BY Fraser Tennant
In a move that would significantly strengthen its copper portfolio, Anglo-Australian mining group Rio Tinto has offered to buy the 49 percent of Canadian mineral exploration and development company Turquoise Hill it does not already own – a proposal that values the shares at $2.7bn
Under the terms of the non-binding proposal, Turquoise Hill minority shareholders would receive $34 in cash per Turquoise Hill share, representing a premium of 32 percent to Turquoise Hill’s last closing share price on the Toronto Stock Exchange.
Founded in 1995, Turquoise Hill is an international mining company focused on the operation and continued development of the Oyu Tolgoi copper-gold mine in Mongolia, the company's principal and only material mineral resource property.
The proposed transaction follows the recent comprehensive agreement reached between Rio Tinto, Turquoise Hill and the government of Mongolia to move the Oyu Tolgoi project forward – resetting the relationship between the partners and approving commencement of underground operations.
If the acquisition proves successful, Rio Tinto will hold a 66 percent interest in Oyu Tolgoi, with the remaining 34 percent owned by Mongolia.
“Rio Tinto strongly believes in the long term success of Oyu Tolgoi and Mongolia, and delivering for all stakeholders over the long-term,” said Jakob Stausholm, chief executive of Rio Tinto. “That is why we want to increase our interest in Oyu Tolgoi, simplify the ownership structure and further strengthen Rio Tinto’s copper portfolio.
“Furthermore, an acquisition would enable Rio Tinto to work directly with the government of Mongolia to move the Oyu Tolgoi project forward with a simpler and more efficient ownership and governance structure,” he continued. “We believe the terms of proposal are compelling for Turquoise Hill shareholders.”
To progress the proposal, Turquoise Hill’s board of directors will be establishing a special committee of independent directors to review and consider Rio Tinto's offer. Turquoise Hill shareholders are not required to take any action at this time.
Mr Stausholm concluded: “With our relationship reset and underground operations commenced, this transaction demonstrates our clear and unequivocal long-term commitment to Mongolia.”
News: Rio Tinto offers $2.7 bln to buy rest of Turquoise Hill stake