Ivanhoe Launches Counter Claim Against Rio In Arbitration

Ivanhoe Mines Ltd (IVN.T) late Tuesday announced a counter-claim as part of its defense in an ongoing arbitration process with Rio Tinto PLC (RIO) over Rio's investment in the Canada-based miner.

The counter-claim contends that Rio Tinto has breached the covenants of a private placement agreement with Ivanhoe signed in Oct 2006 which allows Rio Tinto to increase its stake in Ivanhoe to 46.65% and no more before Oct 2011.

The Anglo-Australian miner has a 34.9% stake in Ivanhoe, the majority owner of Oyu Tolgoi, the world's largest undeveloped copper and gold deposit located in Mongolia.

Ivanhoe contends that Rio breached an agreement "not to engage in activities that could affect control of Ivanhoe Mines without Ivanoe's permission," Ivanhoe said, without disclosing further details.

An independent arbitrator has been appointed and hearings of Rio's claim and Ivanhoe's counter-claim are scheduled for Jan. 18 and Feb. 19.

The arbitration process was launched in July after Ivanhoe introduced a shareholders rights plan earlier this year, seen by analysts as an attempt to prevent Rio from seizing a majority stake in Ivanhoe.

Rio Tinto is keen to increase its investment in Ivanhoe because the Canada-base miner owns a 66% stake in the massive Oyu Tolgoi project. Oyu Tolgoi has resources amounting to 81 billion pounds of copper and 46 million ounces of gold, which would help bolster Rio's copper reserves significantly.

Robert Friedland, Ivanhoe's chairman and CEO said the arbitration process shouldn't impact the construction of the project in Mongolia.

-By Alex MacDonald, Dow Jones Newswires; 44 20 7842 9328; alex.macdonald@dowjones.com (David Fickling in Sydney and Edward Welsch in Calgary contributed to this story)

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