Ivanhoe swaps coal assets for bigger stake in Asia Gold

Vancouver – In a related party transaction, Ivanhoe Mines (IVN-T, IVN-N) has agreed to vend its coal division into Asia Gold (ASG-V) in exchange for a majority ownership of the company.

Earlier this year, Ivanhoe announced plans to create a stand-alone publicly listed Mongolian coal and power company that would hold the Nariin Sukhait coal project, the Tsagaan Tolgoi coal deposit, and exploration lands prospective for coal deposits. The goal is to allow Ivanhoe to focus on and finance its core assets, namely the wholly owned Oyu Tolgoi copper-gold project in southern Mongolia, and advance copper-gold exploration projects in various parts of the Asian nation.

The latest plan calls for Asia Gold to acquire Ivanhoe’s coal division in exchange for 82.5 million shares. Asia Gold would then become a majority-owned subsidiary of Ivanhoe, with a coal division and a mineral exploration division. Ivanhoe already owns 47% of Asia Gold, and if all goes as planned, this would increase to a 91.4% stake on an issued and outstanding share basis, and 88.8% on a fully diluted basis.

BHP Billiton holds a 7% interest in Asia Gold, and is also involved in a Mongolian joint venture with the company covering 7,600 sq. km of ground prospective for copper, gold and coal deposits.

Asia Gold’s existing Mongolian assets include the Khongor porphyry copper-gold prospect, the Naran Bulag prospect, which hosts high-grade gold veins in the Gobi region. The company also has exploration projects in Mongolia, Indonesia, and Bulgaria.

The coal assets to be acquired by Asia Gold are substantial. Nariin Sukhait hosts measured and indicated resources totaling 124 million tonnes, plus a further 33.75 million tonnes of inferred resources. An open-pit mine is being evaluated that would produce thermal coal for power generation, PCI coal for steel-making, and coking coal.

An infill drilling campaign is under way to generate a resource estimate for the Tsagaan Tolgi coal deposit. The goal is to outline a sufficient quantity of thermal coal for a coal-fired plant that would supply electricity to Ivanhoe’s large Oyu Tolgoi project, and also to residents in the sparsely populated southern part of Mongolia.

Ivanhoe’s proposed transaction is subject to a definitive agreement, various regulatory approvals, and the approval of a majority of Asia Gold’s shareholders at a meeting to be convened for that purpose.