TIDMRIO
RNS Number : 0932E
Rio Tinto PLC
25 October 2022
Rio Tinto issues letter to Turquoise Hill shareholders
Rio Tinto has issued an open letter to the shareholders of
Turquoise Hill Resources Ltd (TSX: TRQ) (NYSE: TRQ) ("Turquoise
Hill") outlining the future of TRQ and reiterating its long-term
commitment to Oyu Tolgoi.
Dear Turquoise Hill Shareholders,
Since Rio Tinto's approach in March to acquire Turquoise Hill
Resources you may have heard many views about the merits of our
proposal. Today, we want you to hear directly from Rio Tinto.
We are all shareholders in Turquoise Hill because we believe in
the long term potential of the Oyu Tolgoi project in Mongolia. But
we must also recognise that we have a long way to go before its
full value is unlocked. Over the next seven years we face
significant technical, financial, and macroeconomic risks while we
complete the design, development and ramp-up of this major
underground block caving project. Further, to achieve this, over
the next two years Turquoise Hill needs an additional US$3.6
billion (C$4.9 billion) in funding. A proportion of the funding
burden will fall on shareholders, and we will all need to
contribute cash or face dilution.
Against that backdrop we have made our best and final offer of
C$43 in cash for each of your shares. That is:
-- A premium of 67% to the share price immediately before our proposal; and
-- An implied premium of more than 150% to the price of your
shares if they had performed in line with copper company peers
since 11 March 2022. [1]
The independent and highly qualified Directors of your Board,
with the help of leading Canadian financial advisors, reviewed our
proposal and, after extensive negotiations and analysis over six
months, unanimously recommended in favour of the transaction. That
view was further endorsed by Glass Lewis, a prominent advisor to
institutional investors.
We acknowledge that we do not have the support of some Turquoise
Hill shareholders and ISS, another advisor to institutional
investors. However, we believe that ISS's final conclusion on Net
Asset Value (NAV) is based on flawed logic. The average analyst NAV
when the transaction was announced was C$39 per share, giving a
resultant P/NAV of our offer of 1.10x, which is a strong premium to
NAV and above precedent transactions for assets under
development..
There are many important issues that may affect your voting
decision, but we would like to highlight two:
-- We believe that Rio Tinto's proposal fully values the long
term potential of Oyu Tolgoi and Turquoise Hill and assumes that
the near term challenges can be overcome.
-- Whilst in the past Rio Tinto has shouldered the majority of
the funding burden on behalf of all shareholders, if our proposal
does not proceed then in future all shareholders will need to
contribute proportionately. To be clear, that means Turquoise Hill
shareholders will need to contribute at least US$1.1 billion in the
first half of 2023, in the form of new equity through placings or
rights issues, or potentially face dilution.
If, after considering the realities outlined above, you decide
not to accept the Rio Tinto proposal, then we welcome you as
ongoing investors in Turquoise Hill. Together we will make the
substantial commitments necessary to complete the Oyu Tolgoi
project over the next seven years.
But, if you conclude that C$43 per share represents a strong
return for your investment, taking into account the balance of
risks and long term potential, then vote FOR our proposal. If the
transaction proceeds, then we look forward to soon paying C$43 in
cash for each of your shares in a market which has otherwise
deteriorated significantly since our initial proposal.
To learn how to vote today, go to
www.turquoisehillacquisition.com
Yours sincerely
Bold Baatar
Rio Tinto Copper Chief Executive
Notes to editors
Turquoise Hill Resources analyst consensus NAV and target
prices
24 January
2022(1)
Day before 11 March 2022(2)
relationship Day before Rio
TRQ NAVPS Estimates reset with Government Tinto initial
(C$ / share) of Mongolia offer
---------------------- ----------------------- -----------------
BMO 24.88 36.79
RBC 16.48 32.24
Macquarie Research 16.80 29.50
Eight Capital 37.04 43.27
Canaccord Genuity 29.38 47.90
Scotiabank 31.86 37.28
TD Securities 40.63 48.12
Average 28.15 39.30
24 January
2022(1)
Day before 11 March 2022(2)
relationship Day before Rio
TRQ Target Price Estimates reset with Government Tinto initial
(C$ / share) of Mongolia offer
---------------------------- ----------------------- -----------------
BMO 10.50 20.00
RBC 15.00 32.00
Macquarie Research 16.80 29.50
Eight Capital 16.00 30.00
Canaccord Genuity 12.50 31.00
Scotiabank 22.00 30.00
TD Securities 24.00 32.00
Average 16.69 29.21
Source:
(1) 24 January 2022 estimates include research notes as of: BMO
(17 Jan 22), RBC (03 Nov 21), Macquarie Research (18 Jan 22), Eight
Capital (03 Nov 21), Canaccord Genuity (03 Nov 21), Scotiabank (17
Jan 22), TD Securities (17 Jan 22).
(2) 11 March 2022 estimates include research notes as of: BMO
(03 Mar 22), RBC (03 Mar 22), Macquarie Research (03 Mar 22), Eight
Capital (03 Mar 22), Canaccord Genuity (03 Mar 22), Scotiabank (03
Mar 22), TD Securities (04 Mar 22).
Additional Disclaimers
General
The information contained in this press release is for
informational purposes for the shareholders ("Shareholders") of
Turquoise Hill Resources Ltd. ("TRQ") in order to provide the views
of Rio Tinto plc ("Rio Tinto") and its affiliates regarding the
arrangement agreement entered into between Rio Tinto, Rio Tinto
International Holdings Limited ("RTIH") and TRQ, pursuant to which,
RTIH would acquire the approximately 49% of the issued and
outstanding common shares of TRQ ("Common Shares") that it and its
affiliates do not currently own for C$43.00 in cash per common
share (the "Arrangement") and other matters which Rio Tinto
believes to be relevant to Shareholders. The views expressed in
this press release represent the views and opinions of Rio Tinto as
of the date hereof.
Forward-Looking Statements
The information provided in this press release includes
"forward-looking statements" and "forward looking information"
within the meaning of the U.S. Private Securities Litigation Reform
Act of 1995 and under Canadian securities law, respectively. All
statements other than statements of historical facts included in
this release, are forward-looking statements or information. 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 or information. More particularly and
without restriction, this press release contains forward-looking
statements and information regarding: statements and implications
about the anticipated benefits of the Arrangement for Rio Tinto,
TRQ and their respective shareholders, Shareholder and court
approvals, the anticipated timing of the completion of the
Arrangement and the anticipated funding and other risks for TRQ and
the Shareholders if the Arrangement does not proceed.
Such forward-looking statements and information 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 or
information. These risks and uncertainties include, but are not
limited to, the failure of the parties to obtain the necessary
Shareholder and court approvals or to otherwise satisfy the
conditions to the completion of the Arrangement; failure of the
parties to obtain such approvals or satisfy such conditions in a
timely manner or at all; significant transaction costs; failure to
realize the expected benefits of the Arrangement and general
economic conditions. Failure to obtain the necessary Shareholder
and court approvals, or the failure of the parties to otherwise
satisfy the conditions to the completion of the Arrangement or to
complete the Arrangement, may result in the Arrangement not being
completed on the proposed terms, or at all. Consequently, all of
the forward-looking statements and information contained in this
press release is qualified by the foregoing cautionary statements,
and there can be no guarantee that the results or developments that
we anticipate will be realized or, even if substantially realized,
that they will have the expected consequences or effects on our
business, financial condition or results of operation.
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 or information contained in this press
release to reflect any change in its expectations with regard
thereto or any change in events, conditions or circumstances on
which any such statement or information is based.
Additional Information
The information contained in this press release does not
constitute an offer to buy or sell or the solicitation of an offer
to sell or buy any securities.
As disclosed in the management proxy circular of TRQ dated
September 27.2022 (the "Circular"). Rio Tinto and RTIH may also
participate in the solicitation of proxies on behalf of TRQ
management for the special meeting of Shareholders of TRQ scheduled
to be held on November 1, 2022. Notwithstanding the foregoing, Rio
Tinto is hereby voluntarily providing the disclosure required under
Section 9.2(4) of National Instrument 51-102 - Continuous
Disclosure Obligations and has filed a document containing the
disclosure required under Section 9.2(4)(c) of NI 51-102 in
compliance with securities laws applicable to public broadcast
solicitation.
All costs of this press release will be borne by Rio Tinto. Rio
Tinto has entered into agreements with each of Laurel Hill Advisory
Group and Innisfree M&A Incorporated in respect of certain
consulting and related services, the aggregate cost of which is
anticipated to be US$0.5 million, plus ancillary payments and
disbursements. Rio Tinto may participate in the solicitation of
proxies, including through websites, press releases,
advertisements, speeches, town halls or publications, and by any
other manner permitted under applicable Canadian corporate and
securities laws. Proxies may be revoked as described under the
heading "Information Concerning the Meeting and Voting - Changing
Your Mind (Revoking Your Proxy)" on pages 72 and 73 of the
Circular.
Other than as disclosed in the Circular or TRQ's public filings,
neither Rio Tinto nor, to its knowledge, any of its associates or
affiliates, has any material interest, direct or indirect, by way
of beneficial ownership of securities or otherwise, (i) in any
matter proposed to be acted upon in connection with the special
meeting of Shareholders of TRQ to be held in connection with the
Arrangement or (ii) in any transaction since the beginning of TRQ's
most recently completed financial year or in or in any proposed
transaction which has materially affected or would materially
affect TRQ or any of its subsidiaries.
Rio Tinto currently beneficially owns 102,196,643 Common Shares,
representing approximately 50.8% of the issued and outstanding
Common Shares. Upon the closing of the Arrangement, Rio Tinto would
hold 100% of the outstanding Common Shares.
TRQ's head office is located at 1 Place Ville-Marie, Suite 3680,
Montreal, QC, H3B 3P2.
The person responsible for arranging the release of this
announcement on behalf of Rio Tinto plc is Steve Allen, Group
Company Secretary.
Contacts Please direct all enquiries to media.enquiries@riotinto.com
Media Relations, UK Media Relations, Australia
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
Simon Letendre
M +514 796 4973
Malika Cherry Investor Relations, Australia
M +1 418 592 7293 Tom Gallop
M +61 439 353 948
Investor Relations, UK Amar Jambaa
Menno Sanderse M +61 472 865 948
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 Melbourne 3000
United Kingdom Australia
T +61 3 9283 3333
T +44 20 7781 2000 Registered in Australia
Registered in England ABN 96 004 458 404
No. 719885
This announcement is authorised for release to the market by
Steve Allen, Rio Tinto's Group Company Secretary.
riotinto.com
[1] Since Rio Tinto's initial public proposal, Turquoise Hill
copper peers First Quantum, Freeport, Lundin, and Southern Copper
have fallen by 35%, which would imply an unaffected Turquoise Hill
share price of C$16.70 today without the Rio Tinto transaction.
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END
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