Why Is Turquoise Hill (TRQ) Stock Up Today?

Rio Tinto (NYSE:RIO) announced today that it had proposed buying the 49% of Turquoise Hill Resources (NYSE:TRQ) that it does not already own. The United Kingdom-based mining giant offered 34 CAD per share, or roughly $2.7 billion, for the stake in Turquoise Hill. TRQ stock has surged nearly 33% to $26.70.

Close-up of a gold-ingot on top of a troy ounce silver and palladium bar. Precious metals. Gold, silver, palladium.
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Earlier this year, Rio reached a settlement with the Mongolian government over its mining of the copper deposit at Oyu Tolgoi. Turquoise Hill has a 66% stake, and Mongolia owns the rest. Rio currently mines the project through its current ownership of Turquoise Hill.

In October, Rio was hit with $1.4 billion of “cost overruns and delays” at Oyu Tolgoi, which was reportedly running “two years” behind schedule. The giant mining firm has also been involved in disagreements “with both the Mongolian government and Turquoise Hill,” Bloomberg reported.

“The proposed transaction would enable Rio Tinto to work directly with the government of Mongolia to move the Oyu Tolgoi project forward with a simpler and more efficient ownership and governance structure,” Rio CEO Jakob Stausholm stated today.

Rio’s offer comes in 32% higher than Turquoise’s closing price on Friday. TRQ stock reached a 52-week high of $26.73 today, while Rio’s shares were slipping 3% to $70.55.

Increased Focus on Commodities Lifts TRQ Stock

The offer from Rio Tinto also comes at an especially relevant time, with the price of many commodities in focus. Russia’s ongoing invasion of Ukraine has pushed commodity-related stocks, including mining names, higher.

For example, since Feb. 24, Freeport-McMoRan (NYSE:FCX), a copper and gold miner, has jumped about 10%. Although Russia mines just 4% of the world’s copper, the price of the metal has surged about 10% since the invasion.

One of the reasons behind the rapid increase may be the European Union’s decision to step up its use of solar and wind energy in the wake of the invasion, as copper is a key component of both solar modules and wind turbines.

Another factor boosting the demand for the metal is the proliferation of electric vehicles, as EVs on average incorporates “200 pounds” of copper. The world’s current copper supply is reportedly too low to support the move to clean energy.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.


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