TORONTO (miningweekly.com) – Vancouver-based miner Turquoise Hill Resources on Thursday said it would not be able to complete project financing for an expansion at Oyu Tolgoi, in Mongolia, this year, and that it had filed a preliminary prospectus for a rights offering.

This is owing to uncertainties as to when issues with the Mongolian government, including obtaining all required approvals and completing the Oyu Tolgoi expansion feasibility study, would be resolved. The miner, which is owned by global mining giant Rio Tinto, reported that discussions with the Mongolian government were ongoing and that there was a positive and ongoing engagement between the parties.

Rio Tinto was trying to resolve disputes with the Mongolian government over terms for $4.2-billion in project financing to fund an expansion at Oyu Tolgoi, which would be critical to Rio's and Mongolia's growth.

Rio put the $5-billion expansion project on hold in August and said it would have to cut up to 1 700 jobs owing to the project financing dispute.

Turquoise Hill stressed that it remained committed to obtaining project finance to fund the development of the Oyu Tolgoi expansion project and was engaging the government to achieve this while work continued on optimising the underground mine design and construction plan and to finalise the feasibility study.

To this end Turquoise Hill and Rio Tinto had agreed to extend the maturity date of the interim funding facility and the new bridge facility to January 15, 2014, in order to allow the rights offering to be completed.

Meanwhile, Turquoise Hill reported that the Oyu Tolgoi concentrator consistently achieved throughput capacity of above 95% of its capacity during the three months ended September 30, and was now operating at nameplate capacity of about 100 000 t of ore processed a day.

Oyu Tolgoi operations continued to progressively ramp up and were now expected to produce between 72 000 t and 77 000 t of copper in concentrates for 2013.

The daily concentrate shipment rates were expected to broadly align with output rates by the end of the year, as the mine should reach full capacity by the end of 2013.

Further, Oyu Tolgoi customers had also received the necessary approvals allowing them to collect bought concentrate from the Chinese-border warehouse, and as at November 12, about 5 000 t had been collected.

Turquoise Hill added that at the end of the year it expected about 90% of the Oyu Tolgoi employees would be Mongolian nationals, in line with the investment agreement requirements.

The company also reported that exploration drilling results had confirmed the potential Hugo West deposit in the Oyu Tolgoi trend, the first drill hole intersecting 502 m grading 0.54% copper and 0.32 g/t gold.

At the start of the month, Turquoise Hill announced that it had completed the divestment of its 56.1% stake in Inova Resources to Shanxi Donghui Coal Coking & Chemicals Group for about $85-million.