Rio Tinto PLC offered to pay roughly $2.7 billion to buy out minority shareholders in Turquoise Hill Resources Ltd., which controls a giant copper-mining operation in Mongolia, a bet on copper being in high demand.
Rio Tinto’s proposal to take over the company in which it currently owns about 51% comes as commodity prices are running hot, fanned by concerns that Russia’s invasion of Ukraine could disrupt supplies. Russia is an important producer and exporter of a number of commodities, including copper, whose price is close to record highs.
Turquoise Hill controls Oyu Tolgoi, a copper-gold mining operation in Mongolia’s Gobi desert that Rio Tinto expects will be the fourth-largest copper mine in the world by 2030.
Rio Tinto has an almost 34% indirect interest in the mine through its stake in Turquoise Hill, which is listed on the Toronto Stock Exchange. Turquoise Hill has a 66% stake in Oyu Tolgoi LLC, which owns the mine, with the remainder held by the Mongolian government.
Rio Tinto on Monday said it would pay other Turquoise Hill investors 34 Canadian dollars, equivalent to about 26.68 U.S. dollars, in cash for each share. That was a 32% premium to the stock’s last closing price Friday before Rio Tinto disclosed the offer.
Rio Tinto, the world’s second-biggest mining company by market value, wants to boost its production of commodities such as copper, lithium and aluminum to play a key role in the world’s transition away from fossil fuels to cleaner alternatives. Currently, the company relies on iron ore, used in steel, for the bulk of its earnings.
Many analysts expect supply of copper will fall short of demand in the years ahead. The metal is used in much higher quantities in electric cars and renewable energy compared with conventional vehicles and power generation.
Russia mines around 3.5% of the world’s copper, according to the U.S. Geological Survey.
Rio Tinto Chief Executive Jakob Stausholm said a takeover of Turquoise Hill would strengthen the company’s copper portfolio.
Source: Mint