Ivanhoe Mines' (TSX:IVN)(NYSE:IVN)(NASDAQ:IVN) founder Robert
Friedland announced today that the company has signed a binding
memorandum of agreement with majority shareholder Rio Tinto that
establishes Rio Tinto's support for a series of funding measures
expected to cover all projected capital requirements for Ivanhoe's
flagship Oyu Tolgoi Project in southern Mongolia for the next four
to five years.
"This agreement sets the stage for the Oyu Tolgoi Project's
transition to a major mining operation in coming months," Mr.
Friedland said.
"The measure of certainty that Rio Tinto's financial resources
and global industry leadership bring to the realization of our
long-cherished Oyu Tolgoi dream is reassuring for the people and
government of Mongolia, and for Ivanhoe's shareholders.
"We were attracted to Mongolia's new horizons for resources
opportunities 17 years ago. It now is a fact of Mongolia's modern
history that the men and women of Oyu Tolgoi LLC and Ivanhoe Mines
discovered some of the world's largest deposits of copper, gold,
silver and molybdenum in the South Gobi Region. And today, with Rio
Tinto's expanded support, we are counting down to the start-up
later this year of what I am sure will quickly grow to become one
of the world's most significant, and successful, mining complexes,"
Mr. Friedland added.
"For generations to come, this remarkable, unfolding story will
continue to contribute so much to Mongolia's economic growth,
enhance its reputation as a destination for international
investment and infuse with well-placed confidence the personal
aspirations and national pride of so many Mongolians."
In accordance with terms of the agreement between Ivanhoe Mines
and Rio Tinto, Mr. Friedland resigned yesterday as a member of the
Ivanhoe Mines Board of Directors and as Chief Executive Officer.
Six other directors and four other senior management members also
resigned yesterday.
Comprehensive financial plan to launch Oyu Tolgoi as world-scale
copper-gold miner
Mr. Friedland said that the agreement, negotiated by a committee
of Ivanhoe Mines' independent directors, contains a comprehensive
financing plan structured to secure Rio Tinto's direct
participation in, and support for, funding for planned developments
at Oyu Tolgoi.
"All members of the Ivanhoe Mines Board of Directors have been
acutely aware of their paramount duties to ensure that the
interests of all shareholders are adequately protected. This now
has been accomplished with the comprehensive plan and we can be
confident that funding will be available to keep Oyu Tolgoi on
schedule and carry it through, and well beyond, the start of
commercial production."
Rio Tinto's commitments will support:
-- The scheduled start of initial production from the open-pit mine during
the second half of this year.
-- The ramp-up to commercial production during the first half of 2013 as
part of Oyu Tolgoi's first phase of development. Phase-one work includes
operation of the open-pit mine and a 100,000-tonne-per-day nameplate-
capacity concentrator, infrastructure and a US$900 million investment in
underground development in preparation for phase two.
-- The construction of a dedicated, coal-fired electrical power plant in
Mongolia. The Investment Agreement requires Oyu Tolgoi to source all of
its power requirements from within Mongolia within four years of the
start of commercial production; the project plans to use power imported
from China during its initial years of operation.
-- Continuing development of Oyu Tolgoi's second phase, including expansion
of the concentrator's nameplate capacity to 160,000 tonnes per day and a
start of production of high-grade ore from the Hugo Dummett underground
block-cave mine in 2016 - which will increase to 54,000 tonnes per day
by 2019, with subsequent increases to full production of 85,000 tonnes
per day.
Assurances for financing measures provided by Rio Tinto
Rio Tinto is committed to the following steps:
-- Rio Tinto will provide full support for completion of an Oyu Tolgoi
project-finance package of US$3 to $4 billion to be provided by third-
party lenders. The package is the core component of the new
comprehensive financial plan. Ivanhoe Mines has been negotiating project
financing with a consortium of national and international institutions
and banks since 2010. Ivanhoe Mines and Rio Tinto now have set a goal of
completing a project-finance arrangement by the end of this year. Rio
Tinto may choose to advance senior loans to Oyu Tolgoi LLC as an
alternative to, or in addition to, the project-finance package, on terms
no less favourable than those available through the international
financial institutions or commercial banks.
-- A member of the Rio Tinto Group will enter into a completion support
agreement with Ivanhoe Mines and the project-finance lenders to cover
the Oyu Tolgoi project-finance package now under negotiation. This
measure is expected to provide significantly greater certainty that
funds will be received. In exchange, Ivanhoe Mines will pay Rio Tinto an
annual fee of 2.5% on the outstanding project-finance debt until project
completion is achieved.
-- Rio Tinto will provide an immediate, additional bridge-funding facility
of up to US$1.5 billion to help ensure uninterrupted progress on the
completion of construction of the first phase of Oyu Tolgoi's
development, which was 77.9% complete at the end of March. As part of an
earlier funding agreement in December 2010, Rio Tinto provided an
interim funding facility of US$1.8 billion, which Ivanhoe Mines now has
drawn down by approximately $1.3 billion. The interim financing and
bridge-funding facilities will be repaid from the proceeds of the
project-finance package and an equity financing.
-- Rio Tinto also will fully support an equity financing with a goal of
US$1.8 billion in gross proceeds.
In addition, Ivanhoe Mines is engaged in active and detailed
negotiations on potential divestments involving its subsidiary
interests, which would supplement the comprehensive financing plan
that has been arranged with Rio Tinto.
Transition will include restructuring of the Ivanhoe Mines Board
of Directors
and appointment of a new senior management team
In paving the way for Oyu Tolgoi's transition to a miner,
Ivanhoe Mines and Rio Tinto have reached amicable agreement on the
following corporate governance and management changes:
-- The Ivanhoe Board of Directors has been reduced to 13 seats from the
present 14.
-- Seven directors - Marc Faber, Edward Flood, Robert Friedland, David
Korbin, Livia Mahler, Tracy Stevenson and Dan Westbrook - have resigned
from the Ivanhoe board, effective immediately. They are to be replaced
by six Rio Tinto nominees, four of whom will be independent directors,
in changes expected to take place within five business days.
-- A majority of the new, 13-person Ivanhoe board will be independent
directors until at least the earlier of January 18, 2014, or the date on
which Ivanhoe ceases to be a reporting issuer under Canadian securities
laws. Two directors, at least one an independent, will be nominated by
Mr. Friedland for as long as he continues to own at least 10% of
Ivanhoe's outstanding shares.
-- The Ivanhoe Mines senior management team has resigned, effective
immediately. The outgoing senior management team consisted of Chief
Executive Officer Robert Friedland, who founded Ivanhoe Mines in 1994,
President John Macken, Chief Financial Officer Tony Giardini, Deputy
Chairman Peter Meredith and Executive Vice President Sam Riggall. The
senior managers also have resigned from management posts at Ivanhoe
Mines' subsidiary companies.
-- In one of a series of interim appointments, Michael Gordon has become
Interim Chair of the Ivanhoe Mines Board of Directors. David Huberman,
Robert Holland and Andrew Harding will constitute the Corporate
Governance and Nominations Committee, which will receive and process
nominations and make recommendations to the full board on candidates for
the six board vacancies, and also for the positions of Chief Executive
Officer and Chief Financial Officer.
-- Kay Priestly, Chief Financial Officer of Rio Tinto's copper group and a
director of Ivanhoe Mines, has been appointed Ivanhoe's Interim Chief
Executive Officer; Catherine Barone, Ivanhoe's Vice President, Finance,
has been appointed Interim Chief Financial Officer. A new CEO and CFO
will be nominated by Rio Tinto for approval by the reconstituted board
of directors within the next five business days.
Mr. Gordon, the Interim Chair and a member of the Ivanhoe Mines
board for the past 18 months, acknowledged the contributions and
achievements of the outgoing directors and management
executives.
"From the beginning of the exploration discoveries in 2001 to
today's advanced-stage development project at Oyu Tolgoi, Robert
Friedland and the Ivanhoe team have done an outstanding job of
adding value for shareholders. With Ivanhoe now assured of full
funding, the new board and management team will share the exciting
prospect of building on that legacy and completing Oyu Tolgoi's
transformation into one of the most valuable copper-mining
complexes in the world."
Ivanhoe Mines to issue Series 'D' warrants to Rio Tinto
In conjunction with the equity financing and the overall package
of extending interim lines of credit and completion guarantees of
support, Ivanhoe Mines will issue 55 million Series 'D'
share-purchase warrants to Rio Tinto.
Each warrant will be exercisable to purchase one Ivanhoe share
at US$12.79 at any time and from time to time during a three-year
period. The price of the warrants is based on the volume-weighted
average price of the Ivanhoe shares on the New York Stock Exchange
on the five trading days preceding the date of the companies'
memorandum of understanding.
Conference call with investors to discuss financial plan
Ms. Priestly, Interim CEO of Ivanhoe Mines, and Mr. Gordon,
Interim Chairman of the Board, will conduct a conference call and
webcast beginning at 4:30 p.m. EDT (1:30 p.m. PDT) on Wednesday,
April 18, to discuss details of the comprehensive financial plan
with investors following the close of trading on North American
stock exchanges.
The conference call presentation may be accessed by dialing
1-866-225-0198 in Canada and the United States, or 1-416-340-8061
in the Toronto area and internationally. A simultaneous webcast of
the conference call will be provided through www.ivanhoemines.com.
The conference call will be archived for later playback until April
25, 2012 and may be accessed by dialing 1-800-408-3053 or
1-905-694-9451 and entering the pass code 3291894.
About Ivanhoe Mines
Ivanhoe Mines (TSX:IVN)(NYSE:IVN)(NASDAQ:IVN) is an
international mining company with operations focused in the Asia
Pacific region. Assets include the company's 66% interest in the
Oyu Tolgoi copper-gold-silver mine development project in southern
Mongolia; a 58% interest in Mongolian coal miner SouthGobi
Resources (TSX:SGQ)(HK:1878); a 59% interest in copper-gold miner
Ivanhoe Australia (TSX:IVA)(ASX:IVA), which also is developing a
molybdenum-rhenium discovery; and a 50% interest in Altynalmas
Gold, a private company developing the Kyzyl Gold Project in
Kazakhstan.
Ivanhoe Mines' shares are listed on the New York, NASDAQ and
Toronto stock exchanges under the symbol IVN.
Website: www.ivanhoemines.com
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 made with respect to the memorandum of agreement that
establishes Rio Tinto's support for a series of funding measures
expected to cover all projected capital requirements for Ivanhoe's
flagship Oyu Tolgoi Project in southern Mongolia for the next four
to five years; statements regarding the scheduled start of
production from the initial open-pit mine in the second half of
this year; statements regarding the ramp-up to commercial
production during the first half of 2013; statements regarding
construction of a dedicated, coal-fired electrical power plant in
Mongolia; statements regarding plans to use power imported from
China during the project's initial years of operation; statements
regarding continuing development of Oyu Tolgoi's second phase,
including expansion of the concentrator's nameplate capacity to
160,000 tonnes per day and a start of production of high-grade ore
from the Hugo Dummett underground block-cave mine in 2016 - which
will increase to 54,000 tonnes per day by 2019, with subsequent
increases to full production of 85,000 tonnes per day; statements
that Rio Tinto will provide full support for completion of an Oyu
Tolgoi project-finance package of US$3 to $4 billion to be provided
by third-party lenders; statements regarding the Ivanhoe Mines and
Rio Tinto goal of completing a project-finance arrangement by the
end of this year; statements that the interim financing and
bridge-funding facilities will be repaid from the proceeds of the
project-finance package and an equity financing; and statements
regarding Ivanhoe's plan to issue 55 million Series 'D'
share-purchase warrants to Rio Tinto.
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
headings "Risk Factors" and "Risks and Uncertainties" elsewhere in
the Company's periodic filings with Canadian and U.S. securities
regulators. 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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