Ivanhoe Mines Backs Down On Rio Tinto Poison Pill Plan

(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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