Anglo-Australian mining giant Rio Tinto (RTP-N) has joined the horde of miners heading to Mongolia by taking a 9.9% stake in junior explorer Entree Gold (ETG-V), with an option to double down.
The major initially bought 5.7 million units at $2.20 apiece, with each unit consisting of one share accompanied by an A- and B-class warrant; two A warrants are good for an additional Entree share at $2.75 apiece for two years, and two B warrants are exercisable for one share at $3 for two years.
Rio Tinto also picks up a right of first refusal on Entree’s 70-sq.-km Ulziit Uul property in Mongolia. Ulziit Uul is 120 km from Entree’s Shivee Tolgoi (Lookout Hill) property and immediately east of Ivanhoe Mines‘ (IVN-T) Kharmagtai property. At Ulziit Uul, Entree is in the midst of a US$900,000 program of deep-probing induced-polarization surveys in anticipation of 2,500 metres worth of drilling slated to begin in August.
The deal also allowed Rio to buy up to an additional 641,191 units to preserve its interest level should Ivanhoe decided to exercise its right to buy more shares (around 1.2 million) to maintain its existing 9% interest in Entree.
Ivanhoe recently did that and more by cashing in 4.6 million existing Entree warrants at $1.10 apiece to double its stake to 9.2 million shares. Ivanhoe says it will maintain its new equity interest under the private placement of units at $2.20 each.
As it stands, Ivanhoe owns a 16.4% stake in Entree, with Rio Tinto holding 9.9%. In all, the investments inject around $21.7 million into Enrtee. Assuming all warrants were exercised, Ivanhoe would own about 16% and Rio own about 18%, and Entree would see another $21.7 million.
Each company is also allowed to maintain their stakes via future financings.
Ivanhoe originally came by its 9% stake in Entree as part of a 2004 agreement to earn up to an 80% interest in a 400-sq.-km portion of the junior’s 1,800-sq.-km Shivee Tolgoi project by spending US$35 million on exploration. The property completely surrounds Ivanhoe’s Oyu Tolgoi (Turquoise Hill) copper-gold project in Mongolia.
Earlier this month, drilling by Ivanhoe on the Copper Flats area of Shivee Tolgoi returned 608 metres averaging 3.2% copper and 0.8 gram gold per tonne, including 322 metres grading 4.6% copper and 1.1 grams gold. The partners say the result represents one of the longest and highest-grade intervals ever encountered in a porphyry copper-gold system.
Hole 8, a 450-metre stepout, yielded 324 metres grading 2.45% copper and 1.2 grams gold. More recently, nearby hole 16C yielded “visually strong” chalcopyrite- and bornite-rich copper mineralization.
The partners say drill results suggest the mineralized system remains strongly developed and open to the north. The latest hole also confirms the continuity of the Hugo North mineralized system over 450 metres on to the Entree-Ivanhoe property. The extension remains open to the north and at depth.
Ivanhoe has seven drills testing the Hugo North extension on Copper Flats. The Hugo North copper-gold discovery has now been traced over more than 2.2 km from Oyu Tolgoi on to Shivee Tolgoi.
Shares in Entree have risen by about 50% during the past month and were trading near $2.35 on the TSX Venture Exchange at presstime.
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