Rio Blocking Ivanhoe Share Sale May Be Tough, RBC Says
Rio Tinto Group, building a $4.6 billion copper and gold mine with Ivanhoe Mines Ltd., may have difficulty in blocking Ivanhoe’s planned $1 billion share sale should it choose to do so, according to RBC Capital Markets Ltd.
Ivanhoe this week said it planned a rights offer to help fund development of the Oyu Tolgoi mine in Mongolia. Rio, which owns 35 percent of Ivanhoe, has informed the company that it’s “reserving its rights to make an arbitration claim or seek injunctive relief to protect its interests,” Vancouver-based Ivanhoe said in an Oct. 18 regulatory filing.
“Among Rio’s remedies would be an injunction against the rights offer, though this might prove difficult,” Des Kilalea, a London-based analyst at RBC, wrote today in a report. “Ultimately, Rio wants more of Oyu Tolgoi and Ivanhoe is, we believe, a seller -- at a price.”
Rio has described Oyu Tolgoi as the world’s largest untapped copper and gold deposit, and it’s due to start output in 2013. The two companies are locked in a dispute over a shareholder rights plan adopted by Ivanhoe in April. They agreed to an arbitration hearing starting Jan. 18, Ivanhoe said in the filing.
A disagreement between the two companies could lead to delays in starting the mine, while the partners will seek to avoid this, RBC said. Ivanhoe is seeking to raise between $800 million and $1 billion from the rights offer and has yet to disclose the price at which shares will be sold.
Superior Options
Rio sees superior financing options for Ivanhoe and the plan offends its right of first offer, said Ivanhoe, which told Rio the idea is “wrong and without merit.”
“We have advised the representative, the Chief Executive Officer and board of directors of Rio Tinto that if the rights offering is delayed or impeded by Rio Tinto’s conduct, we intend to hold Rio Tinto fully liable for any and all losses Ivanhoe may suffer as a result of Rio Tinto’s actions,” it said.
“Our first priority is to the Oyu Tolgoi project and making sure that nothing stands in the way of its swift development,” Tony Shaffer, a London-based spokesman for Rio Tinto, said today in an e-mailed statement.
Under current share-purchase warrants, Rio has the right to increase its stake to about 44 percent. In a July filing, Rio said it had held talks with Aluminum Corp. of China, which indicated an interest in acquiring a minority stake in Ivanhoe or the project.
Ivanhoe, which spent more than six years negotiating an accord with Mongolia for the project, said in January it hired Citigroup Inc. to study options, including debt and equity offerings and asset sales.
The 81.3 billion pounds of copper and 46.4 million ounces of gold at Oyu Tolgoi may give the site a 59-year life, Ivanhoe said in May. The mine will produce an average of 1.2 billion pounds of copper and 650,000 ounces of gold a year for the first decade, it said.
To contact the reporter on this story: Jesse Riseborough in London at jriseborough@bloomberg.net
To contact the editor responsible for this story: Amanda Jordan at ajordan11@bloomberg.net
Ivanhoe this week said it planned a rights offer to help fund development of the Oyu Tolgoi mine in Mongolia. Rio, which owns 35 percent of Ivanhoe, has informed the company that it’s “reserving its rights to make an arbitration claim or seek injunctive relief to protect its interests,” Vancouver-based Ivanhoe said in an Oct. 18 regulatory filing.
“Among Rio’s remedies would be an injunction against the rights offer, though this might prove difficult,” Des Kilalea, a London-based analyst at RBC, wrote today in a report. “Ultimately, Rio wants more of Oyu Tolgoi and Ivanhoe is, we believe, a seller -- at a price.”
Rio has described Oyu Tolgoi as the world’s largest untapped copper and gold deposit, and it’s due to start output in 2013. The two companies are locked in a dispute over a shareholder rights plan adopted by Ivanhoe in April. They agreed to an arbitration hearing starting Jan. 18, Ivanhoe said in the filing.
A disagreement between the two companies could lead to delays in starting the mine, while the partners will seek to avoid this, RBC said. Ivanhoe is seeking to raise between $800 million and $1 billion from the rights offer and has yet to disclose the price at which shares will be sold.
Superior Options
Rio sees superior financing options for Ivanhoe and the plan offends its right of first offer, said Ivanhoe, which told Rio the idea is “wrong and without merit.”
“We have advised the representative, the Chief Executive Officer and board of directors of Rio Tinto that if the rights offering is delayed or impeded by Rio Tinto’s conduct, we intend to hold Rio Tinto fully liable for any and all losses Ivanhoe may suffer as a result of Rio Tinto’s actions,” it said.
“Our first priority is to the Oyu Tolgoi project and making sure that nothing stands in the way of its swift development,” Tony Shaffer, a London-based spokesman for Rio Tinto, said today in an e-mailed statement.
Under current share-purchase warrants, Rio has the right to increase its stake to about 44 percent. In a July filing, Rio said it had held talks with Aluminum Corp. of China, which indicated an interest in acquiring a minority stake in Ivanhoe or the project.
Ivanhoe, which spent more than six years negotiating an accord with Mongolia for the project, said in January it hired Citigroup Inc. to study options, including debt and equity offerings and asset sales.
The 81.3 billion pounds of copper and 46.4 million ounces of gold at Oyu Tolgoi may give the site a 59-year life, Ivanhoe said in May. The mine will produce an average of 1.2 billion pounds of copper and 650,000 ounces of gold a year for the first decade, it said.
To contact the reporter on this story: Jesse Riseborough in London at jriseborough@bloomberg.net
To contact the editor responsible for this story: Amanda Jordan at ajordan11@bloomberg.net
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