Ivanhoe Mines to Receive US$502 Million from Rio Tinto's Exercise of All Outstanding Warrants to Advance Construction of Oyu Tol
June 21 2011 - 8:11AM
Marketwired
Ivanhoe Mines Ltd. (TSX: IVN)(NYSE: IVN)(NASDAQ: IVN)
Ivanhoe Mines' Chief Executive Officer Robert Friedland
announced today that the company expects to receive US$502 million
from Rio Tinto later today following Rio Tinto's decision to
exercise all remaining share-purchase warrants that it holds in
Ivanhoe Mines.
Ivanhoe Mines received notification yesterday that Rio Tinto was
exercising all the remaining Series B and Series C warrants that it
was granted as part of the 2006 and 2007 financing agreements
associated with Rio Tinto's original investment in Ivanhoe Mines.
Rio Tinto previously had committed to convert all the warrants to
shares by January 2012.
The additional shares will increase Rio Tinto's ownership stake
in Ivanhoe Mines to 46.5% from the present 42.0%.
The US$502 million from the exercise of the warrants will be
applied toward the accelerated, full-scale construction of the
first phase of the Oyu Tolgoi copper-gold-silver complex in
southern Mongolia. Following the receipt of the proceeds from the
warrants, Ivanhoe Mines' current consolidated cash balance will be
approximately US$1.8 billion.
The Rio Tinto payment will be comprised of US$119.7 million for
the purchase of 14.1 million Ivanhoe Mines shares at US$8.51 per
share from the exercise of the remaining Series B Warrants;
US$379.3 million for 40.2 million Ivanhoe Mines shares priced at
US$9.43 per share from the Series C warrants; and CDN$2.5 million
for 827,000 anti-dilution warrants.
The increased level of ownership will entitle Rio Tinto to
nominate one additional director to the 14-member Ivanhoe Mines
board, increasing to seven the total number of Ivanhoe directors
nominated by Rio Tinto.
Rio Tinto's investments in Ivanhoe Mines now total US$3.5
billion since 2006
Including proceeds from the warrants, Rio Tinto's combined
investment in Ivanhoe Mines since October 2006 will amount to
US$3.5 billion through the purchase of shares, the exercise of
warrants and a converted debt facility.
The maximum level of ownership interest in Ivanhoe Mines that
Rio Tinto may achieve - through the exercise of its right to
subscribe, from time to time, for additional Ivanhoe shares and
permitted open-market purchases of common shares - is capped at 49%
until the current standstill limitation expires on January 18,
2012.
Table: Present and potential Rio Tinto investments in Ivanhoe
Mines and levels of ownership
Investment % interest
Item (US$ billions) in IVN
----------------------------------------------------------------------------
Total of Rio Tinto investments prior to
June 2011 (1) $3.0 42.0%
----------------------------------------------------------------------------
Exercise of remaining Series B warrants
and Series C warrants (2 & 3) $0.5 46.5%
----------------------------------------------------------------------------
Subscription right (4) Up to approx. $0.6 48.5%
----------------------------------------------------------------------------
3.7 million shares purchased in open
market (5) $0.1 49.0%
----------------------------------------------------------------------------
Total potential Rio Tinto investment
(before Interim Funding Facility) Up to approx. $4.2 49.0%
----------------------------------------------------------------------------
1. Includes US$0.5 billion paid by Rio Tinto to Robert Friedland and
Citibank. Rio Tinto purchased 10.0 million shares from Mr. Friedland at
US$25.34 per share and 10.0 million shares from Citibank at US$25.34 per
share and 1.5 million shares at US$13.88 per share. Ivanhoe Mines did
not receive any proceeds from the transactions.
2. Based on 710.2 million shares outstanding as of June 21, 2011, following
the exercise of remaining warrants.
3. Includes anti-dilution warrants previously issued to Rio Tinto.
4. Rio Tinto is not required to exercise its subscription right, in which
case there may be no proceeds from the subscription right. The exercise
price of the subscription right will be based on the prevailing market
price at the time of exercise. For example, up to approximately US$0.6
billion of proceeds assumes a US$25.00 per share exercise price on all
shares issuable under the subscription right.
5. If acquired, the per-share purchase price will be based on the
prevailing market price at the time of acquisition. For example, US$0.1
billion assumes a US$25.00 per share purchase price on all 3.7 million
shares. Ivanhoe Mines will not receive any proceeds from the
transactions.
Negotiations continuing for major Oyu Tolgoi project-finance
package
Ivanhoe Mines is working with Rio Tinto to complete a major
project-finance package of up to US$3.6 billion that Ivanhoe is
negotiating with a group of international financial institutions,
government credit agencies and commercial banks. The objective is
to have the finance package in place later this year.
Rio Tinto also has committed to provide Ivanhoe Mines with an
initial, non-revolving, interim funding facility of US$1.8 billion,
should it be required, to sustain Oyu Tolgoi construction pending
the finalization of the project financing. The interim funding
facility ensures that Ivanhoe Mines would have the required
financial resources to continue building the project without
interruption and, if drawn upon, would be refinanced with funds to
be provided under the project-finance package.
Construction at Oyu Tolgoi is continuing toward a projected peak
level of activity that is expected to be reached during the third
quarter of this year. Commissioning of the concentrator's first
production line is projected to begin in the second quarter of 2012
and commercial production is expected to be achieved in the first
half of 2013.
About Ivanhoe Mines (www.ivanhoemines.com)
Ivanhoe Mines (NYSE: IVN)(NASDAQ: IVN)(TSX: IVN) is an
international mining company with operations focused in the Asia
Pacific region. Assets include the company's 66% interest in the
world-scale, Oyu Tolgoi copper-gold mine development project in
southern Mongolia; its 57% interest in Mongolian coal miner
SouthGobi Resources (TSX: SGQ)(HK: 1878); a 62% interest in Ivanhoe
Australia (TSX: IVA)(ASX: IVA), a
copper-gold-uranium-molybdenum-rhenium exploration and development
company; and a 50% interest in Altynalmas Gold, a private company
developing the Kyzyl Gold Project in Kazakhstan.
FORWARD-LOOKING STATEMENTS: This document includes
forward-looking statements regarding Ivanhoe Mines' plans.
Forward-looking statements include, but are not limited to,
statements concerning the development and expected start of
commissioning and commercial production of the Oyu Tolgoi Project
and the exercise of warrants by Rio Tinto. When used in this
document, the words such as "expected," "intend," "plan," "advance"
and similar expressions are forward-looking statements. Although
Ivanhoe Mines believes that its expectations reflected in these
forward-looking statements are reasonable, such statements involve
risks and uncertainties and no assurance can be given that actual
results will be consistent with these forward-looking statements.
Important factors that could cause actual results to differ from
these forward-looking statements are disclosed under the heading
"Risk Factors" and elsewhere in the corporation's periodic filings
with Canadian and US securities regulators.
Contacts: Ivanhoe Mines Ltd. Bill Trenaman Investors 1 604 688
5755 Ivanhoe Mines Ltd. Bob Williamson Media 1 604 331 9830
www.ivanhoemines.com
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