Ivanhoe Mines (TSX:IVN)(NYSE:IVN)(NASDAQ:IVN) today announced its
financial results for the quarter ended March 31, 2012. All figures
are in US dollars unless otherwise stated.
HIGHLIGHTS
-- Overall construction of the first phase of the Oyu Tolgoi copper-gold
mining complex was 77.8% complete at the end of Q1'12 and had advanced
to 82.2% complete at the end of April 2012. Construction remains on
track to meet the mine's targeted start of initial production in the
second half of 2012. Commercial production is projected to begin in the
first half of 2013.
-- Mining and stockpiling of the first ore from Oyu Tolgoi's phase-one
open-pit mine began in late April 2012 as pre-stripping of the open pit
progressed ahead of schedule during the first quarter.
-- Arrangements are proceeding to ensure that electrical power from China
will be available for the start of initial production. In early March
2012, Chinese contractors began construction of the power line and
switching station as part of the 87-kilometre, 220-kilovolt power
transmission line to be built from the electrical distribution grid in
Inner Mongolia, China, to the Mongolia-China border. Stringing of
transmission cables along the 95-kilometre section of the power line
from the Oyu Tolgoi mine site to the Mongolia-China border began in
April 2012. It is currently anticipated that the physical construction
of all transmission infrastructure necessary to import power from China
will be completed by July 2012.
-- Installation of the two ore-processing production lines in the
concentrator and pre-commissioning works are progressing on track. The
concentrator, which will have an initial capacity of 100,000 tonnes of
ore per day, was 84.7% complete at the end of Q1'12, ahead of the
planned completion of 83.6%.
-- Construction of Shaft #2 at the Hugo North underground mine is
progressing well. The headframe has now reached a height of 78.5 metres
above surface approaching its planned final height of 97 metres. Shaft-
sinking activities began in December 2011 and the bottom had reached 224
metres below surface on May 12, 2012.
-- Long-term sales contracts have been signed on a substantial portion of
Oyu Tolgoi's total concentrate production. Most of the concentrate
initially produced at Oyu Tolgoi is expected to be delivered to
customers in China.
-- On April 18, 2012, Ivanhoe Mines announced that the Company had signed a
binding memorandum of agreement, subject to certain terms and
conditions, with majority shareholder Rio Tinto that established Rio
Tinto's support for a series of funding measures expected to cover the
projected capital requirements for Ivanhoe Mines' flagship Oyu Tolgoi
Project in southern Mongolia for the next several years.
-- The funding measures are expected to be sufficient to complete both the
phase-one and phase-two development programs at Oyu Tolgoi, delivering a
160,000-tonne-per-day concentrator fed from an open-pit mine and an
underground mine and operating on power generated by a dedicated power
station within Mongolia. Highlights of the comprehensive financing plan
include:
-- Rio Tinto will provide an additional bridge-funding facility of up
to $1.5 billion to help ensure uninterrupted progress on the
completion of construction of the first phase of Oyu Tolgoi's
development.
-- Rio Tinto will support an Ivanhoe Mines equity financing with a goal
of $1.8 billion in gross proceeds, subject to certain terms and
conditions.
-- Rio Tinto will provide full support for completion of an Oyu Tolgoi
project-finance package of $3 to $4 billion to be provided by third-
party lenders.
-- A member of the Rio Tinto Group will enter into a completion support
agreement with Ivanhoe Mines and the project-finance lenders to
cover the Oyu Tolgoi project-finance package now under negotiation,
subject to lenders responding with improvements to the terms of the
Oyu Tolgoi project financing.
-- The Company and Rio Tinto are currently engaged in discussions with
respect to certain existing terms of the memorandum of agreement,
including the standby commitment and the Series D warrants with a view
to amending certain terms to address conditions of regulatory approval
and to more closely align the terms of the proposed equity financing
with current market conditions.
-- In paving the way for Oyu Tolgoi's transition to a producing mine,
Ivanhoe Mines and Rio Tinto reached amicable agreement on the following
corporate governance and management changes:
-- The Ivanhoe Mines board presently consists of nine members,
including four new directors nominated by Rio Tinto and appointed on
May 7, 2012 - Jill Gardiner, Peter Gillin, Isabelle Hudon and David
Klingner - and Livia Mahler, who was reappointed as a director on
May 10, 2012, as one of Robert Friedland's two nominees. They joined
existing directors Andrew Harding, Dan Larsen, Kay Priestly and
Peter Meredith, Mr. Friedland's other nominee. David Klingner was
appointed as the Chairman of the Board on May 10, 2012. A further
four directors will be nominated by Rio Tinto for appointment at the
2012 Annual General Meeting.
-- Seven directors - Marc Faber, Edward Flood, Robert Friedland, David
Korbin, Livia Mahler, Tracy Stevenson and Dan Westbrook - resigned
from the Ivanhoe Mines board on April 17, 2012. Three directors -
Michael Gordon, David Huberman and Bob Holland - resigned from the
Ivanhoe Mines board on May 7, 2012.
-- A majority of the new Ivanhoe Mines board will be independent
directors until at least the earlier of January 18, 2014, or the
date on which Ivanhoe Mines ceases to be a reporting issuer under
Canadian securities laws. Two directors, at least one an
independent, will be nominated by Mr. Friedland until January 18,
2014, as long as he continues to own at least 10% of Ivanhoe Mines'
outstanding shares.
-- A new Ivanhoe Mines senior management team was appointed on May 1,
2012. It includes Kay Priestly as Chief Executive Officer (CEO),
Chris Bateman as Chief Financial Officer (CFO), Brett Salt as Senior
Vice President, Strategy and Development, Stewart Beckman as Senior
Vice President, Operations and Technical Development and Neville
Henwood as Senior Vice President, Legal. The new appointees replace
former CEO Robert Friedland, former CFO Tony Giardini, former
President John Macken, former Deputy Chairman Peter Meredith and
former Executive Vice President Sam Riggall, all of whom resigned on
April 17, 2012, as part of the agreement between Ivanhoe Mines and
Rio Tinto.
-- During Q1'12, Ivanhoe Mines' 57.6%-owned subsidiary, SouthGobi Resources
Ltd. (SouthGobi) (TSX:SGQ)(HK:1878), had sales of approximately 0.84
million tonnes of coal at an average realized selling price of $56.79
per tonne. Revenue increased from $20.2 million in Q1'11 to $40.2
million in Q1'12 due to the increased sales volumes and higher average
realized selling prices.
-- On April 1, 2012, Ivanhoe Mines received notice that Aluminum
Corporation of China Ltd. (Chalco) intends to make a proportional
takeover bid for up to 60%, but not less than 56%, of the common shares
of SouthGobi Resources at C$8.48 per share. Ivanhoe Mines entered into a
lock-up agreement with Chalco and has agreed to tender all of its
SouthGobi shares, on a pro-rata basis, to Chalco. The proportional offer
by Chalco is subject to all statutory and regulatory approvals.
-- On March 8, 2012, Ivanhoe Mines' 58.9%-owned subsidiary, Ivanhoe
Australia Limited (Ivanhoe Australia) (TSX:IVA)(ASX:IVA), began initial
production of copper and gold at its Osborne mine, in northwestern
Queensland. Milling rates ramped up to target levels of up to 5,200
tonnes of ore per day in March 2012.
-- Ivanhoe Mines, through its 50% interest in Altynalmas Gold Ltd.
(Altynalmas Gold), is advancing the Kyzyl Gold Project in Kazakhstan. On
February 27, 2012, Ivanhoe Mines and Altynalmas released the results of
an independent feasibility study.
-- Ivanhoe Mines' cash position on a consolidated basis at March 31, 2012,
was $895.1 million. As at May 15, 2012, Ivanhoe Mines' consolidated cash
position was approximately $750 million.
OYU TOLGOI COPPER-GOLD PROJECT (66% owned)
Construction of the Oyu Tolgoi copper-gold complex is advancing
toward its planned start-up in the second half of 2012 and
commercial production in the first half of 2013
The Oyu Tolgoi Project initially is being developed as an
open-pit operation, with the first phase of mining now underway at
the near-surface Southern Oyu deposits. A copper concentrator
plant, with related facilities and necessary infrastructure to
support an initial throughput of 100,000 tonnes of ore per day, is
being constructed to process ore mined from the Southern Oyu open
pit. Initial production of copper-gold-silver concentrate is
expected in the second half of 2012 and commercial production is
projected to begin in the first half of 2013.
In conjunction with the surface activities, an
85,000-tonne-per-day underground block-cave mine also is being
developed at the Hugo North Deposit. The throughput capacity of the
concentrator plant is expected to be expanded to 160,000 tonnes of
ore per day to process available ore from both the open pit and
underground mines. The underground mine is scheduled to commence
operations in 2016 and the concentrator expansion will need to be
in place by 2018 to meet the increasing tonnage available from
underground production.
Progress continuing to be made on supply of interim electrical
power
The long-term Investment Agreement for the development and
operation of Oyu Tolgoi, signed by Ivanhoe Mines, Rio Tinto and the
Government of Mongolia on October 6, 2009, recognized that the
reliable supply of electrical power is critical to the project. The
agreement also confirmed that Ivanhoe Mines has the right to obtain
electrical power from inside or outside Mongolia, including China,
to meet its initial electrical power requirements for up to four
years after Oyu Tolgoi begins commercial production. The agreement
established that a) Ivanhoe Mines has the right to build or
sub-contract construction of a coal-fired power plant at an
appropriate site in Mongolia's South Gobi Region to supply Oyu
Tolgoi; and b) all of the project's power requirements would be
sourced from within Mongolia no later than four years after the
start of commercial production.
Oyu Tolgoi LLC is proceeding with arrangements to ensure that
electrical power from China will be available for the start of
initial production that is expected in the second half of 2012. In
early March 2012, Chinese contractors began construction of the
power line and switching station as part of the 87-kilometre,
220-kilovolt power transmission line to be built from the
electrical distribution grid in Inner Mongolia, China, to the
China-Mongolia border. The construction of the transmission towers
along the 95-kilometre section of the power line from the Oyu
Tolgoi mine site to the Mongolia-China border was completed in
October 2011. It is currently anticipated that the physical
construction of all transmission infrastructure necessary to import
power from China will be completed by July 2012.
A separate power-purchase agreement establishing a supply
arrangement between Mongolian and Chinese authorities is required
before Chinese electrical power can be imported into Mongolia. Oyu
Tolgoi LLC will be a party to any agreement for the purchase and
supply of electrical power.
Subject to negotiations and final agreement, commercial
arrangements and power-purchase tariffs are expected to be
expedited to ensure that imported power will be available at the
Oyu Tolgoi Project site in Q3'12. In the meantime, additional
diesel-powered generating capacity has been installed to meet the
project's more immediate requirements during the remaining phases
of construction. If those negotiations are not able to be
successfully concluded, and the establishment of a dedicated power
plant is required for the early production at Oyu Tolgoi, that
would adversely affect the project's ability to achieve the planned
start of commercial production in 2013.
In November 2011, the Government of Mongolia provided Oyu Tolgoi
LLC with a cabinet resolution allowing for the future construction
by Oyu Tolgoi LLC of a dedicated coal-fired power plant in
Mongolia. Such a plant requires certain Government of Mongolia
permits and the negotiation of commercial agreements with the
Government of Mongolia and coal suppliers. Although construction of
a dedicated coal-fired power plant in Mongolia was expected as part
of the Oyu Tolgoi Project's future development, the current
phase-one budget does not contain a provision for the plant.
However, the recent comprehensive financing plan developed by the
Ivanhoe Mines board and Rio Tinto provides for the financial
capacity to undertake such a project.
In April 2012, the Oyu Tolgoi LLC Board of Directors
acknowledged and supported the construction of a dedicated
coal-fired power plant at the Oyu Tolgoi Project site, subject to
the receipt of all of the necessary approvals from the Government
of Mongolia. The Oyu Tolgoi LLC Board of Directors also approved an
increase in the 2012 budget of $52 million for early works to be
undertaken in mid-2012 for the dedicated coal-fired power
plant.
The increase in the 2012 budget of $52 million for early works
was also approved in April 2012 by the Ivanhoe Mines Board of
Directors. In the coming months, the Ivanhoe Mines board is
expected to consider for approval the budget for the construction
of the coal-fired power plant.
Overall phase-one construction of the Oyu Tolgoi Project 77.8%
complete at the end of Q1'12
Overall construction of Oyu Tolgoi's first phase of development
reached 77.8% completion at the end of Q1'12 and had advanced to
82.2% completion at the end of April 2012. Total capital invested
in the construction of the first phase of the Oyu Tolgoi Project to
the end of Q1'12 was approximately $4.6 billion.
Among major updates for Q1'12 and plans for Q2'12:
-- Pre-stripping of overburden continued in Q1'12 as part of the
construction of the phase-one open-pit mine to recover ore from the
Southern Oyu deposits. Pre-stripping has progressed ahead of schedule
and the mining and stockpiling of the first open-pit ore began in April
2012. Pre-commissioning of the primary crusher, overland conveyor and
coarse-ore stockpile circuits are progressing on schedule.
-- Construction of the concentrator, which will have an initial capacity of
100,000 tonnes per day, was 84.7% complete at the end of Q1'12, ahead of
the planned completion of 83.6%.
-- Line #1 of the concentrator is on track to be completed and pre-
commissioned by August 15, 2012. Line #2 is on track to be completed and
pre-commissioned by October 31, 2012. Commissioning of the concentrator
with ore will depend on the availability of electrical power from China.
-- Underground lateral development at the Hugo North Deposit was suspended
in February 2012 as planned to enable the upgrading of hoisting
equipment at Shaft #1, which is expected to continue until August 2012.
Underground lateral development is scheduled to resume in September
2012.
-- Construction of Shaft #2 at the Hugo North Deposit is progressing well
and the headframe has now reached a height of 78.5 metres above surface.
The final height of the shaft will be 97 metres. The headframe and
ancillary buildings were 87.4% complete at the end of Q1'12 and ahead of
schedule. Shaft-sinking activities began in December 2011 and the bottom
had reached 224 metres below surface on May 12, 2012.
-- Construction of off-site facilities and infrastructure reached 72.4%
completion at the end of Q1'12, which was behind the planned rate of
83.2%. The cumulative shortfall was due to delays during the building of
the Oyu Tolgoi-Gashuun Sukhait road to the Mongolia-China border and the
Khanbumbat permanent airport, near Oyu Tolgoi, and the prior deferral of
the stringing of transmission cables on the power line to the Mongolia-
China border until spring 2012. The road and airport contractors
remobilized in March 2012 and work is progressing. Facilities required
for the production of first ore are on schedule.
-- Long-term sales contracts have been signed on a substantial portion of
Oyu Tolgoi's total concentrate production. Most of the concentrate
initially produced at Oyu Tolgoi is expected to be delivered to
customers in China.
Phase-one construction budget
The scope of work for the phase-one project is to bring the
initial, 100,000-tonne-per-day concentrator into production, with
the required infrastructure and operational team to begin
commercial production in the first half of 2013. The phase-one
project also includes underground lateral development until June
2012 and the completion of Shaft #2, which are essential to the
continued development of the high-value underground mine at Oyu
Tolgoi. The phase-one control budget was $5.998 billion and had no
provision for foreign-exchange variances; as of the end of Q1'12,
the calculated, actual foreign-exchange exposure was approximately
$100 million. The forecast total foreign-exchange exposure on
phase-one is in the range of $170 million to $200 million. With
approved scope changes of $40.5 million to date, the phase-one
current budget is $6.039 billion.
A Definitive Forecast Final Cost was completed in March 2012 and
indicated that the final cost for the phase-one capital project
would be approximately $6.2 billion, or 2.7% over budget, excluding
foreign-exchange exposures but including $90 million in project
contingencies to mitigate the remaining risks on the project.
Pre-stripping of open-pit mine continuing
Pre-stripping of overburden to gain access to ore in the
phase-one open-pit mine continued in Q1'12. Deliveries, assembly
and commissioning of heavy mobile equipment are ongoing and all
operational-readiness activities are on schedule. The full fleet of
28 trucks is expected to be in operation in August 2012.
During Q1'12, a total of 16.0 million tonnes of overburden had
been moved, approximately 75,000 metres had been drilled and more
than 2,300 tonnes of explosives had been used in blasting. Mining
activities continued to focus on phase-one development and
infrastructure requirements, including the run-of-mine (ROM) pad,
low-grade-ore stockpile pad and road development.
Underground development of Hugo North Mine proceeding on
schedule
The development of the first lift of the phase-two underground
block-cave mine at the Hugo North Deposit continued successfully
during Q1'12. Lateral mine development 1,300 metres below surface
at Hugo North advanced a total of 10,914 metres since tunnelling
started in 2008 until February 2012. Underground lateral
development was suspended in February 2012 as planned to permit the
upgrading of hoisting equipment at Shaft #1, which is expected to
continue until August 2012. Underground lateral development is
scheduled to resume in September 2012.
The underground development from Shaft #1 is expected to connect
with the bottom of Shaft #2 in 2013 to enable the installation of
the ore-handling system and production from the first lift of the
Hugo North block-cave mine.
Work to establish the first and second ventilation raise holes
to provide a flow of fresh air from surface to the underground
workings will continue from surface while Shaft #1 is being
upgraded.
Ivanhoe Mines drawing down on Rio Tinto interim funding
facility
In December 2010, Rio Tinto committed to provide Ivanhoe Mines
with an initial, non-revolving, interim funding facility of $1.8
billion to assist in sustaining Oyu Tolgoi construction during the
negotiation of a project-finance package. The interim funding
facility is required to be repaid with funds to be provided under
the project-finance package. The interim facility is on
arm's-length terms, with funds to be advanced to the project on a
month-to-month basis, if and when required.
In December 2011, Ivanhoe Mines made its first draw on the
facility. A total of $1.1 billion had been drawn down by March 31,
2012, which increased to $1.4 billion as at May 15, 2012.
Rio Tinto and Ivanhoe Mines working to complete international
project finance package
Ivanhoe Mines has been negotiating project financing with a
consortium of national and international institutions and banks
since 2010. Under their April 2012 memorandum of agreement, Ivanhoe
Mines and Rio Tinto agreed that the negotiating team for the $3 to
$4 billion Oyu Tolgoi project-finance package will be comprised of
Ivanhoe Mines personnel selected by the Ivanhoe Mines CEO and Board
and designated Rio Tinto resources as determined by the Rio Tinto
Treasurer. In addition, it was agreed that the Rio Tinto Treasurer
has the exclusive authority to direct all aspects of the
negotiation of the day-to-day management of the Oyu Tolgoi project
financing.
Since the signing of the memorandum of agreement, the
project-finance team has been focused on transitioning control of
the project-finance process to Rio Tinto. This includes developing
the way forward on overall process and governance, the financing
plan and the term sheet. It is the goal of Ivanhoe Mines and Rio
Tinto to have the Oyu Tolgoi project financing in place by December
31, 2012.
A member of the Rio Tinto Group will enter into a completion
support agreement with Ivanhoe Mines and the project-finance
lenders, subject to lenders responding with improvements to the
terms of the Oyu Tolgoi project financing, to cover the Oyu Tolgoi
project-finance package now under negotiation. This measure is
expected to provide significantly greater certainty that funds will
be received. In exchange, Ivanhoe Mines will pay Rio Tinto an
annual fee of 2.5%, in advance, on the amount of debt that is
projected as the aggregate average of the debt that will be
outstanding under the project financing at the end of each calendar
month during the ensuing 12-month period.
Rio Tinto may choose to advance senior loans to Oyu Tolgoi LLC
as an alternative to, or in addition to, the project-finance
package, on terms no less favourable than those available through
the international financial institutions or commercial banks.
Skills training programs preparing Mongolians for jobs
The Oyu Tolgoi Project's staffing strategy for the start of
initial production in the second half of 2012 continues to rely
heavily on the utilization of Mongolian men and women whose skills
are being developed and who are receiving training throughout the
construction phase. As of the end of March 2012, the Oyu Tolgoi
Project was providing jobs for 9,054 Mongolians, including more
than 7,150 Mongolians who were working for 72 Oyu Tolgoi
contractors. A further 372 trainees are enrolled at four selected
Mongolian technical and vocational education training schools and
in apprenticeship training with two major vendors, Transwest and
Wagner Asia, and an additional 3,300 Mongolians are participating
in a special government employee-training program, funded by Oyu
Tolgoi, which is adding to Mongolia's overall skills-development
pool.
2012 Integrated Development and Operations Plan (IDOP) Technical
Report released
The Company released the 2012 IDOP Technical report in March
2012, updating the Company's Integrated Development Plan issued in
May 2010 (IDP10).
The 2012 IDOP Technical Report is an update of the Oyu Tolgoi
Reserve Case that was contained in the IDP10 report. The 2012 IDOP
Technical Report is based on a pre-feasibility-quality-level study
complying with Canadian National Instrument 43-101 Standards of
Disclosure for Mineral Projects and the United States SEC Industry
Guide 7 requirements for reporting Mineral Reserves.
The 2012 IDOP Technical Report was prepared for Ivanhoe Mines by
AMC Consultants Pty. Ltd. in March 2012, based on the technical,
production and cost information contained in the Oyu Tolgoi LLC
study titled, Integrated Development and Operations Plan (IDOP).
The IDOP was completed by the Rio Tinto-appointed management of Oyu
Tolgoi LLC in March 2011 as the basis for the Oyu Tolgoi
project-finance package currently under negotiation.
The IDOP Technical Report represents the views of the Oyu Tolgoi
Project by the Company and by AMC Consultants Pty. Ltd., and not
the views of the Rio Tinto-appointed management of Oyu Tolgoi LLC
or Rio Tinto.
The next phase in the project planning process after IDOP is the
preparation of a Detailed Integrated Development and Operating Plan
(DIDOP) by Oyu Tolgoi LLC. The DIDOP will integrate a number of
detailed capital expansion studies into an overall project report.
The key additional work to be assessed in the DIDOP includes: the
phase-two project expansion, infrastructure, power supply, water
permitting, concentrate marketing, the underground feasibility
study, and further work on the mine closure and reclamation
plan.
Highlights of the 2012 IDOP Technical Report:
-- The phase-one project economics have a net present value of $11.4
billion, using an 8% discount rate and assuming long-term metals prices
of $2.85 per pound of copper, $1,200 per ounce of gold and $16.60 per
ounce of silver.
-- Estimated operating costs are $0.65/lb of copper in the first 10 years
and $0.81/lb of copper for the reserve case's 27-year mine life, net of
by-product credits.
-- The expected phase-two expansion includes a significant change in scope
that has occurred in the underground development schedule.
-- The current scope now incorporates underground development through
to 2019, when underground production would reach a projected rate of
54,000 tonnes per day. The previously projected rate was 34,000
tonnes per day of production by 2017.
-- Phase-two costs now include all government fees and taxes
(previously allocated as sustaining capital).
Development diamond drilling Q1'12
During Q1'12, Oyu Tolgoi LLC completed a total of 7,459 metres
of development drilling. Surface development drilling totalled
1,865 metres for Q1'12, including characterization drilling for
Shaft #5 and the pilot hole for Vent Raise #3. Surface-resource
definition infill drilling in the Hugo North initial cave area
continued with 4,043 metres completed.
A total of 1,551 metres of underground geotechnical drilling was
completed at the Hugo North Deposit before the rigs were removed in
February 2012 for the planned temporary shutdown of Shaft #1.
Exploration drilling continued in Q1'12
In Q1'12, Ivanhoe Mines incurred exploration expenses of $13.8
million at Oyu Tolgoi, compared to $5.1 million incurred in
Q1'11.
Ivanhoe Mines continued its exploration drilling program on the
Oyu Tolgoi Project during Q1'12, completing 9,300 metres of surface
exploration diamond drilling, including 5,412 metres of diamond
drilling on the Oyu Tolgoi mining licence and 3,888 metres on
Entree Gold's Javkhlant mining licence.
Five exploration drill rigs are in operation, including rigs
that are delineating an initial resource for the Heruga North
Deposit, a 2.5-kilometre, mineralized extension of the Heruga
Deposit that extends northward to the Southern Oyu deposits.
Drilling in Q1'12 focused on the southern one-kilometre-long
section of this zone, where the deposit is closer to surface.
Q1'12 drilling also was conducted on two adjacent sections that
will fill in the gap between the Heruga resource and Heruga North,
and possibly add to the inferred resource. Testing the eastern
flank of the Heruga and Heruga North Deposits, are in
progress.Further drilling was conducted on the Javkhlant mining
license at the south western end of the Oyu Tolgoi mineralization
trend.
Prior to the signing of the memorandum of agreement in April
2012, Ivanhoe Mines conducted certain exploration activities at the
Oyu Tolgoi Project. As part of the agreement, all rights and
responsibilities for conducting exploration activities for the Oyu
Tolgoi Project now are held by the Rio Tinto affiliate that manages
the Oyu Tolgoi Project.
SOUTHGOBI RESOURCES (57.6% owned)
Chalco announced its intention to make a proportional bid for up
to 60% of SouthGobi
On April 1, 2012, Ivanhoe Mines received notice that Aluminum
Corporation of China Ltd. (Chalco) intends to make a proportional
takeover bid for up to 60%, but not less than 56%, of the common
shares of SouthGobi at C$8.48 per share. Ivanhoe Mines currently
owns 104,807,155 shares of SouthGobi, representing approximately
57.6% of SouthGobi's issued and outstanding shares. Ivanhoe Mines
has entered into a lock-up agreement with Chalco and has agreed to
tender all of its SouthGobi shares, on a pro-rata basis, to
Chalco.
Depending upon the uptake of the offer by other SouthGobi
shareholders, Ivanhoe Mines could receive up to approximately C$889
million ($886 million) from the sale of all of its shares in
SouthGobi. A sale of 60% of its current holding would realize
proceeds of approximately C$533 million ($532 million). Ivanhoe
Mines plans to use the proceeds from the sale of its shares in
SouthGobi primarily to fund the continued development of the Oyu
Tolgoi Project.
The offer price for SouthGobi's shares represented a 28% premium
over the closing price on the TSX of C$6.62 on March 30, 2012, and
a 32% premium over the volume-weighted average price on the TSX of
C$6.41 during the 10 trading days prior to April 1, 2012.
The proportional offer from Chalco will be made by way of a
takeover-bid circular under British Columbia law and will be made
to all SouthGobi shareholders. If individual shareholders elect to
tender more than 60% of their common shares of SouthGobi to the
takeover bid - and if Chalco receives less than 60% of the
outstanding common shares of SouthGobi as a result of the offer - a
proportional amount of shares will be taken up, on a pro rata
basis, from each shareholder who has elected to tender those
additional shares.
The proportional offer by Chalco is subject to all statutory and
regulatory approvals, including Investment Canada Act and
Competition Act approvals, Chinese regulatory approvals, regulatory
approvals from the Government of Mongolia, as may be required, and
Chalco shareholder approval. Chalco's bid also is subject to
confirmation by China Investment Corporation, SouthGobi's
second-largest shareholder, that it does not intend to exercise its
right of first offer over Ivanhoe Mines' SouthGobi shares.
Sales and operations at SouthGobi's Ovoot Tolgoi coal mine
SouthGobi's Ovoot Tolgoi Mine is in Mongolia's South Gobi
Region, approximately 40 kilometres north of the Shivee Khuren-Ceke
crossing at the Mongolia-China border.
SouthGobi achieved sales of 0.84 million tonnes in Q1'12, an
increase of 84% from of 0.45 million tonnes in Q1'11. SouthGobi
recognized revenue of $40.2 million in Q1'12, an increase of 99%
from $20.2 million in Q1'11 due to increased sales volumes and
higher average realized selling prices. Sales volumes and revenue
decreased from Q4'11 due to the extended closure of the Shivee
Khuren border crossing for the Chinese New Year and Mongolian
Tsagaan Sar public holidays.
SouthGobi's average realized selling price increased to a record
$56.79 per tonne in Q1'12, an increase of 13% from the Q1'11
average realized selling price of $50.29.
In Q1'12, SouthGobi produced 1.07 million tonnes of raw coal
with a strip ratio of 2.07, compared to production of 1.11 million
tonnes of raw coal in Q1'11 with a strip ratio of 3.47. The lower
strip ratio for Q1'12 is a function of the mine plan and will be
normalized over the life-of-mine.
Cost of sales was $30.4 million for Q1'12, compared to $20.3
million for Q1'11. Cost of sales comprise the direct cash costs of
product sold, mine administration cash costs of product sold,
equipment depreciation, depletion of mineral properties,
share-based compensation and inventory write-downs, if any. Cost of
sales increased in Q1'12 compared to Q1'11 due to higher sales
volumes, which were partially offset by lower unit costs.
On February 13, 2012, SouthGobi successfully commissioned the
dry-coal handling facility (DCHF) at the Ovoot Tolgoi Mine. The
DCHF has the capacity to process nine million tonnes of ROM coal
per year. The facility includes a 300-tonne-capacity dump hopper,
which receives ROM coal to feed a rotary breaker, and screens that
size coal to a maximum of 50 millimetres and reject oversize ash.
The DCHF will be upgraded during 2012 to include dry-air
separation, as well as covered load-out conveyors with fan stackers
to transfer processed coals to stockpiles that will enable more
efficient blending.
Potential suspension of licences
On April 16, 2012, SouthGobi announced that the Mineral
Resources Authority of Mongolia (MRAM) held a news conference
announcing a request to suspend exploration and mining activity on
licences owned by SouthGobi Sands LLC, a wholly-owned subsidiary of
SouthGobi. As at May 15, 2012, SouthGobi had not received any
official notification from MRAM and Ivanhoe Mines has no reason to
believe SouthGobi's licences were not in good standing. However,
Ivanhoe Mines cautions at this time that receipt of any such
official notification would require a suspension of operations.
IVANHOE AUSTRALIA (58.9% owned)
Ivanhoe Australia is continuing to make progress on its four
main projects, achieving a significant milestone during Q1'12 with
the start of production of copper-gold concentrate at the Osborne
processing complex in northwestern Queensland. The other three
projects - the Merlin molybdenum and rhenium project, the Mount
Elliott copper-gold project and the Mount Dore cathode copper
project - are in various stages of development and study. All the
projects are on granted mining leases.
During Q1'12, work focused on beginning production from the
Osborne processing complex and completing the Merlin feasibility
study and Mount Elliott scoping study. The Mount Elliott
Preliminary Economic Assessment, a NI 43-101-compliant report, was
filed on www.sedar.com in May 2012.
Ivanhoe Australia incurred expenses of $47.6 million in Q1'12,
compared to $30.4 million in Q1'11. The $17.2 million increase was
a combination of development expenditures on the Merlin decline,
production expenditures on the Osborne copper-gold project and
exploration expenditures.
Osborne Copper-Gold Project
The start of production at the Osborne complex was an important
strategic step for Ivanhoe Australia, elevating the company to the
status of a producer. The Osborne Copper-Gold Study (Preliminary
Economic Assessment, a Canadian NI 43-101-compliant technical
report), released in October 2011, evaluated mill-feed sources only
for an initial four-year period. Mill-feed included in the initial
mine plan is to be sourced from the Osborne and Kulthor underground
mines, the Osborne open-pit and the Starra 276 underground mine.
Ivanhoe Australia is targeting a mine life of approximately 15 to
20 years, with a number of prospects identified as potential ore
sources across Ivanhoe Australia's Cloncurry tenements.
Processing operations began in early March 2012. All processing
plant components and systems were tested and commissioned with no
significant issues. Commissioning has proceeded well, with milling
rates achieving target levels and recoveries and copper concentrate
grades steadily improving to target rates. Production during March
2012 achieved throughput rates of up to 5,200 tonnes per day.
Production ramp-up is on target to achieve mill throughput for
2012 of between 700,000 and 900,000 tonnes of ore.
Merlin Molybdenum and Rhenium Project
The phase-one decline development at the Merlin Project was
completed on time and on budget in January 2012. At completion, the
north decline face had progressed to 1,682 metres while the south
decline progressed to 531 metres. Phase-two decline development is
expected to recommence following project approval from Ivanhoe
Australia's Board.
Regional exploration
Ivanhoe Australia has 43 granted Exploration Permits for
Minerals (EPMs) covering a total of 4,687 square kilometres,
including joint ventures, and 14 EPM applications with a total area
of 2,115 square kilometres. The granted EPMs include 12 EPMs in the
Ivanhoe Australia/Exco joint venture (525 square kilometres) and
one EPM in the Goldminco/Ivanhoe (Osborne) joint venture (16 square
kilometres).
Exploration in Q1'12 focused on copper-gold targets around the
Osborne area and Houdini and exploration targets along the Mount
Dore-Mount Elliott Trend and Starra Line.
Strategic partnership process
In January 2012, Ivanhoe Australia engaged UBS Investment Bank
to assist in securing a strategic corporate partner to provide
funding for the development of its projects. The strategic
partnership process is progressing. Indicative, non-binding
proposals have been received from several international
parties.
KYZYL GOLD PROJECT (50% owned)
Altynalmas Gold, a private company, holds 100% ownership of the
Kyzyl Gold Project in northeastern Kazakhstan. The Kyzyl Gold
Project contains the Bakyrchik and Bolshevik gold deposits, as well
as a number of satellite deposits.
Exploration continuing; 34,000 metres of drilling planned for
2012
Drilling activities re-commenced at the Kyzyl Gold Project on
March 15, 2012. A total of 3,385 metres were drilled during March
2012, all on Bakyrchik Exploration Licence No. 27. Exploration
drilling in 2012 is budgeted to total 34,000 metres.
Completion of a NI 43-101 Technical Report
On February 27, 2012, Ivanhoe Mines and Altynalmas released the
results of an independent feasibility study of the Kyzyl Gold
Project. Roscoe Postle Associates completed an independent, NI
43-101-compliant technical report on the Kyzyl Gold Project based
on a feasibility-study-level report completed by Fluor Canada and
subsequent optimization studies undertaken by Hatch Mining and
Metals Canada.
The project encompasses the re-development of the Bakyrchik
underground mine, the construction of a new processing plant
incorporating fluidized-bed ore-roasting technology, and supporting
mine infrastructure.
UPDATE OF DEVELOPMENTS WITH RIO TINTO
Rio Tinto's stake in Ivanhoe Mines increased to 51.0% in January
2012
On January 24, 2012, Rio Tinto announced that it had increased
its stake in Ivanhoe Mines to 51.0% from 49.0%, by purchasing an
additional 15.1 million common shares of Ivanhoe Mines from two
sellers in a privately negotiated transaction. The shares were
purchased at a price of C$20.00 per share.
Rio Tinto had been restricted to a 49.0% ownership stake in
Ivanhoe Mines until January 18, 2012, under the December 2010 Heads
of Agreement between the two companies.
Ivanhoe Mines and Rio Tinto signed an agreement to ensure
funding through to commercial production and additional expansion
at Oyu Tolgoi
On April 18, 2012, Ivanhoe Mines announced that the Company had
signed a binding memorandum of agreement, subject to certain terms
and conditions, with majority shareholder Rio Tinto that
established Rio Tinto's support for a series of funding measures
expected to cover the projected capital requirements for the Oyu
Tolgoi Project for the next several years.
The funding measures are expected to be sufficient to complete
both the phase-one and phase-two development programs at Oyu
Tolgoi, delivering a 160,000-tonne-per-day concentrator fed from an
open-pit mine and an underground mine and operating on electrical
power generated by a dedicated power station within Mongolia.
The agreement, negotiated by a committee of Ivanhoe Mines'
independent directors, contained a comprehensive financing plan
structured to secure Rio Tinto's direct participation in, and
support for, funding for planned developments at Oyu Tolgoi.
Rio Tinto's commitments will support:
-- The scheduled start of initial production from the open-pit mine during
the second half of this year.
-- The ramp-up to commercial production during the first half of 2013 as
part of Oyu Tolgoi's first phase of development. Phase-one work includes
operation of the open-pit mine and a 100,000-tonne-per-day nameplate-
capacity concentrator, infrastructure and a $900 million investment in
underground development at the Hugo North Deposit in preparation for
phase-two production.
-- The construction of a dedicated, coal-fired electrical power plant in
Mongolia. The Oyu Tolgoi Investment Agreement requires the project to
source all of its power requirements from within Mongolia within four
years of the start of commercial production. The project plans to use
power imported from China during its initial years of operation.
-- Continuing development of Oyu Tolgoi's second phase, including expansion
of the concentrator's nameplate capacity to 160,000 tonnes per day and a
start of production of high-grade ore from the Hugo Dummett underground
block-cave mine in 2016 - which is forecast to increase to 54,000 tonnes
per day by 2019, with subsequent increases to full production of 85,000
tonnes per day.
Rio Tinto is committed to the following steps:
-- Rio Tinto will provide an additional bridge-funding facility of up to
$1.5 billion to help ensure uninterrupted progress on the completion of
construction of the first phase of Oyu Tolgoi's development. As part of
an earlier funding agreement in December 2010, Rio Tinto provided an
interim funding facility of $1.8 billion, which Ivanhoe Mines has drawn
down by approximately $1.4 billion as at May 15, 2012. Ivanhoe Mines is
required to repay the interim funding facility and the bridge-funding
facility from the proceeds of the planned Oyu Tolgoi project-finance
package of $3 to $4 billion.
-- Rio Tinto will support the Ivanhoe Mines equity financing, with a goal
of generating $1.8 billion in gross proceeds, subject to certain terms
and conditions.
-- Rio Tinto will provide full support for completion of an Oyu Tolgoi
project-finance package of $3 to $4 billion that remains under
negotiation with third-party lenders. The package is the core component
of the new comprehensive financing plan. Ivanhoe Mines has been
negotiating project financing with a consortium of national and
international institutions and banks since 2010. Ivanhoe Mines and Rio
Tinto have set a goal of completing a project-finance arrangement by the
end of 2012. Rio Tinto may choose to advance senior loans to Oyu Tolgoi
LLC as an alternative to, or in addition to, the project-finance
package, on terms no less favourable than those available through the
international financial institutions or commercial banks.
-- A member of the Rio Tinto Group will enter into a completion support
agreement with Ivanhoe Mines and the project-finance lenders to cover
the Oyu Tolgoi project-finance package now under negotiation, subject to
lenders responding with improvements to the terms of the Oyu Tolgoi
project financing. This measure is expected to provide significantly
greater certainty that funds will be received. In exchange, Ivanhoe
Mines will pay Rio Tinto an annual fee of 2.5%, in advance, on the
amount of debt that is projected as the aggregate average of the debt
that will be outstanding under the project financing at the end of each
calendar month during the ensuing 12-month period.
In conjunction with the equity financing and the overall package
of extending interim lines of credit and completion guarantees of
support, Ivanhoe Mines has agreed to issue, subject to regulatory
approval, 55 million Series D share-purchase warrants to Rio Tinto.
Each warrant would be exercisable to purchase one Ivanhoe Mines
share at $12.79 at any time during a three-year period. The
exercise price of the warrants was based on the volume-weighted
average price of the Ivanhoe Mines shares on the New York Stock
Exchange on the five trading days preceding the date of the
companies' memorandum of agreement.
The Company and Rio Tinto are currently engaged in discussions
with respect to certain existing terms of the memorandum of
agreement, including the standby commitment and the Series D
warrants with a view to amending certain terms to address
conditions of regulatory approval and to more closely align the
terms of the proposed equity financing with current market
conditions.
Transition included restructuring of the Ivanhoe Mines Board of
Directors and appointment of a new senior management team
In paving the way for Oyu Tolgoi's transition to a producing
mine, Ivanhoe Mines and Rio Tinto reached amicable agreement on the
following corporate governance and management changes:
-- The Ivanhoe Mines board presently consists of nine members, including
four new directors nominated by Rio Tinto and appointed on May 7, 2012 -
Jill Gardiner, Peter Gillin, Isabelle Hudon and David Klingner - and
Livia Mahler, who was reappointed as a director on May 10, 2012, as one
of Robert Friedland's two nominees. They joined existing directors
Andrew Harding, Dan Larsen, Kay Priestly and Peter Meredith, Mr.
Friedland's other nominee. David Klingner was appointed as the Chairman
of the Board on May 10, 2012. A further four directors will be nominated
by Rio Tinto for appointment at the 2012 Annual General Meeting.
-- Seven directors - Marc Faber, Edward Flood, Robert Friedland, David
Korbin, Livia Mahler, Tracy Stevenson and Dan Westbrook - resigned from
the Ivanhoe Mines board on April 17, 2012. Three directors - Michael
Gordon, David Huberman and Bob Holland - resigned from the Ivanhoe Mines
board on May 7, 2012.
-- A majority of the new Ivanhoe Mines board will be independent directors
until at least the earlier of January 18, 2014, or the date on which
Ivanhoe Mines ceases to be a reporting issuer under Canadian securities
laws. Two directors, at least one an independent, will be nominated by
Mr. Friedland until January 18, 2014, as long as he continues to own at
least 10% of Ivanhoe Mines' outstanding shares.
-- A new Ivanhoe Mines senior management team was appointed on May 1, 2012.
It includes Kay Priestly as Chief Executive Officer (CEO), Chris Bateman
as Chief Financial Officer (CFO), Brett Salt as Vice President, Strategy
and Development, Stewart Beckman as Vice President, Operations and
Technical Development, and Neville Henwood as Vice President, Legal. The
new appointees replace former CEO Robert Friedland, former CFO Tony
Giardini, former President John Macken, former Deputy Chairman Peter
Meredith and former Executive Vice President Sam Riggall, all of whom
resigned on April 17, 2012, as part of the agreement between Ivanhoe
Mines and Rio Tinto.
NAME CHANGE
At the 2012 Annual General Meeting of Ivanhoe Mines
shareholders, scheduled for June 28, 2012, the Company will
propose, and recommend that shareholders approve, a resolution to
change the Company's name from Ivanhoe Mines Ltd. to Turquoise Hill
Resources Ltd. The record date for the 2012 Annual General Meeting
is May 25, 2012.
REVIEW OF OPERATIONS
In Q1'12, Ivanhoe Mines recorded a net loss of $80.6 million
($0.11 per share), compared to a net loss of $492.5 million ($0.79
per share) in Q1'11, which was a decrease of $411.9 million. The
decrease is largely due to the Q1'11 result including a $432.5
million change in fair value of the derivative realized on the 2011
rights offering. Results for Q1'12 included $76.8 million in
exploration expenses; $30.4 million in cost of sales; $31.5 million
in general and administrative expenses; $0.7 million in interest
expense; a $0.8 million change in the fair value of SouthGobi's
embedded derivatives; an $18.3 million share of loss of
significantly influenced investees; and a $3.9 million write-down
of carrying value of long-term investments. These amounts were
offset by $40.2 million in coal revenue; $9.9 million in foreign
exchange gains; an $8.9 million gain on other long-term
investments; and $5.9 million in interest income.
Exploration expenses of $76.8 million in Q1'12 increased by
$30.6 million from $46.2 million in Q1'11. Exploration expenses
included $25.1 million spent in Mongolia ($13.5 million in Q1'11),
primarily for Oyu Tolgoi and SouthGobi's Ovoot Tolgoi and Soumber
deposits, and $47.6 million incurred by Ivanhoe Australia ($30.4
million in Q1'11). Exploration costs are charged to operations in
the period incurred and often represent the bulk of Ivanhoe Mines'
operating loss for that period.
During Q1'12, additions to property, plant and equipment for the
Oyu Tolgoi Project totalled $608.0 million, which included
development costs.
Ivanhoe Mines' cash position, on a consolidated basis at March
31, 2012, was $895.1 million. As at May 15, 2012, Ivanhoe Mines'
consolidated cash position was approximately $750 million.
QUALIFIED PERSON
Disclosure of a scientific or technical nature in this release
and the Company's MD&A in respect of the Oyu Tolgoi Project was
prepared under the supervision of Stephen Torr, P.Geo., an employee
of Ivanhoe Mines and a "qualified person" as that term is defined
in NI 43-101.
SELECTED QUARTERLY DATA
($ in millions of dollars, except per share information)
Quarter Ended
------------------------------
Mar-31 Dec-31 Sep-30 Jun-30
2012 2011 2011 2011
---------------------------------------------------------------------------
Revenue $40.2 $51.0 $60.5 $47.3
Cost of sales (30.4) (44.2) (54.0) (49.7)
Exploration expenses (76.8) (88.2) (79.6) (68.6)
General and administrative (31.5) (34.6) (21.4) (19.5)
Foreign exchange gains (losses) 9.9 13.3 (35.6) 2.3
Change in fair value of embedded
derivatives (0.8) 10.8 62.1 70.4
Gain on settlement of note receivable - - 103.0 -
Net income (loss) from continuing
operations (80.6) (85.8) 16.4 0.6
Income (loss) from discontinued operations - - (9.1) -
Net income (loss) (80.6) (85.8) 7.3 0.6
Net income (loss) per share - basic
Continuing operations ($0.11) ($0.05) $0.02 $0.00
Discontinued operations $0.00 $0.00 ($0.01) $0.00
Total ($0.11) ($0.05) $0.01 $0.00
Net income (loss) per share - diluted
Continuing operations ($0.11) ($0.05) $0.02 $0.00
Discontinued operations $0.00 $0.00 ($0.01) $0.00
Total ($0.11) ($0.05) $0.01 $0.00
---------------------------------------------------------------------------
Quarter Ended
------------------------------
Mar-31 Dec-31 Sep-30 Jun-30
2011 2010 2010 2010
---------------------------------------------------------------------------
Revenue $20.2 $41.6 $6.6 $17.7
Cost of sales (20.3) (46.4) (14.9) (13.2)
Exploration expenses (46.2) (59.6) (48.1) (39.5)
General and administrative (25.3) (46.4) (15.0) (14.7)
Foreign exchange gains (losses) 3.2 6.6 5.3 (4.9)
Change in fair value of derivative (432.5) 135.7 - -
Change in fair value of embedded
derivatives (36.8) (20.0) 49.8 72.2
Net income (loss) from continuing
operations (492.5) 37.3 (24.9) (30.0)
Income (loss) from discontinued operations - - - -
Net income (loss) (492.5) 37.3 (24.9) (30.0)
Net income (loss) per share - basic
Continuing operations ($0.79) $0.07 ($0.05) ($0.06)
Discontinued operations $0.00 $0.00 $0.00 $0.00
Total ($0.79) $0.07 ($0.05) ($0.06)
Net income (loss) per share - diluted
Continuing operations ($0.79) $0.06 ($0.05) ($0.06)
Discontinued operations $0.00 $0.00 $0.00 $0.00
Total ($0.79) $0.06 ($0.05) ($0.06)
---------------------------------------------------------------------------
Ivanhoe Mines' results for the three months ended March 31,
2012, are contained in the unaudited Consolidated Financial
Statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations, available on 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.
About Ivanhoe Mines
Ivanhoe Mines (TSX:IVN)(NYSE:IVN)(NASDAQ:IVN) is an
international mining company with operations focused in the Asia
Pacific region. Assets include the company's 66% interest in the
Oyu Tolgoi copper-gold-silver mine development project in southern
Mongolia; a 58% interest in Mongolian coal miner SouthGobi
Resources(TSX:SGQ)(HK:1878); a 59% interest in copper-gold miner
Ivanhoe Australia (TSX:IVA)(ASX:IVA), which also is developing a
molybdenum-rhenium discovery; and a 50% interest in Altynalmas
Gold, a private company developing the Kyzyl Gold Project in
Kazakhstan.
Ivanhoe Mines' shares are listed on the New York, NASDAQ and
Toronto 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 Ivanhoe
Mines' 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; statements concerning the schedule for
carrying out and completing construction of the Oyu Tolgoi Project;
the statement that the memorandum of agreement is expected to cover
the project capital requirements for the Oyu Tolgoi project for the
next several years; the statement that the Company and Rio Tinto
are currently engaged in discussions with respect to certain
existing terms of the memorandum of agreement with a view to
amending certain terms to address conditions of regulatory approval
and to more closely align the terms of the proposed equity
financing with current market conditions; the statement that
initial production from the Oyu Tolgoi Project is projected to
begin in the second half of 2012, with commercial production to
follow in the first half of 2013; the statements concerning the
expected timing of initial production from the Hugo North
block-cave mine; statements related to the expansion of throughput
capacity of the concentrator;
statements regarding the timing of completion and
pre-commissioning of Lines #1 and #2 of the concentrator; the
statement that imported power is expected to be available at the
Oyu Tolgoi site in the second half of 2012; the statements that the
physical construction of all transmission infrastructure necessary
to import power from China will be completed by July 2012; the
statements regarding the plans to extend the electrical
transmission power line from across the Mongolian border into the
Inner Mongolian electrical grid; the statements concerning the
timing and outcome of discussions between the Mongolian and Chinese
authorities regarding importing electrical power from China; the
schedule of receipt of permits, commercial arrangements and
power-purchase tariffs from the Government of Mongolia; the
statements concerning the approval, budget and timing of any
construction of a coal-fired power plant at Oyu Tolgoi; statements
concerning the resuming of underground lateral development in
September 2012; statements relating to the Shaft # 1 and 2
development plans, along with the plans for the ventilation raise
holes; statements concerning the expected markets for concentrate
produced at the Oyu Tolgoi Project; statements related to the
anticipated capital costs and the phase-one budget of the Oyu
Tolgoi Project; statements concerning the revised expectations of
the total phase-one budget to bring the Oyu Tolgoi Project into
commercial production; statements regarding the timing of the full
mining fleet at the Oyu Tolgoi Project being in operation; initial
production estimates; the Oyu Tolgoi Project's anticipated yearly
production of copper and gold; statements regarding the goal to
have the Oyu Tolgoi Project financing be in place by December 31,
2012; statements related to the Rio Tinto having the ability to
choose to advance senior loans to Oyu Tolgoi LLC as an alternative
to project financing; statements concerning the preparation of
DIDOP by Oyu Tolgoi LLC and its content and timing;
statements concerning the amount of proceeds Ivanhoe Mines could
receive from Chalco for the sale of its shares in SouthGobi;
statements regarding SouthGobi's coal strip ratio being normalized
over the life-of-mine; target milling rates, mining plans and
production forecasts for the coal mine at Ovoot Tolgoi, the
statements concerning SouthGobi's expected coal sales and prices in
Q2'12 and related statements about border access; the statements
concerning the dry coal handling facility enabling more efficient
blending of coal; the statement that if official notification from
MRAM is received regarding a suspension of activity on SouthGobi's
licences that this would require a suspension of operations; the
statements concerning the Ivanhoe Australia's need for additional
funds to develop its projects; statements concerning the
development and construction of the Merlin Project; statements
concerning expected production throughput at the Osborne processing
plant; statements concerning the planned drilling on the Bakyrchik
Mining Lease and the surrounding exploration licence; the statement
that if the comprehensive financing plan is not successfully
implemented the Company may not have the ability to obtain
alternate debt or equity financing which could have a material
impact on the development schedule of the Oyu Tolgoi Project; the
impact of amendments to the laws of Mongolia and other countries in
which Ivanhoe Mines carries on business, particularly with respect
to taxation; statements concerning foreign-exchange rate
volatility; statements concerning global economic expectations and
future demand for commodities; 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 MD&A 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. Jason Combes Investors +1
604.648.3920jasonco@ivancorp.net Ivanhoe Mines Ltd. Tony Shaffer
Media +1 604.648.3934tonysh@ivancorp.net www.ivanhoemines.com
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