The Special Committee of independent directors of Turquoise Hill Resources Limited has terminated its review and consideration of Rio Tinto’s proposal to acquire full ownership of the company.
In a statement released by Turquoise Hill, the Special Committee, after consulting with its financial advisor BMO Capital Markets, concluded that Rio Tinto’s offer price of C$34 per share does not entirely and adequately reflect the underlying and long-term strategic worth of the company’s majority ownership of the Oyu Tolgoi project.
The Special Committee also determined that supporting Rio Tinto’s proposal is not in the best interests of the company or the company’s minority shareholders.
“Market conditions in the equity and copper markets have changed significantly since the receipt of Rio Tinto’s privatisation proposal in March. At the same time, the Company has continued to make positive progress on the underground project. The Special Committee has considered all relevant factors in reaching its decision, including TD’s preliminary indications of value analysis. Ultimately, we concluded that a transaction at the price proposed by Rio Tinto would not fairly compensate minority shareholders for the fundamental, long-term value of the Company’s interest in Oyu Tolgoi,” Turquoise Hill Special Committee Chair Maryse Saint-Laurent said.
According to Turquoise Hill CEO Steve Thibealt, the management maintained its attention on the company operations and on aiding the advancement of the Oyu Tolgoi underground project while the Special Committee process with Rio Tinto was in progress.
“As a result, we are well positioned to sustain the positive momentum of the past year when we achieved a number of significant milestones, including new understandings with the Government of Mongolia, which reset our relationship, de-risked the project, and enabled us to start the blasting of the undercut in January,” Thibeault stated.
In a separate announcement, Rio Tinto has expressed disappointment in Turquoise Hill’s decision and maintains that the parameters of the Proposed Transaction would give Turquoise Hill’s minority shareholder compelling value.
Should a transaction not proceed, Rio Tinto welcomes Turquoise Hill’s minority shareholders’ continued investment and their pro rata sharing of future risks and funding obligations.
“Rio Tinto remains as committed as ever to the long-term success of Oyu Tolgoi. While we are disappointed by this decision, we will continue to work constructively with the Board of Turquoise Hill to advance the Oyu Tolgoi project,” Rio Tinto Chief Executive Copper Bold Baatar said.
