Tough talk about Oyu Tolgoi does nothing to staunch Ivanhoe bleeding
A statement put out by Ivanhoe Mines and partner Rio Tinto on Monday saying it has formally informed the Mongolian government it won't renegotiate the terms of the Oyu Tolgoi investment did not have the desired effect and the share was beaten down 6.6% on Monday.
The counter’s losses began after rumours – now confirmed – surfaced that the Mongolian government is rethinking a 2009 deal that gave Ivanhoe Mines and Rio Tinto a 66% stake in Oyu Tolgoi and that it now wants half of the $6 billion gold and copper project.
Ivanhoe Mines said it has also sent letters that cautioned that the Mongolian government’s actions could "seriously undermine the confidence that international investors have in Mongolia’s future as a safe and stable country in which to invest." According to the statement Ivanhoe is "encouraged" by remarks made by Mongolia’s President Elbegdorj over the weekend when he said that "Mongolians should keep their word."
By the close on Monday Ivanhoe Mines (TSE:IVN) was trading at $13.49 after plunging 6.6%, bringing its market value to $9.6 billion and taking the share's losses over the last three month to 44.6%. In August Vancouver-based Friedland told a group of investors that Ivanhoe is worth at least $30 billion.
Ivanhoe is closely tied to Mongolia. Its 57%-owned SouthGobi Resources (TSE:SGQ) is already producing coal at an annual rate of 5.3mm metric tonnes and is often touted as a takeover target. It lost 6.6% on the TSX where it is worth $1.1 billion – Southgobi has shed a third of its value over the last month. American Depositary Receipts of Rio Tinto, the world's number two miner, which owns just under half of Ivanhoe shed 4% on a day where the broader markets fell 2.8%.