Monday, Turquoise Hill Resources (NYSE:TRQ) Ltd said no to an offer from majority shareholder Rio Tinto (NYSE:RIO) Ltd to buy the 49% stake it doesn’t already own for $2.7 billion. This was because the offer didn’t reflect the full and fair value of the Canadian company.
After Rio Tinto’s proposal in March, which the global miner thought would pave the road to direct control of the enormous Oyu Tolgoi copper-gold mining project in Mongolia, Turquoise Hill created an independent committee to assess whether Rio Tinto’s offer of C$34 ($26.57) per share was in the best interest of minority shareholders.
There has been “no agreement on value and pricing” or “any better proposal from Rio Tinto” as a consequence of the parties’ “interaction,” as stated by Turquoise Hill.
The $5.3 billion market cap Toronto-listed miner said the committee considered the drop in copper prices since the March offer and noted the significant work made on the underground project in recent months.
Both Turquoise Hill and Rio Tinto’s Stock Fell as a Consequence
After the acquisition was rejected, its stock price fell by 16%, while Rio’s stock fell by 2.5% in London.
The Anglo-Australian mining giant said in a statement that it was “disappointed” by the Special Committee’s decision because it “continues to believe that the terms of the Proposed Transaction would deliver compelling value for Turquoise Hill minority shareholders and provide the certainty of an all-cash offer at an attractive premium.”
Oyu Tolgoi, located 550 kilometers (342 miles) south of Mongolia’s capital Ulaanbaatar, is one of the world’s biggest known copper and gold reserves, and Turquoise Hill owns 66% of it.
A long-running dispute between Rio Tinto (NYSE:RIO) and the Mongolian government, which owns the remaining 34% of Oyu Tolgoi, over the mine’s almost $7 billion expansion that has been behind time and over budget was resolved in January.
Turquoise Hill’s interim CEO, Steve Thibeault, said that the business still anticipated that the finance deal with Rio Tinto would provide enough liquidity to satisfy financial commitments.
The Canadian firm said in May that Rio Tinto (NYSE:RIO) would offer up to $400 million in temporary loan capital.
The biggest minority shareholder, activist investor Pentwater Capital Management, with a 10% stake, and the second-largest minority shareholder, SailingStone Capital Partners, with a 2.4% interest, had both opposed Rio’s bid.
MacKenzie Davis, a portfolio manager at SailingStone, told Reuters, “We are happy that the Special Committee has found that the underlying value is considerably greater than the offer from Rio Tinto.”
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Author Shariq Khan 
