Mining major Rio Tinto has inked an agreement to provide Turquoise Hill Resources with a $600m bridge funding facility for first phase development of the $6bn Oyu Tolgoi copper and gold mine in Mongolia.
This funding facility would mature on 31 December 2013.
The Oyu Tolgoi gold and copper project, also known as Turquoise Hill, is located in the south Gobi region of Mongolia, around 80km north of the Chinese-Mongolian border and 550km south of the capital Ulaanbaatar.
The mine is jointly owned by Rio Tinto’s subsidiary Turquoise Hill, which holds a 66% stake, and the Mongolian Government, which owns the remaining interest.
The funding facility initially would be used to refinance outstanding amounts under an existing $225m short-term funding facility offered by Rio in June, and thereafter would be used for development of the mine.
The Anglo-Australian company has agreed to extend the short term financing facility through 28 August 2013 and to allow funds, which are repaid by Turquoise Hill from the proceeds of 50% stake stale in Altynalmas Gold, to be redrawn.
Meanwhile, under the terms of this latest financing, Turquoise Hill needs to raise equity to repay the new bridge facility and also the current interim funding facility of $1.8bn, which too would mature by the end of this year.
Rio stated that it would provide stand-by commitment for a completely underwritten rights offering by Turquoise Hill.
Last month, Rio Tinto halted underground expansion of the Oyu Tolgoi copper mine in Mongolia, as funding for the project required approval from Mongolian Parliament.
The project funding, however, received approval earlier this week.
Expansion of the mine would increase annual production to 425,000t of copper and 460,000oz of gold.
Image: Oyu Tolgoi mine is jointly-owned by Rio Tinto and the Mongolian Government. Photo courtesy of Rio Tinto Company.