Ivanhoe sells Savage River mine

Vancouver — In keeping with its plan to divest itself of non-core assets, Ivanhoe Mines (IVN-T) has sold the Savage River iron ore mine in northwestern Tasmania.

In return, London-based Stemcor Holdings will pay Ivanhoe a total of US$21.5 million in two initial payments, plus five annual payments contingent on the price of iron ore pellets. Ivanhoe could realize a total sale price upwards of US$150 million should pellet prices rise as expected. The current Nibrasco-Japanese Steel Mills price is US$38.10 per tonne.

Ivanhoe has operated the Savage River mine since 1997, through subsidiary ABM Mining. The operation produced 2.1 million tonnes in 2004, versus 2.3 million tonnes in 2003. Production recently has been hampered by a shortage of high-grade ore from the Centre pit, which in turn was caused by a wall failure.

However, development is proceeding on two smaller pits on either side of the failed zone, and, as a result, the mine should produce 2 million tonnes this year.

Sufficient reserves have been outlined in the pits for production until at least 2009, and a feasibility study is examining an underground, block-caving operation beneath the North pit.

Twenty-eight million tonnes of proven and probable reserves grading 50.1% DTR (36% iron) remain at the North and Centre pits and at the South deposit. (DTR stands for Davis Tube Recovery, a measure of the percentage of magnetite recoverable into concentrate from the ore. Pure magnetite has an iron content of about 72%; thus the iron content of the ore is determined by multiplying the DTR grade by 0.72.) There is also a measured and indicated resource of 200 million tonnes grading 51.1% DTR (36.8% iron).

The deposits at Savage River occur as sub-vertical, north-south-striking magnetite lodes in a schist-serpentinite sequence. Magnetite occurs in massive to layered zones, in some instances disseminated, ranging texturally from fine-grained to coarse crystalline.

The sale of Savage River enables Ivanhoe to focus on its Oyu Tolgoi copper-gold project in southern Mongolia, where shaft sinking and underground development on the Hugo Dummett deposits are planned.