Pentwater Capital Management LP,聽the second-largest investor in Turquoise Hill Resources (TSX: TQR) has while again rejecting Rio Tinto鈥檚 C$43-a-share offer for the 49% of the miner聽it doesn鈥檛 already own.
The activist investor disclosed it had bought around 1.24% of common stock at C$41.01 per share in Turquoise Hill, for a total of C$102.5 million on September 15. It means it currently owns 13.77% of Turquoise Hill鈥檚 shares
Rio Tinto (ASX, LON: RIO) agreed earlier this month to take over Turquoise Hill after sweetening an initial offer by around 20% to 鈥渁 best and final鈥� $3.3 billion.
Pentwater, which joined minority shareholder SailingStone Capital Partners in publicly opposing Rio Tinto鈥檚 offer as too low, restated its discontent.
鈥淭he proposed price implies an equity value of聽C$8.65 billion, which is a fraction of the free cash flow that Pentwater expects Turquoise Hill to generate over the next decade,鈥� it .听
Pentwater noted it expects Turquoise Hill to generate over C$10.5 billion of free cash flow through 2030 assuming a $3.50 per pound copper price and almost C$14.2 billion of free cash flow assuming copper prices of $4 per pound.
It also said it was weighing options to thwart the deal, including but not limited to the possible exercise of dissent rights or other legal action.听聽
Rio鈥檚 offer requires two thirds of shareholders, including Rio Tinto鈥檚, to vote in favour. More than 50% of minority shareholders must approve it.
The final bid represents a 67% premium from Turquoise Hill鈥檚 closing price of C$25.68 a share on March 11, the trading day prior to聽the initial proposal.
Third largest copper-gold mine
Pentwater has said the proposed premium is unacceptable for a mine that it expects to be 鈥渢he third largest copper and gold mine in the world with a mine life in excess of 90 years.鈥�
Some analysts believe that Rio Tinto will need to increase its offer to win over some minority shareholders and so hold a direct majority stake in the massive Oyu Tolgoi copper-gold mine in Mongolia.
The global miner, which has mined copper from Oyu Tolgoi鈥檚 open pit for a decade, will have the task of finishing building the underground section of the mine.
Once completed, it will lift production from 125,000鈥�150,000 tonnes in 2019 to 560,000 tonnes per year at peak output, which is now expected by 2025 at the earliest.
This would make it the biggest new copper mine to come on stream in several years.