TORONTO, March 2 (Reuters) – Ivanhoe Mines’ (IVN.TO: Quote, Profile, Research) chief executive said on Monday that financing for its Oyu Tolgoi copper and gold project in Mongolia should not be a problem, despite tight credit conditions and a cost-cutting campaign at strategic partner Rio Tinto (RIO.L: Quote, Profile, Research).
“When you have a long-life mine like this, I think financing will be.. I won’t say it will be easy, but there’s lots of opportunity,” Ivanhoe CEO John Macken told the annual Prospectors and Developers conference in Toronto.
He also said the company hopes to soon ink an investment agreement with the Mongolian government for the project.
Mongolia is reportedly seeking a 34 percent stake in Oyu Tolgoi, down from earlier attempts to seek a majority stake.
Ivanhoe initially struck a deal in 2006, but it was withdrawn last year as Mongolia sought better terms as copper and gold prices soared.
Since then, copper prices have fallen sharply, and reports have suggested an agreement could be inked in early March for the mine.
“It’s difficult times out there for the miners, but it’s equally difficult for the countries, and I think there’s lot of… common sense coming to the whole issue,” Macken said.
However, with capital costs expected to hit $3 billion, Ivanhoe will require both financing and help from partner Rio, which holds about 10 percent of Ivanhoe, and can increase its stake to more than 40 percent by meeting funding objectives.
The timing for additional investment for Rio may not be ideal, as it announced spending cuts and layoffs in December to pay off nearly $40 billion in debt.
Offsetting this is China’s planned $19.5 billion in vestment in the company, announced last month.
Macken said Rio has remained enthusiastic about Oyu Tolgoi and he welcomed the Chinese investment in Rio. (Reporting by Cameron French; Editing by Peter Galloway)
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