Far North extension adds value to Oyu Tolgoi

Using more than a dozen drill rigs to define the extent of the Far North discovery at Oyu Tolgoi in Mongolia’s South Gobi region, Ivanhoe Mines (IVN-T) is encountering some of the best values to date while stepping out on deep high-grade mineralization along the zone’s northern projection.

Several of the new drill holes contain intercepts hundreds of metres long averaging 2-3% copper. Hole 409, the northernmost hole drilled to date for which assays are available, returned a 226-metre-long intercept grading 2.06% copper and 0.67 gram gold per tonne starting at a down-hole depth of 966 metres. This intercept included a 66-metre section of 3.52% copper and 1.88 grams gold at depths of 1,114-1,180 metres.

“As we have drilled to the north in the Far North orebody, the deposit become more gold rich, and the copper grades continue to rise,” says Ivanhoe’s deputy chairman, Edward Flood.

Results to date have extended the boundaries of the Far North zone at least 800 metres beyond the northern limit of the resource model prepared by AMEC A&E Services in February 2003, while increasing the overall strike length to more than 2 km. Ivanhoe believes the current width of the zone, which varies from 200 to 800 metres, may be constrained by a lack of drill holes along the margins.

The Far North zone was estimated to contain an inferred resource of 804 million tonnes grading 0.81% copper and 0.07 gram gold, equivalent to 14.4 billion lbs. copper and 1.8 million oz. gold, at a cutoff of 0.3% copper-equivalent. Using a higher cutoff of 0.6% copper-equivalent, the tonnage falls to 489 million tonnes grading 1.08% copper and 0.07 gram gold, for 11.6 billion contained pounds of copper and 1.2 million contained ounces of gold.

The high-grade sweetener contained 29.3 million tonnes grading 2.69% copper and 0.19 gram gold, or 1.7 billion lbs. copper and 175,000 oz., based on a 2% copper-equivalent cutoff.

An updated resource estimate for the Far North zone will announced later in July.

The Far North zone is characterized as having two distinct mineralized bodies. The southern portion, hosted primarily in ignimbrites, is closer to the surface and has a high-grade hypogene copper component consisting of bornite and chalcocite. The southernmost end of the zone remains open toward the Central zone. The bulk of the deeper, Far North northern portion is hosted by basalt, with the highest-grade intersections occurring in quartz stockwork that replaces up to 90% of the host rock. Bornite mineralization dominates, with associated chalcopyrite. Drilling has cut numerous intersections of mineralized porphyry beneath the northern portion of the system. Intense chlorite, hematite after biotite, and magnetite alteration in the northern portion reinforces the gold-rich porphyry association.

The high-grade core of the Far North extension is at least 700 metres long by 300 metres wide and at least 150 metres thick. The potential of the zone is best illustrated by hole 367A, which intercepted a previously reported 144 metres of 4.41% copper and 1.61 grams gold starting at a down-hole depth of 1,062 metres, or more than 800 metres vertically.

Ivanhoe drilled off a fan of holes from hole 367 using the Navidrill direction system. Hole 367 B cut the zone 100 metres east of 367A and returned 204 metres grading 2.69% copper and 0.2 gram gold at 912 metres down-hole. Hole 367E stepped out a further 100 metres to the east and hit 334 metres grading 2.8% copper and 0.29 gram gold (including 90 metres of 4.2% copper and 0.37 gram gold) at a down-hole depth of 872 metres.

Drilling on the core’s outer eastern and western margins is intercepting 200-300 metres of 1-1.5% copper.

“I think it’s clear now to most observers that the Far North orebody is exceptional in terms of size and grade,” says Flood. “We are more confident than ever that this project will generate significant returns.”

Ivanhoe is pushing ahead to complete definition drilling on the high-grade zone and incorporate the results in independent scoping studies, to be completed this fall.

The Far North deposit is one of four co-genetic copper-gold zones delineated to date along a 5-km-long chain of deposits at Oyu Tolgoi, or Turquoise Hill. Based on the February resource calculation, Turquoise Hill contains an overall resource of 26.8 billion lbs. copper and 18.7 million oz. silver in 2.1 billion tonnes of mineralized rock at a cutoff of 0.3% copper-equivalent. Inferred resources were estimated to total 1.6 billion tonnes grading 0.63% copper and 0.17 gram gold, with an additional 509 million tonnes of indicated resources grading 0.4% copper and 0.59 gram gold.

Ivanhoe says internal scoping work shows “excellent” economics for a 40,000-to-50,000-tonne-per-day open-pit mine on the Southwest Oyu zone. The company believes an underground block-cave-mining operation at Far North could supplement open-pit mill feed and expand the project to 100,000 tonnes per day.

The company is conducting extensive due diligence of Chinese mining and development costs, as well as practices. Oyu Tolgoi is only 80 km north of China. Ivanhoe is looking at the costs of sinking a shaft and driving a production-size decline into the Far North zone to accelerate development.

In terms of infrastructure development, Flood says the company is receiving exceptional support from the governments of Mongolia and China, both on municipal and regional levels, as well as up through the highest levels. The president of China recently traveled to Mongolia where he met with the Mongolian president. Among the topics discussed were development of Oyu Tolgoi and cross-border co-operation in areas of transportation and power. “We have all the ingredients coming together for a scoping study that will give investors some real insight into the scope and scale of this orebody,” says Flood.