Ivanhoe Mines has secured up to US$4billion from Rio Tinto to fund the completion of the Oyu Tolgoi copper-gold-silver project in southern Mongolia. The new omnibus agreement includes US$1.8 billion in equity financing and will ensure the project through to commercial production and additional expansion. Rio Tinto will also provide additional bridging finance which is being negotiated with multi-national banks.
Ivanhoe’s former chief executive officer Robert Friedland says the series of funding measures is expected to cover all projected capital expenditure requirements for the flagship project during the next five years. “This agreement sets the stage for Oyu Tolgoi’s transition to a major mining operation in coming months. The measure of certainty that Rio Tinto’s financial resources and global industry leadership bring to the realization of our long-cherished Oyu Tolgoi dream is reassuring for the people and government of Mongolia, and for Ivanhoe’s shareholders.
“Some of the world’s largest deposits of copper, gold, silver and molybdenum have been discovered in the South Gobi region. With Rio Tinto’s expanded support, we are counting down to the start-up later this year of what I am sure will quickly grow to become one of the world’s most significant, and successful, mining complexes,” Robert Friedland says.
Under the agreement, Rio Tinto will nominate independent directors to the Ivanhoe board and a new chief executive officer and senior management team. Robert Friedland has since resigned as a member of the Ivanhoe Mines board of directors and as chief executive officer. Six other directors and four other senior management members have also resigned.
The financial commitment will fund the scheduled start of initial production from the open-pit mine during the second half of this year as well as the ramp-up to commercial production early in 2013. The construction of a dedicated, coal-fired power plant and development of the project’s second phase, including expansion of the concentrator’s nameplate capacity to 160,000 tonnes per day and a start of production from the Hugo Drummet underground block-cave mine in 2016, are also included in the funding plan.
Michael Gordon has been named interim chair of the Ivanhoe Mines’ board. “From the beginning of the exploration discoveries in 2001 to today’s advanced-stage development project at Oyu Tolgoi, Robert Friedland and the Ivanhoe team have done an outstanding job of adding value for shareholders. With Ivanhoe now assured of full funding, the new board and management team will share the exciting prospect of building on that legacy and completing Oyu Tolgoi’s transformation into one of the most valuable copper-mining complexes in the world,” he says.