Ivanhoe Mines Ltd. (TSX: IVN)(NYSE: IVN)(NASDAQ: IVN) today
announced its results for the quarter ended September 30, 2009. All
figures are in US dollars, unless otherwise stated.
HIGHLIGHTS DURING THE QUARTER AND SUBSEQUENT WEEKS
- On October 6, Ivanhoe Mines and its strategic partner, Rio
Tinto, joined with the Government of Mongolia in a state ceremony
for the signing of an Investment Agreement for the Oyu Tolgoi
copper-gold project. The Investment Agreement establishes a stable
legal, fiscal and regulatory environment for the construction and
operation of the Oyu Tolgoi mining complex.
- On October 27, Ivanhoe received $388 million from Rio Tinto,
increasing Rio Tinto's equity ownership in Ivanhoe Mines to 19.7%.
The additional funds will be used to help build and commission the
open-pit mine and to advance development of the underground
block-cave mine at Ivanhoe's Oyu Tolgoi copper-gold project in
Mongolia.
- Exploration work continued at Oyu Tolgoi utilizing
proprietary, deep-probing Zeus(TM) induced polarization (IP) survey
technology on the first 12-kilometre section of the Oyu Tolgoi
copper-gold mineralized trend. The IP anomalies outlining the
deposits have been dramatically extended and there is important
potential to significantly increase Oyu Tolgoi's current gold and
copper resources through expanded drilling programs. The company
expects to release initial Zeus survey results in the near
future.
- On October 26, Ivanhoe's 79%-owned subsidiary, SouthGobi
Energy Resources (TSX VENTURE: SGQ), entered into a financing
agreement with a wholly-owned subsidiary of China Investment
Corporation for $500 million in the form of a secured, convertible
debenture. The funds primarily will support an accelerated coal
expansion program in Mongolia. SouthGobi reported coal sales in
Q3'09 of approximately 457,000 tonnes from its Ovoot Tolgoi mine in
southern Mongolia.
- In November, Ivanhoe Mines' 83%-owned subsidiary, Ivanhoe
Australia (ASX: IVA), received its initial, independent NI 43-101
resource estimate for its Merlin Project in northwestern
Queensland.
- The Oyu Tolgoi Project's Integrated Development Plan (IDP-09)
is being updated based on the terms of the signed Investment
Agreement. The IDP-09 is being prepared for Ivanhoe Mines by
several of the world's foremost engineering, mining and
environmental consultants, led by GRD Minproc and including Stantec
(formerly McIntosh) Engineering.
- In Q3'09, Ivanhoe Mines expensed $43.5 million in exploration
and development activities, compared with $59.7 million in Q3'08.
In Q3'09, Ivanhoe Mines' exploration activities were largely
focused in Mongolia and Australia.
MONGOLIA: OYU TOLGOI COPPER-GOLD PROJECT
Rio Tinto increased its interest in Ivanhoe Mines to 19.7%
On October 27, 2009, Rio Tinto completed Tranche 2 of its
private placement financing as part of the strategic partnership
announced between the companies in October 2006. Tranche 2
consisted of 46,304,473 Ivanhoe Mines shares at $8.38 per share,
for proceeds to Ivanhoe Mines of $388 million. The financing
increased Rio Tinto's equity ownership in Ivanhoe Mines from 9.9%
to 19.7%.
The proceeds of $388 million will be used to help build and
commission the open-pit mine at Oyu Tolgoi and to advance
development of the underground block-cave mine.
Under the current agreement with Ivanhoe Mines, Rio Tinto has
rights to subscribe for common shares from Ivanhoe Mines'
representing up to 43.1% of Ivanhoe Mines and, during the next two
years, Rio Tinto may increase this stake to a maximum of 46.6%
through purchases on the open market.
Ivanhoe Mines and Rio Tinto signed long-term Investment
Agreement with the Mongolian Government to build and operate Oyu
Tolgoi
On October 6, 2009, Ivanhoe Mines, with its subsidiary, Ivanhoe
Mines Mongolia Inc. LLC (IMMI), and Rio Tinto, signed the
long-awaited Investment Agreement with the Government of Mongolia,
establishing a long-term, comprehensive framework for maintaining a
stable tax and operating environment for the construction and
operation of the Oyu Tolgoi copper-gold mining complex in
Mongolia's South Gobi Region. The signing, at a state ceremony in
Ulaanbaatar, was attended by invited guests and dignitaries,
including the President, the Prime Minister, the Speaker of
Mongolia's Parliament (the State Great Khural), Cabinet members,
members of Parliament and representatives of the international
diplomatic and business communities. The ceremony culminated nine
years of exploration successes that have established Oyu Tolgoi as
one of the world's largest, undeveloped copper-gold porphyry
projects, and nearly six years of negotiations with the Government
of Mongolia for an Investment Agreement.
The agreement created a partnership between the Mongolian
Government - which will acquire a 34% interest in Oyu Tolgoi's
licence holder, IMMI - and Ivanhoe Mines, which will retain a
controlling 66% interest in IMMI. Provisions of the Investment
Agreement include protection of the parties' investments in the Oyu
Tolgoi Project, the amount and term of the parties' investments in
the Oyu Tolgoi Project, the right to realize the benefits of such
investments, the conduct of mining with minimum environmental
impact and progressive rehabilitation, the social and economic
development of the South Gobi Region and the creation of thousands
of new jobs in Mongolia.
The Mongolian Parliament, through a special resolution approved
on July 16, 2009, authorized the Government to finalize the
Agreement. As mandated by the resolution, the terms of the
Investment Agreement were consistent with or authorized under
current laws and regulations applicable in Mongolia. The draft
agreement was accepted by the Government's Cabinet and Mongolia's
National Security Council - consisting of the Prime Minister, the
President and Speaker of the State Great Khural.
Four Mongolian laws were changed to clear the way for an Oyu
Tolgoi Investment Agreement. On August 25, the Mongolian Parliament
approved amendments to the laws, including the insertion of a
sunset provision to cancel the 68% windfall profits tax on copper
and gold effective January 1, 2011.
A 50-year assurance of stability
Given the extent of the discoveries associated with the Oyu
Tolgoi Project and the potential for additional discoveries,
Ivanhoe Mines and the Government of Mongolia agreed that the
Investment Agreement should conform with the provision of
Mongolia's current Minerals Law specifying that certain deposits of
strategic importance qualify for 30 years of stabilized tax rates
and regulatory provisions, with an option of extending the term of
the Investment Agreement for an additional 20 years.
Major taxes and rates stabilized for the life of the agreement
include: corporate income tax; customs duty; value-added tax;
excise tax; royalties; exploration and mining licences; and
immovable property and/or real estate tax.
IMMI will receive a 10% investment tax credit on all capital
expenditures and investments made throughout the initial Oyu Tolgoi
construction period. Any future taxes introduced will not be
imposed on the project unless future legislation is more
favourable, in which case Ivanhoe Mines may request the more
favourable treatment. If Mongolia enters a tax or bilateral treaty
that provides greater benefits to the investor, Ivanhoe Mines may
request the benefit of such law, regulation or treaty to help
ensure that a stable taxation and operating environment is
maintained.
Mongolia will join Ivanhoe Mines and Rio Tinto as a partner in
Oyu Tolgoi
Mongolia's state-owned company, Erdenes MGL LLC, will acquire a
34% interest in the Oyu Tolgoi Project within 14 days of the
Investment Agreement taking effect - after the conditions precedent
contained in the Investment Agreement have been satisfied.
Provisions of the Investment Agreement and Shareholders'
Agreement also include:
- Ivanhoe Mines will arrange financing for the construction of
Oyu Tolgoi within two years of the Investment Agreement taking
effect. Production must begin within five years of financing being
secured.
- Ivanhoe Mines will fund the construction of Oyu Tolgoi through
loans and equity during the construction and initial production
periods. Ivanhoe Mines will receive loan repayments, redemption of
the equity, dividends and interest at a rate of 9.9%, adjusted to
the US CPI. Erdenes will nominate three directors and Ivanhoe will
nominate six directors to the nine-member IMMI board of
directors.
- Ivanhoe Mines will nominate the management team that will be
responsible for Oyu Tolgoi's core operations. Management services
payments will be received, based on capital and operating costs,
through the construction period and after production begins.
- The Government will have the option to purchase an additional
equity interest of 16% of IMMI, at an agreed upon fair-market
value, one year after the expiry of the initial 30-year term of the
Investment Agreement and following the start of the permitted
20-year extension. This additional equity interest would give the
government a total maximum interest of 50% of IMMI for the
remainder of the Oyu Tolgoi Project's operational life. Ivanhoe
Mines would continue to hold management rights over the project and
hold a deciding vote at board and shareholder meetings.
Mongolian Government Treasury Bills purchased by IMMI
On October 6, 2009, IMMI agreed to purchase three Treasury Bills
(T-Bills) from the Government of Mongolia, having an aggregate face
value of $287.5 million, for the aggregate sum of $250 million. The
effective rate of interest on the T-Bills is 3.0%. Each T-Bill will
mature on the fifth anniversary from the date of its respective
issuance.
- The initial T-Bill, with a face value of $115 million, was
purchased on October 20, 2009. The purchase price was $100
million.
- A second T-Bill, with a face value of $57.5 million, will be
purchased for $50 million within 14 days of the satisfying of all
conditions precedent to the Investment Agreement.
- The final T-Bill, having a face value of $115 million, will be
purchased for $100 million within 14 days of IMMI fully drawing
down the financing necessary to enable the complete construction of
the Oyu Tolgoi Project, or June 30, 2011, whichever date is
earlier.
Present status of work at Oyu Tolgoi
The 1,385-metre Shaft No. 1 has been completed at Oyu Tolgoi and
is supporting the initial development program underway for the Hugo
North underground block-cave mine. The underground lateral
development currently covers a total of 1,430 metres, with
development rates exceeding initial estimates. In addition, surface
works for the construction of Shaft No. 2 have been completed.
Site earthworks have been undertaken in preparation for the
laying of the concentrator foundation. An initial 1,800-person
construction camp has been built and the construction warehousing
facility is nearing completion.
By mid-October 2009, engineering for the concentrator facility
was 73% complete and engineering for the required infrastructure
was 50% complete. Key management for construction and operations
has been engaged and is in place in Mongolia in preparation for the
start of full-scale construction.
Ivanhoe Mines has continued to advance mine planning and
engineering. The Oyu Tolgoi Project's Integrated Development Plan
(IDP-09) is being updated based on the terms of the signed
Investment Agreement. IDP-09 is being prepared for Ivanhoe Mines by
several of the world's foremost engineering, mining and
environmental consultants, led by GRD Minproc and including Stantec
(formerly McIntosh) Engineering.
Oyu Tolgoi exploration continued on the area between Southwest
Oyu and Heruga; Zeus(TM) IP survey technology deployed in first
full field test
During Q3'09, Ivanhoe Mines completed 2,350 metres of drilling
on the Oyu Tolgoi Project, entirely in the area between the
established Southwest Oyu and Heruga deposits, within Ivanhoe
Mines' 100%-owned Oyu Tolgoi Mining Licence. Two holes were drilled
by the one drill rig available. Drill hole OTD1495 is a vertical
hole 1,000 metres northeast of the previously reported thick
intersection in OTD1487A, targeting the same mineralized zone; it
was lost at 1,951 metres in the conglomerate that overlies the
mineralization. A daughter hole, OTD1495A, is a northeast-oriented
wedge off OTD1495, commencing at 1,140 metres. The hole intersected
the top of mineralization at 2,034 metres, and went on to intersect
280 metres of 0.84% copper to 2,314 metres, followed by a 16-metre
unmineralized dyke, then by 47.2 metres of 1.32% copper from 2,330
metres to the end of the hole at 2,377 metres. The hole ended, due
to drilling difficulties, in 1.8% copper mineralization. Hole
OTD1487A completed in December 2008 intersected 369.3 metres
grading 0.83 g/t gold, 0.53% copper, and 64 ppm molybdenum (1.09%
copper equivalent). This hole included an intersection of 78.3
metres grading 2.13 g/t gold, 0.82% copper and 126 ppm molybdenum
(2.24% copper equivalent) between 2258 and 2336.3 metres downhole.
The mineralization is rich in bornite and appears to be very
similar to that in the Hugo Dummett Deposit.
In Q2'09, Ivanhoe Mines and GoviEx Gold entered into an
agreement to inaugurate the proprietary Zeus technology at Oyu
Tolgoi in an expanded induced-polarization (IP) survey to test the
full extent, on strike and at depth, of the Oyu Tolgoi copper and
gold mineralized trend. The Zeus IP transmitter has been designed
to increase the effectiveness and productivity of exploration
surveys through improved resolution of targets and host geology,
enabling real-time investigation of mineralized targets to extended
depths. The multiple A-B electrode spacings, up to 20 kilometres
wide, allows for a much greater understanding of the deep
mineralization in this area. GoviEx Gold is an Asia-based mineral
exploration company that utilizes proprietary geophysical
technology and expertise to conduct exploration activities at the
regional, district and mine scale.
Using Zeus, the IP anomalies outlining the deposits have been
dramatically extended, indicating important potential to
significantly increase Oyu Tolgoi's current gold and copper
resources through expanded drilling programs. An update on the
initial Zeus survey results is expected to be issued in the near
future.
Three rigs, including one underground rig to be set up on the
1300-metre level near the Hugo North Deposit, are being used in the
current drilling program directed at expanding the the Oyu Tolgoi
Project's resources and reserves.
MONGOLIA: COAL PROJECTS
SOUTHGOBI ENERGY RESOURCES (79% owned)
SouthGobi secured $500 million convertible debenture financing
from China Investment Corporation
On October 26, 2009, SouthGobi announced that it had entered
into a financing agreement with a wholly-owned subsidiary of China
Investment Corporation (CIC) for $500 million in the form of a
secured, convertible debenture bearing interest at 8.0% (6.4%
payable in cash and 1.6% payable in SouthGobi shares, where the
number of shares to be issued is calculated based on the 50-day
volume-weighted average price (VWAP), with a maximum term of 30
years.
The conversion price is set as the lower of C$11.88 or the
50-day VWAP at the date of conversion, with a floor price of C$8.88
per share. Assuming full conversion at the base price of C$11.88
and that any conversion occurs following SouthGobi achieving a 25%
public float (on an as converted for the debenture loan basis),
CIC's overall shareholding interest in SouthGobi would be
approximately 22%.
SouthGobi and CIC each have various rights to call conversion of
the debenture into common shares. CIC has the right to convert the
debenture, in whole or in part, into common shares 12 months after
the date of issue. SouthGobi has the right to call for the
conversion of up to US$250 million of the debenture on the earlier
of 24 months after the issue date, if the market price of its
common shares is greater than C$10.66, or upon SouthGobi achieving
a public float of 25% of its common shares under certain agreed
circumstances. If SouthGobi fully exercises its conversion right
immediately following its achieving a 25% public float (on an as
converted for the debenture loan basis) and assuming conversion at
the C$11.88 base price, CIC's initial shareholding interest in
SouthGobi would be approximately 11%.
After five years from the issuance of the convertible debenture,
at any time that the VWAP of SouthGobi's shares for 50 consecutive
business days is 20% higher than the floor price of C$8.88,
SouthGobi can convert any remaining outstanding portion of the
convertible debenture into SouthGobi shares at the conversion
price, which is set as the lower of C$11.88 or the 50-day VWAP at
the date of conversion, with a floor price of C$8.88 per share.
The financing primarily will support the accelerated investment
program in Mongolia and up to $120 million of the financing also
may be used for working capital, repayment of debt due on funding,
general and administrative expense and other general corporate
purposes.
Expansion planned for SouthGobi's Ovoot Tolgoi coal mine
SouthGobi is producing and selling coal at its Ovoot Tolgoi
Project in Mongolia's South Gobi Region, 45 kilometres north of
Mongolia's border with China.
During early 2009, SouthGobi and other regional coal exporters
experienced difficulties expediting coal shipments across the
Mongolia-China border due to sporadic openings at the Ceke
crossing. In January 2009, SouthGobi curtailed production to
preserve cash and to manage stockpiles. By the end of Q2'09,
operating hours at the border crossing had increased to 11 hours a
day, six days a week, enabling SouthGobi to increase its coal sales
and draw down its coal stockpiles. With the increasing sales and
reductions in its coal inventory, SouthGobi resumed non-stop mining
operations effective July 1, 2009.
In July 2009, Chinese and Mongolian authorities agreed to build
a designated coal transportation corridor at the Shivee Khuren-Ceke
border crossing. This facility is under construction and is
expected to be operational by late 2009. When completed, it will
permit coal to be transported across the border through three
corridors that are separate from non-coal traffic. SouthGobi
believes that these improvements to the border crossing capacity
will allow it to continue to substantially increase the amount of
coal it ships into China.
Coal sales in Q3'09 were approximately 457,000 tonnes, an
increase from the Q2'09 coal sales of approximately 384,000 tonnes.
SouthGobi recognized revenue of $11.9 million in Q3'09 at an
average realized selling price of approximately $28 per tonne. The
cost of sales was $8.6 million in Q3'09. Total cash costs per tonne
of coal sold in Q3'09 were $13.41, compared with $18.13 for Q2'09.
The decrease primarily was due to SouthGobi resuming full mining
operations in Q3'09. Operational costs were expensed in Q2'09 due
to the full mine shutdown and therefore resulted in higher total
cash costs in Q2'09.
In April 2008, SouthGobi purchased a second fleet of coal-mining
equipment that is scheduled to be commissioned in Q4'09. The new
shovel/truck mining fleet consists of a Liebherr 996 hydraulic
excavator with a 34-cubic-metre bucket and four Terex MT4400
218-tonne-capacity trucks. The new fleet will supplement the
existing mine fleet consisting of a Liebherr 994 hydraulic
excavator with a 13.5-cubic-metre bucket and seven Terex TR100
91-tonne-capacity trucks.
Additional equipment will be required as production at the mine
expands, including larger hydraulic shovels, larger dump trucks,
bulldozers and graders. SouthGobi has entered into an agreement for
a third fleet that will be delivered in mid-2010, with an
additional fleet likely to be ordered for 2011. The larger
equipment will increase productivity. However, SouthGobi will
continue to employ the smaller initial fleet in areas of thinner
seams and to supplement the larger equipment.
Ovoot Tolgoi resources updated
On October 12, 2009, SouthGobi completed a pre-feasibility study
for the Ovoot Tolgoi Mine resulting in the identification of Proven
and Probable Mineral Reserves. The independent estimate prepared by
Norwest Corporation (Norwest) calculated 114.1 million tonnes of
Proven and Probable surface coal reserves at July 1, 2009.
SouthGobi also received an updated, independent NI 43-101
resource estimate for the Ovoot Tolgoi Complex, prepared by
Norwest. The Ovoot Tolgoi surface and underground resources contain
Measured plus Indicated coal resources of 249.8 million tonnes,
with an additional Inferred coal resource of 33.5 million tonnes as
at June 1, 2009.
Initial resources reported for Soumber Deposit
The Soumber Deposit is approximately 20 kilometres east of the
Ovoot Tolgoi Mine and approximately 50 kilometres northeast of the
Shivee Khuren-Ceke border crossing.
On October 12, 2009, SouthGobi received an initial, independent
NI 43-101 resources estimate for the Soumber Deposit. The Soumber
central field resources consist of Measured coal resources of 13.1
million tonnes, Indicated coal resources of 8.3 million tonnes and
Inferred coal resources of 55.5 million tonnes. Laboratory data
demonstrated that some coal seams possess the potential of
coking-coal characteristics. The Soumber Deposit has potential to
increase coal resources to the east and to the west, as well as at
depth.
Due to its proximity to the Ovoot Tolgoi Mine, the Soumber
Deposit likely will be able to share common infrastructure with the
Ovoot Tolgoi Mine. SouthGobi has initiated mine planning and will
submit an application for a mining licence for development of this
project.
AUSTRALIA
IVANHOE AUSTRALIA (83% owned)
Ivanhoe Australia's Merlin molybdenum and rhenium deposit
received initial NI 43-101 Mineral Resource estimate
In November 2009, Ivanhoe Mines received an initial, independent
NI 43-101 resource estimate for the high-grade Merlin molybdenum
and rhenium deposit, which comprises part of Ivanhoe Australia's
Mt. Dore Project in the Cloncurry District in northwestern
Queensland. The NI 43-101 Technical Report on Mt. Dore (including
the Merlin Zone) has been filed on www.sedar.com.
At a cut-off grade of 0.3% molybdenum, estimated Indicated
resources total 5.2 million tonnes at a grade of 1.0% molybdenum
and 16 g/t rhenium, containing 52,000 tonnes of molybdenum and 83
tonnes of rhenium, plus additional Inferred resources totalling 3.5
million tonnes at a grade of 0.8% molybdenum and 14 g/t rhenium,
containing 28,000 tonnes of molybdenum and 49 tonnes of
rhenium.
Using a lower cut-off grade of 0.1% molybdenum, estimated
Indicated resources total 10 million tonnes at a grade of 0.6%
molybdenum and 10 g/t rhenium, containing 58,000 tonnes of
molybdenum and 97 tonnes of rhenium, plus additional Inferred
resources totalling 5.8 million tonnes at a grade of 0.5%
molybdenum and 10 g/t rhenium, containing 29,000 tonnes of
molybdenum and 58 tonnes of rhenium.
Preliminary development project studies for Merlin are underway
to evaluate suitable mining and processing alternatives for the
Merlin Project.
KAZAKHSTAN
Drilling underway at Bakyrchik Gold Project
Altynalmas Gold has commenced an initial 33,000-metre deep-level
drilling program at the Bakyrchik Gold Project intended to upgrade
the present mineral resource to provide the basis for future
project financing. The drilling program is expected to be completed
by April 2011. In addition, Altynalmas Gold plans to commence a
6,000-metre, near-surface drilling program in early 2010 to drill
open-pit targets. Following completion of the drilling program,
Altynalmas Gold plans to complete a feasibility study.
Construction of a 100,000-tonne-per-year rotary kiln (Pilot
Roaster) began in September 2007 and was completed in December
2008. The purpose of the Pilot Roaster plant is to assess the
viability of single-stage roasting, using a rotary kiln as outlined
in the work program approved by Kazakhstan's Ministry of Energy and
Mineral Resources. On April 18, 2009, a decision was made to shut
down the Pilot Roaster until further modifications were made to the
ore preparation and rotary kiln. The Pilot Roaster is in the
process of being re-commissioned. Given an increased understanding
of the mineralogical characteristics of the Bakyrchik ores, it
remains unlikely that recoveries greater than 60% can be achieved
by single-stage roasting.
Following the completion of laboratory bench-scale and pilot
testwork, the solution to successfully treating Bakyrchik ores
appears to be fluidized-bed roasting involving two stages: a
reductive first stage, followed by an oxidative second stage.
Whereas the reductive first stage volatizes and drives off arsenic,
the oxidative stage oxidizes sulphur and carbon. Altynalmas Gold
believes that gold recoveries of 85% to 88% can be realized in a
commercial-scale plant. Following pilot testwork, the technology is
scalable into commercial use. Preliminary design work has commenced
as part of a pre-feasibility study.
EXECUTIVE CHANGES
Andrew Harding, Rio Tinto's new Chief Executive, Copper, was
appointed to Ivanhoe Mines' Board of Directors on November 5,
2009.
Based in London, Mr. Harding provides management oversight to
the Copper Group, which comprises Kennecott Utah Copper, Kennecott
Minerals Company and the Resolution copper project in the U.S.,
interests in the copper mines of Escondida in Chile, Grasberg in
Indonesia, Northparkes in Australia and Palabora in South Africa
and the La Granja copper project in Peru, as well as the Oyu Tolgoi
copper-gold partnership with Ivanhoe Mines in Mongolia.
Mr. Harding joined Rio Tinto in 1992, initially working for
Hamersley Iron. He went on to hold operating roles within the
Energy, Aluminium and Iron Ore product groups, including at the
Mount Thorley, Hunter Valley, Weipa, Mount Tom Price, Marandoo and
Brockman mines. In 2007, he became Global Practice Leader, Mining,
within Rio Tinto's Technology & Innovation group. Prior to his
new executive role, Mr. Harding was President and Chief Executive
Officer of Kennecott Utah Copper.
Mr. Harding succeeds Bret Clayton as Rio Tinto's representative
on the Ivanhoe Mines Board. Mr. Clayton, who served on the Board
since May 2007, recently was appointed to the new role of Group
Executive, Business Support and Operations, for Rio Tinto.
FINANCIAL RESULTS
In Q3'09, Ivanhoe Mines recorded a net loss of $69.8 million (or
$0.18 per share), compared with a net loss of $88.0 million (or
$0.23 per share) in Q3'08, representing a decrease of $18.2
million. Results for Q3'09 mainly were affected by $43.5 million in
exploration expenses, $12.5 million in general and administrative
expenses, $4.1 million in interest expense, a $23.0 million
write-down of property, plant and equipment, and $23.0 million in
share of loss of significantly influenced investees. These amounts
were offset by $3.6 million in income from discontinued operations
and $19.5 million in mainly unrealized foreign exchange gains.
Exploration expense of $43.5 million in Q3'09 decreased $16.2
million from $59.7 million in Q3'08. The exploration expenses
included $28.1 million spent in Mongolia ($37.9 million in Q3'08),
primarily for Oyu Tolgoi and Ovoot Tolgoi, and $11.5 million
incurred by Ivanhoe Australia ($17.0 million in Q3'08). Exploration
costs are charged to operations in the period incurred and often
represent the bulk of Ivanhoe Mines' operating loss for that
period. Ivanhoe Mines expects to commence capitalizing Oyu Tolgoi
development costs in 2010 once the Investment Agreement conditions
precedent have been addressed and the agreement takes full
effect.
Ivanhoe Mines' cash position, on a consolidated basis at
September 30, 2009, was $341.7 million. As at November 13, 2009,
Ivanhoe Mines' current consolidated cash position is approximately
$600 million.
SELECTED QUARTERLY DATA
This selected financial information is in accordance with U.S.
GAAP, as presented in the annual consolidated financial
statements.
($ in millions of dollars, except per share information)
Quarter Ended
------------------------------------
Sep-30 Jun-30 Mar-31 Dec-31
2009 2009 2009 2008
---------------------------------------------------------------------------
Revenue $11.9 $10.7 $3.5 $3.1
Exploration expenses (43.5) (38.1) (37.4) (76.0)
General and administrative (12.5) (10.5) (7.8) (8.1)
Foreign exchange gains (losses) 19.5 21.7 (9.3) (40.6)
Writedown of other long-term
investments - - - (18.0)
Net (loss) income from continuing
operations (73.4) (29.9) (66.7) (168.1)
Income from discontinued operations 3.6 5.0 10.7 8.1
Net (loss) income (69.8) (24.9) (56.0) (160.0)
Net (loss) income per share - basic
Continuing operations ($0.19) ($0.08) ($0.18) ($0.45)
Discontinued operations $0.01 $0.01 $0.03 $0.02
Total ($0.18) ($0.07) ($0.15) ($0.43)
Net (loss) income per share - diluted
Continuing operations ($0.19) ($0.08) ($0.18) ($0.45)
Discontinued operations $0.01 $0.01 $0.03 $0.02
Total ($0.18) ($0.07) ($0.15) ($0.43)
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Quarter Ended
------------------------------------
Sep-30 Jun-30 Mar-31 Dec-31
2008 2008 2008 2007
---------------------------------------------------------------------------
Revenue $0.0 $0.0 $0.0 $0.0
Exploration expenses (59.7) (67.3) (57.3) (96.6)
General and administrative (5.1) (7.5) (6.8) (9.0)
Foreign exchange (losses) gains (20.0) (1.0) (1.3) 2.3
Writedown of other long-term
investments - - - (24.5)
Gain on sale of long-term
investments - 201.4 - -
Net (loss) income from continuing
operations (98.7) 118.3 (69.6) (265.5)
Income from discontinued operations 10.7 9.2 6.0 11.9
Net (loss) income (88.0) 127.5 (63.6) (253.6)
Net (loss) income per share - basic
Continuing operations ($0.26) $0.32 ($0.19) ($0.71)
Discontinued operations $0.03 $0.02 $0.02 $0.04
Total ($0.23) $0.34 ($0.17) ($0.67)
Net (loss) income per share - diluted
Continuing operations ($0.26) $0.29 ($0.19) ($0.71)
Discontinued operations $0.03 $0.02 $0.02 $0.04
Total ($0.23) $0.31 ($0.17) ($0.67)
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QUALIFIED PERSONS
Disclosures of a scientific or technical nature in this release
and the Company's MD&A in respect of each of Ivanhoe Mines'
material mineral resource properties were prepared by, or under the
supervision of, the qualified persons (as that term is defined in
NI 43-101) listed below:
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Oyu Tolgoi Project Stephen Torr, P.Geo, Employee of the Company
Ivanhoe Mines
Ovoot Tolgoi Project Stephen Torr, P.Geo, Employee of the Company
SouthGobi Energy
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Ivanhoe Mines' results for the three and nine months ended
September 30, 2009, are contained in the audited Consolidated
Financial Statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations, available on the
SEDAR website at www.sedar.com and Ivanhoe Mines' website at
www.ivanhoemines.com.
Ivanhoe Mines shares are listed on the Toronto, New York and
NASDAQ stock exchanges under the symbol IVN.
Forward Looking Statements:
Certain statements made herein, including statements relating to
matters that are not historical facts and statements of our
beliefs, intentions and expectations about developments, results
and events which will or may occur in the future, constitute
"forward-looking information" within the meaning of applicable
Canadian securities legislation and "forward-looking statements"
within the meaning of the "safe harbor" provisions of the United
States Private Securities Litigation Reform Act of 1995.
Forward-looking information and statements are typically identified
by words such as "anticipate", "could", "should", "expect", "seek",
"may", "intend", "likely", "plan", "estimate", "will", "believe"
and similar expressions suggesting future outcomes or statements
regarding an outlook. These include, but are not limited to,
statements respecting the timely satisfaction of conditions
precedent to the effectiveness of the Investment Agreement; future
equity investments in Ivanhoe Mines by Rio Tinto; the availability
of project financing for the Oyu Tolgoi Project; expansion of the
reserves and resources identified to date at the Oyu Tolgoi
Project; the timing of commencement of full construction of the Oyu
Tolgoi Project: the estimated timing and cost of bringing the Oyu
Tolgoi Project into 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 anticipated future production for the Ovoot Tolgoi
Coal Mine; the potential improvement of the export conditions at
the Ceke border between Mongolia and China; the planned
commissioning of a second fleet and third fleet of coal-mining
equipment to expand Ovoot Tolgoi's production capacity; the
completion of a Scoping Study for the Merlin Project; the planned
drilling program and feasibility study at the Bakyrchik Gold
Project; 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. Bill Trenaman Investor Contact
+1.604.688.5755 Ivanhoe Mines Ltd. Bob Williamson Media Contact
+1.604.688.5755 www.ivanhoemines.com
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