UPDATE 2-Turquoise Hill plans rights offering for Oyu Tolgoi

Thursday, 14 Nov 2013 | 11:10 AM ET

(Adds context on political situation in Mongolia, financial results.)

Nov 14 (Reuters) - Turquoise Hill Resources Ltd said Thursday it was planning a rights offering, citing delays at Rio Tinto's Oyu Tolgoi copper-gold mine in Mongolia that have stopped it from financing the mine's next phase.

Shares of Vancouver-based Turquoise Hill, the 66 percent owner of Oyu Tolgoi, fell 5.8 percent to C$4.36 in morning trading on the Toronto Stock Exchange.

Turquoise Hill filed a preliminary prospectus for the rights offering. Rights offerings raise funds from existing shareholders.

Rio Tinto put Oyu Tolgoi's more than $5 billion underground expansion on hold in July, saying the government wanted parliament to approve the project's financing.

Uncertainty over Oyu Tolgoi and shifting foreign investment rules have weighed on foreign direct investment in Mongolia over the last year.

Turquoise Hill said progress was being made with the government, but it was not clear when the project would be approved or when a feasibility study would be final. The company did not expect to complete project financing this year.

Under an agreement with Turquoise Hill, Rio will be required to buy shares that are not taken up under the rights offering, subject to some conditions. The preliminary prospectus did not include the size of the proposed offering.

Turquoise Hill also reported its financial results for the third quarter. The company's net loss was $94.0 million, or 9 cents a share, compared with net income of $112.2 million, or 13 cents, a year earlier.

Analysts, on average, had expected a loss of 5 cents a share, according to Thomson Reuters I/B/E/S.

Revenue rose to $15.7 million from $3.8 million, but results were boosted in the year-earlier quarter by a $176.2 million gain in derivative value, the result of an earlier rights offering.

(Reporting by Allison Martell; Editing by Lisa Von Ahn and Bernadette Baum)