Ivanhoe Mines (TSX:IVN)(NYSE:IVN)(NASDAQ:IVN) Chairman David
Huberman said today that the company's Board of Directors has
received a progress report from its Special Finance Committee on
the status of a comprehensive financing plan to cover the
completion of the first phase of the Oyu Tolgoi mining complex in
southern Mongolia through to the projected start of commercial
production of copper, gold and silver in 2013.
The four-member committee is working in an advisory role with
the company's management to review components of the comprehensive
plan, which includes a wide range of financing alternatives in
addition to a major, long-term, limited-recourse project finance
facility that currently is under negotiation.
The Ivanhoe Mines Board of Directors has accepted a
recommendation from the Special Finance Committee and approved a
proposed US$1.8 billion facility to be provided by a major
international bank as an interim, bridge financing measure. The
facility, a precautionary response to volatility in the project
finance and corporate debt markets stemming from recent events in
Europe, could be used if there is a delay in completing and gaining
approvals for the long-term project-finance package. The proposed
bridging facility approved by the Ivanhoe Mines board remains
subject to approvals by Rio Tinto and the bank credit committee,
and completion of final documentation.
The bridge loan is expected to be in addition, and on similar
terms, to the US$1.8 billion interim funding facility already being
provided by Rio Tinto and now being accessed by Ivanhoe Mines to
continue advancing construction of the Oyu Tolgoi Project. Both
bridge facilities are expected to be repaid from the first drawdown
from the planned project-finance facility.
As previously reported, Ivanhoe Mines, Rio Tinto, a core lending
group and their respective advisers are working together to
complete a project-finance facility of up to approximately US$4.0
billion for Oyu Tolgoi, with the objective of signing loan
documentation during the second quarter of 2012.
"Ivanhoe Mines remains intensely focused on the remaining
requirements that are key to completing the first phase of the
development of the Oyu Tolgoi mining complex in Mongolia," Mr.
Huberman said.
"The completion of long-term project financing and finalization
of a Mongolia-China pact to supply electrical power from China for
up to the first four years of Oyu Tolgoi's operation are central to
our objective of ensuring that Oyu Tolgoi remains on schedule to
begin initial production later this year, which is fundamental to
our commitment to build significant value for shareholders."
Oyu Tolgoi construction surpasses 70% completion
Construction of the first phase of Oyu Tolgoi has surpassed the
70% completion milestone this month. Installation of the two
production lines in the concentrator and pre-commissioning works
are progressing ahead of plan; the first production line is
expected to be completed in mid-July 2012.
Following extensive negotiations, an agreement has been reached
with the Inner Mongolia Power Company on the schedule and capital
costs for construction of a high-voltage transmission line in
China, which will be a key link in the delivery of interim power to
Oyu Tolgoi. Approval of the Inner Mongolia government in China is
required for the project to be given the Notice to Proceed.
Discussions on the provision of Chinese power were held between
Mongolia and China as recently as last week during a visit to
Beijing by Mongolia's Minister of Foreign Affairs and Trade,
Gombojav Zandanshatar.
Detailed design and engineering of the Inner Mongolia portion of
the line already is underway. Subject to receipt of the formal
Notice to Proceed, Chinese contractors presently are expected to
begin construction of the transmission towers up to the
China-Mongolia border by March 2012, a schedule that would permit
stringing of the power cable to follow in late-April or May
2012.
Transmission towers already have been erected along the
95-kilometre portion of the line in Mongolia. Completion of the
entire 220-kilovolt line from the Inner Mongolian power grid to the
Oyu Tolgoi complex presently is projected for the third quarter of
2012.
Initial production from the Southern Oyu open-pit mine is
expected in mid-2012; commercial production of copper-gold-silver
concentrate is projected to begin in the first half of 2013.
Ivanhoe Mines Board to recommend termination of shareholders'
rights plan
Mr. Huberman also said today that the Board of Directors has
decided that the interests of shareholders and the company's
strategic objectives would be best served by the termination of the
company's shareholders' rights plan.
Since formal termination of the rights plan requires the
approval of shareholders, the Ivanhoe Mines board will recommend
that shareholders vote in favour of the termination at the
company's annual general meeting set for May 11 this year. In the
meantime, the board will delay the effective activation of the
rights plan until the annual meeting. Introduction of the plan was
approved by shareholders at the 2010 annual meeting.
Mr. Huberman said Ivanhoe Mines also may take further steps to
ensure that the shareholders' rights plan is not inadvertently
triggered. The Ivanhoe board will explore other avenues, perhaps
through an amendment to the 2006 Ivanhoe-Rio Tinto private
placement agreement, which could enable Rio Tinto to acquire
additional shares through a transaction that would be exempt from
the rights plan, if the board determines that such an accommodation
would be in Ivanhoe's best interests.
Rio Tinto, which has been restricted to a 49% ownership stake in
Ivanhoe Mines until after the scheduled expiry later today of a
2006 standstill agreement, has advised the Ivanhoe Mines board in
recent weeks that it intends to purchase additional shares in
Ivanhoe Mines, regardless of the status of the shareholders' rights
plan, to enable Rio Tinto to increase its ownership level to more
than 50%.
Board has authority to defer activation of plan
While the shareholders' rights plan technically will remain in
effect until a shareholders' vote in May, Mr. Huberman said that
the Ivanhoe Mines Board of Directors will exercise its discretion
under the plan to defer the Separation Time - the activation point,
nominally occurring 10 days after the announcement of a triggering
share acquisition, at which shareholders could exercise rights to
acquire additional discounted shares.
An arbitrator's decision issued on December 12 last year
suggested that the Ivanhoe Mines board seriously consider whether
preserving the application of the shareholders' rights plan to any
Rio Tinto share purchases was in the best interests of Ivanhoe
Mines.
Following the arbitrator's ruling, the Ivanhoe Mines board
unanimously approved the formation of a special committee,
comprised of members of the board's Corporate Governance Committee,
to conduct an evaluation of the arbitrator's decision, with the
assistance of independent legal counsel. The committee completed
its evaluation last week. The Corporate Governance Committee, also
chaired by Mr. Huberman, consists entirely of independent directors
and does not include any representatives of Rio Tinto, Ivanhoe
Mines Chief Executive Officer Robert Friedland or Ivanhoe
management.
The decision to recommend termination of the shareholders'
rights plan was unanimously supported by the participating
directors; directors who are Rio Tinto employees did not take part
in the discussion or vote.
FORWARD-LOOKING STATEMENTS
Certain statements made herein, including statements relating to
matters that are not historical facts and statements of our
beliefs, intentions and expectations about developments, results
and events which will or may occur in the future, constitute
"forward-looking information" within the meaning of applicable
Canadian securities legislation and "forward-looking statements"
within the meaning of the "safe harbor" provisions of the United
States Private Securities Litigation Reform Act of 1995.
Forward-looking information and statements are typically identified
by words such as "anticipate", "could", "should", "expect", "seek",
"may", "intend", "likely", "plan", "estimate", "will", "believe"
and similar expressions suggesting future outcomes or statements
regarding an outlook. These include, but are not limited to:
statements respecting the acquisition by Rio Tinto of additional
Ivanhoe shares; the deferral of the separation time by the Ivanhoe
board; the triggering of the SRP; the proposed termination of the
SRP by Ivanhoe's shareholders; statements regarding the objective
of implementing the proposed comprehensive financing plan,
fulfillment of the conditions necessary to obtain the bridge loan
facility and the finalization and signing of loan documentation for
the project finance facility during the second quarter of 2012;
statements regarding that the expectation that pre-commissioning
works at the concentrator be completed by July 2012; the statement
that commercial production of copper-gold-silver concentrate is
projected to begin in the first half of 2013; statements that
construction of the transmission towers by Chinese contractors up
to the China-Mongolia border could begin by March 2012 and
stringing of the power cable could follow in late-April or May
2012; statements regarding the expected completion dates for the
entire 220-kilovolt line from the Inner Mongolian power grid to the
Oyu Tolgoi complex in mid-2012; and other statements that are not
historical facts.
All such forward-looking information and statements are based on
certain assumptions and analyses made by Ivanhoe Mines' management
in light of their experience and perception of historical trends,
current conditions and expected future developments, as well as
other factors management believes are appropriate in the
circumstances. These statements, however, are subject to a variety
of risks and uncertainties and other factors that could cause
actual events or results to differ materially from those projected
in the forward-looking information or statements. Important factors
that could cause actual results to differ from these
forward-looking statements include those described under the
heading "Risks and Uncertainties" elsewhere in the Company's
MD&A. Readers are cautioned not to place undue reliance on
forward-looking information or statements.
Contacts: Ivanhoe Mines Ltd. - Investors Bill Trenaman
+1.604.688.5755 Ivanhoe Mines Ltd. - Media Bob Williamson
+1.604.688.5755 www.ivanhoemines.com
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