Mongolia project to be among world's largest: Ivanhoe Mines

Mongolia project - Ivanhoe Mines Ltd. (IVN-T15.49-1.05-6.35%) says an independent study shows that its Oyu Tolgoi copper-gold project in Mongolia will be among the top three of its kind in the world when it reaches full production in 2013.

The report released Tuesday forecasts average annual copper production of 544,000 tonnes, and 650,000 ounces of gold for the first 10 years.

The extended mine life is said to be 59 years, which Ivanhoe executive chairman Robert Friedland said “will prove to be very conservative.”

Oyu Tolgoi will “stand tall with established giants like Grasberg and Escondida in the pantheon of the world’s greatest mines,” Mr. Friedland said.

Escondida, which is majority owned by BHP Billiton and Rio Tinto, is the world’s largest copper producer with annual production of more than one million tonnes.

Grasberg, located in Indonesia, is the largest gold mine and the third largest copper mine in the world. It is majority owned by Freeport-McMoRan. RioTinto also has a stake in the project, as well as the Indonesian government.

Ivanhoe and its partner in Oyu Tolgoi, mining giant Rio Tinto PLC, need to invest $4.6-billion to bring the project into production.

“This is a mine designed to be robust at $2 copper and $850 gold,” Mr. Friedland told analysts during a conference call Tuesday.

Copper is currently trading above $3 per pound, while gold hit an all-time high above $1,230 an ounce Tuesday.

Ivanhoe is in the midst of a strategic review, which the company said could include everything from equity investments to a possible sale of subsidiaries. There was no update on that review.

China is believed to be on the list of suitors after state-owned Chinalco said recently it’s interested in Oyu Tolgoi, which is located about 80 kilometres north of the Mongolia-China border.

The interest comes just as the development's long-awaited investment agreement was finalized with the Mongolian government in March. The agreement was signed last fall, after six years of negotiations.

Ivanhoe has a 66-per-cent interest in the project, while the Mongolian government holds the rest. Rio Tinto, Ivanhoe's partner in Oyu Tolgoi, has a 22-per-cent stake in Ivanhoe. It also has the ability to increase its Ivanhoe stake to just under 47 per cent in the next 18 months.

Brenda Bouw Mining Reporter,

Vancouver — Globe and Mail Update Published on Tuesday, May. 11, 2010 7:18PM EDT