TORONTO (Reuters) - Canadian miner Ivanhoe Mines said on Monday it will defend its shareholder rights plan in arbitration proceedings that have been initiated by its largest shareholder and partner Rio Tinto.
Shares of Ivanhoe rose after it announced its intention to defend the plan, which was approved by Ivanhoe shareholders.
The plan would protect shareholders against any one shareholder, such as Rio, slowly accumulating a majority stake. It would also give Ivanhoe's board time to explore alternative transactions in the event of an unsolicited bid.
Rio Tinto, which currently owns a 29.6 percent of Ivanhoe, has the right under an earlier agreement to raise its stake in the company to 46.6 percent. Rio Tinto contends that Ivanhoe's plan breaches some of its rights under an October 2006 private placement agreement between the two companies.
Ivanhoe countered that nothing in the private placement agreement prohibits it from implementing a rights plan.
The plan was approved on April 5 by all members of the Ivanhoe board except the sole Rio Tinto appointee. It was then ratified on May 7 by 95 percent of Ivanhoe's minority shareholders.
Ivanhoe also sought to assure shareholders that the squabble would not jeopardize the development of Oyu Tolgoi project in Mongolia. The two companies, along with the Mongolian government, are developing the copper-gold project in southern Mongolia.
"Ivanhoe intends to continue to work in good faith with Rio Tinto to realize our shared objective of bringing the world-class Oyu Tolgoi mine into production in 2013," said David Huberman, the lead independent director of Ivanhoe's board, in a statement.
The tussle is of particular interest given the interest shown by Rio's largest shareholder, China's Chinalco, in acquiring a minority equity stake in Ivanhoe, or a direct minority interest in the Oyu Tolgoi project.
Shares of Ivanhoe rose 3.6 percent to C$15.04 in early trade on the Toronto Stock Exchange.
Reporting by Euan Rocha