The Oyu Tolgoi mine. Image: Rio Tinto
Following months of negotiations and renegotiations, Rio Tinto has finally won over the Turquoise Hill Resources board and is poised to acquire a full stake in the Canadian miner for $US3.3 billion ($4.84 billion).
The two companies announced an in-principle agreement enabling Rio to acquire the remaining 49 per cent interest in Turquoise Hill it doesn’t already own for $C43 ($48.15) per share.
This represents a 67 per cent premium to Turquoise Hill’s share price on March 11, the date prior to Rio’s initial proposal.
The offer has the blessing of the Turquoise Hill board but will require the approval of 66.7 per cent of its shareholders and a simple majority of its minority shareholders before it can be completed.
Turquoise Hill is set to host a shareholder vote in the fourth quarter of 2022 and Rio Tinto expects the deal to be completed shortly thereafter.
It begs the question: if Rio is paying a 67 per cent premium for Turquoise Hill, what does that mean for BHP’s bid for OZ Minerals, another intriguing copper battle?
BHP offered $25 per share for OZ, equating to a 32.1 per cent premium to the copper miner’s share price of $18.92 on August 5, which is less than half the value of Rio’s offer for Turquoise Hill.
OZ swiftly rejected BHP’s offer, indicating it was not an accurate reflection of its attributes, and no further bid has been proposed from the Big Australian.
OZ Minerals’ share price has since climbed above $25, and the company was trading at $25.30 at close on September 1.
Will the Rio–Turquoise Hill deal have any influence on a renewed bid for OZ? It remains to be seen, but there’s little doubt Andrew Cole will be watching on with vested interest.
If the Turquoise Hill takeover is completed, Rio Tinto would hold a 66 per cent interest in the fancied Oyu Tolgoi copper mine, with the remaining 34 per cent to be owned by the Government of Mongolia.
Oyu Tolgoi is considered one of the largest known copper and gold deposits in the world but has been plagued by interruptions.
The Government of Mongolia had flagged concerns that development capital needed to commence underground mining was too high and had “eroded the economic benefits”.
Underground operations at Oyu Tolgoi commenced in late January and sustainable underground production is expected in the first half of 2023.