Ivanhoe Mines Ltd
Friedland's resignation, along with the resignations of six other directors and four senior management members, comes a few months after mining giant Rio Tinto bought a controlling stake in the Toronto-listed mining company.
The management change signals an end to the often tumultuous relationship between Ivanhoe and top shareholder Rio, which has helped finance a large portion of the Oyu Tolgoi development and brought the project to the verge of production.
Vancouver, British Columbia-based Ivanhoe said its agreement with Rio contains a comprehensive financing plan structured to secure Rio's direct participation in, and support for, funding Oyu Tolgoi, the company's flagship project.
This agreement sets the stage for the Oyu Tolgoi project's transition to a major mining operation in coming months, said Friedland, a well-known mining financier who made a fortune in the 1990s by selling the then-undeveloped Voisey's Bay nickel deposit in Eastern Canada to Inco for about C$4.3 billion.
Friedland's move to step down sets the stage for him to focus on his next big project, Ivanplats. The private company, controlled by Friedland, owns the Platreef platinum project in South Africa and the Kamoa copper and Kipushi zinc operations in the Democratic Republic of Congo. The company is expected to go public mid-year and raise about $1 billion (624 million pounds).
Ivanhoe said its board has been reduced to 13 members from 14. The company's board and management shake-up is no surprise as Rio had signalled its intent to gain more direct control after it raised its stake in Ivanhoe to 51 percent in January of this year.
As Rio's stake in Ivanhoe has grown, the two companies have repeatedly locked horns over financing matters and other issues. In December, an independent arbitrator cleared the way for Rio to take control of Ivanhoe, after ruling the Canadian company's poison pill defence was not valid.
Today's changes can be seen as the last move in the struggle for control of Ivanhoe, wrote BMO analyst Tony Robson in a note to clients that also commended Rio CEO Tom Albanese on his handling of Rio's strategy with Ivanhoe.
Investors in Ivanhoe had hoped that Friedland, who owns a roughly 13.7 percent stake in Ivanhoe worth about $1.3 billion (811.2 million pounds), would replicate his Voisey's Bay success and extract a large premium from Rio. This is now unlikely, some analysts say, and Ivanhoe shares, which topped $28 in early 2011, now trade at less than half that.
Ivanhoe said seven of its directors - Marc Faber, Edward Flood, Robert Friedland, David Korbin, Livia Mahler, Tracy Stevenson and Dan Westbrook - have stepped down. They will be replaced shortly by six Rio nominees, four of whom will be independent directors.
The company said Kay Priestly, Rio's chief financial officer and a director of Ivanhoe, was appointed Ivanhoe's interim CEO. Catherine Barone, Ivanhoe's head of finance, was named the company's interim CFO. Barone replaces Tony Giardini who stepped down as CFO.
Other top Ivanhoe executives that have resigned are President John Macken, Deputy Chairman Peter Meredith and Executive Vice President Sam Riggall. A new CEO and CFO will be nominated by Rio within the next five business days, the company said.
Ivanhoe said it remains engaged in active talks on divesting its subsidiary interests. Ivanhoe's other assets include stakes in coal miner South Gobi
Chinese aluminium company Chalco recently agreed to pay $926 million (577 million pounds) for a controlling stake in South Gobi.
Despite Friedland's departure, the certainty provided by the financing deal lifted Ivanhoe shares on Wednesday. Shares in Ivanhoe jumped nearly 10 percent to C$12.76 in afternoon trading on the Toronto Stock Exchange, while its New York-listed shares rose by a similar margin to $12.88.
Rio has agreed to support a $3 billion (1 billion pounds) to $4 billion (2 billion pounds) finance package for the Mongolian project that will be provided by third-party lenders. Ivanhoe has been in talks with lenders for months to line up the financing package, which is expected to be finalized by the end of the year.
Ivanhoe said Rio also has the option of advancing loans to finance Oyu Tolgoi as long as the terms are no less favourable than those available via financial institutions or banks.
As part of the agreement, Ivanhoe will also proceed with a rights offering to its shareholders that will raise up to $1.8 billion (1.1 billion pounds) in gross proceeds. The rights offering will be supported by a standby commitment for the full amount from Rio Tinto.
Proceeds of the rights offering will be used as part of the financing plan to cover all projected capital requirements for Oyu Tolgoi. Ivanhoe said all shareholders may participate on an equal proportional basis in purchasing additional common shares of Ivanhoe Mines at a subscription price of C$8.34.
Rio has also agreed to provide an immediate, additional bridge-funding facility of up to $1.5 billion (936.0 million pounds) to help ensure uninterrupted progress on the construction of the first phase of Oyu Tolgoi. This is on top of a $1.8 billion (1.1 billion pounds) interim facility already provided by Rio. Both facilities will be repaid from the proceeds of the finance package and the equity financing.
In addition, Ivanhoe will issue 55 million share-purchase warrants to Rio. Each warrant will be exercisable to purchase one Ivanhoe share at $12.79 at any time during a three-year period.
(Reporting By Euan Rocha; Editing by Gerald E. McCormick, Maureen Bavdek and Peter Galloway)