UK-based mining company, Rio Tinto, has agreed to acquire all remaining shares of Turquoise Hill Resources.
Turquoise Hill is an international mining company focused on the operation of the Oyu Tolgoi copper-gold mine in Mongolia. It owns 66 per cent of the Oyu Tolgoi mine with the Government of Mongolia holding the remaining 34 per cent interest.
The total consideration of the acquisition to be paid out of existing cash reserves, according to Rio Rinto, is approx. 3.3 billion USD.
If this transaction proceeds as planned then Rio Tinto will hold a 66 per cent interest in Oyu Tolgoi with the remaining 34 per cent owned by Mongolia.
During the transaction period, Rio Tinto will provide Turquoise Hill with a secured short-term liquidity of up to $1.1 billion USD (subject to certain pre-conditions), which would need to be repaid from an equity raising from shareholders in 1H 2023 if the deal acquisition is not approved by shareholders.
Turquoise Hill has estimated that it requires $3.6 billion USD of additional funding in total to complete the project. It aims to address this through a funding plan including renegotiating debt repayment dates, which requires the unanimous consent of participating lenders. The success of this debt renegotiation and certain other funding plans is uncertain and, if unsuccessful, could require further equity contributions from shareholders. The Transaction delivers certainty for the financing needs of Oyu Tolgoi and alleviates any further funding risks for shareholders.
“This Transaction will simplify governance, improve efficiency and create greater certainty of funding for the long-term success of the Oyu Tolgoi project,” said Rio Tinto CEO, Jakob Stausholm.
“Rio Tinto’s offer guarantees Turquoise Hill’s minority shareholders outstanding value through a significant all-cash premium for their shares. After extensive negotiations, the terms of the transaction are final and there will be no further price increase. We look forward to working with the Turquoise Hill Board of Directors to ensure Turquoise Hill shareholders are able to realise the significant and immediate value of the Transaction.”
Rio Tinto Copper Chief Executive, Bold Baatar, said: “Rio Tinto will work in direct partnership with the Government of Mongolia and Erdenes Oyu Tolgoi to realise the full potential of the Oyu Tolgoi project for the benefit of all stakeholders. This Transaction rewards all minority shareholders with an exceptional premium of 67 per cent for their shares and brings the financial certainty necessary to ensure the Oyu Tolgoi project can be developed without having to ask minority shareholders to contribute further significant funds.”
The acquisition will be implemented by way of a Canadian Plan of Arrangement and require the approval of 66.67 per cent of votes cast by all shareholders of Turquoise Hill (including Rio Tinto) and the approval of a simple majority of the votes cast by minority shareholders of Turquoise Hill. A special meeting of shareholders of Turquoise Hill to approve the acquisition is expected as early as possible in the fourth quarter of 2022 and, if approved, the acquisition is expected to close shortly thereafter.