Ivanhoe Mines Ltd (IVN.T) Tuesday said it was terminating a covenant that governs Rio Tinto PLC's (RTP) investment in Ivanhoe, a step that will allow the Canadian miner to issue more than 5% of its shares to strategic investors.

Ivanhoe's board of directors said it gave Rio Tinto 60-day notice that it was exercising its right to cancel the strategic purchaser covenant in order to give the board more "flexibility" to consider opportunities to maximize value for Ivanhoe Mines shareholders.

The termination of the covenant will allow Ivanhoe to issue "common shares to one or more third-party strategic investors, which could include major mining companies," the company said.

Andrew Harding, chief executive of Rio Tinto's copper division, resigned from the Ivanhoe's board prior to the meeting which led to the termination of the covenant.

David Huberman, lead independent director of the Ivanhoe, said the Canadian firm was still dedicated to working with Rio Tinto to develop the Oyu Tolgoi project, one of the world's largest copper and gold deposits. Ivanhoe is the largest shareholder in Oyu Tolgoi, with a 66% stake, and Rio Tinto is the operator.

Rio Tinto has a 29.6% stake in Ivanhoe and has rights to increase it to 46.6% by October 2011.

Rio Tinto could not immediately be reached for comment.

At 1326 GMT, Rio Tinto's shares were up 55.50 pence or 1.8% at 3158p. At 1331 GMT, Ivanhoe's shares were up C$0.45 at C$15.52 in Toronto.

 
  Company Website: http://www.riotinto.com 
http://www.ivanhoemines.com

-By Alex MacDonald, Dow Jones Newswires; 44 20 7842 9328; alex.macdonald@dowjones.com
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