Rio Tinto’s ambition to assume full ownership of a massive Mongolian copper mining project suffered a heavy blow today, after its $2.7bn takeover proposal for a key company associated with the project was rejected.
The multinational miner owns a 51 per cent majority stake in Toronto-listed Turquoise Hill Resources, and has sought to snap up the remaining 49 per cent of the company in C$34 per share deal.
However, Turquoise revealed today that a special committee had “terminated” its review of Rio Tinto’s cash offer, having assessed the deal on behalf of minority shareholders.
It argued the bid did not “fully and fairly reflect” the value of its holding in the Oyu Tolgoi project, one of the world’s biggest copper deposits.
While Rio Tinto operates the mine and is overseeing the development’s underground expansion project, it does not have a direct stake in Oyu Tolgoi.
Instead, it holds a 51 per cent stake in Turquioise, which owns 66 per cent of Oyu Tolgoi.
The rest is owned by the government of Mongolia.
Rio Tinto submitted its bid in March, which the global miner hoped would clear the way to direct ownership of the project. – with copper prices rising to a record high of $10,600 per tonne.
Since then prices have dropped to $8,000 per tonne, but long-term demand for the metal is expected to remain high due to its usage in wiring, machinery, construction and motors – providing it a key role in the energy transition.
Oyu Tolgoi is located in the Gobi desert.
Once the underground expansion project is completed, it will be one of the world’s biggest copper mines, with production in its early years of about 500,000 tonnes per year, just as demand for the metal increases amid the shift to electric cards and renewable energy.