Ivanhoe Mines Ltd. (TSX: IVN)(NYSE: IVN)(NASDAQ: IVN), today
announced its results for the quarter ended September 30, 2010. All
figures are in US dollars, unless otherwise stated.
HIGHLIGHTS DURING THE THIRD QUARTER AND SUBSEQUENT WEEKS
-- Full-scale construction at the Oyu Tolgoi copper and gold mine in
Mongolia is progressing ahead of schedule and there now are more than
5,500 workers on site. Ivanhoe expects to begin initial production of
copper and gold at Oyu Tolgoi in late 2012.
-- On October 18, 2010, Ivanhoe launched a strategic, conditional rights
offering in which all existing shareholders, subject to applicable law,
may participate on a pro rata basis in purchasing additional common
shares. The rights offering is expected to raise approximately $800
million to $1.0 billion.
-- Also on October 18, Ivanhoe announced that Executive Chairman Robert
Friedland re-assumed the duties and title of Chief Executive Officer as
part of a series of organizational changes that included the
establishment of the Office of the Chairman as part of an ongoing
commitment to maximize shareholder value.
-- Discussions are progressing with a group of international financial
institutions on a separate debt-financing package that is expected to
close in the first half of 2011. The proposed multi-billion-dollar
package is being considered by a core lending group comprised of the
European Bank for Reconstruction and Development, the International
Finance Corporation, Export Development Canada, BNP Paribas and Standard
Chartered.
-- In September 2010, Ivanhoe converted Rio Tinto's maturing $350.0
million convertible credit facility, plus accrued interest of $50.8
million, into approximately 40.1 million common shares of Ivanhoe Mines,
increasing Rio Tinto's ownership in Ivanhoe Mines from 29.6% to 34.9%.
-- In September 2010, a new hole drilled at Oyu Tolgoi intercepted 938
metres of near-continuous copper-gold mineralization between the Heruga
Deposit and the Southern Oyu deposits, making it the longest exploration
drill intercept of copper and gold mineralization recorded since Ivanhoe
began drilling at the Oyu Tolgoi Project in 2000.
-- On September 30, 2010, Ivanhoe's 62%-owned subsidiary, Ivanhoe Australia
(IVA-ASX) completed the acquisition of the Osborne Copper and Gold
Mining Complex, which includes a two-million-tonne-per-annum
concentrator located 53 kilometres south of Ivanhoe Australia's high-
grade Merlin molybdenum and rhenium project in northwestern Queensland.
-- On September 10, 2010, Ivanhoe Australia successfully completed a A$269
million equity raising through the institutional component of its
accelerated, non-renounceable, pro rata entitlement offer and an
institutional placement.
-- Ivanhoe Australia shares are scheduled to begin trading on the Toronto
Stock Exchange on November 12, 2010, under the symbol IVA.
-- During Q3'10, Ivanhoe's 57%-owned subsidiary, SouthGobi Resources (SGQ -
TSX; 1878 - HK), reported coal sales of $6.6 million from its Ovoot
Tolgoi mine in southern Mongolia, representing approximately 194,000
tonnes of coal sold to customers.
-- In July 2010, Ivanhoe's 50%-owned Altynalmas Gold began a definitive
feasibility study for the Kyzyl Gold Project in northeastern Kazakhstan.
Altynalmas Gold has engaged Fluor Canada Ltd., Crescent Technology Inc.,
Technip USA Inc., Environmental Resources Management, Scott Wilson
Roscoe Postle Associates Inc. and Sustainability East Asia LLC to
conduct the study.
MONGOLIA: OYU TOLGOI COPPER-GOLD PROJECT (66% owned)
Oyu Tolgoi copper-gold complex construction progressing ahead of
schedule for initial production in late 2012
Full-scale mine construction is underway at the Oyu Tolgoi
Project. Production of the first concentrate is expected in late
2012, with a build up to the start of commercial production in
2013. The Project initially is being developed as an open-pit
operation, with mining starting at the near-surface Southern Oyu
deposits. A copper concentrator plant, related facilities and
necessary infrastructure supporting an initial throughput of
100,000 tonnes of ore per day are being constructed to process the
ore mined in the open pit. Mining of ore from the Southern Oyu open
pit is scheduled to begin in Q3'12, to provide feed for the
commissioning of the concentrator.
An 85,000-tonne-per-day underground block-cave mining operation
also is being developed at the Hugo North Deposit, with initial
production expected to begin in 2015. The throughput capacity of
the concentrator plant is expected to be expanded when the
underground mine begins production.
Fluor Corporation is in charge of overall Oyu Tolgoi program
management, as well as services related to engineering, procurement
and construction management for the ore processing plant and
mine-related infrastructure such as roads, water supply, a regional
airport and administration buildings. Fluor is executing the
engineering for the Project from its Vancouver, Canada, and
Beijing, China, offices with operations being managed onsite in
Mongolia.
Current activities related to the 100,000-tonne-per-day phase
one copper-gold concentrator are focused on finalizing the
operational readiness plan. Detailed commissioning, operation and
maintenance plans are being developed for all the components of the
concentrator circuits. Representatives of various manufacturers and
engineering groups are assisting with the preparation of the
operational readiness plan.
Approximately 41,000 cubic metres of concrete had been poured by
the end of Q3'10 for the foundations for the concentrator building,
the foundations for the two 38-foot-diameter, semi-autogenous
grinding (SAG) mills and four ball mills, the pebble-crusher
building and the ore-reclaim tunnels. Work also continued with the
excavations for the tailings-thickening ponds and the preparation
of the storage yard for the mechanical equipment. Erection of the
structural steel for the concentrator building has begun and the
major contract for the mechanical, electrical and piping work for
the concentrator has been awarded. Surface excavation work for the
primary crusher also has commenced.
Detailed engineering for the ore concentrator was 83% complete
at the end of Q3'10. Key construction activities planned for Q4'10
include completing the pouring of concrete for the pebble-crusher
building and continuation of the erection of structural steel for
the concentrator building.
During Q3'10, Oyu Tolgoi LLC concluded the competitive bidding
process for the main infrastructure works, which include on-site
infrastructure required to support the mine operations and the
70-kilometre water pipeline to supply the concentrator.
Construction of the pipeline is expected to start in early
2011.
Bidders' packages are being prepared for construction of a
97-kilometre paved road from Oyu Tolgoi to the Mongolia-China
border at Gashuun Sukhait. This road will be the primary route for
the export of copper concentrate to China from Oyu Tolgoi. A
dual-circuit, 220-kilovolt electrical transmission line from a
Chinese substation to Oyu Tolgoi is being designed, with a target
construction completion date of late 2012. The power line is
expected to provide the electricity for the initial mine operating
period. Contracts for the road and power line are expected to be
awarded early in 2011.
Pre-stripping of open-pit mine expected to begin in mid-2011
The open-pit operation is on schedule to begin pre-stripping of
the Southern Oyu deposits in mid-2011, with first ore deliveries to
the concentrator expected during Q3'12. Work is continuing on the
selection and optimization of the open-pit mining fleet; the tender
is expected to be awarded during Q4'10.
Underground development of Hugo North Mine proceeding ahead of
schedule
The development of the first lift of the underground block-cave
mine at the Hugo North Deposit continued successfully during Q3'10.
Lateral mine development on the 1,300-metre level at the Hugo North
underground deposit is ahead of schedule, with a year-to-date
advance of 2,503 metres, well ahead of the planned advance of 2,325
metres. More than 5,000 metres of underground development off Shaft
#1 has been completed to date.
Raise-bore drilling for the first of two ventilation shafts near
Shaft #1 continued, with a successful breakthrough of the pilot
hole for the first lift of the raise (from the 512-metre level to
surface) and commencement of the pilot hole for the second lift of
the raise (from the 1,300-metre level to the 512-metre level).
Completion of the ventilation borehole will increase ventilation
capacity at the 1,300-metre level and allow for the introduction of
two additional underground development crews and equipment,
expected in Q3'11.
The design and engineering of the Shaft #2 headframe has been
finalized. Construction of a 97-metre-tall (approximately
31-storey), reinforced-concrete headframe for Shaft #2 is
progressing to plan. The structure for the Shaft #2 conveyor tunnel
is nearing completion and the ventilation plenum structure has been
completed.
The sinking platform for Shaft #2 arrived at site and sinking of
the 10-metre-diameter shaft is expected to begin in Q3'11. Shaft
#2, with a planned final depth of 1,335 metres below surface, will
be the main service shaft for the underground Hugo North block-cave
mine. Shaft #2 also will be used as the initial production shaft to
hoist the Hugo North ore to the surface.
The underground development from Shaft #1 is expected to connect
with the bottom of Shaft #2 in early 2013 and production from the
first lift of the Hugo North block-cave mine is scheduled to
commence in 2015.
Oyu Tolgoi skills training and community utilities programs well
advanced
The Oyu Tolgoi Project staffing strategy relies heavily on the
utilization of Mongolian nationals being developed and trained
during ongoing construction activities. More than 3,000 Mongolians
are employed by the Project. These construction employees will form
the bulk of the eventual production workforce, particularly within
the open-pit operations. For those areas requiring specialized
skills, such as activities in the concentrator, a specific training
plan is scheduled to begin early in 2012.
A total of 60 operators and 25 electrical trades trainees began
their training programs in September 2010. The programs, developed
at the Erdenet Technical College and the Darkhan Technical College,
primarily will provide skilled personnel for concentrator
operations and maintenance. In addition, 43 graduates from the
mobile machinery mechanics course are expected to be available for
continued training at the Oyu Tolgoi site in July 2011.
Fourteen students from the local Khanbogd community have been
selected for scholarships in tertiary studies under Oyu Tolgoi's
Sustainable Development and Communities program.
The Mongolian Urban Design Institute is implementing its
contract for providing planning support to the town of Khanbogd,
the nearest community to Oyu Tolgoi. A pre-feasibility study is
underway of the short- and medium-term electricity requirements in
the local communities of Khanbogd, Bayan-Ovoo and Manlai. The
detailed design of the bulk-water supply to Khanbogd remains on
track for construction beginning in late 2010 or early 2011.
Exploration: New drill hole at Oyu Tolgoi intercepted 938 metres
of near-continuous copper-gold mineralization between the Heruga
Deposit and the Southern Oyu deposits
On September 28, 2010, Ivanhoe Mines announced that drill hole
OTD1510 at Oyu Tolgoi intercepted almost one kilometre of
near-continuous copper and gold mineralization, making it the
longest exploration drill intercept of copper and gold
mineralization recorded since Ivanhoe Mines began drilling at the
Oyu Tolgoi Project in 2000. Hole OTD1510 intercepted 112 metres
grading 1.36 grams of gold per tonne (g/t) and 0.34% copper, with a
copper equivalent grade of 1.21% (CuEq), at a down-hole depth of
between 2,286 and 2,398 metres. The intercept included 20 metres
grading 3.78 g/t gold and 0.64% copper, with a CuEq grade of 3.06%,
at a down-hole depth of between 2,376 and 2,396 metres, and six
metres of 8.4 g/t gold and 0.66% copper, with a CuEq grade of
6.05%, at a down-hole depth of between 2,388 and 2,394 metres.
Individual two-metre samples near the bottom of hole OTD1510
returned gold assays of approximately 10 grams per tonne - among
the highest gold grades ever drilled at Oyu Tolgoi. Over the entire
938-metre intercept, OTD1510 averaged 0.42 g/t gold and 0.46%
copper, with a CuEq grade of 0.76%, at a down-hole depth of between
1,460 and 2,398 metres (true depth below surface of between
approximately 1,200 and 1,885 metres).
The area previously known as the New Discovery Zone has been
renamed the Heruga North Zone. The OTD1510 intercept indicates that
Heruga North is part of a 2.5-kilometre, gold-rich mineralized
extension of the Heruga Deposit, stretching north from the southern
border of the Oyu Tolgoi mining licence to the Southern Oyu
deposits.
Based on interpreted geology and a large, coincident,
gradient-array induced polarization (IP) chargeability anomaly
identified by proprietary, deep-exploration technology, Hole
OTD1510 was targeted on a critical, 600-metre gap in the known
mineralization between the northern, fault-controlled limit of the
Heruga Deposit and the former New Discovery Zone.
The 938-metre Heruga North intercept in Hole OTD1510 covers a
horizontal distance of 643 metres and a vertical distance of 681
metres. The hole was stopped after it entered the West Bat Fault,
which appears to form the western boundary of the high-grade
mineralization. Ivanhoe Mines is drilling a daughter hole -
OTD1510B - to better delineate the extent of the gold-rich
mineralization encountered in OTD1510.
Ivanhoe Mines' deep diamond drilling between the Heruga Deposit
and the Southwest Oyu deposits first identified what is now the
Heruga North Zone in December 2008. Since the initial discovery,
Ivanhoe has completed approximately 43,500 metres of wide-spaced
diamond drilling into the Heruga North Zone. Geological modeling
indicates that Heruga North is the northern continuation of the
Heruga Deposit, with a horizontal displacement of more than 500
metres along a fault between the two zones. The top of Heruga North
is approximately 1,100 metres below surface and slopes gradually
downward as it extends to the north. The Solongo Fault forms the
current northern limit of mineralization. Although the overall
limits of the system have yet to be defined, an approximate
2.5-kilometre, northeast-trending corridor from the Heruga Deposit
in the south to the Solongo Fault in the north is potentially
mineralized over a height of at least 700 metres and width of up to
700 metres.
During Q3'10, Ivanhoe Mines completed 6,446 metres of drilling
on the Oyu Tolgoi Project, comprised of 3,899 metres at Heruga
North and 2,547 metres in other parts of Oyu Tolgoi and the
surrounding area.
Less than half of the 20-kilometre-long mineralized trend at Oyu
Tolgoi has been extensively drill-tested to date. An ongoing
exploration program using a proprietary, induced-polarization
technology has identified numerous additional exploration and
development targets. Drilling continues to be directed at expanding
the Project's resources and reserves.
Joint Mine Development Plan being prepared to chart early start
to Oyu Tolgoi production in 2012
The independent 2010 Oyu Tolgoi Integrated Development Plan,
commissioned by Ivanhoe Mines, was released in May 2010. The plan
was prepared by a team of the world's foremost engineering, mining
and environmental consultants, led by AMEC Minproc, of Australia,
and including Stantec Engineering, of the US.
As noted in Ivanhoe Mines' May 14, 2010, news release, the
Integrated Development Plan recommended that Oyu Tolgoi LLC, the
Mongolian company that owns the Oyu Tolgoi Project and is
developing and will operate the mining complex, conduct a
comprehensive review to establish a baseline for the Oyu Tolgoi
Project with a goal of improving or optimizing value. The
Integrated Development Plan also recommended that its scenarios be
reviewed and analyzed by the Oyu Tolgoi Technical Committee to help
determine detailed plans for the ongoing implementation of the Oyu
Tolgoi Project.
The fundamental elements of the 2010 Integrated Development Plan
were completed before October 2009 when Rio Tinto, under terms of
its private-placement agreement with Ivanhoe Mines, assumed voting
control of the Technical Committee through which Ivanhoe Mines and
Rio Tinto jointly are overseeing and supervising the development,
operation and management of the Oyu Tolgoi Project. Three of the
Technical Committee's five members, including the Chair, currently
are appointed by Rio Tinto and two members are appointed by Ivanhoe
Mines.
The Technical Committee, independent of the Integrated
Development Plan, has initiated its own review and analysis of all
relevant measures required to develop and operate Oyu Tolgoi's
phase-one open pit and phase-two underground mining and processing
activities. The preparation of a Joint Mine Development Plan for
Oyu Tolgoi will continue into 2011. The Technical Committee is
examining projected operating costs, construction and development
costs, production rates, scheduling, financing and economic
returns. It also is expected to involve extensive stakeholder
analysis and consultation on several levels, including among
Ivanhoe Mines and Rio Tinto technical personnel and the Oyu Tolgoi
LLC Board of Directors.
There are indications from work by Fluor Corporation, the Oyu
Tolgoi program management contractor, and the Technical Committee
that the Project's pre-production capital costs will be higher than
were estimated in the scenarios studied in the 2010 Integrated
Development Plan. Contributing factors include a more aggressive
construction schedule that is expected to ensure an earlier start
to production, in 2012, with commensurate earlier generation of
sales revenues, fluctuations in foreign-currency exchange rates and
escalation of costs for equipment, materials, labour and
preparation of the workforce for operations.
Oyu Tolgoi debt-financing package expected to close in the first
half of 2011
Discussions are progressing with a group of international
financial institutions on a debt-financing package that is targeted
for completion in the first half of 2011. The proposed
multi-billion-dollar package is being considered by a core lending
group comprised of the European Bank for Reconstruction and
Development, the International Finance Corporation, Export
Development Canada, BNP Paribas and Standard Chartered.
In May 2010, Ivanhoe Mines signed a joint mandate letter with
the European Bank for Reconstruction and Development (EBRD) and the
World Bank Group's International Finance Corporation (IFC) for
evaluation of a major syndicated financing package for the
construction of the planned Oyu Tolgoi mining complex.
Under terms of the joint mandate letter, EBRD and IFC are
considering providing a two-part package consisting of:
-- up to $300 million each from EBRD and IFC, as part of a group of primary
lenders, in limited-recourse project financing under an "A loan"
structure; and
-- mobilization of a further $1.2 billion from commercial lenders under a
"B loan" structure.
IFC and EBRD financings are subject to detailed due diligence,
including a review of the extensive environmental and social
studies conducted by the Oyu Tolgoi Project, and approval by their
respective managements and Boards of Directors.
Export Development Canada (EDC), the Canadian government's
export credit agency, is considering providing up to $500 million
in direct project financing capacity, subject to necessary
approvals, including ensuring that the Oyu Tolgoi Project meets
EDC's environmental and social impact review requirements.
Ivanhoe Mines selected Paris-based BNP Paribas and London-based
Standard Chartered to work with EBRD, IFC and EDC in arranging the
financing. The commercial banks will be coordinating the
involvement of other Export Credit agencies and other commercial
banks that will be part of the lenders syndicate being
assembled.
Negotiations are proceeding on finalizing a detailed term sheet
with the core lenders group involving an upfront
multi-billion-dollar commitment with a first tranche released on
closing, which is targeted for completion in the first half of
2011, and a second tranche released when the underground mining
plan is better defined (expected to be in 2012) with flexibility to
adjust final loan amounts at that time. The financing is structured
as a true limited recourse project financing with no recourse to
Ivanhoe Mines following project completion and with long maturities
and grace periods appropriate for a large scale project such as Oyu
Tolgoi.
Ivanhoe Mines initiates strategic rights offering open to all
shareholders on a pro rata basis
On October 18, 2010, Ivanhoe Mines announced that it was
launching a strategic, conditional rights offering in which all
existing shareholders, subject to applicable law, may participate
on a pro rata basis in purchasing additional common shares. The
rights offering is expected to raise approximately $800 million to
$1.0 billion. Ivanhoe Mines intends to use 90% of the net proceeds
from the rights offering to continue to advance construction,
development and exploration of Oyu Tolgoi and the remaining 10% of
the net proceeds for general and administrative expenses.
The announcement stated that the Ivanhoe Mines Board of
Directors had unanimously agreed to proceed with a rights offering
as the best of several available alternative measures to help to
secure the independence and flexibility of Ivanhoe Mines to
maintain the accelerated construction schedule at Oyu Tolgoi and to
establish a bridge to the previously announced debt financing
package, outlined immediately above.
A preliminary prospectus for the rights offering was filed with
securities regulators in Canada and the United States on October
18, 2010. Full details of the offering, including pricing, will be
disclosed in the final prospectus that currently is being prepared
for filing.
Mr. Robert Friedland, the founder and largest individual
shareholder of Ivanhoe Mines, has indicated that he intends to
participate in the rights offering to the maximum permitted level
to maintain his present 18.3% ownership stake in Ivanhoe Mines.
Subject to applicable law, a prospectus and a rights certificate
or a Beneficial Owner Election Form will be mailed to each
shareholder after a record date has been set for issuance of the
rights in conjunction with the filing of the final prospectus. The
rights offering will be open for exercise for at least 21 days from
the date of mailing to shareholders.
In keeping with international practice in rights offerings, each
new common share of Ivanhoe Mines available for purchase by rights
holders will be offered at a discount to Ivanhoe Mines' current
market price as at the date of the final prospectus. Subject to
applicable law, all Ivanhoe Mines shareholders will have the choice
of deciding whether to participate and, by doing so, to maintain
their existing levels of ownership. It means, for example, that an
individual shareholder with a one per cent stake in Ivanhoe Mines
will be issued rights to buy a maximum number of new shares that
would maintain that shareholder's stake at one per cent following
completion of the rights offering, assuming all other shareholders
exercised their rights.
The completion of the rights offering also is conditional on at
least 85% of the rights being exercised by holders of rights, but
this condition may be waived at the sole discretion of Ivanhoe
Mines.
An application will be submitted to the Toronto Stock Exchange
to approve the listing of the rights and the common shares issuable
upon the exercise of the rights. Similar applications also will be
made to the New York Stock Exchange and the Nasdaq Stock Market to
admit the rights for trading and to list the common shares issuable
upon the exercise of the rights, subject to Ivanhoe Mines
fulfilling listing requirements.
Shareholders who do not wish to exercise their rights to buy new
common shares under the rights offering will have the option of
selling their rights through the Toronto Stock Exchange, the New
York Stock Exchange or the Nasdaq Stock Market. Shareholders who do
not exercise all of their rights consequently may have their
present ownership interests in Ivanhoe Mines, as a percentage of
the total outstanding common shares, reduced to the extent other
shareholders exercise their rights under the rights offering.
Rio Tinto, as an accredited shareholder, will be fully entitled
to exercise its rights in the offering. Rio Tinto currently owns
34.9% of Ivanhoe Mines' common shares. Ivanhoe Mines believes that
the rights offering is exempt from Rio Tinto's right of first offer
to acquire shares issued by Ivanhoe Mines under terms of Ivanhoe
Mines' 2006 five-year private-placement agreement with Rio Tinto,
contrary to an assertion by Rio Tinto. Ivanhoe Mines also has
advised Rio Tinto that Ivanhoe Mines does not believe that
alternative financing opportunities suggested by Rio Tinto are
superior to Ivanhoe Mines' planned rights offering. Citi has been
appointed dealer manager for the rights offering.
MONGOLIA
COAL PROJECTS
SOUTHGOBI RESOURCES (57% owned)
Ongoing expansion of SouthGobi's Ovoot Tolgoi coal mine
SouthGobi continues to mine and sell coal produced at its Ovoot
Tolgoi Mine in Mongolia's South Gobi Region, approximately 40
kilometres north of the Shivee Khuren-Ceke crossing at the
Mongolia-China border.
In a major transportation infrastructure initiative, SouthGobi
announced on October 25, 2010, that it had entered into a $48
million contract to design and construct a paved highway dedicated
to hauling coal from the Ovoot Tolgoi Mine to a major
trans-shipment terminal at Ceke, across the border in China. The
four-lane highway, to be completed by the end of 2012, will be 17
metres wide, with a one metre central median, and provide SouthGobi
with the capacity to ship well in excess of 20 million tonnes of
coal per year.
The terminal at Ceke has rail connections directly to key
industrial markets in China. A north-south railway line connects
Ceke with Jiayuguan City in Gansu Province and other markets in
China's interior. An east-west railway line from Ceke to Linhe, an
industrial city in China's eastern Inner Mongolia, is expected to
be in commercial operation in 2011. This line is expected to have
an initial capacity of approximately 15 million tonnes per year,
later increasing to 25 million tonnes per year. The line will
enable coal to be shipped to markets to the east, such as the
region around Baotou and Hebei Province, and further east to ports
on China's Bohai Gulf.
During June 2010, SouthGobi began construction of a basic
coal-handling facility. The basic coal-handling facility will
include a 300-tonne-capacity dump hopper, which will receive
run-of-mine coal from the Ovoot Tolgoi Mine and feed a rotary
breaker that will size coal to a maximum of 50 millimetres and
reject oversize ash. Interim screening operations will continue at
Ovoot Tolgoi until the permanent coal-handling facility is
completed.
SouthGobi is studying the feasibility of additional coal
beneficiation that may include dry and/or wet separation plants.
Bulk samples have been delivered to testing facilities in China;
results are pending.
In October 2010, SouthGobi approved the purchase of additional
equipment, including one Liebherr R9250 hydraulic excavator, which
will replace the Liebherr 994 now in service, and an additional
Terex MT4400 truck. This purchase will provide better fleet
flexibility as the new excavator will be a back-hoe configuration
and can load the larger MT 4400 trucks and the smaller TR100
trucks, as well as mine the thinner seams more cleanly. A fifth
equipment fleet has been approved, including another Liebherr R9250
hydraulic excavator and two more MT4400 trucks, to accelerate
production.
In Q3'10, the increased cost per tonne of sold coal primarily
reflected the increased strip ratio of 5.09 bank cubic metres of
waste per tonne of coal, compared to a strip ratio of 2.98 for
Q3'09.
As at September 30, 2010, the carrying amount of the Ovoot
Tolgoi coal stockpiles inventory was reviewed for impairment, which
resulted in recording a $7.9 million write-down primarily
associated with the raw high-ash stockpiles. A total of $2.6
million of the write-down was due to the inclusion of waste-removal
costs associated with expansion of the open-pit as a cost of
inventory produced during Q3'10.
In Q3'10, SouthGobi shipped approximately 194,000 tonnes of coal
at an average realized selling price of approximately $37 per
tonne. This compared to 457,000 tonnes of coal shipped in Q3'09 at
an average realized selling price of $28 per tonne. The lower sales
volume resulted in $6.6 million of revenue being recognized in
Q3'10 compared to $11.9 million in Q3'09. Shipments in Q3'10 were
lower due to low availability of semi-soft coking coal from the
Sunset Pit's #5 seam in the short-term mine plan and the limited
screening capacity for the higher-ash, higher-sulphur coal from the
Sunset Pit's #8, 9 & 10 seams.
In Q2'10, Ivanhoe Mines reported that there were two issues that
had the potential to impact SouthGobi's results in the second half
of 2010. Firstly, SouthGobi's near-term mine plan included
proportionately less of the better-quality, raw, semi-soft coking
coal coming from the Sunset Pit's #5 seam. Secondly, SouthGobi was
experiencing areas of higher sulphur than originally expected in
mine plans and studies. SouthGobi previously indicated that some of
the higher-sulphur coal potentially would not be attractive to
customers in its current form and may need to be stockpiled until
appropriate processing is in place, or until blending opportunities
arose.
Results in Q3'10 were impacted by these two issues, while
SouthGobi worked on various projects to mitigate their effect. Some
progress subsequently has been made and in October 2010 SouthGobi
announced an increased expected sales volume for the second half of
2010 of approximately 1.5 million tonnes. SouthGobi expects to
achieve or exceed this revised sales estimate. Physical coal
shipments are running at record levels in terms of average daily
movements by customers' trucks. Contracted sales of 527,000 tonnes
during October 2010 exceeded the previous monthly record of 232,000
tonnes set in June 2009. SouthGobi now expects to finish 2010 with
a substantial reduction in unsold coal in its inventory.
SouthGobi has indicated that the pricing of individual coal
products for Q4'10 is expected to remain broadly the same as for
Q3'10. However, the overall average selling price likely will be
substantially reduced to reflect the fact that a large proportion
of sales are of the higher-ash coal that remained in the stockpile
at the end of Q3'10. The current selling price of the screened
higher-ash, higher-sulphur coal from the Sunset Pit's # 8, 9 &
10 seams is approximately $26 per tonne.
With the full commissioning of the third mining fleet in October
2010, the capacity to move material in Q4'10 will be much higher
than for Q3'10. Average capacities for the months of November and
December are expected to be 50% higher than the average monthly
capacities in Q3'10.
Cost of sales was $14.9 million in Q3'10, compared to $8.6
million for Q3'09. The increase primarily relates to the impairment
of the raw high-ash coal stockpiles. Cost of sales is comprised of
the cost of the product sold, inventory write-downs, mine
administration costs, equipment depreciation, depletion of
pre-production stripping costs and stock-based compensation
costs.
Investment in Aspire Mining Limited
On October 26, 2010, SouthGobi announced an agreement with
Aspire Mining Limited (Aspire) (ASX: AKM) to acquire 105,726,650
common shares of Aspire in a private placement at a price of A$0.19
per share, for an aggregate of approximately A$20.1 million. On
completion of the private placement, SouthGobi will hold
approximately 19.9% of Aspire. SouthGobi also will have the right
to nominate one director to the Board of Aspire and the right to
maintain its proportionate shareholding in Aspire for a period of
two years. Closing of the transaction is expected to be on or
before January 31, 2011, and is subject to the approval of the
Australian Stock Exchange and Australia's Foreign Investment Review
Board.
Aspire owns 100% of the Ovoot Coking Coal Project in Mongolia,
along with the Nurant and Shanagan coal projects. In addition,
Aspire owns a 49% interest in the Windy Knob gold and base metals
project in Western Australia.
Regional coal exploration
A number of SouthGobi's exploration licences are associated with
the broader Ovoot Tolgoi Complex and Soumber Deposit. The 2010
exploration program includes drilling, trenching and geological
reconnaissance on a number of licence areas identified as having
good potential for coking and thermal coal deposits.
The 2010 exploration program began in March 2010. Year-to-date
exploration activities include 60,646 cubic metres of trenching and
more than 105,800 metres of drilling (core and reverse
circulation). Key targets so far have been the Soumber Deposit,
fields surrounding the Soumber Deposit and also the SW target,
which is approximately six kilometres southwest of the Ovoot Tolgoi
Complex. The 2010 drilling program for the Soumber Deposit is
complete; results from coal laboratory analysis are pending.
The drilling program will focus on further definition of known
coal occurrences that is intended to bring them to a NI
43-101-compliant definition stage and to allow for registration
with the Mongolian Government as the next step toward expanding
SouthGobi's mining-licence holdings.
AUSTRALIA
IVANHOE AUSTRALIA (62% owned)
Ivanhoe Australia incurred exploration expenses of $15.7 million
in Q3'10, compared to $11.5 million in Q3'09. The increase was
largely related to costs incurred for the Merlin molybdenum and
rhenium project prefeasibility study and the commencement of the
decline to access the Merlin Deposit.
Ivanhoe Australia's key projects, all situated on granted Mining
Leases, are Merlin, Mount Dore and Mount Elliott. During Q3'10,
work focused on the completion of the equity raising, settlement of
the acquisition of the Osborne Mining Complex, the Merlin Resource
Update and the commencement of the Merlin decline.
A$269 million equity raising completed
On September 10, 2010, Ivanhoe Australia completed its
accelerated, non-renounceable, pro rata entitlement offer, raising
gross proceeds of approximately A$269 million. The entitlement
offer was well supported by Ivanhoe Australia's current
international institutional shareholders, while also attracting a
large number of new domestic investors. As a result of the
significant interest received, the initial contemplated offering of
A$231 million was increased to A$269 million.
The shares offered under the entitlement offer consisted of one
ordinary share attaching one-half of one option, with each full
option entitling the holder to acquire one Ivanhoe Australia
ordinary share until September 20, 2011, at a price of A$3.38. A
total of 46,729,404 options were issued under the entitlement
offer, which could raise a further A$158 million - increasing the
total amount raised to approximately A$427 million.
Toronto Stock Exchange listing approved
Ivanhoe Australia's application for a compliance listing on the
Toronto Stock Exchange (TSX) now has been approved and the stock
will begin trading on the TSX on November 12, 2010. The dual
listing will enhance access to the international pool of resource
investors.
Ivanhoe Australia's headquarters will remain in Australia and
Ivanhoe Australia will maintain its listing on the Australian Stock
Exchange. There will be no equity offering as part of the
listing.
Strategic acquisition of Osborne Complex completed
On September 30, 2010, Ivanhoe Australia completed the strategic
acquisition of the Osborne Complex, which includes a
two-million-tonne per annum concentrator, infrastructure and
tenements. Osborne is a significant purchase for Ivanhoe Australia
and is expected to advance Ivanhoe Australia's plans for molybdenum
and rhenium production and provide the opportunity for
supplementary copper and gold production. Importantly, the
integration of the Osborne Complex has the potential to elevate
Ivanhoe Australia to producer status by late 2011, well ahead of
previous plans.
Consideration for the acquisition of the Osborne Complex
consisted of A$17.2 million in cash; a 2% Net Smelter Return
royalty capped at A$15.0 million from ore extracted from the
Osborne tenements only; and the assumption of all site
environmental obligations, including the provision of an EPA
Financial Assurance of A$18.4 million (discounted).
Implementation of Ivanhoe Australia's integration of its Osborne
Complex and Cloncurry sites is progressing well, with the following
key initiatives undertaken during Q3'10:
-- The 53-kilometre road linking the Merlin Project with the Osborne
Complex has been cleared and permitted. A number of tender parties have
been pre-qualified to enable construction of the road to start in Q4'10.
-- Approximately 35 former Osborne employees have joined Ivanhoe Australia
since the acquisition was announced, including a number of Osborne's key
operating managers and supervisors. Their skills and knowledge will help
to ensure a high standard of care and maintenance, facilitate mining
studies of copper-gold sources and assist with a smooth transition from
development to operation.
-- Ivanhoe Australia conducted a competitive tendering process for the sale
of excess volumes of contracted natural gas identified at the Osborne
Complex to Q1'12. Sale negotiations were concluded in early October
2010, resulting in net savings of approximately A$4 million to Ivanhoe
Australia.
Decline roadway to access Merlin molybdenum and rhenium
underway
The Merlin Deposit is the lowermost mineralized zone in the
Mount Dore Deposit starting near the surface and dipping east at
between 45 and 55 degrees. To date, the deposit has been
intersected to approximately 500 metres down-dip. The overall
mineralized zone at Merlin has an average true thickness of
approximately 20 metres. Mineralization has been found over a
strike length of 1,300 metres in step-out holes. The mineralization
thins to the north, where it also has been noted that the copper,
zinc and gold content increases. To the south, the mineralization
flattens and pinches out. The high-grade Little Wizard Zone
represents the southern-most extent of molybdenum mineralization of
economic interest found to date. During Q3'10, work continued on
infill drilling on the Merlin Project to maximize the indicated
resources with assay results confirming molybdenite
intersections.
Construction of the decline to provide underground access to the
Merlin Deposit is underway, with excavation of the box cut. Mining
of Little Wizard Zone is expected in Q4'11.
The Merlin prefeasibility study work began during Q2'10 and is
expected to be completed in Q4'10. The prefeasibility study will
examine the various mining, processing and infrastructure options
to develop the Merlin Deposit utilizing the Osborne processing
facilities. A feasibility study then will focus on the preferred
development option and produce the financial data for project
approval. Environmental permitting will be undertaken in parallel
with the studies and is expected to be available at the end of the
feasibility study, which is expected by Q3'11.
On August 4, 2010, Ivanhoe Australia released an updated
independent resource estimate for the Merlin Deposit prepared by
Golder Associates, of Brisbane, Australia.
Mount Dore Deposit
The Mount Dore heap-leach solvent extraction-electrowinning
scoping study continued during Q3'10 with a final report expected
in Q4'10. Work undertaken during Q3'10 included preliminary
open-pit assessments, metallurgical test work, recovery modelling,
preliminary engineering and preparation of capital cost and
operating cost estimates.
On August 4, 2010, Ivanhoe Australia released an updated
independent resource estimate for the Mount Dore Deposit prepared
by Golder Associates of Brisbane, Australia.
Mount Elliott Project
The Mount Elliott Project hosts three principal zones of
copper-gold mineralization: Mount Elliott, SWAN and SWELL.
Mineralization primarily is hosted in banded and brecciated
calc-silicates and is associated with
albite-pyroxene-magnetite-chalcopyrite-pyrite alteration.
On October 21, 2010, Ivanhoe Australia released an updated
independent resource estimate for the Mount Elliott Project
prepared by AMC Consultants. A detailed scoping study will commence
when the resource estimate has been finalized. The scoping study
will evaluate the mining of both the higher-grade portion of the
SWAN zone from underground and an open pit to mine the top of the
SWAN zone and the remaining mineralization around and beneath the
old Mount Elliot mine. The study also will evaluate the possibility
of processing ore at Ivanhoe Australia's Osborne Complex.
Metallurgical testing of the SWAN mineralization has indicated high
metal recoveries and readily saleable concentrates for the sulphide
ores.
Regional exploration
Ivanhoe Australia holds 14 Exploration Permits for Minerals
(EPMs) and 20 Mining Leases covering a total of 1,704 square
kilometres. Ivanhoe Australia also has 21 EPM applications in
process, covering 2,744 square kilometres. The Osborne EPMs total
529 square kilometres and the Exco joint venture EPMs total 493
square kilometres. Drilling on Ivanhoe Australia's tenements in
Q3'10 focused on the previously mined Starra 222 Deposit and Barnes
Shaft Prospect.
In Q3'10, four holes were completed at Starra 222, targeting the
along-strike projection of previously mined mineralization. These
holes intersected copper-gold mineralized ironstones. The best
intercept to date is 58 metres at 1.76 grams of gold per tonne and
1.04% copper from 550 metres in hole STQ1036, including 18 metres
at 4.28 grams of gold per tonne and 1.07% copper from 551 metres.
Additional details are available in Ivanhoe Australia's news
release dated October 26, 2010.
In Q3'10, 17 diamond drill holes and 11 reverse-circulation
holes were drilled at the Barnes Shaft Prospect targeting
copper-gold-cobalt mineralization. Significant mineralization was
intersected in 14 holes and is tabulated in Ivanhoe Australia's
news release dated October 26, 2010.
Exploration on the Osborne ground began in October 2010 and will
focus on the Houdini Prospect, where drilling by Barrick in 2009
targeted a magnetic anomaly. A series of significant, high-grade
copper-gold intercepts were made near surface, including 16 metres
at 3.08% copper and 0.58 grams of gold per tonne.
KAZAKHSTAN
Kyzyl Gold Project (50% owned)
Ivanhoe Mines has a 50% interest in Altynalmas Gold, the company
that holds 100% ownership of the Kyzyl Gold Project in northeastern
Kazakhstan. Following the successful completion of the
prefeasibility study in Q3'10, Altynalmas Gold is proceeding to
advance the development of the Kyzyl Gold Project.
Project drilling program continuing to confirm grades and extent
of high-grade gold mineralization
In October 2009, Altynalmas Gold commenced a deep-level drilling
program at the Kyzyl Gold Project intended to upgrade the present
mineral resource for inclusion in a prefeasibility study and
follow-on feasibility study.
During the nine months ended September 30, 2010, Altynalmas Gold
completed a total of 68,392 metres of drilling. Altynalmas Gold is
continuing its drilling program, with a further 15,000 metres
planned for completion in Q4'10.
In Q3'10, 65 holes totalling 25,067 metres were completed and
more than 4,100 samples were collected and prepared for assay.
Samples collected during Q3'10 drilling activities, including
Bakyrchik Lenses 1, 9 and 12, as well as the Promezhutochny and
Globiki Log deposits, either are in transit or being prepared for
shipment to Canada for assaying.
On August 9, 2010, Ivanhoe Mines issued a news release
containing a summary of Altynalmas Gold's drill results received to
that date. Intersection widths and gold grades of the new drill
holes correlate well with the results of the earlier, Soviet-era
drilling.
Project prefeasibility study completed; Fluor Canada retained to
complete feasibility study for planned gold mine
In August 2010, Scott Roscoe Postle Wilson Inc. produced an
independent NI 43-101-compliant report on the Kyzyl Gold Project
(the Technical Report), filed on www.sedar.com, which confirmed the
economics of Altynalmas Gold's development plan. The Technical
Report estimated that probable mineral reserves contained in Lenses
1, 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 of gold per tonne (g/t), containing 3.78
million ounces of gold, using a cut-off grade of 4.0 g/t gold and a
gold price of $900 per ounce. Estimated mineral resources,
inclusive of reserves, total 13.82 million tonnes at a grade of
9.36 g/t gold for Indicated resources and 12.02 million tonnes at a
grade of 8.58 g/t gold for Inferred resources. Mineral resources
were estimated using an average long-term gold price of $1,000 per
ounce.
The Technical Report 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. A summary of the Technical
Report is provided in Ivanhoe Mines' June 30, 2010, news
release.
In July 2010, Altynalmas Gold began a definitive feasibility
study that is expected to be completed in late Q1'11. Altynalmas
Gold has engaged Fluor Canada Ltd., Crescent Technology Inc.,
Technip USA Inc., Environmental Resources Management, Scott Wilson
Roscoe Postle Associates Inc. and Sustainability East Asia LLC to
complete this work, which will be undertaken in parallel with
detailed engineering work.
Altynalmas Gold is investigating financing options for the Kyzyl
Gold Project including, but not limited to, an initial public
offering, strategic investors, project financing or continued
financing from existing shareholders.
OTHER DEVELOPMENTS
Rio Tinto increased its interest in Ivanhoe Mines to 34.9% in
September, 2010
In September 2010, Ivanhoe Mines issued 40.1 million common
shares to Rio Tinto upon the conversion of Rio Tinto's maturing
convertible credit facility. The Rio Tinto convertible credit
facility's $350.0 million outstanding principal, plus accrued
interest of $50.8 million, was converted at a price of $10.00 per
common share.
In October 2010, a further 0.7 million common shares were issued
to Rio Tinto upon its exercise of the first series of anti-dilution
warrants granted to Rio Tinto under Rio Tinto's private-placement
agreement with Ivanhoe Mines. Each anti-dilution warrant entitled
Rio Tinto to acquire one common share in exchange for the payment
of C$3.15.
With these transactions, Rio Tinto now has invested
approximately $1.7 billion in Ivanhoe Mines and increased its
ownership in Ivanhoe Mines to approximately 34.9%.
Executive changes; Office of the Chairman to evaluate strategic
initiatives
On October 18, 2010, Ivanhoe Mines announced that Executive
Chairman Robert Friedland was re-assuming the duties and title of
Chief Executive Officer in a series of organizational changes that
also have seen the establishment of the Office of the Chairman as
part of an ongoing commitment to maximize shareholder value. Mr.
Friedland previously served as Chief Executive Officer of Ivanhoe
Mines for 10 years, from the Company's founding until 2006.
The Ivanhoe Mines Board of Directors approved President John
Macken's relinquishment of the position of Chief Executive Officer.
As President, Mr. Macken will continue to lead the ongoing
construction of Ivanhoe Mines' flagship Oyu Tolgoi copper-gold
mining complex in southern Mongolia. He is a member of the Ivanhoe
Mines-Rio Tinto joint Oyu Tolgoi Technical Committee.
Mr. Macken also will continue as an Ivanhoe Mines representative
on the Oyu Tolgoi LLC Board of Directors. As the senior
representative of the Operations Committee established by the Oyu
Tolgoi LLC Board, Mr. Macken will be responsible for guiding the
strategic direction of construction and development activities on
behalf of the Board. Mr. Macken is one of six Ivanhoe Mines'
appointees to the nine-member Oyu Tolgoi LLC Board; an Ivanhoe
Mines appointee also is Chairman of the Board. The Mongolian
government, through its wholly-owned company Erdenes MGL LLC, is
represented by three directors on the Oyu Tolgoi LLC Board.
Joining Mr. Friedland in the Office of the Chairman are Peter
Meredith, Ivanhoe Mines' Deputy Chairman for the past four years
and former Chief Financial Officer, and Sam Riggall, who is
Executive Vice President of Ivanhoe Australia and now is taking on
the added duties of Executive Vice President, Business Development
and Strategic Planning, with Ivanhoe Mines. Mr. Riggall previously
worked at Rio Tinto for more than a decade in a variety of roles
covering project generation and evaluation, business development
and capital market transactions. He has significant experience
working in many parts of the world, where he managed a number of
government negotiations over mine development projects.
Mr. Meredith led the Ivanhoe Mines team and Mr. Riggall led the
Rio Tinto team during the successful negotiations with the
Mongolian government that culminated in the approval of the
Investment Agreement in October 2009. Mr. Meredith and Mr. Riggall
also are Directors of Oyu Tolgoi LLC.
The Office of the Chairman, with facilities in Vancouver, London
and Singapore, will lead the assessment of potential strategic
initiatives and direct any necessary negotiations to create and
enhance value for shareholders. The Office of the Chairman also
will assume responsibilities within Ivanhoe Mines related to the
development of other subsidiary interests, including SouthGobi
Resources, Ivanhoe Australia and Altynalmas Gold.
Appointment of additional directors
On September 16, 2010, Ivanhoe Mines announced the appointments
to the Ivanhoe Mines Board of Directors of Michael Gordon, former
Executive Vice President of Anglo American Plc, and Dan Westbrook,
former President, BP China Gas, Power & Upstream. Both
directors occupied two vacant seats on the board and serve as
non-executive, independent board members.
On November 5, 2010, Ivanhoe Mines announced the appointment to
the Ivanhoe Mines Board of Directors of Robert B. Holland III,
Executive Co-Chairman of Max Petroleum and former United States
Executive Director of the World Bank. Mr. Holland will serve as a
non-executive, independent member of the board and occupy the
vacancy created by the retirement of Robert Hanson after more than
a decade as an Ivanhoe Mines director.
Mr. Gordon, Mr. Westbrook and Mr. Holland were nominated to the
Ivanhoe Mines Board of Directors by Rio Tinto, increasing the
present number of Rio Tinto appointees to four. Tracy Stevenson,
the fourth Rio Tinto appointee, became an independent Ivanhoe Mines
director on June 1, 2010. Under the terms of the October 2006
private-placement agreement between Rio Tinto and Ivanhoe Mines,
Rio Tinto is entitled to nominate a proportionate share of members
to the Ivanhoe Mines Board of Directors, based on Rio Tinto's
shareholding in Ivanhoe Mines.
Independent arbitrator to hear claim and counter-claim between
Rio Tinto and Ivanhoe Mines in early 2011
On October 26, 2010, Ivanhoe Mines announced that it had
delivered a statement of defence and initiated a counter-claim as
part of an ongoing arbitration proceeding launched by Rio Tinto on
July 9, 2010. The statement of defence rejects Rio Tinto's claim
that the shareholders' rights plan approved by Ivanhoe Mines'
shareholders on May 7, 2010, breached Rio Tinto's contractual
rights under its agreements with Ivanhoe Mines.
The counter-claim contends that Rio Tinto has breached its
covenants in its private-placement agreement, signed with Ivanhoe
Mines in October 2006, not to engage in activities that could
affect control of Ivanhoe Mines without Ivanhoe Mines'
permission.
An independent arbitrator has scheduled hearings of the claim
and counter-claim between January 18 and February 5, 2011.
Financial Results
In Q3'10, Ivanhoe Mines recorded a net loss of $24.9 million
($0.05 per share) compared to a net loss of $69.8 million ($0.18
per share) in Q3'09, representing a decrease of $44.9 million.
Results for Q3'10 mainly were affected by $48.1 million in
exploration expenses, $14.9 million in cost of sales, $15.0 million
in general and administrative expenses, $6.3 million in interest
expense and $8.5 million in share of loss of significantly
influenced investees. These amounts were offset by coal revenue of
$6.6 million, $3.8 million in interest income, $5.3 million in
mainly unrealized foreign exchange gains and a $49.8 million change
in fair value of embedded derivatives.
Exploration expenses of $48.1 million in Q3'10 increased $7.2
million from $40.9 million in Q3'09. Exploration expenses included
$30.4 million spent in Mongolia ($28.1 million in Q3'09), primarily
for Oyu Tolgoi and Ovoot Tolgoi, and $15.7 million incurred by
Ivanhoe Australia ($11.5 million in Q3'09). Exploration costs are
charged to operations in the period incurred and often represent
the bulk of Ivanhoe Mines' operating loss for that period.
Ivanhoe Mines' cash position, on a consolidated basis at
September 30, 2010, was $1.4 billion. As at November 10, 2010,
Ivanhoe Mines' current consolidated cash position is approximately
$1.3 billion.
SELECTED QUARTERLY DATA
This selected financial information is in accordance with U.S.
GAAP.
($ in millions of dollars, except
per share information)
Quarter Ended
----------------------------------------------------
Sep-30 Jun-30 Mar-31 Dec-31
2010 2010 2010 2009
----------------------------------------------------------------------------
Revenue $ 6.6 $ 17.7 $ 13.9 $ 9.9
Cost of sales (14.9) (13.2) (20.3) (8.5)
Exploration expenses (48.1) (39.5) (71.4) (67.2)
General and
administrative (15.0) (14.7) (8.3) (15.0)
Foreign exchange gains
(losses) 5.3 (4.9) 1.7 2.2
Change in fair value of
embedded derivatives 49.8 72.2 (1.4) (45.0)
Loss on conversion of
convertible credit
facility - - (154.3) -
Net loss from continuing
operations (24.9) (30.0) (200.5) (138.7)
Income (loss) from
discontinued operations - - 6.6 9.2
Net loss (24.9) (30.0) (193.9) (129.5)
Net (loss) income per
share - basic and
diluted
Continuing operations ($0.05) ($0.07) ($0.47) ($0.35)
Discontinued
operations $ 0.00 $ 0.00 $ 0.02 $ 0.03
Total ($0.05) ($0.07) ($0.45) ($0.32)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Quarter Ended
----------------------------------------------------
Sep-30 Jun-30 Mar-31 Dec-31
2009 2009 2009 2008
----------------------------------------------------------------------------
Revenue $ 11.9 $ 10.7 $ 3.5 $ 3.1
Cost of sales (8.6) (9.1) (3.2) (2.2)
Exploration expenses (40.9) (35.2) (34.1) (73.0)
General and
administrative (12.5) (10.5) (7.8) (8.1)
Foreign exchange gains
(losses) 19.5 21.7 (9.3) (40.6)
Writedown of other long-
term investments - - - (18.0)
Loss on conversion of
convertible credit
facility - - - -
Net loss from continuing
operations (47.8) (27.0) (63.4) (165.0)
Income from discontinued
operations (21.9) 2.1 7.4 5.0
Net loss (69.8) (24.9) (56.0) (160.0)
Net (loss) income per
share - basic and
diluted
Continuing operations ($0.13) ($0.07) ($0.17) ($0.44)
Discontinued
operations ($0.05) $ 0.00 $ 0.02 $ 0.01
Total ($0.18) ($0.07) ($0.15) ($0.43)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
QUALIFIED PERSONS
Disclosures of a scientific or technical nature in this release
and the Company's MD&A in respect of each of Ivanhoe Mines'
material mineral resource properties were prepared by, or under the
supervision of, the qualified persons (as that term is defined in
NI 43-101) listed below:
Oyu Tolgoi Project Stephen Torr, P.Geo, Employee of the Company
Ivanhoe Mines
Ovoot Tolgoi Project Stephen Torr, P.Geo, Employee of the Company
SouthGobi Resources
Ivanhoe Mines' results for the three months ended September 30,
2010, are contained in the audited Consolidated Financial
Statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations, available on the SEDAR website
at www.sedar.com and Ivanhoe Mines' website at
www.ivanhoemines.com.
Ivanhoe Mines shares are listed on the Toronto, New York and
NASDAQ stock exchanges under the symbol IVN.
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
anticipated business activities; planned expenditures; corporate
strategies; proposed acquisitions and dispositions of assets;
discussions with third parties respecting material agreements; the
schedule for carrying out and completing construction of the Oyu
Tolgoi Project; the estimated commencement of pre-stripping of the
Southern Oyu open pit deposits; the estimated delivery of the first
ores from the Southern Oyu open pit to the concentrator; the
estimated schedule to bring the Oyu Tolgoi Project into initial
production and commercial production; statements related to the
anticipated capital costs of the Oyu Tolgoi Project; the expected
timing of production from the first lift of the Hugo North
block-cave mine; possible expansion scenarios for the Oyu Tolgoi
Project; the commencement of construction of the water pipeline,
paved road and electrical transmission power line to the Oyu Tolgoi
Project; completion of the pouring of concrete for the pebble
crushing building and erection of structural steel for the
concentrator building at the Oyu Tolgoi Project; the Oyu Tolgoi
Project's anticipated yearly production of copper and gold; the
ability of Ivanhoe Mines to arrange acceptable financing
commitments for the Oyu Tolgoi Project; implementation of the Oyu
Tolgoi Project's training and development strategy; target milling
rates, mining plans and production forecasts for the coal mine at
Ovoot Tolgoi, Mongolia; the schedule for carrying out and
completing an expansion of the production capability of the Ovoot
Tolgoi Coal Project; anticipated outcomes with respect to the
ongoing marketing of coal products from the Ovoot Tolgoi Coal
Project; the anticipated timing of payback of capital invested in
the Ovoot Tolgoi Coal Project; statements with respect to the
expected closing of the Oyu Tolgoi debt-financing package;
statements respecting future equity investments in Ivanhoe Mines by
Rio Tinto; the impact of arbitration proceedings with Rio Tinto;
statements with respect to the timing and the expected amount to be
raised under the planned rights offering; the impact of assertions
made by Rio Tinto that the rights offering offends its rights under
the Private Placement Agreement and the shareholders' agreement
between Mr. Friedland and Rio Tinto; the statement that the
integration of the Osborne Complex has the potential to elevate
Ivanhoe Australia to producer status by late 2011; the statement
that Altynalmas Gold's definitive feasibility study is expected to
be completed in late Q1'11; the impact of amendments to the laws of
Mongolia and other countries in which Ivanhoe Mines carries on
business, particularly with respect to taxation; and the
anticipated timing, cost and outcome of plans to continue the
development of non-core projects, and other statements that are not
historical facts.
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.
The news release also contains references to estimates of
mineral reserves and mineral resources. The estimation of reserves
and resources is inherently uncertain and involves subjective
judgments about many relevant factors. The accuracy of any such
estimates is a function of the quantity and quality of available
data, and of the assumptions made and judgments used in engineering
and geological interpretation, which may prove to be unreliable.
There can be no assurance that these estimates will be accurate or
that such mineral reserves and mineral resources can be mined or
processed profitably. Mineral resources that are not mineral
reserves do not have demonstrated economic viability. Except as
required by law, the Company does not assume the obligation to
revise or update these forward-looking statements after the date of
this document or to revise them to reflect the occurrence of future
unanticipated events.
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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