Source: The Mining Weekly             Date: 15 June, 2011

Rio Tinto and Ivanhoe Mines, which are together building the giant Oyu Tolgoi copper/gold/silver mine, will likely go back to arbitration later this month, after a six-month suspension on the proceedings expires, Ivanhoe said last week. Construction at the USD6-billion project, which is now more than 23% complete, will not be affected by the arbitration, Ivanhoe CEO Robert Friedland said.

Rio currently holds a 34.9% stake in Ivanhoe, and, under a 2006 agreement, could have increased its holding in Ivanhoe to about 46.6% until October 2011. But Ivanhoe this year implemented a shareholder rights plan that would prevent the bigger firm from increasing its stake even after the agreement expires next year, unless it makes an offer to all shareholders. Rio Tinto disputed the shareholder rights plan and the two parties headed to arbitration over the issue.

In December last year, the two companies announced they had reached a new agreement that would result in Rio assuming management of the big copper/gold project, as well as taking a bigger stake in Ivanhoe. The new deal includes support from Rio for a previously disputed rights offering and help with arranging project funding, as well as a six-month suspension the arbitration process.

Mr. Friedland said in a statement on June 9 the company remains “highly confident” that the shareholder rights plan does not breach Rio Tinto's contractual rights. “We are committed to vigorously protecting the rights of all of our shareholders and have received very strong support from institutional shareholders for our insistence that all shareholders be treated fairly during any takeover bid."

Mr. Friedland said Ivanhoe also continues to assess “potential strategic initiatives” and was negotiating with several parties. Ivanhoe owns 66% of the Oyu Tolgoi project and the Mongolian government holds the balance, after the two signed a long-awaited investment agreement in October 2009. Rio's interest in the asset is indirect only, through its shareholding in Ivanhoe, but there has been speculation that CEO Tom Albanese wants either a direct stake in the project or control of Ivanhoe itself.