Canadian miner Turquoise Hill and its majority owner Rio Tinto expects to sign a $4-billion project-financing plan and term sheet at the end of June, which will allow for future financial flexibility in starting development of the giant mine’s second phase.

Turquoise Hill late on Monday said it was actively engaged with lenders to finalise the financing deal. It had by February secured debt approval from the European Bank of Reconstruction and Development and the International Finance Corporation.

During April, Rio had also signed commitment letters with 15 global banks that locked in pricing and terms for financing. The boards of Export Development Canada, Australian Export Finance and Insurance Corporation, and Export-Import Bank of the United States also conditionally approved Oyu Tolgoi project financing.

Turquoise Hill noted project financing was still subject to board approval, which included representatives from the Mongolian government.

Meanwhile, the Mongolian government, Turquoise Hill said Rio was in disagreement over taxes and rising costs at the project, which Mongolia fears would erode prospective earnings.

Turquoise Hill on Tuesday said the parties continued with “productive discussions” on a range of issues related to implementing the investment accord governing the public/private partnership, including project development and costs, the operating budget, project financing, management fees and governance.

While the issues between stakeholders were being ironed out, the Oyu Tolgoi board had approved a temporary budget for the mine, which is ramping up to commercial production .

Oyu Tolgoi was expected to make up a third of Mongolia”s economy by 2020, and at full production would produce about 450 000 t of copper and 330 000 oz of gold a year. Rio was the largest single investor in Mongolia – a country where livestock outnumbered people 15 to 1.

Rio last week said it expected the imminent Mongolian approval to ship copper concentrate from the mine.

At the end of the first quarter, construction of the Oyu Tolgoi concentrator complex and openpit mine was complete, and mine infrastructure was substantially complete.

As at March 31, the total capital invested in Oyu Tolgoi was about $6-billion of the final cost of $6.2-billion, excluding foreign-exchange exposures.

Long-term sales contracts had been signed for about 75% of the Oyu Tolgo mine”s concentrate production in the first three years, and half of the total concentrate production was contracted for ten years, subject to renewals.

Meanwhile, Turquoise Hill said its subsidiary SouthGobi Resources, which also has its operations in Mongolia, and some of its employees were subject to rolling investigations by the Mongolian Independent Authority Against Corruption and the State Investigation Office regarding allegations of corruption and flouting of the country’s taxation laws.

SouthGobi said its audit committee, comprised of independent directors, was conducting an internal investigation into possible breaches of law, internal corporate policies and codes of conduct arising from the allegations.

SouthGobi, through its board and new management, has taken a number of steps to focus on ongoing compliance by employees with all applicable laws, internal corporate policies and codes of conduct, and with SouthGobi”s disclosure controls and procedures and internal controls over financial reporting.

Operations at its flagship Ovoot Tolgoi mine restarted in the quarter, after it had been fully curtailed since the end of the second quarter of 2012.

Turquoise Hill reported a net loss of $50.7-million, or $0.05 a share, which was a decrease of $29.9-million when compared with a net loss of $80.6-million, or $0.10 a share a year earlier.

SouthGobi reported a net loss of $24.9-million, or $0.14 a share, in the period, compared with profit of $3.1-million, or $0.02 a share, a year earlier.

Turquoise Hill’s Toronto-listed shares traded 1.30% lower on Tuesday morning at C$7.58 apiece.

Source: Mining Weekly