Rio Allowed to Maintain Ivanhoe Stake, Arbitrator Decides

Ivanhoe Mines Ltd., building the Oyu Tolgoi in mine in Mongolia with its largest shareholder Rio Tinto Group (RIO), said an arbitrator ruled in favor of Rio in a dispute about its holding.

Rio will be allowed to maintain its ownership level in Ivanhoe if Rio’s actions trigger Ivanhoe’s shareholder rights plan, the Vancouver-based company said today in a statement.

Ivanhoe, which owns 66 percent of the Oyu Tolgoi copper and gold project, and London-based Rio have been in arbitration over Ivanhoe’s adoption last year of the rights plan. Rio had said the so-called poison pill contravened a 2006 agreement between the two companies.

The arbitrator also ruled in favor of Rio in a dispute where Ivanhoe claimed Rio broke covenants in the 2006 agreement not to engage in activities without Ivanhoe’s permission that could affect control of Ivanhoe. Rio, which owns 49 percent of Ivanhoe, is barred from making a hostile bid for Ivanhoe under an agreement that expires Jan. 18. Rio was found not to have breached its obligations, Ivanhoe said today.

Rio said in a regulatory filing last year that Aluminum Corp. of China, that country’s biggest producer of aluminum, indicated an interest in acquiring a minority stake in Ivanhoe or in the Oyu Tolgoi project. Chinalco, as the Chinese company is also known, is Rio’s biggest investor.

Ivanhoe’s shareholders’ rights plan may remain in effect until its scheduled expiry in April 2013, Ivanhoe said.

Shareholder Rights

The purpose of Ivanhoe’s shareholder rights plan, adopted by the board of directors in April 2010, “was to protect all shareholders, while allowing takeover bids that are made to all shareholders and that satisfy certain conditions,” it said in the statement.

Rio fell 2.1 percent to A$62.76 at the close in Sydney. Ivanhoe Australia Ltd., 59-percent controlled by Ivanhoe according to data compiled by Bloomberg, declined 6.9 percent.

David Luff, a Melbourne-based spokesman for Rio, said the London-based company is “examining the decision.” Rio can confirm an independent arbitrator “has upheld our claim in respect of Ivanhoe Mines’ shareholder rights plan,” he said in an e-mailed response today.

Oyu Tolgoi, 80 kilometers (50 miles) north of Mongolia’s border with China, will be one of the world’s five biggest copper mines, according to Rio, which is managing its development. Commercial output is expected to begin within the first half of 2013, the company has said.

Overall construction was 54 percent complete as of the end of the third quarter and should be more than 70 percent complete by the end of this year, Ivanhoe said in a Nov. 14 statement.

To contact the reporters on this story: Soraya Permatasari in Melbourne at soraya@bloomberg.net; Christopher Donville in Vancouver at cjdonville@bloomberg.net

To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net; Andrew Hobbs at ahobbs4@bloomberg.net

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