Source: The Mining Weekly, Reuters                      Date: 31 March, 2011

Construction at the Oyu Tolgoi copper/gold mining complex is on track, with several key items actually ahead of schedule, and prestripping of the big open pit mine will start in August this year, Ivanhoe Mines said on Monday. The present year represents the peak year of construction activity on the first phase of the project, with the mine scheduled to start commissioning in 2012 and to begin commercial production in the first half of 2013.

The company plans to start moving material from over the Southern Oyu deposits in mid-2011, and all the major mining equipment has been secured to ensure the prestripping stays on schedule. Oyu Tolgoi will start off as a 100 000 t/d open pit operation, with a concentrator plant, related facilities and necessary infrastructure, followed by an 85 000 t/d underground block-cave mine that will begin production in 2015. The concentrator plant capacity will be expanded when the underground mine starts up.

Ivanhoe has said it has advanced contract negotiations for the sale of the copper/gold/silver concentrate produced at Oyu Tolgoi and expects most of the production will initially be sent to major Chinese smelters.

Ivanhoe owns 66% of the project and the Mongolian government holds the other 34%. Diversified miner Rio Tinto, in turn, currently owns a 42.1 percent stake in Ivanhoe and can gradually raise this stake up to 49 percent.

Shaft sinking work on the shaft number two will start in September this year, and the headframe had reached 40 m of a final 97 m height by late in the first quarter. The shaft will be the first production shaft and the key personnel and materials shaft for the Hugo North block-cave mine. Construction of the concentrator was 23,6% complete by late March, and ahead of schedule, Ivanhoe said. There are now more than 7 000 people working at the project, including about 5,500 present at the site each day.

Contracts for the 97-km paved road to the Mongolia-China border and a permanent domestic airport are expected to be awarded by mid-year. The company is waiting for land-use permits from the Mongolian government for the process water pipeline, the permanent airport and roads and electrical power transmission lines, but expects the approvals during the second quarter.

Ivanhoe said it continues to work with Rio Tinto to complete an international project finance package of up to USD3.6-billion, which the two companies plan to have in place by the second half of this year. Ivanhoe agreed last year to let Rio Tinto take over management of the project, but the new agreement has yet to be approved by the Oyu Tolgoi company board.

Ivanhoe estimates capital expenditures on the OT project will be about USD2.3 billion in 2011. As of March 28, the company’s consolidated cash position was about USD1.9 billion. Ivanhoe also reported a full-year net loss of USD211.5 million. That compared with a full-year net loss of USD280.2 million in 2009.