Turquoise Hill Resources (NYSE:TRQ)
Following news that Canadian mineral explorer and developer Turquoise Hill Resources (NYSE:TRQ) had reached an agreement to be acquired by mining giant Rio Tinto (RIO) on Thursday, shares of TRQ soared 13.23%. At 3:15 p.m. ET, the stock price of Turquoise Hill had increased by over 13%.
What’s the Reason?
The deal calls for Rio Tinto to pay $43.0 ($32.68) per share in cash to acquire the roughly 49.0% of Turquoise Hill Resources (NYSE:TRQ) stock it does not currently control. The value of Turquoise Hill is estimated to be around CA$8.7 billion in the all-cash transaction.
Turquoise Hill Resources (NYSE:TRQ) said no to Rio Tinto’s CA$25.68 per share offer in March. Likewise, it turned down Rio Tinto’s amended offer of CA$40 per share in August. After that, the two firms put together a special committee of independent directors to settle on a reasonable price for the stockholders. According to the committee’s deliberations, a new offer of CA$43 per share is appropriate.
The purchase can’t go through unless two-thirds of Turquoise Hill’s investors, including a large majority of minority owners, agree. This vote will likely occur in the fourth quarter, with the deal closing shortly afterward.
Rio Tinto could increase its interest in Mongolia’s colossal copper and gold mine by acquiring Turquoise Hill. The remaining 34% of the mine is owned by Erdenes Oyu Tolgoi, a Mongolian state-controlled business.
In a press release, Rio Tinto CEO Jakob Stausholm said, “Rio Tinto is committed to bringing Oyu Tolgoi ahead in direct partnership with the Government of Mongolia to realize its full potential for all stakeholders.” According to the statement, “This agreement constitutes another key milestone following the recent initiation of the underground operations and will simplify governance, increase efficiency, and create greater certainty of finance for the long-term success of the Oyu Tolgoi project.”
Copper prices have fallen significantly from their March highs due to coronavirus-related interruptions and recession fears. Still, demand is expected to climb sharply over the future decade as the commodity is heavily used in electric vehicles and renewable energy projects.
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