Ivanhoe Mines Ltd. recently reached an agreement under which Rio Tinto has agreed to support and provide certain elements of a comprehensive funding package that will underpin the development of the Oyu Tolgoi copper-gold mine in Mongolia. Rio Tinto, which currently owns 51% of Ivanhoe, will replace a number of the directors on the Ivanhoe board with Rio Tinto-nominated directors and also nominate a new management team.

The financing package, together with the proceeds from any potential future asset sales by Ivanhoe, are intended to cover Ivanhoe’s total funding needs to complete the development of Oyu Tolgoi. Rio Tinto will support a $1.8 billion equity financing by Ivanhoe. Rio Tinto will also 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.

Rio Tinto said it remains committed to continue working with Ivanhoe to secure project financing for the Oyu Tolgoi project and has agreed to provide a guarantee of certain obligations of Ivanhoe under the project financing. 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.

Under the agreement, a new 13-member board will be formed, the majority of which will be independent directors comprising 11 Rio Tinto-nominated directors, six of which will be independent; and two directors nominated by Robert Friedland, one of which will be independent. There will be an interim board in place until the new board is formed. Seven Ivanhoe board directors will step down immediately. David Huberman will step down from his role as chairman but continue to serve as a board member. Michael Gordon has been appointed as interim chairman pending the formation of the new board.

Friedland has stepped down from the board and from his role as CEO of Ivanhoe. In addition, the CFO and certain other senior executives of Ivanhoe have stepped down. Kay Priestly, a director of Ivanhoe and CFO of Rio Tinto Copper, has been appointed interim CEO and Catherine Barone, vice president, corporate controller of Ivanhoe, has been appointed interim CFO.

“Since 2006, Rio Tinto has provided funding of $3.5 billion to Ivanhoe for the development of Oyu Tolgoi,” said Rio Tinto Copper Chief Executive Andrew Harding. “This agreement provides future financial certainty for Ivanhoe and stability for the timely development of Oyu Tolgoi. We will also undertake a strategic review of Ivanhoe’s assets with a view to maximizing value.

“Working with our partners in Mongolia, we are dedicated to meeting our target of starting commercial production from Oyu Tolgoi in the first half of 2013 and bringing the benefits of the mine to the people of Mongolia,” said Harding.