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TORONTO (miningweekly.com) – Diversified miner Rio Tinto will increase its holding in Vancouver-based Ivanhoe Mines from 9,9% to 19,7%, the companies announced on Tuesday.
The transaction, which is the second tranche of a larger investment in Ivanhoe by Rio, follows last week's signing of an investment agreement with the government of Mongolia for the development of the Oyu Tolgoi copper/gold mine, in the country's South Gobi region.
Rio will buy 46,3-million Ivanhoe shares at $8,38 apiece, for a total of $388-million, as agreed by the companies in 2006.
Under the agreement between the two companies, Rio can increase its holding in Ivanhoe to 43,1% over the next two years, and can boost the stake to more than 46% by buying shares on the open market.
The latest investment will boost Ivanhoe's consolidated cash position to about $725-million, the company said.
The funds will be used to help build and commission the openpit mine at Oyu Tolgoi and to advance development of the underground block cave mine.
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 – with its strategic shareholder Rio – will hold the balance.
Under a separate agreement, Ivanhoe will also be investing $100-million in Mongolian government treasury bills on October 20, 2009.
The company said on Tuesday it will have “adequate” capital for its current development plans and spending commitments.
Ivanhoe had indicated last month it was considering selling a stake of up to 9,9% to other strategic investors. However, that is no longer something being considered at present, the firm said.
