Robert Friedland finally has his deal Mongolian Prime Minister Sanj Bayaar will attend a signing ceremony Tuesday with government officials, executives from Ivanhoe and its partner, global mining giant Rio Tinto PLC (RTP-N174.027.344.40%) .
Mr. Friedland will lead efforts to raise the capital needed to build Oyu Tolgoi, which is expected to cost about $4-billion (U.S.) over the next five years. Friedland, 59, has raised billions of dollars from investors over the years. He is perhaps best known for helping create a frenzy around the Voisey's Bay nickel deposit in Labrador, which was eventually sold to Inco in 1996 for $4.3-billion (Canadian).
He was also able to draw plenty of investor interest in Ivanhoe early on, including the deal with Rio in 2006. But the investment agreement stalled in Mongolia as the country tried to impose a windfall profit tax amid a global metals boom and surging copper prices. Political opposition grew, handcuffing Mr. Friedland's ability to raise funds for the project.
There's plenty at stake for Mr. Friedland, Ivanhoe and its partner Rio Tinto, not to mention Mongolia itself. Oyu Tolgoi contains a measured and indicated resource of more than 40 billion pounds of copper and 20 million ounces of gold and could be in production for more than 35 years.
Mr. Friedland personally controls about 26 per cent of Ivanhoe's stock and while Rio Tinto currently owns just 9.9 per cent of the company, it has the right to increase its stake to about 43 per cent in exchange for $2.4-billion (U.S.) in project financing.
Under the terms of the investment agreement, Mongolia will acquire a 34-per-cent interest in Oyu Tolgoi, but its share of the capital costs to build the mine are expected to be carried by Ivanhoe. That means Mr. Friedland will have to raise about half of the capital to finance the project.
Ray Goldie, an analyst with Salman Partners Inc. expects him to succeed, in part, by striking a deal to supply copper concentrate to smelters in Japan or China, in return for financing. Investment capital is expected to come from a sovereign wealth fund, such as China Investment Corp.(CIC), which has plowed more than $5-billion into the resource sector in the past few months and in September, Ivanhoe said “several” sovereign wealth funds had expressed an interest in investing in the company and could acquire a stake of up to 9.9 per cent.
source: The Globe and Mail
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