Ivanhoe expenses overshadow earnings

Ivanhoe Mines (IVN-T) reported record copper production from its 50%-owned Monywa copper project, in Myanmar, but because of exploration expenditures, ended 2004 with a net loss of US$89.6 million.

A record operating profit of US$27.5 million was primarily achieved through increased production. Ivanhoe’s share of production, stood at 15,878 tonnes of copper, 14% higher than in 2003.

The average realized copper price in 2004 was US$1.34 per lb., US55 higher than in 2003.

At the end of Feb., the remaining debt at Monywa stood at US$7.5 million (down from an initial US$90 million). The property has been in production since 1999. During the fourth quarter of last year, the copper cathode throughput capacity was increased to 39,000 tonnes per year and over the next few years this will increase again, as the S&K mine is set to expand with development of an additional deposit.

Ivanhoe completed the sale of its Savage River iron ore mine in Australia in Feb. of this year. A large part of the purchase price is still to come: two initial payments, which totaled US$21.5 million are to be followed by five annual payments, beginning in March of next year, which will be dependant on production and the realized pellet price.

The company made about US$1.3 million in interest over the year, as the Mongolian government made payments towards a US$50 million treasury bill purchased by the company. Payment was received in full in Dec.

The Oyu Tolgoi project, which includes the Southern Oyu and Hugo Dummett deposits in Mongolia, ate up US$72 million, of the US$98.2 million, spent on exploration in 2004.

In Aug. of last year, the Southern Oyu measured and indicated resource stood at 1.06 billion tonnes grading 0.48% copper and 0.36 gram gold per tonne. This estimate used a .3% copper-equivalent cutoff down to 560 metres below surface and a .6% copper-equivalent cutoff below that.

Last May, the Hugo Dummett inferred resource was 1.16 billion tonnes grading 1.29% copper and 0.23 gram gold per tonne. This was calculated using a .6% copper-equivalent cutoff.

An updated resource is expected in the second quarter of this year. In addition, an integrated development plan, combining the open pit feasibility for Southern Oyu and the underground pre-feasibility for Hugo North, is being compiled.

The company plans to develop an exploration shaft at Hugo North starting next month. It is expected to be 2 years in the making.

Ivanhoe predicts a 40-year mine-life at Oyu Tolgoi, so it is negotiating a long-term stability agreement with the Mongolian government.

US$13.5 million was spent on other Mongolian exploration and US$3.8 million was spent at the Bakyrchik gold mine in Kazakstan.

At the beginning of 2005, Ivanhoe had 292.8 million shares outstanding (310 million on a fully diluted basis).