The sale of a large stake became the driver of the Turquoise Hill Resources mining company
The Canadian company Turquoise Hill Resources Ltd. (TDC), which produces copper, received a strong positive impulse thanks to the news about the potential sale of a large share of shares.
Major mining company Rio Tinto Group (RIO) has offered to gain a 49% stake in Turquoise Hill for $2.7 billion. Rio Tinto already has a significant stake, so we are talking, in fact, about a takeover.
The primary motive for the acquisition is the consent of the Government of Mongolia to the extraction of copper by Turquoise Hill specialists within the framework of the project at the Oyu Tolgoi deposit. The purchase of the stake will allow Rio Tinto to receive 66% of this project (the second share will be by the government of Mongolia).
The deal has not reached yet, and we can cancel it at the stages of negotiations between companies, approval by regulators and shareholders. However, the interest of such a major player as Rio Tinto in expanding copper mining assets is a signal for investors who are following this direction.
In the next decade, the demand for copper will continue to increase because of many factors, in particular, the growth in the production of batteries for electric vehicles and industrial energy storage. Renewable energy creates a significant demand: there are about three tons of copper in a megawatt wind farm.
Rio Tinto expects global copper demand to grow at a rate of up to 2.5% per year. Rio Tinto has a large copper mine in Utah, USA, which produces gold and silver besides copper. It has already almost completely converted to renewable energy and can supply products to companies that seek to reduce their carbon footprint. The increase in the share in the project will allow the company to expand its presence in the global copper market.
