Chinese aluminium giant Chalcohas agreed to pay $926 million for a controlling stake in SouthGobi Resources in a deal with Robert Friedland’s Ivanhoe Resources.Ivanhoe said a sell-down would free up capital that could be invested in the OyuTolgoi mine.Under the deal, state-owned Chalco plans to buy up to a 60 percent stake in SouthGobi for C$8.48 per share. Ivanhoe, which owns 57.6 percent of SouthGobi, said it could get C$889 million for selling its entire stake or C$533 million for selling 60 percent of its stake, depending on how much stock is tendered by other shareholders.
Under the deal Chalco will buy all of SouthGobi’s coal for up to 24 months at market prices. It will also assist SouthGobi to procure electricity for its Mongolian business operations either through a direct connection to grid power, or through development of a conveniently located power plant. It will also provide support to SouthGobi’s coal-haul highway project.SouthGobi owns four coal projects in Mongolia, three development projects and a mineral exploration license.
Ivanhoe, which is 51 percent owned by Rio Tinto, said the deal would free up capital to deploy in OyuTolgoi, which it is co-developing with Rio.Analysts said the SouthGobi stake sale could also remove a large asset that would be unwanted by Rio Tinto as it pursues greater ownership of OyuTolgoi, possibly via an acquisition of Ivanhoe.Chalco’s parent Chinalco is the largest shareholder in Rio Tinto, one of the world’s most diversified mining houses, with a 12.9 percent stake