* Friedland resigns as CEO and director of Ivanhoe
* Six other directors, along with top management, step down
* Rio's CFO to take over as interim CEO of Ivanhoe
* Ivanhoe close more than 15 pct higher in New York, Toronto
By Euan Rocha
TORONTO, April 18 Ivanhoe Mines Ltd
said Wednesday its founder and Chief Executive Robert Friedland
has resigned as part of a financing deal with majority
shareholder Rio Tinto, marking a new era for the
Canadian miner that is developing the $13.2 billion Oyu Tolgoi
copper-gold project in Mongolia.
Friedland's resignation, along with the resignations of six
other directors and four senior management members, comes a few
months after mining giant Rio Tinto bought a controlling stake
in the Toronto-listed mining company.
The management change signals an end to the often tumultuous
relationship between Ivanhoe and Rio, which has helped finance a
large portion of the Oyu Tolgoi development and bring the giant
project to the verge of production.
Vancouver, British Columbia-based Ivanhoe said its agreement
with Rio contains a detailed financing plan that secures Rio's
direct participation in, and support for, funding Oyu Tolgoi.
"This agreement sets the stage for the Oyu Tolgoi project's
transition to a major mining operation in coming months," said
Friedland, a well-known mining financier who made a fortune in
the 1990s by selling the then-undeveloped Voisey's Bay nickel
deposit in Eastern Canada to Inco for about C$4.3 billion.
Friedland's move to step down sets the stage for him to
focus on his next big project, Ivanplats. The private company,
controlled by Friedland, owns the Platreef platinum project in
South Africa and the Kamoa copper and Kipushi zinc operations in
the Democratic Republic of Congo. The company is expected to go
public mid-year and raise about $1 billion.
Ivanhoe said its board has been reduced to 13 members from
14. The board and management shake-up is no surprise as Rio had
signaled its intent to gain more direct control after it raised
its stake in Ivanhoe to 51 percent in January.
As Rio's stake in Ivanhoe has grown, the two companies have
repeatedly locked horns over financing matters and other issues.
In December, an independent arbitrator cleared the way for Rio
to take control of Ivanhoe, after ruling the Canadian company's
"poison pill" defense was not valid.
"Today's changes can be seen as the last move in the
struggle for control of Ivanhoe," wrote BMO analyst Tony Robson
in a note to clients that also commended Rio CEO Tom Albanese
for his handling of Rio's strategy with Ivanhoe.
Investors in Ivanhoe had hoped that Friedland, who owns a
roughly 13.7 percent stake in Ivanhoe worth about $1.3 billion,
would replicate his Voisey's Bay success and extract a large
premium from Rio. This is now unlikely, some analysts say, and
Ivanhoe shares, which topped $28 in early 2011, now trade at
less than half that.
Ivanhoe said seven of its directors - Marc Faber, Edward
Flood, Robert Friedland, David Korbin, Livia Mahler, Tracy
Stevenson and Dan Westbrook - have stepped down. They will be
replaced shortly by six nominees to be named by Rio.
The company said Kay Priestly, Rio's chief financial officer
and a director of Ivanhoe, was appointed Ivanhoe's interim CEO.
Catherine Barone, Ivanhoe's head of finance, was named the
company's interim CFO, replacing Tony Giardini. Other Ivanhoe
executives that have resigned are President John Macken, Deputy
Chairman Peter Meredith and Executive Vice President Sam
Riggall. A new CEO and CFO will be nominated by Rio within the
next five business days, the company said.
Ivanhoe said it remains engaged in active talks on divesting
its subsidiary interests. Ivanhoe's other assets include stakes
in coal miner South Gobi, Ivanhoe Australia,
and Altynalmas Gold, a private company developing the Kyzyl gold
project in Kazakhstan.
Chinese aluminum company Chalco recently agreed to pay $926
million for a controlling stake in South Gobi.
Despite Friedland's departure, the certainty provided by the
financing deal lifted Ivanhoe shares on Wednesday. Shares in
Ivanhoe closed 16 percent higher at C$13.49 on the Toronto Stock
Exchange, while its New York-listed shares rose by a similar
margin to $13.64.
"Friedland is probably one of the best stock promoters and
financiers in the world today, so when he does make a decision
that's based on the finances of the company, it's probably the
right thing for the company and for himself" said Arthur Salzer,
chief executive of Northland Wealth Management.
Rio has agreed to support a $3 billion to $4 billion finance
package for the Mongolian project that will be provided by
third-party lenders. Ivanhoe has been in talks with lenders for
months to line up the financing package, which is expected to be
finalized by the end of the year.
Ivanhoe said Rio also has the option of advancing loans to
finance Oyu Tolgoi as long as the terms are no less favorable
than those available via financial institutions or banks.
As part of the agreement, Ivanhoe will also proceed with a
rights offering to its shareholders that will raise up to $1.8
billion in gross proceeds. The rights offering will be supported
by a standby commitment for the full amount from Rio Tinto.
Proceeds of the rights offering will be used as part of the
financing plan to cover all projected capital requirements for
Oyu Tolgoi. Ivanhoe said all shareholders may participate on an
equal proportional basis in purchasing additional common shares
of Ivanhoe Mines at a subscription price of C$8.34.
Rio has also agreed to provide an immediate, additional
bridge-funding facility of up to $1.5 billion to help ensure
uninterrupted progress on the construction of the first phase of
Oyu Tolgoi. This is on top of a $1.8 billion interim facility
already provided by Rio. Both facilities will be repaid from the
proceeds of the finance package and the equity financing.
In addition, Ivanhoe will issue 55 million share-purchase
warrants to Rio. Each warrant will be exercisable to purchase
one Ivanhoe share at $12.79 at any time during a 3-year period.