Ivanhoe weighs offers for Oyu Tolgoi (April 19, 2004)

Shares in Ivanhoe Mines (IVN-T) jumped 50 to $9.10 in early trading in Toronto on Monday after the company said that “several leading international mining companies” have expressed interest in a possible transaction relating to the Oyu Tolgoi copper-gold project in Mongolia.

Ivanhoe says it has retained financial advisors CIBC World Markets and Citigroup Global Markets to help it weigh its options for the project.

At last count Oyu Tolgoi was home to an inferred resource of 1.28 billion tonnes grading 1.13% copper and 0.24 gram gold, equivalent to 14.6 million tonnes (30.1 billion lbs.) copper and 9.7 million oz. gold, at a 0.6% copper-equivalent cutoff. In addition, the Southwest Oyu deposit hosts an indicated portion of 267 million tonnes grading 0.53% copper and 0.86 gram gold, equivalent to 1.4 million tonnes (3.1 billion lbs.) copper and 7.3 million oz. gold, at a cutoff grade of 0.6% copper-equivalent.

An updated resource estimate is expected in the next few weeks, with a revised scoping study due for release in June.

Ivanhoe owns 100% of the Oyu Tolgoi project, and holds or controls around 111,000 sq. km worth of exploration rights in central and southern Mongolia.

In February, an independent scoping study based on a minable inventory of around 1 billion tonnes averaging 0.95% copper and 0.26 gram gold per tonne suggested a base-case scenario that would support a 20-million-tonne-per-year conventional flotation process plant for 29 years. The plan calls for the addition of a second milling circuit to double production in year five. The capital cost for the first phase is pegged at US$529 million, with the overall cost of both stages running US$1.17 billion. (T.N.M., Mar. 8-14/04). Ivanhoe recently reported a loss of US$73 million (or 3 per share) for 2003. The loss includes exploration expenditures of US$68 million, with US$59.5 million of that incurred at Oyu Tolgoi, where the company accelerated drilling on the Hugo Dummett deposit.