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Latest Headlines
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Nov 19, 2009 3:55:00 PM MST
Ivanhoe Energy subsidiary to merge with PanAsian Petroleum Inc in Mongolia (Ivanhoe-Mongolia)
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Ivanhoe Energy Inc. (TSX:IE) said Thursday a move to acquire oil and gas exploration and production rights in highly prospective central Mongolia is the first step in a plan to aggressively grow its Mongolian operations.
"I love this deal, we love Mongolia," said Robert Friedland, president and CEO of Ivanhoe Energy in a conference call to investors Thursday.
"Mongolia is ripe for exploration and production investment for oil and gas."
The Vancouver-based heavy-oil company announced Wednesday its Asian-focused subsidiary Sunwing Energy Ltd. is set to merge with Alberta-based PanAsian Petroleum Inc. in an all-stock deal for light oil exploration in Mongolia.
The deal, expected to close in the next few weeks, involves the issuance of up to three million Ivanhoe shares worth about $7.9 million, but no payment of cash to PanAsian´s principals.
PanAsian will keep its corporate structure and its contractual relationship with the petroleum authority of Mongolia will not be altered by the merger.
Ivanhoe said a key strategy for the upcoming year is growing its Sunwing operation, with the aim of trading the company on a public listing of a major Asian stock exchange.
Friedland, who is also utive chairman of Ivanhoe Mines (TSX:IVN), which is developing the massive Oyu Tolgoi copper project in Mongolia, said there is a race to inject foreign investment in the country, with many countries competing for a piece of the vast and resource rich land.
PetroChina, China´s major oil producer has allocated a $500,000 million budget to drill in Mongolia in 2010, which underscores the importance of market,Friedland said.
There have been multiple recent light oil discoveries in China, Friedland said, as well as discoveries on the southern border with Mongolia and two discoveries in Eastern Mongolia, just south of block 16, which the company will acquire.
The company believes that block is the jewel of central Mongolia´s oil resources. At 16,000 square kilometres, it is roughly the size of Kuwait, and possesses geological similarities to the basins to the south and east, where oil discoveries have been made.
Friedland said he hopes the deal will help to generate similar levels of wealth in oil and gas as his companies have achieved in coal, gold and copper exploration in the rapidly-developing country.
Ivanhoe Mines is the largest foreign investor in the country, he added.
Ivanhoe Mines recently signed a long-awaited deal with Mongolia to develop the Oyu Tolgoi projected after a heated national debate over how to exploit the country´s mineral wealth.
The agreement on the gold and copper mine in the Gobi desert was renegotiated repeatedly after opponents complained it shortchanged Mongolia, which lies wedged between Russia and China and has long been wary of foreign domination.
Ivanhoe Mines also has an 80 per cent stake in SouthGobi Energy Resources Ltd. (TSXV:SGQ), focused on exploring and developing metallurgical and thermal coal deposits in Mongolia and Indonesia.
With those operations underway, Friedland said the country will experience dramatic growth and increased demands for oil from the mining industry.
Friedland added that the country desperately needs roads and highways, suggesting the company could get into the asphalt business as well.
"That alone could be a very attractive business, and heavy oil has already been identified on the block...and of course the mining industry is going to need a lot of hydrocarbon so we could put up a refinery."
Shares in Ivanhoe Energy closed down 2.5 per cent or seven cents to $2.67 on the Toronto Stock Exchange Thursday.
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