Monday, 2 April 2012

Chalco to take C$925 mln majority stake in SouthGobi Resources

Aluminum Corp. of China (Chalco) Monday agreed to buy a controlling stake in Mongolian coal miner SouthGobi Resources (TSE:SGQ) from Ivanhoe Mines (TSE:IVN)(NYSE:IVN) in a deal worth as much as C$925 million.

Ivanhoe has agreed to tender its entire 57.6 percent stake in SouthGobi to the Chinese aluminum giant's offer to buy up to 60 percent of the Mongolian miner at C$8.48 per share, a 28 percent premium to Friday's closing price.

"Depending upon the uptake of the offer by other SouthGobi shareholders, Ivanhoe could receive up to approximately C$889 million from the sale of all of its shares in SouthGobi," Ivanhoe said in a statement.

Chinese miners have been carrying out overseas acquisitions of natural resources to feed the nation's growing energy demands. It is the latest move by Chalco to diversify away from aluminium following a $1.35 billion investment in the Simandou iron-ore deposit in Guinea with Rio Tinto (NYSE:RIO)(LON:RIO).

Earlier this year, Ivanhoe Mines' founder Robert Friedland said the company was considering asset sales to raise funds to develop its giant Oyu Tolgoi copper mine in Mongolia.

Chalco will take up to 100 percent of SouthGobi's coal for up to two years and help it get electricity to the site, under the agreement.

SouthGobi, which owns the flagship Ovoot Tolgoi coal mine, is also developing three other projects and plans to increase production to 6 million metric tons this year from 4.57 million tons in 2011. Ovoot Tolgoi is producing and selling coal to customers in China.

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