A Battle for Mongolia’s Copper Lode – by Alistair MacDonald (Wall Street Journal – February 22, 2012)


Billionaire Friedland on Defensive as Rio Tinto Grabs Controlling Stake in His Ivanhoe Mines.

TORONTO—Billionaire entrepreneur Robert Friedland built his fortune learning how to gain advantage over some of the world’s largest and most powerful mining companies. Today Mr. Friedland is finding that dealing with giants can be tricky sport.

At issue is ownership of resources buried deep in the Mongolian desert that are among the world’s largest unexploited gold and copper deposits—a development with estimated reserves of 81 billion pounds of copper and 46 million ounces of gold.

Mr. Friedland, the chief executive of Ivanhoe Mines Ltd. and one of the sector’s most colorful moguls, is on the back foot in a squabble with industry giant Rio Tinto PLC over Oyu Tolgoi, Ivanhoe’s massive copper-and-gold project in Mongolia.

Last month, Rio Tinto increased its ownership in Ivanhoe to 51%, a stake that gives it effective control of the Canadian miner without having paid a premium to other shareholders—a move that Ivanhoe CEO and founder Mr. Friedland had fought to prevent.

Now in charge, Rio wants to hold on to Oyu Tolgoi but spin off or sell Ivanhoe’s other mining assets, according to people familiar with the matter.

One of the people said, however, that Rio is in no hurry to make such a move. For a start, the Oyu Tolgoi project still has to overcome some key hurdles, including the conclusion of power-supply negotiations with Chinese authorities.

The intentions of Mr. Friedland, who holds a 13.7% stake in Ivanhoe, are less clear. According to people familiar with the matter, he is now looking to negotiate with Rio over an exit for himself and Ivanhoe’s other shareholders.

If Mr. Friedland wanted to, he could also hold on to the bitter end. Canadian rules require a potential acquirer to own over 90% of a company’s shares before forcing a full takeover, which Rio would be unable to do if Mr. Friedland maintains his current stake.

The self-made, 61-year-old billionaire has a colorful past that takes in student activism against the Vietnam War, a youthful friendship with late Apple Inc. co-founder Steve Jobs and some of the sector’s potentially most-lucrative discoveries in recent decades. It has also included controversial forays such as Ivanhoe’s past venture in military-run Myanmar.

Mr. Friedland, who currently spends much of his time in Singapore, declined to comment for this article. An Ivanhoe spokesman said Rio’s “slim” 51% controlling interest “has not curtailed Mr. Friedland’s long-standing and active service to Ivanhoe Mines.”

The Ivanhoe spokesman said the company’s future is for all the company’s shareholders to decide, not just Rio and Mr. Friedland. The company is based in Vancouver and listed in Toronto and New York.

Mr. Friedland, who spent much of the 1970s traveling in India, where he studied Sanskrit, Hindu culture and Buddhism, once said he became interested in mining after stumbling upon an abandoned gold mine on property he was developing for a timber venture with Mr. Jobs, whom he met at Reed College in Portland, Ore., in the early 1970s.

Mr. Friedland came to prominence in the 1990s with a large Canadian nickel-deposit find. Through another company he controlled at the time, Diamond Fields Resources Inc., he sold that off to Canada’s Inco Ltd. for about $3 billion, after stoking a bidding war.

For the rest of this article, please go to the Wall Street Journal website: http://www.wallstreetjournal.de/article/SB10001424052970204059804577225512807094878.html