UPDATE:Ivanhoe Approves $2.3 Billion Budget For Oyu Tolgoi Complex In 2011

Canada-based Ivanhoe Mines Ltd (IVN, IVN.T) said Monday it approved a $2.3 billion construction budget for Mongolia's massive Oyu Tolgoi copper and gold complex in 2011.

Ivanhoe said total capital required for phase one from January 2011 to the start of commissioning of the ore processing plant, planned for the second half of 2012, is projected to be $3.5 billion.

In all, Ivanhoe forecasts total spending from 2011 to commercial production forecast in the first half of 2013 to be $4.5 billion.

The company reported that construction is already 13% complete.

Last week Ivanhoe announced it reached a deal with miner Rio Tinto PLC (RIO) to secure as much as $6.5 billion to develop the first phase of the project.

Rio Tinto is currently invested indirectly in the Oyu Tolgoi project through its shareholding in Ivanhoe, which owns a 66% stake in the project alongside the Mongolian government's 34% stake.

"Our ramp-up to full-scale construction during 2010 was so successful that we are now targeting to deliver the first ore to the concentrator up to six months earlier than previously projected," said Ivanhoe president John Macken. "Oyu Tolgoi should be making its first sales of copper and gold in concentrate produced from ore from the Southern Oyu open pit during the fourth quarter of 2012."

Construction plans for 2011 include $561 million for the copper-gold concentrator, $186 million to purchase the initial mining fleet of trucks and other equipment, $713 million for project infrastructure and electrical power, and $211 million for ongoing underground mine development.

The $4.5 billion phase-one capital costs projected between 2011 and 2013 includes $498 million for development work on the Hugo North underground mine, which will form the second phase of Oyu Tolgoi's planned production.

"Our plans call for initial production of 100,000 metric tons of ore per day and we expect to move to between 150,000 and 160,000 tons per day when ore from the underground mine becomes available," Macken said.

Phase-one capital costs will also cover the underground lateral development program, geotechnical program, and mine planning and expansion studies through to mid-2012.

Final design of the underground mine is set for 2012, when decisions will be made about optimum production rates from the underground mine, Ivanhoe said.

-By Devon Maylie, Dow Jones Newswires; +44 20 7842 9483; devon.maylie@dowjones.com

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