does not intend to comment on or disclose further developments regarding the Special Committee’s evaluation of the Proposal unless and until it deems additional disclosure to be appropriate or required. As previously noted, the Special Committee has retained BMO Capital Markets as financial advisor and Blake, Cassels & Graydon LLP as legal advisor. In addition, the Special Committee has retained TD Securities as an independent valuator to prepare a formal valuation of the Company’s common shares in accordance with Multilateral Instrument 61-101– Protection of minority shareholders in special transactions.
In addition, the Company announced today that, following her election to the Company’s Board of Directors at the Company’s annual meeting of shareholders on May 11, 2022, the Board of Directors has appointed Caroline Donally to special committee as of May 11, 2022.
About Turquoise Hill Resources
Turquoise Hill is an international mining company focused on the operation and continued development of the Oyu Tolgoi copper-gold mine in Mongolia, which is the Company’s principal and only material mineral resource property. Turquoise Hill’s property in the Oyu Tolgoi mine is held through a 66% interest in Oyu Tolgoi LLC); Erdenes Oyu Tolgoi LLC, a Mongolian public entity, holds the remaining 34% stake.
Forward-Looking Statements and Forward-Looking Information
Certain statements made herein, including statements relating to matters that are not historical facts and statements of the Company’s beliefs, intentions and expectations regarding developments, results and events that will or may occur in the future, constitute “forward-looking information” within the meaning of applicable Canadian securities laws and “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements and information relate to future events or future performance, reflect expectations or beliefs about future events and are generally identified by words such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “likely”, “may”, “plan”, “seek”, “should”, “will” and similar expressions areas suggesting future results or statements about a perspective. These include, but are not limited to, statements and information regarding: the proposal received by the company from Rio Tinto, including the terms and conditions of the proposal and its review and evaluation by the special committee; the successful implementation and execution of the updated financing plan that is the subject of the financing HoA, as such agreement may be amended or restated, and the amount of any future additional financing gap to complete the Oyu Tolgoi Project and the availability and amount of potential sources of additional funding required therefor, all as contemplated by the Funding HoA, as well as potential delays in the Company’s and OT LLC’s capacity proceed with the financing items contemplated by the financing HoA; liquidity, funding sources and funding requirements generally, in particular until first sustainable production is achieved, including the Company’s ability to enter into agreement with project finance lenders on the reprofiling existing debt payments in accordance with current cash flow projections, and the Company (or a wholly owned subsidiary) and OT LLC entering into a prepaid copper concentrate sale agreement; the availability and amount of potential sources of additional financing, including the short-term secured advance to be provided by Rio Tinto to the Company under the HoA financing; the amount by which a successful reprofiling of the Company’s existing debt would reduce the Company’s currently projected funding requirements; the Company’s ability to make one or more share offerings as contemplated by the HoA Financing in light of future and then prevailing market conditions; the Offer and the Company’s liquidity needs and financing options by the Special Committee; statements regarding Rio Tinto’s intention to withdraw its proposal and exercise its preemptive rights in the event of a share offering by the Company; and other statements that are not historical facts.
Forward-looking statements and information are made on the basis of certain assumptions and other important factors which, if incorrect, could cause the actual results, performance or achievements of the Company to be materially different from the results, performance or future achievements expressed or implied by these statements. or information. There can be no assurance that such statements or information will prove to be accurate. These statements and information are based on numerous assumptions regarding present and future business strategies, local and global economic conditions and the environment in which the Company will operate in the future, including: the possibility that the Company, its Board of directors, the Special Company Committee and Rio Tinto fail to agree on the terms of a going-private transaction or that the terms of any definitive agreement between the Company and Rio Tinto with respect to a going-private transaction will differ from those currently contemplated by the Proposal; the successful implementation and execution of the updated financing plan which is the subject of the financing HoA, as this agreement may be amended and restated; and the amount of any additional future funding gap to complete the Oyu Tolgoi Project as well as the availability and amount of potential sources of additional funding required for this purpose.
Readers are cautioned not to place undue reliance on any forward-looking information or statements. By their nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, which contribute to the possibility that the anticipated results will not occur. Events or circumstances could cause the actual results of the Company to differ materially from those estimated or projected and expressed or implied by these forward-looking statements. Important factors that could cause actual results to differ from these forward-looking statements are included in the “Risk Factors” section of the Company’s Annual Information Form, supplemented by the “Risks and Uncertainties” section of the Company’s MD&A. Company for the first quarter ended March 31, 2022 (“First Quarter 2022 MD&A”).
Readers are further cautioned that the lists of factors listed in the Risk Factors section of the Company’s Annual Information Form and the “Risks and Uncertainties” section of the Q1 2022 MD&A that could affect future results do not are not exhaustive. When relying on the Company’s forward-looking statements and information to make decisions about the Company, investors and others should carefully consider the foregoing factors as well as other uncertainties and potential events. Further, the forward-looking statements and information contained herein are made as of the date hereof, and the Company undertakes no obligation to update or revise any forward-looking statements or information included herein, whether as a result of new information, future events or otherwise, except as required by applicable law. The forward-looking statements and information contained herein are expressly qualified by this cautionary statement.