News Releases

Rio Tinto provides US$350 million convertible credit facility to Ivanhoe Mines

September 12, 2007

Rio Tinto will provide Ivanhoe Mines Ltd with a convertible credit facility of US$350 million for interim financing for the Oyu Tolgoi copper-gold complex in Mongolia’s South Gobi region. The credit facility is directed at maintaining the momentum of mine development activities at Oyu Tolgoi while Ivanhoe and Rio Tinto continue to engage in finalising an Investment Agreement between Ivanhoe and the state of Mongolia. 

Rio Tinto expects that in the absence of a satisfactory Investment Agreement it is likely that the rate of ongoing investment in the project will need to be scaled down significantly. 

Bret Clayton, chief executive of Rio Tinto Copper, said, “The provision of this facility allows Rio Tinto to raise its shareholding in Ivanhoe and the Oyu Tolgoi project while at the same time allowing the project to continue construction as the Investment Agreement goes through final parliamentary approval. 

“An equitable Investment Agreement is essential if Mongolia is to attract sustainable international mining investment. This will encourage further exploration, development, employment and skill training programmes,” he said. 

Rio Tinto invested approximately US$303 million in October 2006 to take an initial stake of 

9.95 per cent in Ivanhoe Mines under the terms of a Placement Agreement. A second 9.95 per cent holding, valued at approximately US$388 million, will be taken up under the terms of the Placement Agreement at the conclusion of a satisfactory long term Investment Agreement with the Mongolian Government. 

As part of the interim funding agreement, Rio Tinto will increase its presence and involvement in Mongolia and the Oyu Tolgoi project. This agreement also raises both Rio Tinto’s fixed price conversion and warrants from 33.35 per cent up to 42.2 per cent and restrictions on total Ivanhoe share acquisitions from a maximum of 40 per cent under the Placement Agreement to 46.65 per cent. 

Structure of the Deal 
The US$350 million credit facility matures on September 12, 2010. Funds borrowed under the credit facility, together with up to US$108 million in interest, are convertible into up to 45,800,000 common shares of Ivanhoe at a price of US$10.00, per share. Ivanhoe will grant to Rio Tinto on the first funding date (which is expected to occur during October) warrants to acquire an additional 35,000,000 common shares of Ivanhoe at a price of US$10.00 per share for a period of five years and which may be exercised pro rata with funds borrowed by Ivanhoe under the credit facility. 

If Rio Tinto were to exercise all possible conversions and warrants, it would hold approximately 256,247,400 common shares of Ivanhoe acquired through fixed price mechanisms representing 42.2 per cent of Ivanhoe’s common shares on a fully diluted basis (43.1 per cent undiluted). 

In addition, Rio Tinto will now have the right to appoint the Chairman of the Technical Committee overseeing development and operation of the Oyu Tolgoi project within three years of the Placement Agreement (rather than the five years as initially agreed in the Placement Agreement) conditional upon first draw down under the facility. 

Rio Tinto has no present intention of acquiring other securities of Ivanhoe, except as regards its right to acquire additional securities so as to maintain its proportional equity interest in the future, or of disposing of any of the securities of Ivanhoe which it holds. Depending upon its evaluation of Ivanhoe’s business, prospects and financial condition, the market for Ivanhoe’s securities, general economic and tax conditions and other factors, Rio Tinto may acquire additional securities of Ivanhoe or sell some or all of the securities it holds. 

Mongolian Investment Agreement 
The draft Investment Agreement that was completed by the Mongolian Government’s Working Group and the negotiating team for Ivanhoe Mines and Rio Tinto in April and reviewed by the Cabinet in June is currently before Mongolia’s State Great Hural (National Parliament). The draft agreement is being reviewed by a working group comprised of Members of Parliament from the parliamentary Standing Committee on the Economy, which is expected to report to Parliament’s autumn session this year. The parliamentary review and approval are the final steps to complete the Investment Agreement process that started more than eight months ago. 

For further information, or to obtain a copy of Rio Tinto’s Early Warning Report once it is filed with the Canadian securities regulators, please contact: 

Media Relations, London 
Christina Mills Office: +44 (0) 20 8080 1306 Mobile: +44 (0) 7825 275 605 
Nick Cobban Office: +44 (0) 20 8080 1305 Mobile: +44 (0) 7920 041 003 

Investor Relations, London 
Nigel Jones Office: +44 (0) 20 7753 2401 Mobile: +44 (0) 7917 227 365 
David Ovington Office: +44 (0) 20 7753 2326 Mobile: +44 (0) 7920 010 978 

Media Relations, Australia 
Ian Head Office: +61 (0) 3 9283 3620 Mobile: +61 (0) 408 360 101 
Amanda Buckley Office: +61 (0) 3 9283 3627 Mobile: +61 (0) 419 801 349 

Investor Relations, Australia 
Dave Skinner Office: +61 (0) 3 9283 3628 Mobile: +61 (0) 408 335 309 

Media Contact

Please direct media request and queries to:

Roy McDowall

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