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Rio Tinto wins arbitration challenge to Ivanhoe poison pill provisions

Tom Albanese, CEO of Rio Tinto, during a visit to the Globe and Mail offices in Toronto on April 6, 2011.

Fernando Morales/The Globe and Mail/Fernando Morales/The Globe and Mail

International mining giant Rio Tinto has been successful in its arbitration challenge against certain provisions of a poison pill defence adopted by Ivanhoe Mines Ltd. aimed at preventing an unwanted takeover.

Ivanhoe announced after the close of markets Monday that the decision by the arbitrator involved two aspects of the shareholders rights agreement adopted by the Vancouver-based miner in April 2010.

One of the rulings held that anti-dilution rights granted to Rio Tinto in a private placement agreement with Ivanhoe in 2006 would continue to apply even if Rio Tinto triggered the rights plan by becoming an "acquiring person."

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The arbitrator's decision also addressed the counterclaim that Ivanhoe filed against Rio Tinto alleging it had acted in breach of certain aspects of its obligations under the private placement agreement.

"The arbitrator determined that Rio Tinto had not breached such obligations," Ivanhoe said in its release.

Meanwhile, the company said its rights plan may remain in effect until its scheduled expiry in April, 2013, and would apply to all Ivanhoe Mines' shareholders, "but the exercise of rights . . . will be subject to Rio Tinto's anti-dilution rights."

Rio Tinto initiated the arbitration proceeding after claiming the adoption of the poison pill breached a joint-venture agreement to develop the huge Oyu Tolgoi copper-gold mine in Mongolia.

The mine, which is owned by Ivanhoe and the Mongolian government, is thought to be one of the top three copper and gold mines in the world.

In December 2010, Rio Tinto and Ivanhoe reached an agreement that will see the international mining giant, already Ivanhoe's largest single shareholder, provide billions of dollars in financing and assume management of Oyu Tolgoi.

Rio Tinto committed to invest an additional roughly $1.3-billion in Ivanhoe in the coming months through a rights offering and the exercise of warrants as well as agreed to provide up to $1.8-billion in interim financing.

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The company also has the potential to invest hundreds of millions more in Ivanhoe if it decides to exercise various rights over the next few years.

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