NORTH West Queensland-focussed Ivanhoe Australia (Ivanhoe) celebrated the March 2012 quarter by joining the miner ranks and producing its first copper-gold concentrate from the Osborne project in Cloncurry.
Ivanhoe started out in 2003 after acquiring several tenements in the Cloncurry region from the receivers of Selwyn Mines. These assets included former mines, mining leases and exploration permits 160km southeast of Mount Isa in Queensland’s North West.
Three of these projects – Merlin molybdenum and rhenium, Mount Dore cathode copper and Mount Elliot copper-gold – constitute much of the company’s current focus.
Prior to 2008, Ivanhoe was a wholly-owned subsidiary of Ivanhoe Mines and existed purely as the latter’s exploration vehicle. In mid-2008, Ivanhoe Mines spun off its exploration arm and Ivanhoe was admitted to official quotation on the ASX in August. Ivanhoe Mines maintained 80 per cent equity in Ivanhoe when it listed and remains the company’s majority owner today, with a 59 per cent interest.
Towards the latter half of 2010, Ivanhoe added the Osborne copper-gold project to its portfolio.
Barrick Australia had mined Osborne, 50km from Merlin and Mount Dore, previously and the purchase included the mill and existing infrastructure. Osborne copper-gold project After several feasibility reviews, Ivanhoe made the decision to begin mining at Osborne and refurbished the processing plant. This was commissioned in late February this year, a few weeks ahead of schedule. Initial production at Osborne is expected to continue for at least four years. In that time, Ivanhoe hopes to identify other deposits within the project area to sustain about 20 years of operation.
During the initial four years, about 6.6 million tonnes grading 1.3 per cent copper and 0.8 grams per tonne of gold are expected to be fed through the mill.
The plant is currently fed ore from the Osborne and Kulthor underground ore bodies within the Osborne project, and milling rates ramped up to 5200t a day in March. Open pit mining will also be carried out at the Starra 276 and Osborne deposits.
By the end of the March quarter, almost 60,000t of ore was milled, producing 676t of copper concentrate and 1020 ounces of gold.
About 900,000t of ore is expected to be milled this year, increasing to its 2mt per annum capacity by 2013.
The final feasibility study on Osborne indicated 21,000t of copper and 34,000oz gold would be produced annually, with a total project after-tax cash flow of about $162 million and a project internal rate of return (IRR) of 51 per cent.
Average cash costs have been estimated at US$1.67 per pound of metal.
Osborne has measured and indicated resources of 13.1mt grading 1.4 per cent copper and 0.9g/t of gold and an inferred resource of 7.9mt grading 1.4 per cent copper and 1g/t of gold.
Merlin molybdenum and rhenium project
The March 2012 quarter also saw the completion of a feasibility study for Ivanhoe’s Merlin project, which is believed to host the world’s highest-grade molybdenum and
rhenium deposit. The study indicated an initial 10-year mine life was possible, with an average annual production of 5100t of molybdenum and 7.2t of rhenium.
Ore would be crushed at Merlin and then trucked 53km to a processing plant at Osborne.
Ivanhoe anticipates first concentrate production from Merlin in mid-2013, with first product sales during the first quarter 2014.
Project development costs are estimated at $337 million, which includes an $86 million contingency.
Development expenses include an optimised molybdenum trioxide purification plant that would produce a high-grade molybdenum product. Payback of capital expenditure for first production is expected to take about four years.
The study estimated a 32 per cent IRR, with an annual after-tax cash flow of $170 million.
Merlin has a current mineral reserve of 7.1mt grading 1.1 per cent molybdenum and 18.1g/t of rhenium. The project also has an indicated resource of 6.7mt
grading 1.39 per cent molybdenum and 23.4g/t of rhenium.
Mount Dore cathode copper project A scoping study indicating that the Mount Dore project could be mined profitably was completed in September last year, revealing that the deposit had a possible 10-year life and was amenable to open pit mining.
About 3mtpa could be processed from the mine to produce about 19,000t of cathode copper at an average cash cost of $2.69/lb.
Initial project capital costs have been valued at $83 million, with an annual after-tax cash flow of about $60 million. The IRR for the project is about 51 per
Mount Dore has an indicated resource of 28.6mt grading 0.75 per cent copper and an inferred resource of 1mt grading 0.7 per cent copper.
Mount Elliott copper-gold project A scoping study conducted at the Mount Elliott copper-gold project was also completed in the March quarter of this
It revealed that the original Mount Elliott underground deposit could be mined as an open pit and that the ore could be processed at Osborne, thereby adding to the latter’s mine life.
Ivanhoe chief executive officer and managing director Peter Reeve said the company was pleasantly surprised that the study indicated Mount Elliott production could add about four years to Osborne’s mine life.
In addition, the study showed that Mount Elliott’s SWAN deposit could be mined via sub-level open stoping to produce 3mtpa. It also suggested that a 12mtpa block cave development was a viable option.
“There are very few copper-gold resources of this size and quality in the world, and even fewer in such favourable political environments as Australia,” Mr Reeve said.
“The study demonstrates that SWAN could become a major, long-life mine with strong potential for increasing the resource at depth and also from nearby
Financial position In order to progress the development of Merlin while conducting more comprehensive studies and exploration at the other projects, Ivanhoe announced in January this year that it had appointed UBS Investment Bank to help with inviting and evaluating potential investors and strategic partners.
“As a global investment bank, UBS is well suited to assist us with approaches to large domestic and offshore companies and investors, and their appointment will formalise the strategic partnership process for us,” Mr Reeve said. “We have held detailed discussions with a number of parties during the past few months and look forward to working closely with UBS to bring the strategic partnering process to a timely and successful conclusion.
“The interest we have received to date has been very encouraging and we expect the sale of available minority interests in our assets would provide sufficient funding to help establish Ivanhoe Australia as one of the main base metal players in Australasia,” Mr Reeve added.
At the end of the March quarter 2012, Ivanhoe had 553.9 million ordinary shares on issue, a market capitalisation of $842 million and $99.6 million cash on hand.
With production only just beginning, Ivanhoe posted a net operating loss for the quarter of $44.3 million.
By Lorna Seatter