By Eric Onstad
LONDON, July 7 (Reuters) - Global miner Rio Tinto's biggest shareholder, China's Chinalco, is considering buying a stake in the massive Oyu Tolgoi copper-gold project in Mongolia, according to a regulatory filing.
Oyu Tolgoi is billed as one of the world's biggest undeveloped mine deposits and is expected to cost $4.6 billion to build.
A deal with state-owned Chinalco would fit into a strategy by China, the world's biggest consumer of metals, of securing vital raw materials for its ambitious infrastructure building programme. Rio also said it was interested in converting its stake in partner Ivanhoe Mines, which discovered the deposit, into direct ownership of the mine project, Rio reported in a filing to the U.S. Securities and Exchange Commission.
'Chinalco has indicated an interest in acquiring a minority equity stake in the company (Ivanhoe) or acquiring, from the company, a direct minority ownership interest in the OT project,' Rio said in the filing.
'Rio Tinto's ongoing discussions with Aluminum Corporation of China (Chinalco) also continue.'
The filing confirms what Chinalco -- which has a 9 percent stake in Rio -- told Reuters on Tuesday about its interest in investing in Oyu Tolgoi.
POTENTIAL CONVERSION
Rio is in charge of building and operating the mine but its holding in the deposit is indirect, through Ivanhoe.
Rio has been holding talks with Ivanhoe about 'the potential conversion of its ... equity stake in the company into a direct ownership interest in the Oyu Tolgoi copper and gold mineral development project,' the filing said.
On June 29, Rio paid $393 million to exercise warrants and increase its stake in Ivanhoe to 29.6 percent from just over 22w percent.
It has the right to increase the stake to about 44 percent if it exercises all of its remaining warrants and converts its $350 million loan into shares.
The end result of the talks with Chinalco could be a two-way or three-way agreement between Ivanhoe, Rio and Chinalco, Rio added.
Any such deal would require the approval of the Mongolian government, Rio said in the filing.
Ivanhoe holds 66 percent of Oyu Tolgoi, and the Mongolian government owns 34 percent.
Rio has also discussed the mine project with the European Bank for Reconstruction and Development and the International Finance Corp, the finance arm of the World Bank, it added.
The mine is expected to produce 544,000 tonnes of copper and 650,000 ounces of gold annually over its first 10 years, and operate for at least 27 years.
(Reporting by Eric Onstad; Editing by Erica Billingham and Jon Loades-Carter) Keywords: RIOTINTO CHINALCO/ (eric.onstad@thomsonreuters.com; +44 20 7542 7093; Reuters Messaging: eric.onstad.reuters.com@reuters.net; ) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
LONDON, July 7 (Reuters) - Global miner Rio Tinto's biggest shareholder, China's Chinalco, is considering buying a stake in the massive Oyu Tolgoi copper-gold project in Mongolia, according to a regulatory filing.
Oyu Tolgoi is billed as one of the world's biggest undeveloped mine deposits and is expected to cost $4.6 billion to build.
A deal with state-owned Chinalco would fit into a strategy by China, the world's biggest consumer of metals, of securing vital raw materials for its ambitious infrastructure building programme. Rio also said it was interested in converting its stake in partner Ivanhoe Mines, which discovered the deposit, into direct ownership of the mine project, Rio reported in a filing to the U.S. Securities and Exchange Commission.
'Chinalco has indicated an interest in acquiring a minority equity stake in the company (Ivanhoe) or acquiring, from the company, a direct minority ownership interest in the OT project,' Rio said in the filing.
'Rio Tinto's ongoing discussions with Aluminum Corporation of China (Chinalco) also continue.'
The filing confirms what Chinalco -- which has a 9 percent stake in Rio -- told Reuters on Tuesday about its interest in investing in Oyu Tolgoi.
POTENTIAL CONVERSION
Rio is in charge of building and operating the mine but its holding in the deposit is indirect, through Ivanhoe.
Rio has been holding talks with Ivanhoe about 'the potential conversion of its ... equity stake in the company into a direct ownership interest in the Oyu Tolgoi copper and gold mineral development project,' the filing said.
On June 29, Rio paid $393 million to exercise warrants and increase its stake in Ivanhoe to 29.6 percent from just over 22w percent.
It has the right to increase the stake to about 44 percent if it exercises all of its remaining warrants and converts its $350 million loan into shares.
The end result of the talks with Chinalco could be a two-way or three-way agreement between Ivanhoe, Rio and Chinalco, Rio added.
Any such deal would require the approval of the Mongolian government, Rio said in the filing.
Ivanhoe holds 66 percent of Oyu Tolgoi, and the Mongolian government owns 34 percent.
Rio has also discussed the mine project with the European Bank for Reconstruction and Development and the International Finance Corp, the finance arm of the World Bank, it added.
The mine is expected to produce 544,000 tonnes of copper and 650,000 ounces of gold annually over its first 10 years, and operate for at least 27 years.
(Reporting by Eric Onstad; Editing by Erica Billingham and Jon Loades-Carter) Keywords: RIOTINTO CHINALCO/ (eric.onstad@thomsonreuters.com; +44 20 7542 7093; Reuters Messaging: eric.onstad.reuters.com@reuters.net; ) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.