Vancouver-based Ivanhoe Mines Ltd.'s (TSX:IVN) founder and CEO Robert Friedland resigned his post Tuesday, along with six other directors and four other senior management members.
Friedland announced Wednesday morning that the company has signed a binding agreement with majority shareholder Rio Tinto Plc (NYSE:RTP) whereby Rio Tinto will provide $1.8 billion to cover all projected capital requirements for Ivanhoe's flagship Oyu Tolgoi Project in southern Mongolia for the next four to five years.
Friedland's resignation came in accordance with terms of the agreement.
Under the agreement, a new 13-member board will be formed, the majority of which will be independent directors, made up of:
- 11 Rio Tinto-nominated directors, six of whom will be independent; and
- two directors nominated by Robert Friedland, one of whom will be independent.
Kay Priestly, a director of Ivanhoe and CFO of Rio Tinto Copper, has been appointed interim CEO of Ivanhoe. Catherine Barone, Ivanhoe's vice-president of finance, has been appointed interim CFO.
"This agreement sets the stage for the Oyu Tolgoi Project's transition to a major mining operation," Friedland said.
Friedland said the agreement, negotiated by a committee of Ivanhoe Mines' independent directors, contains a comprehensive financing plan structured to secure Rio Tinto's direct participation in, and support for, funding for planned developments at Oyu Tolgoi.
"All members of the Ivanhoe Mines board of directors have been acutely aware of their paramount duties to ensure that the interests of all shareholders are adequately protected. This now has been accomplished with the comprehensive plan, and we can be confident that funding will be available to keep Oyu Tolgoi on schedule and carry it through, and well beyond, the start of commercial production."
Rio Tinto Copper CEO Andrew Harding, said, "Since 2006, Rio Tinto has provided funding of US$3.5 billion to Ivanhoe for the development of Oyu Tolgoi. Today's agreement provides future financial certainty for Ivanhoe and stability for the timely development of Oyu Tolgoi. We will also undertake a strategic review of Ivanhoe's assets with a view to maximizing value for all Ivanhoe shareholders."
"Working with our partners in Mongolia, we are dedicated to meeting our target of starting commercial production from Oyu Tolgoi in the first half of 2013 and bringing the benefits of the mine to the people of Mongolia."
The agreement and subsequent shake-up come after several years of strife in the Rio-Ivanhoe relationship.
In 2006, Rio Tinto invested in Ivanhoe, however the relationship soured as Rio Tinto made repeated attempts to get a bigger piece of Oyu Tolgoi. (For more on the history between the two companies, see "Ivanhoe reaches deal with Rio, raises US$6.5 billion"- BIV Business Today, December 8, 2010.)
@JHarrisonBIV
