Turquoise Hill rejects $2.7 billion offer from Rio Tinto

August 15, 2022

Turquoise Hill has rejected Rio Tinto’s $2.7 billion bid to buy the 49 percent stake in the company that it didn’t already own. Turquoise Hill said in a statement that the bid did not reflect its full and fair value.

Rio Tinto said it was is disappointed by the decision and continues to believe that the terms of the proposed transaction would deliver compelling value for Turquoise Hill minority shareholders and provide the certainty of an all-cash offer at an attractive premium of:
• 32 percent to Turquoise Hill’s closing price of C$25.68 per share on March 11, 2022 and
• 78 percent to Turquoise Hill’s closing price of C$19.12 per share on Jan. 24, 2022, the day before agreeing a path forward between government of Mongolia, Turquoise Hill and Rio Tinto that enabled commencement of the underground mine at Oyu Tolgoi.

The decision by the special committee appointed by Turquoise Hill blocks Rio Tinto’s efforts to gain greater control of the giant Oyu Tolgoi copper-gold mine it’s developing in Mongolia.

Rio Tinto controls and operates Oyu Tolgoi through its 51 percent stake in Turquoise Hill. The project is Rio Tinto’s main copper growth project.
“Market conditions in the equity and copper markets have changed significantly since the receipt of Rio Tinto’s privatization proposal,” Maryse Saint-Laurent, chair of the special committee, said in the statement. “At the same time, the company has continued to make positive progress on the underground project.”

“Since Rio Tinto made its proposal on March 14, 2022, the average share price performance of Turquoise Hill’s peers has declined 35 percent in light of a deteriorating and more uncertain external environment,” Rio Tinto said in a statement. “Furthermore, Turquoise Hill has disclosed in its latest earnings results that it needs to raise equity proceeds of more than US$1 billion to address its current estimate of funding requirements.”

Rio Tinto Chief Executive Copper Bold Baatar said: “Rio Tinto remains as committed as ever to the long-term success of Oyu Tolgoi. While we are disappointed by this decision, we will continue to work constructively with the Board of Turquoise Hill to advance the Oyu Tolgoi project.”

The offer came only two months after Rio Tinto and the government of Mongolia reached an agreement to complete the long-delayed $6.9 billion underground development of the Oyu Tolgoi project in the Gobi Desert.

That deal saw the Melbourne-based miner agree to write off $2.4 billion of loans and interest used by Ulan Bator to fund its share of the development costs.

First production from Oyu Tolgoi was initially expected in late 2020 but was rescheduled for October 2022 and later to the first half of 2023.

Once completed, the underground section will lift production from 125 kt –150 kt (138,000 to 165,000 st) in 2019 to 560 kt (617,000 st) at peak output, which is now expected by 2025 at the earliest.

According to the miner, this would make it the biggest new copper mine to come on stream in several years and, by 2030, the operation would be the world’s fourth largest copper mine.

Oyu Tolgoi is expected to produce 110 kt -150 kt (121,000 – 165,000 st) tonnes of copper and 4.5 t – 4.8 t (150,000-170,000 oz) of gold in concentrates in 2022 from processing ore from the openpit, underground and stockpiles.

Rio Tinto controls and operates the Oyu Tolgoi mine via Turquoise Hill’s 66 percent stake in the operation. The government of Mongolia owns the remaining 34 percent.



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