Setback for Rio Tinto as miner’s £2.2bn takeover bid for Mongolian copper site is rejected
Rio Tinto suffered another setback after its £2.2bn bid to take control of a Mongolian copper project was rebuffed.
The FTSE 100 miner said he was “disappointed” that his plan to buy the 49% stake in Canadian mining explorer Turquoise Hill which he does not already own has been rejected.
Turquoise Hill owns 66% of the Oyu Tolgoi site in the Gobi Desert, one of the largest copper and gold deposits in the world, with the rest held by the Mongolian government.
Mine: Turquoise Hill owns 66% of the Oyu Tolgoi site in the Gobi Desert, one of the largest copper and gold deposits in the world.
The global thirst for copper is expected to be reinforced in the coming years by the global drive to reduce carbon emissions.
Rio Tinto says that when fully operational, Oyu Tolgoi is expected to produce 500,000 tonnes of metal each year, equivalent to what is needed to build 1,580 wind turbines or 16,400 electric vehicle batteries per day.
However, the price of copper has fallen sharply since peaking earlier this year as the global economic outlook darkens.
The British-Australian group owns 51% of Turquoise Hill and also manages operations at Oyu Tolgoi.
He announced a proposal to take over the rest of the Montreal-based business in March, saying it would create a “more efficient ownership and governance structure” for the Mongolian site. But some minority shareholders said the price was too low.
An independent committee set up to assess the offer concluded yesterday that it ‘does not fully and fairly reflect the long-term strategic value of the company’s majority stake in the Oyu Tolgoi project’.
Talks between the parties “did not result in a consensus on value and price or an improved proposal from Rio Tinto”, the committee said.
The statement acknowledged the drop in the price of copper since the offer was made in March, but also highlighted “positive progress” in unlocking underground operations – the most valuable part of the site.
Rio Tinto said it still believed its offer represented “compelling value” for Turquoise Hill investors and said its rivals had seen their share prices fall by a third “in light of an environment exterior which is deteriorating and more uncertain” since the offer was made.
Bold Baatar, Rio’s managing director for copper, said the miner “remains more committed than ever to the long-term success of Oyu Tolgoi.”
“We will continue to work constructively with the Turquoise Hill Board to move the Oyu Tolgoi project forward.”
Rio Tinto reiterated that it was not interested in alternative deals such as selling its stake in Turquoise Hill.
Rio Tinto also suffered a setback in Serbia recently when a major lithium project was compromised after the government revoked its exploration license following protests from residents and environmentalists.