RTGAM



Toronto - Ivanhoe Mines Ltd. said on Friday it would raise up to $1.2-billion (U.S.) in a strategic rights offering to fund the development of the first phase of its massive Oyu Tolgoi copper and gold project in southern Mongolia.

The rights offering is structured so that every 100 rights can be exchanged for 15 common shares in the company.

The rights will be priced at $13.93 (Canadian) on the Toronto Stock Exchange and $13.88 (U.S.) on the New York Stock Exchange.

Ivanhoe said the price represented a 44 per cent and 43 per cent discount, respectively, on the average closing price on the TSX and NYSE over the five trading days before Dec 16.

The company said it expects to issue 85 million common shares through the offering, about 15 per cent of Ivanhoe's current outstanding shares.

Rio Tinto PLC is the largest shareholder in the Vancouver-based company, which is led by mining financier Robert Friedland.

Rio recently increased its stake to 40.5 per cent, with a payment of $300-million in a partial exercise of Ivanhoe series B warrants, along with the purchase of shares from Mr. Friedland.

Rio Tinto is expected to increase its interest in Ivanhoe Mines to 42.3 per cent through a previously announced deal to buy Citibank's shares.

Mr. Friedland owns 15.3 per cent of the company, but could increase his stake through the rights offering.

Oyu Tolgoi is one of the world's biggest untapped copper-gold deposits. Development was delayed for years due to complicated royalty negotiations between Ivanhoe and the Mongolian government. The project is 34 per cent owned by Mongolia and 66 per cent owned by Ivanhoe.