12th Sep 2007 07:03
Rio Tinto PLC12 September 2007 Rio Tinto provides US$350 million convertible credit facility to Ivanhoe Mines Rio Tinto will provide Ivanhoe Mines Ltd with a convertible credit facility ofUS$350 million for interim financing for the Oyu Tolgoi copper-gold complex inMongolia's South Gobi region. The credit facility is directed at maintainingthe momentum of mine development activities at Oyu Tolgoi while Ivanhoe and RioTinto continue to engage in finalising an Investment Agreement between Ivanhoeand the state of Mongolia. Rio Tinto expects that in the absence of a satisfactory Investment Agreement itis likely that the rate of ongoing investment in the project will need to bescaled down significantly. Bret Clayton, chief executive of Rio Tinto Copper, said, "The provision of thisfacility allows Rio Tinto to raise its shareholding in Ivanhoe and the OyuTolgoi project while at the same time allowing the project to continueconstruction as the Investment Agreement goes through final parliamentaryapproval. "An equitable Investment Agreement is essential if Mongolia is to attractsustainable international mining investment. This will encourage furtherexploration, development, employment and skill training programmes," he said. Rio Tinto invested approximately US$303 million in October 2006 to take aninitial stake of 9.95 per cent in Ivanhoe Mines under the terms of a PlacementAgreement. A second 9.95 per cent holding, valued at approximately US$388million, will be taken up under the terms of the Placement Agreement at theconclusion of a satisfactory long term Investment Agreement with the MongolianGovernment. As part of the interim funding agreement, Rio Tinto will increase its presenceand involvement in Mongolia and the Oyu Tolgoi project. This agreement alsoraises both Rio Tinto's fixed price conversion and warrants from 33.35 per centup to 42.2 per cent and restrictions on total Ivanhoe share acquisitions from amaximum of 40 per cent under the Placement Agreement to 46.65 per cent. Structure of the Deal The US$350 million credit facility matures on September 12, 2010. Funds borrowedunder the credit facility, together with up to US$108 million in interest, areconvertible into up to 45,800,000 common shares of Ivanhoe at a price ofUS$10.00, per share. Ivanhoe will grant to Rio Tinto on the first funding date(which is expected to occur during October) warrants to acquire an additional35,000,000 common shares of Ivanhoe at a price of US$10.00 per share for aperiod of five years and which may be exercised pro rata with funds borrowed byIvanhoe under the credit facility. If Rio Tinto were to exercise all possible conversions and warrants, it wouldhold approximately 256,247,400 common shares of Ivanhoe acquired through fixedprice mechanisms representing 42.2 per cent of Ivanhoe's common shares on afully diluted basis (43.1 per cent undiluted). In addition, Rio Tinto will now have the right to appoint the Chairman of theTechnical Committee overseeing development and operation of the Oyu Tolgoiproject within three years of the Placement Agreement (rather than the fiveyears as initially agreed in the Placement Agreement) conditional upon firstdraw down under the facility. Rio Tinto has no present intention of acquiring other securities of Ivanhoe,except as regards its right to acquire additional securities so as to maintainits proportional equity interest in the future, or of disposing of any of thesecurities of Ivanhoe which it holds. Depending upon its evaluation ofIvanhoe's business, prospects and financial condition, the market for Ivanhoe'ssecurities, general economic and tax conditions and other factors, Rio Tinto mayacquire additional securities of Ivanhoe or sell some or all of the securitiesit holds. Mongolian Investment Agreement The draft Investment Agreement that was completed by the Mongolian Government'sWorking Group and the negotiating team for Ivanhoe Mines and Rio Tinto in Apriland reviewed by the Cabinet in June is currently before Mongolia's State GreatHural (National Parliament). The draft agreement is being reviewed by a workinggroup comprised of Members of Parliament from the parliamentary StandingCommittee on the Economy, which is expected to report to Parliament's autumnsession this year. The parliamentary review and approval are the final steps tocomplete the Investment Agreement process that started more than eight monthsago. For further information, or to obtain a copy of Rio Tinto's Early Warning Reportonce it is filed with the Canadian securities regulators, please contact: Media Relations, London Media Relations, AustraliaChristina Mills Ian HeadOffice: +44 (0) 20 8080 1306 Office: +61 (0) 3 9283 3620Mobile: +44 (0) 7825 275 605 Mobile: +61 (0) 408 360 101 Nick Cobban Amanda BuckleyOffice: +44 (0) 20 8080 1305 Office: +61 (0) 3 9283 3627Mobile: +44 (0) 7920 041 003 Mobile: +61 (0) 419 801 349 Investor Relations, London Investor Relations, AustraliaNigel Jones Dave SkinnerOffice: +44 (0) 20 7753 2401 Office: +61 (0) 3 9283 3628Mobile: +44 (0) 7917 227 365 Mobile: +61 (0) 408 335 309 David OvingtonOffice: +44 (0) 20 7753 2326Mobile: +44 (0) 7920 010 978 Email: [email protected] Website: www.riotinto.com High resolution photographs available at: www.newscast.co.uk This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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