Why Turquoise Hill Stock Exploded 33% on Monday

Turquoise Hill (TSX:TRQ)(NYSE:TRQ) stock soared 33% on Monday, as stakeholder Rio Tinto offered to buy out the company for over $6 billion.

Amy Legate-Wolfe

Author Bio

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband.

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Published March 14, 2022 1:30 pm EDT

Turquoise Hill Resources (TSX: TRQ)(NYSE: TRQ) shares soared by 33% on Monday after stakeholder Rio Tinto (NYSE: RIO) offered to take the company private.

What happened?

Rio Tinto offered Turquoise Hill stock $6.84 billion to claim the remaining 49% stake in the company it doesn’t own. From there, the company would like to take Turquoise private. The offer would see Rio Tinto purchase the company for about $34 per share, buying up about 99 million shares in the process.

The stock started out the day at about $25 per share. Since then, shares of Turquoise stock are now up to that $34 mark. However, the company doesn’t seem to be slowing down anytime soon.

So what?

So, why did Rio Tinto make the purchase? Turquoise Hill stock owns 66% of the lucrative Oyu Tolgoi copper and gold mine in Mongolia. The rest of the interest is held by the Mongolian state. After years of battling with the government, an agreement was finally reached to get mining back underway. This creates the perfect opportunity for Rio Tinto to swoop in.

Turquoise Hill stock really depends on this one mine. Meanwhile, Rio Tinto wants exposure to this amazing mine. Therefore, it’s a win-win situation, where the latter can now work directly with the Mongolian government.

Now what?

Turquoise Hill stock stated the Oyu Tolgoi mine should produce 110,000 to 150,000 tonnes of copper and 115,000 to 165,000 ounces of gold in 2022. While this is lower than 2021, Rio Tinto is in it for the long game — especially now that a working relationship has been made between Turquoise Hill and the Mongolian government.

Now, here’s the very important part. There has been no agreement reached by both parties. Therefore, Turquoise Hill stockholders don’t need to take any action at this time. But tell that to the surging share price. Still, it’s one that’s hard to turn down, considering Rio Tinto already bought out the US$2.3 billion loan to the Mongolian government.

Shares of Turquoise Hill stock are up 32.5% trading at $34 and 62% in the last year to 52-week highs. The company trades at 10.2 times earnings as of writing.