RIO CHALKS UP A MONGOLIAN PLAY
When Rio Tinto finally gained control of Ivanhoe Mines and its prized Oyu Tolgoi copper-gold mine in Mongolia earlier this year it appeared probable that it would oversee a slimming down of Ivanhoe to focus on that massive project. With a little help from its friends, that process has now started.
Apart from its interest in Oyu Tolgoi, Ivanhoe owns 58 per cent of a Mongolian coal producer, SouthGobi Resources, 50 per cent of an aspiring Kazakhstan gold miner, Altynalmas Gold, and 59 per cent of Ivanhoe Australia, which has base metal interests in Australia.
Yesterday Ivanhoe Mines announced it had received notice that Aluminium Corporation of China (Chalco) plans to make a proportional takeover bid for between 56 per cent and 60 per cent of the shares in SouthGobi.
SouthGobi produces nearly five million tonnes a year of thermal and coking coal, selling it into China.
Chalco is a subsidiary of China’s state-owned Chinalco group which is, of course, Rio’s biggest shareholder.
Despite the collapse of a proposed $US19 billion alliance in 2009, negotiated when Rio was under extreme financial pressure, Rio and Chinalco have developed a strong relationship, with Chinalco buying into Rio’s giant Simandou iron ore project in Guinea and the companies forming a joint venture to explore for minerals in China. Chinalco has also expressed some interest in gaining a share of Oyu Tolgoi.
The offer for SouthGobi, which values that group at about $1.5 billion, will release between about $514 million and $866 million for Ivanhoe, which has entered a lock-up arrangement with Chalco that binds to tender its shares into the offer. Ivanhoe said it planned to use the proceeds to help fund the development of Oyu Tolgoi.
While the sale of a majority of its SouthGobi holding might not be part of a grander design, it will focus more interest on the fate of the other non-Oyu Tolgoi assets within Ivanhoe. The Kyzyl gold project in Kazakhstan and Ivanhoe Australia could both be worth up to $1 billion each and they represent a potential billion-dollar cash injection for Ivanhoe if it does pare down to the Oyu Tolgoi interest.
It is conceivable that those assets could be distributed to existing shareholders, including Friedland, to increase Rio’s stake in Ivanhoe while simplifying the company in the process. That might also make it simpler and cheaper for Chinalco to offer to take out the minorities in Ivanhoe – Rio currently owns 51 per cent – to create another partnership between the two companies.
Ivanhoe’s Robert Friedland fought hard and creatively to try to prevent Rio from gaining control of Ivanhoe but he does have some other major ventures to occupy himself with.
There have long been suggestions that the privately-owned Ivanplats, which has a nickel, platinum and copper project in South Africa and a copper-cobalt prospect in the Congo may go public this year seeking $US750 million to $US1 billion in a float that would value the company at about $US5 billion. Friedland owns about 30 per cent of Ivanplats.
Stephen Bartholomeusz
Apart from its interest in Oyu Tolgoi, Ivanhoe owns 58 per cent of a Mongolian coal producer, SouthGobi Resources, 50 per cent of an aspiring Kazakhstan gold miner, Altynalmas Gold, and 59 per cent of Ivanhoe Australia, which has base metal interests in Australia.
Yesterday Ivanhoe Mines announced it had received notice that Aluminium Corporation of China (Chalco) plans to make a proportional takeover bid for between 56 per cent and 60 per cent of the shares in SouthGobi.
SouthGobi produces nearly five million tonnes a year of thermal and coking coal, selling it into China.
Chalco is a subsidiary of China’s state-owned Chinalco group which is, of course, Rio’s biggest shareholder.
Despite the collapse of a proposed $US19 billion alliance in 2009, negotiated when Rio was under extreme financial pressure, Rio and Chinalco have developed a strong relationship, with Chinalco buying into Rio’s giant Simandou iron ore project in Guinea and the companies forming a joint venture to explore for minerals in China. Chinalco has also expressed some interest in gaining a share of Oyu Tolgoi.
The offer for SouthGobi, which values that group at about $1.5 billion, will release between about $514 million and $866 million for Ivanhoe, which has entered a lock-up arrangement with Chalco that binds to tender its shares into the offer. Ivanhoe said it planned to use the proceeds to help fund the development of Oyu Tolgoi.
While the sale of a majority of its SouthGobi holding might not be part of a grander design, it will focus more interest on the fate of the other non-Oyu Tolgoi assets within Ivanhoe. The Kyzyl gold project in Kazakhstan and Ivanhoe Australia could both be worth up to $1 billion each and they represent a potential billion-dollar cash injection for Ivanhoe if it does pare down to the Oyu Tolgoi interest.
It is conceivable that those assets could be distributed to existing shareholders, including Friedland, to increase Rio’s stake in Ivanhoe while simplifying the company in the process. That might also make it simpler and cheaper for Chinalco to offer to take out the minorities in Ivanhoe – Rio currently owns 51 per cent – to create another partnership between the two companies.
Ivanhoe’s Robert Friedland fought hard and creatively to try to prevent Rio from gaining control of Ivanhoe but he does have some other major ventures to occupy himself with.
There have long been suggestions that the privately-owned Ivanplats, which has a nickel, platinum and copper project in South Africa and a copper-cobalt prospect in the Congo may go public this year seeking $US750 million to $US1 billion in a float that would value the company at about $US5 billion. Friedland owns about 30 per cent of Ivanplats.
Stephen Bartholomeusz
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