Mongolian prize finally in Rio Tinto’s grasp

RIO Tinto is expected to offload a clutch of Australian and Asian assets now under its control after it clinched majority ownership of Canadian explorer Ivanhoe Mines.

Rio’s long-held desire to control the lucrative Oyu Tolgoi mine in Mongolia came to fruition early yesterday, when a private purchase of 15.1 million Ivanhoe shares lifted Rio’s stake in the Canadian company from 49 per cent to 51 per cent.

Ivanhoe owns 66 per cent of Oyu Tolgoi, with the Mongolian government controlling the rest of what is considered one of the world’s most exciting copper and gold deposits, with a possible mine life of 100 years.

While not a surprise, Rio’s $C302 million ($A285 million) purchase has cast doubt on the future of Ivanhoe’s other assets, which include a controlling 59 per cent stake in ASX-listed Ivanhoe Australia.

Ivanhoe also has a gold play in Kazakhstan, coal interests in Mongolia and exploration tenements in south-east Asia. Rio is believed to have recently told Ivanhoe chief executive Robert Friedland that its long-term interests did not extend beyond Oyu Tolgoi.

Mr Friedland declined to comment yesterday.

A spokeswoman for Rio said: ”We intend to conduct a strategic review of the company before making any decisions on our future intentions.”

Consensus among Australian analysts pointed to Rio offloading all but Oyu Tolgoi.

”I expect Rio only wants Oyu Tolgoi, so any deal they do would be for this asset, with the other assets spun out to existing shareholders excluding Rio Tinto,” said CLSA analyst Hayden Bairstow.

Ivanhoe Australia boss Peter Reeve said his Melbourne-based company would adopt a ”business as usual” approach despite the ructions under way at its Canadian parent.

The identity of the sellers – who at $C20 got a premium of close to 15 per cent above Ivanhoe’s trading price on Canadian markets – remained a mystery yesterday, but Mr Friedland is not expected to be involved in the transaction.

Ivanhoe shares fell by close to 4 per cent on Canadian markets after Rio said it had no immediate intention to buy further shares in the company.

Given Mr Friedland’s frosty relationship with Rio Tinto, his future on the Ivanhoe board now appears clouded.

Rio is entitled to nominate directors to the Ivanhoe board in proportion to its shareholding, but it pledged as recently as last July to maintain a majority of independent directors until January 2014.

Control of Ivanhoe further entrenches Rio’s presence in Canada, where it has interests in aluminium, diamonds and uranium. Rio would not comment on speculation that a Canadian listing could accompany listings in Australia, London and New York.

Rio Tinto shares closed steady at $68.35. Shares in Ivanhoe Australia were also unchanged, at $1.90.

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