From Barry FitzGerald's's article in The Age which goes a bit...

From Barry FitzGerald's's article in The Age which goes a bit further to discuss the implications for EXS and Xstrata! (See the last few paragraphs)

Ivanhoe takes second go at float (The Age 20 June 2008)

BILLIONAIRE mining entrepreneur Robert Friedland is seeking $125 million from a float of the Queensland copper, gold and uranium exploration interests of his Canadian-listed Ivanhoe Mines.

Best known locally for his arrivals by private Boeing jet at the annual Diggers & Dealers bash in Kalgoorlie and his early call on the China boom, Mr Friedland first looked to list Ivanhoe's local interests in a $90 million float last year backed by Macquarie.

But that fell victim to equity market wobbles caused by the subprime crisis in the US. He is now back, seeking $125 million, with UBS as sole lead manager and bookrunner. Because the float comes without any published stock exchange-compliant resource estimates, it amounts to one of the biggest mineral exploration floats ever.

But that is Mr Friedland's style. A terms sheet for the float circulating in the market says that "Ivanhoe does things differently than the average exploration company".

Mr Friedland made his fortune with the discovery of the Voisey's Bay nickel deposit in Newfoundland by his Diamond Fields Resources, which was sold to INCO for $A5 billion. More recently he enticed Rio Tinto to throw its weight behind Ivanhoe's Oyu Tolgoi copper-gold project in Mongolia, a project he picked up from BHP Billiton for a now embarrassing — to BHP — $US11 million in 2000.

The Oyu Tolgoi deposit is one of the world's next great mine developments, with Rio Tinto more recently pumping in $US1.5 billion ($A1.6 billion) (through investing in Ivanhoe) to secure a one-third stake.

Under that deal, Rio took a 9.9% stake in Ivanhoe at a cost of $US303 million as part of a broader plan to invest $US1.5 billion to take its eventual stake to 40%, subject to an investment agreement covering Oyu Tolgoi's development with the Mongolian Government.

Should BHP win its bid for Rio, it will be getting Oyu Tolgoi back and it will become an indirect investor in Ivanhoe.

Ivanhoe will be keeping 80% of Ivanhoe Australia (IA), implying a market value for IA on listing at the issue price of $2 a share of $625 million. IA has an inter-company loan with Ivanhoe of $74.7 million, of which $30 million will be satisfied with proceeds from the float. The remainder is earmarked for a typically aggressive exploration and development program.

IA's focus is on the Cloncurry region in Queensland, where the hunt is on for iron oxide, copper-gold deposits such as Ernest Henry (Xstrata) in the same region, and Olympic Dam (BHP Billiton) and Prominent Hill (Oxiana) in South Australia.

IA's float is expected to lead to some aggressive wheeling and dealing by the group, using its scrip as currency. That should ring alarm bells for Xstrata, which needs to secure additional ore supplies for its Ernest Henry mill.

Exco Resources — owned 19.9% by IA — has a 31 million tonne resource containing 261,000 tonnes of copper and 241,000 ounces of gold just eight kilometres from the hungry Ernest Henry mill. Xstrata has been sniffing around Exco but now faces the prospect that IA could make a scrip bid that foils Xstrata's longer-term planning for the Ernest Henry mill. Alternatively, Xstrata could strike first. That was behind Exco's 3¢ gain to 38.5¢ yesterday.

Independently, Exco is studying the feasibility of a stand-alone development that would cost $187 million and produce 20,000 tonnes of copper in concentrates and 14,000 ounces of gold annually.