Ivanhoe Mines (TSX:IVN) expects its board to continue to have a majority of independent directors, deputy chairman Peter Meredith said Friday following comments by Rio Tinto, which now owns more than half of the company’s stock.
Rio Tinto, which upped its holdings in Ivanhoe Mines to 51 per cent this week, said it expects to seek a majority of the board’s seats and the replacement of some of Ivanhoe’s management.
The company currently has seven nominees on Ivanhoe’s 14-member board, including four directors deemed to be independents.
Meredith noted that the commitment to maintain an independent majority on the board is not connected to the number of directors Rio Tinto is entitled to appoint.
“The four incumbent independent directors nominated to the Ivanhoe Mines board by Rio Tinto have done an outstanding job representing the interests of all shareholders of Ivanhoe Mines,” Meredith said in a statement.
“We look forward to maintaining a highly capable and motivated board to ensure that the company is managed in the best interest of all shareholders, even as new independent directors may be added.”
Ivanhoe is developing the Oyu Tolgoi copper-gold project in Mongolia.
Rio Tinto paid $302 million or $20 per share for an additional 15.1 million common shares of Ivanhoe Mines to increase its holdings to 51 per cent from roughly 49 per cent.
In a filing with U.S. securities regulators earlier this week, Rio Tinto said although it did not have any immediate plans for changes at Ivanhoe Mines, the company was conducting a thorough review of its investment.
“The Rio Tinto companies anticipate that they will, in the future, seek the replacement of some of the management, including senior management, of the company and at least a majority of the non-Rio Tinto appointed directors,” the company said.
Under a 2010 agreement, at least eight of the 14 directors must be independent, based on Canadian and U.S. securities laws, until the earlier of Jan. 18, 2014 or when Ivanhoe ceases to be a Canadian public company.
Oyu Tolgoi is expected to produce 1.2 billion pounds of copper and 650,000 ounces of gold per year in the first decade of operation.
Ivanhoe warned last year that if a deal to import power from China for the Oyu Tolgoi project falls through, the company may have to construct a coal-fired power plant ahead of schedule.
Building the power plant would delay commercial production and add to the initial costs of building the mine which is currently expected to achieve commercial production in 2013.
Ivanhoe has held talks with the Mongolian and Chinese governments regarding securing the power from China by the third quarter of next year. However, if that is not possible, a study of alternative arrangements has found that advancing the construction of the coal-fired power plant in Mongolia would be the best option.
In addition to its stake in Oyu Tolgoi, Ivanhoe holds a 57 per cent interest in Mongolian coal miner SouthGobi Resources, 54 per cent stake in Ivanhoe Australia (TSX:IVA) and a 50 per cent interest in Altynalmas Gold Ltd., a private company developing a gold project in Kazakhstan.
Ivanhoe shares were down 24 cents at $17.12 in trading Friday on the Toronto Stock Exchange.