Relations between Vancouver-based Ivanhoe Mines Ltd. (TSX:IVN) and mining giant Rio Tinto plc (NYSE:RTP) grew frostier Monday after Rio Tinto’s appointed board representative stepped down and Ivanhoe terminated an arrangement that had prevented it from attracting new capital.
Ivanhoe's board authorized the termination of the strategic purchaser covenant at a board meeting Monday which had restricted Ivanhoe’s ability to land major investors.
Ivanhoe said the termination of the arrangement, which had been in place since October 2007, would allow it to issue more than 5% of its common shares to one or more third-party investors, which could include major mining companies.
As well, the sole Rio Tinto executive on Ivanhoe’s board, Andrew Harding, announced his resignation before yesterday’s meeting.
Ivanhoe’s stock soared more than 15% to $17.49 in midday trading Tuesday.
The news comes days after Rio Tinto filed arbitration against Ivanhoe.
Rio Tinto believes a poison pill strategy Ivanhoe adopted in April, which protects shareholders from creeping takeover bids, is in breach of the 2006 private placement agreement signed between the two companies.
That $2.5 billion agreement allows Rio Tinto to earn up to a 44% interest in Ivanhoe through incremental financings.
Ivanhoe reiterated its support for the poison pill strategy Monday and said it did not breach the 2006 agreement.
The relationship between the two companies revolves around Oyu Tolgoi, which is believed to be one of the richest copper-gold deposits in the world.
For more on this story, check BIV’s Daily edition on Monday, July 12.