Ivanhoe Soars After Rio Tinto Raises Stake to 49 Percent

Ivanhoe Mines Ltd. rose the most in more than two years after Rio Tinto Group, its partner in a gold and copper mine in Mongolia, increased its stake in the Canadian company to 49 percent. Ivanhoe, which owns 66 percent of the Oyu Tolgoi project, one of the world’s largest untapped copper deposits, rose C$2.42, or 16 percent, to C$17.42 at 4 p.m. in Toronto Stock Exchange trading. Shares of the Vancouver-based company earlier climbed 26 percent, the biggest intraday gain since Feb. 5, 2009. Rio acquired 3.7 million Ivanhoe shares at an average price of C$19.75 ($19.46), boosting its stake by 0.5 percent, London- based Rio said today in a statement. The purchase was part of a previous agreement with Ivanhoe that caps Rio’s stake at 49 percent. The standstill accord expires on Jan. 18.Alex Terentiew, a Toronto-based analyst at Credit Suisse Group AG, today upgraded his recommendation on Ivanhoe to “outperform” from “neutral” as the company continues with development of Oyu Tolgoi, or OT.

“Our higher rating is based on what is in our view an overdone slide in Ivanhoe’s share price,” Terentiew said in the note. Ivanhoe “continues to present upside potential as OT, in our view, is a high quality asset with strategic value.”

Ivanhoe plunged 9.2 percent yesterday in Toronto trading after reports that the Mongolian government is seeking to boost its stake in Oyu Tolgoi to 50 percent from 34 percent. The shares are down 21 percent this year.

The company expects the government to live up to its commitments in a 2009 agreement that limits Mongolia’s stake in the metal deposit until 2039, Ivanhoe said yesterday in a statement.

“The investment agreement for the Oyu Tolgoi Project remains a fair and legally binding contract that deserves and requires the unqualified support of all parties,” Ivanhoe said yesterday.

To contact the reporter on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net.