Rio Tinto Takes Over Oyu Tolgoi Gold-Copper Mine in Mongolia

azocommodity.com - Rio Tinto will take over the management of Oyu Tolgoi gold and copper mine project in Mongolia. Oyu Tolgoi is one of gold-copper mines that has deposits of gold and copper mine in the world. Rio Tinto will invest $ 3.7 billion on the mining company Ivanhoe Mines in order to take over project management of mining Oyu Tolgoi gold and copper.

Rio agreed to lend Ivanhoe $1.8 billion and will exercise share warrants, participate in Ivanhoe?s planned $1.2 billion rights offer and buy outstanding shares, the London-based said in a statement. The deal will allow Rio to raise its stake in Ivanhoe to 49 percent from 35 percent, the Vancouver-based mine operator said separately.

The interim loan from Rio will fund development of the mine through to production, Friedland said yesterday in a statement. Both companies are seeking to complete talks on a long-term project finance package of $3.6 billion to replace the interim loan in the first half of 2011, Ivanhoe said.

In addition to buying new stock as part of Ivanhoe?s rights offer and exercising warrants, Rio will buy 20 million shares at current market prices from Citibank Inc. and Friedland.

Ivanhoe, which spent more than six years negotiating an accord with Mongolia for Oyu Tolgoi, said in January it hired Citigroup to study financing options including debt and equity offerings and asset sales. The company said on Oct. 18 it planned a rights offer, which Rio said it might seek to block.

Oyu Tolgoi holds estimated resources of 37 million metric tons of copper and 1,300 tons of gold, allowing the mine to operate for almost 60 years, Rio said. Mongolian President Tsakhiagiin Elbegdorj said last year the project may operate for 30 years and generate $30 billion to $50 billion of revenue. Output is scheduled to begin next year.

Oyu Tolgoi, which means ?turquoise hill? in Mongolian, lies about 80 kilometers (50 miles) north of the Chinese border. The mine will produce an average 1.2 billion pounds of copper and 650,000 ounces of gold a year for the first decade, according to Ivanhoe.

Rio Tinto agreed to buy 9.95 percent of Ivanhoe for $303 million in October 2006 and acquired the right to increase its stake by converting a credit line and outstanding warrants into equity. Before yesterday?s accord, Friedland owned 18.3 percent.