Ivanhoe Mines and Rio Tinto ink funding deal on Mongolia copper mine
Rio will provide an immediate additional credit facility up to $1.5 billion to ensure construction isn’t delayed. Rio will also support the completion of a loan of $3 billion to $4 billion to be provided by third-party lenders.
Ivanhoe plans a $1.8 billion share sale to repay the loan and an existing facility.
The deal resolves issues over financing Oyu Tolgoi, which will be one of the world’s largest copper mines when it is complete.
Capital spending on the project is seen by Ivanhoe at $2.1 billion in 2012. The company had $917.7 million of cash as of March 19.
"This agreement sets the stage for the Oyu Tolgoi Project's transition to a major mining operation in coming months," Ivanhoe Mines' chief executive Robert Friedland said.
"The measure of certainty that Rio Tinto's financial resources and global industry leadership bring to the realization of our long-cherished Oyu Tolgoi dream is reassuring for the people and government of Mongolia, and for Ivanhoe's shareholders."
As part of the agreement with Rio, Ivanhoe founder Robert Friedland resigned as chief executive along with six other Ivanhoe directors and four senior management members also resigned.
Kay Priestly, chief financial officer of Rio's copper group and an Ivanhoe director, was appointed Ivanhoe’s interim CEO.
Initial production at Oyu Tolgoi is expected later in 2012. Once in production, it is set to beat Chile's Escondida as the world's
largest copper mine.
Earlier this month Ivanhoe sold its 57.6 percent stake in Mongolian coal miner SouthGobi Resources (TSE:SGQ) to Chalco, China's biggest aluminum maker for over $900 million.
Shares in Ivanhoe were up 11 percent in Toronto Wednesday morning at $12.98.
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