PERTH (miningweekly.com) – Diversified miner Rio Tinto claims that Ivanhoe Mines' new shareholder rights plan, or 'poison pill', represents a breach of an existing agreement between the two firms, but Ivanhoe maintains there are no contractual problems with the plan.

The shareholders of Vancouver-based Ivanhoe voted to adopt the rights plan in April, giving shareholders and the board more time to evaluate and assess takeover bids. The plan was also approved by all of Ivanhoe's directors, except for Rio Tinto's representative on the company's board.

Now, Rio Tinto has referred the adoption of the plan to arbitration, citing an alleged breach of a private placement agreement with Ivanhoe.

The weekend announcement from Rio was followed on Monday by a statement by Ivanhoe that it "reaffirms support" for the shareholder rights plan.

The two companies are partners in developing the lucrative Oyu Tolgoi project in Mongolia, which is expected to start production in 2013, with a five-year ramp-up to full production.

Rio Tinto increased its stake in Ivanhoe Mines to 29,6%, by spending $393-million to acquire more than 46-million shares in the company, and has the right to eventually increase its holding to 46,6%.

Ivanhoe said in April that the shareholder rights plan did not affect Rio Tinto’s rights to increase its shareholding in the company through the exercise of warrants, convertible bonds, or secondary market purchases during the current five-year standstill agreement.

The plan was intended to prevent any shareholders from increasing their holdings beyond 20%, or in the case of executive chairperson Robert Friedland and Rio Tinto, beyond their current or contractually agreed levels, without making an offer to all other shareholders, the firm said at the time.

Ivanhoe "firmly believes" that the shareholders' rights plan is not in breach of any of Rio Tinto's existing contractual rights, Ivanhoe's lead independent director David Huberman said on Monday.

"Ivanhoe intends to continue to work in good faith with Rio Tinto to realise our shared objective of bringing the world-class Oyu Tolgoi mine into production in 2013 and begin delivering its very substantial benefits to present and future generations of stakeholders," he added.

Average production from Oyu Tolgoi is forecast at some 1,2-billion pounds of copper and 650 000 oz/y of gold, in the first ten years of operations.

The Oyu Tolgoi project is estimated to contain about 81-billion pounds of copper and 46-million ounces of gold in measured, indicated and inferred resources.

The initial capital cost required to achieve production from the openpit mine on the Southern Oyu deposits is estimated to be $4,6-billion.

Rio Tinto said last week that its biggest shareholder, Chinese metals group Chinalco, may be interested in taking a stake in either Ivanhoe Mines or directly in the Oyu Tolgoi project itself.

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