Rio Tinto PLC (LSE:RIO) said it reached an agreement in principle to acquire full ownership of Canadian mineral explorer Turquoise Hill Resources Ltd for US$3.3bn.
Turquoise Hill owns 66% of Oyu Tolgoi, one of the world’s largest copper and gold deposits, located in Mongolia.
According to a statement, the FTSE 100 miner will pay C$43 per share for the remaining 49% of Turquoise Hill shares that it does not currently own.
This represents a 67% premium to the share price on 11 March 2022, the day before Rio Tinto’s initial offer was made, and a 125% premium to 24 January 2022, the day before an agreement was reached between the two parties and the government of Mongolia to commence the underground mine at Oyu Tolgoi.
It is also an improvement on the C$40 per share offer announced last week.
Approval is required from two-thirds of votes cast by shareholders of Turquoise Hill, as well as from a simple majority of the votes cast by minority shareholders, with shareholders set to meet in the fourth quarter of 2022 and the deal, if approved, expected to close shortly after.
“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,” said Rio Tinto’s chief executive Jakob Stausholm.
Additionally, the companies agreed in principle amendments to the financing agreement to support Turquoise Hill with near-term liquidity.
That includes increasing the early advance facility, agreed in May, to US$650mln from US$400mln, with the possibility to increase further by an additional US$100mln if necessary.
They also agreed to extend the outside date by which the initial equity of US$650mln must be raised to 31 March 2023, with the possibility to extend further to 31 May 2023.
If Rio Tinto’s takeover has not been approved by December this year, when the repayment of US$362mln is required by Turquoise Hill, “Rio has committed to ensuring funds are available to Turquoise Hill", according to a statement.