Rio Tinto takes a serving of Entre (June 21, 2005)

Rio Tinto takes a serving of EntreeMining giant Rio Tinto (RTP-N) has agreed to take a 9.9% stake in Entree Gold (ETG-V), with an option to double down.

The major will initially buy 5.7 million units at $2.20 apiece, with another 641,191 available to preserve the interest level if Ivanhoe Mines (IVN-T) exercises its right to buy more shares (around 1.2 million) to maintain its existing 9% interest in Entree. The deal also allows Rio Tinto to participate in any future financings in order to maintain its stake in the junior.

A unit consists of one share accompanied by an A- and B-class warrant; two A warrants are good for an additional Entree share at $2.75 apiece for two years, with two B warrants exercisable for one share at $3 for two years.

The deal also gives Rio Tinto right of first refusal on Entree’s 70-sq.-km Ulziit Uul property in Mongolia. Ulziit Uul is 120 km from the Shivee Tolgoi (Lookout Hill) property and immediately east of Ivanhoe’s Kharmagtai property. Entree is in the midst of a US$900,000 program of deep-probing induced-polarization surveys in anticipation of 2,500 metres worth of drilling slated to begin in August.

Meanwhile, Ivanhoe is earning up to an 80% interest in a 400-sq.-km portion of the Shivee Tolgoi project by spending US$35 million.

Earlier this month, drilling by Ivanhoe returned 608 metres averaging 3.2% copper and 0.8 gram gold per tonne, including 322 metres grading 4.6% copper and 1.1 grams gold from an area known as Copper Flats. The partners say the result represents one of the longest and highest-grade intervals ever encountered in a porphyry copper-gold system.

Hole 8, a 450-metre stepout, yielded 324 metres grading 2.45% copper and 1.2 grams gold.

The partners say the hole indicates that the mineralized system remains strongly developed and open to the north. It also extends, 450 metres northeast of previous drilling, the length of the high-grade Hugo North mineralized system on the Entree-Ivanhoe property.