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China's CITIC becomes biggest shareholder in Friedland's Ivanhoe

[TORONTO] Ivanhoe Mines Ltd. agreed to sell a minority stake to CITIC Metal Co, making the Chinese conglomerate the largest shareholder in the Canadian mining company and bumping founder Robert Friedland to second place.

CITIC will pay C$3.68 apiece for 196.6 million common shares, a premium of about 14 per cent to the June 8 closing price. Ivanhoe will use the proceeds of approximately C$723 million (S$741 million) to invest in the Vancouver-based company that holds copper, zinc and platinum deposits in Southern Africa.

"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," Friedland said in a statement Monday.

Ivanhoe jumped 5.9 per cent to C$3.42 at 9:43 a.m. in Toronto.

Ivanhoe Mines holds the Kipushi zinc and Kamoa-Kakula copper projects in the DRC and the Platreef platinum deposit in South Africa.

China's Zijin Mining Group Co., which holds almost 10 per cent of Ivanhoe, will be entitled to exercise existing anti-dilution rights through a private placement. CITIC will be granted similar rights to maintain its stake. CITIC will also make a US$100 million interim loan facility available.

"Mr. Friedland is a respected friend of CITIC and through this strategic investment we are delighted to become a partner in Ivanhoe's projects," Sun Yufeng, President of CITIC said in the statement.

CITIC Approval

The deal is subject to CITIC internal approval and other regulatory approvals. Upon closing, Sun would become co-chair with Friedland and CITIC will have the right to nominate two directors. Friedland and Sun have signed standstill agreements that prevent them from increasing their ownership stake to more than 19.9 percent until January 2022.

Ivanhoe's Kamoa-Kakula copper deposit is seen by some analysts as the most significant copper discovery since Oyu Tolgoi, the massive copper and gold mine discovered in Mongolia's Gobi Desert in 2001. Oyu Tolgoi was the core asset of the first company founded by Friedland and called Ivanhoe Mines.

Rio Tinto Group gained control of the company in 2012 and it's now known as Turquoise Hill Resources Ltd. Friedland is also known for the discovery of the Voisey's Bay nickel discovery in Newfoundland and Labrador, which he sold to Inco Ltd. in 1996 for more than US$3 billion.

The DRC is seen as one of the riskier places in the world for miners, as President Joseph Kabila has pledged to hike taxes and royalties on metals. Friedland, Glencore Plc's Ivan Glasenberg, and Mark Bristow of Randgold Resources Ltd., all met with Kabila earlier this year to voice their concerns. Despite this, the law was passed without major concessions. It remains to be seen if foreign mining companies will take legal action against the government.


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