Robert Friedland, executive chairman of Ivanhoe Mines, and Lars-Eric Johansson, CFO, have announced that CITIC Metal, a wholly-owned subsidiary of CITIC Limited, has agreed to make a major investment acquiring a significant 19.9% stake in Ivanhoe Mines.
Under terms of the agreement signed in Beijing, Ivanhoe Mines will issue 196,602,037 common shares to CITIC Metal through a private placement at a price of C$3.68 per share, yielding gross proceeds to Ivanhoe of approximately US$560 million.
CITIC Metal will come to own 19.9% of the company’ issued and outstanding common shares when the placement is completed, establishing CITIC Metal as Ivanhoe’s largest single shareholder.
Friedland will be the comapny’s second-largest shareholder, with over 17% shareholding.
The company intends to use the proceeds for the advancement of the company’s world-scale mine development projects in Southern Africa ─ Kamoa-Kakula, Platreef and Kipushi ─ and also for working capital and general corporate purposes.
China’s Zijin Mining Group, which acquired a 9.9% stake in the company in 2015 through a wholly-owned subsidiary, will be entitled to exercise its existing anti-dilution rights through a concurrent private placement, which could result in additional proceeds of C$78 million (US$60 million) if exercised in full.
Friedland said the agreement with CITIC Metal is the culmination of a 15-year relationship between the leaderships of the company and CITIC.
“In 2003, the original Ivanhoe Mines was grappling with the challenge of developing its vast copper-gold discoveries at the Oyu Tolgoi Project in southern Mongolia.
“Following extensive discussions, the company and CITIC established a strategic alliance to cooperatively pursue a number of selected common interests in metals production and related technologies.
“For some time now, the board of directors and senior management of today’s Ivanhoe Mines have been evaluating potential transactions that would combine the critical elements needed for Ivanhoe to advance the development of our exceptional assets that have been established in Southern Africa in recent years,” Friedland added.
“A fundamental, qualifying condition has been that any new partner must be complementary to our established partners, Zijin and the Japanese consortium led by ITOCHU Corporation. We are confident that CITIC Metal shares our vision and has the experience and financial resources to help us advance our three projects to production, creating value for Ivanhoe’s stakeholders in the Democratic Republic of Congo and South Africa, and our international shareholders.”
Friedland said that the strategic investment arranged by CITIC Metal – a respected state-owned enterprise in China, which now is the world’s largest consumer of base metals – is a critical validation of the quality of Ivanhoe’s assets.
“CITIC Metal will be playing a significant role in Ivanhoe’s emergence as one of the world’s
leading producers of copper, zinc and platinum-group metals. Today, with CITIC Metal’s
commitment to this investment, Ivanhoe is one step closer to becoming Canada’s next
important, diversified mining company.”
Sun Yufeng, President of CITIC Metal Group Limited, said that CITIC and Ivanhoe have shared a long-standing relationship dating back more than 15 years. “Robert is a respected friend of CITIC and through this strategic investment we are delighted to become a partner in Ivanhoe’s projects with Mr. Friedland and his accomplished team of mine finders and developers.
“CITIC Metal and Ivanhoe are truly complementary to one another. This cooperation will result in a win-win scenario. Together with existing shareholders and stakeholders, and by employing best international practice, we will achieve the gold standard for Sino-Canadian companies, resulting in a partnership that will benefit the people in the Democratic Republic of Congo, South Africa, China and Canada,” Sun added.
“Ivanhoe’s three projects are some of the world’s best undeveloped mining assets. We are
looking forward to working closely with the Ivanhoe team to build innovative, environmentally and socially-responsible mines that can contribute to the advancement of economic transformations in Africa and China.”
The Ivanhoe-CITIC Metal transaction is conditional upon completion of confirmatory due
diligence and CITIC internal approval, which is expected in approximately 30 days. It also is subject to approval by the Toronto Stock Exchange, other customary closing conditions, and recordals and registration with certain Chinese regulatory agencies. Receipt of all necessary approvals and completion of the transaction is expected to take up to four months.
CITIC Metal to make US$100 million interim loan facility available to Ivanhoe Mines.
While the required approvals are being obtained for the transaction, CITIC Metal has agreed to provide Ivanhoe with a nine-month, interim loan of US$100 million in accordance with an agreed term-loan-facility agreement.
The loan, which is expected to be available in approximately 35 days, will have an interest rate of 6%. It will be pre-payable, or will be repaid with part of the 19.9% private placement proceeds – or no later than nine months following draw-down.
Friedland will provide a secured, limited-recourse guarantee and securities pledge securing of the companys’ obligation in support of the interim loan facility.