Ivanhoe completes scoping study on Mount Elliott

Ivanhoe Australia’s (IVA-T, IVA-A) acquisition in September 2010 of the Osborne copper-gold processing complex in northwestern Queensland will help transform the company into a significant base metal producer and much of its mill feed is likely to come from its flagship Mount Elliot copper-gold project, 70 km to the north, a scoping study has found. (Osborne resumed production of copper and gold concentrate in late February.)

Mount Elliot, which the company believes is one of the largest copper-gold mineralized systems ever discovered in Australia, is a large-scale system that is made up of the previously operated Mount Elliot underground mine, and the South West Anomaly (SWAN), South West Elliott (SWELL) and Corbould zones.

A scoping study released today indicates that the original Mount Elliot underground mine can be mined via open pit and provide the Osborne mill with an additional four years of feed. The study also found that the open-pit resource can be mined independently of the SWAN resource and is to be based on recovery of pillars from historical underground operations at Mount Elliott.

Such an open pit would have a mining inventory of roughly 7.8 million tonnes grading 1.51% copper and 0.75 gram gold per tonne and the feed would be trucked to the Osborne processing complex. The study estimated  capital expenditures of such an operation of about A$95 million (US$99 million) with a total life of mine production of 108,000 tonnes of copper and 152,000 ounces of gold and C1 cash costs of about US$1.85 per lb. copper.

The scoping study also looked at two options for mining Mount Elliott’s high-grade SWAN zone: a sub-level open-stope mining operation and as a large-scale block cave mine.

Under the first option, initial mining inventory is estimated at 25.9 million tonnes grading 0.90% copper and 0.56 gram gold for a nine-year mine life processing three million tonnes of mill feed per year. Development would take about three years with capital expenditure of about A$478 million and a total life-of-mine production of 215,000 tonnes of copper and 392,000 ounces of gold. C1 cash costs would work out to about US$1.20 per lb. copper.

The second option of a block cave method would process throughput of about 12 million tonnes per year for a 14-year mine life with initial mining inventory of 134.6 million tonnes grading 0.45% copper and 0.29 gram gold. Development would take about five years, capital expenditures would reach about A$1.18 billion and total life-of-mine production of 560,000 tonnes of copper and 1.07 million ounces of gold. C1 cash costs would amount to about US$0.91 per lb. copper.

“All options have significant upside given the exploration potential at depth in the Mount Elliott system and regionally to the north,” the company said in a press release announcing the results of the scoping study. “A major outcome of the study is that more drilling is required in the SWAN high-grade zone to extend the resources and increase the resource quality and continuity.”

There are several SWAN-style near mine targets on the property that have been found using magnetic, gravity and local sub-audio magnetics surveys, the company adds.

Ivanhoe Australia, in which Ivanhoe Mines (IVN-T, IVN-N, IVN-Q) holds a 59% stake, also says the Mount Elliott system itself has the potential to grow significantly with further drilling at depth. The mineralisation at SWAN and at Mount Elliott is associated with hydrothermal magnetite and the deposits are underlain by a large untested magnetic anomaly.

Mining started at Mount Elliott in 1899 and mining and on-site smelting of high-grade copper-gold ores continued until the 1920s. Between 1909 and 1919, the mine produced about 24,800 tonnes of copper and 34,000 ounces of gold. It was reopened as a modern decline mine in 1993 and the treatment of ore continued until 2003, when it was closed due to low copper and gold prices. Ivanhoe Australia estimates that between 1993 and 2003 the mine produced about 5.06 million tonnes of ore at 2.90% copper and 1.5 grams gold.