Setback for Rio Tinto as miner’s £2.2bn buyout bid for Mongolian copper site is rejected
Rio Tinto has suffered another setback after its £2.2biliion bid to take control of a Mongolian copper project was rebuffed.
The FTSE 100 miner said it was ‘disappointed’ its plan to buy the 49 per cent stake in Canadian mineral explorer Turquoise Hill it does not already own has been rejected.
Turquoise Hill owns 66 per cent of the Oyu Tolgoi site in the Gobi Desert, one of the largest copper and gold deposits in the world, with Mongolia’s government owning the rest.
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 world’s thirst for copper is expected to be bolstered in the coming years by the global push to cut carbon emissions.
Rio Tinto says that when fully operational, Oyu Tolgoi is expected to produce 500,000 tonnes of the metal every year – equivalent of 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 Anglo-Australian group owns 51 per cent of Turquoise Hill and also manages operations at Oyu Tolgoi.
It 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 ownership of the Oyu Tolgoi project’.
Talks between the parties have ‘not resulted in a consensus on value and price or in any improved proposal from Rio Tinto’, the committee said.
The statement acknowledged the downturn in the copper price since the offer was made in March but also pointed to ‘positive progress’ on 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 rivals had seen their share prices fall by a third ‘in light of a deteriorating and more uncertain external environment’ since the offer was made.
Bold Baatar, Rio’s chief executive for copper, said the miner ‘remains as committed as ever to the long-term success of Oyu Tolgoi.
‘We will continue to work constructively with the board of Turquoise Hill to advance the Oyu Tolgoi project’.
Rio Tinto reaffirmed 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 jeopardised after the government revoked its exploration licence following protests from locals and environmentalists.