Rio Tinto Agrees to $3.3B Purchase of Remaining Turquoise Hill Stake

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Rio Tinto Agrees to $3.3B Purchase of Remaining Turquoise Hill Stake
Credit: © Reuters.

By Scott Kanowsky -- Rio Tinto PLC (LON: RIO ) has agreed to a proposed $3.3B buyout of Canadian partner Turquoise Hill (TSX: TRQ ), ending a drawn-out negotiation over a purchase that would see the Anglo-Australian miner assume direct control over a massive copper mine in Mongolia.

Rio described its proposed bid of 43 Canadian dollars (C$) a share for the remaining 49% stake in Turquoise Hill it does not already own as its "best and final offer." It implies a 67% premium to Turquoise Hill's closing share price in March when Rio first unveiled the buyout.

The offer also represents a 7.5% improvement to its prior bid of C$40 per share in cash made last week. Turquoise Hill had already rejected a separate offer of C$34 per share in mid-August, claiming it undervalued its holdings in Oyu Tolgoi.

The site, located in Mongolia's Gobi Desert, could become one of the world's largest copper mines once an ongoing underground expansion project is completed, with output estimated to register as much as 500,000 tons of copper per year.

This comes as the shift to a low-carbon global economy is expected to cause a spike in demand for the metal, which is used in products like wind turbines and solar power units. Rio is aiming to take full ownership of Oyu Tolgoi in a bid to ready the company for the energy transition.

The group oversees the underground expansion project but does possess a direct stake in the site.

At the moment, Turquoise Hill holds a 66% interest in Oyu Tolgoi, while the rest is owned by the Mongolian government. Rio - which already has a 51% stake in Turquoise Hill - would subsequently take control of the Canadian firm's Oyu Tolgoi holdings if the deal is approved.

"This agreement represents another significant step following the recent commencement of the underground operations, and will simplify governance, improve efficiency and create greater certainty of funding for the long-term success of the Oyu Tolgoi project,” said Rio Tinto Chief Executive Jakob Stausholm in a statement.

Thursday's agreement also revamps terms to help shore up Turquoise Hill's near-term liquidity, including a hike to an early advance facility to $650M from $400M, with room for an additional $100M. The deadline for $650M in equity raising and debt repayment was pushed back to at least March 2023, as well.

Turquoise Hill shareholders are expected to meet to sign off on the transaction in the fourth quarter of this year, Rio said in a statement.

London-listed shares in Rio were lower in mid-morning trade.

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