ULAANBAATAR, MONGOLIA - The following statement was issued to The Globe and Mail newspaper in Canada in response to questions directed to the company. Portions of the statement were included in a story published in The Globe and Mail on August 24th under the headline:
“Ivanhoe set to strike deal with Mongolia - An agreement will pave the way for its billion-dollar gold and copper project in the Gobi desert.”
Full text of August 23rd statement by Robert M. Friedland, Chairman of Ivanhoe Mines
Ivanhoe Mines reiterates its official statement, originally made on September 8, 2003, which firmly established a very clear set of conditions that will guide future consideration by Ivanhoe of possible partnerships in the development of its Oyu Tolgoi copper-gold project in Mongolia.
In particular, Ivanhoe intends to be around for the long term and will fulfill all of its responsibilities, including ensuring that everything about this mining project is done right. The mine is being designed from the outset to meet international standards for environmental management and operational safety and health. We will demonstrate that it is possible to introduce sound mining practices to the South Gobi that will deliver on the region’s economic promise while respecting long-established cultural values. We also will ensure that the local people of the South Gobi region are involved in our planning from the beginning, and that they and their children benefit directly and indirectly from the development of the resources with which their land is blessed. The depth of Ivanhoe’s commitment to these principles cannot be overstated.
The company recently met with the President of Mongolia (Natsagiyn Bagabandi), the new Speaker of the national parliament and a prominent member of the democratic coalition and restated previous assurances that we will consult with the Mongolian government and seek its approval before we make any decisions about future partnerships for the development of Oyu Tolgoi. Mongolia is enthusiastic about expanding its economy through development of its natural resources and is particularly encouraging new investment in mining.
Ivanhoe’s exploration in Mongolia already is covered by ISO 14001 environmental certification, demonstrating our commitment to international quality standards that is further reflected in the ISO14001 certification for our copper joint venture in Myanmar and the receipt of environmental awards by our Australian iron ore mine.
Follow-up statement August 25th: Comments and context omitted from Globe story
The newspaper’s selective use of statements from a telephone conference call between investors and Ivanhoe executives on August 16th may have confused, rather than informed, readers about partnership alternatives being evaluated by Ivanhoe.
The substance and context of the August 16th statements show that the newspaper story incorrectly claimed that “there are growing indications that Ivanhoe will find a Chinese or Japanese partner for the mine, rather than a Western mining company.”
Although the newspaper’s attention was directed to the significant distinction, the story failed to report that Ivanhoe’s active alternatives continue to include:
- a series of partnerships with one or more Asia-based companies to finance the development of Oyu Tolgoi; and
- a potential separate partnership, with one or more established, international mining organizations to build, operate and own the mine.
The newspaper chose to ignore significant statements about Ivanhoe’s partnership alternatives that were made by Mr. Friedland during the August 16th conference call, including:
- “Now, for the major mining companies that have expressed an interest in this project, it’s possible for them to enter, but if they enter they’re going to have to pay us money. We’re not in the business of giving a large portion of this discovery away for free, especially when it’s getting bigger every day.”
- “…we’re not ignoring some very interesting discussions with major mining companies, and it’s very difficult to say where this might end up on that end of the equation, but I want to repeat the fact that our company believes way too much in the fact that we’re undervalued to contemplate selling this company. It is not being offered for sale. We think there’s a huge amount of value to accrete by putting the project into direct production.”
The newspaper claimed that Mr. Friedland had “said the ‘logical choices’ for a partner in the mine are the major copper-consuming countries that are Mongolia’s neighbours.” In fact, the conference call transcript given to the newspaper shows that Mr. Friedland said, more specifically, that Ivanhoe was in advanced, detailed discussions with Japanese, Chinese and Korean entities anxious to secure copper for their regional economies, and he added: “They are the logical choices to be involved in financing the development of this mine.”
During the August 16th conference call, Mr. Friedland also said:
- Ivanhoe is in discussion with a major Japanese automaker that is “very much interested in financing new copper production in Asia.”
“There are enormous quantities of Asian capital looking to finance Oyu Tolgoi. And we’re just looking to strike the right balance that will minimize dilution to our shareholders and at the end of the day see us with some strategic partners that take a reasonable piece of the pie and leave as much as possible for our ultimate stakeholders, which are the Mongolian government and our shareholders.”
- And he added: “…the fact is that the companies that are the most interested in providing finance for our project are the quietest. So it really is a waste of time to speculate in the media about whom we will ultimately reach an agreement with.”
Background: Excerpts from original statement September 8th, 2003
Ivanhoe Mines has discovered one of the world’s largest known gold and copper porphyry deposits at Turquoise Hill, better known to Mongolians as Oyu Tolgoi.
It is no surprise that a discovery of such significance is generating widespread interest in Ivanhoe’s ongoing planning for the development of our wholly-owned project into a major open-pit and underground mining complex. There is speculation within the international mining industry and in investment circles on a range of options that might be available to Ivanhoe and on whether and to what extent there will be a role for other companies and interests to become partners with Ivanhoe in some way, shape or form.
Interest in Oyu Tolgoi is very keen indeed among major mining companies around the world and governments in the Asia region. Many of these companies and governmental representatives have directly approached Ivanhoe on an unsolicited basis, wanting to know whether there are opportunities for them to participate in the development.
We are always willing to listen to good ideas and we remain cognizant of our fiduciary obligations to our shareholders to do our utmost to maximize the value of their investments. However, we remain convinced that the best opportunity for creating value for our shareholders is through a long-term commitment to Oyu Tolgoi. Our approach to all overtures that we receive from interested parties is based on the fundamental premise that Ivanhoe will continue to control the project and take the lead role in directing its development. We want to be the builder of Oyu Tolgoi, not the auctioneer. This is not Voisey’s Bay all over again.
Ultimately, our strategic plans will be motivated by our determination to remain at the forefront of a burgeoning new mining industry in Mongolia. To that end, we will continue to consult closely with Mongolian government leaders on an ongoing basis as we advance our plans for Oyu Tolgoi.
While we weigh the alternatives open to us, we are protecting our position by requiring companies to sign strict confidentiality agreements before we grant them access to our data. We already have signed 16 agreements with international mining companies that have initiated unsolicited contacts with Ivanhoe Mines and agreed to our conditions. Our confidentiality agreements are designed to safeguard our control of Oyu Tolgoi and also to restrict other companies from acquiring mineral properties in our defined areas of interest in the South Gobi and from using our confidential information to launch hostile bids for control of Ivanhoe.
We at Ivanhoe are committed to playing a pre-eminent role in the development of the South Gobi region, on both sides of the Mongolia-China border, in close partnership with the Mongolian government, and to continuing discussions with Chinese government organizations about the development of a mine at Oyu Tolgoi. We also are committed to supporting the initiatives for new cross-border transportation links pledged at the bilateral summit between Mongolian President Natsagiyn Bagabandi and Chinese President Hu Jintao on June 5, 2003, that could facilitate the future export of copper and gold to China and world markets.
Investors: Bill Trenaman / Media: Bob Williamson