Robert Friedland, Executive Chairman and Chief Executive Officer of
Ivanhoe Mines Ltd. (TSX: IVN)(NYSE: IVN)(NASDAQ: IVN), and John
Macken, President, said today that the Oyu Tolgoi Mine in southern
Mongolia is expected to produce an average of more than three
million ounces of silver a year during its first 10 years of
commercial production, beginning in 2013.
"Although Oyu Tolgoi is best known for its large and growing
deposits of copper and gold, silver forms a significant proportion
of the total Oyu Tolgoi resource and Oyu Tolgoi will rank as a very
substantial silver producer when commercial production begins in
2013," said Mr. Friedland.
"While we have not routinely itemized the silver content of Oyu
Tolgoi's porphyry ore in our discovery reports, the buoyant global
silver market has fuelled the interests of investors and has
prompted us to more widely circulate the projections for silver
production that have been prepared as part of our project planning
and development studies."
Construction of Oyu Tolgoi's first phase is ahead of schedule
and on track to begin initial production in late 2012.
Oyu Tolgoi could produce an estimated total of 78 million ounces
of silver, or 2.4 million kilograms, during the projected 27-year
mine life under the Reserve Case outlined in the June 2010
independent Integrated Development Plan (IDP-10) for Oyu Tolgoi.
The Reserve Case draws only from the Measured and Indicated
resources of Oyu Tolgoi.
During the projected 59-year mine life under the IDP-10's
Life-of-Mine Sensitivity Case, total silver production was
estimated to be 180 million ounces, or 5.5 million kilograms. Part
of the ongoing exploration program at Oyu Tolgoi is designed to
upgrade Inferred resources to higher classifications, as has been
progressively accomplished through the past 10 years of discovery
and resource definition at the project.
Mr. Friedland said that some investors and analysts may not have
fully appreciated the significance of Oyu Tolgoi's expected
production of such by-product metals as silver and molybdenum.
"The reality is that silver and other by-product revenues will
considerably lower the average cash cost to produce a pound of
copper or an ounce of gold at Oyu Tolgoi."
Silver currently is trading at more than US$34 an ounce,
commanding the highest prices since October 1980.
Silver, gold and molybdenum will be contained in Oyu Tolgoi's
copper concentrate
The copper concentrate produced and sold at Oyu Tolgoi will
contain significant quantities of by-product gold and silver that
will be recovered during the subsequent smelting and refining
processes and sold separately.
The average annual production at Oyu Tolgoi during the first 10
years is projected to exceed 1.2 billion pounds (544,000 tonnes) of
copper, 650,000 ounces of gold and three million ounces of silver.
The mine also is expected to produce 160 million pounds of
molybdenum during the 59-year Life-of-Mine Sensitivity Case. Most
of the molybdenum at Oyu Tolgoi is contained in the Heruga Deposit,
which will be brought into production in later stages of
development. Molybdenum currently is trading at approximately US$18
per pound.
Using a copper price of US$2.00 per pound, a gold price of
US$850 per ounce and a silver price of US$13.50/oz, the IDP-10
Reserve Case estimated that Oyu Tolgoi's total cash costs in the
first 10 years of production would be 45 cents (US) per pound of
payable copper produced, after gold credits, during the first 10
years. Total cash costs include mine site costs and all treatment,
refining, transport and royalty costs arising from product
sales.
Calculated on potentially higher gold prices, the IDP-10
estimated that total cash costs at Oyu Tolgoi in the first 10 years
of production could be as low as 25 cents (US) per pound of payable
copper at a gold price of US$1,250 per ounce and 12 cents (US) per
pound at a gold price of US$1,500 per ounce.
Qualified Person
Disclosures of a technical nature in this release related to
IDP-10 estimates and assumptions have been reviewed by Bernard
Peters, B. Eng. (Mining), M. AusIMM (201743), employed by AMEC
Minproc Limited as Technical Director and a Qualified Person as
defined by National Instrument 43-101.
Mr. Peters was responsible for the overall preparation of the
IDP-10 report, a Technical Report compliant with Canada's 43-101F1
reporting standards. Details surrounding the key assumptions,
parameters and methods used to estimate the mineral resources and
reserves are in the 43-101F1 Technical Report for the Oyu Tolgoi
Project, which is available at www.sedar.com and on Ivanhoe's
website at www.ivanhoemines.com. The Technical Report was prepared
for Ivanhoe Mines Ltd. by AMEC Minproc Limited.
Mine-life scenarios
The IDP-10 presented two complementary development cases: 1) the
Reserve Case, based strictly on Proven and Probable Mineral
Reserves; and 2) the Life-of-Mine (Sensitivity) Case, which added a
large base of Inferred resources to the Reserve Case.
The Reserve Case set out the likely path of development for the
initial phases of the Oyu Tolgoi group of deposits. The Reserve
Case was based on a prefeasibility-quality study complying with
Canadian National Instrument 43-101, although some parts of the
Project were further advanced and considered at feasibility level.
The work of the IDP-10 met the standards of US Industry Guide 7
requirements for reporting Reserves.
The Life-of-Mine (Sensitivity) Case reflected the development
flexibility provided by later phases of the Oyu Tolgoi group of
deposits (Heruga, Hugo South and the second lift of Hugo North),
which will require separate development decisions in the future
based on then prevailing conditions and the experience gained from
developing and operating the initial phases of the Project.
Accordingly, the Life-of-Mine (Sensitivity) Case is effectively a
Preliminary Assessment. Insofar as the Life-of-Mine (Sensitivity)
Case included an economic analysis that was based, in part, on
Inferred Mineral Resources, the Life-of-Mine (Sensitivity) Case
does not have as high a level of certainty as the Reserve Case.
Inferred Mineral Resources are considered too speculative
geologically to have the economic considerations applied to them
that would allow them to be categorized as Mineral Reserves and
there is no certainty that the Life-of-Mine (Sensitivity) Case will
be realized.
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 mine development project in southern
Mongolia; its 57% interest in Mongolian coal miner SouthGobi
Resources (TSX: SGQ)(HK: 1878); a 62% interest in Ivanhoe Australia
(IVA: ASX & TSX), a copper-gold-uranium-molybdenum-rhenium
exploration and development company; and a 50% interest in
Altynalmas Gold Ltd., a private company developing the Kyzyl Gold
Project in Kazakhstan.
Forward-looking statements
This news release contains forward-looking statements.
Forward-looking statements are statements that relate to future
events such as Ivanhoe's intention to continue drilling at the Oyu
Tolgoi Project. In some cases, you can identify forward-looking
statements by terminology such as "may", "should", "expects",
"plans", "anticipates", "believes", "estimates", "predicts",
"potential" or "continue", or the negative of these terms or other
comparable terminology. These statements include statements
regarding Oyu Tolgoi's expected production of silver, gold, copper
and molybdenum; and statements regarding Oyu Tolgoi's expected cash
costs. These statements are only predictions and involve known and
unknown risks, uncertainties and other factors that may cause our
or our industry's actual results, levels of activity, performance
or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or
implied by these forward-looking statements. While these
forward-looking statements, and any assumptions upon which they are
based, are made in good faith and reflect our current judgment
regarding the direction of our business, actual results almost
always will vary, sometimes materially, from any estimates,
predictions, projections, assumptions or other future performance
suggested herein. Readers are referred to the sections entitled
"Risk Factors" in Ivanhoe Mines' periodic filings with Canadian and
US Securities Commissions.
Contacts: Ivanhoe Mines Ltd. - Investors Bill Trenaman
+1.604.688.5755 Ivanhoe Mines Ltd. - Media Bob Williamson
+1.604.331.9830 www.ivanhoemines.com
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