The Rio Tinto share price has dropped 4.5% in London today on news it has made a $2.7 billion bid designed to give it a majority 66% interest in the giant Mongolian Oyu Tolgoi copper mine project. Rio Tinto’s direct interest in the mine currently stands at around a third with another 33% held by the Canadian miner Turquoise Hill Resources and 34% owned by the Mongolian government.

Rio Tinto currently owns 51% of Turquoise Hill and has made an all-cash offer for the remaining 49%. That would take its interest in the Oyu Tolgoi mine, which it operates, to 66%. The project is located in the Gobi desert around 340 miles from the Mongolian capital Ulan Bator.

Explaining the move to investors, Rio chief executive Jakob Stausholm today stated the company believes the proposed move would

“enable Rio Tinto to work directly with the government of Mongolia to move the Oyu Tolgoi project forward with a simpler and more efficient ownership and governance structure”.

It’s not a move without risk with the project already having been held up by disputes between the two miners and the Mongolian government which were resolved less than two months ago. That resolution has allowed underground mining to begin at the site which already has a working $6 billion open pit mine.

However, a new underground mine is expected to offer access to much larger deposits of copper and gold. By 2030 Oyu Tolgoi is expected to be the world’s fourth-largest copper mine.

Delays to the project have largely been the result of disagreements between the Rio and Turquoise over how to finance the project and its cost overruns, which has seen sunk costs rise to $6.9 billion from the $5.3 billion projected when it was signed off in 2016. Rio has come in for heavy criticism from some of Turquoise Hill’s other shareholders and the acquisition bid appears to be seen as the most efficient way to avoid further disagreement.

Rio said the proposed deal for Turquoise would “simplify the Oyu Tolgoi ownership structure, strengthen Rio Tinto’s copper portfolio, and reinforce its long-term commitment to Mongolia”.

Mr Stausholm further stated:

“With our relationship reset and the underground operations commenced, this transaction demonstrates our clear and unequivocal long-term commitment to Mongolia.”

Turquoise Hill said that it would be “establishing a special committee of independent directors to review and consider Rio Tinto’s proposal”.

Rio, which is one of the world’s biggest mining groups but generates a large majority of its $21 billion annual profits from iron ore mining in Australia sees Oyu Tolgoi as key to its diversification strategy. Copper is seen as a metal for which demand will continue to rise as energy transitions away from fossil fuels as it is used in electrical wiring.

Rio’s pitch to minority shareholders in Turquoise is that its offer, representing a 32% premium on the company’s closing price on the Toronto Stock Exchange last Friday, provides them with:

“…the ability to realise compelling, immediate and certain value for their shares at a time when uncertainties inherent in the development of the underground operations and funding of such development remain”.