Ivanhoe Gets More Credit from Rio Tinto
IVANHOE Mines has arranged up to US$350 million in convertible credit
financing from its strategic partner Rio Tinto to help develop the Oyu
Tolgoi copper-gold project in Omnogobi province.
IVANHOE Mines has arranged up to US$350 million in convertible credit financing from its strategic partner Rio Tinto to help develop the Oyu Tolgoi copper-gold project in Omnogobi province. The Vancouver-based company announced on September 11 that the credit facility, which it termed “an interim measure”, would help maintain ongoing mine development activities while the two companies worked on finalizing an investment agreement between Ivanhoe and the Government of Mongolia.
A 2006 deal between Ivanhoe and Rio Tinto stipulated that Rio Tinto’s investment in Ivanhoe could go up to US$1.5 billion under certain conditions. Rio Tinto was also limited to owning no more than 40 percent of the company until October 2011.
But under the terms of the new credit facility, Ivanhoe said, Rio Tinto’s total investment may now reach US$2.3 billion. It also can now own up to 46.65 percent of Ivanhoe before October 2011.
“The credit facility will permit site preparations and final design to continue through the coming months. It will help to mitigate impacts on the construction schedule while Members of Parliament complete their review of the Investment Agreement. It also will maintain the interests of shareholders, our employees and contractors and suppliers. But we also are facing the reality that without the support and prompt action by Members of Parliament to ensure timely approval of the Investment Agreement, we will have to curtail our investment and suspend much of the planned development work at Oyu Tolgoi,” Ivanhoe’s chief executive John Macken said in a statement.
The draft investment agreement, completed by the Government’s working group and the negotiating team for Ivanhoe Mines and Rio Tinto in April and reviewed by the Government in June, is currently before Mongolia’s State Great Hural (Parliament). It is being reviewed by a newly established working group comprising members of Parliament from the Standing Committee on Economics. The group is expected to report to Parliament’s autumn session this year. The parliamentary review and approval are the final steps to complete the investment agreement process.
“If there is no satisfactory conclusion of an Investment Agreement between Ivanhoe and the Mongolian Government before a date to be mutually agreed to by Ivanhoe and Rio Tinto, the proceeds of the credit facility then would be used to implement a Suspension Plan that would provide for an orderly cessation of operations and the ongoing care and maintenance of the Oyu Tolgoi Project,” the company statement said.
