logo-loader

New scenario suggests 59-year mine life for huge Oyu Tolgoi copper-gold mine

Published: 15:40 13 May 2010 BST

no_picture_pai

By Dorothy Kosich, Mineweb.com

Ivanhoe Mines Tuesday presented a new Integrated Development plan for its Oyu Tolgoi copper and gold, which would more than double mine life to 59 years as well as double copper and gold recovery for the same project capex cost of US$4.6 billion.

IDP-10 as the plan is called offers two scenarios a Reserve Case and a Life-of-Mine Sensitivity Case, the latter of which adds an economic analysis based in part on inferred resources.

Both call for production to commence in 2013 with both scenarios predicting average production of 1.2 billion pounds of copper and 650,000 ounces of gold during the first decade of operation. Peak single-year production would hopefully occur during year seven when Oyu Tolgoi would yield 1.7 billion pounds of copper and 1.1 million ounces of gold.

During a conference call Tuesday, Ivanhoe Executive Chairman Robert Friedland said the duration of the payback period is nearly the same for both scenarios between 6.22 years to 6.33 years. However, the key difference between the two is a mine life of 27 years in the Reserve Case, compared to nearly six decades of mine life under the Life-of-Mine Sensitivity Case.

Copper recovery in the Reserve scenario is estimated at 25.2 billion pounds, less than half the production of 52.5 million pounds projected in the Life-of-Mine Sensitivity Scenario. The latter scenario would be solidified only after inferred resources are upgraded to higher classifications by Oyu Tolgoi's ongoing exploration program.

While gold recovered under the Reserve Case would total 13.1 million ounces, it would more than double to 26.4 million ounces in the Life-of-Mine Sensitivity Case, Friedland noted.

Both scenarios call for a peak production rate of 160,000 tpd. The 10 year cash cost net of gold credits would be 45-cents per pound for the Reserve and drop to 44-cents per pound in Life-of-Mine Sensitivity.

The Life-of-Mine Sensitivity Scenario would call for 1.2 billion pounds of annual production in the first 30 years of mine life, and 650,000 ounces annually of gold production in the first 10 years.

Total measured and indicated resources as of March 2010 are 40.68 million pounds of copper, 20.97 million ounces of gold and 49.86 million pounds of copper equivalent pounds. Inferred resources, which are not recognized by the SEC in the United States but are legally recognized in Canada, are 40.61 million pounds of copper, 25.39 million ounces of gold, and 53.28 million copper equivalent pounds.

Friedland said the 2010 Integrated Development Plan's Life-of-Mine Sensitivity Case estimates a net present value of US$15.25 billion at a copper price of $3.23/lb and a gold price of $1,200/oz.

For the first time IDP-10 declares underground reserves at the Hugo Dummett Deposits of proven and probable copper reserves of 16.85 million pounds of copper and nearly 4.9 million ounces of gold. The Reserve Case production would mine only the Hugo North Lift 1 underground reserves and the South Oyu Open Pit.

The Life-of-Mine Sensitivity Case would also add three underground operations-Life 2 in Hugo North, Hugo South block cave and Hergua block cave.

At the end of his presentation, Friedland concluded that "Oyu Tolgoi is firmly on track to become one of the world's top three copper-gold mines." Both Friedland and Ivanhoe Mines CEO John Macken suggested the massive mining operation could become "an industry model of responsible, environmentally-sound mineral development."

Despite their optimism, Mongolia has proven itself to be a politically risky venue when it comes to mining development. Last week Mongolian President Tsakhia Elbegdorj initiated a law to prohibit the issuance of new mineral exploration licenses. The draft law has been submitted to Mongolia's parliament, the Great Khural for further consideration.

Nevertheless, also on Tuesday Canadian junior coal company Prophecy Resource said it received a 30- year mining license from the Mongolian Government for the Ulaan Ovoo coal project. The license can be extended an additional 40 years, according to Prophecy.

Chesnara reports strong 2023 results with improved cash generation and...

Chesnara PLC (LSE:CSN) chief executive Steve Murray discusses the company's full-year results for 2023 with Proactive's Stephen Gunnion, describing them as strong and particularly highlighting £53 million in commercial cash generation and a dividend coverage of around 150%. The company has...

1 hour, 23 minutes ago