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Rio Tinto takes bigger stake in Ivanhoe Mines, will manage Oyu Tolgoi project
December 8 (The Canadian Press) Rio Tinto (ASX:RIO, LON:RIO) and Ivanhoe Mines (TSX:IVN, NYSE:IVN) have called a truce, which will result in the international mining giant providing billions of dollars in financing and assuming management of Ivanhoe's Oyu Tolgoi copper-gold project in Mongolia.
The mining companies had been in a fight over Ivanhoe's institution of a so-called "poison pill" plan to protect against a hostile or creeping takeover.
"The mutually beneficial evolution and expansion of the scope of Ivanhoe's four-year relationship with Rio Tinto comes at a pivotal time in the development of Oyu Tolgoi," Ivanhoe executive chairman and chief executive Robert Friedland said in a statement.
Ivanhoe shares were down $3.42 or nearly 12 per cent at $26.15 on the Toronto Stock Exchange after news of the plan that will see the company issue millions of new shares. Rio Tinto shares were down US$1.53 at $69.49 on the New York Stock Exchange.
Rio Tinto said the deal will help speed development of the mine, with first production now expected to start in late 2012, six months ahead of schedule.
"We are looking forward to bringing Rio Tinto's world-class operating and technical capability to the development of one of the world's greatest copper-gold mines of tomorrow," Rio Tinto Copper chief executive Andrew Harding said in a statement.
"Together with Ivanhoe and the Government of Mongolia, we are determined to develop Oyu Tolgoi in a sustainable, mutually beneficial manner for the people of Mongolia."
Ivanhoe holds a 66 per cent stake in the Oyu Tolgoi copper and gold mine, while the Mongolian government holds the remaining 34 per cent.
Under the deal announced Wednesday, Rio Tinto has agreed to provide up to $1.8 billion in interim financing while the companies work together to complete the funding of the project.
Rio Tinto will also invest more than $1 billion through a rights offering, the exercise of warrants and buying shares from Friedland and Citibank.
Rio Tinto currently owns 34.8 per cent of Ivanhoe Mines. That is expected to increase to 42.3 by January under the deal and may rise even further if Rio Tinto continues to exercise its warrants and rights.
London-based Rio Tinto's interest in Ivanhoe Mines will be capped at 49 per cent until Jan. 18, 2012, up from an earlier cap of 46.6 per cent until October 2011.
Related articles:
Ivanhoe Mines Falls as Rio Tinto Stake Makes Takeover Unlikely – Bloomberg, December 8
Rio provides finance for Ivanhoe's Mongolia mine – Reuters, December 8
Rio Tinto To Take Direct Management Of Oyu Tolgoi Project In Mongolia – Dow Jones, December 8
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"Mogi" Munkhdul Badral
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CPS International is a marketing arm of CPS Securities in Mongolia. CPS Securities is a Perth, Western Australia based AFSL License Holder. To trade ASX and international stocks, feel free to contact me at mogi@cpsinternational.mn or +976-99996779.
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