Canadian Mining Journal

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CANADIAN MINING PERSPECTIVES: VIEWPOINT – Ivanhoe, Rio Tinto join forces in Mongolia

The development of the Oyu Tolgoi project is moving toward reality with a boost from one of the world's largest min...



The development of the Oyu Tolgoi project is moving toward reality with a boost from one of the world’s largest mining companies.

RIO TINTO is investing US$1.5 billion in IVANHOE MINES, which owns the Oyu Tolgoi copper-gold complex in Mongolia’s South Gobi region. If the deal goes through as proposed, funding has been secured for mine development and Rio Tinto will wind up holding 33.35% of Ivanhoe.

Rio Tinto’s investment will be structured in three parts. First, Rio Tinto will buy 37.1 million Ivanhoe shares for a cost of US$303 million, bringing its share of Ivanhoe to 9.95%. Second, Rio Tinto may purchase a further 46.3 million Ivanhoe shares for US$388 million, boosting its share in Ivanhoe to 19.9%. Third, Rio Tinto will be granted warrants for a further 92.0 million shares of Ivanhoe. If Rio Tinto exercises all the warrants, it will be spending a further US$808 million. Rio Tinto also has the right to acquire an additional 6.65% share of Ivanhoe on the open market, to bring its total Ivanhoe holdings to 40%.

Ivanhoe has said all along that Oyu Tolgoi is a world-class deposit. Earlier this year, the company released numbers for proven and probable reserves of 930 million tonnes averaging 0.50% Cu and 0.36 g/t Au. The grade may not be high, but the tonnage is. The project contains perhaps 8.9 billion lb of copper and 7.6 million oz of gold in reserves. There is an additional measured and indicated resource of 1.1 billion tonnes at 0.48% Cu and 0.35 g/t Au, containing 11.8 billion lb of copper and 12.6 million oz of gold. And there is more: 266.8 million tonnes at 0.34% Cu and 0.23 g/t Au containing 2.0 billion lb of copper and 2.0 million oz of gold in the inferred category.

We agree those are world-class numbers. And now Ivanhoe has tapped into the world-class expertise needed to create a new mine by mid-2009.