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FTSE 100: Rio Tinto to buy Canada's Turquoise Hill in $3.3bn deal

Rio Tinto: A worker walks past a bucket-wheel reclaimer in the Pilbara region of Western Australia
Turquoise Hill accepted Rio Tinto's sweetened offer of C$43 per share in cash for the remaining 49% of the company it does not already own. Photo: David Gray/Reuters

Rio Tinto (RIO.L) has agreed to acquire the rest of Turquoise Hill Resources for $3.3bn (£2.8bn), which will give the miner direct access to the Oyu Tolgoi project in Mongolia.

Turquoise Hill accepted Rio’s sweetened offer of C$43 per share in cash for the remaining 49% of the company it does not already own, a near 20% premium to Wednesday’s closing price.

It also comes after its previous offer of C$34 a share from Rio was rejected for being too low.

The deal is subject to shareholder approval, and requires the backing of at least 66.67% of votes cast.

A special meeting of Turquoise Hill shareholders to approve the transaction is expected as early as possible in the fourth quarter of 2022 and, if approved, the transaction is expected to close shortly thereafter.

It gives global miner Rio Tinto ownership of Turquoise Hill's 66% stake in Oyu Tolgoi, the world's largest known copper and gold deposits, south of Mongolia's capital Ulaanbaatar.

Shares in Rio Tinto were down 2.6% on Thursday.

"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," Jakob Stausholm, chief executive, said.

“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."

Rio and Turquoise Hill also agreed to amend certain financing arrangements to help the Canadian firm address near-term liquidity, the miner said on Thursday.

The deal includes raising an early advance facility agreed in May to $650m from $400m, and extending the deadline for a $650m equity raising and debt repayment to at least March 2023.

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“The situation in Mongolia had been messy for Rio Tinto. Oyu Tolgoi is its most important growth project but was hit by delays and created disputes with the Mongolian government and its partner Turquoise Hill,” Victoria Scholar, head of investment at Interactive Investor, said.

“Now Rio has provided itself with access to one of the largest known copper and gold deposits in the world, with this deal a major win for the mining giant.”

She added: “However, the outlook for the mining sector looks challenging with concerns about China’s faltering economy, fears of a global economic slowdown and softening commodity prices.

“Rio’s first half earnings fell sharply versus last year’s record of $12.2bn and its dividend was also significantly lower year-on-year, paving the way for a challenging trajectory ahead.”

Watch: Rio Tinto profit falls 29% as China demand cools