Why Did Turquoise Hill Stock Soar 18% on Tuesday?

Turquoise Hill (TSX:TRQ)(NYSE:TRQ) stock soared on Tuesday after the company finally came to an agreement with the Mongolian government for its mine.

| More on:
grow dividends

Image source: Getty Images

Turquoise Hill Resources (TSX:TRQ)(NYSE:TRQ) shares climbed as high as 18% in early Tuesday trading. This came after news that a feud has finally been settled over a copper mine for the company.

What happened?

An ongoing dispute over a Mongolian copper-gold mining project finally came to a close late on Monday. It sent shares of Turquoise Hill stock soaring. The Mongolian government announced it reached an agreement with Rio Tinto. The company owns 51% of Turquoise Hill, which operates the mine.

The Oyu Tolgoi mine dispute came about as the Mongolian government believed its economic benefits weren’t being met. The $6.93 billion project is 34% owned by the Mongolian government, with the rest controlled by Turquoise Hill stock.

So what?

Turquoise Hill stock waived $2.4 billion in debt owed to it by the Mongolian government under the deal. Now, things can really get underway, with the first production from the expansion due around the first half of 2023.

Furthermore, Turquoise Hill stock stated it would use the Mongolian power grid, buying electricity from the company. Rio Tinto stated it would help add renewable power to this grid. In the meantime, Mongolia is importing power from China through 2023. This will replace the original coal-power signed on when the deal originated in 2009.

“Today is a landmark day for Turquoise Hill and a major milestone in the development of the Oyu Tolgoi underground development project,” said Steve Thibeault, interim chief executive officer of Turquoise Hill. “[W]e now have greater certainty and confidence to complete construction of this once-in-a-generation mine that, when finished, is expected to be one of the largest copper producing mines in the world and a generator of vast economic value and employment in Mongolia and of returns for our shareholders for years to come.”

Now what?

It’s the end of a long struggle that Turquoise Hill stock investors haven’t enjoyed. And it came at a great time considering the crash in practically every sector. It answers the two major questions analysts have been waiting for: what the Mongolian government would demand, and how the mine would be financed.

The only cause for concern is the price. The $6.93 billion price continues to be maintained by Rio Tinto. However, analysts believe there will surely be a re-forecast in the near future. Still, analysts have since upped the price target, most recently to $28 from $21 from these problems answered and work finally underway.

Shares of Turquoise Hill stock are up 16% as of writing on Tuesday alone.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Metals and Mining Stocks

edit Person using calculator next to charts and graphs
Metals and Mining Stocks

Pick From 2 Lithium Stocks for Your Next Big Investment

Two TSX lithium stocks are the next high-growth stocks as the electric revolution intensifies.

Read more »

Metals
Metals and Mining Stocks

2 of the Best Metal Stocks (With Dividends) to Buy on the TSX Today

Long-term investors can buy the dip in these two TSX metal stocks today, as they have the potential to stage…

Read more »

gold stocks gold mining
Metals and Mining Stocks

2 Gold Stocks With Huge Dividend Yields

Agnico Eagle Mines (TSX:AEM)(NYSE:AEM) and another high-yielding gold-mining stock look like fantastic deals for contrarians.

Read more »

edit Businessman using calculator next to laptop
Metals and Mining Stocks

3 Stocks to Diversify Your Metal Portfolio

Diversification is more than just about spreading the risk. You can also stagger short-term growth cycles by choosing the right…

Read more »

Gold bullion on a chart
Metals and Mining Stocks

1 Top Gold Stock With a Huge Dividend

Barrick Gold (TSX:ABX)(NYSE:GOLD) stock may very well be one of the most productive ways to invest in precious metals.

Read more »

gold stocks gold mining
Metals and Mining Stocks

Market Volatility: 3 Gold and Silver Stocks to Buy Now!

Investors worried about market volatility may want to snatch up gold and silver stocks like Silvercorp Metals Inc. (TSX:SVM)(NYSE:SVM).

Read more »

clock time
Metals and Mining Stocks

Teck Resources (TSX:TECK.B) Stock: Time to Buy?

Teck Resources stock has had a big run. Are more fans on the way?

Read more »

Gold bars
Metals and Mining Stocks

Here’s a Precious Metals Stock With Less Risk

Wheaton is well positioned to form a small part of a much

Read more »