Ivanhoe Mines and Rio Tinto Sign Omnibus Agreement to Ensure Funding Through to Commercial Production and Additional Expansion at Oyu Tolgoi Copper-Gold-Silver Project
VANCOUVER, BRITISH COLUMBIA — Ivanhoe Mines' (TSX:IVN)(NYSE:IVN)(NASDAQ:IVN) founder Robert Friedland announced today that the company has signed a binding memorandum of agreement with majority shareholder Rio Tinto that establishes Rio Tinto's support for a series of funding measures expected to cover all projected capital requirements for Ivanhoe's flagship Oyu Tolgoi Project in southern Mongolia for the next four to five years.
"This agreement sets the stage for the Oyu Tolgoi Project's transition to a major mining operation in coming months," Mr. Friedland said.
"The measure of certainty that Rio Tinto's financial resources and global industry leadership bring to the realization of our long-cherished Oyu Tolgoi dream is reassuring for the people and government of Mongolia, and for Ivanhoe's shareholders.
"We were attracted to Mongolia's new horizons for resources opportunities 17 years ago. It now is a fact of Mongolia's modern history that the men and women of Oyu Tolgoi LLC and Ivanhoe Mines discovered some of the world's largest deposits of copper, gold, silver and molybdenum in the South Gobi Region. And today, with Rio Tinto's expanded support, we are counting down to the start-up later this year of what I am sure will quickly grow to become one of the world's most significant, and successful, mining complexes," Mr. Friedland added.
"For generations to come, this remarkable, unfolding story will continue to contribute so much to Mongolia's economic growth, enhance its reputation as a destination for international investment and infuse with well-placed confidence the personal aspirations and national pride of so many Mongolians."
In accordance with terms of the agreement between Ivanhoe Mines and Rio Tinto, Mr. Friedland resigned yesterday as a member of the Ivanhoe Mines Board of Directors and as Chief Executive Officer. Six other directors and four other senior management members also resigned yesterday.
Comprehensive financial plan to launch Oyu Tolgoi as world-scale copper-gold miner
Mr. Friedland said that the agreement, negotiated by a committee of Ivanhoe Mines' independent directors, contains a comprehensive financing plan structured to secure Rio Tinto's direct participation in, and support for, funding for planned developments at Oyu Tolgoi.
"All members of the Ivanhoe Mines Board of Directors have been acutely aware of their paramount duties to ensure that the interests of all shareholders are adequately protected. This now has been accomplished with the comprehensive plan and we can be confident that funding will be available to keep Oyu Tolgoi on schedule and carry it through, and well beyond, the start of commercial production."
Rio Tinto's commitments will support:-- The scheduled start of initial production from the open-pit mine during
the second half of this year.
-- The ramp-up to commercial production during the first half of 2013 as
part of Oyu Tolgoi's first phase of development. Phase-one work includes
operation of the open-pit mine and a 100,000-tonne-per-day nameplate-
capacity concentrator, infrastructure and a US$900 million investment in
underground development in preparation for phase two.
-- The construction of a dedicated, coal-fired electrical power plant in
Mongolia. The Investment Agreement requires Oyu Tolgoi to source all of
its power requirements from within Mongolia within four years of the
start of commercial production; the project plans to use power imported
from China during its initial years of operation.
-- Continuing development of Oyu Tolgoi's second phase, including expansion
of the concentrator's nameplate capacity to 160,000 tonnes per day and a
start of production of high-grade ore from the Hugo Dummett underground
block-cave mine in 2016 - which will increase to 54,000 tonnes per day
by 2019, with subsequent increases to full production of 85,000 tonnes
per day.
Assurances for financing measures provided by Rio Tinto
Rio Tinto is committed to the following steps:-- Rio Tinto will provide full support for completion of an Oyu Tolgoi
project-finance package of US$3 to $4 billion to be provided by third-
party lenders. The package is the core component of the new
comprehensive financial plan. Ivanhoe Mines has been negotiating project
financing with a consortium of national and international institutions
and banks since 2010. Ivanhoe Mines and Rio Tinto now have set a goal of
completing a project-finance arrangement by the end of this year. Rio
Tinto may choose to advance senior loans to Oyu Tolgoi LLC as an
alternative to, or in addition to, the project-finance package, on terms
no less favourable than those available through the international
financial institutions or commercial banks.
-- A member of the Rio Tinto Group will enter into a completion support
agreement with Ivanhoe Mines and the project-finance lenders to cover
the Oyu Tolgoi project-finance package now under negotiation. This
measure is expected to provide significantly greater certainty that
funds will be received. In exchange, Ivanhoe Mines will pay Rio Tinto an
annual fee of 2.5% on the outstanding project-finance debt until project
completion is achieved.
-- Rio Tinto will provide an immediate, additional bridge-funding facility
of up to US$1.5 billion to help ensure uninterrupted progress on the
completion of construction of the first phase of Oyu Tolgoi's
development, which was 77.9% complete at the end of March. As part of an
earlier funding agreement in December 2010, Rio Tinto provided an
interim funding facility of US$1.8 billion, which Ivanhoe Mines now has
drawn down by approximately $1.3 billion. The interim financing and
bridge-funding facilities will be repaid from the proceeds of the
project-finance package and an equity financing.
-- Rio Tinto also will fully support an equity financing with a goal of
US$1.8 billion in gross proceeds.
In addition, Ivanhoe Mines is engaged in active and detailed negotiations on potential divestments involving its subsidiary interests, which would supplement the comprehensive financing plan that has been arranged with Rio Tinto.
Transition will include restructuring of the Ivanhoe Mines Board of Directors and appointment of a new senior management team
In paving the way for Oyu Tolgoi's transition to a miner, Ivanhoe Mines and Rio Tinto have reached amicable agreement on the following corporate governance and management changes:-- The Ivanhoe Board of Directors has been reduced to 13 seats from the
present 14.
-- Seven directors - Marc Faber, Edward Flood, Robert Friedland, David
Korbin, Livia Mahler, Tracy Stevenson and Dan Westbrook - have resigned
from the Ivanhoe board, effective immediately. They are to be replaced
by six Rio Tinto nominees, four of whom will be independent directors,
in changes expected to take place within five business days.
-- A majority of the new, 13-person Ivanhoe board will be independent
directors until at least the earlier of January 18, 2014, or the date on
which Ivanhoe ceases to be a reporting issuer under Canadian securities
laws. Two directors, at least one an independent, will be nominated by
Mr. Friedland for as long as he continues to own at least 10% of
Ivanhoe's outstanding shares.
-- The Ivanhoe Mines senior management team has resigned, effective
immediately. The outgoing senior management team consisted of Chief
Executive Officer Robert Friedland, who founded Ivanhoe Mines in 1994,
President John Macken, Chief Financial Officer Tony Giardini, Deputy
Chairman Peter Meredith and Executive Vice President Sam Riggall. The
senior managers also have resigned from management posts at Ivanhoe
Mines' subsidiary companies.
-- In one of a series of interim appointments, Michael Gordon has become
Interim Chair of the Ivanhoe Mines Board of Directors. David Huberman,
Robert Holland and Andrew Harding will constitute the Corporate
Governance and Nominations Committee, which will receive and process
nominations and make recommendations to the full board on candidates for
the six board vacancies, and also for the positions of Chief Executive
Officer and Chief Financial Officer.
-- Kay Priestly, Chief Financial Officer of Rio Tinto's copper group and a
director of Ivanhoe Mines, has been appointed Ivanhoe's Interim Chief
Executive Officer; Catherine Barone, Ivanhoe's Vice President, Finance,
has been appointed Interim Chief Financial Officer. A new CEO and CFO
will be nominated by Rio Tinto for approval by the reconstituted board
of directors within the next five business days.
Mr. Gordon, the Interim Chair and a member of the Ivanhoe Mines board for the past 18 months, acknowledged the contributions and achievements of the outgoing directors and management executives.
"From the beginning of the exploration discoveries in 2001 to today's advanced-stage development project at Oyu Tolgoi, Robert Friedland and the Ivanhoe team have done an outstanding job of adding value for shareholders. With Ivanhoe now assured of full funding, the new board and management team will share the exciting prospect of building on that legacy and completing Oyu Tolgoi's transformation into one of the most valuable copper-mining complexes in the world."
Ivanhoe Mines to issue Series 'D' warrants to Rio Tinto
In conjunction with the equity financing and the overall package of extending interim lines of credit and completion guarantees of support, Ivanhoe Mines will issue 55 million Series 'D' share-purchase warrants to Rio Tinto.
Each warrant will be exercisable to purchase one Ivanhoe share at US$12.79 at any time and from time to time during a three-year period. The price of the warrants is based on the volume-weighted average price of the Ivanhoe shares on the New York Stock Exchange on the five trading days preceding the date of the companies' memorandum of understanding.
Conference call with investors to discuss financial plan
Ms. Priestly, Interim CEO of Ivanhoe Mines, and Mr. Gordon, Interim Chairman of the Board, will conduct a conference call and webcast beginning at 4:30 p.m. EDT (1:30 p.m. PDT) on Wednesday, April 18, to discuss details of the comprehensive financial plan with investors following the close of trading on North American stock exchanges.
The conference call presentation may be accessed by dialing 1-866-225-0198 in Canada and the United States, or 1-416-340-8061 in the Toronto area and internationally. A simultaneous webcast of the conference call will be provided through www.ivanhoemines.com. The conference call will be archived for later playback until April 25, 2012 and may be accessed by dialing 1-800-408-3053 or 1-905-694-9451 and entering the pass code 3291894.
"This agreement sets the stage for the Oyu Tolgoi Project's transition to a major mining operation in coming months," Mr. Friedland said.
"The measure of certainty that Rio Tinto's financial resources and global industry leadership bring to the realization of our long-cherished Oyu Tolgoi dream is reassuring for the people and government of Mongolia, and for Ivanhoe's shareholders.
"We were attracted to Mongolia's new horizons for resources opportunities 17 years ago. It now is a fact of Mongolia's modern history that the men and women of Oyu Tolgoi LLC and Ivanhoe Mines discovered some of the world's largest deposits of copper, gold, silver and molybdenum in the South Gobi Region. And today, with Rio Tinto's expanded support, we are counting down to the start-up later this year of what I am sure will quickly grow to become one of the world's most significant, and successful, mining complexes," Mr. Friedland added.
"For generations to come, this remarkable, unfolding story will continue to contribute so much to Mongolia's economic growth, enhance its reputation as a destination for international investment and infuse with well-placed confidence the personal aspirations and national pride of so many Mongolians."
In accordance with terms of the agreement between Ivanhoe Mines and Rio Tinto, Mr. Friedland resigned yesterday as a member of the Ivanhoe Mines Board of Directors and as Chief Executive Officer. Six other directors and four other senior management members also resigned yesterday.
Comprehensive financial plan to launch Oyu Tolgoi as world-scale copper-gold miner
Mr. Friedland said that the agreement, negotiated by a committee of Ivanhoe Mines' independent directors, contains a comprehensive financing plan structured to secure Rio Tinto's direct participation in, and support for, funding for planned developments at Oyu Tolgoi.
"All members of the Ivanhoe Mines Board of Directors have been acutely aware of their paramount duties to ensure that the interests of all shareholders are adequately protected. This now has been accomplished with the comprehensive plan and we can be confident that funding will be available to keep Oyu Tolgoi on schedule and carry it through, and well beyond, the start of commercial production."
Rio Tinto's commitments will support:-- The scheduled start of initial production from the open-pit mine during
the second half of this year.
-- The ramp-up to commercial production during the first half of 2013 as
part of Oyu Tolgoi's first phase of development. Phase-one work includes
operation of the open-pit mine and a 100,000-tonne-per-day nameplate-
capacity concentrator, infrastructure and a US$900 million investment in
underground development in preparation for phase two.
-- The construction of a dedicated, coal-fired electrical power plant in
Mongolia. The Investment Agreement requires Oyu Tolgoi to source all of
its power requirements from within Mongolia within four years of the
start of commercial production; the project plans to use power imported
from China during its initial years of operation.
-- Continuing development of Oyu Tolgoi's second phase, including expansion
of the concentrator's nameplate capacity to 160,000 tonnes per day and a
start of production of high-grade ore from the Hugo Dummett underground
block-cave mine in 2016 - which will increase to 54,000 tonnes per day
by 2019, with subsequent increases to full production of 85,000 tonnes
per day.
Assurances for financing measures provided by Rio Tinto
Rio Tinto is committed to the following steps:-- Rio Tinto will provide full support for completion of an Oyu Tolgoi
project-finance package of US$3 to $4 billion to be provided by third-
party lenders. The package is the core component of the new
comprehensive financial plan. Ivanhoe Mines has been negotiating project
financing with a consortium of national and international institutions
and banks since 2010. Ivanhoe Mines and Rio Tinto now have set a goal of
completing a project-finance arrangement by the end of this year. Rio
Tinto may choose to advance senior loans to Oyu Tolgoi LLC as an
alternative to, or in addition to, the project-finance package, on terms
no less favourable than those available through the international
financial institutions or commercial banks.
-- A member of the Rio Tinto Group will enter into a completion support
agreement with Ivanhoe Mines and the project-finance lenders to cover
the Oyu Tolgoi project-finance package now under negotiation. This
measure is expected to provide significantly greater certainty that
funds will be received. In exchange, Ivanhoe Mines will pay Rio Tinto an
annual fee of 2.5% on the outstanding project-finance debt until project
completion is achieved.
-- Rio Tinto will provide an immediate, additional bridge-funding facility
of up to US$1.5 billion to help ensure uninterrupted progress on the
completion of construction of the first phase of Oyu Tolgoi's
development, which was 77.9% complete at the end of March. As part of an
earlier funding agreement in December 2010, Rio Tinto provided an
interim funding facility of US$1.8 billion, which Ivanhoe Mines now has
drawn down by approximately $1.3 billion. The interim financing and
bridge-funding facilities will be repaid from the proceeds of the
project-finance package and an equity financing.
-- Rio Tinto also will fully support an equity financing with a goal of
US$1.8 billion in gross proceeds.
In addition, Ivanhoe Mines is engaged in active and detailed negotiations on potential divestments involving its subsidiary interests, which would supplement the comprehensive financing plan that has been arranged with Rio Tinto.
Transition will include restructuring of the Ivanhoe Mines Board of Directors and appointment of a new senior management team
In paving the way for Oyu Tolgoi's transition to a miner, Ivanhoe Mines and Rio Tinto have reached amicable agreement on the following corporate governance and management changes:-- The Ivanhoe Board of Directors has been reduced to 13 seats from the
present 14.
-- Seven directors - Marc Faber, Edward Flood, Robert Friedland, David
Korbin, Livia Mahler, Tracy Stevenson and Dan Westbrook - have resigned
from the Ivanhoe board, effective immediately. They are to be replaced
by six Rio Tinto nominees, four of whom will be independent directors,
in changes expected to take place within five business days.
-- A majority of the new, 13-person Ivanhoe board will be independent
directors until at least the earlier of January 18, 2014, or the date on
which Ivanhoe ceases to be a reporting issuer under Canadian securities
laws. Two directors, at least one an independent, will be nominated by
Mr. Friedland for as long as he continues to own at least 10% of
Ivanhoe's outstanding shares.
-- The Ivanhoe Mines senior management team has resigned, effective
immediately. The outgoing senior management team consisted of Chief
Executive Officer Robert Friedland, who founded Ivanhoe Mines in 1994,
President John Macken, Chief Financial Officer Tony Giardini, Deputy
Chairman Peter Meredith and Executive Vice President Sam Riggall. The
senior managers also have resigned from management posts at Ivanhoe
Mines' subsidiary companies.
-- In one of a series of interim appointments, Michael Gordon has become
Interim Chair of the Ivanhoe Mines Board of Directors. David Huberman,
Robert Holland and Andrew Harding will constitute the Corporate
Governance and Nominations Committee, which will receive and process
nominations and make recommendations to the full board on candidates for
the six board vacancies, and also for the positions of Chief Executive
Officer and Chief Financial Officer.
-- Kay Priestly, Chief Financial Officer of Rio Tinto's copper group and a
director of Ivanhoe Mines, has been appointed Ivanhoe's Interim Chief
Executive Officer; Catherine Barone, Ivanhoe's Vice President, Finance,
has been appointed Interim Chief Financial Officer. A new CEO and CFO
will be nominated by Rio Tinto for approval by the reconstituted board
of directors within the next five business days.
Mr. Gordon, the Interim Chair and a member of the Ivanhoe Mines board for the past 18 months, acknowledged the contributions and achievements of the outgoing directors and management executives.
"From the beginning of the exploration discoveries in 2001 to today's advanced-stage development project at Oyu Tolgoi, Robert Friedland and the Ivanhoe team have done an outstanding job of adding value for shareholders. With Ivanhoe now assured of full funding, the new board and management team will share the exciting prospect of building on that legacy and completing Oyu Tolgoi's transformation into one of the most valuable copper-mining complexes in the world."
Ivanhoe Mines to issue Series 'D' warrants to Rio Tinto
In conjunction with the equity financing and the overall package of extending interim lines of credit and completion guarantees of support, Ivanhoe Mines will issue 55 million Series 'D' share-purchase warrants to Rio Tinto.
Each warrant will be exercisable to purchase one Ivanhoe share at US$12.79 at any time and from time to time during a three-year period. The price of the warrants is based on the volume-weighted average price of the Ivanhoe shares on the New York Stock Exchange on the five trading days preceding the date of the companies' memorandum of understanding.
Conference call with investors to discuss financial plan
Ms. Priestly, Interim CEO of Ivanhoe Mines, and Mr. Gordon, Interim Chairman of the Board, will conduct a conference call and webcast beginning at 4:30 p.m. EDT (1:30 p.m. PDT) on Wednesday, April 18, to discuss details of the comprehensive financial plan with investors following the close of trading on North American stock exchanges.
The conference call presentation may be accessed by dialing 1-866-225-0198 in Canada and the United States, or 1-416-340-8061 in the Toronto area and internationally. A simultaneous webcast of the conference call will be provided through www.ivanhoemines.com. The conference call will be archived for later playback until April 25, 2012 and may be accessed by dialing 1-800-408-3053 or 1-905-694-9451 and entering the pass code 3291894.
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