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LONDON, Dec 9 (Reuters Breakingviews) – Lastly, one thing has gone proper for Rio Tinto (RIO.L) in Mongolia. The $118 billion miner on Friday secured the shareholder votes it wanted to purchase the 49% it doesn’t personal of Turquoise Hill Sources (TRQ.TO), the bulk proprietor of the Asian nation’s $10 billion copper mine Oyu Tolgoi. Rio boss Jakob Stausholm squeaked residence with 60.5% of minority votes forged, simply over the 50% threshold.
It’s an enormous win for Stausholm and Rio copper boss Daring Baatar. Had they misplaced the vote, traders would have rightly blamed the pair for a shambolic course of wherein Rio 3 times raised its provide to Turquoise Hill’s minority shareholders. As it’s, in return for a $3 billion outlay they get to manage 66% of a key progress challenge. The Mongolian authorities holds the remaining 34%, however Rio already improved relations with Ulaanbaatar a 12 months in the past by pledging to put in writing down an enormous chunk of the federal government’s debt.
The deal is sweet for Turquoise Hill traders, too. Oyu Tolgoi nonetheless wants greater than $3.5 billion of funding. Elevating the money might need required shareholders to contribute extra fairness, or face vital dilution. As a substitute, Rio is handing them C$43 per share in money – a 70% premium to the value in March. In the meantime, future money owed will accrue the place they at all times have: on Rio’s steadiness sheet. (By George Hay)
Observe @Breakingviews on Twitter
(The creator is a Reuters Breakingviews columnist. The opinions expressed are their very own.)
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