Turquoise Hill climbs on speculation Rio may take it private

TORONTO – Turquoise Hill Resources Ltd. soared amid speculation that its controlling shareholder  Rio Tinto Group is preparing for a commodity-price recovery by increasing its stake in the company.

Rio Tinto has hired Goldman Sachs Group Inc. to advise it as the world’s second-largest miner looks into the possibility of taking Turquoise Hill private, a person with knowledge of the matter said. The news was reported earlier by the Sunday Times.

Shares in Vancouver-based Turquoise Hill rose as much as 19% in Toronto on Monday, the biggest intraday gain since October 2011. The stock was up 14% to C$4.20 at 3:09 p.m. Turquoise Hill’s Oyu Tolgoi copper and gold mine in Mongolia is going ahead with an underground expansion that will more than double its output.

The Sunday Times reported on its website that Rio Tinto is planning to increase its 51% stake in Turquoise Hill slightly, and is hoping a single company or consortium will buy the rest.

Should this happen, shareholders might stand to benefit, according to Aleksandra Bukacheva, an analyst at BMO Capital Markets in Toronto.
‘Only Advantage’

“The only advantage would be if there was a transaction where another entity comes in and consolidates some of the minority stake at a premium,” she said Monday in a telephone interview. Meanwhile, the operational impact would likely be minimal given that Rio Tinto already has a controlling stake in the project. “Unless the entity has some unique technical expertise that benefits the project, not much is likely to change.”

Rio Tinto, Turquoise Hill and Goldman Sachs declined to comment on the story.

Turquoise Hill will begin work on an expansion of the mine at Oyu Tolgoi later this year. The project would increase annual capacity to more than 500 000 metric tons of copper by 2027. Turquoise Hill owns 66% of the deposit.