Exclusive: Ivanhoe likely to put itself on block

By Michael Erman

NEW YORK (BestGrowthStock) – Ivanhoe Mines (IVN.TO: ) is likely to put itself on the block in a two-step process, which will first see it sell or spin off all its assets except its stake in the huge Oyu Tolgoi copper-gold mine in Mongolia, according to a source familiar with the matter.

After disposing of all of the assets except for the Oyu Tolgoi stake, Ivanhoe would look for a buyer for the part of the company not owned by its largest shareholder, Rio Tinto (RIO.L: ) (RIO.AX: ), the source said on Wednesday. Ivanhoe is valued at more than $15.5 billion.

Ivanhoe’s plans could still change, the source said.

Ivanhoe and Rio Tinto put aside an ongoing spat, agreeing on Wednesday to a new financing plan that moved Oyu Tolgoi a step closer to getting built. [nSGE6B70F7]

Rio Tinto is in the process of lifting its ownership stake in the Canadian miner to 42.3 percent and currently has the right to buy up to 49 percent of the company.

Rio and Ivanhoe have a standstill agreement that expires in January 2012 that keeps the Anglo-Australian mining company from taking majority control of Ivanhoe.

A spokesman for Ivanhoe declined to comment. Rio Tinto was not immediately able to comment.

Ivanhoe opened the door to other buyers in July by terminating a clause in their agreement that restricted sales to other strategic investors. But Rio still has the right to make its own offer if Ivanhoe decides to sell itself.

Oyu Tolgoi is one of the world’s biggest untapped copper-gold deposits. Development of the project was delayed for years due to complicated royalty negotiations between Ivanhoe and the Mongolian government.

The project is 34 percent owned by Mongolia and 66 percent owned Ivanhoe, of Vancouver, British Columbia, Canada, which is developing it in partnership with Rio.

Ivanhoe’s other assets include a majority stake in Mongolian coal company SouthGobi Energy (SGQ.TO: ), currently worth more than $1 billion, a stake in Ivanhoe Australia (IVA.TO: ) worth more than $800 million, and a gold venture in Kazakhstan.


Ivanhoe is led by colorful mining financier Robert Friedland, who already made a fortune selling an undeveloped nickel deposit.

The company said in January that it hired advisers from Citigroup (C.N: ) and mining sector specialist Hatch Corporate Finance to eye possibilities to enhance shareholder value.

Analysts have previously said that Friedland is maneuvering to prevent Ivanhoe from being acquired too cheaply by the much bigger Rio.

He told a conference in July that opening the company up to strategic investors had “opened us up to some very interesting discussions with third parties,” without elaborating further.

Rio has long coveted the Oyu Tolgoi project. Rio Chief Executive Tom Albanese has called the Mongolian project one of the “most attractive undeveloped copper-gold projects in the world.”

But other big copper miners including BHP Billiton (BHP.AX: )(BLT.L: ), Xstrata (XTA.L: ) and Anglo American (AAL.L: ) could be competitors for the asset.

China’s hinalco, Rio Tinto’s biggest shareholder, has also expressed interest in taking a stake in the Oyu Tolgoi project, as the mine is located just 80 km (50 miles) from its border.

Shares of Ivanhoe closed down 14 percent at C$25.28 on the Toronto Stock Exchange on Wednesday.

(Additional reporting by Euan Rocha in Toronto and Sonali Paul in Melbourne; Editing by Bernard Orr)

Exclusive: Ivanhoe likely to put itself on block