(Updates with Rio no comment, analyst) Nov 10 (Reuters) - A gold stream is "probably the mostattractive" option for Canadian miner Turquoise Hill Resources as it seeks funding for a copper and gold project inMongolia, the head of mine financing company Wheaton PreciousMetals said on Tuesday. Turquoise Hill last week began arbitration proceedingsagainst its biggest shareholder Rio Tinto to seek"clarity" on financing for Oyu Tolgoi, one of Rio's biggestgrowth projects. Streaming is a type of alternative finance that generallyinvolves an upfront payment by the streamer to a miner, whichrepays the loan by supplying metal at a later date. A "gold streaming transaction" is among options under studyby Turquoise Hill to plug a funding gap for the projectestimated at $1.7 billion as of the end of the second quarter,the company said.
The aim would be to reduce the size and delay the timing ofany equity rights offering. "Definitely from a Turquoise Hill shareholder perspective Iwould say it is probably the most attractive way of financingthat project," Randy Smallwood, president and chief executive ofWheaton Precious Metals, told Reuters. He declined comment when asked if Wheaton was in activetalks. Any such deal would require approval from Rio.
"That's one of the challenges that I think Turquoise Hillhas," he said. Turquoise Hill and Rio declined comment.
Additional debt or a streaming agreement are not in Rio'sbest interests as both options would leave the miner carryingall the risk but with a higher cost of capital than a directequity funding option, Bank of Montreal analyst Edward Stercksaid last week in note. The Oyu Tolgoi deposit in south Mongolia is jointly owned bythe Mongolian state and ranks as one of the world's largestknown copper and gold deposits. (Reporting by Jeff LewisEditing by Chris Reese, Emelia Sithole-Matarise and DavidGregorio)
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