UPDATE:Ivanhoe Issues Counter Claim Against Rio In Arbitration
October 27 2010 - 7:33AM
Dow Jones News
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
October 2006 which allows Rio Tinto to increase its stake in
Ivanhoe to 46.65% and no more before October 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
Ivanhoe's permission," Ivanhoe said, without disclosing further
details.
Rio Tinto declined to comment on the matter.
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 chief executive, said
the arbitration process shouldn't impact the construction of the
project in Mongolia.
Oyu Tolgoi is on track to begin production at the end of 2012,
and is expected to have average annual production during its first
10 years of more than 540,000 metric tons of copper and 650,000
ounces of gold. That compares with Rio Tinto's annual production at
the end of 2008 of 699,000 tons of copper and 501,000 ounces of
gold.
Rio Tinto is the project operator while the Mongolian government
owns the remaining 34% stake in the project that Ivanhoe doesn't
already own.
-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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