Mr. Daniel Burch of MacKenzie Partners reports
PENTWATER CALLS FOR TURQUOISE HILL TO BE TRANSPARENT ABOUT THE MAGNITUDE OF THE POTENTIAL FUNDING SHORTFALL FOR CONSTRUCTION OF THE OYU TOLGOI UNDERGROUND DEVELOPMENT
Last Wednesday, Pentwater Capital Management LP, the largest minority shareholder of Turquoise Hill Resources Ltd., wrote to Turquoise Hill highlighting the company's inadequate and misleading disclosure of important financial information. Specifically, Pentwater explained how the Company's disclosure of a $4 billion capital shortfall was misleading because it failed to explain that over $900 million of the shortfall was for the construction of a power plant that the government of Mongolia publicly indicated it intended to build, and over $1.9 billion of the shortfall was for debt amortization payments that typically can be extended for the payment of a small fee.
Yesterday, Rio Tinto confirmed that the Company will no longer need to fund the construction of the power plant as the Government of Mongolia will now "fund and construct a State Owned Power Plant at Tavan Tolgoi." Today, Pentwater responds: Now that the Company's 51% owner Rio Tinto has confirmed that Turquoise Hill will not need to finance the construction of the power plant, Turquoise Hill must come clean and provide at least the bare minimum of financial disclosure to its minority shareholders who own 49% of its stock. Tell us the truth!
- Isn't it true that without needing to finance the construction of a power plant, the capital funding shortfall is less than $3.1 billion?
- Isn't it true that more than $1.9 billion of the $3.1 billion is debt amortization payments?
- Isn't it true that if the debt amortization payments are contractually extended, the capital funding shortfall is less than $1.2 billion?
- Isn't it true that the existing project financing arrangements provide the Company the ability "to raise additional supplemental debt of up to $1.6 billion at the same attractive terms," as its existing financing?
- Isn't it true that if the Company raises the supplemental financing and extends the amortization payments, then there is NO capital funding shortfall?
Turquoise Hill's disclosures are inadequate and misleading. Shareholders have a right to know these answers. However, the Board and management seem to not want to be honest and transparent with their minority shareholders. Instead, the Board and management prefer to act only in the interest of Rio Tinto, which has chosen every single Board member and every single manager.
This is why it is so important that shareholders vote for the election of a minority shareholder representative to the Board and why shareholders support Pentwater's proposal to amend the bylaws to allow minority shareholders to have full time representatives on the Company's Board.
We Need Your Support
We are seeking your support at the Company's upcoming annual and special meeting of shareholders to be held on July 24, 2020 to restore accountability at Turquoise Hill and give minority shareholders back their voice.
We encourage our fellow shareholders to consider the facts and take action against the current culture of entrenchment, value destruction and misconduct at Turquoise Hill. The interests of the Company's minority shareholders have been disregarded for far too long. Your vote is critical to initiate much-needed change, to restore accountability and to safeguard minority shareholder interests in Turquoise Hill.
Shareholders are urged to vote only the GOLD proxy:
- FOR the election of Matthew Halbower to the board of directors of the Company;
- WITHHOLD in respect of the election of all of the management nominees to the board of directors of the Company; and
- FOR the adoption of the shareholder proposal submitted by Pentwater to amend the Company's articles to provide minority shareholders of the Company with the exclusive right to nominate and elect three of seven directors to the Board.
Shareholders are urged to read the full text of Pentwater's proxy circular and related press releases, which have been filed and made available under Turquoise Hill's issuer profile at www.sedar.com.