Mining giant Rio Tinto reached in-principle agreement on Thursday to get control of Oyu Tolgoi, a huge mine in Mongolia with the world’s largest known copper and gold deposits.
Rio will pay $3.3 billion for the 49% of shares in Canadian firm Turquoise Hill Resources it does not already own, for direct ownership of the giant copper mine.
Rio will pay C$43 per share in cash for the remainder of Turquoise Hill, a more than 19% premium to the stock’s last close and higher than a sweetened offer of C$40 apiece proposed last month.
The deal, which still needs shareholder approval, gives the global miner ownership of Turquoise Hill’s 66% stake in Oyu Tolgoi, which is 550 km (342 miles) south of Mongolia’s capital Ulaanbaatar.
‘New Energy Minerals’
Global mining firms are looking for growth in commodities such as copper – used in wind turbines, solar power systems and electric cables – and nickel and lithium that are used in batteries for electric vehicles (EVs), as the world gears up to decarbonise.
The takeover process has been ongoing for about six months with Turquoise Hill earlier rejecting the C$34 apiece offer from Rio, citing it was too low.
“Rio Tinto is committed to moving Oyu Tolgoi forward in direct partnership with the government of Mongolia to realise its full potential for all stakeholders,” Rio Tinto chief executive 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 a long-running dispute over the $7-billion expansion of the mine earlier this year.
OZ Minerals Takeover Rebuffed
BHP has not said if it would sweeten its offer, although analysts and bankers believe it would have to if it wants to secure the asset.
Rio and Turquoise Hill also agreed on Thursday to amend certain financing arrangements to help the Canadian firm address near-term liquidity, the global miner said.
The agreements include increasing an early advance facility agreed in May to $650 million from $400 million and extending the deadline for a $650 million equity raising and debt repayment to at least March 2023.
The amended arrangements also include a commitment by Rio to participate pro rata in an initial equity offering.
A special meeting of Turquoise Hill shareholders to approve the deal is expected in the fourth quarter, and the deal will close shortly thereafter, if approved, Rio said.
- Reuters with additional editing by Jim Pollard