Rio Tinto’s $3.3 billion bid to buy Turquoise Hill has suffered significant setbacks, after minority shareholders expressed opposition and Canadian financial regulators raised concerns.
The date for the Canadian miner’s shareholders to vote on Rio’s offer has been postponed indefinitely while the financial regulator in Quebec, the Autorité des Marchés Financiers, reviews the deal.
The regulator “treats the transaction as it is structured to raise public interest,” according to a statement from Turquoise Hill.
The delay is a blow to Rio’s eight-month effort to consolidate control over Oyu Tolgoi, Mongolia’s copper mine, one of its most important assets. Rio already owns a 51% stake in Montreal-based Turquoise Hill, which in turn owns a 66% stake in Oyu Tolgoi.
In September Rio Tinto suggested C$43 per share to buy the remaining shares of Turquoise Hill that it does not own. That proposal was proposed by Turquoise Hill’s board but was opposed by its largest minority shareholders, Pentwater Capital and SailingStone.
After failing to secure enough votes to approve the transaction outright, Rio signed a special agreement with Pentwater and Sailing Stone that allowed them to register dissent, then receive the dissenting shares through a special arbitration process after the overall transaction is completed.
Peter Mallin-Jones, an analyst at Peel Hunt, said: “Unsurprisingly, the Quebec regulator is taking a dim view of the side deal made between Rio and two of its shareholders. larger than that of TRQ. “This suggests that the soap opera Oyu Tolgoi will have some more twists and turns coming soon,” he added.
A meeting for Turquoise Hill shareholders to vote on the transaction was initially scheduled for November 2, then rescheduled twice, before being adjourned indefinitely.
According to one company, a special committee of independent directors of Turquoise Hill expressed “concern about the company’s differential treatment of minority shareholders.” statement on 9 November.
For Rio Tinto, securing greater control of the Oyu Tolgoi mine is a strategic priority, as the company is working to expand production of metals such as copper and lithium needed for the transition to energy. low carbon content.
Earlier this year, Rio began expanding the mine’s underground operations, which will significantly boost copper production and also increase the project’s capital requirements.
Rio estimate Turquoise Hill will need an additional $3.6 billion over the next two years to support the expansion. Some of that will need to be paid out by shareholders.
Once the underground project is complete, Oyu Tolgoi will be one of the largest copper mines in the world, with production in the early years around 500,000 tons per year, as well as increased demand for the metal due to the process. energy conversion.