Rio Tinto increases ownership in Ivanhoe Mines to 22.4% with US$232 million purchase of shares

Mar 2 • Business, Companies, Mining • 468 Views • No Comments on Rio Tinto increases ownership in Ivanhoe Mines to 22.4% with US$232 million purchase of shares

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Proceeds to be used by Ivanhoe to acquire critical mining and milling equipment for the Oyu Tolgoi copper-gold complex in Mongolia

LONDON, ENGLAND — Robert Friedland, Executive Chairman of Ivanhoe Mines, and John Macken, President and Chief Executive Officer, announced today that the company has entered into an agreement to issue 15 million common shares to Rio Tinto at CDN$16.31 per share, for net proceeds of CDN$244.7 million (US$232.4 million*).

Ivanhoe Mines will use the proceeds to purchase from Rio Tinto key mining and milling equipment to be installed during the construction of the Oyu Tolgoi copper-gold mining complex in Mongolia.

The equipment includes principal components for the 100,000-tonne-per-day Oyu Tolgoi phase-one copper-gold concentrator, including two large, 38-foot-diameter, semi-autogenous grinding (SAG) mills, four ball mills, re-grind mills, crushers, motors, gearless drives, conveyors and flotation cells. Also included is the hoist and major components for the sinking of Shaft #2 — the 10-metre-diameter, main production shaft for the underground block-cave mine at the Hugo North Deposit.
Much of the equipment originally was ordered by Ivanhoe Mines from various manufacturers while it was waiting for an Investment Agreement with the Government of Mongolia. Ivanhoe subsequently transferred ownership of the equipment to strategic partner Rio Tinto in August 2008 under an agreement between the companies. Additional equipment also was acquired by Rio Tinto directly from suppliers. At the time, Ivanhoe required funds for the ongoing development of the Oyu Tolgoi Project. The equipment-sale agreement with Rio Tinto ensured that the procurement and delivery schedules for the critical, long lead time major mining and milling equipment were protected while Ivanhoe and Rio Tinto worked with the Mongolian Government to conclude the mutually-acceptable, long-term Investment Agreement that was executed in October 2009.

“We are positioning Ivanhoe Mines and our strategic shareholder, Rio Tinto, to begin full-scale construction of the Oyu Tolgoi Mine as we approach the start of the construction season in Mongolia and the completion of all conditions precedent to the approved Oyu Tolgoi Investment Agreement that we signed with the Mongolian Government last October,” Mr. Friedland said.

“The joint Ivanhoe Mines-Rio Tinto Oyu Tolgoi Technical Committee has conditionally approved a US$758 million budget for 2010 that includes Ivanhoe’s repurchase from Rio Tinto of major items of mining and milling equipment. Acquisition of the equipment is another significant step in building one of the world’s largest copper-gold mines. Having this equipment available now, rather than being forced to wait behind competitors in a delivery queue, is vital to our plan to begin commercial production from Oyu Tolgoi in 2013.”

With this transaction, Rio Tinto has increased its ownership in Ivanhoe Mines from 19.6% to 22.4%. The transaction is subject to the approval of the Toronto Stock Exchange. Rio Tinto holds rights to subscribe for common shares from Ivanhoe’s treasury and also to make purchases on the open market that could increase Rio Tinto’s stake in Ivanhoe to up to 46.6% during the next 19 months.

Ivanhoe’s consolidated cash position currently is approximately US$1.3 billion. 2

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