Mining giant Rio Tinto is to underwrite a massive rights issue by its subsidiary, Ivanhoe Mines, with the funds used to pay for the development of Ivanhoe's Oyu Tolgoi copper-gold mine in Mongolia.
Canada's Ivanhoe, which Rio Tinto took control of in January of this year, intends to raise US$1.8bn through a rights issue, with shares being issued at US$8.34 per share.
Rio Tinto will receive 4% of the gross proceeds of the issue in return for underwriting the issue.
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Rio Tinto will also provide US$1.5bn of bridge financing to Ivanhoe, in addition to the US$1.8bn interim funding facility that was agreed in December 2010, both of which will be repaid in full once project financing is in place for Oyu Tolgoi.
Ivanhoe Chief Executive Officer (CEO) Robert Friedland has stepped down from the board, as have the Chief Financial Officer (CFO) and certain other senior executives in Ivanhoe. In total, seven Ivanhoe directors are quitting the board while company Chairman David Huberman is giving up the chair but is remaining on the board.
A new 13-member board will be formed, comprising 11 directors nominated by Rio Tinto - six of which will be independent - and two directors nominated by Friedland, one of which will be independent.
Kay Priestly, a director of Ivanhoe and CFO of Rio Tinto Copper, has been appointed interim CEO and Catherine Barone, vice-president, finance of Ivanhoe, has been appointed interim CFO.
"Working with our partners in Mongolia, we are dedicated to meeting our target of starting commercial production from Oyu Tolgoi in the first half of 2013 and bringing the benefits of the mine to the people of Mongolia," said Rio Tinto Copper Chief Executive Andrew Harding.
Shares in Rio Tinto were 46p higher at 3,563.5p on the afternoon of the rights issue announcement.
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