By Alex MacDonald
-- Rio Tinto spends $935M in Ivanhoe's over-subscribed $1.8B rights issue
-- The Anglo-Australian miner now owns 51% stake in Ivanhoe, up from 50.9% before rights issue
-- No plans at the moment to boost its equity stake in Ivanhoe
-- Rio Tinto has the ability to exercise warrants that would give it a 54.4% stake in Ivanhoe
(adds details and updated share price)
LONDON--Mining titan Rio Tinto PLC /zigman2/quotes/202627887/composite RIO -1.91% said Monday it has spent nearly $1 billion in accordance with a pact to participate in Canada-based Ivanhoe Mines Ltd.'s $1.8 billion rights issue, which is aimed at funding the development of the massive Mongolian Oyu Tolgoi copper and gold project.
Rio Tinto spent $935 million to participate in the over-subscribed rights issue and increased its stake to 51.0% from 50.9% as a consequence. The purchase is in keeping with Rio Tinto's agreement to participate in any Ivanhoe rights issue to fund the Oyu Tolgoi project.
"We are pleased with the strong reception our rights offering received from shareholders," said Ivanhoe's Chief Executive Kay Priestly, adding that the project remains on track to process its first ore in the second half of 2012 and begin commercial production in the first half of 2013.
Rio said that it has no plans to buy additional Ivanhoe shares at the moment, although it has the ability to exercise warrants that would allow it boost its shares to 54.4% if desired.
The Anglo-Australian miner, which this year secured majority control of Ivanhoe's board, also has the right to be the first to participate in further equity financing from Ivanhoe up until Oct. 24; it also has anti-dilution rights to make sure it's able to maintain its current stake in the company in the future.
"The purpose of Rio Tinto acquiring additional shares under Ivanhoe's rights offering was to honor its contractual obligations to Ivanhoe and to provide additional funding to Ivanhoe to ensure the timely development of Ivanhoe's Oyu Tolgoi copper-gold mine in Mongolia," it said.
The mine holds some of the world's largest unexploited gold and copper deposits, with estimated reserves of 46 million ounces of gold and 81 billion pounds of copper.
At 1432 GMT, Rio Tinto's shares were up 2.2% or 63 pence at 2,955 pence while Ivanhoe's shares were down 1.6% or 0.14 Canadian dollars at C$8.64.
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