Ivanhoe Seals The Deal

It’s one of those dramas that has carried on so long that its resolution is oddly underwhelming.

• But in early October, after years of negotiations, setbacks and frustrations for shareholders, Vancouver-based Ivanhoe Mines signed a comprehensive, long-term investment agreement with the Mongolian government that allows the company’s massive Oyu Tolgoi copper-gold project to go forward.

Rio Tinto, Ivanhoe’s strategic partner at Oyu Tolgoi, was also on hand at a signing ceremony in Ulaanbaatar attended by the president, prime minister, cabinet members and other top government officials.

The delay has been frustrating and expensive, but this is a great step forward for Ivanhoe, Rio Tinto and Mongolia, as together they can now build a huge, profitable, long-life mine that will give a significant boost to the Mongolian economy. And the three partners truly need each other here: Trailblazer Ivanhoe has provided the development drive; Rio Tinto has the expertise for the tricky job of underground bulk mining; and the Mongolian government contributes its personnel management and infrastructure-construction abilities. Geopolitically, it’s also a nice way for Mongolia to moderate Chinese and Russian influence in the country.

The new development agreement wisely kicks the question of building a smelter down the road a few more years until the scope of the Oyu Tolgoi project is better grasped in terms of geology, possible production levels and district potential.

It’s a watershed moment for the ragged group of Western juniors who are still hanging onto mineral prospects in Mongolia, too. They finally have some good news to pass onto long-suffering shareholders and can head to the upcoming annual mining conference in Ulaanbaatar with renewed enthusiasm for what is without question a mineral-rich country.

On a side note, it’s interesting to see Ivanhoe chairman and consummate showman Robert Friedland keep a very low public profile during the final stages of negotiations and the actual signing ceremony. There’s nothing quite like having your effigy burned by a mob in a city centre — as Friedland’s was in Ulaanbaatar in mid- 2006 — to tell you simultaneously that you’ve hit the big time and that you probably need to ratchet down the promotion and keep your name out of the headlines.

• There’s a kerfuffle breaking out in the Ring of Fire polymetallic play in the James Bay lowlands, with camp leader Noront Resources launching a hostile bid for Mac Watson’s Freewest Resources Canada and its chromite assets there. Also of interest to Noront is Freewest’s $12-million stake in high-flying junior Quest Uranium, which is exploring for rare earths in Quebec.

There’s no love lost between the two management teams, so one angle Noront is playing is to attack the juicy $4-million payout owed to Watson should there be a change in management at Freewest.

Despite the offer’s 51% premium, Freewest will likely reject the offer after it is officially tabled, though Watson has stated he’s open to selling only the Ring of Fire chromite assets.

• It’s one of those things that never quite makes it into annual reports or press releases, but it’s a critical skill you sometimes need when hunting for minerals in rural Mexico: the delicate art of working around the illegal drugs trade, either in the form of marijuana or poppy crops, or the transportation of goods by gang members.

The dance often involves something like hiring a local who might be linked to the gang, and then asking him well in advance when would be a good time to bring in drills to a certain spot during daylight hours.

So, with our Mexican special appearing this week, it’s useful to note an under-reported but radical change in Mexico’s drug laws: In late August, the Mexican government decriminalized the possession of small amounts of marijuana, cocaine, heroin, methamphetamine, LSD and other drugs. Anyone caught with personal-use amounts will only be encouraged to seek treatment, and no penalties for noncompliance are specified.

For you explorers out there on the front lines, please let us know how these new laws play out on the ground in Mexico’s pretty but sometimes deadly countryside.

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