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Why Shares of Turquoise Hill Resources Are Soaring Today

By Scott Levine – Dec 13, 2021 at 1:07PM

Key Points

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This copper company is glittering brightly in investors' eyes thanks to some help from its partner.

What happened

Finding themselves uncertain about Turquoise Hill (TRQ) and the future of Oyu Tolgoi, the company's sole operating asset, investors are finding that the days ahead may be a little more lustrous for the copper-producing asset. Rio Tinto (RIO -0.53%), which also has a vested interest in Oyu Tolgoi, has made an offer to the government of Mongolia to assist in the financing of the asset's development.

As of 12:06 p.m. ET, shares of Turquoise Hill are up 13%, having retreated from an earlier rise of 17.7%. 

Copper on the periodic table of elements.

Image source: Getty Images.

So what

Characterizing Oyu Tolgoi as "one of the world's largest new copper-gold mines," Turquoise Hill had informed investors in October that funding requirements for the asset would be higher than previously estimated because of delays in the project's development. But Rio Tinto appears to be coming to the rescue. The company has a 50.6% ownership stake in Turquoise Hill, which itself has a 66% controlling interest in the copper-gold project (the Mongolian government has the remaining 34% ownership stake).

Reuters reported today that Mongolia's prime minister, Oyun-Erdene Luvsannamsrai, had received a letter from Rio Tinto in which it offered to write off $2.3 billion of the nation's debt related to the asset. In addition, Rio Tinto also confirmed that development of the underground section of the project would be completed by 2023.

Although Rio Tinto is providing some clarity into the financing of the project, all outstanding issues haven't been resolved. In a press release addressing Rio Tinto's offer, Turquoise Hill stated that "Negotiations continue and remain subject to required approvals, with all parties focused on being in a position to finalise an agreement."

Now what

A lot of things will spook the market, but uncertainty is one of the greatest catalysts for investors running from an investment. It makes sense, therefore, that the opposite is playing out today; investors are feeling more confident about the path forward for Oyu Tolgoi's development. The company's not out of the woods yet, however, so cautious investors may prefer to consider other companies with copper exposure.

Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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