Rio Tinto: Oyu Tolgoi 2011 Capex May Be More Than $1 Billion
November 24 2010 - 10:07AM
Dow Jones News
More than $1 billion is likely to be spent on the massive
Mongolian Oyu Tolgoi copper and gold project in 2011, a senior
executive on the project said Wednesday.
Andrew Harding, chief executive of Rio Tinto PLC's (RIO) copper
division said "pretty much" $1 billion was spent on the Oyu Tolgoi
project this year and "more than $1 billion" would likely be spent
next year, although the final capital expenditure program still
needs to be approved. He was speaking at the Mongolian investment
summit in London.
Ivanhoe Mines Ltd. (IVN), the principal owner in the project,
still needs to approve the final capital expenditure plan in unison
with Rio Tinto, the project operator and 34.9% shareholder in
Ivanhoe.
Ivanhoe owns a 66% stake in Oyu Togloi while the Mongolian
government owns the remaining 34% stake in the project.
The timeline of the capital expenditure program will be key in
determining when Ivanhoe will need to tap the debt and equity
markets or find an equity investor to finance the project.
Ivanhoe has announced its intention to raise up to $1 billion
through a rights issue but the company hasn't set a date yet.
Ivanhoe is in the midst of an arbitration process with Rio Tinto
over Ivanhoe's shareholders' rights plan, which conflicts with
Rio's rights under a 2006 private placement agreement with
Ivanhoe.
Analysts say the shareholder rights plan was adopted earlier
this year to prevent Rio Tinto from creeping in and taking majority
control of Ivanhoe.
Rio Tinto's private placement agreement with Ivanhoe allows the
Anglo-Australian miner to raise its stake in the Canada-based
mining company to about 46.65% and no more before 2011.
The first phase of the Oyu Tolgoi project will begin production
by the end of 2012 and begin commercial production in 2013.
Oyu Tolgoi is expected to ramp up annual production to more than
450,000 metric tons of copper and 650,000 troy ounces of gold.
-By Alex MacDonald, Dow Jones Newswires; +44 20 7842 9328;
alex.macdonald@dowjones.com
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