Legendary mining financier Robert Friedland quits Ivanhoe in Rio Tinto shake-up

Anglo-Australian mining giant Rio Tinto (ASX, LSE & NYSE: RIO) tightened its grip on Ivanhoe Mines Ltd. (TSX:IVN) as part of a US$3.3 billion financing deal announced this morning, which led to the resignation of Ivanhoe's chief executive and founder Robert Friedland.

Vancouver, British Columbia-based Ivanhoe said the deal with Rio contains a comprehensive financing plan structured to secure Rio's direct participation in, and support for, funding of developments at Oyu Tolgoi copper-gold project in Mongolia, the company's flagship project.

“This agreement sets the stage for the Oyu Tolgoi Project’s transition to a major mining operation in coming months,” Friedland said in a statement.

“The measure of certainty that Rio Tinto’s financial resources and global industry leadership bring to the realization of our long-cherished Oyu Tolgoi dream is reassuring for the people and government of Mongolia, and for Ivanhoe’s shareholders,” he added.

Under the financing agreement, Rio Tinto provides a standby commitment for a $1.8 billion rights offering by Ivanhoe and $1.5 billion in bridge financing to Ivanhoe.

The funding is in addition $1.8 billion in interim funding that was agreed in December 2010.

The money will be used to help fund construction of Ivanhoe's massive Oyu Tolgoi copper-gold mine in Mongolia.

The deal will also see Rio Tinto, which owns a 51% stake in Ivanhoe Mines, nominate 11 of the company's 13-member board.

Ivanhoe announced that apart from Friedland six of its other directors — Marc Faber, Edward Flood, David Korbin, Livia Mahler, Tracy Stevenson and Dan Westbrook — have stepped down. They will be replaced shortly by six Rio nominees, four of whom will be independent directors.

Ivanhoe shares were up $1.36 or about 12% at $12.99 on the Toronto Stock Exchange at 10:30 am ET.

The company said Kay Priestly, Rio's chief financial officer and a director of Ivanhoe, was appointed Ivanhoe's Interim CEO. Catherine Barone, Ivanhoe's head of finance, was named the company's interim CFO. Barone replaced Tony Giardini who stepped down as CFO.

Oyu Tolgoi Costs

In October last year, Ivanhoe and Rio dodged a bullet when the Mongolian government said it was rethinking the 2009 deal that gave Ivanhoe Mines a 66% stake in Oyu Tolgoi and that it wanted half of the $6 billion project.

Ivanhoe shares plunged on the news, but the firm took a tough stance and after some desperate negotiations Mongolia backed off.

Oyu Tolgoi, which Ivanhoe has been advancing for the last eight years, is one of the biggest mining projects in the world and will help turn Mongolia into the world’s fastest-growing economy with staggering GDP growth of 35%.

The mine is set to produce more than 1.2 billion pounds of copper, 650,000 ounces of gold and 3 million ounces of silver each year.

(Ivanhoe has scheduled a conference call at 4:30 p.m. ET today. Dial +1-866-225-0198 or +1-416-340-8061, or follow the webcast at www.ivanhoemines.com)

 Photo: Oyu Tolgoi in the Gobi Desert, southern Mongolia from YouTube