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Investor pledges to oppose Rio Tinto’s acquisition of Turquoise Hill Resources, labeling it one of ‘the biggest corporate governance failure’ ever
- SailingStone Capital Partners is an investment group based in California
- The Oyu-Tolgoi Mine has some of the world’s largest known copper deposits
- Copper is a commonly used metal in electric vehicles, wind turbines and solar panels
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A prominent investor in Turquoise Hill Resources plans to vote down Rio Tinto’s £2.9bn proposal to take full ownership of the company.
SailingStone Capital Partners, a California-based investment group, said approval of the deal would amount to one of “the biggest corporate governance failures” in history and be of poor value to shareholders.
About six weeks ago, Rio Tinto agreed to buy the remaining stake it did not own in the Canadian mineral exploration company, whose main asset is the Oyu-Tolgoi copper mine in Mongolia.
Deal: Rio Tinto recently agreed to purchase the remaining stake it did not own in Turquoise Hill Resources, whose main asset is the Oyu-Tolgoi copper mine in Mongolia
This mine has some of the world’s largest known copper and gold deposits and could potentially be in operation for more than a century.
Copper is considered a critical element in the clean energy transition, given its use in batteries and motors for electric vehicles, as well as technologies such as wind turbines and solar panels.
But SailingStone believes Rio Tinto’s offer cannot “adequately offset” minority investors like her, even if it’s a £600m increase over a previous deal that was turned down by a committee of directors formed by Turquoise Hill.
It accused the mining giant and Turquoise’s independent directors of backing a bid that is too low and does not take into account future net asset value growth.
The company also claimed that the FTSE 100 company had a “established history of corporate crime.”
SailingStone pointed to an independent report published last year, which concluded that Rio’s poor management was primarily responsible for the delays and cost overruns in the Oyu Tolgoi project.
Pros?: Rio Tinto CEO Jakob Stausholm has said the Turquoise Hill acquisition would improve his company’s copper portfolio and simplify governance matters
Rio Tinto disputed the report’s findings, claiming that weak rock conditions required the mine to be redesigned, adding to the delays.
Underground operations began at the mine in January this year after the FTSE 100 company canceled £1.8 billion in debt and interest incurred by the Mongolian government to fund the plan.
SailingStone said Rio Tinto should have “provided money to ALL (sic) shareholders” in compensation.
The group went on to say that Turquoise’s management and independent directors were “completely dependent” on Rio Tinto, which had led to a significant backlash against those minority investors who had called for reform.
The deal will be voted on on November 1. In a strong statement, SailingStone stated: “C$43 is a disposable offer that is not based on intrinsic value and ignores upside potential. We will VOTE NO.’
Rio Tinto CEO Jakob Stausholm has said the acquisition would enhance the company’s copper portfolio, simplify governance and strengthen its commitment to Mongolia.
This intervention comes the week before Rio Tinto publishes its production output for the third quarter.
It reported bumper gains and paid record dividends to investors last year after prices of key metals skyrocketed following the easing of lockdown restrictions.
Copper prices have fallen over the year, however, as global economic uncertainty, rising inflation and China’s draconian zero-covid policy have hit demand.
Rio Tinto Shares were down 2.15 per cent to £47.73 by late afternoon Friday, meaning their value has fallen by about a fifth over the past six months.