Robert Friedland: Rights offerings are the fairest form of equity finance ever developed by the human mind

Shareholders of Turquoise Hill Resources (TSX:TRQ) would be wise to participate in an upcoming rights offering, according to company founder and billionaire mining entrepreneur Robert Friedland, who lost control of Turquoise Hill in 2012, and says he still owns 8-9% of the company.

“People should buy the rights and exercise them hand over fist,” Mr. Friedland told CEO.CA by email Monday evening.

Turquoise Hill, which owns 66% of the massive Oyu Tolgoi copper-gold-silver mine in Mongolia, has been forced to issue a rights offering to repay US $2.4 billion in debts to its majority shareholder, Rio Tinto.

Under the terms of the rights offering, each Turquoise Hill shareholder will receive one transferable right for each common share owned as of December 6, 2013, to purchase an additional Turquoise Hill share at US $2.40 or CDN $2.53 per share, representing a 42% discount to the closing price of Turquoise Hill on November 25, 2013.

rading of the rights will begin on December 4 and stop at noon EST on January 7, 2014, at which point the rights offering will no longer be open for exercise. Shareholders who do not exercise will have their present ownership interest reduced by 50%. Rio Tinto will acquire any Turquoise Hill common shares not taken up by the offering.

Mr. Friedland remains bullish on Turqoise Hill’s prospects, continuing in his email, “Post the rights issues, the company is in full commercial production, the company will be debt free, and have receivables of $750+ millions in copper-gold inventory and sales pipeline, plus a $2 billion receivable from the Mongolian government. Being debt free, the minorities may also be in play. Idiots in Canada do not understand rights offerings are not dilution.. Everyone participates equally.. Rights offerings are the fairest form of equity finance ever developed by the human mind.”

Back on September 13, Mr. Friedland remarked, “Consider picking up a few shares [of Turquoise Hill] as a speculation… Pack them away for your favourite nephew.” Shares in TRQ.TO could be had for CDN $5.23 then, and last traded at $4.50 Tuesday morning.
TRQ Chart

TRQ data by YCharts