The 2 fundamental questions prospective and current TRQ shareholders MUST find answer to are:
1.What are RIO's intentions towards TRQ given the worsening M climate
2. How will OT future look like - how debacle with M donks will end up
Pre-condition to answering 2 above Qs is Q3
3 What / how much $$ is really at stake for RIO.
How much the donk -adventure cost RIO to date
Therefore, what are the likely RIO moves / options on both fronts (1&2)
Here we need some numbers by some serious posters
3.1 . how much EXACTLY cost RIO to get 51% stake in TRQ
3.2 how much RIO spend directly on OT of it's own money ( not TRQ's)
3.3 . how much RIO lent to GOM for them to cover their stake in capex
( 250 OR 500M - AND NOW IS ABOUT TO CALL THAT LOAN )
or paid for GOM capex portion - to be repaid from future GOM portion of profits.
( BOTH SHALL TOTAL TO $1.8 b )
3.4 how RIO outlays are structured -looks mostly in form of loans to TRQ or directly to operating mongolian co
RIO may have most of it's investments in form of loans to TRQ/ GOM insulating it somewhat from fate of OT
( OT can be failure but loans have to be paid back )
( side Q : who holds TRQ $1.9 b debt ?)
But RIO controls TRQ / SGQ/IVN AU etc cash = at a click of a mouse
can transfer about $ 2 b to itself and get PART OF it's money back
4. what is the total RIO exposure/ cost and in what form
( breakdown betwen cost of equity in TRQ, loans , direct cash spent )
I suspect , the $6 B capex tossed arround is misleading as applied to RIO's real cost.
Can be much higher ( cost of 51% stake ) or lower if selling TRQ subs and grabing TRQ cash.
OR SELLING TRQ ITSELF and getting out of donks-land un/ little scrached .
5. what are the odds that the fighting parties will use third party potential suckers to pay for their claims - the debt and equity bagholderes= the market ?
"Market" paid already substantial portion of OT capex ( HOW MUCH ?.. $3-4 b )
in form of giving in the past hard cash to IVN for IVN shares .
EQUTY INVESTORS ARE ALWAYS THE DEFAULT SUCKERS / VICTIMS WHEN THINGS GO WRONG.
ROUGH CALATION oF RIO COST
WE NEED BETTER OINE
Jan 4 2012
Rio Tinto purchased an additional 15.1 million common shares of Ivanhoe, representing 2 per cent of Ivanhoe's outstanding common shares, from two sellers in a privately negotiated share purchase transaction. The shares were purchased for an aggregate of C$302 million at a price per share of C$20.00.
After the completion of the share purchase, Rio Tinto will own 377,397,658 common shares of Ivanhoe representing 51 per cent of Ivanhoe's outstanding common shares.
IF 377.4 M SH ON JAN 4 2012 = 51%
, IVN TOTAL SHARES COUNT AT THAT TIME MUST HAVE BEEN 747.2 M
THERE WERE SH POSTs AT THAT TIME TRYING TO CALCULATE THE $ AMOUNT RIO SPENT ON 51% IVN
QUOTE FROM SOME POST AT THAT TIME
The CS-analysis of Jan 16, page 8 states:
Rio’s weighted average purchased price since it started to build its shareholding in Ivanhoe has been C$11.45 per share (highest price paid C$25.34 per share). bull se sgq fil
We can the update CS's numbers and calculate RT's average purchase price of IVN-shares to date:
( (377 397 658 - 15 100 000) x 11.45 + 15 100 000 x 20 ) / 377 397 658 = C$11.79 per share.
377,4 M SH X $11.8 = $ 4., 44 b
THEN CAME THE DILUTION BY RIGHTS OFFERING SAGA = SCREWING ORIGINAL SHAREHOLDERS SECOND TIME
NOW YAHOO SHOWS 1.01 B SH OUT AND 307 M SH FLOAT
Means , RIO's 51% represents now 511m sh = 134 m sh ( like 28% more SINCE TAKE OVER ) x $ 8 ?? rights buy = $ 1.25 B more
total cost of 51 % TRQ equity = $ 5.7 b = around $ 10.5 / sh after the rights manouver
TRQ cap now at $ 7.5 /sh = $ 7.7 b
RIO 51% at market is worth now = $3.9 B
Investment loss on equity = $1.8 b = 30%
TOTAL RiO;s' COST
$ 5.7 b = 51% equty in TRQ= that's it ?
what is RIO's own cash portion in the $ 1.8b financing of M donks portion of capex
Add RIO ( not TRQ) loans / capex (if any) directly to M OT operating co
and RIO ( not TRQ) welfare/ community spending
Should be zero or not much because RIO is not spending it's own money
- is using TRQ money .
So , about $ 5.7 b bought RIO 51% in 66% TRQ stake in OT
= 33% in OT
+ stakes in TRQ subs
By selling the subs ( Kazak gold mine for 300m and SGQ + iVN Australia they can reduce the pure 33% OT cost to say $ 5 B
Whole OT capex = book value is say $6b
33% of it = $2 b
So , Rio bought for $ 5 b , $ 2 b of OT book = paid 2.5 times OT book
LOOKS OVERPAID ON P/B BASIS
But because of controlling stake in TRQ,,,, laid it;s hands on $ 4 B book = whole TRQ portion of book
If Rio will ever recover from GOM donks that $ 1.8. b than the deal can be reduced to say 1.5 OT book
and $ 3 b final outlays.
Right ?.. I am confused myself by looking at things from this angle
Can RIO afford to put OT on ice if donks will force them to ?
Walk away write down $ 3b and engage for next 10 Y in litigation with GOM ?
Sure they can
RIO has written down $ 14 b of bad investments and still made $ 13 billions in NEW investments in projects all over the world besides OT.
2012 earnings due today will likely miss as all others in the space
Most of majors put many projects on ice all the time because of many reasons
- explosion of capex /opex , rise in taxes / royalties ,oversupply /price drop of given commodity
being major causes.
IE: in Poland they discovered more $$ in shale gas than M has in coal or Cu
Enough to put Russia out of gas business in EU.
Majors staked most of licences , spent lotsa on drilling
but those post commie countries have same thing in common
- red tape , corruption and too big tax / free stake grabs
So, majors are returning the licences , writing down costs and leaving the country
Pump / dig yourself ....commie ... if you can afford the $$ billions in investments, have the technical expertise , efficiency and access to markets
Stable US is cheaper better to do NG business in .\
IE : under GOM is sea of oil.
Cuba sits in the middle of it and 90 miles from biggest oil market in world .
Have you heard of commie Cuba being a big oil exporter despite having huge oil resource in it;s territorial waters
Maybe this is RIO response to M donks
Feb 7 (Reuters) - Rio Tinto is looking into restarting its Panguna mine in Papua New Guinea
one of the world's largest sources of copper and gold
until the company abandoned it a quarter century ago
after local villagers chased off workers in a secessionist uprising.
Well ,the villages after happy 25 years of hunting- gathering in the jungle
apparently are now more eager / receptive to 'exploitation by multinationals '
Note also that no other miner went there for 25 Y ,after RIO left the region / country
Did the world missed or suffered undersupply after putting on ice
" one of the world's largest sources of copper and gold "
As will not miss OT if RIO WILL PUT ON ICE M donks .