Economy may trip Ivanhoe’s step forward in Mongolia

Dec 24, 2008 | 07:10 AM | Anne Riley

Ivanhoe Mines Ltd.'s Oyu Tolgoi copper-gold project took a giant step forward this month when the Mongolian government finally agreed to negotiate a draft investment agreement with the company.

But for the Vancouver, British Columbia-based company, a slew of slowdowns spurred by the global economic downturn may challenge the feasibility of the project once again.

The long-awaited operation, located less than 50 miles from the Chinese border, is forecast to someday become one of the largest copper projects in the world, producing some 1 billion pounds of copper and 330,000 ounces of gold a year for at least 35 years. "There's nothing comparable in terms of size and grade," Bill Trenaman, head of investor relations, said at Desjardins Securities' Materials Conference. "Resources, reserves, ore will not be a problem for this deposit. This thing will be mining 100 years from now."

Even though the ore is there, the right to mine is not. Ivanhoe, which has a licensing agreement for the Oyu Tolgoi project, has been unable to finalize an investment agreement with the Mongolian government despite four years of efforts.

Although the company has made its case for investment a number of times, its efforts have been largely overshadowed by an ongoing push by the local population to amend Mongolia's minerals law and give the government larger share of strategic mining sites. The current law, which allows the government to take up to a 50-percent stake in major mineral deposits discovered using state funds and a 34-percent stake in other projects, has been under revision for years, and the government has been reluctant to give Ivanhoe the go-ahead at Oyu Tolgoi until changes to the minerals law have been finalized. ....





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