Rio Tinto Buys Stake in Ivanhoe - Analyst Blog
August 25 2011 - 1:37PM
Zacks
In order to directly manage the Oyu Tolgoi project,
RioTinto Plc. (RIO) recently
increased its stake in Ivanhoe Mines Ltd. (IVN) by
2% to 48.5%.
Based in Mongolia, Oyu Tolgoi is a copper and gold mine in which
Ivanhoe has a 66% stake and the remainder is owned by the Mongolian
government.
Rio Tinto would exercise its right to subscribe and
acquire an additional 27.9 million shares in Ivanhoe Mines for
C$529.5 million, through its wholly-owned subsidiary, Rio Tinto
International Holdings Limited.
The company also provided a financial package to Ivanhoe Mines
including the $1.8 billion interim loan facility. In doing so, the
project is expected to be completed by early fiscal 2012 instead of
late fiscal 2012.
Management stated that
investment in Ivanhoe underscores Rio Tinto’s commitment to the Oyu
Tolgoi project. Moreover, the Oyu Tolgoi project suits the
company’s strategy of focusing on low-cost, long-life assets
providing growth potential.
On the basis of the
contractual agreement, the company can acquire a 49% stake in
Ivanhoe Mines.
Rio Tinto may obtain the
rights to buy additional securities of Ivanhoe, based on Ivanhoe's
business, financial condition, the market for Ivanhoe's securities,
general economic and tax conditions.
Headquartered in London,
UK, Rio Tinto is engaged in exploring, mining and processing of the
earth's mineral resources, producing a broad range of metals and
minerals. Rio Tinto competes against global mining giants
like BHP
Billiton Ltd. (BHP) and Vale S.A (VALE).
We currently have a Neutral
recommendation on the stock. Rio Tinto has a Zacks #3 Rank, which
implies a short-term (1-3 months) Hold rating.
BHP BILLITN LTD (BHP): Free Stock Analysis Report
IVANHOE MINES (IVN): Free Stock Analysis Report
RIO TINTO-ADR (RIO): Free Stock Analysis Report
VALE RIO DO-ADR (VALE): Free Stock Analysis Report
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