Ivanhoe is planning to raise $1 billion by a shareholder rights offering which will highten the tensions between the Canadian company and its biggest shareholder, Rio Tinto in the vast Oyu Tolgoi copper project in Mongolia. The two companies have been having trouble seeing eye to eye on issues in the mining venture for some time now.
The Vancouver based Ivanhoe Mines, led by Robert Friedland, has warned Rio Tinto that Ivanhoe will hold Rio Tinto fully liable for losses sustained if it delays or blocks the financing. Rio Tinto spokesperson, Tony Shaffer declined to comment on the matter.
Number 1 Shaft at Oyu Tolgoi. Image Credit: Brücke-Osteuropa
Ivanhoe said that it needed the funds to maintain the pace of development on the project pending the final agreement for a package of bank loans which is expected to come through in the first half of next year. They added that the rights issue would help secure the flexibility and independence of the company.
However Rio Tinto reminds that it has a 35% stake in Ivanhoe and the rights issue will violate contractual rights given in the draft prospectus. Rio Tinto has so far invested $1.7 billion in Ivanhoe but has no direct stake in the project which is owned two third by Ivanhoe and one third by the Mongolian government.