Ivanhoe Mines (TSE:IVN)(NYSE:IVN) said Wednesday it will scrap its shareholder rights plan, clearing the way for its single largest shareholder, Rio Tinto (NYSE:RIO)(LON:RIO) (ASX:RIO), to take over what could be one of the world's largest copper-gold mines.
Ivanhoe is the owner of Mongolia's vast Oyu Tolgoi project.
A shareholder rights plan, or poison pill, is a defence tactic used by a company’s board of directors to fight against unwanted takeovers and makes it more expensive to acquire the target company.
In a statement, Ivanhoe said: "The board of directors has decided that the interests of shareholders and the company's strategic objectives would be best served by the termination of the company's shareholders' rights plan."
Cancelling the plan will require approval of shareholders at the company's annual meeting on May 11. The move came as an agreement limiting Rio Tinto's holding at 49 percent expired.
Ivanhoe also said Rio had recently told Ivanhoe's board that it intends to buy additional shares to raise its stake to more than 50 percent.
Ivanhoe's rights plan, backed by shareholders in 2010 and due to expire next year, was dealt a fatal blow in December when a court ruled it could not be used to dilute Rio's stake.
The ruling recommended Ivanhoe scrap the provision, which would have triggered a massive rights issue in the event of a bid.
Industry insiders believe that Rio would be unlikely to jump into an aggressive move to take over Oyu Tolgoi or Ivanhoe - or get into a battle with Ivanhoe's CEO, Robert Friedland.
There are no other apparent buyers for Oyu Tolgoi, with Rio already controlling a blocking stake in Ivanhoe. It also already operates the project and is one of few companies with the deep pockets necessary to fund a similar sized mine.
This could allow Rio time to resolve key operational issues at Oyu Tolgoi, including power provision to the site.
Oyu Tolgoi is considered one of the world's largest copper deposits, and is expected to reach commercial production in 2013.
Over its first 10 years, the mine is expected to produce more than 544,000 tonnes of copper, 650,000 ounces of gold, and three million ounces of silver.
Ivanhoe made Wednesday's announcement as it said it had obtained a second $1.8 billion bridge loan as a stopgap measure, while it negotiates $4 billion in long-term financing for Oyu Tolgoi.
The bridge loan is subject to Rio's approval.
Wednesday afternoon, Ivanhoe shares lost 17 cents to trade at $19.12.