After months of arbitration regarding a massive copper-gold project in Mongolia, Ivanhoe Mines Ltd. (TSX:IVN) and Rio Tinto plc (NYSE:RIO) have come to an agreement.
On Wednesday, Vancouver-based Ivanhoe said it had secured funding measures that could yield up to US$6.5 billion toward the Oyu Tolgoi project.
The deal means the massive project would continue full-scale construction toward early production in 2012, and both companies have agreed to suspend arbitration proceedings for six months.
Relations between Ivanhoe and mining behemoth Rio soured over a poison-pill strategy Ivanhoe adopted in April to stymie takeover attempts. (See “Shareholders’ plan threatens Ivanhoe-Rio Tinto partnership” – issue 1082; July 20 to 26.)
The downturn between the two began July 9, when Rio Tinto filed for arbitration against Ivanhoe, saying the strategy, or shareholders’ rights agreement, breached a private placement deal the companies signed in 2006.
The 2006 agreement is worth approximately $2.5 billion and allows Rio Tinto to incrementally earn up to a 44% stake in Ivanhoe.
The latest agreement between the two companies would see:
At press time, Ivanhoe’s shares were down approximately 13% to $25.73.
Salman Partners senior mining analyst Raymond Goldie said the stock decline is likely a reaction to the fact the ownership cap means Ivanhoe is no longer a prime takeover target.
When asked if the two companies had lost sight of the project amid the arbitration proceedings, Goldie said it was his impression that it was business as usual at Oyu Tolgoi.
Said Goldie: “I don’t think they had really taken their eye off the speedy bringing of Oyu Tolgoi into production, it had always been a very gentlemanly legal thing.”