An Invanhoe Mines exploration camp at the Oyu Tolgoi project in Mongolia
Global mining giant Rio Tinto has increased its ownership in Ivanhoe Mines to 34.9 per cent after the conversion of a credit facility into shares.
Ivanhoe, which is currently focused on the Oyu Tolgoi copper-gold mine in Mongolia, said Monday it converted a maturing $350-million (U.S.) credit facility plus interest of $50.8-million into about 40.1 million shares, increasing Rio Tinto's stake in the company to 34.9 per cent from 29.6 per cent.
London-based Rio Tinto also got share-purchase warrants to buy another 35 million Ivanhoe shares at $10 each until October, 2012.
Rio Tinto's total cash investment in Vancouver-based Ivanhoe totals $1.73-billion so far and could increase to about $2.5-billion if all of its financing options are exercised.
Oyu Tolgoi, which is jointly owned by Ivanhoe and the Mongolian government, is thought to be one of the top three copper and gold mines in the world. Rio Tinto has an indirect ownership interest in the mine through its stake in Ivanhoe, although the company has expressed interest in converting its equity into a direct stake.
Rio Tinto has already initiated an arbitration proceeding against Ivanhoe for its adoption of a so-called "poison pill," which it says breaches the companies' joint-venture agreement.
Poison pills are designed to protect companies from hostile or creeping takeovers by allowing them to flood the market with shares in the face of a hostile bid, making a takeover far more expensive than it would be otherwise.
Ivanhoe's is triggered when any new investor acquires more than 20 per cent of the company's outstanding shares. Rio Tinto, which now owns 34.9 per cent of Ivanhoe, would trigger the poison pill if it acquires more than 46.7 per cent as permitted by a prior agreement.
Ivanhoe also owns 57 per cent of Mongolian coal miner SouthGobi Resources and a 63 per cent interest in Ivanhoe Australia as well as a half stake in privately held Altynalmas Gold, which is developing the Kyzyl gold project in Kazakhstan.