Rio Tinto has signed an agreement in principle to acquire the remaining 49% stake in Turquoise Hill Resources, at a price of C$43 per share in cash, for a total of around $3.3bn.
The agreement marks the latest development in the company’s efforts to acquire Turquoise Hill, which gives direct control over the Oyu Tolgoi project in Mongolia.
Rio Tinto currently owns 102,196,643 common shares of Turquoise Hill, representing approximately 51% of the issued and outstanding common shares of Turquoise Hill.
The company also holds anti-dilution rights that allow it to acquire additional securities of Turquoise Hill to maintain its proportionate equity stake in Turquoise Hill.
Last month, it has increased its offer price to C$40 ($31) per share, from the initial price of C$34 ($26), which was rejected by the Mongolian government.
Rio Tinto said that C$43 per share is its best and final offer, and is unanimously approved by an independent Special Committee of Turquoise Hill’s Board of Directors.
Rio Tinto chief executive Jakob Stausholm said: “Rio Tinto is committed to moving Oyu Tolgoi forward in direct partnership with the Government of Mongolia to realise its full potential for all stakeholders.
“This agreement represents another significant step following the recent commencement of the underground operations, and will simplify governance, improve efficiency and create greater certainty of funding for the long-term success of the Oyu Tolgoi project.”
The transaction is planned to be implemented under the Business Corporations Act, and both companies intend to expeditiously finalise an arrangement agreement.
It requires approval of Turquoise Hill shareholders with 66.67% votes, and the approval of a majority votes from Turquoise Hill minority shareholders.
The transaction is expected to be completed soon after receiving approve of the Turquoise Hill shareholders, said Rio Tinto.
Upon completion of the transaction, Rio Tinto will have a 66% stake in Oyu Tolgoi with the remaining 34% owned by the Government of Mongolia.
Oyu Tolgoi is a combined open pit and underground copper and gold mining project, located 550km south of Mongolia’s capital Ulaanbaatar.
Rio Tinto Copper chief executive Bold Baatar said: “The transaction simplifies the ownership structure of Oyu Tolgoi and enables Rio Tinto to focus on working in partnership directly with Erdenes Oyu Tolgoi and the Government of Mongolia to create long-term value for all stakeholders.
“Turquoise Hill minority shareholders will realise a significant and immediate cash premium for their shares at a time when uncertainties inherent in the development of the underground operations remain.
“Turquoise Hill will also avoid the issuance of any equity component as part of the $3.6bn incremental funding requirement through to the completion of the Oyu Tolgoi project.”
