Ivanhoe ups its stake in Pacific Minerals

Vancouver — Looking to get a firm foot hold in China, Ivanhoe Mines (IVN-T) plans on taking a 42.2% stake in junior explorer Pacific Minerals (PMZ-V).

“Pacific Minerals is one of the leading exploration and development companies in China,” says Ivanhoe’s Chairman, Robert Friedland. “Ivanhoe intends to be a significant player in what will be a tremendous future for the mining industry in China, and this is the right time for us to assume a larger role in determining the future direction of Pacific Minerals.”

In June, the company made its first move with Pacific Minerals by taking a US$3 million private placement in the junior. In return for the funding, Pacific Minerals gave Ivanhoe the right to acquire a majority interest in the 217 gold project in Inner Mongolia and the JBS platinum-palladium- nickel project in Yunnan province. Ivanhoe was also granted a right of first refusal to acquire a majority interest in any new project in China (excluding Anhui Province) undertaken by Pacific during the next 10 years.

Now, Ivanhoe intends to garner further control by picking up another 2 million units in the junior at $1 each. A unit holds one share and one warrant, which is exercisable at $1.10 for 2-years. In a separate deal, Ivanhoe agreed to acquire 6.6 million Pacific Minerals shares from five shareholders in exchange for 2.3 million Ivanhoe shares. Once the deals are complete, Ivanhoe will hold 38.4% of Pacific Minerals, 42.2% on a fully diluted basis.

Pacific Minerals is currently in the midst of a 5,000 metre drill program on the 217 gold project and has inked three preliminary agreements to earn 70% and 75% of 4,500-sq.-km in Yunnan and Guizhou provinces. Under each of the deals, Pacific Minerals agreed to fund US$4 million in the joint venture over 3 years. Under the earlier agreement with Ivanhoe, the Robert Friedland led junior has the first right of refusal over each of the properties and has the option to earn a 60% stake by paying US$500,000 of the first US$1 million in expenses, plus completing a feasibility study. Ivanhoe can then elect to earn another 20% by arranging production financing.