Ivanhoe's Destiny Is In Robert Friedland's HandsI
vanhoe's Destiny Is In Robert Friedland's Hands
Tuesday 10/06/2009 1:50 PMET - Dow Jones News
By Brian Truscott
Of DOW JONESNEWSWIRES
VANCOUVER -(Dow Jones)- Now that Ivanhoe Mines Ltd. (IVN) hassigned an investment agreement with Mongolia, paving the way for theconstruction and operation of the Canadian company's Oyu Tolgoi copper-gold minein the South Gobi region, it raises the question: What does Robert want?
TheRobert in question is Ivanhoe's executive chairman and largest shareholder,Robert Friedland. His aspirations, when it comes to Oyu Tolgoi, are an openquestion at this stage, because he's not showing his cards. His stake in Ivanhoeis 26%.
His reticence to give interviews is well-known, but a Friedland-ledconference call is in the process of being set up, perhaps as early as nextweek, a company spokesman said.
While Friedland and his team are good atde-risking a project with extensive drilling and dealing with the issuesinherent in any project under develoment, it's clear that Ivanhoe remains, atheart, an exploration company.
It needs an experienced operator to ramp upOyu Tolgoi's operation. Rio Tinto PLC (RTP) is the obvious candidate, given itsoption to take up to a 46.65% stake in Ivanhoe. It holds a 9.9% stake in Ivanhoeand has an option to double that by April 2010 for $388 million.
However,there's speculation that Rio could move more quickly and aggressively ramp upits Ivanhoe holding sooner than expected. And then there's specter of RioTinto's non-takeover agreement with Ivanhoe, which expires in2011.
Copper Becoming An Increasingly Strategic Metal ToOwn
Again, everything comes down to what Robert really wants.
"Perhapshe's not really done with Oyu Tolgoi - maybe he wants to create a mining companyor perhaps take another tack, given that copper is one of the most strategicmetals to own," one analyst said. "Copper, theoretically, could be worth $5 to$10 a pound in a decade, so what's Oyu Tolgoi going to be worth then?"
Forexample: the Going Green movement and electric cars. There are 200-plus poundsof copper in every car. Oyu Tolgoi is near the border with China, which is nowthe world's largest consumer of copper. The country is determined to build itsown car and battery industry. And it's already committed to building a new cityon the Mongolian border. Population? About a million or so.
Mongolia itselfis on track to build a giant industrial zone in-country.
The stakes areclearly high. Rio Tinto knows that. Friedland knows that. And his leverage? OyuTolgoi.
"So, does he want to create a mining company that will rival TeckResources Ltd. (TCK) in the Canadian market?" asks another analyst. "He could,by putting Oyu Tolgoi together with some of his assets in Australia andIvanplats (his private nickel and platinum company). It would be a veryinteresting company."
Or will he go down a different avenue? He could use OyuTolgoi as leverage to become Rio Tinto's exploration arm or perhaps it'sprecious-metals subsidiary, if Rio dumped all its precious-metal assets intoIvanhoe.
Company Web Sites:
https://www.ivanhoe-mines.com
https://www.riotinto.com
-Brian Truscott, Dow JonesNewswires; 604-669-1595; brian.truscott@dowjones.com