Rio Tinto has formed a plan to raise funding for the Oyu Tolgoi underground project in Mongolia after a cost blowout in July.
The company and its subsidiary Turquoise Hill have agreed to re-profile debt repayments to align better with the revised Oyu Tolgoi mine plan.
Together, the companies will aim to raise up to $US500 million ($687 million) in additional lending for the project.
The companies have also agreed that any balance of funding required for Oyu Tolgoi’s completion must be met by a Turquoise Hill equity offering.
“The memorandum of understanding agreed with Turquoise Hill provides a clear funding pathway for the completion of the Oyu Tolgoi underground project,” Rio Tinto chief executive of copper and diamonds Arnaud Soirat said.
“We will continue working with Turquoise Hill and the Government of Mongolia to progress the underground project, which has the potential to unlock the most valuable part of the mine for the benefit of all stakeholders.”
Rio Tinto owns more than a billion, or approximately 50.8 per cent interest in Turquoise Hill common shares but does not intend to acquire additional securities of the company.
The mining giant may directly or indirectly acquire or sell some or all of the securities of Turquoise Hill, subject to its evaluation of the business.
Development costs for Oyu Tolgoi were originally budgeted at $US5.3 billion. This was bumped up by a further $US1.3–$1.8 billion in July as Rio Tinto began a new underground mine design.
This had caused a delay of 21–29 months to the first sustainable production at Oyu Tolgoi, a project which has been plagued by delays since its commencement in 2011.