Rio Tinto ends deal with dissenting Turquoise Hill investors

Rio Tinto Group has terminated a pair of deals with two minority investors who disagreed with the impending acquisition of Turquoise Hill Resources.

The mining giant will now hold a shareholder vote on the £2.9 billion acquisition of the remaining 49 per cent of the mineral exploration company it does not own at an undetermined date.

Turquoise Hill is the majority owner of the Oyu Tolgoi mining project in Mongolia, which contains some of the world’s largest copper and gold deposits.

Copper will play a vital role in helping the world move away from fossil fuels due to its widespread use in renewable technologies, such as batteries for electric vehicles, wind turbines and solar panels.

Rio Tinto made its first move towards full control of the Canadian company in March, putting £2.3bn on the table before raising it to £2.6bn in the summer and then making a final offer of C$43 per part.

The latest offer has continued to be heavily criticized by some of Turquoise’s minority investors, including investment group SailingStone Capital Partners, who said its acceptance would be one of “the biggest corporate governance failures” in history.

Activist investor Pentwater Capital Management joined the chorus, voicing disapproval of the plan, arguing that it was well below the free cash flow Turquoise is expected to generate over the next decade.

Two weeks ago, the pair, which together own about 17.3 percent of Turquoise shares, agreed with Rio Tinto to withhold their votes on the deal at a special hearing scheduled for November 8.

In return, they would receive 80 percent of the $43 per share acquisition price, with the remainder paid after arbitration of dissent proceedings and some other claims.

Dissident rights give shareholders the chance to sell their holdings at a value they believe is fair if a company makes a decision they oppose.

But the special meeting was subsequently suspended following “public interest objections” raised by Quebec securities regulator AMF, Turquoise said.

Rio Tinto has said it will now proceed with a vote and treat all minority investors as having “the same differing rights and legal process” for the proposed offer.

It added: “The dissent process is a time-consuming and lengthy process that involves uncertainty regarding the compensation to be received and the possibility of significant legal costs.”

The transaction requires the support of at least 50 percent of votes cast by minority investors, but two-thirds of all voting shareholders to be accepted.

Whether the acquisition goes through or not, the mining sector faces a potentially challenging year, with commodity prices expected to continue to fall after a surge in 2021.

In October, Rio Tinto cut its annual forecast for iron ore shipments from its Pilbara operations in Australia, citing the downturn in the Chinese real estate market and rate hikes in Europe and Australia.

Rio Tinto Group Shares were up 0.45 per cent late Friday afternoon to £53.91, meaning their value has risen by about a fifth over the past 12 months.