Ivanhoe finds gold-rich copper zone at Turquoise Hill

Encouraged by the potential of the Turquoise Hill copper-gold project in southern Mongolia, Ivanhoe Mines (IVN-T) has assigned three drill rigs to the Central Oyu zone, where it recently cut a significant intercept of gold-rich porphyry copper mineralization.

Collared at an angle of 60, hole 187 was drilled to a down-hole depth of 533 metres into the Central Oyu zone. The hole is designed to test the hypogene potential beneath a broad, near-surface, supergene-enriched chalcocite and copper oxide zone uncovered in previous drilling. Central Oyu is 700 metres north of the Southwest Oyu discovery zone.

Hole 187 passed through a 22-metre-thick chalcocite-enriched zone grading 0.68% copper and 0.31 gram gold per tonne, before cutting 138 metres averaging 0.57% copper and 0.42 gram gold per tonne, from 90 to 228 metres down-hole; this was followed by 102 metres grading 0.84% copper and 1.4 grams gold per tonne in basaltic volcanic rocks, beginning at 334 metres down-hole or roughly 290 metres vertically.

The collar of hole 187 is 1.2 km northeast of hole 150, Ivanhoe’s discovery hole in the Southwest Oyu zone, which averaged 0.81% copper and 1.17 grams gold over 508 metres, from 70 to 578 metres of depth. In recent months, Ivanhoe has been systematically drilling off the Southwest Oyu zone, using as many as five rigs.

Only one other deep hole has tested Central Oyu, which is almost invisible in the regional magnetics data but shows up strongly in a large doughnut-shaped circular chargeability feature that also contains the North Oyu prospect.

The Central zone is defined by an induced-polarization (IP) anomaly measuring 1,000 by 500 metres, whereas the untested North IP anomaly measures 1,600 metres long by 400 metres wide.

Collared last year, hole 159 was spotted about 300 metres east of hole 187 and drilled to a depth of 450 metres as a vertical twin of reverse-circulation (RC) hole 94, which intercepted 87 metres of supergene copper grading 0.98%. Hole 159 passed through a 49-metre-thick, enriched blanket of supergene chalcocite grading 1.17% copper and 0.21 gram gold, from 47 to 96 metres, before intersecting a 326-metre-thick covellite zone averaging 0.61% copper, 0.13 gram gold and 181 parts per million (ppm) molybdenum.

The Central Oyu area was previously interpreted to be a high-sulphidation mineralized system unrelated to the Southwest discovery zone. However, based on the strong gold values and style of mineralization intercepted in hole 187, Ivanhoe’s geological team believes the Southwest and Central Oyu zones may represent the first of several gold-rich porphyry zones originating from the same mineralizing source at depth.

Ground magnetometer and IP surveys over the 4-by-3-km core area of the property have defined extensive chargeability highs correlating to known copper mineralization and strong, coincident magnetic highs over the South and Southwest zones that are related to intense magnetite alteration in the basaltic and andesite country rocks. There remain many untested anomalies in the core area.

The Turquoise Hill project (or “Oyu Tolgoi,” as it is known in Mongolia) lies deep in the South Gobi Desert, 560 km south of Ulaanbaatar, the country’s capital, and 80 km north of the Chinese border.

BHP Billiton (BHP-N) first acquired the project in September 1996 during a regional investigation program of porphyry-style copper targets in southern Mongolia. Based on the recommendations of Dennis Cox, who recognized signs of a leached cap and supergene enrichment, BHP applied for, and was granted, an exploration concession that originally covered 1,350 sq. km. The licence area has since been scaled back to 238 sq. km.

After conducting geological mapping, soil geochemical surveys and geophysical magnetometer and IP surveys, BHP, in 1997-98, drilled 23 widely spaced core holes totalling 3,800 metres over a 5-sq.-km area. The company identified porphyry-style copper-gold-molybdenum mineralization in the South, Southwest and North Oyu areas, as well as an enriched supergene chalcocite blanket underlying a leached cap in Central Oyu. In 1999, BHP suspended all operations in Mongolia as part of a corporate reorganization.

Ivanhoe signed an option to buy the concession from BHP in May 2000. The company assumed ownership in early 2002 after completing its earn-in obligations by spending US$3 million on exploration and paying US$5 million. BHP retains a 2% net smelter return royalty and certain back-in rights to re-purchase a 40-60% participating interest based on the nature and size of the deposit defined prior to the completion of the next, US$3-million phase of exploration.

BHP will have the right to buy a 40% interest if a “significant mineral occurrence” contains a potential resource of at least 250 million tonnes of 1% supergene copper, which can be processed using solvent extraction-electrowinning and acid-leaching methods.

If a resource of at least 300 million tonnes of hypogene copper grading 1% or more has been defined, BHP will have the right to buy a 60% interest in that portion of the project. If either of the back-in rights is exercised (or if both are), BHP will pay a cash sum equal to three times the value of all expenditures incurred by Ivanhoe, and reimburse the company for its purchase payment if the mineral resource should lie in the Central Oyu area. BHP’s back-in rights are based solely on copper and not on combined copper and gold.

In the summer of 2000, Ivanhoe delineated the supergene chalcocite blanket in the Central Oyu and South Oyu area, with 109 RC holes totalling 8,800 metres. The widely spaced drilling suggests that the chalcocite and copper oxide zone contains a 50-million-tonne resource grading 0.73% copper, with minor gold credits.

Many of the initial holes bottomed in copper and gold hypogene mineralization, setting the stage for follow-up RC and core drilling in 2001. After drilling an additional 15 RC holes, Ivanhoe sunk three deep core holes to test hypogene copper-gold targets in the South, Southwest and Central zones. This effort resulted in the discovery of a buried high-grade system at Southwest Oyu.

Ivanhoe has now reported results for 28 holes completed at Southwest Oyu. Recent drilling has extended the higher-grade gold-enriched mineralized core to a vertical depth of at least 750 metres. Hole 185 was steeply drilled to a down-hole depth of 1,000 metres and averaged 400 metres of 0.56% copper and 1.31 grams gold, from 498 to 898 metres. This 400-metre-long intercept contained a higher-grade 160 metres grading 0.73% copper and 2.17 grams gold, beginning at 600 metres.

Other highlights include hole 184, which further tested the monzodiorite in previously reported hole 173 (24 metres of 0.82% copper and 1.32 grams gold) by intersecting 216 metres of 0.97% copper and 1.88 grams gold at a down-hole depth of 456-672 metres.

Hole 189 cut 200 metres of hypogene mineralization averaging 0.77% copper and 1.9 grams gold, from 112 to 312 metres vertically. The hole was designed to test for high-grade mineralization above hole 180, which averaged a previously reported 0.56% copper and 0.92 gram gold over 802 metres, including a 120-metre section of 1.28% copper and 3.44 grams gold.

The recent deep holes in the Southwest Discovery zone continue to confirm that the ratio of gold to copper increases with depth. The upper part of the deposit is about 1 gram gold to about 1% copper, whereas in the deeper drill intercepts in the monzodiorite porphyry, there will be 2.5 to 3 grams.

A preliminary resource estimate for the Discovery zone will be released in the weeks ahead. Further deep drilling at Southwest Oyu has been halted until the arrival of navigational drilling equipment, which will allow the holes to be accurately guided.

The high-grade Discovery zone lies on the northern end of the Southwest Oyu IP chargeability anomaly, which extends 1,200 metres north-south and 350 metres east-west. Ivanhoe has now moved two rigs on to the southern extension of the zone to delineate the area and test its high-gra
de potential at depth. Previous drilling on the southwestern extension of the Discovery zone intercepted 466 metres of 0.41% copper and 0.31 gram gold in hole 165,318 metres of 0.49% copper and 0.52 gram gold in hole 167, and 382 metres of 0.21% copper and 0.3 gram gold in hole 168.

Ivanhoe has more than doubled its land holdings in southern Mongolia, and now holds mineral rights to 33,600 sq. km (about half the size of New Brunswick).

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