December 16, 2013 / 2:12 PM / in 4 years

UPDATE 1-Turquoise Hill says Oyu Tolgoi financing pledges extended

TORONTO, Dec 16 (Reuters) - Turquoise Hill Resources Ltd said on Monday that parent Rio Tinto had secured extended commitments from the banks that have agreed to finance the underground expansion of the Oyu Tolgoi copper and gold mine in Mongolia.

The extension, to March 31, gives Rio Tinto more time to resolve a dispute over costs with the government of Mongolia.

Rio, which owns 50.8 percent of Turquoise Hill and operates Oyu Tolgoi, put the mine’s more than $5 billion expansion on hold in July, saying the Mongolian government wanted parliament to approve the project’s financing.

Mongolia, which will not see its share of Oyu Tolgoi’s profit until Turquoise Hill recovers its costs, has complained that total costs on the first phase were $2 billion higher than planned.

It wants assurances such overruns will not happen again, and hopes to resolve the dispute by early 2014, a government source told Reuters last month.

Turquoise Hill, which owns 66 percent of Oyu Tolgoi, had said in June that financing commitments would expire Dec. 12.

The Vancouver-based company announced a rights offering to raise up to $2.4 billion in November, citing the delays at Oyu Tolgoi.

A feasibility study for the underground expansion is still on track for the first half of 2014, the company said on Monday. It also confirmed that it expects Oyu Tolgoi to produce 150,000 to 175,000 tonnes of copper in concentrates, and 700,000 to 750,000 ounces of gold in concentrates in 2014.

Separately, Turquoise Hill said a class action complaint has been filed in the Southern District of New York in connection with SouthGobi Resources Ltd’s recent revenue restatements.

SouthGobi, a coal miner controlled by Rio through Turquoise Hill, said last month it had recognized revenue from its Ovoot Tolgoi mine in Mongolia earlier than it should have. Turquoise Hill said it believes the complaint has no merit.

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