By Adriano Marchese

 

One of Turquoise Hill Resources Ltd.'s largest shareholder has been buying more shares in the company days after a court dismissed all its claims against the Canadian miner.

At 11:15 a.m. ET, shares of Turquoise Hill were trading 1.9% lower at C$40.23, but are up more than 93% since the beginning of the year.

On Thursday evening, Pentwater Capital Management LP said that funds and accounts over which it and its affiliates exercise control and direction acquired a total of 2.5 million more shares of Turquoise Hill, or around 1.2% of the issued and outstanding common shares.

Pentwater said that prior to Thursday's acquisition, it had also acquired other common shares on Sept. 13, 14 and 15 for a total of 4.2 million shares, or about 2.1% of the issued outstanding common shares.

Pentwater expects the global transition to a greener economy will drive the price and demand for copper higher, and said it expects Turquoise Hill to generate more than 10.5 billion Canadian dollars ($7.94 billion) of free cash flow through 2030 at its conservative price projection of copper at $3.50 a pound. If the price of copper were to reach $4.00 a pound, it could generate cash flow of almost C$14.2 billion, it said.

On Sept. 5, Rio Tinto PLC, which owns 51% of Turquoise Hill and has a 66% interest in the Oyu Tolgoi project, entered a binding agreement with Turquoise Hill Resources to acquire the remaining shares in Turquoise Hill it doesn't already own.

The cash offer was for C$43 a share, but Pentwater criticized the proposed price on the grounds that it "significantly undervalues the common shares."

At the proposed price, an equity value of C$8.65 billion is implied, which it said is a fraction of the free cash flow that Pentwater expects Turquoise Hill to generate over the next decade.

Pentwater doesn't support the proposed plan of arrangement, and said it is evaluating a number of legal alternatives with respect to their proposed plan of arrangement, one of which is the exercise of dissent rights, which entitles any dissenting shareholder to require that their shares be acquired by the buyer for their fair value.

In the period between Sept. 13 and Friday, shares in Turquoise Hill have remained fairly steady, with lows around C$40.18 and a high of C$40.60 a share, below Rio Tinto's proposed offer price.

In September, Pentwater was dealt a blow when a federal court in New York dismissed all claims against Turquoise Hill and three executives of deliberately misleading investors about the costs and progress at its mine in Mongolia. The claims were first made against Turquoise Hill and the executives in a putative class action lawsuit in October 2020, with Pentwater Capital as lead plaintiff.

Pentwater had alleged that the company and three of its executives violated U.S. securities laws by making false or misleading statements about the progress and expected cost of the Oyu Tolgoi underground mine, developed in partnership with Rio Tinto.

With the new shares acquired in recent days, the Pentwater funds now have beneficial ownership of 27.7 million shares, representing almost 14% of the total issued and outstanding common shares.

 

Write to Adriano Marchese at adriano.marchese@wsj.com

 

(END) Dow Jones Newswires

September 16, 2022 11:49 ET (15:49 GMT)

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