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/ 82.28.81.* / 2010-01-06 22:26
an. 6 (Bloomberg) -- Ivanhoe Mines Ltd. hired Citigroup Inc. to evaluate options including debt or asset sales after winning approval to build one of the world’s largest copper mines with Rio Tinto Group.
Options include “potential debt/equity offerings, a credit facility, the sale of subsidiaries, equity investments, project financing and/or various corporate transactions,” Vancouver- based Ivanhoe said today in a statement.
Rio has described the Mongolian Oyu Tolgoi deposit, which Ivanhoe has said may require about $9 billion in capital spending over three decades, as the world’s largest untapped copper and gold resource. Ivanhoe needs financing to bring the project into production after the company spent more than six years negotiating an agreement with the Mongolian government, said Adam Graf, a New York-based analyst with Dahlman Rose & Co.
“I’m assuming Ivanhoe wants to be aggressive in how they develop Oyu Tolgoi, and by my calculations they’ll need to raise $2.4 to $3 billion of additional capital before 2013,” Graf said today in a telephone interview.
Oyu Tolgoi may be one of the world’s top four or five biggest copper deposits after mines including BHP Billiton Ltd.’s Escondida project in Chile and Freeport-McMoRan Copper & Gold Inc.’s Grasberg in Indonesia, Graf said.
Ivanhoe rose 56 cents, or 3.4 percent, to C$17.28 at 11:31 a.m. in Toronto Stock Exchange trading. The shares increased more than fourfold last year.
Former BHP Property
In 2000, Ivanhoe agreed to pay $5 million and to spend $6 million on exploration to acquire the exploration license for Oyu Tolgoi from Broken Hill Proprietary Co., now BHP Billiton, the world’s largest mining company.
Friedland, 59, Ivanhoe’s founder, reiterated on Oct. 15 a 2003 pledge that he will “be the builder, not the auctioneer” of Oyu Tolgoi, or Turquoise Hill in Mongolian.
“This is the right time to explore options available to us to further enhance value from our successes,” Chairman Robert Friedland said in today’s statement.
Ivanhoe may want to sell its two main subsidiaries, Vancouver-based SouthGobi Energy Resources Ltd. and Melbourne- based Ivanhoe Australia Ltd. or sell 10 percent to China’s sovereign wealth fund, China Investment Corp., Graf said.
SouthGobi, one of the largest coal producers in Mongolia, is raising capital to finance exploration and to expand and build production plants and infrastructure, according to an e- mail sent to fund managers. The company may raise $400 million in a Hong Kong share sale, according to the e-mail.
Copper Rises
Oyu Tolgoi may produce more than 1 billion pounds of copper and 500,000 ounces of gold annually in the first decade of production, Chief Executive Officer John Macken said in October.
The Oyu Tolgoi project, less than 80 kilometers (50 miles) north of Mongolia’s Chinese border, contains about 78.9 billion pounds of copper and 45.2 million ounces of gold in measured, indicated and inferred categories, according to company estimates from March 2008.
Copper climbed to a 16-month high in New York and London today on speculation that demand may build as the U.S. economy