VANCOUVER (CP) -- Ivanhoe Mines Ltd. [TSX:IVN; NYSE:IVN] its selling its 42% controlling interest in Jinshan Gold Mines Inc. [TSX:JIN] to China National Gold Group Corp., a government-owned mining conglomerate.
Ivanhoe said Thursday it will receive C$3.1115 per share for each of its 67.5 million Jinshan shares, a total of just over C$210 million, plus a two-year C$7.5-million promissory note paying 12%.
Jinshan shares rose 13 cents or 4.6% to C$2.98 on the TSX, while Ivanhoe Mines edged up five cents to C$10.86.
"This is the first step toward the formation of a long-term strategic partnership between Ivanhoe Mines and China National Gold Group that will focus on gold and copper exploration and mine development opportunities in China," Ivanhoe chairman Robert Friedland stated in announcing the deal Thursday.
Ivanhoe - whose core assets are the Oyu Tolgoi copper-gold project in Mongolia, its holding in Mongolian coal miner SouthGobi Energy Resources [TSX-V:SGQ] and the Cloncurry iron-copper-gold site in Australia - will retain one-year warrants to purchase up to 1.5 million Jinshan shares at C$2.50, and will record a gain on the sale of its interest in Jinshan in the second quarter.
Jinshan, headquartered in Vancouver, began producing gold at its CSH mine in Inner Mongolia last July, and has produced 33,280 ounces to date, ramping up toward projected output of 120,000 ounces a year. It also has the Dadiangou discovery in Gansu province, with an inferred resource of 778,000 ounces of gold.
"There are significant benefits to be realized for Ivanhoe Mines' independent 100% owned gold exploration programs now underway in China through a co-operative partnership with China's pre-eminent government-owned gold group," Friedland said.
He added that "a substantial portion" of the proceeds of the asset sale will be applied to Ivanhoe Mines' gold and copper exploration in China, now the world's largest gold producing country.
China National Gold Group president Sun Zhaoxue said Jinshan "will continue to be based in Canada and we have plans to build it into a leading global gold producer as we pursue growth opportunities for our group."
Jay Chmelauskas is to remain president and CEO of Jinshan, which "believes the presence of China's largest gold producer will create new opportunities for strategic associations."
"We successfully entered China five years ago with the objective of becoming a significant player in the Chinese gold mining industry," Chmelauskas stated.
"This seminal relationship with China Gold validates our progress and significantly expands our platform for growth in the global gold mining industry."
(c) The Canadian Press 2008