Rio Tinto to Double Its Interest in Ivanhoe Mines to 19.7% by Completing US$388 Million Tranche 2 Equity Placement
October 13 2009 - 9:16AM
Marketwired
Ivanhoe Mines' (TSX: IVN)(NYSE: IVN)(NASDAQ: IVN) Executive
Chairman Robert Friedland and Deputy Chairman Peter Meredith
announced today that Ivanhoe Mines has been formally notified that
Rio Tinto immediately intends to complete its Tranche 2 private
placement financing - consisting of 46,304,473 Ivanhoe shares at
US$8.38 per share - for net proceeds to Ivanhoe of US$388 million.
Upon completion of the financing, expected within 10 business
days, Rio Tinto's equity ownership in Ivanhoe Mines will increase
from its current level of 9.9% to 19.7%. The terms of the private
placement were negotiated as part of the original Rio Tinto-Ivanhoe
Mines strategic partnership announced in October 2006 to develop
the Oyu Tolgoi copper and gold mining complex in southern Mongolia,
approximately 80 kilometres north of the Mongolia-China border.
Receipt of the funds will increase Ivanhoe's consolidated cash
position to approximately US$725 million. The Tranche 2 proceeds of
US$388 million from Rio Tinto will be used to help build and
commission the open-pit mine at Oyu Tolgoi and to advance
development of the underground block-cave mine.
Last week, on October 6, Ivanhoe Mines, Rio Tinto and the
Government of Mongolia signed a long-term Investment Agreement for
the development of the Oyu Tolgoi mining complex. The agreement
creates a partnership between the Mongolian Government - which will
acquire a 34% interest in Oyu Tolgoi's licence holder, Ivanhoe
Mines Mongolia Inc. LLC - and Ivanhoe Mines, which will retain a
controlling 66% interest in the Oyu Tolgoi Project.
As part of a separate agreement signed last week in conjunction
with the Oyu Tolgoi Investment Agreement, Ivanhoe will be investing
US$100 million in Mongolian Government treasury bills on October
20, 2009.
Rio Tinto also entitled to buy Ivanhoe stock on open market
Under the current financing agreement with Ivanhoe Mines, Rio
Tinto has rights to subscribe for common shares from Ivanhoe's
treasury representing up to 43.1% of Ivanhoe Mines and, during the
next two years, Rio Tinto may increase this stake to 46.6% through
purchases on the open market.
Rio Tinto's option to complete the Tranche 2 financing was
scheduled to expire in approximately two weeks, on October 27. On
September 22, 2009, Ivanhoe and Rio Tinto announced that they had
agreed to extend the expiry date, on a month-to-month basis, for up
to six months. The extension was subject to approval at a special
meeting of Ivanhoe Mines' shareholders that was set for October 20,
2009. However, the decision by Rio Tinto to complete the Tranche 2
financing without any postponement means that the special meeting
of Ivanhoe shareholders no longer is required and has been
cancelled.
With the completion of the Tranche 2 financing, Ivanhoe Mines
considers that the company will have adequate capital for its
current development plans and spending commitments. Accordingly,
Ivanhoe Mines is deferring any consideration of the sale of an
aggregate interest totalling up to 9.9% in Ivanhoe Mines to one or
two potential strategic investors.
The Ivanhoe Mines/Rio Tinto private-placement agreement
originally negotiated in 2006, and other financing transactions
negotiated in 2007 and 2008, include the following elements:
--------------------------------------------------------------------------
Minimum &
Exercise Price Maximum
(US$) Proceeds
unless noted Shares (millions)
--------------------------------------------------------------------------
Tranche 1 - Oct 2006 $8.18 37,089,883 $ 303.4
--------------------------------------------------------------------------
Tranche 2 - Oct 2009 $8.38 46,304,473 $ 388.0
--------------------------------------------------------------------------
Warrants (A) -
expire Oct 2010 $8.38 - 8.54 46,026,522 $ 385.7 to $ 393.1
--------------------------------------------------------------------------
Warrants (B) -
expire Oct 2011 $8.38 - 9.02 46,026,522 $ 385.7 to $ 415.2
--------------------------------------------------------------------------
Warrants © -
expire Oct 2012 $10.00 35,000,000 $ 350.0
--------------------------------------------------------------------------
Anti Dilution
Warrants and Shares Cdn $3.15 1,684,178 $ 4.8
--------------------------------------------------------------------------
Equipment purchased
from Ivanhoe n/a n/a $ 121.5
--------------------------------------------------------------------------
Mandatory Convertible
Debt (1) n/a 45,800,000 $ 410.0 to $ 458.0
--------------------------------------------------------------------------
257,931,578 $2,349.1 to $2,434.0
--------------------------------------------------------------------------
(1) The Mandatory 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 US$10.00 per share upon
maturity. Based on current interest rates, the amount may approximate
$410 million, or approximately 41 million shares, on conversion.
Conference call for investors to be arranged
A conference call for investors to discuss details and
implications of the Oyu Tolgoi Investment Agreement will be held on
Thursday, October 15. Details of the conference call will be
announced in a separate news release.
Ivanhoe Mines' shares are listed on the Toronto, New York and
NASDAQ stock exchanges under the symbol IVN.
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
1-604-331-9880
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