© Reuters. The logo of mining company Rio Tinto is pictured during their annual general meeting in Sydney, Australia May 4, 2017. REUTERS/Jason Reed
By Praveen Menon and Shashwat Awasthi
(Reuters) – Rio Tinto reached an agreement in principle on Thursday to buy the remainder of Canada’s Turquoise Hill Resources (NYSE:) for $3.3 billion, giving the global miner direct ownership of a giant mine in Mongolia.
Rio will pay C$43 per share in cash for the 49% of Turquoise Hill it does not already own, a premium of more than 19% to the stock’s last close and above a $40 sweetened bid. CA each proposed last month.
The deal, which awaits shareholder approval, gives the global miner ownership of Turquoise Hill’s 66% stake in Oyu Tolgoi, the world’s largest known copper and gold deposits, 550 km (342 miles) south of the Mongolian capital, Ulaanbaatar.
Global mining companies are seeking growth in commodities such as copper – used in wind turbines, solar power systems and power cables – and nickel and lithium which are used in electric vehicle (EV) batteries , as the world prepares to decarbonize.
The takeover process has been underway for about six months, with Turquoise Hill previously rejecting Rio’s offer of C$34 each, citing it was too low.
“Rio Tinto (NYSE:) is committed to moving Oyu Tolgoi forward in direct partnership with the Government of Mongolia to realize its full potential for all stakeholders,” said Rio Tinto CEO Jakob Stausholm.
“This agreement … will simplify governance, improve efficiency and create greater funding certainty for the long-term success of the Oyu Tolgoi Project.”
Rio and the Mongolian government, which owns the remaining 34% of Oyu Tolgoi, ended a long-running dispute over the mine’s $7 billion expansion earlier this year.
Rio rival BHP Group (NYSE:) was rebuffed in its A$8.34 billion ($5.8 billion) takeover bid for OZ Minerals last month as it seeks to turn to clean energy and the electric vehicle market.
BHP has not said whether it will sweeten its offer, although analysts and bankers believe it should if it wants to secure the asset.
Rio and Turquoise Hill also agreed on Thursday to modify certain financing agreements to help the Canadian company deal with short-term liquidity, the global miner said.
The agreements include increasing an advance advance facility agreed in May from $400 million to $650 million and extending the deadline for raising $650 million and repaying debt until in March 2023 at least.
The amended arrangements also include a commitment by Rio to participate pro rata in an initial share offering.
A special meeting of Turquoise Hill shareholders to approve the deal is scheduled for the fourth quarter, and the deal will close shortly thereafter, if approved, Rio said.
($1 = 1.4669 Australian dollars)