Workers are seen at 551 meters below the surface of the earth while sinking an exploration shaft at the Oyu Tolgoi copper-gold project in southern Mongolia.STRINGER/MONGOLIA/Reuters
Ivanhoe Mines announced Monday it plans a conditional rights share offering in move to raise US$800 million to $1-billion (U.S.) to develop the Oyu Tolgoi copper-gold mine in Mongolia.
Full terms of the offering were not disclosed, but the company said in a news release that each new common share of Ivanhoe Mines available for purchase by rights holders will be at a discount to the company's current market price.
"Subject to applicable law, all Ivanhoe Mines shareholders will have the choice of deciding whether to participate and, by doing so, to maintain their existing levels of ownership," the company said.
Ivanhoe founder and CEO Robert Friedland, the company's largest individual shareholder, intends to participate in the rights offering to the maximum permitted level to maintain his 18.3-per-cent stake, it said.
The Ivanhoe Mines board unanimously approved the planned offering Oct. 15 and a preliminary prospectus has been filed with regulators in Canada and the United States. Full details of the offering, including pricing, are to be disclosed in a final prospectus.
Shareholders who do not wish to exercise their rights to buy new common shares under the plan will have the option of selling the rights through the Toronto Stock Exchange, the New York Stock Exchange or the Nasdaq, where the rights will trade for at least 21 days.
"The goal of the offering is to ensure that Ivanhoe Mines remains in a strong financial position to bring the Oyu Tolgoi copper-gold mining complex into operation ahead of schedule in 2012 and to reinforce the company's independence to pursue strategic alternatives to protect and enhance shareholder value," Mr. Friedland said.
The company said discussions were progressing with a group of international financial institutions on a separate debt-financing package that is expected to close in the first half of 2011.
The proposed multibillion-dollar package is being considered by a core lending group comprised of the European Bank for Reconstruction and Development, the International Finance Corporation, Export Development Canada, BNP Paribas and Standard Chartered.
"In the meantime, the Ivanhoe Mines board of directors has chosen to proceed with a rights offering as the best of several available alternative measures to help secure the independence and flexibility of the company to maintain the accelerated construction schedule at Oyu Tolgoi and to establish a financing bridge to the planned debt package," Mr. Friedland said.
Rio Tinto, which currently owns 34.9 per cent of Ivanhoe's common shares, "will be fully entitled to exercise its rights in the offering announced today," Ivanhoe said.
However, it said the company believes that the rights offering is "exempt from Rio Tinto's right of first offer to acquire shares issued by Ivanhoe Mines under terms of Ivanhoe's 2006 five-year private-placement agreement with Rio Tinto."
Ivanhoe Mines, an international mining company with operations focused in the Asia-Pacific region, has assets that include the company's 66 per cent in Oyu Tolgoi, a 57 per cent interest in Mongolian coal miner SouthGobi Resources (TSX: SGQ), a 62 per cent interest in Ivanhoe Australia, a copper-gold-uranium-molybdenum-rhenium exploration and development company, and a 50 per cent interest in Altynalmas Gold Ltd., a private company developing the Kyzyl gold project in Kazakhstan.