By Dhirendra Tripathi
Investing.com – Turquoise Hill (NYSE:TRQ) stock surged 30% in premarket Monday after Rio Tinto (ASX:RIO) Group (NYSE:RIO) offered to buy the 49% stake it doesn’t already own in the company.
At C$34 in cash offer (around $26.5), Turquoise Hill is valued at about C$6.84 billion.
No agreement has been reached between the parties, and there can be no assurance that any transaction will result from these discussions, Rio Tinto said.
The company’s purchase is expected to breathe life into its much delayed Oyu Tolgoi copper and gold project in Mongolia. The proposed transaction follows the recent agreement reached amongst the companies and the Mongolian government to move the project forward.
Rio had in December agreed to write off a $2.3 billion loan to the Mongolian government as part of its plans to accelerate work on the project. The Mongolian government owns 34% of the project company, with the rest held by Turquoise Hill. The financing agreement for the mine was signed in 2015 but the project has been mired in controversy since its inception. Mongolian politicians have often called for the original investment agreement to be renegotiated.
Oyu Tolgoi is one of the largest deposits of copper in the world. Its proximity to the Chinese market, which accounts for over half of global copper consumption, gives the project a particular appeal, given China's status as the world's largest electric vehicle market.
EVs routinely require three to four times more copper than conventional internal combustion engine vehicles.
According to a Reuters report, Mongolian Prime Minister Oyun-Erdene Luvsannamsrai has committed to completing the expanded underground section of the mine by 2023.