Ivanhoe Mines Backs Down On Rio Tinto Poison Pill Plan
January 18 2012 - 11:16AM
Dow Jones News
(Dow Jones)--Ivanhoe Mines Ltd. (IVN.T) said Wednesday it won't
use a shareholders' rights plan to stop Rio Tinto PLC (RIO) from
taking a majority stake in the Vancouver miner, which is building a
massive copper-gold mine in Mongolia.
Ivanhoe's board said it will defer activation of the
shareholders' rights plan until the company's May 11 meeting, where
it will recommend that shareholders vote to cancel it entirely.
Ivanhoe made the announcement as a standstill agreement with Rio
Tinto preventing it from increasing its current 49% stake in
Ivanhoe expired Wednesday. Rio Tinto has informed Ivanhoe it plans
to increase its stake to more than 50% whether or not Ivanhoe
exercises its shareholders' rights plan, Ivanhoe said in the
release.
Ivanhoe and Rio Tinto have been engaged in a long-running
dispute over ownership of Oyu Tolgoi, one of the largest and
richest undeveloped mines in the world that's 66% owned by Ivanhoe
and 34% owned by the Mongolia government. Ivanhoe adopted its
shareholders' rights plan in 2010 to stop Rio Tinto from gaining a
creeping control of Ivanhoe and the Oyu Tolgoi project through
stock purchases, rather than by making a takeover offer for the
whole company.
But the shareholders' rights plan was crippled last month after
an arbitrator upheld Rio Tinto's anti-dilution rights under a
previous agreement. The ruling effectively nullified the
shareholders' rights plan because it gave Rio Tinto the option to
participate, and the arbitrator recommended that Ivanhoe abandon
the rights plan altogether.
Ivanhoe also said in the release that it has borrowed an
additional $1.8 billion in bridge financing from a bank to develop
Oyu Tolgoi, in addition to the $1.8 billion in interim funding it
had already received from Rio Tinto. Rio Tinto and Ivanhoe are
trying to line up a permanent $4 billion in financing for the
project, and expect to do so in the second quarter of this year,
according to the release.
Oyu Tolgoi's construction is more than 70% complete and on track
to being production in the first half of 2013, the company said.
Oyu Tolgoi contains about 81 billion pounds of copper and 46
million ounces of gold.
-By Edward Welsch, Dow Jones Newswires; 403-229-9095;
edward.welsch@dowjones.com
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