The Turquoise Hill Special Committee has terminated its review of Rio Tinto’s non-binding proposal to acquire full ownership of Turquoise Hill for C$34 in cash per Turquoise Hill share.
The Special Committee concluded that Rio Tinto’s offer does not fully and fairly reflect the fundamental and long-term strategic value of the company’s majority ownership of the Oyu Tolgoi project in Mongolia. In addition, the Special Committee reported that:
- In reaching its conclusion, the Special Committee considered a preliminary indications of value analysis, and noted that Rio Tinto’s offer price of C$34 per share was well below a range of values implied by the preliminary analysis.
- Engagement between the parties has not resulted in a consensus on value and price or in any improved proposal from Rio Tinto.
- In assessing the Rio Tinto Proposal, the Special Committee also considered the risks facing the company’s investment in the Oyu Tolgoi project, as well as the progress that the company has achieved in recent months on the underground project, including the firing of the first three drawbells ahead of schedule and current expectations that sustainable production will be achieved earlier than previously forecast.
- In consideration of the foregoing, the Special Committee determined that it is not in the best interests of the company or its minority shareholders to support the proposal.
Rio Tinto said it is disappointed by the decision and continues to believe that the terms of the proposal would deliver compelling value for Turquoise Hill minority shareholders and provide the certainty of an all-cash offer at an attractive premium of.
Since Rio Tinto made its proposal on 14 March 2022, the average share price performance of Turquoise Hill’s peers has declined 35 per cent in light of a deteriorating and more uncertain external environment. Furthermore, Turquoise Hill has disclosed in its latest earnings results that it needs to raise equity proceeds of more than US$1 billion to address its current estimate of funding requirements.
Rio Tinto Chief Executive Copper Bold Baatar said: “Rio Tinto remains as committed as ever to the long-term success of Oyu Tolgoi. While we are disappointed by this decision, we will continue to work constructively with the Board of Turquoise Hill to advance the Oyu Tolgoi project.”
Rio Tinto will not pursue any alternative transaction, including any such transaction which would result in the sale of Rio Tinto’s interest in Turquoise Hill or the acquisition by a third party of Turquoise Hill or Oyu Tolgoi in partnership with or independent of Rio Tinto.
