REG - Rio Tinto - Rio Tinto and TRQ enter into definitive agreement

Rio TintoAnnouncement

06/09/2022 07:16

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RNS Number : 3647Y  Rio Tinto PLC  06 September 2022

 6 September 2022

Rio Tinto and Turquoise Hill enter into definitive arrangement agreement for
Rio Tinto to acquire full ownership of Turquoise Hill

Turquoise Hill Board of Directors unanimously recommends minority shareholders
vote in favour of Rio Tinto's best and final offer of C$43 per share in cash

 

Rio Tinto has entered into a binding agreement (the "Arrangement Agreement")
to acquire all of the remaining shares of Turquoise Hill Resources Ltd (TSX:
TRQ) (NYSE: TRQ) ("Turquoise Hill") that Rio Tinto does not currently own (the
"Transaction").

 

The Independent Directors of Turquoise Hill have unanimously recommended that
Turquoise Hill minority shareholders vote in favour of the Transaction and,
together with senior officers of Turquoise Hill, have entered into voting
support agreements with respect to all of the Turquoise Hill shares they own
or control.

 

The Transaction delivers significant value to Turquoise Hill minority
shareholders with the certainty of an all-cash offer of C$43 per share, which
is Rio Tinto's best and final offer.  This represents a premium of 67% to
Turquoise Hill's closing price of C$25.68 per share on 11 March 2022, the day
prior to Rio Tinto's initial public proposal to acquire Turquoise Hill.

 

Rio Tinto has agreed to provide Turquoise Hill with secured short-term
liquidity during the Transaction period of up to US$1.1 billion (subject to
certain pre-conditions), which would need to be repaid from an equity raising
from shareholders in the first half of 2023 if the Transaction is not approved
by shareholders. Turquoise Hill has estimated that it requires US$3.6 billion
of additional funding in total to complete the project. It aims to address
this through a funding plan including renegotiating debt repayment dates,
which requires the unanimous consent of participating lenders. The success of
this debt renegotiation and certain other funding plans is uncertain and, if
unsuccessful, could require further equity contributions from shareholders.
The Transaction delivers certainty for the financing needs of Oyu Tolgoi and
alleviates any further funding risks for shareholders.

 

Rio Tinto Chief Executive Jakob Stausholm said: "This Transaction will
simplify governance, improve efficiency and create greater certainty of
funding for the long-term success of the Oyu Tolgoi project. Rio Tinto's offer
guarantees Turquoise Hill's minority shareholders outstanding value through a
significant all-cash premium for their shares. After extensive negotiations,
the terms of the transaction are final and there will be no further price
increase. We look forward to working with the Turquoise Hill Board of
Directors to ensure Turquoise Hill shareholders are able to realise the
significant and immediate value of the Transaction."

 

Rio Tinto Copper Chief Executive Bold Baatar said: "Rio Tinto will work in
direct partnership with the Government of Mongolia and Erdenes Oyu Tolgoi to
realise the full potential of the Oyu Tolgoi project for the benefit of all
stakeholders. This Transaction rewards all minority shareholders with an
exceptional premium of 67% for their shares and brings the financial certainty
necessary to ensure the Oyu Tolgoi project can be developed without having to
ask minority shareholders to contribute further significant funds."

 

The Transaction will be implemented by way of a Canadian Plan of Arrangement
and require the approval of 66.67% of votes cast by all shareholders of
Turquoise Hill (including Rio Tinto) and the approval of a simple majority of
the votes cast by minority shareholders of Turquoise Hill.  A special meeting
of shareholders of Turquoise Hill to approve the Transaction is expected as
early as possible in the fourth quarter of 2022 and, if approved, the
Transaction is expected to close shortly thereafter. Details of the
Transaction and Arrangement Agreement will be provided in the management
information circular to be mailed to Turquoise Hill shareholders.

 

Advisors

 

Credit Suisse, RBC Capital Markets and Rothschild & Co are acting as
financial advisors to Rio Tinto, and McCarthy Tétrault LLP and Sullivan &
Cromwell LLP are acting as legal advisors.

 

BMO Capital Markets is acting as exclusive advisor to the Special Committee of
Turquoise Hill and Blake, Cassels & Graydon LLP is acting as legal counsel
to the Special Committee. TD Securities has been retained by the Special
Committee as independent valuator.

 

Norton Rose Fulbright Canada LLP and Paul, Weiss, Rifkind, Wharton &
Garrison LLP are acting as Canadian and U.S. legal counsel, respectively, to
Turquoise Hill.

 

Notes to editors

 

Turquoise Hill is an international mining company focused on the operation of
the Oyu Tolgoi copper-gold mine in Mongolia. Turquoise Hill owns 66% of the
Oyu Tolgoi mine with the Government of Mongolia holding the remaining 34%
interest. The total consideration to be paid will be US$3.3bn 1  (#_ftn1)
which will be paid out of existing cash reserves.

 

Turquoise Hill had earnings before tax of US$993 million in the year to 31
December 2021, and a gross asset value of US$14,791 million as at 30 June
2022. Both the earnings and gross assets are currently consolidated within Rio
Tinto's accounts.

 

The Transaction represents a premium of 67% to Turquoise Hill's closing price
of C$25.68 per share on 11 March 2022, the day prior to Rio Tinto's public
non-binding proposal to acquire Turquoise Hill, and a premium of 125% to
Turquoise Hill's closing price of C$19.12 per share on 24 January 2022, the
day before agreeing a path forward between the Government of Mongolia,
Turquoise Hill and Rio Tinto that enabled commencement of the underground mine
at Oyu Tolgoi.

 

If the Transaction is successful Rio Tinto will hold a 66% interest in Oyu
Tolgoi with the remaining 34% owned by Mongolia.

 

Rio Tinto Canadian early warning disclosure

 

Rio Tinto currently beneficially owns 102,196,643 common shares of Turquoise
Hill, representing approximately 51% of the issued and outstanding common
shares of Turquoise Hill. Rio Tinto also has anti-dilution rights that permit
it to acquire additional securities of Turquoise Hill so as to maintain its
proportionate equity interest in Turquoise Hill from time to time.

 

This announcement is authorised for release to the market by, and a copy of
the related early warning report may be obtained from, Rio Tinto's Group
Company Secretary.

 

The head office of Turquoise Hill is located at 1 Place Ville-Marie, Suite
3680, Montreal, Quebec, Canada H3B 3P2.

 

Additional disclosures

 

This press release does not constitute an offer to buy or sell or the
solicitation of an offer to sell or buy any securities. Any offers,
solicitations or offers to buy, or any sales of securities will be made in
accordance with registration and other requirements under applicable law.

 

 

Forward-Looking Statements

 

This press release includes "forward-looking statements" within the meaning of
the U.S. Private Securities Litigation Reform Act of 1995. All statements
other than statements of historical facts included in this release, are
forward-looking statements. The words "intend", "forecast", "project",
"anticipate", "estimate", "plan", "believes", "expects", "may", "should",
"will", "target", "pursue", "seek" or similar expressions, commonly identify
such forward-looking statements. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause actual
results, performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Rio Tinto expressly disclaims any obligation or
undertaking (except as required by applicable law, the UK Listing Rules, the
Disclosure Guidance and Transparency Rules of the Financial Conduct Authority
and the Listing Rules of the Australian Securities Exchange) to release
publicly any updates or revisions to any forward-looking statement contained
herein to reflect any change in its expectations with regard thereto or any
change in events, conditions or circumstances on which any such statement is
based. All information provided in this press release, including the
forward-looking statements herein, speak only as of the date of this press
release.

 

The person responsible for arranging the release of this announcement on
behalf of Rio Tinto plc is Steve Allen, Group Company Secretary.

 

LEI: 213800YOEO5OQ72G2R82

Classification: 3.1. Additional regulated information required to be disclosed
under the laws of a Member State.

 

 Contacts  Please direct all enquiries to media.enquiries@riotinto.com

 

 Media Relations, UK         Media Relations, Australia

 Illtud Harri                Jonathan Rose

 M +44 7920 503 600          M +61 447 028 913

 Matthew Klar                Matt Chambers

 M+ 44 7796 630 637          M +61 433 525 739

 David Outhwaite             Jesse Riseborough

 M +44 7787 597 493          M +61 436 653 412

 Media Relations, Americas   Investor Relations, Australia

 Simon Letendre              Amar Jambaa
 M +514 796 4973

                           M +61 472 865 948
 Malika Cherry
 M  +1 418 592 7293

 Investor Relations, UK

 Menno Sanderse

 M: +44 7825 195 178

 David Ovington

 M +44 7920 010 978

 Clare Peever

 M +44 7788 967 877

 Rio Tinto plc               Rio Tinto Limited

 6 St James's Square         Level 43, 120 Collins Street

London SW1Y 4AD

United Kingdom             Melbourne 3000

 T +44 20 7781 2000          Australia

Registered in England

 No. 719885

                             T +61 3 9283 3333

                             Registered in Australia

                             ABN 96 004 458 404

 

This announcement is authorised for release to the market by Steve Allen, Rio
Tinto's Group Company Secretary.

 

riotinto.com

 

 

 1  (#_ftnref1) Based on a CAD/USD FX rate of 0.764. as of 31 August 2022.

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