Rio Gains Majority Stake in Ivanhoe After Poison Pill Scrapped
Rio Tinto Group (RIO) raised its stake to a 51 percent majority in Ivanhoe (IVN) Mines Ltd., the owner of the $6 billion Oyu Tolgoi copper and gold mine in Mongolia, after buying C$302 million ($299 million) of stock from two sellers.
Rio paid C$20 apiece for 15.1 million shares, a 2 percent stake, and has no “current intention” of buying more stock, the London-based company said yesterday in a statement.
“However, Rio Tinto reserves its right to seek opportunities to purchase additional securities” depending on a range of factors including its view of Ivanhoe (IVN)’s business, the market for the stock as well as general economic and tax conditions, it said.
Rio, the world’s third-largest mining company, became the majority owner of Vancouver-based Ivanhoe less than a week after the Canadian company said it decided to scrap a shareholder rights plan. The so-called poison pill would have allowed Ivanhoe to issue new shares to block an attempted takeover. Oyu Tolgoi is one of the world’s largest untapped copper and gold deposits.
“It’s clear that Rio Tinto will own all of this project; the question is when and at what price,” John Goldsmith, a Toronto-based money manager at Montrusco Bolton Investments, which oversees C$4.5 billion, said yesterday in a telephone interview. “Any smart business person knows it’s not astute to bid against yourself when you already own the bulk of the asset.”
Whole Company
Ivanhoe (IVN) fell 4.2 percent to C$17.53 in Toronto yesterday. Rio declined 1 percent to close at 3,700 pence in London.
“Rio will eventually move to take over the whole company,” Ray Goldie, a Toronto-based analyst at Salman Partners Inc., said yesterday by telephone. “The only advice would be you have to be patient because we don’t know the time frame.”
Construction of Oyu Tolgoi is 70 percent complete and commercial production is due to start in the first half of 2013, Rio said yesterday.
Ivanhoe owns 66 percent of Oyu Tolgoi, which is located 80 kilometers (50 miles) north of Mongolia’s border with China. The project will be one of the world’s five biggest copper mines, according to Rio, which is managing its development.
“Rio would definitely like to have 100 percent of the asset, and we don’t know what their time frame is for achieving that,” Goldie said.
To contact the reporters on this story: Jesse Riseborough in London at jriseborough@bloomberg.net; Christopher Donville in Vancouver at cjdonville@bloomberg.net
To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net
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