The investment advisory firm said that Rio Tinto’s bid considerably undervalues Turquoise Hill Resources, which has a 66% stake in the Oyu Tolgoi copper-gold mine in Mongolia
SailingStone Capital Partners has revealed plans to vote against Rio Tinto’s $3.3bn deal to take full ownership of Turquoise Hill Resources.
The investment solutions provider, which is a division of Pickering Energy Partners, has a stake of 2.2% in Turquoise Hill Resources.
Last month, Rio Tinto entered into a binding agreement with Turquoise Hill Resources to acquire the remaining 49% stake in the latter, which it previously didn’t own.
As per the terms of the deal, the mining major will pay C$43 ($31.2) per share in cash to Turquoise Hill Resources’ minority shareholders.
A special meeting of Turquoise Hill Resources’ shareholders is currently slated for 1 November 2022.
The closing of the deal will require the approval of 66.67% of the votes cast by all Turquoise Hill Resources’ shareholders, including Rio Tinto, and the approval of a simple majority of the votes cast by the former’s minority shareholders.
SailingStone Capital Partners said that Rio Tinto’s bid considerably undervalues Turquoise Hill Resources. Besides, it tries to take advantage of the “material governance failures” created by Rio Tinto and the independent directors of Turquoise Hill Resources over the last 10 years, claimed the investment solutions provider.
Turquoise Hill Resources has a stake of 66% in the Oyu Tolgoi copper-gold mine in Mongolia. The remaining 34% stake in the Mongolian mine is owned by the state-owned Erdenes Oyu Tolgoi.
According to SailingStone Capital Partners, Oyu Tolgoi is an asset that is not replicable. The fund manager said that the Mongolian mine, which, after an investment of $16bn and after 17 years, is about to come online into the copper market which is structurally short and earn billions of dollars per year of free cash flow for decades to come.
SailingStone Capital Partners stated: “Rio Tinto and its hand picked “independent” directors have endorsed a bid which in no way reflects either current or future asset value just ahead of sustainable first production.”