Oh my gosh.....
BEST IDEA: Beyond Superlatives
Ivanhoe Mines Inc (IVN) $9.61 NYSE
Market-cap $3.04 billion
A Re-Visit to Mongolia and China April / May 2006
This report runs a bit long - will publish another part tomorrow.
I just recently visited for the second time to what will be, when completed, the largest mining project ever - Ivanhoe Mines, Oyu Tolgoi (Turquoise Hill) project in southern Mongolia. The build out of the project is proceeding as planned, but there may be an interesting new twist about that could hasten production, cut costs and provide much of the funding that the final build-out will necessitate.
The new thinking is that, due to the sharply increased price of copper / gold (IVN) may make a change in their original plans of going to their target depth of 1300-meters and proceed only to 900-meters so they may pluck off the super high concentration of 3% to 4 plus% copper ore that is located at the top “hump” of the ore body. They would use more conventional mining techniques to harvest that much richer ore as opposed to the massive block cave mining that they will pursue 400-meters deeper. The shaft has now been sunk to 170-meters. It was only about 20-meters deep when I was last there in July 2005. Obviously the rational is that they could harvest the richer high copper content ore faster and much less expensively and that would help finance the deeper and costly block cave mining. The higher part ore body itself would take 5 to 7 years to mine. My understanding is that the final decision to mine the high part of the ore body has not been made yet. Mine officials now estimate that the entire body as it stands today will take 50 to 60 years to mine.
This visit to the remote mine site was with a group of internationally known, money managers, analysts, geologists and mining experts. We journeyed to Mongolia after the JP Morgan China Conference held in Beijing on April 27, 28 and 29. We were instructed in a detailed and comprehensive manner by Ivanhoe management and employees from contracted support companies that are delineating, what is to be the world's largest copper gold deposit.
About 1000 employees are in the remote area and a scheduled airline services the 11,000 foot jet strip.
What Ivanhoe has found buried in the vastness of the Gobi Desert is a 6.5 kilometer long, 1 1/2 kilometers deep and about a 1 kilometer wide copper and gold ore body the likes of which has not been discovered on planet earth in over 50-years. So far, over 640,000 meters of sample cores have delineated the positioning, the size, and the grade of this immense deposit. Mining experts say that Oyu Tolgoi is the richest and largest copper / gold mine ever discovered.
Lets not forget that the worlds largest consumer of copper, steel and coal is China, just 100-miles due south. China has already built a paved road to the Chinese Mongolian border from a major rail and highway link to the major industrial cities in northern China and a railway is planned to the border also.
Important is the fact that the project is being engineered & overseen by John Macken, President of Ivanhoe, who some time ago finished building out Grasberg, the worlds largest mine in Indonesia.
Fluor Corporation (FLR) has also just been hired as project managers. The contract I believe is around US $150 million. Fluor is already onsite planning the relocation of the current village (to be the site of the open-pit mine) and the build out of the copper concentration plant.
I think it’s important to note that all of my fellow attendees were impressed by the high level of execution and professionalism of not only the Ivanhoe staff, but by the contracted companies involved.
That includes Redpath Group, the shaft drillers, Major Drilling, the core drillers, and the Swiss company, SGS Group, that oversees the control, maintenance and the assays of the 640,000 meters of core samples. Each one of these outside contractors is thought to be the “tops” in their respective industry. See below.*
Another important company that provides key services to Ivanhoe is the internationally respected AMEC Americas Limited engineering group who provide independently verified estimates of Ivanhoe's resource. Their reports comply with the required statutes of National Instrument 43-101 and are a matter of public record. AMEC's findings are based on detailed examination of Ivanhoe's exploration drilling results.
That said, AMEC’s recent estimate of February 2006, has increased the copper and gold contained in Measured, Indicated and Inferred resources at the company's Oyu Tolgoi property to truly mind-boggling numbers. AMEC’s estimates are stamped by Dr. Harry Parker who is considered to be the worlds leading geostatistician; it’s said that when he stamps a resource with his signature it’s thought to be bankable and conservative.
The new AMEC estimate as of February 2006 the total of measured, indicated and inferred: Huge and “silly” numbers follow.
68 billion pounds of copper, times current price of $3.71 a pound copper, equals $252 billion. 25.7 million ounces of gold in the ground at $719 an ounce, equals $18.4 billion. (IVN)’s total resource in the ground is therefore worth $270 billion at today’s price of gold and copper.
(IVN)’s market-cap is $3.04 billion
Furthermore (IVN) additionally owns approximately 16% of Entrée Gold, (EGI) a joint venture that abuts the (IVN) northern boundary. The ore body extends well into the Entrée property and it is also very rich. Importantly, (IVN) owns an increased participating interest of 80% in all minerals extracted below a sub-surface depth of 560-meters on the optioned property. All of the Entrée ore body resource lies below 560-meters. This resource is thought to contain, based on core drillings, 6.6 billion tons of copper and 3.2 million ounces of gold. In US dollars that’s worth $26.8 billion and (IVN)’s 80% of that is $21.42 billion. And they own 16% of what’s left.
Should note that “mining giant” Rio Tinto (RTP) also owns 10% of Entrée Gold.