Rio Tinto’s offer to take over giant copper mine rebuffed

RIO Tinto Group’s US$2.7 billion offer to buy out Turquoise Hill Resources has been rejected, blocking its efforts to gain greater control of a giant copper mine it is developing in Mongolia. 

Rio’s offer doesn’t “fairly reflect the fundamental and long-term strategic value of the company’s majority ownership of the Oyu Tolgoi project,” Turquoise Hill said Monday, after appointing a special committee to review the bid.

The rejection is a setback for Rio chief executive officer Jakob Stausholm, who has prioritised getting stalled projects moving, while rebuilding the company’s reputation after a series of missteps. Rio owns 51 per cent of Turquoise Hill, which in turn holds a two-thirds share in Oyu Tolgoi. (Turquoise Hill is a Canadian mineral exploration and development company headquartered in Montreal, Quebec.)

Rio said in a statement that it was disappointed by the decision of the special committee and reiterated its proposal to buy Turquoise Hill. The offer would deliver “compelling value” for minority investors, it said.

The miner is also looking to increase its exposure to so-called future-facing commodities, the natural resources such as copper and nickel that are key for the green-energy transition. Taking a big stake in the Oyu Tolgoi mine was an obvious way to achieve that goal.

Earlier this year, Rio struck a deal with the government to start work on a long-delayed US$6.9 billion underground expansion of Oyu Tolgoi, after agreeing to write off US$2.4 billion owed by the state. 

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The mining sector largely turned its back on big deals since a commodity crash in the middle of the last decade. Yet that’s now changing as the biggest miners push to increase their exposure to commodities such as copper. Last week, BHP Group, the biggest miner, had a US$5.8 billion offer for copper miner Oz Minerals Ltd rejected.

In March, Rio Tinto offered C$34 (S$36.25) a share to Turquoise Hill’s minority shareholders, a then 32 per cent premium to its previous closing price. Turquoise Hill closed at C$33.54 on Friday.

“Engagement between the parties has not resulted in a consensus on value and price or in any improved proposal from Rio Tinto,” Turquoise Hill said in a statement on Monday (Aug 15). BLOOMBERG