SINGAPORE, SINGAPORE (NYSE: IVN)(NASDAQ: IVN) today announced
its results for the third quarter of 2007 (Q3'07). All figures are
in US dollars, unless otherwise stated.
Ivanhoe Mines is continuing to advance its wholly-owned Oyu
Tolgoi copper and gold mine development project in Mongolia. Also
in Mongolia, the majority-owned SouthGobi Energy Resources is
scheduled to commence coal mining in 2008 at its Ovoot Tolgoi
deposit in the South Gobi Region, near the Mongolia-China border.
Ivanhoe has made significant progress in developing financing
options for its Cloncurry copper-gold-uranium exploration project
in Queensland, Australia, and for its Bakyrchik gold project in
Kazakhstan, to maximize value for Ivanhoe's shareholders.
MONGOLIA - OYU TOLGOI COPPER-GOLD PROJECT
Members of Mongolia's Parliament visiting mines in the US,
Australia and Chile in preparation for discussion of Oyu Tolgoi
draft Investment Agreement
During the third quarter, members of the Mongolian National
Parliament's Standing Committee on Economics formed a Working Group
to review and evaluate the draft Investment Agreement that Ivanhoe
Mines and its strategic partner, Rio Tinto, had negotiated in April
2007 with a separate Working Group appointed by the Government of
Mongolia. Standing Committee Working Group members began a series
of visits to international mines owned by Rio Tinto PLC, BHP
Billiton and other companies to familiarize themselves with
industry-leading mining practices that could be introduced to
Mongolia and economic benefits that could be expected with the
construction of the copper-gold mining complex at Oyu Tolgoi
planned by Ivanhoe Mines and Rio Tinto.
In late September 2007, Mongolia's Finance Minister and several
members of the Standing Committee's Working Group visited the
Bingham Canyon Mine near Salt Lake City, Utah. Owned by Kennecott
Utah Copper Company, which is part of Rio Tinto's global portfolio
of assets, Bingham Canyon has been in production for more than 100
years and is the second-largest copper producer in the US. The
Mongolian MPs inspected the mine's open pit, concentrator, smelter
and refinery operations and were briefed by Rio Tinto executives
and community leaders. In early October, other MPs who are also
members of the Standing Committee's Working Group visited Rio
Tinto's North Parkes underground block-cave mine in Australia,
which utilizes advanced ore recovery technologies similar to those
planned for the underground portion of the Oyu Tolgoi development.
Mongolia's Minister of Industry and Trade accompanied MPs on an
inspection of Chilean mines in November.
The Mongolian Parliament began its autumn session in early
October and consideration of the draft Investment Agreement for Oyu
Tolgoi is on Parliament's official schedule of business. The
Mongolian Government's Cabinet completed its review of the draft
Investment Agreement in June. The agreement is structured to
stabilize tax and fiscal issues and guide the planned development
and long-term operation of the Oyu Tolgoi Project. Consideration
and approval by the Parliament is expected to be the final step in
the process of concluding an Investment Agreement in accordance
with the revised Minerals Law enacted by Parliament last year. The
draft agreement also remains subject to approvals by the Ivanhoe
Mines and Rio Tinto boards of directors.
Ivanhoe Mines and Rio Tinto have been meeting with Members of
Parliament to discuss issues relating to the planned development of
Oyu Tolgoi and lawmakers have visited the Oyu Tolgoi Project site
to see work in progress. Ivanhoe Mines and Rio Tinto also have
expressed their concerns to Members of Parliament, the Government's
Cabinet and the President about adverse impacts on the cost and
timing for the Oyu Tolgoi project that would result from further
unexpected delays in the parliamentary approval process.
Ivanhoe Mines is monitoring the deliberations of the National
Parliament and the anticipated formation of a reconstituted cabinet
under Sanjaa Bayar, who was recently elected Chairman of the
Mongolian People's Revolutionary Party (MPRP) and who is expected
to be appointed Prime Minister. Ivanhoe is continuing to assess any
implications for the Oyu Tolgoi development schedule. A plan
prepared by the joint Ivanhoe Mines-Rio Tinto Technical Committee
would guide an orderly curtailment of development activities and a
significant reduction of expenditures at the Oyu Tolgoi Project if
an Investment Agreement with the Mongolian Government is not
finalized within an acceptable period of time.
Oyu Tolgoi development activities see Shaft No. 1 nearing
completion
The Oyu Tolgoi site celebrated a safety record with 2.5 million
hours worked without a lost-time incident in early October 2007.
Site preparation continued during Q3'07, positioning the project to
commence full construction upon final approval of an Investment
Agreement. Activities on site during the third quarter focused on
the sinking of Shaft No. 1, sub-surface collar works at Shaft No.
2, excavation of the full concentrator area and continued
enlargement of the construction camp facilities.
As expected, Shaft No. 1 reached 1,300 metres, the depth of the
characterization drift level, at the end of Q3'07. Additional
sinking to allow for underground infrastructure will continue to
the end of the year. Planned lateral development will allow for
additional exploration of the Oyu Tolgoi high-grade underground
deposits and also will provide initial production - and ultimately
ventilation - to the underground mine. Lateral development work is
expected to formally commence in early 2008. The expected
completion of Shaft No. 1, together with the horizontal exploration
tunnels, will provide access to the Hugo Dummett Deposit, enabling
the Company to complete its geotechnical assessment that is
required to advance the underground deposit to a feasibility level
- a milestone expected to be reached in 2008.
Work continued on Shaft No. 2, which is planned to be the
initial, primary underground production and service shaft at Oyu
Tolgoi. Site work completed in Q3'07 included concrete work to
bring the sub-surface works to grade or near to grade by the onset
of winter. This work includes the below-surface collar foundation
to support the headframe, and accommodate a conveyor gallery and
vent plenum. Engineering work is continuing on schedule.
On the concentrator, total excavation work is approximately 20%
complete. Concentrator engineering reached 71% completion as of
October 2007 and is scheduled for substantial completion in March
2008.
Work also continued on the temporary facilities during Q3'07.
The main construction camp continues to be built out to allow for
full mobilization of the construction workforce. The combined
capacity of the three camps is 2,408 beds. Planning for the
mobilization of the construction crew continued throughout the
quarter.
Infrastructure engineering progressed during Q3'07. The
principal activities included engineering for the diesel power
station, which will provide construction power to the project, and
engineering on the Gunii Hooloi bore field, which will serve as a
permanent water source for the mine.
Oyu Tolgoi block-cave planning advances
Block-cave planning for the Hugo Dummett Deposit continued
during Q3'07 with the commencement of a detailed study of the first
production lift. This study will extend throughout 2008 and will
incorporate the findings of the characterization drift. This drift
will provide the geotechnical parameters to determine the detailed
block-cave footprint design and mine development requirements.
Additionally, information from the characterization drift will
provide data for the underground engineering design criteria that
will be used to optimize the production schedule and to upgrade the
underground resources to reserves.
Other aspects of this detailed study include further
optimization evaluations for the future concentrator expansion and
smelter.
Work continued in Q3'07 on detailed design of the plant and
infrastructure, which is approximately 60% complete. Continued
negotiations with equipment suppliers for the open pit and plant
operations took place and major critical-path equipment items are
fully specified.
The update to the Integrated Development Plan (IDP) was advanced
and awaits the finalization of the Investment Agreement prior to
completion of the economic model. All major capital estimates will
be updated and included in the revised IDP.
Ongoing drilling expands Oyu Tolgoi geological trend to 20
KM
(Entree Gold-Ivanhoe Mines' earn-in joint-venture property
immediately south of Oyu Tolgoi)
Ivanhoe Mines completed approximately 14,755 metres of drilling
on the Oyu Tolgoi Project during Q3'07, including 9,176 metres on
the newly identified Heruga Deposit within the Javkhlant concession
of the Entree Gold-Ivanhoe Mines' earn-in joint-venture property
adjoining the southern boundary of Oyu Tolgoi. In addition, 2,600
metres of drilling was completed for geotechnical characterization
on the Entree Gold-Ivanhoe Shivee Tolgoi earn-in joint venture
property on the northern boundary of Oyu Tolgoi and on the east
side of the Hugo North Deposit. The remaining 2,972 metres of
drilling was split between sterilization drilling under the
proposed coal-fired power plant in the southwest corner of Oyu
Tolgoi and exploration drilling on other induced polarization (IP)
targets.
The Heruga Deposit, formerly referred to as the Sparrow South IP
target, now has been identified by 19 drill holes, totalling 21,000
metres of core drilling. The holes, which are spaced on 200- to
300-metre centres, have defined a 1,100-metre strike length of
continuous copper, gold and molybdenum mineralization up to 400
metres in width. The north-south-striking deposit is open on the
east side and to the south. While a series of drill holes across
the northern strike extension failed to intersect the deposit, they
may have been terminated in the hanging wall of the
mineralization.
The discovery of the Heruga Deposit marks a new style of
molybdenum-rich mineralization not previously encountered on the
Oyu Tolgoi trend. While no age dating has been done yet on this
mineralization, the deposit is hosted by late-Devonian basaltic
volcanics and quartz monzodiorite that are nearly identical to the
host rocks of the Oyu Tolgoi deposits. The structural corridor that
bounds the Heruga Deposit also is flanked by Devonian and
Carboniferous volcanic rocks similar to the Oyu Tolgoi structural
corridor.
In all, the Oyu Tolgoi trend, including the Heruga Deposit and
an area of lower-grade copper and gold mineralization - known as
the Airport North Zone (discovered in 2006), approximately 10
kilometres northeast of the Hugo Dummett Deposit and on the same
structural corridor - now has a strike length in excess of 20
kilometres. In addition, the "trend" has been well defined by the
regional gradient-array IP surveys conducted by Ivanhoe Mines'
geophysical team. The IP has located four chargeability anomalies
along the Oyu Tolgoi trend-line extending approximately 15
kilometres south-southwest into Ivanhoe Mines' 100%-owned
exploration tenements from the Heruga discovery, which are untested
by drilling. Three of the anomalies and a portion of the fourth are
on Ivanhoe's ground.
By the end of Q3'07, Ivanhoe Mines had incurred in excess of $20
million in exploration expenditures on the Entree Gold-Ivanhoe
Mines JV agreement areas and now has earned a 51% interest in all
minerals - including the Heruga Deposit - on the Javkhlant
exploration tenement and the northern extension of the Hugo Dummett
North Deposit on the Shivee Tolgoi exploration tenement. Ivanhoe
Mines intends to continue incurring earn-in expenditures in
accordance with the terms of the JV agreement to increase its
participating interest in the project. Subject to Ivanhoe Mines
spending a total of US$35.0 million on exploration and/or
development on the JV properties prior to November 2012, Ivanhoe
Mines will earn a participating interest of 80% in all minerals
extracted below a sub-surface depth of 560 metres on the optioned
property and a 70% participating interest in all minerals extracted
from surface to a depth of 560 metres.
Ivanhoe Mines held directly approximately 14.8% of the issued
and outstanding share capital of Entree, in addition to the earn-in
rights, at September 30, 2007. In November 2007, Entree announced a
C$30.0 million treasury offering consisting of 10 million common
shares at an issue price of $3.00 per share. Ivanhoe Mines has
exercised its pre-emptive rights to acquire an additional 2.1
million common shares for proceeds of C$6.4 million to maintain its
14.8% ownership interest in Entree.
Rio Tinto provides $350 million convertible credit facility to
Ivanhoe Mines
In September 2007, Ivanhoe Mines announced that Rio Tinto would
provide a convertible credit facility of up to $350 million to
finance ongoing mine development activities at the Oyu Tolgoi
Project pending the finalization of an Investment Agreement between
Ivanhoe Mines and the state of Mongolia. A definitive Credit
Agreement was signed in October 2007, following which Ivanhoe Mines
made an initial draw against the credit facility of $150
million.
The proceeds of the credit facility will be used to ensure that
long-lead-time orders for the manufacture of mining equipment such
as trucks, tires, electric motors and ball mills, and development
work on Shafts No. 1 and No. 2 at Oyu Tolgoi, remain on schedule
pending a satisfactory conclusion of an Investment Agreement with
the Mongolian Government. The Credit Agreement contemplates that
all such development activities and expenditures will be made in
accordance with an Operating Plan and Budget unanimously approved
by the Ivanhoe Mines and Rio Tinto representatives on the Oyu
Tolgoi Technical Committee.
Amounts advanced under the credit facility will bear interest at
a rate per annum equal to the three-month London Inter-Bank Offered
Rate, plus 3.3%, and mature on September 12, 2010. The outstanding
principal amount and up to $108 million in interest are convertible
into up to 45.8 million common shares of Ivanhoe Mines at a price
of US$10.00 per share and will be automatically converted into
common shares upon maturity.
As part of the credit facility transaction, Rio Tinto also
received share-purchase warrants exercisable to purchase up to 35
million common shares of Ivanhoe Mines at a price of US$10.00 per
share for a period of five years. These warrants may be exercised
on a basis proportionate to the amount of funds drawn down by
Ivanhoe Mines under the credit facility.
Assuming the completion of the second tranche equity investment
contemplated by the October 2006 Private Placement Agreement, if
Rio Tinto were to fully convert the maximum amount available for
conversion under the credit facility and exercise all of its share
purchase warrants, it would hold approximately 256.2 million common
shares of Ivanhoe Mines representing 42.2% of Ivanhoe Mines' then
outstanding common shares on a fully diluted basis (43.1%
undiluted).
Ivanhoe Mines and Rio Tinto also agreed to amend certain terms
of the October 2006 Private Placement Agreement. Rio Tinto now has
the right to appoint the Chairman of the Technical Committee
overseeing development and operation of the Oyu Tolgoi project in
2009 rather than in 2011 and Rio Tinto's maximum permitted
shareholding in Ivanhoe Mines has been increased to 46.65% from
40%.
MONGOLIA - COAL ASSETS
SouthGobi Energy Resources receives mining license for its Ovoot
Tolgoi coal operations in Mongolia
On September 11, 2007, SouthGobi Energy Resources received
official notification from the Government of Mongolia that it had
been granted a mining license for its open-pit coal mine at its
Ovoot Tolgoi Project. This step was conditional on paying the first
year mining licence fees within 10 days of the receipt of the
letter. The fees were paid on September 17, 2007, and the 30-year
Mining Licence Certificate, dated September 20, 2007, was received
on October 1, 2007. SouthGobi expects to receive the Permit to Mine
by the end of 2007.
On November 5, 2007, SouthGobi announced that it had committed
to purchase a fleet of coal-mining equipment for Ovoot Tolgoi.
Delivery of the equipment, valued at approximately $16.0 million,
is scheduled for Q1'08. Site facilities have been designed and
construction is scheduled for spring 2008, subject to favourable
weather.
SouthGobi plans an initial mine start up in Q1'08, with the
first shipment of coal in Q3'08. The Ovoot Tolgoi work camp has
been winterized and will service the mine during the pre-production
phase. The engineering and design for a permanent camp, maintenance
facilities and offices has been completed.
SouthGobi also announced on November 5 that it had arranged a
new credit facility with Ivanhoe Mines, which allows SouthGobi to
obtain advances from Ivanhoe Mines to an aggregate maximum of $32.5
million. The new credit facility is unsecured and is not
convertible into equity. The facility will be used to fund certain
operating, development and administrative expenditures.
SouthGobi has commissioned Norwest Corporation to complete an
updated mining study on Ovoot Tolgoi. The study is expected to be
completed by the end of Q4'07 and will be an enhancement of two
earlier Scoping Studies. This report will be used to fulfill the
legal requirement to file a technical and economical study with
applicable Mongolian authorities as required by Mongolian Mining
Laws within 60 days of receiving a mining licence.
Further drilling in the Ovoot Tolgoi Extension will focus on
gaining a better geological, structural and quality understanding
of the coal resources from identified coal occurrences on two
different fields and delineating spoil areas and specific site
facilities areas.
In June 2007, Norwest completed a study of Ovoot Tolgoi's
underground mining potential as part of SouthGobi's plans for the
potential development of Ovoot Tolgoi's underground coal seams -
prompted by increasing demand for high-quality metallurgical and
thermal coal from Northern China. An underground mining consultant
has been retained and is working on a plan to advance the project.
The Ovoot Tolgoi underground project requires further drilling
before a resource estimate can be completed. This program was
initiated during this year's drilling program and will be continued
in the spring of 2008.
SouthGobi Energy has been approached by a number of significant
industry participants and investors with respect to potential
project participation and investments. Discussions are ongoing.
Ivanhoe Mines at September 30, 2007, held approximately 86% of
the issued and outstanding share capital of SouthGobi. Ivanhoe
Mines also has 25.6 million SouthGobi preferred shares that, when
aggregated with Ivanhoe Mines' existing holding of common shares,
represent approximately 90% of the total number of issued and
outstanding common shares of SouthGobi.
AUSTRALIA
Cloncurry IOCG Project expanding exploration
Ivanhoe Mines' recent exploration at the Cloncurry project has
discovered a series of related iron-oxide-copper-gold (IOCG)
systems, with associated uranium. Ivanhoe Mines continued its
significant exploration activities at Cloncurry, spending $7.9
million during Q3'07 compared to $1.1 million in Q3'06.
Swan Prospect. In October 2007, Ivanhoe Mines announced that
continued exploration drilling had resulted in the discovery of a
significant high-grade zone of copper and gold mineralization on
the western margin of the large, open-ended SWAN IOCG Project.
Drill hole MEHQ071130, on the western margin of the SWAN system,
intersected 90 metres grading 2.02% copper and 1.3 g/t gold from
582 metres to 672 metres, including 54 metres grading approximately
3.04% copper and 1.89 g/t gold. The intersection is missing a
3.5-metre section of high-grade core resulting from loss during
drilling of the very friable composition of the intense
chalcopyrite-rich mineralization. As such, this zone is being
re-drilled and recovery improved by using a triple-tube core-barrel
to preserve the entire high-grade intercept. Additional drilling
will define the attitude and dip of the high-grade zone and also
the true thicknesses of the drill intersections.
The Hole 1130 intersection highlights the potential for further
large, high-grade zones in and around the extensive SWAN system.
The tenor and thickness of the high-grade mineralization appears to
be superior to that previously mined at the Mt. Elliott Mine,
approximately one kilometre away. The high-grade sections within
the 90-metre intercept are associated with one- to three-metre-wide
veins of chalcopyrite, magnetite, pyrite and calcite. These veins
are sub-vertical and have a north-northeast trend. These zones
might represent long-lived feeder zones to the main body of
mineralization or be cross-cutting late-stage mineralization. The
style and structure of the mineralization intersected in the newly
discovered high-grade zone indicates that repeat structures with
similar grades and thicknesses are possible within the SWAN
system.
Ivanhoe Mines is conducting an aggressive drilling campaign to
explore the immediate area around the high-grade zone to expand the
size and to better understand the structural controls of the
mineralization. An additional 150-metre-wide intersection of
visibly strong chalcopyrite-dominated mineralization was
intercepted in Hole 1118 (assay results pending), approximately 100
metres up-dip from Hole 1130 and within the same stratigraphic
position. Given the tenor of the intersection in holes 1130 and
1118, a pattern of drilling to achieve a mineral resource on this
high-grade portion of SWAN will be completed as a priority
undertaking.
During Q3'07, 32 diamond core holes were drilled at SWAN,
totalling 25,087 metres. The recent drilling at SWAN has included
testing of the northwest strike extent and also the SWELL
mineralization to the east of SWAN and southwest of Mt Elliot;
drilling is continuing at SWELL with a view to establishing the
relationship between the SWAN and Elliott deposits. Seven drill
rigs are located at SWAN, but soon will be reduced to four as some
rigs move on to the testing of other targets. One
six-kilometre-long line of dipole-dipole IP was completed close to
the North Gossans area. Mapping commenced this quarter on the
Central and Northern Leases, located immediately northwest of the
SWAN and Mt Elliot prospects. This work will continue into the next
quarter and is expected to define additional drill targets.
The SWAN-Mt. Elliott IOCG system is the first of numerous
targets to be intensively drill tested by Ivanhoe in the Cloncurry
district. Delineation drilling has just begun at Mt. Dore (see
below) and Amethyst Castle, the second and third targets to be
drill tested in the district. Reconnaissance drilling at the other
IOCG targets will proceed when sufficient delineation on the SWAN
and Mt. Dore prospects has been completed.
Reconnaissance drilling at the Amethyst Castle and Castle Mount
prospects has intercepted significant intersections of classic,
IOCG-style breccias similar to those that host economic
mineralization at the Ernest Henry Mine, near Cloncurry, and the
Olympic Dam and Prominent Hill deposits in South Australia's Gawler
Craton. A first-pass drill program at the Metal Ridge prospect has
intercepted anomalous copper and gold mineralization similar in
alteration style to the SWAN Deposit.
Central and Northern Gossans. Detailed geological mapping and
sampling are taking place at the Central and Northern Gossans areas
where copper and gold mineralization was intersected in limited,
shallow drilling carried out decades ago. To date, mineralized
zones have been intersected over a strike length of at least four
kilometres. This north-trending zone could represent the northern
strike extension of the SWAN deposit, which already has been
demonstrated to be approximately 1.3 kilometres long.
Mt. Dore Prospect. Significant Mineral Resources have been
previously declared at the Mt Dore Prospect and drilling is
underway to re-establish a valid 43-101 compliant resource. Copper
within this system is hosted within east-dipping shales and
siltstones overlain by granites. One drill rig is located at this
prospect, drilling vertical infill holes up to 400 metres deep, as
follow-up to the previous programs. A total of 19 holes are
planned, with a second rig to move to Mt. Dore from SWAN in Q4'07.
Mt Dore is one of the most advanced prospects in the field and
provides the earliest opportunity for copper production on the
Cloncurry prospect.
Amethyst Castle Prospect. Copper, gold and uranium are hosted in
a widespread, large-scale breccia body in the Amethyst Castle area.
Ivanhoe Mines has identified the presence of uranium and the
IOCG-style of mineralization and has carried out magnetic,
conductivity, IP and gravity surveys. The drill results indicate a
large breccia structure containing pods of high-grade gold, copper
and uranium that requires further investigation. In Q3'07, six
lines of 200-metre-deep dipole-dipole IP were completed at
400-metre line spacings, producing a number of anomalies that
require follow-up exploration and/or drilling.
Metal Ridge. Air-core drilling over the western portion of this
prospect has identified a zone of higher copper values associated
with a gravity feature striking north-easterly from Amethyst Castle
across to Metal Ridge. Deep IP is planned for this project.
Starra Line. The Line on the Western Ironstone System produced a
reported 170,000 tonnes of copper and one million ounces of gold
from ore grading 2.23% copper and 4.56 g/t gold between 1987 and
2003. The system had been previously drilled to an average depth of
230 metres. Testing of this system at depth is expected to commence
later this year or early in 2008.
Uranium Prospects. In addition to the IOCG prospects identified
above, Ivanhoe's Cloncurry Project hosts a significant number of
uranium exploration prospects, including Robert Heg, Elizabeth
Anne, Great Wall and Dairy Bore. Five diamond-drill holes were
completed on Robert Heg in the previous quarters, totalling 1,676
metres. Uranium was encountered in chloritic shear zones and
low-grade, possibly disseminated uranium within sections of the
granite and calc silicate country rock. Secondary uranium minerals
were seen on many fracture planes as coatings that were easily
washed off during core cutting and drilling. This problem will be
addressed in future core-handling procedures. The drill results
re-affirm the results obtained by the early Rio Tinto drilling in
1991.
At Elizabeth Anne, a program of air-core drilling detected
anomalous copper, lead and uranium, while rock-chip samples
highlighted the presence of strong secondary uranium minerals seen
in ironstone outcrops associated with this prospect. A detailed SAM
conductivity survey with a 50-metre line separation is in progress
in the Elizabeth Anne-Great Wall area, with the objective of more
detailed mapping of the structures, revealed by conductivity
trends, associated with anomalous uranium. Eight rock-chip samples
from an ironstone outcrop at the Great Wall prospect assayed
between 0.8% and 1.1% U, with associated anomalous copper
mineralization.
Gravity and air-core drilling was completed over the Dairy Bore
prospect, with assay results confirming a correlation between
copper, magnetics and gravity features. This target is expected to
be an IOCG-style of mineralization, with drilling to follow a
further detailed mapping program. The rock-chips from the air-core
programs at Dairy Bore and Elizabeth Anne will be logged and
reported on in Q4'07.
More detailed follow-up on the uranium targets will commence in
early 2008. Work in Q4'07 will focus on the SWAN and Mt. Dore
deposits.
KAZAKHSTAN
Progress on commercial-scale demonstration plant at Bakyrchik
Gold Project
The Bakyrchik Mining Venture (BMV) is in the process of
completing construction of a commercial-scale demonstration plant
capable of processing 200,000 tonnes per annum, using a rotary kiln
to oxidize the ore, followed by conventional grinding and
cyanidation. BMV has a stockpile of approximately 100,000 tonnes of
ore grading 8.17 g/t of gold that will be run through the
demonstration plant to confirm metallurgical parameters.
During Q3'07, the remaining contracts for the construction of
the demonstration plant were signed and advance payments made.
Construction of the plant continued during the quarter and
currently involves nine major contractors. Most purchase orders for
the major mechanical equipment have been placed. The work program
is being reviewed to ensure that all technical, budgetary and
scheduling commitments are being met for the construction. It is
expected that the scheduled completion date for the demonstration
plant may be extended to the summer of 2008 following the review.
This is due largely to the competition for contracting resources in
Far East Kazakhstan, which reflects economic growth and high levels
of construction activity being experienced throughout Kazakhstan.
Ivanhoe Mines is continuing to assess numerous financing
alternatives for the Bakyrchik Gold Project, including a potential
equity offering in the project in international financial
markets.
CHINA
Inner Mongolia and Northern China exploration
Reconnaissance field exploration in western Inner Mongolia and
elsewhere in Northern China continued during Q3'07. The program
consisted of the field geological assessment of more than 50
licenced intrusive-related and breccia-hosted gold-silver and
copper-molybdenum deposits within and along the margins of the
North China Craton. Reconnaissance exploration will continue into
Q4'07 and follow-up ranking, detailed legal and geological
assessment of previously assessed targets will be completed prior
to cessation of the field season in early December.
Gold Production tops 10,000 ounces at Jinshan's CSH 217 Gold
Mine
In July 2007, Jinshan Gold Mines announced the pouring of the
first 500-ounce gold dore bar at the CSH 217 Gold Mine in Inner
Mongolia, China. The pouring marked the start of pre-commercial
production at the mine, which is expected to produce an average of
approximately 120,000 ounces per year once full production is
achieved during the next few months.
On October 17, Jinshan reported that gold production since July
2007 from the CSH Gold Mine had reached 13,926 gold dore ounces, or
10,143 ounces of gold. Silver comprises approximately 30% of each
dore bar. All production at Jinshan's CSH gold mine is un-hedged
and sold at the prevailing Shanghai Gold exchange price, which
closely tracks the London Gold Fixing price.
A drilling program at the CSH 217 Gold Mine is designed to
delineate additional mineralization along strike, to infill zones
with Inferred resources and bring them up to the Indicated
category, and to expand other mineralized zones that remain open or
untested. The drilling program recently has been increased to
approximately 11,000 metres, more than double the originally
planned 5,000 metres. Once this drilling is complete, an updated
resource estimate will be commissioned and is expected in early
2008.
An expansion study, expected to be completed by the end of 2007,
is underway to determine the potential to scale up gold production
to approximately 180,000 ounces per year.
Ivanhoe Mines held approximately 43% of Jinshan's issued and
outstanding share capital at September 30, 2007.
Review of operations
In Q3'07, Ivanhoe Mines recorded a net loss of $83.1 million (or
$0.22 per share), compared to a net loss of $66.5 million (or $0.20
per share) in Q3'06. The $16.6 million increase in the loss from
2006 to 2007 was largely due to a $7.5 million increase in
exploration expenses. Included in exploration expenses are shaft
sinking and engineering and development costs for the Oyu Tolgoi
Project that have been expensed and not capitalized. Results for
the quarter also were affected by a $2.5 million increase in
foreign exchange gains and a $5.3 million increase in income from
discontinued operations, less a $6.7 million write-down of asset
backed commercial paper.
Ivanhoe Mines is engaged primarily in exploration activities,
although a significant portion of its expenditures relate directly
to development activities at its Oyu Tolgoi Project in Mongolia.
Exploration costs are charged to operations in the period incurred
and often constitute the bulk of the company's operating loss for
that period. It is expected that the company will commence
capitalizing Oyu Tolgoi development costs once an Investment
Agreement is finalized with the Government of Mongolia.
Ivanhoe's results for the first nine months of 2007 are
contained in the unaudited Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and
Results of Operations, available on the SEDAR website at
www.sedar.com and Ivanhoe's website at www.ivanhoemines.com.
QUALIFIED PERSONS
Disclosure of a scientific or technical nature in this release
in respect of each of the following projects of Ivanhoe Mines was
prepared by or under the supervision of the "qualified persons" (as
that term is defined in NI 43-101) listed below:
Relationship to
Project Qualified Person Ivanhoe Mines
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Mongolia - Oyu Tolgoi Charles Forster Employee of the Company
Exploration and Heruga
Mongolia - Other Copper Gold Charles Forster Employee of the Company
Exploration Projects
Australia - Cloncurry Project Douglas Kirwin Employee of the Company
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SELECTED QUARTERLY DATA
---------------------------------------------------------------------------
($ in millions of U.S. dollars, except per share information)
Quarter Ended
---------------------------------------
Sep-30 Jun-30 Mar-31 Dec-31
2007 2007 2007 2006
--------------------------------------------------------------------------
Exploration expenses ($74.8) ($79.1) ($53.5) ($70.4)
General and administrative ($7.0) ($5.9) ($5.2) ($8.9)
Share of income from
investment held for sale $ 0.0 $ 0.0 $ 0.4 $ 7.4
Foreign exchange gains (losses) $ 2.1 $ 6.7 $ 0.8 ($3.7)
Net (loss) from
continuing operations ($90.0) ($78.7) ($55.4) ($73.5)
Income from discontinued
operations $ 6.8 $ 4.6 $ 8.6 $ 4.8
Net (loss) ($83.1) ($74.2) ($46.8) ($68.7)
Net (loss) income per share
Continuing operations ($0.24) ($0.21) ($0.15) ($0.21)
Discontinued operations $ 0.02 $ 0.01 $ 0.02 $ 0.01
Total ($0.22) ($0.20) ($0.13) ($0.20)
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Quarter Ended
---------------------------------------
Sep-30 Jun-30 Mar-31 Dec-31
2006 2006 2006 2005
--------------------------------------------------------------------------
Exploration expenses ($67.3) ($43.7) ($31.6) ($41.7)
General and administrative ($6.9) ($6.0) ($6.4) ($4.2)
Share of income (loss) from
investment held for sale $ 9.0 ($2.4) $ 4.5 ($0.5)
Foreign exchange gains (losses) ($0.4) $ 4.7 ($0.2) ($0.4)
Net (loss) from
continuing operations ($68.0) ($45.7) ($31.1) ($49.8)
Income from discontinued
operations $ 1.5 $ 5.4 $ 7.9 $ 7.9
Net (loss) ($66.5) ($40.3) ($23.2) ($41.8)
Net (loss) income per share
Continuing operations ($0.20) ($0.14) ($0.10) ($0.16)
Discontinued operations $ 0.00 $ 0.02 $ 0.03 $ 0.03
Total ($0.20) ($0.12) ($0.07) ($0.13)
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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, which 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", "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 expected timing and
outcome of Ivanhoe Mines' discussions with representatives of the
Government of Mongolia for an Investment Agreement in respect of
the Oyu Tolgoi Project; the estimated timing and cost of bringing
the Oyu Tolgoi Project into commercial production; anticipated
future production and cash flows; target milling rates; the impact
of amendments to the laws of Mongolia and other countries in which
Ivanhoe Mines carries on business; the timing for completion of the
2007 IDP and changes in mine plan contemplated thereunder; the
timing of commencement of full construction of the Oyu Tolgoi
Project; the completion of an updated mine plan for the Ovoot
Tolgoi Project and other statements that are not historical
facts.
Contacts: Ivanhoe Mines Ltd. Bill Trenaman Investors (604)
688-5755 Ivanhoe Mines Ltd. Bob Williamson Media (604) 688-5755
Website: www.ivanhoemines.com
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