Turquoise Hill could be the new black for acquisitive miner Rio Tinto

Almost a decade after Rio Tinto took its first bite of Ivanhoe Mines speculation is building that Rio may seek to grow its stake in the company that is now known as Turquoise Hill Resources.

Rio is in a more acquisitive mood than at any time in the past three years, and is keen to buy quality copper assets while commodity prices and asset prices are low.

Shares in Turquoise Hill, 50.79 per cent of which are owned by Rio, hit a seven-year low last month and at current prices Rio could buy the remaining shares for about $US2.3 billion ($3.2 billion).

Turquoise Hill owns 66 per cent of Oyu Tolgoi – a copper, silver and gold mine in Mongolia that Deutsche analyst Paul Young has labelled "the best undeveloped copper project globally and probably the best undeveloped asset in the industry".

Rio's Turquoise Hill stake means it owns just 33 per cent of a copper deposit that is seen as the company's most exciting growth project.

Increasing a company's stake in a jointly owned mine is one of the lowest-risk ways to make acquisitions, given the buyer already has full knowledge of the asset it is bidding for.

Goldman Sachs banker Luke Gordon is rumoured to be advising Rio on a process to increase its stake in Turquoise Hill, but Fairfax Media was unable to confirm that because Mr Gordon declined to speak at his Toronto office on Wednesday.

Rio also declined to comment.

Some believe two significant developments in 2015 have given Rio the confidence to grow its stake in Turquoise Hill; the development agreement for the second stage of Oyu Tolgoi that was struck with the Mongolian government in May, and the $US4.4 billion debt package that was secured for the mine expansion in December.

The development agreement has cemented the financial terms upon which Rio, Turquoise Hill and the Mongolian government will build and operate the second stage, which contains most of Oyu Tolgoi's value.

The agreement also settled long-running tax disputes that had threatened to unravel the relationship between the companies and the government.

But Mongolia remains a risky place to invest in, and Oyu Tolgoi remains the focus of fierce public debate in the developing nation.

Nineteen of Mongolia's 76 parliamentarians filed a petition in January alleging that Prime Minister Saikhanbileg Chimed had abused his power when he agreed to the Oyu Tolgoi development agreement in May 2015.

In the same month, Mr Saikhanbileg was the subject of a no-confidence motion in the Mongolian parliament that, according to Bloomberg, he won by 42 votes to 31.

That win has kept the wolves at bay for now, but Mr Saikhanbileg faces elections in mid-2016, and Oyu Tolgoi is certain to be a topic of debate.

Rio may want to know the outcome of the elections before deciding whether it is ready to take another bite of Turquoise Hill.

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