PERTH (miningweekly.com) – Major Rio Tinto said it was "disappointed" by the decision of takeover target Turquoise Hill’s Special Committee to reject its C$34-a-share cash bid.

The Special Committee this week said that Rio’s bid for the company did not "fully and fairly" reflect the value of its majority interest in the Oyu Tolgoi copper project, in Mongolia, and that Rio’s offer price was ‘well below’ a range of values implied by a value analysis conducted by TD Securities.

Rio, which holds a 51% interest in Turquoise Hill, continued to argue that the proposed transaction would deliver "compelling value" for the remaining shareholders in the company, and would provide the certainty of an all-cash offer at an attractive premium of 32% to Turquoise Hill’s closing price of C$25.68 a share on March 11 and a 78% premium to Turquoise Hill’s closing price of C$19.12 a share on January 24, the day before agreeing a path forward between the government of Mongolia, Turquoise Hill and Rio Tinto that enabled commencement of the underground mine at Oyu Tolgoi.

Rio also pointed out that in its latest earning results, Turquoise Hill disclosed that it needs to raise equity proceeds of more than $1-billion to address its current estimate of funding requirements.

“Rio Tinto remains as committed as ever to the long-term success of Oyu Tolgoi. While we are disappointed by this decision, we will continue to work constructively with the board of Turquoise Hill to advance the Oyu Tolgoi project,” said the miner’s CEO for copper, Bold Baatar.

He said that the company would remain financially disciplined as it considers its options.

Investment advisory Sailingstone Capital Partners has applauded Turquoise Hill's decision to reject Rio's bid, saying offer price was 'nowhere near' the intrinsic value of the Oyu Tolgoi asset.

"In the next few months, the underground mine will achieve sustainable first production, unlocking billions of dollars in annual free cash flow for decades into the future even before the impact of potential expansions. Tier 1 copper assets with brownfield growth options are increasingly rare and therefore increasingly valuable, particularly given how critical copper is in the race to decarbonize and expand the world's energy systems. Rio Tinto's opportunistic bid did not compensate Turquoise Hill minority shareholders adequately for any of these realities," Sailingstone said in a note.

The advisory firm has meanwhile noted that while Rio was unwilling to sell its own stake in the Turquoise Hill, this should not preclude potentially interested parties from approaching Turquoise Hill with a transaction proposal, nor can it preclude the independent directors from considering a combination or transaction from any party which might crystalize the true value of Oyu Tolgoi.

"In other words, if Rio wants complete control, they can acquire it for a price. The Special Committee has determined that price is meaningfully higher than C$34/share, and we agree with that conclusion," Sailingstone said.