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Rio Raises Ivanhoe Stake as Loan Converts Into Shares

Rio Tinto Group, the world’s third-largest mining company, raised its holding in Ivanhoe Mines Ltd. to 35 percent after the automatic conversion of a $350 million credit facility.

The loan and the accrued interest -- totaling $400.8 million -- converted into about 40 million shares at $10 apiece, London-based Rio said today in a statement. The loan was agreed on with Ivanhoe in 2007 and matured today, Rio said.

Rio and Ivanhoe are building the $4.6 billion Oyu Tolgoi copper and gold mine in Mongolia, which Rio has described as the world’s largest untapped copper and gold deposit, due to start output in 2013. The two companies are locked in a dispute over a shareholder rights plan adopted by Ivanhoe in April.

Under existing share-purchase warrants, Rio has the right to increase its stake to about 44 percent, it said today. In a July filing, Rio said it had held talks with Aluminum Corp. of China, which had indicated an interest in acquiring a minority stake in Ivanhoe or the project.

Ivanhoe, which spent more than six years negotiating an accord with Mongolia for the project, said in January it hired Citigroup Inc. to study options, including debt and equity offerings and asset sales.

Rio also said in the July filing it’s in talks with Ivanhoe about converting its equity stake in the company into a direct ownership stake in the mine. Any arrangement may require approval from the Mongolian government, Rio said.

The 81.3 billion pounds of copper and 46.4 million ounces of gold at Oyu Tolgoi may give the site a 59-year life, Ivanhoe said in May. The mine will produce an average of 1.2 billion pounds of copper and 650,000 ounces of gold a year for the first decade.

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