Canadian mining company Turquoise Hill Resources Ltd. is locked in a dispute with its largest shareholder, Rio Tinto Plc, over an underground expansion of its Oyu Tolgoi copper mine in Mongolia, According to Reuters.
Tensions between Rio Tinto, the mining operator, and turquoise Hill's management and minority shareholders have burst into the open in recent months.
Rio owns 51 per cent of Turquoise Hill, which in turn owns 66 per cent of the mine.
Oyu Tolgoi is one of the largest known copper and gold deposits in the world, located in the Gobi region of southern Mongolia.
The Mongolian government owns 34 per cent of the project, with Turquoise Hill, controlled by Rio, owning the rest.
Open-pit mining began in 2011.
The first copper output from the underground expansion is expected to climb to 500,000 tonnes a year at full capacity in 2022, making it the world's third largest copper mine.
What is the cost of expansion?
Rio tinto announced a 30-month delay in 2019, with cost overruns of $1.9 billion due to geological difficulties and total expenses ranging from $6.5 billion to $7.2 billion.
Add to that the cost of generating electricity for the mine from coal-fired power plants.
Why are minority shareholders upset?
In November, Turquoise Hill initiated arbitration proceedings against Rio tinto, alleging that Rio's financing of expansion was "incompatible" with its own practices.
Rio said in September it would borrow $500m to develop the mine, with the rest to be covered by a Turquoise Hill share issue.
Turquoise Hill shareholders fear that this would allow Rio to acquire more shares in turquoise Hill, undervaluing the company's entire valuation.
Pentwater Capital Partners and Sailingstone Capital Partners, which own 9.23 per cent of Turquoise Hill, accuse Rio of mismanagement that unfairly limited The group's ability to obtain financing to cover those costs.
The Canadian mining company wants to take longer to repay some of its debt while exploring other financing options, including a possible gold rush, to delay or avoid a share offering.
What happens next?
Turquoise Hill said the arbitration could take up to five months and would provide the necessary "clarity" for mine financing.
Oyu Tolgoi's board has approved the establishment of a special committee to conduct an independent review of the mine's cost overruns and delays.
According to the company, an outside expert firm will report to the Special Committee within six months of the start of the investigation.
Rio declined to comment.
Turquoise Hill said it would need to raise $1.1bn in bank bonds, bonds or metal flows if it and Rio extended the time to repay existing loans and issue new debt as planned.
However, the Canadian miner has said it may need to raise at least $3bn if it is unable to modify debt repayment terms or secure other financing.
In 2010, PUDA signed a contrate with RITO, and sold a big copper concentrate packing machine to rito.
