Second Open Letter to TRQ Independent Directors
Focuses on Unjust Business Dealings by Rio Tinto and Long-Time
Concerns of Minority Owners
HOUSTON, Aug. 16,
2022 /PRNewswire/ -- SailingStone Capital
Partners, a long-time owner of Turquoise Hill Resources Ltd. (TSX:
TRQ) (NYSE: TRQ), has delivered the attached letter to the
Turquoise Hill Independent Directors:
As a Tier 1 copper mine, Oyu Tolgoi's value
is much higher than what Rio Tinto offered minority owners.
Dear Independent Directors of Turquoise Hill Resources Ltd.,
SailingStone Capital Partners applauds the decision of the
Turquoise Hill Resources Special Committee to reject Rio Tinto's
opportunistic offer to acquire the minorities' stake in TRQ for
C$34/share.
As one of the largest, lowest cost, and longest duration
copper/gold assets ever discovered, Oyu Tolgoi is a crown jewel.
The proposed acquisition price is nowhere near the intrinsic value
of Oyu Tolgoi, as it values the Company at less than 35% of capital
invested to date and represents a 60% discount to Rio Tinto's own
cost basis in TRQ, a position that Rio acquired over a decade ago
when the net present value was far lower and the risks far greater
than today. In the next few months, the underground mine will
achieve sustainable first production, unlocking billions of dollars
in annual free cash flow for decades into the future even before
the impact of potential expansions. Tier 1 copper assets with
brownfield growth options are increasingly rare and therefore
increasingly valuable, particularly given how critical copper is in
the race to decarbonize and expand the world's energy systems. Rio
Tinto's opportunistic bid did not compensate TRQ minority
shareholders adequately for any of these realities.
In addition, we appreciate that "Rio Tinto welcomes the
continued investment by Turquoise Hill minority shareholders and
their pro rata sharing of future risks and funding obligations."
Unfortunately, most of the risks and funding obligations "shared"
over the last several years have come as the result of Rio's
incompetence, including the incremental equity raise which now must
be addressed. However, we welcome Rio's continued participation as
mine developer and operator and trust that they have addressed
their internal shortcomings so that all Oyu Tolgoi stakeholders can
benefit from the mine's incredible employment, business
development, and free cash flow potential.
Lastly, we note the following from Rio Tinto's press
release.
As previously disclosed, Rio Tinto is not interested in pursuing
any alternative transaction, including any such transaction which
would result in the sale of Rio Tinto's interest in Turquoise Hill
or the acquisition by a third party of Turquoise Hill or Oyu Tolgoi
in partnership with or independent of Rio Tinto.
Apparently, Rio Tinto isn't interested in selling their stake in
TRQ, even at a price which it claims represents "compelling value"
for the seller. More importantly, this statement clearly is
intended to preempt any price discovery process which might allow
minority owners to be fairly compensated for their 49.2% stake in
the Company. While we appreciate that Rio Tinto has certain rights,
it cannot and should not preclude potentially interested parties
from approaching Turquoise Hill, nor can it preclude the
independent directors from considering a combination or transaction
from any party which might crystalize the true value of Oyu Tolgoi.
In other words, if Rio wants complete control, they can acquire it
for a price. The Special Committee has determined that price is
meaningfully higher than C$34/share,
and we agree with that conclusion.
Best regards,
SailingStone Capital Partners LLC
ABOUT SAILINGSTONE CAPITAL PARTNERS
LLC
SailingStone Capital Partners, a division of Pickering
Energy Partners, provides investment solutions in the global
natural resource space with a specific focus on the industrial
businesses, commodities and infrastructure assets which will enable
the energy transition. SailingStone manages concentrated, long-only
equity portfolios for institutional investors.
For media inquiries:
Petree Partners LLC
Jennifer Petree / Tina Tallant
713.269.3776
For investor inquiries:
SailingStone
MacKenzie Davis
ir@sailingstonecapital.com
View original content to download
multimedia:https://www.prnewswire.com/news-releases/sailingstone-applauds-turquoise-hill-response-to-rio-tintos-offer-301606287.html
SOURCE SailingStone Capital Partners