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Ivanhoe Mines hires Citi to advise, mulls 'range' of deals
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6th January 2010
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TORONTO (miningweekly.com) – Ivanhoe Mines, which is developing the Oyu Tolgoi copper/gold mine in Mongolia with shareholder Rio Tinto, has retained Citi to advise the company on "strategic options" that could include share or debt offerings.

Ivanhoe's executive chairperson Robert Friedland said the company will look at a “range” of potential deals, although it is not yet considering any specific transactions.

Options include “potential debt/equity offerings, a credit facility, the sale of subsidiaries, equity investments, project financing and/or various corporate transactions.”

“This is the right time to explore options available to us to further enhance value from our successes," Friedland said in a statement.

The company, which also controls Mongolian coal-miner SouthGobi Energy Resources and explorer Ivanhoe Australia, has said in the past that it received unsolicited approaches from banks, sovereign wealth funds and other international investors looking to invest in the Oyu Tolgoi project.

Through his Diamond Fields Resources, Friedland famously discovered the large Voisey's Bay nickel deposit, in Northern Canada, while exploring for diamonds, and sold the then-undeveloped discovery two years later to Canadian miner Inco for $3,1-billion in 1996.

However, he asserted on October 15 last year that Ivanhoe planned to continue as the operator of Oyu Tolgoi and maintain its shareholding in the mine.

At the time, Friedland also assured investors that the company would not have trouble coming up with the funding needed to develop the giant mine.

Diversified mining giant Rio Tinto owns just under 20% of Ivanhoe, but can increase its stake to as much as 46,6%.

After years of negotiations, the partners signed an investment agreement with the government of Mongolia in October and construction is expected to begin this year, with first production targeted as early as 2013.

Ivanhoe shares gained 3,05% on Wednesday, to 17,23 apiece by 14:06 in Toronto.

The stock has risen more than 266% since closing at C$4,70 on January 6 last year, and the company currently has a market capitalisation of C$7,33-billion.

Oyu Tolgoi has estimated mineral resources of about 79-million pounds of copper and 45-million ounces of gold in measured, indicated and inferred resources, and both Rio and Ivanhoe have said they believe there is potential to grow the asset by exploration.

Based on current plans, the mine is expected to produce about one-billion pounds of copper, and 500 000 oz of gold a year in the first ten years of its 35-year-plus life.

As part of the investment agreement signed last week, the government of Mongolia has agreed to buy 34% of the Oyu Tolgoi project, and Ivanhoe will hold the balance.

The mine is expected to cost about $4,5-billion to build, including $3,5-billion for the initial openpit phase.

Ivanhoe has also hired mining-sector specialist Hatch Corporate Finance as an advisor, it said on Wednesday.

 

Edited by: Liezel Hill

 

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Ivanhoe Mines chairperson Robert Friedland
 
Picture by: Bloomberg News
Ivanhoe Mines chairperson Robert Friedland