Rio Tinto has a tough decision to make – if it really wants to control all of the 66% non-government stake in the huge Oyu Tolgoi copper gold mine in Mongolia, it has to buy the 49% it doesn’t control in Canadian company Turquoise Hill.
Buying control of Turquoise Hill and its 66% of the mine is how Rio cemented its position in the huge project – which continues to prove a costly proposition, even if the brawl with the Mongolian government has been settled on the government’s terms.
Turquoise Hill Resources said on Monday its special board committee terminated the review and consideration of Rio Tinto proposal to buy the rest 49% for $US2.7 billion as it did not reflect the Canadian company’s full and fair value.
The committee determined that Rio’s offer of $C34 ($US26.57) a share was not in the best interest of Turquoise Hill or its minority shareholders.
“Engagement between the parties has not resulted in a consensus on value and price or in any improved proposal from Rio Tinto,” Turquoise said in a statement.
In March, Rio Tinto proposed to buy the 49% of Turquoise Hill it does not already own, paving the way for direct ownership of the massive Oyu Tolgoi copper-gold mining project in Mongolia.
Rio Tinto did not immediately respond to requests for comment on Monday. The Mongolian mine is one of Rio’s project of the future, especially in green metals and renewables.
The rejection will upset Rio, after agreeing in May to lend Turquoise Hill up to $US400 million in short-term early advances so that the Canadian company could continue to fund its share of expenses in new work at the mine.
That was after the company was unable to get a $US650 million issue away.
The deadline in the previous funding agreement with Turquoise Hill to conduct an initial equity offering of at least $650 million has also been extended from the end of August 2022 to the end of this year.
Will Rio lift its offer, or sit and wait and squeeze Turquoise Hill by playing hardball and not advancing any more money above the $US400 million?
