CITIC Metal Co. Ltd., a subsidiary of Chinese conglomerate Citic Ltd., agreed to invest C$723 million in Ivanhoe Mines Ltd. for a 19.9% interest in the company, to become its largest single shareholder.
Ivanhoe Mines said June 11 that it will complete a private placement of 196,602,037 common shares at C$3.68 apiece to CITIC Metal. The deal is subject to various factors including internal approval at CITIC, which is anticipated within approximately 30 days.
The company noted that Zijin Mining Group Co. Ltd. will be able to exercise an anti-dilution right to maintain its 9.9% interest, which could raise C$78 million in additional proceeds if fully exercised.
CITIC Metal will also provide Ivanhoe Mines with an interim, nine-month loan of US$100 million in accordance with an agreed term loan facility agreement. The loan will have an interest rate of 6% and is expected to be available in 35 days.
Ivanhoe Mines will use the proceeds for development of its Kamoa-Kakula copper joint venture project, its Platreef platinum group metals project and its Kipushi zinc-copper-silver-germanium project, as well as for working capital and general corporate purposes.
The feasibility-stage Kamoa-Kakula and Kipushi properties are located in the Democratic Republic of the Congo, while the preproduction-stage Platreef property is in South Africa.
Ivanhoe Mines and CITIC Metal will enter an investor rights agreement when the placement closes, with CITIC Metal to nominate two directors to an expanded Ivanhoe Mines board and able to maintain its 19.9% stake. CITIC Metal also agreed to help arrange project financing for phase-one development at Kamoa-Kakula.
Bernstein Research dubbed the deal a "significant de-risking" in a same-day note. An updated preliminary economic assessment of Kamoa-Kakula completed in late 2017 defined initial CapEx of US$1.23 billion, nearly 40% of which is attributable to Ivanhoe Mines.
"Whilst some may be frustrated that this is ostensibly dilutive by 19.9%, we see this deal as further de-risking of the asset story: funding was needed, this deal provides that funding and removes the overhang from the stock, and takes us closer to the reality of bringing these assets into production," the Bernstein team elaborated.
