August 1, 2012 on: business, Mining

Mining titan Rio Tinto PLC said Monday it has spent nearly $1 billion in accordance with a pact to participate in Canada-based Ivanhoe Mines Ltd."s $1.8 billion rights issue, which is aimed at funding the development of the massive Mongolian Oyu Tolgoi copper and gold project.

The purchase is in keeping with Rio Tinto"s agreement to participate in any Ivanhoe rights issue to fund the Oyu Tolgoi project. Ivanhoe"s founder and former chief executive, Robert Friedland exercised his rights to keep his holding in the Vancouver-based mining company at about 13%, according to a person familiar with the matter. Mr. Friedland resigned as chief executive of Ivanhoe in April, not long after losing control of the company when Rio Tinto became its majority owner, a situation he had fought to prevent. "We are pleased with the strong reception our rights offering received from shareholders," said Ivanhoe"s new chief executive, Kay Priestly, adding that the project remains on track to process its first ore in the second half of 2012 and begin commercial production in the first half of 2013. Rio said that it has no plans to buy additional Ivanhoe shares at the moment, although it has the ability to exercise warrants that would allow it boost its shares to 54.4% if desired. The Anglo-Australian mining company also has the right to be the first to participate in further equity financing from Ivanhoe up until Oct. 24; it also has antidilution rights to make sure it is able to maintain its current stake in the company in the future. "The purpose of Rio Tinto acquiring additional shares under Ivanhoe"s rights offering was to honor its contractual obligations to Ivanhoe and to provide additional funding to Ivanhoe to ensure the timely development of Ivanhoe"s Oyu Tolgoi copper-gold mine in Mongolia," it said. The mine holds some of the world"s largest unexploited gold and copper deposits, with estimated reserves of 46 million ounces of gold and 81 billion pounds of copper. Rio Tinto"s shares closed up 1.6%, or 45 pence, at 29.37 pounds, while Ivanhoe"s shares were down 2.4%, or 21 Canadian cents, at C$8.57 a share.

SOURCE OF THIS ARTICLE : news.mn

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