Rio Tinto and Ivanhoe Mines announced on April 18, 2012, that Rio Tinto would name a new top-management team for Ivanhoe and that a number of directors of the Ivanhoe board would be replaced by Rio Tinto-nominated directors.
The changes reflect Rio Tinto’s 51% ownership position in Ivanhoe, which it obtained in late January 2012. The two companies also signed an agreement under which Rio Tinto will support and provide certain elements of a comprehensive funding package for Ivanhoe that will underpin the development of the company’s Oyu Tolgoi copper-gold project in Mongolia.
Ivanhoe-founder Robert Friedland resigned as company CEO and as a member of its board of directors, and six other directors and four other senior management members also resigned. Kay Priestly, a director of Ivanhoe and CFO of Rio Tinto Copper, was appointed interim CEO, and Catherine Barone, vice president–finance of Ivanhoe, was appointed interim CFO. A new 13-member board was slated to be formed, the majority of whom will be independent directors. Rio Tinto will nominate 11 directors, six of whom will be independent. Friedland will nominate two directors, one of whom will be independent.
The funding package, together with the proceeds from any potential future asset sales by Ivanhoe, is intended to cover total funding required to complete development of the Oyu Tolgoi project. Rio Tinto will provide a standby commitment for the full amount of a $1.8-billion rights offering by Ivanhoe and also will provide $1.5 billion of bridge financing to Ivanhoe, in addition to the $1.8 billion interim funding facility that was agreed in December 2010. Once project financing is in place, both the $1.5 billion of bridge financing and the $1.8 billion interim funding facility will be repaid to Rio Tinto in full.
The funding commitments are intended to support the scheduled start of phase-one production from the Oyu Tolgoi open-pit mine during the second half 2012. Ramp-up to commercial production is scheduled for the first half of 2013. Phase-one work includes operation of the open-pit mine and a 100,000-mt/d concentrator, infrastructure, and a $900-million investment in underground development in preparation for phase two.
Continuing development of Oyu Tolgoi’s second phase will include expansion of concentrator capacity to 160,000 mt/d and start of production of high-grade ore from the Hugo Dummett underground block-cave mine in 2016. Underground production is planned to increase to 54,000 mt/d by 2019, followed by subsequent increases to full production of 85,000 mt/d.
The Oyu Tolgoi project development agreement with the government of Mongolia requires the project to source all of its power requirements from within Mongolia within four years of the start of commercial production. The project will use power imported from China during its initial years of operation.