Ivanhoe Mines and Rio Tinto, Expecting Finalization of the Oyu Tolgoi Investment Agreement, Reaffirm Long-Term Commitment to Thr
September 22 2009 - 7:12PM
Marketwired
Ivanhoe Mines Ltd. (TSX: IVN)(NYSE: IVN)(NASDAQ: IVN) -
Ivanhoe Mines' President and CEO John Macken said today that
executives of Ivanhoe Mines and its strategic partner, Rio Tinto,
are working with Mongolian Government representatives to finalize
an Investment Agreement for the Oyu Tolgoi copper-gold project as
quickly as possible.
Mr. Macken said that the managements of Ivanhoe Mines and Rio
Tinto accept assurances by members of the Mongolian Government's
Cabinet that the Government is preparing to sign an Investment
Agreement for the Oyu Tolgoi copper-gold project.
In expectation of the signing of a final Investment Agreement,
the companies have mutually agreed to fine-tune two provisions of
Rio Tinto's phased investment of approximately US$2.4 billion in
Ivanhoe Mines. A proposed minor adjustment to the inter-company
investment package would grant Rio Tinto a short-term,
month-to-month extension of the approaching October 27 deadline for
completing Tranche 2 of Rio Tinto's approved schedule of a series
of investments in Ivanhoe Mines. A second adjustment would permit
Ivanhoe Mines to sell an aggregate interest totalling up to 9.9% to
one or two strategic investors - without affecting Rio Tinto's
anti-dilution rights to acquire an equity interest of 43.1% in
Ivanhoe Mines, which may be increased to a maximum of 46.65% by
acquiring additional shares on the open market.
Bret Clayton, Rio Tinto's Chief Executive, Copper &
Diamonds, said in a statement that Rio Tinto expected that any
delay in concluding the Tranche 2 investment would be
short-lived.
"Rio Tinto is committed to its partnership with Ivanhoe in
developing Oyu Tolgoi," Mr. Clayton said. "We have made good
progress with the Government of Mongolia and expect to sign the
Investment Agreement shortly. We then can move forward with
completing the conditions precedent to taking up our second tranche
of Ivanhoe shares."
When completed, the Tranche 2 financing will provide Ivanhoe
with a further US$388 million toward the development and
construction of the Oyu Tolgoi copper-gold mining complex in
Mongolia.
Mr. Macken said that the proposed temporary deferment of the
Tranche 2 investment would not affect the conditions or timing of
Rio Tinto's options to exercise warrants as part of the
private-placement agreement with Ivanhoe. "The estimated total
value of the package, inclusive of equipment purchased from
Ivanhoe, is approximately US$2.4 billion. Rio Tinto will acquire an
interest of up to 43.1% in Ivanhoe Mines and Ivanhoe will use the
funds to cover its share of costs for the development and
construction of the Oyu Tolgoi mining complex," he added.
Ivanhoe and Rio Tinto now have agreed that the deadline for
completing the Tranche 2 investment will be extended in successive
30-day increments, at the discretion of the Ivanhoe Board of
Directors, either until the completion of an approved,
unconditional Investment Agreement for Oyu Tolgoi, or until April
27, 2010 - whichever occurs first.
Mr. Macken said that the extension is a logical modification.
Despite the pending conclusion of the Investment Agreement, there
may not be sufficient time before the October 27, 2009, expiry of
the Tranche 2 financing period to satisfy a number of procedural
and administrative conditions that Ivanhoe and Rio Tinto require as
part of the final Investment Agreement. The Investment Agreement
will come into full effect when the conditions are fulfilled to the
satisfaction of Ivanhoe and Rio Tinto.
The conditions precedent will include the completion of
consideration of a project feasibility study; a transfer of
interests in certain exploration licences adjacent to Oyu Tolgoi
and their conversion to mining licences; the registration of an
appropriate company structure to give effect to the Investment
Agreement; the establishment of a working committee to expedite
permits and customs clearances during construction and operation of
Oyu Tolgoi; and confirmation by taxation authorities of tax losses
and capitalized expenditures to be used for tax depreciation
purposes available for future deduction against taxable income.
The private-placement agreement originally negotiated in 2006,
together with other financing transactions negotiated in 2007 and
2008, includes the following elements:
---------------------------------------------------------------------------
Minimum &
Exercise Price Maximum
(US$) Proceeds
unless noted Shares (millions)
---------------------------------------------------------------------------
Tranche 1 - Oct 2006 $8.18 37,089,883 $303.4
---------------------------------------------------------------------------
Tranche 2 - extended $8.38 46,304,473 $388.0
---------------------------------------------------------------------------
Warrants (A) - $8.38 - 8.54 46,026,522 $385.7 to $393.1
expire Oct 2010
---------------------------------------------------------------------------
Warrants (B) - $8.38 - 9.02 46,026,522 $385.7 to $415.2
expire Oct 2011
---------------------------------------------------------------------------
Warrants © - $10.00 35,000,000 $ 350.0
expire Oct 2012
---------------------------------------------------------------------------
Anti Dilution Warrants Cdn $3.15 1,684,178 $4.8
and Shares
---------------------------------------------------------------------------
Equipment purchased n/a n/a $121.5
from Ivanhoe
---------------------------------------------------------------------------
Convertible Debt(1) n/a 45,800,000 $400.0 to $458.0
---------------------------------------------------------------------------
257,931,578 $2,339.1 to $2,434.0
---------------------------------------------------------------------------
(1) The Convertible Debt bears interest at LIBOR plus 3.3% and matures on
September 12, 2010. The principal amount of $350 million and up to
$108 million in interest automatically convert into a maximum of 45.8
million shares at a price of $10.00 per share upon maturity. Based on
current interest rates, the amount may approximate $400 million on
conversion.
Opportunities for other potential strategic shareholders
Ivanhoe Mines and Rio Tinto also have agreed to cooperate in
considering potential investments in Ivanhoe by one or more
strategic shareholders. Mr. Macken said several sovereign-wealth
funds are among potential investors who have expressed unsolicited
interest in participating in Ivanhoe's growth opportunities. Rio
Tinto will not exercise its existing right of first offer in
respect of any third-party equity financings that meet certain
conditions, including 1) that the number of new common shares
issued not exceed a total of 9.9% of Ivanhoe's issued and
outstanding common shares following the completion of such
financings; and 2) that Rio Tinto's anti-dilution equity rights
remain intact. Ivanhoe would use a minimum of 90% of the proceeds
from any such financings to advance the Oyu Tolgoi Project.
Ivanhoe Mines has scheduled a special meeting of shareholders on
October 20, 2009, when shareholders will be asked to approve the
extension of the deadline for completing the Tranche 2 investment.
Robert M. Friedland, Ivanhoe's Executive Chairman and largest
shareholder, and the Ivanhoe Board of Directors are recommending
approval of the proposed adjustments to the private-placement
agreement.
An information circular outlining the terms of the proposed
extension is being filed today and will be available online, at
www.sedar.com, and on the Ivanhoe website at www.ivanhoemines.com.
Copies of the circular will be mailed to all Ivanhoe shareholders
this week.
More information about Ivanhoe Mines, its mining interests and
exploration projects is available at www.ivanhoemines.com.
FORWARD-LOOKING STATEMENTS: This document includes
forward-looking statements regarding Ivanhoe Mines' plans.
Forward-looking statements include, but are not limited to,
statements concerning the completion of the second tranche of Rio
Tinto's private placement financing, receipt of an unconditional
investment agreement for the Oyu Tolgoi Project, and the
development of the Oyu Tolgoi Project. When used in this document,
the words such as "could", "plan", "estimate", "expect", "intend",
"may", "potential", "should", and similar expressions are
forward-looking statements. Although Ivanhoe Mines believes that
its expectations reflected in these forward-looking statements are
reasonable, such statements involve risks and uncertainties and no
assurance can be given that actual results will be consistent with
these forward-looking statements. Important factors that could
cause actual results to differ from these forward-looking
statements are disclosed under the heading "Risk Factors" and
elsewhere in the corporation's periodic filings with Canadian and
US securities regulators.
Contacts: Ivanhoe Mines Ltd. Bill Trenaman Investors
+1.604.688.5755 Ivanhoe Mines Ltd. Bob Williamson Media
+1.604.688.5755 www.ivanhoemines.com
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