Rio Buys Stake in Entrée Gold for Feast in Mongolia
By Ben Abelson
21 Jun 2005 at 11:17 PM EDT
NEW YORK (ResourceInvestor.com) -- In a bid to gain entrance to Mongolia's vast mineral wealth, Anglo-Australian mining behemoth Rio Tinto [NYSE:RTP] has acquired a 9.9% stake in Entrée Gold [TSXV:ETG].
The nearly C$14 million investment is a bold statement by the international miner on the potential of Entrée's substantial Mongolian landholdings - a fact not lost on investors. Following a delayed opening after the June 20 announcement, shares of Entrée gapped up some C$0.30, about 14%, to trade as high as C$2.40.
Under terms of the deal, a subsidiary of Rio Tinto will acquire some 6.3 million units of Entrée at a cost of C$2.20 each, for a total cost of C$13.9 million. Each unit will be composed of one common share of Entrée and two special purchase warrants, which if exercised over the next two years, would enable Rio Tinto to own nearly 20% of the Mongolian explorer. For its part, Entrée reported that it would use proceeds from the financing to fund exploration work and provide the company with working capital.
Entrée has done little in the way of drilling on its Shivee Tolgoi (Lookout Hill) property, which borders Ivanhoe Mines' highly touted Oyu Tolgoi (Turquoise Hill) property. But, with recent exploration reports suggesting a continuation of high-grade copper-gold mineralization from Ivanhoe's land, prospects are looking quite bright for this junior explorer.
A stake in Entrée was likely a better choice for Rio than trying to cozy up to big brother Ivanhoe Mines, whose shares were long ago discovered and priced quite fully by the mining investment community. And at least for the near term, Rio may get to sit back and watch Ivanhoe finance Entrée's potential.
In its 2004 purchase of some 9.2 million (with warrants fully diluted) shares of Entrée, Ivanhoe bought itself the right to earn 80% of about one-quarter of Entrée's Lookout Hill property by spending at least $35 million on exploration. Considering the recent positive results on the property, it seems more than likely that Ivanhoe will shell out the money.
Even before Rio's acquisition was announced, shares of Entrée Gold have been charging upwards over the past month - more than outrunning a recent rebound in the precious metals sector. Since May 21, shares of Entrée have climbed as much as C$0.87, or 57%, following strong exploration results on Shivee Tolgoi. Just around that time, Entrée's potential was adroitly reported on by Resource Investor.
Those results, delivered June 6, found a mineralized intersection of 608 metres, averaging 3.24% copper and 0.82 g/t gold (or 3.77% copper equivalent), with a contained 322 metre interval averaging 4.59% copper and 1.07 g/t gold (or 5.29% copper equivalent). At the time, Entrée President and CEO Greg Crowe called the results "of the longest and highest grade ever encountered in a porphyry copper-gold system," while Ivanhoe geologists had dubbed the drill results the best yet from the property.
While these results are just the tip of the iceberg, and any mine development at Entrée is at least several years away, Rio's acquisition is the proof of the industry's hopes for the region. What remains to be seen is how, and if, Ivanhoe will react to Rio's acquisition. When one considers the money that Ivanhoe spent on the Entrée purchase, the existing synergies between the two company's landholdings and the expensive infrastructure development to which Ivanhoe has already committed, it’s no surprise that many market watchers hypothesized that Friedland & Co. would look to take Entrée out of the picture.
In additional terms to the deal, Entrée noted that both Rio Tinto and Ivanhoe have rights to maintain their existing percentage ownership of the company, meaning that nearly 1.9 million additional units may be issued under the deal, resulting in further proceeds of C$4.1 million. Rio also was given the right of first refusal on Entrée's 100% owned Ulziit Uul property in southern Mongolia.
By Ben Abelson
21 Jun 2005 at 11:17 PM EDT
NEW YORK (ResourceInvestor.com) -- In a bid to gain entrance to Mongolia's vast mineral wealth, Anglo-Australian mining behemoth Rio Tinto [NYSE:RTP] has acquired a 9.9% stake in Entrée Gold [TSXV:ETG].
The nearly C$14 million investment is a bold statement by the international miner on the potential of Entrée's substantial Mongolian landholdings - a fact not lost on investors. Following a delayed opening after the June 20 announcement, shares of Entrée gapped up some C$0.30, about 14%, to trade as high as C$2.40.
Under terms of the deal, a subsidiary of Rio Tinto will acquire some 6.3 million units of Entrée at a cost of C$2.20 each, for a total cost of C$13.9 million. Each unit will be composed of one common share of Entrée and two special purchase warrants, which if exercised over the next two years, would enable Rio Tinto to own nearly 20% of the Mongolian explorer. For its part, Entrée reported that it would use proceeds from the financing to fund exploration work and provide the company with working capital.
Entrée has done little in the way of drilling on its Shivee Tolgoi (Lookout Hill) property, which borders Ivanhoe Mines' highly touted Oyu Tolgoi (Turquoise Hill) property. But, with recent exploration reports suggesting a continuation of high-grade copper-gold mineralization from Ivanhoe's land, prospects are looking quite bright for this junior explorer.
A stake in Entrée was likely a better choice for Rio than trying to cozy up to big brother Ivanhoe Mines, whose shares were long ago discovered and priced quite fully by the mining investment community. And at least for the near term, Rio may get to sit back and watch Ivanhoe finance Entrée's potential.
In its 2004 purchase of some 9.2 million (with warrants fully diluted) shares of Entrée, Ivanhoe bought itself the right to earn 80% of about one-quarter of Entrée's Lookout Hill property by spending at least $35 million on exploration. Considering the recent positive results on the property, it seems more than likely that Ivanhoe will shell out the money.
Even before Rio's acquisition was announced, shares of Entrée Gold have been charging upwards over the past month - more than outrunning a recent rebound in the precious metals sector. Since May 21, shares of Entrée have climbed as much as C$0.87, or 57%, following strong exploration results on Shivee Tolgoi. Just around that time, Entrée's potential was adroitly reported on by Resource Investor.
Those results, delivered June 6, found a mineralized intersection of 608 metres, averaging 3.24% copper and 0.82 g/t gold (or 3.77% copper equivalent), with a contained 322 metre interval averaging 4.59% copper and 1.07 g/t gold (or 5.29% copper equivalent). At the time, Entrée President and CEO Greg Crowe called the results "of the longest and highest grade ever encountered in a porphyry copper-gold system," while Ivanhoe geologists had dubbed the drill results the best yet from the property.
While these results are just the tip of the iceberg, and any mine development at Entrée is at least several years away, Rio's acquisition is the proof of the industry's hopes for the region. What remains to be seen is how, and if, Ivanhoe will react to Rio's acquisition. When one considers the money that Ivanhoe spent on the Entrée purchase, the existing synergies between the two company's landholdings and the expensive infrastructure development to which Ivanhoe has already committed, it’s no surprise that many market watchers hypothesized that Friedland & Co. would look to take Entrée out of the picture.
In additional terms to the deal, Entrée noted that both Rio Tinto and Ivanhoe have rights to maintain their existing percentage ownership of the company, meaning that nearly 1.9 million additional units may be issued under the deal, resulting in further proceeds of C$4.1 million. Rio also was given the right of first refusal on Entrée's 100% owned Ulziit Uul property in southern Mongolia.