News out this afternoon
Entree says Turquoise reaches deal with Mongolian gov't
2022-01-25 17:06 ET - News Release
Mr. Stephen Scott reports
ENTREE RESOURCES WELCOMES START OF OYU TOLGOI UNDERGROUND MINE AND ANNOUNCEMENT OF RENEWED PARTNERSHIP WITH GOVERNMENT OF MONGOLIA
Entree Resources Ltd. has noted that on Jan. 24, 2022, Turquoise Hill Resources Ltd. provided resolution on key outstanding issues related to the Oyu Tolgoi underground mine:
- Turquoise Hill and the government of Mongolia reached a mutual understanding for a renewed partnership.
- Turquoise Hill and Rio Tinto entered into a binding agreement that delineates a comprehensive funding arrangement to address Turquoise Hill's estimated incremental funding requirements to complete the project.
- The Oyu Tolgoi LLC (OTLLC) board approved the signing of an electricity supply agreement to provide Oyu Tolgoi with a long-term source of power from the Mongolian grid on terms fully agreed with the government of Mongolia.
As a result, the OTLLC board unanimously approved commencement of the undercut to start Hugo North Lift 1 Panel 0 underground mine production on the Oyu Tolgoi mining licence.
Oyu Tolgoi includes two separate landholdings: the Oyu Tolgoi mining licence, which is held by Entree's joint venture partner, OTLLC, and the Entree/Oyu Tolgoi JV property, a partnership between Entree and OTLLC. The Hugo North extension deposit on the Entree/Oyu Tolgoi JV property is located at the northern portion of Panel 1 and is an integral part of the Lift 1 mine plan.
Stephen Scott, Entree's president and chief executive officer, commented: "This is great news for Entree and all Oyu Tolgoi project stakeholders. Establishing a strong relationship between all parties going forward is an essential element of ensuring optimal operational and financial performance at the Oyu Tolgoi mine for decades to come. Resolution of outstanding issues has enabled commencement of Panel 0 underground mining operations. This is a key milestone towards achieving design production rates from the underground mine which will require contributions from all three panels in the Lift 1 mine plan, including Panel 1, a significant portion of which is on the Entree/Oyu Tolgoi JV property. Panel 1 includes some of the highest-grade mineralization in the entire Oyu Tolgoi combined project area."
Highlights of Turquoise Hill's Jan. 24, 2022, news release include:
- Turquoise Hill has agreed to waive in full the $2.4-billion (U.S.) carry account loan of the government of Mongolia's state-owned entity which owns its interest in OTLLC.
- Turquoise Hill and Rio Tinto have agreed to an amended and restated heads of agreement, replacing the prior heads of agreement dated April 9, 2021. The amended HoA delineates a funding arrangement to address Turquoise Hill's estimated $3.4-billion (U.S.) incremental funding requirement. Key elements of the amended HoA include:
- Pursuing the rescheduling of principal repayments of existing debt to potentially reduce the base case funding requirement by up to $1.7-billion (U.S.);
- Seeking to raise up to $500-million (U.S.) of senior supplemental debt (SSD);
- Rio Tinto committing to provide a co-lending facility, incremental to the reprofiling and the SSD, of up to $750-million (U.S.) to be made available once sustainable production from Panel 0 has been achieved (currently expected in H1 2023);
- Rio Tinto committing to provide a short-term bridge financing directly to Turquoise Hill by way of one or more secured advances up to a maximum of $300-million (U.S.), which would be indirectly repaid out of the proceeds of the $750-million (U.S.) co-lending facility; and
- Turquoise Hill agreeing to conduct an equity offering in a form of its choosing of at least $650-million (U.S.) (including a Rio Tinto pro rata participation) by no later than Aug. 31, 2022.
- Once the Mongolian grid is capable of reliably meeting Oyu Tolgoi's power requirements, the electricity supply agreement provides the framework for OTLLC to obtain access to a reliable and secure domestic power source.
Terms agreed between Oyu Tolgoi stakeholders with respect to project financing and Erdenes Oyu Tolgoi's carry account loan do not impact the Entree/Oyu Tolgoi joint venture, which is governed by the terms of the joint venture agreement between OTLLC and Entree.
About Entree Resources Ltd.
Entree Resources is a well-financed Canadian mining company with a unique carried joint venture interest on a significant portion of one of the world's largest copper-gold projects the Oyu Tolgoi project in Mongolia. Entree has a 20-per-cent or 30-per-cent carried participating interest in the Entree/Oyu Tolgoi joint venture, depending on the depth of mineralization. Sandstorm, Rio Tinto and Turquoise Hill are major shareholders of Entree, holding approximately 25 per cent, 9 per cent and 7 per cent of the shares of the company, respectively.