Ivanhoe cancels poison pill, paves way for Rio deal

Wed Jan 18, 2012 3:29pm EST
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By Cameron French and Clara Ferreira-Marques

TORONTO/LONDON (Reuters) - Ivanhoe Mines (IVN.TO: Quote), owner of Mongolia's Oyu Tolgoi project, will scrap a controversial "poison pill", clearing the way for its single largest shareholder, Rio Tinto, to take over what could be one of the world's largest copper-gold mines.

News that Ivanhoe's board will propose throwing out the shareholder rights plan, originally aimed at blocking a creeping increase in Rio Tinto's (RIO.L: Quote) (RIO.AX: Quote) stake, came as a separate standstill agreement capping the global miner's holding at 49 percent expired on Wednesday.

Rio, which has built its stake in the miner as it has helped fund construction of Oyu Tolgoi, welcomed the decision.

"As the 49 percent cap on Rio Tinto's ownership of Ivanhoe expires today, we are free to increase our shareholding as we see fit," a Rio spokesman said.

Ivanhoe said Rio had recently told Ivanhoe's board that it intends to buy additional shares to raise its stake to more than 50 percent.

Ivanhoe's rights plan, backed by shareholders in 2010 and due to expire next year, was dealt a fatal blow in December when a court ruled it could not be used to dilute Rio's stake.

The ruling recommended Ivanhoe consider scrapping the provision, which would have triggered a massive rights issue in the event of a bid.

"Certainly Rio would like to own it, they would like to control it - it is their biggest copper project. They see it is a great asset and they are willing to back it," said analyst Nik Stanojevic at brokerage Brewin Dolphin in London.   Continued...