Chinese company eyeing Rio’s Inova Resources for $160m

Mining giant Rio Tinto's Mongolian subsidiary has consented to selling its 56 per cent stake in molybdenum and copper company Inova Resources.

Turquoise Hill, previously Ivanhoe Mines and controlled by previous Ivanhoe Australia chairman Robert Friedland, is looking to sell its stake in Inova to two rich Chinese brothers from Shanxi Donghui Coal Coking and Chemicals Group, a small private mining company.

The brothers are proposing a $160 million cash bid for the stake.

Inova owns the Osborne gold and copper mine near Mount Isa.

The company is looking to collaborate with someone to expand the close-by $345 million Merlin molybdenum and rhenium project, The Australian reported.

Rio Tinto acquired 51 per cent of Ivanhoe Mines for $US935 million last year as Ivanhoe's Australian subsidiary revealed a huge cut in exploration.

This sale comes as Turquoise Hill looks to concentrate on Mongolian copper and gold mine Oyu Tolgoi.

Rio Tinto's Oyu Tolgoi mine in Mongolia lost 1700 jobs last week.

Contractor Redpath Mongolia LLC handed termination letters to the workers at the $6.6 billion copper mine.

The mine previously faced further delays as it waited for financing grants from the Mongolian government.

Turquoise Hill is in a pre-bid agreement with Shangxi Donghui to sell a 14.9 per cent stake and has indicated it intends to sell its remaining stake to them if they do not get a better offer.

The brothers, Zhang Yaping and Zhang Weidong, have to present a full takeover proposal for the company if it wants to purchase a stake more than 19.9 per cent in Inova, as per Australian law.

Zhang Yaping, the Chinese company's chairman, said the bid is a fair risk-free premium.

"Shanxi Donghui looks forward to progressing the development of Inova's mines and growth projects and managing the inherent risks involved," he said in an ASX statement.

The bid will proceed if it receives approval from Australian and Chinese authorities. It also requires 51 per cent agreement.

Shangxi Donghui is seeking advice from PricewaterhouseCoopers and a firm called Sapphire International Capital.

Ivanhoe Australia said last year it would cut 50 jobs and save about $10 million in order for the company to grow.

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