Rio Tinto has struck a $3.3bn (£2.86bn) deal to buy the rest of Canadian firm Turquoise Hill today in a move that will see it take direct ownership of a major copper mine in Mongolia.
The London-listed miner will pay C$43 per share in cash for the remaining 49 per cent of the firm it does not own, as it looks to push into an area that is set to swell as demand for electric vehicles and renewable energy infrastructure grows.
The purchase price represents more than a 19 per cent premium on Copper Hill’s last closing price – higher than an already boosted offer of C$40 proposed by the firm last month.
Shareholders are yet to vote on the deal but an independent committee appointed by Turquoise Hill has indicated the “fair market value… is in the range of C$42 to C$58 per common share.”
If approved, the deal would give Rio Tinto a 66 per cent stake in Mongolian mine Oyu Tolgoi, which could hold the world’s largest known copper and gold deposits. The Mongolian government holds the remainder of the stake.
Rio Tinto boss Jakob Stausholm said today the frim was “committed to moving Oyu Tolgoi forward in direct partnership with the Government of Mongolia”.
“This agreement represents another significant step following the recent commencement of the underground operations, and will simplify governance, improve efficiency and create greater certainty of funding for the long-term success of the Oyu Tolgoi project,” he added.
The deal will now require the approval of 66.67 per cent of votes cast by shareholders of Turquoise Hill – including Rio Tinto – as well as the approval of a simple majority of the votes cast by minority shareholders of Turquoise Hill.
A “special meeting” of shareholders of Turquoise Hill is now expected in the fourth quarter of the year, Rio Tinto said, with the deal expected to close shortly after if approved.
The agreement comes after a six month takeover process in which the Canadian firm rebuffed a previous offer of C$34 per share as too low.
The chief of Rio Tinto’s copper business Bold Baatar said today the deal would “simplify the ownership structure of Oyu Tolgoi” and enable the firm to focus on working in partnership directly with Erdenes Oyu Tolgoi and the Government of Mongolia.
“Turquoise Hill minority shareholders will realise a significant and immediate cash premium for their shares at a time when uncertainties inherent in the development of the underground operations remain,” he added.