Rio Tinto Group’s $2.7 billion bid to buy Turquoise Hill Resources Ltd. was rejected, hampering her efforts to gain more control over a giant copper mine she is developing in Mongolia.

Rio’s bid does not “fairly reflect the fundamental and long-term strategic value of the company’s majority stake in the Oyu Tolgoi project”, Turquoise Hill said on Monday after appointing a special committee to review the bid. Shares of the Canadian miner fell the most in more than eight months.

The rejection is a setback for Rio’s chief executive, Jacob Stausholm, who has prioritized rescheduling stalled projects while rebuilding the company’s reputation after a string of missteps. Rio owns 51% of Turquoise Hill, which in turn owns two-thirds of Oyu Tolgoi. In March, the London-based miner offered minority shareholders Turquoise Hill C$34 ($25.90) ​​per share, a 32% premium at the time.

Rio said it was disappointed by the ad hoc committee’s decision and reiterated its offer to buy Turquoise Hill. The offer will bring “compelling value” to minority investors.

Turquoise Hill fell 13% to C$22.95 as of 9:50 a.m. in Toronto trading, its lowest since March 11. Rio shares fell 2.9% in London.

Copper shares have fallen about 27% in the period since the bid was announced and now trade within 5% of Turquoise Hill, Morgan Stanley analysts, including Allen Gabriel, said in a note on Monday.

“This dynamic has likely shifted the balance of power in Rio Tinto’s favor,” the analysts noted.

Rio is also looking to increase its exposure to so-called future-oriented commodities, natural resources such as copper and nickel that are key to the green energy transition. Acquiring a large stake in the Oyu Tolgoi mine was an obvious way to achieve this goal. Earlier this year, the company struck a deal with the government to begin work on the long-delayed $6.9 billion Oyu Tolgoi underground extension after agreeing to write off $2.4 billion in government debt.

The mining sector has largely turned away from big deals since the commodity crash in the middle of the last decade. However, this is now changing as the largest miners push to increase their exposure to commodities such as copper. Last week, BHP Group, the biggest miner, rejected a $5.8 billion offer to buy Oz Minerals Ltd.

“Interactions between the parties did not result in a consensus on cost and price or any improved proposal from Rio Tinto,” Turquoise Hill said in a statement on Monday.

© 2022 Bloomberg

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