THE BOURSE WHISPERER: Rio Tinto and Canada-based Ivanhoe Mines have finally reached an agreement concerning the development of the Oyu Tolgoi copper-gold mine in Mongolia.
Ivanhoe Mines is the majority stakeholder of Ivanhoe Australia with a 59 per cent majority shareholding.
Rio Tinto has agreed to support and provide certain elements of a comprehensive funding package for Ivanhoe that will underpin the development of the Oyu Tolgoi copper-gold mine.
The funding has come at some personal cost for most of the Ivanhoe Board, however, with the agreement giving Rio Tinto, which currently owns 51 per cent of Ivanhoe, power to replace a number of the directors, including company founder Robert Friedland, on the Ivanhoe Board with Rio Tinto-nominated directors and also nominate a new management team.
Under the agreement, a new thirteen-member Board will be formed, the majority of which will be independent directors comprising:
– Eleven Rio Tinto-nominated directors, six of which will be independent; and
– Two directors nominated by Friedland, one of which will be independent.
Seven Ivanhoe Board directors will step down immediately, which will result in the formation of an interim Board until the new Board is formed.
David Huberman will step down from his role as chairman but continue to serve as a Board member.
Michael Gordon has been appointed as interim chairman pending the formation of the new Board.
Friedland has stepped down from the Board and from his role as chief executive officer of Ivanhoe.
Other senior executives of Ivanhoe, including the chief financial officer, have also stepped down.
Kay Priestly, a current director of Ivanhoe and chief financial officer of Rio Tinto Copper, has been appointed interim chief executive officer and Catherine Barone, vice president, finance of Ivanhoe, has been appointed interim chief financial officer.
“Since 2006, Rio Tinto has provided funding of US$3.5 billion to Ivanhoe for the development of Oyu Tolgoi,” Rio Tinto Copper chief executive Andrew Harding said in the company’s announcement to the Australian Securities Exchange.
“Today’s agreement provides future financial certainty for Ivanhoe and stability for the timely development of Oyu Tolgoi.
“We will also undertake a strategic review of Ivanhoe’s assets with a view to maximising value for all Ivanhoe shareholders.
“Working with our partners in Mongolia, we are dedicated to meeting our target of starting commercial production from Oyu Tolgoi in the first half of 2013.”
The Ivanhoe reshuffle has resulted in similar chair shifting around the Ivanhoe Australia Boardroom table with the appointment of the present lead director, Ian Plimer, as interim chairman.
Ivanhoe Australia is currently operating and developing a range of projects on its Cloncurry tenements in north western Queensland, including a substantial exploration program.
To support these activities, Ivanhoe Australia is undertaking a process to identify a strategic partner to assist in funding and supporting this program.
“We will continue to work constructively with the board and management of Ivanhoe Australia in order to maximise value for all shareholders.” Kay Priestly said in Ivanhoe Australia’s ASX announcement.
Ivanhoe Australia’s new board composition will include one executive director (Peter Reeve, CEO), Rio Tinto nominated non-executive directors to be determined and four independent non-executive directors, Ian Plimer (interim chairman), Jim Askew, Inés Scotland and Kyle Wightman.