Turquoise Hill shares soar as takeover rumour back in spotlight – by Peter Koven (Financial Post – June 14, 2016)


One of the Canadian mining sector’s most popular takeover rumours is back in the limelight. Shares of Turquoise Hill Resources Ltd. jumped 13 per cent on Monday, closing at $4.16, after Britain’s Sunday Times reported that Rio Tinto Ltd. hired bankers at Goldman Sachs to study a potential privatization of the Vancouver-based company. Turquoise Hill is currently worth $8.3 billion.

It has been nearly 10 years since Rio Tinto first invested in Ivanhoe Mines Ltd., the predecessor company to Turquoise Hill. And in 2012, it became the firm’s controlling shareholder. It is no secret that Rio covets Turquoise Hill’s Oyu Tolgoi mine in Mongolia, and experts were not surprised by the talk that the company is back in play.

“It’s a recurring headline,” said Sasha Bukacheva, an analyst at BMO Capital Markets. Some industry watchers think it is inevitable that Rio will eventually boost its stake in Turquoise Hill. But given the recent positive developments around Oyu Tolgoi, there is some logic for the mining giant to make a move soon.

Rio Tinto and Turquoise Hill have a very complex and intertwined relationship. Rio owns 51 per cent of Turquoise Hill, which owns 66 per cent of Oyu Tolgoi, a massive copper-gold mine. (The Mongolian government owns the rest.) Rio operates the mine, meaning it generates the cash that goes directly to Turquoise Hill’s shareholders.

This was never viewed as an optimal long-term solution for Rio Tinto. But for much of the last several years, Mongolian political risk was a deterrent to investing more money in the country.

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