(Updates with Rio no comment, analyst)
Nov 10 (Reuters) - A gold stream is "probably the most attractive" option for Canadian miner Turquoise Hill Resources TRQ.TO as it seeks funding for a copper and gold project in Mongolia, the head of mine financing company Wheaton Precious Metals WPM.TO said on Tuesday.
Turquoise Hill last week began arbitration proceedings against its biggest shareholder Rio Tinto RIO.L to seek "clarity" on financing for Oyu Tolgoi, one of Rio's biggest growth projects. is a type of alternative finance that generally involves an upfront payment by the streamer to a miner, which repays the loan by supplying metal at a later date.
A "gold streaming transaction" is among options under study by Turquoise Hill to plug a funding gap for the project estimated 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 of any equity rights offering.
"Definitely from a Turquoise Hill shareholder perspective I would say it is probably the most attractive way of financing that project," Randy Smallwood, president and chief executive of Wheaton Precious Metals, told Reuters.
He declined comment when asked if Wheaton was in active talks. Any such deal would require approval from Rio.
"That's one of the challenges that I think Turquoise Hill has," he said.
Turquoise Hill and Rio declined comment.
Additional debt or a streaming agreement are not in Rio's best interests as both options would leave the miner carrying all the risk but with a higher cost of capital than a direct equity funding option, Bank of Montreal analyst Edward Sterck said last week in note.
The Oyu Tolgoi deposit in south Mongolia is jointly owned by the Mongolian state and ranks as one of the world's largest known copper and gold deposits.