GLOBAL miner Rio Tinto has given the Mongolian Oyu Tolgoi copper-gold project in Mongolia a ringing endorsement by spending almost $C245 million ($A259 million) to increase its interest in development partner Ivanhoe Mines by 2.7 per cent.
Under the deal, Rio will acquire 15 million shares in Robert Friedland's Ivanhoe at $16.31 a share to lift its interest to 22.4 per cent.
It comes amid calls from the World Bank and other non-government organisations for the Mongolian government to stabilise the country's tax policies. Mongolia is often criticised for failing to develop its enormous, but largely untapped, reserves of coal, copper, gold and uranium. It also recently announced it would cancel an auction for the world's biggest coking coal reserve at Tavan Tolgoi.
Foreign mining companies that get a foothold in Mongolia have to accept majority local ownership and a windfall tax on mining profits. But the laws governing these constraints are due to expire next year and, because of the country's huge debt problems, might not be renewed.
Andrew Harding, Rio Tinto's chief executive, copper, said Oyu Tolgoi, which is in the Gobi Desert, was on track to start in 2013 and to increase to 450,000 tonnes of copper and 330,000 ounces of gold a year within five years.
''Our further investment in Ivanhoe Mines underlines our confidence in the quality of the world-class Oyu Tolgoi deposit and its priority in our project portfolio,'' he said. ''We are working with Ivanhoe Mines on finalising the conditions precedent for completion of the investment agreement with the government of Mongolia and are looking forward to moving into the development phase of the project.''
Rio will have the right to increase its stake in the Canadian miner by up to 44 per cent. ''Rio Tinto also has, among other things, the right to acquire additional securities so as to maintain its proportional equity interest in Ivanhoe Mines, and the right to acquire additional Ivanhoe Mines securities in certain other circumstances and subject to certain limits,'' the company said in a statement.
Ivanhoe shares rose by more than 8 per cent on the news, before ending the trading day up 8¢, or 2.5 per cent, at $3.18. Rio improved 90¢ to $71.40.
