Mongolian Cabinet, Ivanhoe, Rio Tinto, Finalise Oyu Tolgoi Deal

cabinetThe government of Mongolia approved on March 31st, the feasibility study presented by Ivanhoe Mines and its strategic shareholder, Rio Tinto. The feasibility study was the last of the ten conditions Ivanhoe had to meet, paving the way to start developing the Oyu Tolgoi copper gold mine.

The Mongolian Government announced yesterday at a press conference, that it confirmed that the procedural and administrative conditions contained in the Investment Agreement had been satisfied within the allocated six-month period that has followed the agreements official signing on October 6, 2009

Ivanhoe Mines Ltd and Rio Tinto the development partners for the project, will now move forward with the Government of Mongolia to commence the development phase of the project. Production is expected to commence in 2013, with a five year ramp up to full expected production of 450,000 tones of copper per year with significant gold by-products. Projections remain to be confirmed in an updated development plan. Ivanhoe estimates total investment over the next four years to build and commission the initial mining complex which will be approximately US$4 billion. Building a coal-powered electricity generating plant for Oyu Tolgoi would require an additional capital commitment.

D. Zorigt Minister for Mineral Resource and Energy said that today the minerals sector accounts for 22 percent of GDP and nearly 60 percent of national industrial sector. These figures will increase dramatically following the development of Oyu Tolgoi.

Oyu Tolgoi Shares

otshares2According to the agreement the Mongolian government will now acquire a 34% interest in the Ivanhoe Mines subsidiary, Oyu Tolgoi LLC, which holds the Oyu Tolgoi mining licences. Mongolia's interest will be held through the state-owned, sovereign-wealth resources company, Erdenes MGL LLC. Ivanhoe Mines will own a 66% interest in Oyu Tolgoi LLC.

Rio Tinto has increased it's ownership in Ivanhoe to 22.4%, and holds options to increase that interest to 46.6% during the next 19 months. Ivanhoe Mines Executive Chairman Robert Friedland said: "the participation of Rio Tinto guarantees that the world's best mining and environmental practices and some of the most advanced mining technologies will be applied to the Oyu Tolgoi Project".

 

2010 Development Budget US$ 758

The joint Ivanhoe Mines-Rio Tinto Oyu Tolgoi Technical Committee has conditionally approved US$ 758 million budget for 2010 that includes Ivanhoe’s repurchase from Rio Tinto of major items of mining and milling equipment.

Robert Friedland, Executive Chairman of Ivanhoe Mines said: "Acquisition of the equipment is another significant step in building one of the world’s largest copper-gold mines".

The components for the 100,000-tonne-per-day Oyu Tolgoi phase-one copper-gold concentrator, including two large, 38-foot-diameter, semi-autogenous grinding (SAG) mills, four ball mills, re-grind mills, crushers, motors, gearless drives, conveyors and flotation cells. Also included is the hoist and major components for the sinking of Shaft #2 – the 10-metre-diameter, main production shaft for the underground block-cave mine at the Hugo North Deposit.

Work planned in the 2010 construction budget includes:
• Resumption of the sinking of the 10-metre-diameter Shaft #2, which will be used to hoist ore to the surface from the deep, underground, copper-gold-rich Hugo Dummett Deposit.
• Construction of a 97-metre-tall (approximately 31-storey), reinforced-concrete headframe for Shaft #2.
• Pouring the concrete foundation for the 100,000-tonne-per-day concentrator and deliveries of building materials for the concentrator and infrastructure.
• Installation of a 20-megawatt power station and 35-kilovolt distribution system.
• Initial earthworks for the open-pit mine at the Southern Oyu deposits.
• Continuation of lateral underground development off Shaft #1 at the Hugo Dummett Deposit.
• Construction of a 105-kilometre highway link to the Mongolia-China border, which will be fully paved by the time production begins.
• Construction of a regional airport, with a concrete runway to accommodate Boeing 737-sized aircraft.

Water Issue

A coalition of NGO's has raised concerns over water issues. The Mongolian Professional Minerals Council (PMC) has examined the feasibility study report. One of the concerns of the experts was the question of sufficient water resources. According to a survey conducted by Ivanhoe the water resources are sufficient to process 100,000 tons of ore per day. To enable an increase to 150,000 tons per day, further surveys have to be conducted, to tap more water resources.

Ivanhoe has committed itself not to use the shallow groundwater in depth of about 5-10 meters, used by herders in the region. Research of the deep aquifers at Gunii Hooloi has located an ancient river canyon which contains water in coarse sand at a depth of 100-200 meters. A thick clay layer at a depth of 50-100 meters forms a barrier  separating near surface water from the deep aquifer.

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Sources: Ivanhoe press release, Rio Tinto press release,

Related article: Oyu Tolgoi Agreement

By: Dan G. ToMongolia@Gmail.com

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