Robert Friedland, Executive Chairman of Ivanhoe Mines Ltd. (TSX:
IVN)(NYSE: IVN)(NASDAQ: IVN), and David Woodall, Chief Executive
Officer of Altynalmas Gold Ltd., announced today at the Kazakhstan
International Mineral and Metallurgy Congress in Astana,
Kazakhstan, that a new, independent Pre-Feasibility Study (the
Study) has confirmed the economic viability of the Kyzyl Gold
Project in northeastern Kazakhstan. Ivanhoe Mines owns 50% of
Altynalmas, which owns 100% of the Kyzyl Gold Project.
Mr. Friedland and Mr. Woodall were accompanied by Jean Chretien,
former Prime Minister of Canada and a special advisor to Ivanhoe
Mines, at the Astana conference, which is being attended by
international governmental representatives and mining industry
leaders.
The Study and National Instrument 43-101-compliant Technical
Report (NI 43-101) prepared by Scott Wilson Ltd., of London,
England, is based on an underground mining operation producing an
average of 368,000 ounces of gold per year during an initial mine
life of up to 10 years.
The Study states that the economics supporting Mineral Reserves
have been established. The current drilling program converting
Mineral Resources to Mineral Reserves has been very successful,
ensuring confidence in the Life-of-Mine Sensitivity Case, with a
potential, extended mine life of up to 16 years with the presently
estimated Indicated and Inferred Mineral Resources. Inferred
Mineral Resources are considered too speculative geologically to
have the economic considerations applied to them that would allow
them to be categorized as Mineral Reserves, and there is no
certainty that the Life-of-Mine Sensitivity Case will be
realized.
Mr. Friedland said there is a high probability of increasing the
current Mineral Reserves and Resources through the ongoing infill
and exploration drilling program. "We believe that the current,
projected 10-year mine life based only on initial Probable Reserves
will prove to be very conservative. We have been highly successful
in upgrading Soviet-era resources to modern, Canadian NI 43-101
standards. In addition to the ongoing program of re-drilling and
upgrading the former Soviet-era gold resources, there is excellent
potential to discover new high-grade gold mineralization along
strike and to depth."
"The Scott Wilson Study provides independent verification that
the Kyzyl Project is the foundation for Altynalmas Gold to become a
significant gold producer. The Study verifies the quality of the
Mineral Resources and with the proprietary metallurgical processes
that have been developed allow us to proceed with development of
the project as quickly as possible," Mr. Woodall said.
"The Study also has confirmed the economic viability of the
Project Mineral Resources, and upgraded them to Probable Reserves
at an outstanding conversion rate averaging 98%. The Study
considered all aspects of a proposed operation at the Kyzyl Gold
Project, including a mine production plan, metallurgy and
processing, and capital and operating costs."
The Study contains the first estimation of underground Mineral
Reserves for the planned Kyzyl Project mine. It also presents the
results of extensive studies of two complementary development
scenarios - the Base Case and the Life-of-Mine Sensitivity
Case.
The Base Case evaluates only the Probable Mineral Reserves
established to date, which would sustain mining for a projected 10
years.
---------------------------------------------------------------------------
Summary of Base Case project analysis
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Mine life 10 years
---------------------------------------------------------------------------
Production rate 4,300 tonnes per day mining (1.5 Mtpa)
---------------------------------------------------------------------------
Metallurgical recovery 88%
---------------------------------------------------------------------------
Average annual gold production 368,000 ounces
---------------------------------------------------------------------------
Total ounces produced 3,308,000 ounces
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Average gold price US$905
---------------------------------------------------------------------------
Preproduction capital (allowing for US$682 million
recoverable VAT)
---------------------------------------------------------------------------
Sustaining capital (allowing for US$56 million
recoverable VAT)
---------------------------------------------------------------------------
After-tax free cash flow US$778 million
---------------------------------------------------------------------------
Average total cash cost US$373 per ounce
---------------------------------------------------------------------------
Average total production cost US$605 per ounce
---------------------------------------------------------------------------
The Life-of-Mine Sensitivity Case, adds to the Base Case a large
base of Mineral Resources identified through exploration to date,
but are currently classified only to the level of Inferred Mineral
Resources under Canada's NI 43-101 standards. The Life-of-Mine
Sensitivity Case is a Preliminary Assessment, which is preliminary
in nature as it includes Inferred Mineral Resources that are
considered too speculative geologically to have the economic
considerations applied to them that would enable them to be
categorized as Mineral Reserves. Mineral Resources that are not
Mineral Reserves do not have demonstrated economic viability.
Scott Wilson estimates that the Life-of-Mine Sensitivity Case
would sustain mining for a projected 16 years. A key goal of the
ongoing drilling program at the Kyzyl Project is directed at
upgrading Inferred Mineral Resources to higher resource and reserve
classifications, as has been progressively accomplished with recent
drilling and exploration.
---------------------------------------------------------------------------
Summary of Life-of-Mine Sensitivity Case Project Analysis
---------------------------------------------------------------------------
Mine life 16 years
---------------------------------------------------------------------------
Production rate 4,300 tonnes per day mining (1.5 Mtpa)
---------------------------------------------------------------------------
Metallurgical recovery 88%
---------------------------------------------------------------------------
Average annual gold production 358,000 ounces
---------------------------------------------------------------------------
Total ounces produced 5,372,000 ounces
---------------------------------------------------------------------------
Average gold price US$903 per ounce
---------------------------------------------------------------------------
Preproduction capital (allowing for US$707 million
recoverable VAT)
---------------------------------------------------------------------------
Sustaining capital (allowing for US$82 million
recoverable VAT)
---------------------------------------------------------------------------
After-tax free cash flow US$1,610 million
---------------------------------------------------------------------------
Average total cash cost US$372 per ounce
---------------------------------------------------------------------------
Average total production cost US$528 per ounce
---------------------------------------------------------------------------
Mineral Reserves
Scott Wilson estimated that the current total Probable Mineral
Reserves contained in Lenses 1 and 9-10 of the Bakyrchik Deposit,
one of several deposits comprising the Kyzyl Gold Project, total
13.58 million tonnes with a grade of 8.65 grams per tonne (g/t)
gold, containing 3.78 million ounces of gold, using a cut-off grade
of 4.0 g/t gold and a gold price of US$900 per ounce.
Table 1: Bakyrchik Deposit Mineral Reserves (as of 31/5/2010)
---------------------------------------------------------------------------
Tonnes Grade Au Contained Au
Location Category (million) (g/t) (million oz)
---------------------------------------------------------------------------
Lens 1 Probable 11.12 8.84 3.16
---------------------------------------------------------------------------
Lens 9-10 Probable 2.47 7.76 0.61
---------------------------------------------------------------------------
Total Probable 13.58 8.65 3.78
---------------------------------------------------------------------------
Indicated Mineral Resources contained in Lenses 1, 9 and 10 of
the Bakyrchik Deposit were converted into Mineral Reserves for the
Pre-Feasibility Study. Mineral Reserves were estimated as of May
31, 2010, in accordance with the requirements of NI 43-101 and the
definitions set out by the Canadian Institute of Mining, Metallurgy
and Petroleum (CIM) Definition Standards for Mineral Resources and
Mineral Reserves. These Mineral Reserves were used for the
Pre-Feasibility Study.
Notes:
1. Mineral Reserves were estimated using a gold price of US$900 per ounce.
2. Mineral Reserves were estimated using an underground cut-off grade of
4.00 g/t gold.
3. The values for tonnages, grades and contained ounces have been rounded.
4. Dilution averages 10%. Extraction estimated to be 95%.
Mineral Resources
Mineral Resources shown in Table 2 (inclusive of reserves) and
Table 3 (exclusive of reserves) were estimated as of April 30,
2010, in accordance with the requirements of NI 43-101 and CIM
definitions.
Table 2: Bakyrchik Deposit Mineral Resources Inclusive of Reserves
(as of 30/04/2010)
---------------------------------------------------------------------------
Indicated Inferred
------------------------------ ------------------------------
Grade Contained Grade Contained
Tonnes (cut) Gold Tonnes (cut) Gold
Lens ('000) Au (g/t) ('000 oz) ('000) Au (g/t) ('000 oz)
---------------------------------------------------------------------------
1 11,036 9.61 3,411 6,833 8.35 1,834
---------------------------------------------------------------------------
9-10 2,640 8.32 706 653 7.89 166
---------------------------------------------------------------------------
12 142 8.68 40 4,537 9.03 1,317
---------------------------------------------------------------------------
Total 13,818 9.36 4,157 12,023 8.58 3,317
---------------------------------------------------------------------------
Table 3: Bakyrchik Deposit Mineral Resources Exclusive of Reserves
(as of 30/04/2010)
---------------------------------------------------------------------------
Indicated Inferred
------------------------------ ------------------------------
Grade Contained Grade Contained
Tonnes (cut) Gold Tonnes (cut) Gold
Lens ('000) Au (g/t) ('000 oz) ('000) Au (g/t) ('000 oz)
---------------------------------------------------------------------------
1 324 7.02 73 6,833 8.35 1,834
---------------------------------------------------------------------------
9-10 - - - 653 7.89 166
---------------------------------------------------------------------------
12 142 8.68 40 4,537 9.03 1,317
---------------------------------------------------------------------------
Total 465 7.52 113 12,023 8.58 3,317
---------------------------------------------------------------------------
Notes:
1. Mineral Resources are estimated within wireframes constructed at a
nominal cut-off grade of 3.00 g/t gold, with an incremental cut-off
grade of 2.00 g/t gold where warranted.
2. A minimum true width of three metres was used to provide a minimum
mining width of four metres.
3. High gold assays were capped at 35 g/t gold. Assays were capped prior
to compositing.
4. Mineral Resources were estimated using an average long-term gold price
of US$1,000 per ounce.
5. Block sizes are 5 m x 5 m x 5 m.
6. Inverse distance squared was used to interpolate block grades.
7. Mineral Resources are reported at a block cut-off grade of 3.00 g/t
gold.
8. Bulk density is 2.7 t/m3.
9. Summation errors are due to rounding.
A total of 28,298 metres were diamond drilled between October
2009 and April 2010 in a program designed to upgrade Mineral
Resources to Mineral Reserves in support of the Study. The initial
phase of the drilling program was focused on the middle zone of
Lens 1 between the +150-metre and the -50-metre elevation levels.
The Lens 1 middle zone now has been tested by 60 new drill holes
and the assay results of 30 drill holes have been returned to date.
Drilling to date in the Lens 1 middle zone has confirmed both the
location and widths of the 2007 wireframe interpretations based on
the 2007 digital database re-compilation. The Kyzyl Shear Zone was
intercepted in all holes close to elevations predicted by the
geological model. Intersection widths and grade tenor correlate
well with the 2007 interpretation, providing a high level of
confidence to the spatial locations and assay results of the
historic former Soviet Union and western-based consulting drill
programs.
Altynalmas is following up the successful diamond drilling
program with an additional 50,000 metres planned for 2010 designed
to upgrade the remaining defined Mineral Resources to Mineral
Reserves and begin exploratory drilling on the other Bakyrchik
Deposit targets.
Metallurgy
The gold contained in the Bakyrchik deposit lenses is associated
with arsenopyrite and is refractory to conventional processing. In
order to achieve satisfactory gold extraction by cyanidation,
oxidation of the sulphides and elimination or control of the
adsorption effect of the carbon is necessary.
The Study considers a process flowsheet based on fluidised-bed
roasting technology. This flowsheet has been developed by Crescent
Technologies Inc. as a result of a programme of laboratory
bench-scale and pilot plant testwork carried out in 2009/10 for the
Study.
Although more testwork will be required, in the opinion of Scott
Wilson, Altynalmas has made considerable progress in resolving the
metallurgical and processing challenges over the course of the
current phase of development.
The Study assumes that a secondary gold refining facility will
be constructed on site in order to upgrade the dore produced in the
primary gold recovery process to 99.99% purity.
Life of Mine Plan
The present conversion rate of Indicated Mineral Resources to
Probable Mineral Reserves under this program is very high,
averaging 98%.
The Mineral Reserves were used to forecast the Base Case
Pre-Feasibility Study production schedule for an underground
drift-and-fill mining operation with a steady-state production of
1.5 million tonnes per annum. Scott Wilson forecasts that there are
sufficient Mineral Reserves to support a mine life of 10 years from
the start of commercial production. Pre-production development of
the mine is expected to commence in 2011 and plant start-up is
envisioned to be in Q'2 2013. Total gold produced over the life of
the mine is estimated at 3,308,000 ounces at a metallurgical
recovery of 88%.
The Life-of-Mine Sensitivity Case has a mine life of 16 years
and total production of 5.4 million ounces of gold. The Inferred to
Indicated Resource conversion rate for the October 2009 to April
2010 PFS diamond-drilling program in Lens 1 is almost 100%. In
Scott Wilson's opinion, a one-to-one resource conversion rate is a
reasonable expectation for the remaining drilling in Lens 1, based
on the continuity seen within the geological model and upon the
correlation between the historical drilling and new Altynalmas
drilling. The majority of the upgraded resources would be located
along the fringes of the current Indicated Lens 1 area and within
the deeper zone of Lens 1.
Data Verification
A rigorous QA/QC program was instituted for the 2009/10 drilling
program. In Scott Wilson's opinion results of the blanks, standards
and duplicates of the Pre-Feasibility Study QA/QC program show
overall good precision and accuracy by the ALS Chemex laboratory
for gold analyses.
Every batch of 20 samples had one standard, one blank and one
duplicate randomly inserted. The bagged core samples were
transported to the Bakyrchik Mine Laboratory where they were dried,
crushed and split. One half of the split was then pulverised and
fire assayed at the Bakyrchik Mine Laboratory in order to meet
export clearance requirements. The laboratory is accredited by the
Kazakhstan Government and the work has been supervised by the Chief
Chemist and overseen by the Exploration Manager. Crushing and
splitting protocols were explicitly defined and followed by staff
to ensure consistency in sampling. Matrix-matched standard
reference samples developed and certified by CDN Resource
Laboratories Ltd. of Langley, BC, Canada were provided by Dale A.
Sketchley, P. Geo., Senior Geologist & Manager - QA/QC of
Advanced Projects, Ivanhoe Mines.
The one-kilogram splits of Altynalmas' samples were assayed at
ALS Chemex in Vancouver, BC, Canada. ALS Chemex's Vancouver
laboratory has received ISO 17025 accreditation from the Standards
Council of Canada under CAN-P-4E (ISO/IEC 17025:2005), the General
Requirements for the Competence of Testing and Calibration
Laboratories, and the PALCAN Handbook (CAN-P-1570).
Project Description
The Kyzyl Gold Project is located in the northeastern region of
Kazakhstan, 1,100 kilometres north of the former capital, Almaty,
750 kilometres east of the present capital, Astana, 160 kilometres
southeast of Semey (formerly known as Semipalatinsk). The mine is
adjacent to the village of Auezov (population 4,500).
Altynalmas holds a 100% interest in the Kyzyl Gold Project,
which includes the Bakyrchik and Bolshevik gold deposits. The
project is operated by the Bakyrchik Mining Venture (BMV), which is
70% owned by Altynalmas through a subsidiary, Central Asian Mining
Ltd. (CAML), and 30% owned directly by Altynalmas. Ivanhoe owns 50%
of Altynalmas. Privately-owned Kazakh shareholders own the other
50% of Altynalmas.
Major features and facilities associated with the Kyzyl Gold
Project are:
-- The Bakyrchik and Bolshevik deposits and associated satellite deposits.
-- Underground mine, comprising vertical shafts, surface-access decline and
mine openings.
-- Various open pits and associated waste dumps.
-- The physical plant site, including a number of mine shafts and
associated facilities, process plant, rotary-kiln pilot plant,
workshops, warehouses, administration buildings, bunkhouse trailers and
dining facilities.
-- Facilities providing basic infrastructure to the mine and neighbouring
town, including electric power, heat, water supply and sewage treatment.
-- Waste rock, tailings, and ore stockpiles from historical mining.
-- Tailings facility.
-- Access by highway and gravel roads and a nearby railhead with
connections to Europe, Russia and China.
NI 43-101 Technical Report
The Pre-Feasibility Study and Technical Report for the Kyzyl
Gold Project were prepared to Canada's NI 43-101 reporting
standards. Details surrounding the key assumptions, parameters and
methods used to estimate the mineral resources and reserves
surrounding the resource and reserve estimates, as well as
information relating to the Qualified Persons data verification
procedures, are found in the 43-101F1 Technical Report for the
Project, a copy of which will be filed on SEDAR within 45 days and
available at www.sedar.com and on Ivanhoe's website at
www.ivanhoemines.com.
The Pre-Feasibility Study is an intermediate step in the
engineering studies required to evaluate the Kyzyl mining project
and the level of accuracy is approximately +/- 25%. Scott Wilson
recommends that the project should be advanced to the Feasibility
Study stage.
Preparation of Pre-Feasibility Study and Qualified Persons
The Pre-Feasibility Study was prepared by Scott Wilson Ltd. for
Altynalmas Gold Ltd. under the supervision of Graham Clow the
Qualified Person as defined in National Instrument 43-101, who has
reviewed, verified and approved the technical contents of this news
release.
Forward-Looking Statements
Certain statements made herein, including statements relating to
matters that are not historical facts and statements of our
beliefs, intentions and expectations about developments, results
and events which will or may occur in the future, constitute
"forward-looking information" within the meaning of applicable
Canadian securities legislation and "forward-looking statements"
within the meaning of the "safe harbor" provisions of the United
States Private Securities Litigation Reform Act of 1995.
Forward-looking information and statements are typically identified
by words such as "anticipate", "could", "should", "expect", "seek",
"may", "intend", "likely", "plan", "estimate", "will", "believe"
and similar expressions suggesting future outcomes or statements
regarding an outlook. These include, but are not limited to,
statements respecting Altynalmas Gold's planned exploration and
development work; the planned development work at the Bakyrchik
mine; the expectation that a high probability of increasing the
current Mineral Reserves and Resources through the ongoing infill
and exploration drilling program; the expectation that the current,
projected 10-year mine life based only on initial Probable Reserves
will prove to be very conservative; the expectation that Altynalmas
Gold can become a significant gold producer; the construction of a
secondary gold refining facility on site; the expectation that
pre-production development of the mine to commence in 2011; the
planned plant start-up in Q'2 2013; the projected annual production
rate of 368,000 ounces; the projected gold produced over the life
of the mine of 3,308,000 ounces and a metallurgical recovery of
88%; the estimated mine life of 10 years for the Base Case PFS and
16 years for the Life-of-Mine Sensitivity Case; and the estimated
total production of 5.4 million ounces for the Life-of-Mine
Sensitivity Case.
All such forward-looking information and statements are based on
certain assumptions and analyses made by Ivanhoe Mines' management
in light of their experience and perception of historical trends,
current conditions and expected future developments, as well as
other factors management believes are appropriate in the
circumstances. These statements, however, are subject to a variety
of risks and uncertainties and other factors that could cause
actual events or results to differ materially from those projected
in the forward-looking information or statements. Important factors
that could cause actual results to differ from these
forward-looking statements include those described under the
heading "Risks and Uncertainties" elsewhere in the Company's
MD&A. The reader is cautioned not to place undue reliance on
forward-looking information or statements.
Cautionary Note to U.S. Investors
The United States Securities and Exchange Commission permits
U.S. mining companies, in their filings with the SEC, to disclose
only those mineral deposits that a company can economically and
legally extract or produce. We use certain terms in this release
such as "measured", "indicated", and "inferred" "resources", which
the SEC guidelines generally prohibit U.S. registered companies
from including in their filings with the SEC. U.S. investors are
urged to consider closely the disclosure in our Form 40-F which may
be secured from us, or from the SEC's website at
www.sec.gov/edgar.shtml.
Contacts: Ivanhoe Mines Ltd. Bill Trenaman Investors
+1.604.688.5755 Ivanhoe Mines Ltd. Bob Williamson Media
+1.604.688.5755 www.ivanhoemines.com
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