Oyu Tolgoi copper/gold project steps completed

Canadian-listed Ivanhoe Mines has finalised an investment agreement with its partners to develop the Oyu Tolgoi copper-gold project in Mongolia, and full-scale construction is set to begin in the second quarter. The company said the Mongolian government has confirmed that procedural and administrative conditions in the investment agreement have been satisfied.

The Mongolian government will become a junior partner in the development of the $5 billion project. The government, through Erdenes MGL LLC, a state-owned resources company, will acquire a 34% stake in an Ivanhoe Mines subsidiary, Oyu Tolgoi LLC, which holds the Oyu Tolgoi mining licenses.

Ivanhoe Mines will own the remaining 66% interest in Oyu Tolgoi LLC and will build the project with the financial and technical support of global mining giant Rio Tinto which currently owns 22.4% of Ivanhoe Mines and holds options to increase that stake to 46.6% over the next 19 months.

Ivanhoe said a joint Ivanhoe Mines-Rio Tinto committee has approved an initial $758 million to launch full-scale construction of the Oyu Tolgoi complex in the second quarter.

"The site-wide construction that is about to begin will see the open-pit mine in operation in 2012 and the beginning of commercial production of copper and gold in 2013," said Ivanhoe Chief Executive John Macken in a statement.

The build-out phase of the project will include the construction of a fully paved 105 km highway linking the Oyu Tolgoi site with the Mongolia-China border. It will also include construction of a regional airport that can accommodate Boeing 737-sized aircraft.

Ivanhoe has invested about $1 billion in the exploration and development of Oyu Tolgoi since acquiring the exploration licenses in 2000 and the company estimates that an additional $4 billion will be required from the project's partners to build and commission the mining complex.