Rio Tinto’s takeover of Turquoise Hill indefinitely on hold as Quebec regulator steps in www.mining.com
Canada’s Turquoise Hill Resources (TSX: TQR) is indefinitely postponing a shareholders vote on the proposed $3.3 billion takeover of the company by Rio Tinto (ASX, LON: RIO) as Quebec’s top securities regulator has decided to review the transaction.
The Montreal-based miner said the Autorité des marchés financiers (AMF) is investigating whether a side deal between Rio Tinto and dissident shareholders is legal.
“The AMF considers the transaction as currently structured to raise public interest concerns,” the company said on Wednesday.
Minority shareholder CaravelCapital Investments said last week the agreement inked by Rio Tinto, Pentwater Capital Management and SailingStone Capital Partners gives dissidents preferential treatment over smaller holders.
Caravel filed complaints with both the Ontario Securities Commission and the AMF on fairness grounds, The Globe and Mail reported.
The fresh delay adds another layer of uncertainty over the deal that would grant the Rio Tinto direct ownership of the giant Oyu Tolgoi copper-gold mine in Mongolia.
Under the deal, both investors would be paid out 80% of the takeover amount being offered to all Turquoise Hill shareholders and, after a ruling from an arbitrator, the remaining 20% plus interest, and potentially much more.
The two firms, which had both openly opposed to the acquisition of Turquoise Hill by Rio, agreed to sit out the shareholder vote originally scheduled for Nov. 1, then moved up to Nov. 8 and again to Nov. 15 on Tuesday.
Differential treatment of shareholders
With the decision now to be made at a “date to be determined”, Turquoise Hill is holding talks with Rio representatives to address what it qualifies as “differential treatment of minority shareholders” and if an agreement that satisfy the committee is reached it would update markets.
Rio Tinto has had a rocky relationship with Turquoise Hill, particularly over how to fund Oyu Tolgoi’s expansion. The mining giant has also drawn criticism from some of Turquoise Hill’s minority shareholders about the control it exerts over the company.
The Melbourne and London-based firm, which has mined copper from Oyu Tolgoi’s open pit for a decade, and the Mongolian government ended earlier this year a long-running dispute over the $7 billion expansion of the mine.
Once completed, the underground section of Oyu Tolgoi will lift production from 125,000–150,000 tonnes in 2019 to 560,000 tonnes at peak output, which is now expected by 2025 at the earliest. This would make it the biggest new copper mine to come on stream in several years.
“Rio Tinto’s strategy over its stake in Turquoise Hill has been subject to discussion for many years, but we didn’t think it would end up offering to buy out the minorities based on previous form,” BMO Metals and Mining analysts said in a note to investors.
“Given the dearth of copper opportunities elsewhere, combined with its recently lowered risk profile, perhaps increasing its Oyu Tolgoi exposure now makes sense,” BMO Alexander Pearce and David Gagliano wrote in September.
Rio Tinto chief executive Jakob Stausholm has said the proposed takeover would simplify governance, improve efficiency and create greater certainty of funding for the long-term success of the Oyu Tolgoi project.
Published Date:2022-11-10