Chinese aluminum company seeking stake in Ivanhoe or its Mongolian mine

By: Ross Marowits, The Canadian Press

MONTREAL - Rio Tinto says it is in talks with a Chinese aluminum company about buying a minority equity stake in Ivanhoe Mines Ltd., or a direct interest in Ivanhoe's signature copper-gold project in Mongolia.
In a filing Wednesday with U.S. regulators, the London-based global mining giant said it continues to talk with the Aluminum Corporation of China (Chinalco) — a large Rio Tinto shareholder — about its ownership interests.
"If any arrangement is agreed, it may be a bipartite or tripartite arrangement with (Ivanhoe) and/or Rio Tinto," it said.
Any such arrangement may require approval from Ivanhoe, Rio Tinto and the Mongolian government.
Rio last year walked away from Chinalco's desire to invest US$19.5 billion in the company after shareholders balked at the infusion designed to reduce Rio's debt.
The company said it has also had discussions about the Mongolian project with "numerous parties," including the European Bank for Reconstruction and Development and the World Bank's International Finance Corporation.
Ivanhoe is working with both organizations to evaluate a major financing package for construction of the planned $4.6-billion Oyu Tolgoi mining complex.
"Rio Tinto intends to continue its discussions," it stated.
Rio Tinto (NYSE:RTP) has called the Mongolia project the world's largest untapped copper and gold resource. It announced last week that it was increasing its stake in Ivanhoe Mines Ltd. (TSX:IVN) by 7.3 per cent to almost 30 per cent as Ivanhoe continues to develop the Oyu Tolgoi project.
It will increase its stake by exercising all of its series A warrants, which entitle it to acquire just over 46 million Ivanhoe shares at US$8.54 per share, for total consideration of approximately US$393 million.
Rio Tinto said it is also continuing to talk with Ivanhoe about the potential conversion of the equity stake in Ivanhoe of a subsidiary, Rio Tinto International Holdings Ltd., into a direct ownership interest in the Mongolian project.
Rio Tinto and Ivanhoe are development partners for the Oyu Tolgoi project. Production is expected to commence in 2013, with a five-year ramp up to full production.
Ivanhoe declined to comment on Rio Tinto's filing or its discussions.
But in May, deputy chairman Peter Meredith told a London conference that the project would likely have another partner and that it makes sense for Chinese interests to study investment in the mine.
After the completion of the exercise of the series A warrants, Rio Tinto will own 144.66 million Ivanhoe shares. If Rio Tinto were to exercise all of its remaining share purchase warrants and convert its US$350-million loan into shares, it would own approximately 267.8 million shares of Ivanhoe representing some 44 per cent of the company.
Rio Tinto is a leading international mining group headquartered in the United Kingdom, combining Rio Tinto plc, a London- and NYSE-listed company, and Rio Tinto Ltd., which is listed on the Australian Securities Exchange.

Vancouver-based Ivanhoe is an international mineral exploration and development company. Besides its stake in the Mongolian project, it has a 57 per cent interest in Mongolian coal miner SouthGobi Resources (TSX:SGQ).

It also has an 81 per cent interest in Ivanhoe Australia, an exploration and development company, and a 50 per cent interest in Altynalmas Gold Ltd., a company developing the Kyzyl gold project in Kazakhstan.

Its shares closed up 70 cents, or 5.36 per cent at $13.76 in trading Wednesday on the Toronto Stock Exchange.

Source:http://www.winnipegfreepress.com