Rio Tinto has reached an agreement to buy the remainder of Canada’s Turquoise Hill Resources for $3.3 billion, giving the major mining company ownership of a giant copper mine in Mongolia.
Rio will buy the share for $43 in cash for a 49% stake in Turquoise Hill, representing a premium of more than 19% to the stock’s last close and higher than the $40 per share offer it had before.
The deal, which is in the process of shareholder approval, gives the miner ownership of a 66% stake in Turquoise Hill in Oyu Tolgoi, the world’s largest copper and gold mine, located 550 kilometers south of Mongolia’s capital Ulaanbaatar.
Global mining companies are hoping for growth in commodities such as copper, which is used in the construction of wind turbines, solar energy systems, and electric cables, as well as nickel and lithium, which are found in electric vehicle (EV) batteries, as countries recently decarbonize.
The takeover has been going on for about half a year, and earlier Turquoise Hill rejected Rio’s offer at CAD$34 apiece because the price was too low.
“Rio Tinto is committed to moving Oyu Tolgoi forward in direct partnership with the government of Mongolia to realize its full potential for all stakeholders,” Rio Tinto Chief Executive Officer Jakob Stausholm said.
“This agreement … will simplify governance, improve efficiency and create greater certainty of funding for the long-term success of the Oyu Tolgoi project.”
Rio and the Mongolian government, which owns the remaining 34% of Oyu Tolgoi, ended discussions earlier this year over a $7 billion mine expansion.
Rio de Janeiro competitor BHP Group has been turned down in an A$8.34 billion takeover bid by OZ Minerals as it wants to move into the clean energy and electric vehicle market.
BHP did not say if it would make its offer more attractive, although analysts and bankers believe it is necessary if it wants to protect the asset.
Rio and Turquoise Hill also agreed to slightly change some of their funding arrangements to help the Canadian firm deal with short-term liquidity.
The deal includes clauses such as an increase in the early advance loan to $650 million from $400 million, and an extension of the deadline for raising capital and repaying $650 million in debt until March 2023.
Other terms also include Rio’s obligation to participate on a pro-rata basis in the initial public offering.
Turquoise Hill’s EGM is expected in the fourth quarter to approve the deal, Rio said, and the deal will close shortly thereafter if approved.
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