Ivanhoe CEO Loses in Rio ‘Chess Game’ Over Mongolia Mine – by Christopher Donville and Liezel Hill (Bloomberg.com 0 April 19, 2012)


Twelve years after beginning his quest to build a copper mine in Mongolia’s Gobi Desert, it’s checkmate for Robert Friedland.

Ivanhoe Mines Ltd. said yesterday the billionaire investor resigned as chief executive officer, along with other top executives at the Vancouver-based company. It said Rio Tinto Group agreed to ensure funding of the $6 billion Oyu Tolgoi project’s construction. The accord means Rio is free to appoint Ivanhoe’s management, cementing control of the company three months after increasing its stake to 51 percent.

“Friedland’s lost the chess game with Rio,” John Stephenson, a fund manager in Toronto who oversees about $2.7 billion at First Asset Investment Management, said in an interview.

Oyu Tolgoi — which means “turquoise hill” in Mongolian – – is just the latest of several chapters in the often controversial career of Friedland, who holds a 14 percent stake in Ivanhoe. A one-time mentor to Apple Inc. co-founder Steve Jobs, Friedland, 61, has raised funds for mines in North America and Asia since the mid-1980s and led the C$4.3 billion ($4.3 billion) sale of the Voisey’s Bay nickel deposit in Canada in 1996. His next adventure may be developing mines in Africa.

Ivanhoe’s involvement in Mongolia dates back to 2000 when it signed an option with BHP Billiton Ltd. to explore in the south of the country. That led Ivanhoe to buy the Oyu Tolgoi deposit. It bought BHP’s remaining 2 percent copper-smelting royalty in 2003 for $37 million.

Poison Pill

To raise the capital required to build the mine, Ivanhoe sold a 10 percent stake to London-based Rio in 2006. Rio agreed to help provide financing and went on to raise its shareholding.

The relationship between the two companies became fractious, culminating in a dispute over a shareholder rights plan, or poison pill, put in place by Ivanhoe to stop an unsolicited takeover.

In December, an arbitrator ruled in favor of Rio, effectively allowing the world’s third-largest mining company to gain control of Oyu Tolgoi, which is scheduled to start production in the second half of this year.

While Rio increased its interest to a majority, until yesterday’s announcement it wasn’t clear where the funds to build the mine would come from. As negotiations to secure bank funding dragged on, Ivanhoe began talks to sell other assets to raise cash.

“Rio has basically stepped up to the plate and this is their project now,” said Trey Reik, chief investment officer at Bristol Investment Partners LLC in Darien, Connecticut, which owns Ivanhoe shares. “Oyu Tolgoi is now essentially fully funded.”

Ivanplats IPO?

Friedland, who flies in his own Gulfstream IV jet and has a personal fortune estimated by Canadian Business magazine at C$2.81 billion, may be shifting his focus to Africa with a planned initial public offering of shares in Ivanplats Ltd.

The company, which he controls, owns a copper deposit in the Democratic Republic of Congo and a South African platinum project. It may seek to raise as much as $1 billion in an IPO as early as the second quarter, people with knowledge of the plan said in January.

“Robert is an incredible visionary,” Ian Cockerill, an Ivanplats director and former CEO of Gold Fields Ltd., said in a telephone interview. “He sees a lot of things others don’t see. That’s why people sometimes think he’s off his trolley.”

For the rest of this article, please go to the Bloomberg.com website: http://www.bloomberg.com/news/2012-04-19/ivanhoe-ceo-loses-in-rio-chess-game-over-mongolia-mine.html