Rio Tinto, a mining giant, has entered into an agreement to provide Turquoise Hill Resources with a bridge funding facility of $600m to finance the first phase development of the $6bn Oyu Tolgoi copper and gold mine in Mongolia.
The mine located in the south Gobi region is jointly owned by Rio Tinto’s subsidiary Turquoise Hill and the Mongolian government with Turquoise Hill holding 66% and the government owning the remaining.
Proceeds from the facility will be used initially to refinance all outstanding debt to Rio under an existing $225m short term funding facility, following which the remaining amount will be utilized to ramp up phase one of the Oyu Tolgoi mine development.
Rio Tinto has approved the extension to the short term funding facility until 28 August 2013, besides permitting funds repaid by Turquoise Hill from the proceeds of the sale of its 50% interest in Altynalmas Gold to be redrawn.
Turquoise Hill, nevertheless, is required to raise equity to repay the new bridge facility and the existing $1.8bn interim funding facility provided by Rio Tinto, which also matures on 31 December 2013.
Rio Tinto has also agreed, subject to certain conditions being satisfied, to provide a firm stand-by commitment for a fully underwritten rights offering by Turquoise Hill, the company said.