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After running out of options in a multi-year chess battle with Rio Tinto Ltd., there was nothing left for Robert Friedland to do but walk away.
In doing so, he leaves behind a $10-billion company that he built from scratch, and the satisfaction that he defied the skeptics and developed a mine in a country that very few investors believed in.
In short, Ivanhoe Mines Ltd. was another big win for Mr. Friedland, though his involvement ends with a creeping takeover instead of the premium, all-cash bid that investors have come to expect from Friedland stocks.
Mr. Friedland resigned from Ivanhoe Wednesday, as did the entire management team and six other board members that were not appointed by Rio Tinto. The move, which is part of a sweeping agreement between the two companies, paves the way for Rio to take control of all aspects of the giant Oyu Tolgoi project in Mongolia.
A shakeup of this nature had been anticipated by investors ever since Rio boosted its stake in Vancouver-based Ivanhoe to 51% in January.
It was largely about money. Ivanhoe needed billions of dollars of capital over the next several years to bring Oyu Tolgoi to full production; the estimated capital cost of the project is US$13.2-billion, including US$6-billion to first production. The copper-gold project was simply becoming too big and too complex for a company as small as Ivanhoe to manage in the long term.
Rio Tinto offered to fix those problems by ensuring funding for the project to move ahead. The logical move for Mr. Friedland’s team was to sign that deal and move on, which they did.
“They just didn’t have the dough,” said John Stephenson, portfolio manager at First Asset Investment Management. “This is a big boy’s game now, and it’s hard to be the scrappy start-up.”
Mike Gordon, Ivanhoe’s interim chairman, said on a conference call that Ivanhoe needed a “different set of skills” to keep moving Oyu Tolgoi forward once it reaches production this year. He pointed out that the board has understood for months that Rio Tinto would want a greater say in management once it moved to 51% ownership.
For the rest of this article, please go to the National Post website: http://business.financialpost.com/2012/04/18/friedland-resigns-from-ivanhoe-mines/