Good to Go: Ivanhoe’s CITIC Deal Nears Closing

Ivanhoe Mines (TSX:IVN) C$723-million deal with Chinese mega-conglomerate CITIC (HKEX:0267) has now cleared all the hurdles of Beijing’s regulatory agencies, and will close in mid-September.

On Thursday (September 6), Ivanhoe said that the transaction with CITIC had received the Chinese government’s blessing, and was due to close on September 19, cementing the lucrative deal that was first announced on June 11.

On closing, CITIC will become Ivanhoe Mines’ largest shareholder, taking control of 196,602,037 common shares, or 19.5 percent of the company, for C$3.68 per share.

Founder and chairman of Ivanhoe Robert Friedland will be bumped to second place with a 17-percent stake. Friedland’s role within the company is not reduced though, and will continue as a co-chairman alongside a CITIC-appointed co-chair.

In July, CITIC said that it was putting forward the president of CITIC Metal, Sun Yufeng, to take on that role.

After repaying an unused loan from CITIC, Ivanhoe will have a net cash total of C$591 million from its CITIC transaction.

On top of that, its partner in the Kamoa-Kakula copper project in the Democratic Republic of Congo, Zijin Mining (HKEX:2899), has elected to exercise its anti-dilution rights in light of the deal, resulting in another C$78 million flowing into Ivanhoe coffers.

“These funds will be received concurrently with the CITIC Metal private placement,” said Ivanhoe.

“The exercise by Zijin of its anti-dilution rights also was at a price of C$3.68 per share and will result in Zijin having a 9.7-percent ownership stake in Ivanhoe Mines, its ownership level prior to the completion of the CITIC Metal strategic investment.”

Ivanhoe will be sitting pretty after the two transactions, having received the proceeds of more than C$800 million (before repaying its CITIC loan), and will have the cash equivalent of C$850 million with no significant debts.

The company is now free to dive into its projects with gusto, which it said was exactly what it planned to do.

“Ivanhoe intends to use the funds to continue to advance its exploration and development activities at the Kamoa-Kakula, Platreef and Kipushi projects on current accelerated timetables.”

In Toronto, Ivanhoe Mines’ share price was up a modest 3.06 percent as of 2:30 p.m. EST on Thursday, trading at C$2.36.

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.