The Rio Tinto logo is displayed on a visitor's helmet at a borates mine in Boron, Cali., on Nov. 15, 2019.PATRICK T. FALLON/Reuters
Global mining group Rio Tinto Group RIO-N has raised its offer to acquire Canadian copper miner Turquoise Hill Resources Ltd., TRQ-T but the price still may not be high enough.
Rio Tinto said Wednesday it will pay $3.1-billion for the 49 per cent of Turquoise it does not already own. The new bid of $40 a share is an 18-per-cent increase from an earlier offer of $34, submitted in March and rejected by Turquoise Hill. Rio Tinto said the offer is also a 56-per-cent premium to Turquoise Hill’s closing share price on the day prior to its initial proposal.
The new offer, if accepted by Turquoise, would give Rio more control and ownership of Mongolia’s Oyu Tolgoi, one of the world’s largest copper and gold mines. Turquoise Hill owns 66 per cent of Oyu Tolgoi, while the government of Mongolia controls 34 per cent.
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In a report, Bank of Nova Scotia analyst Orest Wowkodaw said he believes a higher price will be required in order to close the deal. “In our view, the improved offer ... continues to undervalue the company,” he wrote. “Oyu Tolgoi is a world-class Tier 1 copper mine, representing an extremely valuable asset in today’s market.”
Mr. Wowkodaw, who has a $42-a-share target price for Turquoise Hill, said that given the long-standing opinions of several large minority shareholders, the new bid is unlikely to result in enough minority shares being tendered to Rio Tinto to close the deal. A majority of the owners of the 49 per cent of shares not held by Rio Tinto must vote in favour of a deal for it to be approved.
The shares closed Wednesday at $37.44, up 24 per cent, but nearly 7 per cent below the offer price.
In a statement, Turquoise said a special committee of the company’s board of directors is considering the proposal and said its shareholders “do not need to take any action with respect to the proposal at this time.”
Jakob Stausholm, the chief executive of Rio Tinto, said the company “believes this offer not only provides full and fair value for Turquoise Hill shareholders, but is in the best interests of all stakeholders as we work to move the Oyu Tolgoi project forward.”
Last year, Turquoise Hill’s chief executive resigned after months of tension between the company and Rio over the funding of Oyu Tolgoi’s operations.
The project, when completed, is expected to produce more than 500,000 tons a year and boost global copper production and supply.
A study by S&P Global Market Intelligence that examines the growing mismatch between available copper supply and future demand resulting from the energy transition said the looming shortfall presents a challenge to achieving net-zero emissions targets by 2050 and may affect the industry unless a significant boost in supply happens in a timely way.
The study predicts copper demand nearly doubling in the next decade, from 25 million tonnes to about 50 million tonnes by 2035. The record-high level of demand would be sustained and continue to grow to 53 million tonnes in 2050.
Copper is key to wind and solar power, electric vehicles and the infrastructure that transports and stores renewable energy.
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Patrick Egwu