Rio Tinto boosts stake in Ivanhoe Mines to over 46%; advances Oyu Tolgoi development
UK-based mining giant Rio Tinto (LON:RIO) (NYSE:RIO) (ASX:RIO) said Tuesday that it is exercising its remaining warrants in Ivanhoe Mines (NYSE:IVN), increasing its stake in the company by 4.5%, for a total of 46.5%.
Under the terms of its agreement with Ivanhoe signed last December, Rio agreed to exercise its warrants, from which proceeds would go to develop the Oyu Tolgoi copper project in Mongolia, by no later than January 2012.
Rio said it has already given notice to Ivanhoe that it plans to exercise the balance of its warrants, which entitle Rio to acquire around 55.1 million shares at a price of US$9.10 each, for a total consideration of US$502 million.
The company's increased stake in Ivanhoe will allow it to nominate an additional director to Ivanhoe's board, boosting Rio's nominated directors to seven of a total of 14.
Construction at the Oyu Tolgoi project is well underway, said Rio, with plans to spend US$2.3 billion on development this year, for targeted production in 2013.
The site was discovered in 2001 and is being developed as a joint venture between Ivanhoe Mines, Rio Tinto and the government of Mongolia. The project is the largest financial undertaking in Mongolia's history, and is expected to account for more than 30% of the country's gross domestic product once completed. Copper production is anticipated to reach 450,000 tonnes annually.
"Rio Tinto took over management of the project in December. Our industry-leading operating and technical capabilities will enable the development of this world-class project to the highest of standards, for the benefit of our shareholders and the people of Mongolia," said Rio Tinto Copper CEO, Andrew Harding.
Under the agreement with Ivanhoe, Rio can further boost its holding to 49% before January 18, 2012, by exercising its subscription right to acquire additional shares.
Rio Tinto's business is finding, mining, and processing mineral resources, with the bulk of its operations in Australia and North America, as well as South America, Asia, Europe and southern Africa. Major products for the company include aluminium, copper, diamonds, coal, uranium, gold, industrial minerals and iron ore.
