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Date : 08/09/2022

Rio Tinto (ASX RIO) Shares Plunged After Striking a Deal Worth $4.9 Billion to Acquire Turquoise Hill

Rio Tinto Limited (ASX: RIO) is a global company headquartered in Australia and recognised as one of the world’s biggest mining and metals companies.

Rio’s portfolio of assets is concentrated into four product groups: aluminium, copper and diamonds, energy and minerals, and iron ore. The company explores, develops, produces and processes metals and minerals.

In 1873, the company’s founders acquired a mine complex on the Rio Tinto in Huelva, Spain, from the Spanish government. In 1970, over a century after the firm’s founding, RIO shares got listed on the ASX.

RIO share price has plunged after the company announced to striking a deal to purchase of the remaining turquoise Hill shares that it didn’t have.

ASX RIO: HY22 Results Highlights

Rio Tinto shares are currently trading at $91.99 and gained 2% this Monday morning. The RIO stock is rebounding after declining the previous Friday. The current market cap of the company is approximately 134.4 Billion AUD. Here is a comprehensive look on recent news and analysis on Rio Tinto Limited shares:

Rio Tinto Limited Shares Analysis

  1. In the first six months of 2022, Rio’s income declined by 10%, reaching US$29.8 billion.
  2. A 23% drop to US$10.47 billion was seen in the net operating cash flow for the corporation.
  3. The company saw a 30% drop in free cash flow to $7.15 billion.
  4. Compared to HY21, the company’s underlying EBITDA decreased 26% to US$15.6 billion in HY22.
  5. Net profit announced by Rio Tinto Australia dropped by 28%, to $8.9 billion.
  6. The ordinary dividend per RIO share fell by 29%, to USD 2.67.
  7. Unlike the HY21 special dividend of $1.85 per Rio Tinto stock, there was no such announcement for the ensuing HY22.

RIO acquired Turquoise Hill

There is an agreement in principle between Rio Tinto Limited and Turquoise Hill Resources Ltd., under which Rio Tinto (ASX RIO) will acquire the remaining approximately 49% of Turquoise Hill’s issued and outstanding common shares.

Each outstanding common share of Turquoise Hill that Rio Tinto does not already hold will be acquired for C$43 (A$48) per share. This is a 67% increase over the last closing price, which was C$25.68 (A$28.65) on March 11, 2022, the day before Rio Tinto Australia made its first bid.

The purchase, worth $4.9 billion, has received unanimous approval from the board of directors at Turquoise Hill.

An “arrangement agreement” between the two businesses will likely be completed rapidly, with additional information to follow after its execution.

This transaction also requires 66.67% shareholder approval at Turquoise Hill. A special meeting will be held sometime in the last three months of this year.

In  addition, upon completion of the Arrangement Agreement, the Heads of Agreement (HoA) between Rio Tinto Limited and Turquoise Hill shall become effective. That will help Turquoise Hill with its cash flow issues in the short run.

RIO: CEO’s remarks about the acquisition

Rio Tinto Limited CEO Jakob Stausholm has stated that the company is dedicated to developing Oyu Tolgoi in direct partnership with the Government of Mongolia to realise the project’s full potential for all parties involved. Following the recent start of underground operations, this agreement is another significant step toward ensuring the Oyu Tolgoi project’s long-term success by streamlining governance, increasing efficiency, and ensuring adequate funding.

RIO: Reason for decline and what’s next?

What is the forecast for ASX-RIO shares?

RIO share price dropped last week when the acquisition was announced, even though it was positive news. The reason for this is that the price of iron ore, the mining company’s main product, has dropped below the US$100 mark, causing the RIO share price to trade downward. The price of the steel-making ingredient has dropped below the psychological barrier for the first time in more than a month.

China’s economy is in a tailspin as its property market is experiencing its worst crisis in modern history. As a result, officials in Tangshan, a crucial hub, have decided to reduce second-half steel production by more than 8 million tonnes.

But now, RIO shares have begun the week with a positive sentiment and gained 2% this morning.

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