Ivanhoe Australia (ASX:IVA), which is 80 per cent owned by the Robert Friedland-chaired Ivanhoe Mines, plans to raise up to $269 million for a takeover and project development in Queensland as well as to settle debt.

The miner announced today it would raise $213m through a fully underwritten institutional offer and another $18m

from retail investors.

It has set aside additional $38m via a placement subject to demand.

Both the institutional and retail offer will be conducted through a 1-for-4 accelerated non-renounceable pro rata entitlement offer at $2.88 per share. This is a 10.28 per cent discount to Ivanhoe's last traded price of $3.21.

Ivanhoe Mines Ltd, which has its main listing on the Toronto stock exchange, has advised it will not take up its entitlements and will have its holding watered down to 65 per cent.

Ivanhoe Australia said its major shareholder remains committed to its investment.

Investors will also receive one free option for every two shares with a strike price of $3.38 before September 20, 2011. The Australian miner said this could raise a further $136m on top of the funds planned to be raised from the institutional and retail offer.

Funds raised by the offer will be applied to the Osbourne acquisition ($18 million), development of the Merlin project ($55 million), partial repayment of debt owed to Ivanhoe Mines ($53 million) and ongoing exploration, development studies and associated costs.

UBS and Morgan Stanley are underwriters, joint lead managers and bookrunners for the raising.

The announcement lifts a trading halt.