The variables of Chinalco's investment in the Mongolian copper and gold mine

Chinalco's desire to buy a stake in the Oyu (Oyu Tolgoi) copper-gold project in Mongolia is no secret.　　But the escalation of tensions between Rio Tinto and Oyu, the Canadian Ivanhoe Mining Group (Ivanhoe Mines), could hurt Chinalco's original investment plan. Ivanhoe is the Oyu and owner of the lid, with a 66% per cent stake, with the remaining equity vested in the Mongolian government.　　According to Rio Tinto, the mine is the world's untapped, highly qualified copper and gold. A week ago, Ivanhoe's board had voted to terminate a clause in its 2006 agreement with Rio Tinto.　　The clause prohibits Ivanhoe from issuing more than 5% of its shares to third parties.　　Ivanhoe's new decision clearly disrupted Rio's earlier calculations. Rio Tinto, the world leader in mining, is well aware of the strategic significance and investment value of Oyu, in addition to its mineral wealth, Oyu the world's largest consumer of copper.　　As a result, Rio will sooner or later use its Ivanhoe stake in exchange for direct interest in the Oyu cap. At present, the Oyu Project's development funds and technology are all provided by Rio Tinto, Rio Tinto's share of capital in exchange has increased to 29.6%, thereby owning the Oyu cover of indirect interests.　　But under a moratorium, Rio Tinto holds a 47% per cent stake before October next year. But Ivanhoe apparently has its own ideas. Its board will continue to support plans for a third party, which would prevent Rio from acquiring the majority stake in Ivanhoe and thereby controlling the Oyu lid.　　This means that Ivanhoe's stake is opening the door to "third party strategic investors" outside Rio Tinto. But that's not good for Chinalco.　　Chinalco, the single largest shareholder in Rio Tinto, is likely to be blocked from the door. It was Rio that had sparked Chinalco's interest in Oyu.　　People close to the deal said Rio Tinto would increase its stake in direct access to the project. China is the largest consumer of copper, and Oyu can also take advantage of China's rail facilities and labor resources. However, Chinalco's tie-up with Rio Tinto has made Ivanhoe shareholders a bit more "hostile" to Chinalco, adding to the difficulty of Chinalco's indirect investment through the purchase of Ivanhoe Stakes.　　Once Ivanhoe has successfully issued shares to third parties, Chinalco's expected investment share will have to be discounted. But Chinalco doesn't have to be frustrated.　　Let's not forget that Oyu's plan to sell shares to a third party has the added condition that Rio has a preemptive right to meet the requirements of the offer. At the same time, Chinalco also has the opportunity to invest directly in Oyu, and a series of cooperation agreements being negotiated between China and Mongolia will "escort" them.　　In addition, Chinalco can also borrow CIC's capital ties with Ivanhoe to enhance its "friendship" with Ivanhoe. Most importantly, Ivanhoe Chairman Robert Friedland Robert Friedland is not a sentimental guy, and he pursues a maximum equity premium. and the Spirit ofThe principle of strategic investment, Chinalco has always been "negotiable" in the offer.