We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Rio Tinto (RIO) Sweetens the Pot for 49% Stake in Turquoise Hill
Read MoreHide Full Article
Rio Tinto plc (RIO - Free Report) has made a revised offer to Turquoise Hill to acquire the latter’s nearly 49% of the issued and outstanding shares. RIO currently holds a 51% stake in Turquoise Hill. If this deal comes to fruition, then RIO will end up holding a 66% interest in Oyu Tolgoi, one of the largest known copper and gold deposits in the world.
The amended proposal values Turquoise Hill minority share capital at $3.1 billion, up from the previous bid of $2.7-billion made on Mar 14, 2022. Turquoise Hill minority shareholders will now receive C$40 in cash per share, higher than C$34 stated earlier. The offer price represents a premium of 56% to Turquoise Hill’s closing share price on the Toronto Stock Exchange on Mar 11, 2022, a day prior to Rio Tinto’s first proposal.
Oyu Tolgoi in the South Gobi region of Mongolia is jointly owned by the government of Mongolia (with 34% ownership) and Turquoise Hill Resources (with the remaining 66%). The deal will help simplify the Oyu Tolgoi ownership structure, while augmenting Rio Tinto’s copper portfolio. It will also help RIO work directly with the government of Mongolia to move the Oyu Tolgoi project forward.
Following the comprehensive agreement reached between Rio Tinto, Turquoise Hill and the government of Mongolia in January this year, underground operations are now underway at the Oyu Tolgoi project hub. The agreement unlocks the most valuable part of the mine, with the first sustainable production expected in the first half of 2023. Once the underground project is complete, Oyu Tolgoi will be one of the biggest copper mines in the world. Production in its early years is estimated at around 500,000 tons.
This will aid Rio Tinto in capitalizing on growing demand for copper. The long-term outlook for copper is positive as copper demand is expected to grow, driven by electric vehicles and renewable energy plus infrastructure investments. Yet, the fate of this metal’s future supply remains uncertain and challenging, given the declining ore grades and the lack of major discoveries.
Rio Tinto and other miners like BHP Group (BHP - Free Report) and Vale S.A (VALE - Free Report) are now focusing on increasing their exposure to future-facing commodities, such as copper and nickel, which are the key components for the green energy transition. BHP recently inaugurated a new copper concentrator in Spence, Chile, to extend the operation by 50 years. The project called for an investment of $2.46 billion. This endeavor supports BHP's plans to continue growing in Chile while strengthening its global copper portfolio. Vale’s projects (Salobo 3, Aleamao, Victor, South Hub extension) position it well to produce more than 450 kt of copper in the future.
Rio Tinto expects copper production between 500 kt and 575 kt in 2022 compared with 494 kt in 2021. Vale recently lowered its copper production target to a 270-285 kt range in 2022 due to longer-than-expected maintenance at the Sossego mill and additional maintenance at the Salobo mill in the back half of the year. Southern Copper (SCCO - Free Report) expects copper production in 2022 at around 898 kt, lower than 922kt anticipated earlier. The revised guidance indicates a drop of 6% from the year-ago reported figure. SCCO’s production will bear the impact of the stoppage of operations at Cuajone, a temporary reduction in ore grades and recoveries at the Peruvian operations.
Copper had earlier lost much of its steam over concerns that the global economy is falling into a recession pit but has recovered lately to $3.7 per pound on low inventories and production cuts following soaring gas prices, droughts and protests. Lower copper output in 2022 from these prominent copper producers will likely help jack up copper prices while demand in China, a top consumer, is currently rising.
Price Performance
Image Source: Zacks Investment Research
In the past year, shares of Rio Tinto have fallen 20.1% compared with the industry’s decline of 13.6%.
Zacks Rank
Rio Tinto currently has a Zacks Rank #5 (Strong Sell).
Image: Bigstock
Rio Tinto (RIO) Sweetens the Pot for 49% Stake in Turquoise Hill
Rio Tinto plc (RIO - Free Report) has made a revised offer to Turquoise Hill to acquire the latter’s nearly 49% of the issued and outstanding shares. RIO currently holds a 51% stake in Turquoise Hill. If this deal comes to fruition, then RIO will end up holding a 66% interest in Oyu Tolgoi, one of the largest known copper and gold deposits in the world.
The amended proposal values Turquoise Hill minority share capital at $3.1 billion, up from the previous bid of $2.7-billion made on Mar 14, 2022. Turquoise Hill minority shareholders will now receive C$40 in cash per share, higher than C$34 stated earlier. The offer price represents a premium of 56% to Turquoise Hill’s closing share price on the Toronto Stock Exchange on Mar 11, 2022, a day prior to Rio Tinto’s first proposal.
Oyu Tolgoi in the South Gobi region of Mongolia is jointly owned by the government of Mongolia (with 34% ownership) and Turquoise Hill Resources (with the remaining 66%). The deal will help simplify the Oyu Tolgoi ownership structure, while augmenting Rio Tinto’s copper portfolio. It will also help RIO work directly with the government of Mongolia to move the Oyu Tolgoi project forward.
Following the comprehensive agreement reached between Rio Tinto, Turquoise Hill and the government of Mongolia in January this year, underground operations are now underway at the Oyu Tolgoi project hub. The agreement unlocks the most valuable part of the mine, with the first sustainable production expected in the first half of 2023. Once the underground project is complete, Oyu Tolgoi will be one of the biggest copper mines in the world. Production in its early years is estimated at around 500,000 tons.
This will aid Rio Tinto in capitalizing on growing demand for copper. The long-term outlook for copper is positive as copper demand is expected to grow, driven by electric vehicles and renewable energy plus infrastructure investments. Yet, the fate of this metal’s future supply remains uncertain and challenging, given the declining ore grades and the lack of major discoveries.
Rio Tinto and other miners like BHP Group (BHP - Free Report) and Vale S.A (VALE - Free Report) are now focusing on increasing their exposure to future-facing commodities, such as copper and nickel, which are the key components for the green energy transition. BHP recently inaugurated a new copper concentrator in Spence, Chile, to extend the operation by 50 years. The project called for an investment of $2.46 billion. This endeavor supports BHP's plans to continue growing in Chile while strengthening its global copper portfolio. Vale’s projects (Salobo 3, Aleamao, Victor, South Hub extension) position it well to produce more than 450 kt of copper in the future.
Rio Tinto expects copper production between 500 kt and 575 kt in 2022 compared with 494 kt in 2021. Vale recently lowered its copper production target to a 270-285 kt range in 2022 due to longer-than-expected maintenance at the Sossego mill and additional maintenance at the Salobo mill in the back half of the year. Southern Copper (SCCO - Free Report) expects copper production in 2022 at around 898 kt, lower than 922kt anticipated earlier. The revised guidance indicates a drop of 6% from the year-ago reported figure. SCCO’s production will bear the impact of the stoppage of operations at Cuajone, a temporary reduction in ore grades and recoveries at the Peruvian operations.
Copper had earlier lost much of its steam over concerns that the global economy is falling into a recession pit but has recovered lately to $3.7 per pound on low inventories and production cuts following soaring gas prices, droughts and protests. Lower copper output in 2022 from these prominent copper producers will likely help jack up copper prices while demand in China, a top consumer, is currently rising.
Price Performance
Image Source: Zacks Investment Research
In the past year, shares of Rio Tinto have fallen 20.1% compared with the industry’s decline of 13.6%.
Zacks Rank
Rio Tinto currently has a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.