By The Associated Press
Tuesday, October 13, 2009
Rio Tinto PLC said Tuesday it will increase its stake in Canada's Ivanhoe Mines Ltd. to 19.7 percent after the pair last week signed a deal with the Mongolian government to develop a $4 billion gold and copper mine.
Rio Tinto said it will complete the second tranche of its investment — consisting of 46.3 million shares at a subscription price of $8.38 each — raising its holding in Ivanhoe from the current 9.9 percent.
The Oyu Tolgoi mine in the Gobi desert is expected to start production in 2013, the company said in a statement.
"This investment will allow us to work with the Government of Mongolia to progress the development of Oyu Tolgoi as quickly as possible," said Bret Clayton, chief executive of Rio Tinto's Copper and Diamonds Group.
The deal was renegotiated repeatedly after opponents complained it shortchanged Mongolia. Parliament had to repeal a windfall profits tax in August before London-based Rio Tinto Ltd. and Ivanhoe Mines Ltd. would agree to go ahead.
Mongolia will own 34 percent of the mine and receive a $250 million advance payment against royalties and taxes under the agreement signed by its ministers for finance, mining and the environment and executives of Rio and Ivanhoe. It calls for total investment of $4 billion.
Under the deal, the government can buy shares to raise its stake to 50 percent after 30 years once the miners recoup their initial investment.