Noranda Wanted Stake in Oyu TolgoiIvanhoe Says Noranda Wanted Stake in Oyu Tolgoi
2004-06-15 15:37:52 EST
By Nicole Mordant
VANCOUVER, British Columbia (Reuters) - Mining explorer Ivanhoe Ltd. rejected an unsolicited proposal last October from Noranda Inc. to take a 40 percent stake in Ivanhoe's big copper and gold deposit in Mongolia, Ivanhoe chairman Robert Friedland said on Tuesday.
Friedland's statement came four days after a top official from Noranda, the world's ninth biggest copper producer, said the firm was not interested in a stake in Oyu Tolgoi, billed by Ivanhoe as one of the world's largest undeveloped copper deposits.
Oyu Tolgoi's size, high copper and gold prices, a shortage of big mineral finds as well as potent marketing by Ivanhoe have resulted in the project gaining wide publicity. Adding to the interest, the market expects up to a 50 percent stake in the project to be sold.
"We received an approach from Noranda, in writing, unsolicited, to participate in the project about eight months ago," Friedland told Reuters, speaking by telephone from Melbourne.
Friedland said he and Ivanhoe deputy chairman Ed Flood met in Toronto with the heads of both Noranda and Falconbridge Ltd. . Toronto-based Noranda owns nearly 60 percent of Falconbridge, a large nickel and copper producer.
"At that meeting we rejected Noranda's proposal to enter the project. Noranda approached us with an idea to provide financing to acquire a 40 percent interest in the project," Friedland said.
"We did not think it was the type of proposal that was attractive to our shareholders. It was not as attractive as other proposals on the table," he added. He did not disclose any financial terms of Noranda's proposal.
NO FURTHER COMMENT FROM NORANDA
Noranda spokesman Denis Couture declined to comment.
Friedland, a mining promoter who arranged the C$4.3 billion ($3.1 billion) sale of the Voisey's Bay nickel project in Eastern Canada in 1996, said that it was not his intention to "embarrass" Noranda by disclosing their past discussions.
Last week Noranda chief executive Derek Pannell told a Reuters Mining Summit in Toronto that returns from Oyu Tolgoi, which is located 80 km (50 miles) north of Mongolia's border with China, might be hamstrung by a possible over-reliance on a single customer and supplier.
"For us it looks very close to China. I think one would have to make a deal with the Chinese in order to sell the product, or the infrastructure would have to be supplied by the Chinese and go out through China," Pannell said.
"My experience in dealing with situations where you have one customer and one supplier means that one's ability to optimize returns is restricted," Pannell said.
Friedland said Mongolia already had a large operational copper mine, Erdenet, which markets its output to buyers around the world. China was not a "unitary buyer" of copper concentrate, with well over a 100 smelters "screaming for feed", he said.
At the same summit where Noranda made its comments, world No. 1 gold miner Newmont Mining Corp. , the head of Rio Tinto Plc.'s copper division, and No. 3 copper miner Grupo Mexico also said that they were not interested in Oyu Tolgoi.
Ivanhoe appointed two investment banks in April to analyze "strategic options" for Oyu Tolgoi, a drill-stage development also known as Turquoise Hill.
The market has read the brief as a euphemism for selling up to half of the project to one or more partners and put a price tag of about $1 billion on a 50 percent stake.
Friedland said Ivanhoe had entered into about 19 confidentiality agreements with various parties interested in looking into the project. One of these is Barrick Gold Corp. , the world's third biggest gold miner.
Friedland said that parties who were keen would not comment on their interest as they had signed the confidentiality agreements. "You are by definition succeeding in finding people that are saying 'we have no interest'," he told Reuters.
Teck Cominco Ltd. , a large Canadian base metals firm, said recently it is looking at the project.
($1=$1.37 Canadian)