Rio wins Ivanhoe legal stoush
Rio Tinto has won a legal stoush with its hostile joint venture partner Ivanhoe Mines, after an arbitration decision was handed down overnight.
Rio owns 49 per cent of Ivanhoe, and has long been expected to push for a controlling stake in Ivanhoe - the company with which Rio is developing the massive Oyu Tolgoi copper and gold mine in Mongolia.
Ivanhoe sought to buffer itself against such a takeover in 2010 with a controversial shareholder rights plan that was considered by most observers to be a ''poison pill''.
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Rio has contested the legitimacy of that rights plan, and overnight an independent arbiter confirmed that Rio Tinto's non-dilution rights will hold firm if Ivanhoe seeks to issue shares to any third party.
Rio was also victorious on a second matter, with the arbiter rejecting Ivanhoe's claim that Rio had breached a separate, earlier agreement between the companies.
Rio are expected to expand their holdings in Ivanhoe to a controlling stake in January, when a preventing clause expires.
A fund manager and analyst said the ruling effectively left Rio Tinto in control of Ivanhoe and meant Rio will not need to rush in to make a bid for the company.
"The game's played out already," said Tim Schroeders, a portfolio manager at Pengana Capital, which owns shares in Rio Tinto.
Few companies would have the capacity to fund or execute development of Oyu Tolgoi and those which could would be unlikely to want to enter a bid battle against Rio Tinto, he said.
"It seems a pointless exercise to get into a bidding war if you've got someone who's in there already with a swag of equity," Schroeders said.
He predicted that, like any mega development, Oyu Tolgoi would run into obstacles, which would depress Ivanhoe's share price and create opportunities for Rio Tinto to pick up more shares patiently.
Commercial production from Oyu Tolgoi, 66 per cent owned by Ivanhoe and 34 per cent owned by the Mongolian government, is expected to start in the first half of 2013.
Rio Tinto already runs the operation and is counting on production from the mine to underpin growth in its copper business.
pker@theage.com.au
with Reuters
Rio owns 49 per cent of Ivanhoe, and has long been expected to push for a controlling stake in Ivanhoe - the company with which Rio is developing the massive Oyu Tolgoi copper and gold mine in Mongolia.
Ivanhoe sought to buffer itself against such a takeover in 2010 with a controversial shareholder rights plan that was considered by most observers to be a ''poison pill''.
Advertisement: Story continues below
Rio has contested the legitimacy of that rights plan, and overnight an independent arbiter confirmed that Rio Tinto's non-dilution rights will hold firm if Ivanhoe seeks to issue shares to any third party.
Rio was also victorious on a second matter, with the arbiter rejecting Ivanhoe's claim that Rio had breached a separate, earlier agreement between the companies.
Rio are expected to expand their holdings in Ivanhoe to a controlling stake in January, when a preventing clause expires.
A fund manager and analyst said the ruling effectively left Rio Tinto in control of Ivanhoe and meant Rio will not need to rush in to make a bid for the company.
"The game's played out already," said Tim Schroeders, a portfolio manager at Pengana Capital, which owns shares in Rio Tinto.
Few companies would have the capacity to fund or execute development of Oyu Tolgoi and those which could would be unlikely to want to enter a bid battle against Rio Tinto, he said.
"It seems a pointless exercise to get into a bidding war if you've got someone who's in there already with a swag of equity," Schroeders said.
He predicted that, like any mega development, Oyu Tolgoi would run into obstacles, which would depress Ivanhoe's share price and create opportunities for Rio Tinto to pick up more shares patiently.
Commercial production from Oyu Tolgoi, 66 per cent owned by Ivanhoe and 34 per cent owned by the Mongolian government, is expected to start in the first half of 2013.
Rio Tinto already runs the operation and is counting on production from the mine to underpin growth in its copper business.
pker@theage.com.au
with Reuters
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