What happened
Shares of Turquoise Hill Resources (TRQ +0.00%) jumped on Thursday after the Canadian mineral exploration and development company struck a deal to be acquired by mining giant Rio Tinto (RIO +1.48%). As of 3:15 p.m. ET, Turquoise Hill's stock price was up more than 13%.
So what
Under the terms of the agreement, Rio Tinto will buy the roughly 49% of Turquoise Hill's stock it doesn't already own for 43 Canadian dollars ($32.68) per share. The all-cash deal values Turquoise Hill at approximately CA$8.7 billion.
NYSE: TRQ
Key Data Points
Turquoise Hill rejected Rio Tinto's original offer of CA$25.68 per share back in March. It also declined Rio Tinto's revised offer of CA$40 per share in August. The two companies then formed a special committee of independent directors to determine a fair price for shareholders. The new offer of CA$43 per share reflects the committee's deliberations.
Two-thirds of Turquoise Hill's investors -- including a majority of minority shareholders -- must approve the deal if it's to proceed. The vote is expected to take place in the fourth quarter, and the transaction is anticipated to close soon after that.
Now what
Acquiring Turquoise Hill would give Rio Tinto a 66% stake in a massive copper and gold mine in Mongolia. Erdenes Oyu Tolgoi, a Mongolian state-owned company, owns the remaining 34% of the mine.
"Rio Tinto is committed to moving Oyu Tolgoi forward in direct partnership with the Government of Mongolia to realize its full potential for all stakeholders," Rio Tinto CEO Jakob Stausholm said in a press release. "This agreement represents another significant step following the recent commencement of the underground operations, and will simplify governance, improve efficiency, and create greater certainty of funding for the long-term success of the Oyu Tolgoi project."
Although coronavirus-related disruptions and recession fears have contributed to a steep fall in copper prices from their highs back in March, demand for copper is predicted to rise sharply over the coming decade, due to the material's heavy use in electric vehicles and renewable energy projects.
