Rio Tinto Doubles Down On Ivanhoe

Ivanhoe Mines’ (IVN-T, IVN-N) largest publicly traded shareholder wants a bigger piece of the copper pie in Mongolia.

Rio Tinto(RTP-N, RIO-L) — Ivanhoe’s strategic partner at the massive Oyu Tolgoi copper-gold project — is doubling its investment in the Vancouver-based company.

Adding to its 37.1 million Ivanhoe shares, Rio is buying another 46.3 million shares at $8.38 per share, taking its stake to 83.4 million shares, or to 19.7% from 9.9%.

Ivanhoe chairman Robert Friedland remains the junior’s largest shareholder, with 96.9 million shares at last count, worth $1.3 billion at presstime.

This latest cash infusion nets Ivanhoe roughly US$388 million, money that will go towards developing Oyu Tolgoi. The plan is to first mine via an open pit before moving underground for the richer Hugo Dummett deposit.

Widely credited with bringing the heft Ivanhoe needed at the bargaining table with the Mongolian government, Rio Tinto first bought a stake in Ivanhoe in 2006.

At the time, the deal looked like it would help fast-track the signing of a long-term investment agreement with the government.

While it took much longer than many thought, the companies finally announced that such an agreement had been reached on Oct. 6.

The investment agreement paves the way for mine construction, and encouraged Rio to take a greater stake in Ivanhoe, in accordance with parameters laid out in the original deal between the two companies. Rio Tinto can buy as much as 43.1% of Ivanhoe under the agreement.

Rio’s investment will bring Ivanhoe’s cash position to the tidy sum of $725 million.

The investment agreement was a hot topic throughout Mongolian society, as it was widely held as establishing the benchmark for all other mining deals.

The deal gives the government a 34% stake in the mine, as well as a $250-million advance payment against royalties and taxes.

On the latest news on Oct. 13, Ivanhoe shares fell 5¢ to $12.95, while Rio Tinto shares rose US$1.04 to US$182.29.