2. Turquoise Hill Resources Ltd. (NYSE:TRQ)
Kopernik Global Investors Stake Value: $169,816,000
Percentage of Kopernik Global Investors’ 13F Portfolio: 19.05%
Number of Hedge Fund Holders: 10
Turquoise Hill Resources Ltd. (NYSE:TRQ) is a mineral property exploration and development company. Rio Tinto Group (NYSE:RIO) and Turquoise Hill Resources Ltd. (NYSE:TRQ) formed a joint venture with the Mongolian government to run the Oyu Tolgoi copper and gold mine on December 13.
BMO Capital analyst Jackie Przybylowski lowered the rating on Turquoise Hill Resources Ltd. (NYSE:TRQ) from “Market Perform” to “Underperform” in November, with a price target of $12, down from $14. Przybylowski informed investors that their faith in the time-frame and budget is shaky, and it is based on hazy data provided by Turquoise Hill Resources Ltd. (NYSE:TRQ).
In the third quarter, Kopernik Global Investors bought 1.45 million shares of Turquoise Hill Resources Ltd. (NYSE:TRQ), increasing its stake by about 15%. At of the end of the third quarter, the hedge fund held more than 11.51 million shares of Turquoise Hill Resources Ltd. (NYSE:TRQ), worth about $169.82 million.
Pentwater Capital Management, a Florida-based investment firm holding 18.72 million shares valued at more than $276.28 million, is a major shareholder in Turquoise Hill Resources Ltd. (NYSE:TRQ) as of Q3 2021.
In its fourth-quarter 2020 Investor Letter, Massif Capital mentioned Turquoise Hill Resources Ltd. (NYSE:TRQ). Here is what the fund said:
“Turquoise Hill remains a challenging company to evaluate and a problematic company to manage within our portfolio. The company holds rights to a world-class asset, but one with very different characteristics than Ivanhoe’s Kamoa Kakula. Kamoa is a flat, low depth, high-grade block of copper ore that is relatively easy to mine. Turquoise Hill’s OT mine is a deep underground mine with good grades and high tonnage, but it is very challenging to monetize. The planned extraction method, block cave mining, is still a relatively new approach to mining an asset in the grand scheme of things. The scale of the OT mine exacerbates the challenge. Management challenges compound technical risks. Rio-Tinto (the mine operator and developer via a 51% stake in Turquoise Hill) and Turquoise Hill seem to always be at odds with each other, and both parties seem to always be at odds with the Mongolian Government.
Although we have spent significant time underwriting the technical, managerial, and political risks associated with the investment, we are continuously surprised by how frequently issues occur for this company. With that in mind, we constructed a collar on the position during the fourth quarter, selling call options for January 2022 at a $20 strike and using the proceeds to buy January 2022 puts on the position at a $7 strike. This will allow us to confidently hold the position in the near term, knowing we have locked in a gain of at least 50% from our purchase price while still allowing for significant potential price appreciation from the current $12 price.”
