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Analyst Actions: Ivanhoe Mines Target Price Cut at Credit Suisse

Arbitration Ruling Upholds Rights Plan and RIO's Anti-Dilution Rights. "IVN released the results of the decision in the arbitration proceedings between Ivanhoe and Rio Tinto (RIO.L, Outperform, TP 5000p). The arbitrator determined that, if RIO triggers IVN's Shareholder Rights Plan (SRP), the anti-dilution rights granted to RIO in the 2006 Private Placement Agreement would still apply."

Impact is slight negative, as degree of competitive tension falls away. "The arbitrator's decision means that the SRP may remain in effect until its scheduled expiry and will apply to all IVN shareholders, but the exercise of rights under the SRP will still be subject to RIO's anti-dilution rights. It is our understanding that the decision of the arbitrator cannot be appealed by either party. RIO currently holds 49% of Ivanhoe shares and could potentially move to increase its holdings following expiry of the Standstill Agreement on January 18, 2011, subject to keeping within the limit of 5% in any 12-month period rule. IVN mgmt noted that they, along with their legal counsel, are continuing to evaluate the implications of the arbitrator's decision."

RIO still motivated to do a transaction. "We continue to believe in the quality nature of the OT project, and RIO's desire to own a greater interest in the project, either through a full takeover bid, an asset/share swap, or a creeping takeover."

Lowering Target Price to C$25 (from US$27). "We believe that IVN shares continue to present upside potential as OT, in our view, is a high-quality asset with strategic value, and is on track for commissioning in 1H13. Our revised TP of C$25 per share (from US$27) is based on 1x our NAVPS of C$25.45. Given the sharp correction in yesterday's share price, IVN now trades at a P/NAV of 0.65x, a slight premium to the group average of 0.62x."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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