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Mineral Resource Summary | Exploration Highlights | Assays | Maps, Plans, and Cross Sections | Photo Gallery | Comparisons | What is a Porphyry Deposit? | View Full Report
 
Oyu Tolgoi Gold and Copper Project, Southern Mongolia Oyu Tolgoi Fact File: June 2007
OVERVIEW Oyu Tolgoi, also known as Turquoise Hill, gold and copper project is located in the south Gobi region of Mongolia, approximately 550 km due south of Ulaanbaatar and 80 km north of the Chinese-Mongolian border. Road access to the property follows a well-defined track directly south from Ulaanbaatar requiring 12 hours of travel time. An airstrip capable of accommodating small aircrafts is located on site. The Trans-Mongolian Railway that links Mongolia to Russia and China lies 360 km east of the property. The Trans-China Rail line following the Yellow River is approximately 160 km south of the border. The property ranges in elevation from 1,140 m to 1,215 m above sea level and has a relatively flat undulating topography with less than 50 m of relief. It is located on a desert steppe with desert vegetation and consists of gravel covered plains, with low hills along its northern and eastern borders. Ephemeral streams are present which cross the area and flow for a few short periods in an average summer. Temperatures at Oyu Tolgoi range from ~ 36°C to ~ -25°C. Total precipitation is ~ 100 mm per year and for the most part falls as rain in late spring and summer. Take a high resolution virtual tour of the Oyu Tolgoi Project on Google Earth. The image shows the project in 2005, before the construction of Shaft #1 headframe and the new construction camp. To view, please download the free Google Earth software from http://earth.google.com and then "fly to" the Oyu Tolgoi coordinates of 43.009,106.84. Click here to download Google Earth Oyu Tolgoi File (kmz) In October 2006, world mining leader Rio Tinto agreed to form a strategic partnership by investing in Ivanhoe and, through an Ivanhoe-Rio Tinto Technical Committee, will jointly engineer, construct and operate Ivanhoe's Oyu Tolgoi copper-gold mining complex in Mongolia's South Gobi region. The agreement created a defined path for Rio Tinto to become the largest shareholder in Ivanhoe Mines. Provisions of the agreement between Ivanhoe Mines and London-based Rio Tinto called for Rio Tinto to make an immediate investment in the equity of Ivanhoe Mines of approximately US$303 million (CDN$345 million), an amount that will increase, under defined conditions, to up to approximately US$1.5 billion (CDN$1.7 billion). In September 2007, Ivanhoe Mines arranged access to up to US$350 million in the form of a non-revolving, convertible credit facility to be provided by Rio Tinto. The credit facility is an interim measure that will help to maintain the momentum of ongoing mine development activities at Oyu Tolgoi while Ivanhoe and Rio Tinto co-operate with Members of the Mongolian Parliament to achieve a satisfactory conclusion of an Investment Agreement between Ivanhoe Mines and the Government of Mongolia as the representative of the national interest. Under the terms of the credit facility, Rio Tinto's total investment in Ivanhoe may now reach US$2.3 billion. Ivanhoe also has increased the maximum percentage of Ivanhoe equity that Rio Tinto can own in Ivanhoe during the original five-year standstill period, expiring October 18, 2011, to 46.65% from 40%, and granted Rio a right of first offer on future equity placements. Under the terms of the agreement, Rio Tinto would own 256,247,400 shares of Ivanhoe Mines, representing 43.13% of issued and outstanding shares, if Ivanhoe Mines chooses to take down the maximum amount available under the credit facility and Rio Tinto converts all debt and interest into stock and exercises all of its warrants. Rio Tinto could use market purchases of Ivanhoe stock to make up the balance of the 46.65% permitted under the standstill agreement. Ivanhoe Mines agreed to use no less than 95% of the proceeds from the credit facility exclusively on the Oyu Tolgoi Project in accordance with an Operations Budget and Plan, which is to be mutually agreed to by Ivanhoe and Rio Tinto. No part of the credit facility will be spent on any project located outside Mongolia. If there is no satisfactory conclusion of an Investment Agreement between Ivanhoe and the Mongolian Government before a date to be mutually agreed to by Ivanhoe and Rio Tinto, the proceeds of the credit facility then would be used to implement a Suspension Plan that would provide for an orderly cessation of operations and the ongoing care and maintenance of the Oyu Tolgoi Project. 2005 Integrated Development Plan for Oyu Tolgoi In September 2006 Ivanhoe Mines announced that an independent Integrated Development Plan (IDP) prepared by a joint venture between AMEC Americas Limited, of Vancouver, Canada, and Ausenco Limited, of Perth, Australia, with input from 12 other leading international engineering and environmental consultants, confirms the potential of Ivanhoe's Oyu Tolgoi (Turquoise Hill) Project in southern Mongolia to become one of the world's largest copper and gold producers and a model of environmentally-sound mineral development. "The IDP provides a comprehensive roadmap for the staged development of a new, world-scale copper and gold mining complex at Oyu Tolgoi that will positively and significantly contribute to Mongolia's economic growth and social development for decades to come," Ivanhoe's President Mr. Macken said. "The study outlines the framework for the responsible development of the mine, allowing Ivanhoe to integrate economic progress with environmental care and social responsibility." Development at Oyu Tolgoi is scheduled to occur over a 15-year period, providing for an ultimate mine life that is expected to exceed 40 years. The IDP consists of: 1. a feasibility-level evaluation of an initial, large open-pit mine developed on the near-surface Southern Oyu deposits; and 2. pre-feasibility and scoping-level evaluations of the associated infrastructure, such as power supply, and of a world-class, underground block-cave mining operation at the Hugo Dummett North and South deposits. The open-pit resources used in the IDP are all in the Measured and Indicated categories. The underground resources used in the IDP include some Inferred resources that have not yet been sufficiently drilled to have economic considerations applied to them to enable them to be categorized as reserves. Mineral resources which are not reserves do not have demonstrated economic viability. Until there is additional underground drilling and geotechnical rock characterization to upgrade the Indicated and Inferred resources to Measured and Indicated resources, the economic analysis contained in the IDP is a preliminary assessment and there can be no certainty that the predicted results of the IDP will be realized. The independent study indicates that the Oyu Tolgoi Mine will be capable of average annual production in excess of one billion pounds of copper and 330,000 ounces of gold for at least 35 years. Peak annual production in excess of 1.6 billion pounds of copper and 900,000 ounces of gold is projected to be reached six years after initial production begins (Year 6). To achieve this production, the study contemplates a two-phase approach to developing the mine. Summary of Phase 1 The first phase, the Base Case, consists of a concentrator with a single SAG (semi-autogenous grinding) circuit with an initial throughput rate of 70,000 tonnes-per-day (tpd), producing a gold-rich copper concentrate by mining open-pit resources from the Southwest Oyu Deposit. During the first three years of operation, mill feed will be primarily sourced from stages 1 and 2 of the open-pit mine centred on the gold-rich Southwest Oyu Deposit, while the initial underground block cave mine at the copper-rich, higher-grade Hugo North Deposit is being developed. After Year 3, production at Hugo North is expected to commence. By Year 5, Hugo North will be the predominant source of mill feed for the concentrator. With modifications to the downstream portion of the concentrator, the softer, underground mill feed is expected to facilitate an increased throughput rate of 85,000 tpd by Year 6 in the single SAG circuit concentrator. At this point, open-pit production will be curtailed and only stages 1 and 2 of the ultimate nine-stage open-pit mine plan will have been mined. In this Base Case scenario, Hugo North provides the mill feed to beyond Year 40. Summary of Phase 2 Phase 2 of the IDP, the Expanded Case, will be initiated with a decision in Year 3 to develop a block-cave mine at the Hugo South Deposit and proceed with the stripping of stages 3 and 4 of the open-pit mine. The Expanded Case envisions the ramping up of production from the underground block-cave mines and the doubling of the capacity of the concentrator, including the addition of a second SAG milling circuit, to increase Oyu Tolgoi's combined open-pit and underground production to at least 140,000 tpd by Year 7. Hugo North mill feed, combined initially with feed from stages 3 and 4 of the open-pit mine, will ensure that the 140,000 tpd production rate is maintained. By Year 12, when production from Hugo South will commence, underground production alone is expected to reach 140,000 tpd. Assuming that the expansion is undertaken as scheduled, the IDP indicates that Oyu Tolgoi could produce approximately 35 billion pounds of copper and 11 million ounces of gold over the projected, initial 35-year life of the mine, based on resources delineated to May, 2005. Given the significant potential to expand the known resources at Oyu Tolgoi, the ultimate rate of production from the expanded concentrator could exceed the projections provided in the IDP. Ivanhoe believes the project has the potential to achieve a mill throughput of 170,000 tpd, although this is not evaluated in the IDP. Ivanhoe estimates that minimal additional capital would be required to achieve this tonnage through the double SAG circuit. Financial Modelling Results The IDP financial models were constructed using a base copper price of $1.00/lb and a base gold price of $400/oz, and are based on interpretation of existing tax, mining and other relevant Mongolian laws. For comparison, current copper and gold prices are approximately $1.80-$1.85/lb and $470/oz, respectively. All dollar figures are in United States dollars unless otherwise indicated. The estimated net present value (NPV) of the Oyu Tolgoi Mine at an 8% discount rate, assuming the Expanded Case production is developed as scheduled to 140,000 tpd, is $3.44 billion before tax - and $2.71 billion after tax. At a 10% discount rate, the NPV is $2.40 billion before tax and $1.85 billion after tax. The internal rate of return (IRR) of the Expanded Case is 19.75% after tax and the payback period is 6.5 years. The engineering assessment of initial capital required to fund the open-pit mine and the associated milling complex, capable of processing 70,000 tpd, is estimated at $1.15 billion. In addition, $232 million will be expended during the same period to advance the development of the underground Hugo North Mine. This initial expenditure carries the project through a six-month ramp-up period to reach full production of 70,000 tpd at the beginning of 2009. Ivanhoe believes that the continued investment required between 2009 and 2014 for the ongoing development of the mine to reach the 140,000 tpd Expanded Case could be financed from cash flows from initial mining operations. Financing this investment was not assessed in the IDP. The IDP's sensitivity analysis shows that the project's rate of return is most sensitive to changes in the copper price, followed by changes in the gold price, changes to the operating costs and, finally, changes in capital costs. At $1.10 copper and $400 gold, the after-tax IRR increases to 22.08%; the after-tax NPV increases to $3.39 billion at an 8% discount rate and $2.39 billion at a 10% discount rate. Although not included as a basis of the financial analysis in the IDP, the NPV would increase by more than $200 million in either the Base or Expanded cases if gold production for the first six years was hedged at $550 an ounce. Independent of the IDP process, Ivanhoe has received advice from financial advisors that the futures market for gold currently easily could support a hedge at $550 an ounce over this period. A gold hedge at $550 in the first six years of full production would lower estimated minesite cash costs to approximately 2 cents a pound of copper produced during that six-year period. The NPV calculations do not include any value for the new, high-grade Hugo Far North mineralization discovered on the Ivanhoe-Entrée joint venture property, which is adjacent to and directly north of the Oyu Tolgoi property. Ivanhoe is in the process of drilling off the mineralization to the inferred and indicated status and expects to have an independent resource estimate prepared by AMEC Americas Limited by early 2006. As is the case with all long-life mining projects, NPV calculations significantly understate the value of anticipated cash flows from the project beyond the initial 10 years of operation. Key Points in the IDP Report
GEOLOGY 
Regional Geology The South Gobi area lies near the boundary of the South Mongolian and the South Gobi tectonic units. Primarily Paleozoic volcanic, sedimentary and intrusive rocks and Mesozoic sedimentary cover underlie the region. During the Paleozoic, southern Mongolia grew through the accretion of Island Arc- and Andean-type subduction, related magmatic arcs and continental blocks. Late in the Paleozoic, Basin and Range style rifting accompanied bimodal volcanism. By early Mesozoic, continental uplift was in progress, unroofing the tectonic belts with deposition of terrigenous sediments into thrust-controlled, foreland basins. At the end of the Late Cretaceous, the region was increasingly arid, similar to the present day Central Asian basins. The Oyu Tolgoi project area occurs in an early to mid Palaeozoic island arc. The island arc exhibits characteristics typical for calc-alkaline, 'island arc-type' Cu-Au porphyry deposits. The terrane is composed of lower to mid Paleozoic metasediments and island arc basalts that rest upon a lower Palaeozoic ophiolite complex. Oyu Tolgoi Property Geology The Oyu Tolgoi property comprises a rectangular block 10 x 9 kms in area, in which exploration prospects are named South Oyu, Southwest Oyu, Central Oyu and Hugo Dummett (North and South). In general, outcrops are sparse and comprise less than 20% of the area. A Neogene(?) piedmont outwash deposit forms a flat terrace dipping gently to the south, and occupies a NNW trending zone in the center of the exploration block. This deposit comprises red clay and gravel and is up to 40m thick. Two major SSE drainages incise this terrace and are filled by Quaternary sands and gravels. A tentative hardrock stratigraphy is based mainly on drilling data, and is described below from youngest to oldest: 1. Dacite flow units 2. Basaltic tuff and flow units 3. Upper Sedimentary sequence 4. Lower Sedimentary sequence 5. Dacitic pyroclastic units 6. Augite Basalt flow and related breccias 7. Andesitic volcaniclastic units A wide variety of felsic to mafic dykes are found throughout the exploration block and in drill holes. Post mineral dykes comprise basalt, rhyolite, hornblende-biotite andesite, and biotite granodiorite intrusive units. The property also contains variably altered and mineralized porphyritic quartz monzodiorite dykes that may be genetically related to the Cu-Au porphyry systems. Major structures trend N35E and N70E based on satellite imagery and geophysical interpretations. In addition, recent work in the sedimentary covered northern part of the property (Hugo Dummett region) has confirmed the occurrence of folded stratigraphy. Ongoing studies are attempting to unravel the attitude and extent of the folding event. Mineralization and Alteration Mineralization and alteration at Oyu Tolgoi is characterized by multiple copper gold porphyry centres which occur (dependent on erosion of high sulphidation systems) above and partially telescoped onto the underlying Cu-Au porphyry systems. The high-grade core of the Southwest Oyu deposit is a cylindrical shaped Cu-Au porphyry, 250 m in diameter, that extends vertically for over 800m. Mineralization is centered on small 10-30 m wide quartz monzodiorite (QMD) dykes and extends for over 100 m into the adjacent host basaltic volcanics. Contorted milky white quartz veins are developed in both the mineralized QMD and basaltic volcanics. The quartz veins appear to have formed largely as an early, relatively high temperature event. Chalcopyrite with subordinate pyrite and bornite occur as disseminated and late fracture fillings within the quartz veins and host rocks. Gold to copper ratios increase from 2:1 to 3:1 at depth. Alteration within the QMD is predominantly quartz sericite with minor tourmaline and fluorite. The basaltic volcanics feature biotite-magnetite with late chlorite-sericite. Lower grade, propyllitic altered basalt with 1:1 gold to copper ratios extends for 600 m x 2000 m around the high-grade core. The QMD dyke bounding Southwest Oyu to the southeast is sericite altered at upper elevations and weakly mineralized with disseminated pyrite and chalcopyrite. This style of mineralization is distinct from the porphyry style mineralization of Southwest Oyu and may represent the root zone to high sulphidation (HS) alteration systems, eroded away at South and Southwest Oyu, but still existent at the Central Oyu and Hugo Dummett deposits. High sulphidation systems (HS) partly telescoped onto underlying porphyry systems occur at Central and Hugo, the latter hosted by dacitic ashflow tuffs which overly basaltic volcanics. At Central Oyu covellite-pyrite is related to an upwardly flared zone of intense quartz-sericite alteration, and centred on porphyry-style quartz-veined Qmd dykes. In Central Oyu, a supergene-enriched chalcocite blanket, tens of metres in thickness has developed overlying the covellite, pyrite-rich HS mineralization. Sooty chalcocite coating pyrite and filling fractures underlies a 20 m to 60 m thick, hematite, goethite-rich leached cap. High grade copper mineralization at Hugo Dummett occurs predominantly as bornite, chalcocite and chalcopyrite. Pyrite, enargite, tetrahedrite-tennantite occur in subordinate amounts mainly in the Hugo Dummett South deposit. Sulphide associations correlate to the nature of alteration, which in turn is partly dependent on the host rock, but also exhibit a lateral zonation from the core of the high grade shell ellipse. A typical sulphide zonation from the high grade copper core to low grade copper mineralization is, bornite + chalcocite, followed outward to chalcopyrite (+/- tetrahedrite-tennantite) and then finally pyrite (+/- enargite). Enargite, bornite + pyrite, and locally covellite are common sulphide minerals in the ash flow tuff. A large part of the Hugo Dummett South deposit is hosted by ash flow tuff; while in contrast, the high grade mineralization at Hugo Dummett North is almost entirely within basalt. Bornite+chalcocite-chalcopyrite with minor, enargite, tetrahedrite-tennantite occur in the basalt and Qmd intrusions. Molybdenite occurs locally in all rock types. Gold (ppm): copper (%) ratio's over much of the deposit are 1:10, but in strongly quartz-veined Qmd intrusions and adjacent wall rocks encountered in Hugo Dummett North, gold: copper ratio's increase to 1:1. These high gold ratio's correlate with bornite. Qualified Persons Charles Forster, P.Geo., Ivanhoe Mines' Turquoise Hill Manager, and Stephen Torr, Ivanhoe Mines' Chief Resource Geologist, qualified persons as defined by NI 43-101, supervises the preparation of technical information contained in news releases issued by the company relating to the copper and gold resources and exploration activities at Oyu Tolgoi. SGS Analabs Pty. Ltd. prepares the split core at the project site and assays all samples at its facility in Ulaanbaatar, Mongolia. Ivanhoe's QA/QC program is monitored by independent consultant Dr Barry Smee, P.Geo., and managed on site by Dale Sketchley, M.Sc., P.Geo. Prepared standards and blanks are inserted at the sample preparation lab on the project site to monitor the quality control of the assay data. Detailed analyses of the mineral reserves and resources for the Oyu Tolgoi Deposits have been prepared in conformance with the requirements set out in National Instrument 43-101 by AMEC E&C Services of Canada under the direction of various qualified persons as defined by NI 43-101. Please refer to estimate for details on the parmeters used to calculate the estimate and the qualified persons responsible for preparing the estimate.
March 2007 Mineral Reserve & Resource Summary (PDF Format)
Hugo North Drill Assays Update to November 18, 2004 (PDF Format) QA/QC Program Overview (PDF Format) Assays Averages for Oyu Tolgoi Drill Holes to September 22, 2003 (PDF Format) Assays for drill holes in Far North Oyu to February 23, 2003 (PDF Format) Assays for new drill holes in Far North Oyu to January 8, 2003 (PDF Format) Assays for drill holes in Southwest Oyu to November 18, 2002 (PDF Format) Assays for drill holes in Central Oyu to November 4, 2002 (PDF Format) Final Assays from Core Holes Drilled in Far North Zone to October 30, 2002 (PDF Format) Assays for core drill holes at the Far North Zone to September 25, 2002 (PDF Format) Assays for core drill holes from May 30, 2002 to July 22, 2002 (PDF Format) Assays for drill holes in Southwest Oyu to May 29, 2002 (PDF Format) Assays for drill holes in Central Oyu to May 21, 2002 (PDF Format) Assays for drill holes to March 4, 2002 (PDF Format) Ivanhoe Mines Oyu Tolgoi 2002 Drill Results as of January 21, 2002 (PDF Format) Ivanhoe Mines Oyu Tolgoi 2001 Drill Results as of November 26, 2001 (PDF Format) Ivanhoe Mines Oyu Tolgoi 2000 Drill Results (PDF Format)
BHP's Oyu Tolgoi drill results (PDF Format)
Click on image to view an enlarged version:
Porphyries are large-tonnage mineral deposits commonly associated with intrusive igneous rocks. Porphyry deposits are the most important source of gold, molybdenum and copper - reportedly contributing up to half of the copper mined worldwide. Silver and a number of other metals, including tungsten, tin, lead and zinc, are also recovered from porphyry operations. Porphyries are divided into different types based on their metal content: copper, copper-gold, copper-molybdenum and molybdenum. In general, copper- and gold-rich porphyries similar to the Turquoise Hill porphyry are associated with intrusions derived from mafic magmas. Typical porphyry deposits contain hundreds of millions to billions of tonnes of ore grading from 0.2% to more than 1% copper, 0.005% to 0.03% moly, and 0.4 to 2 grams gold per tonne. As an example, the porphyry copper mine at Bingham, Utah, has an average grade of 0.6% copper in more than 2 billion tonnes of ore. This mine has produced more than 16 million tonnes of copper since operations began in 1904. In Canada, all molybdenum production and roughly half of all copper production are derived from porphyry deposits. Current and past-producing mines in British Columbia, include Valley Copper, with 690 million tonnes grading 0.41% copper; Island Copper, with 345 million tonnes grading 0.42% copper and 0.017% moly; Brenda, with 360 million tonnes grading 0.16% copper and 0.039% moly; Mount Polley, with 230 million tonnes grading 0.25% copper and 0.34 gram gold. Because of their relatively low grades, porphyry mines must be low-cost. To keep costs down, these deposits are mined as open-pit operations, which are less costly to run than underground mines. The size of many of these deposits renders such operations huge. For example, at 800 metres deep and four kilometres wide, the open pit in Bingham, Utah, is the largest man-made excavation in the world. Exploration for porphyry deposits focuses on regions with felsic-to-intermediate intrusive rocks, particularly those with a history of multiple intrusions and brecciation or fracturing in the contact zone with country rock. More detailed exploration would zero in on defining alteration halos that grade laterally from the core of the mineralizing system. A vertical zonation in copper mineralization might also develop in hot, arid regions where surface waters tend to redistribute copper from an exposed porphyry system, concentrating it elsewhere. Such enrichments are called "supergene" and contain higher-grade copper minerals, such as chalcocite and bornite, than found in chalcopyrite. The oxidized surface waters dissolve copper from the original porphyry ore and transport it in the water table until such time as the waters encounter a reduced zone and precipitate the copper. The presence of a supergene enrichment indicates the presence of a larger hypogene, or original, porphyry system. Ground geophysical surveys useful in exploration for porphyry deposits include induced-polarization for disseminated and vein sulphides, and magnetic for secondary magnetite content.
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