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Rio ups bid to $3.1bn to take over giant copper mine

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Rio Tinto Group increased its offer to buy out Turquoise Hill Resources Ltd. to $3.1 billion as it moves to gain more control of a giant copper mine in Mongolia.

The world’s biggest mining companies are getting increasingly aggressive in their pursuit of so-called future facing commodities, the natural resources such as copper and nickel that are key for the green energy transition. Yet despite the strong demand outlook, long-term supply may remain constrained by the lack of new mines.

For Rio Tinto, the second biggest miner, increasing its control over the Oyu Tolgoi copper mine in Mongolia is an obvious way to achieve that goal.

Rio said Wednesday it was offering C$40 ($30.75) a share to Turquoise Hill’s minority shareholders, 18% higher than its previous bid of C$34 that was rejected earlier this month.

Shares of Montreal-based Turquoise Hill surged 24% to C$37.29 at 9:47 a.m. in Toronto trading — their biggest intraday increase since March.

Rio made its first offer for Turquoise Hill just after copper hit a record high earlier this year. Yet despite a sharp fall in the price of the metal since then, a special committee of independent directors set up by Turquoise Hill rejected Rio’s bid.

“Rio Tinto believes this offer not only provides full and fair value for Turquoise Hill shareholders, but is in the best interests of all stakeholders as we work to move the Oyu Tolgoi project forward,” Rio’s Chief Executive Officer Jakob Stausholm said Wednesday.

Rio owns 51% of Turquoise Hill, which in turn holds a two-thirds share in Oyu Tolgoi. Should the bid fail, Turquoise Hill is set to have to raise equity to fund its share of developing Oyu Tolgoi’s underground operations.

Oyu Tolgoi is expected to be the world’s fourth-largest copper mine once the underground component is completed, with Turquoise Hill and its partners targeting an eventual production rate of more than 500,000 metric tons of copper a year. Suppliers of the industrial metal have been facing a dearth of new deposits and growing demand for the wiring metal that’s key to economies electrifying in a shift away from fossil fuels.

The mining sector largely turned its back on big deals since a commodity crash in the middle of the last decade. Yet that’s now changing as the biggest miners push to increase their exposure to commodities such as copper. Earlier this month, BHP Group, the biggest miner, had a $5.8 billion offer for copper miner Oz Minerals Ltd. rejected.

Rio struck a deal with the Mongolian government earlier this year to start work on a long-delayed $6.9 billion underground expansion of Oyu Tolgoi after agreeing to write off $2.4 billion owed by the state.

© 2022 Bloomberg

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