VANCOUVER, BC--(Marketwired - December 15, 2015) - Turquoise Hill Resources (NASDAQ:TRQ) (NYSE: TRQ) (TSX: TRQ) today announced that Oyu Tolgoi LLC (Oyu Tolgoi) has signed a $4.4 billion project finance facility, one of the largest in the mining industry. The facility is being provided by a syndicate of international financial institutions and export credit agencies representing the governments of Canada, the United States and Australia, along with 15 commercial banks. All figures are in US dollars.
Jeff Tygesen, Turquoise Hill's Chief Executive Officer, said, "The signing of project finance is an unprecedented milestone for Turquoise Hill and Oyu Tolgoi as well as a historic vote of confidence in both the project and Mongolia. We look forward to working with the Mongolian Government and Rio Tinto to complete the remaining steps leading to the restart of underground development."
The facility consists of the following components:
|Facility||Amount||Term||Annual interest rate|
|A Loan||$0.8 billion||15 years||LIBOR + 3.78% pre-completion; LIBOR + 4.78% post-completion|
|Export Credit Agencies Loan||$0.9 billion
|LIBOR + 3.65% pre-completion; LIBOR + 4.65% post-completion
US Ex-Im at fixed rate of Commercial Interest Reference Rate based on US Treasury rates; determined at time of first disbursement
|MIGA Insured Loan||$0.7 billion||12 years||LIBOR + 2.65 % pre-completion; LIBOR + 3.65% post-completion|
|B Loan||$1.6 billion||12 years||LIBOR + 3.4% pre-completion; LIBOR + 4.4% post-completion Includes $50 million 15-year loan at A Loan rate|
The project finance facility will be funded by Export Development Canada, the European Bank for Reconstruction and Development, the International Finance Corporation, the Export-Import Bank of the United States, the Export Finance and Insurance Corporation of Australia and commercial lenders comprising BNP Paribas, ANZ, ING, Société Générale Corporate & Investment Banking, Sumitomo Mitsui, Standard Chartered Bank, Canadian Imperial Bank of Commerce, Crédit Agricole, Intesa Sanpaolo, National Australia Bank, Natixis, HSBC, The Bank of Tokyo-Mitsubishi UJF, KfW IPEX-Bank and Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden. The Multilateral Investment Guarantee Agency (MIGA) provided political risk insurance for the commercial banks.
Turquoise Hill, Rio Tinto and Oyu Tolgoi will now continue to work towards completing the 2015 feasibility study, including the updated capital estimate and securing all necessary permits for the development of the underground mine. Once these steps have been completed and subject to the boards of Turquoise Hill, Rio Tinto and Oyu Tolgoi approving a formal 'notice to proceed', the full $4.4 billion facility will be drawn down by Oyu Tolgoi subject to satisfaction of certain conditions precedent typical for a financing of this nature. Net proceeds from the project finance facility (the Net PF Proceeds), after fees and taxes, are anticipated to be approximately $4.1 billion. The Net PF Proceeds will be used by Oyu Tolgoi to pay down shareholder loans payable to Turquoise Hill. The Net PF Proceeds will be available to be re-drawn by Oyu Tolgoi for the development of the underground mine.
As part of the project finance agreements, Rio Tinto has agreed to provide a completion support undertaking in favour of the project finance lenders. In consideration for providing completion support, and as contemplated by previous agreements, Oyu Tolgoi and Turquoise Hill have agreed to pay Rio Tinto an annual completion support fee equal to 2.5% of the amounts drawn under the facility, of which 1.9% is payable by Oyu Tolgoi and 0.6% is payable by Turquoise Hill. The annual completion support fee will apply to funding used for facility fees and taxes at initial drawdown as well as amounts used to fund development. The obligation to pay a completion support fee will terminate on the date Rio Tinto's completion support obligations to the project lenders terminate.
The all-in project finance interest rate for Oyu Tolgoi, including upfront and ongoing fees as well as the annual completion support undertaking fee, is LIBOR + 6.0%.
Following successful fulfilment of the completion tests outlined in the project finance facility, the Rio Tinto completion support undertaking will terminate and the facility interest rates will shift to post-completion rates. The project financing facility provides for interest only payments for the first five years and is then structured on a stepped amortization schedule for the remaining life of the facility.
The parties have agreed to a debt capacity of $6.0 billion for Oyu Tolgoi, providing the option for an additional $1.6 billion of supplemental debt in the future.
In its capacity as project sponsor, Turquoise Hill will enter into a sponsor debt service undertaking with Rio Tinto, the project lenders and agents representing such lenders (theSponsor DSU). Under the Sponsor DSU, Turquoise Hill guarantees to the finance parties payment of principal, interest and fees owed by Oyu Tolgoi to the senior lenders under the project financing payable prior to completion. The obligations of Turquoise Hill under the Sponsor DSU terminate upon the earliest of (i) completion of the project, (ii) the termination of the Sponsor DSU as a result of the occurrence of a suspensive event, and (iii) the date on which all senior debt obligations have been irrevocably and unconditionally paid or discharged and the commitments have terminated or expired.
Additionally, in connection with the signing of the project finance agreements with the project lenders and in consideration of Rio Tinto's completion support undertaking, Turquoise Hill has entered into a number of agreements, including: a financing support agreement with Rio Tinto (the Company Financing Support Agreement); a financing support agreement with Oyu Tolgoi and Rio Tinto (the Oyu Tolgoi Financing Support Agreement) and a cash management services agreement with 9539549 Canada Inc. and Rio Tinto International Holdings Limited (RTIH) (the Cash Management Services Agreement). The following briefly summarizes certain provisions in the foregoing agreements, which summaries are subject to and qualified in their entirety by reference to the full text of such agreements, each of which will be filed with the Canadian securities regulatory authorities on the System for Electronic Document Analysis and Retrieval ("SEDAR") website atwww.sedar.com.
The provisions contained in the Company Financing Support Agreement, including those referred to below, are broadly in line with the principles and provisions established under the Memorandum of Agreement between Turquoise Hill and Rio Tinto entered into in 2012:
Under the Oyu Tolgoi Financing Support Agreement, in the event a fact or circumstance occurs which affects or could reasonably be expected to affect Oyu Tolgoi's ability to meet its obligations under the project finance agreements or give rise to an event of default thereunder, Rio Tinto shall have the right to require that Oyu Tolgoi borrow funds from Rio Tinto (or an affiliate thereof) by way of a senior debt advance or a subordinated debt advance, or borrow funds from a third party senior lender. The proceeds of any such advances shall be used to repay amounts due and owing to the project lenders.
Under the Cash Management Services Agreement, Turquoise Hill has appointed 9539549 Canada Inc. as service provider to provide post-drawdown cash management services in connection with the Net PF Proceeds, which shall be deposited with 9539549 Canada Inc. and returned to Turquoise Hill as required for purposes of funding the Oyu Tolgoi underground mine. Turquoise Hill is also entitled to the return of any outstanding balance of such managed funds upon the termination of Rio Tinto's completion support obligations. RTIH has agreed to guarantee the obligations of the service provider under this agreement.
About Turquoise Hill Resources
Turquoise Hill Resources (NYSE: TRQ) (NASDAQ: TRQ) (TSX: TRQ) is an international mining company whose primary operation is its 66% interest in the Oyu Tolgoi copper-gold-silver mine in southern Mongolia.