Ivanhoe Mines Reports Construction of First Phase of Oyu Tolgoi Copper-Gold-Silver Project in Mongolia Nearing 75% Completion, Wit

Mon Feb 27, 2012 9:12am EST

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Ivanhoe Mines (TSX:IVN)(NYSE:IVN)(NASDAQ:IVN) founder and Chief Executive
Officer Robert Friedland said today that construction of the first phase
of the Oyu Tolgoi mining complex in southern Mongolia has surpassed an
estimated 73% completion and is on track to meet the mine's targeted
start of initial production in the third quarter of this year.

    "Installation of the two production lines in the concentrator and
pre-commissioning works are progressing ahead of plan. The concentrator,
which will have an initial capacity of 100,000 tonnes per day, now is
more than 80% complete. The first production line is scheduled to be
completed during the third quarter, followed by completion of the second
production line in the fourth quarter this year," Mr. Friedland said.

    "After achieving the scheduled milestones of the production of first ore
and the production of the first copper, gold and silver concentrate this
year, Oyu Tolgoi will ramp up to reach commercial production during the
first half of next year."

    Progress achieved on supply of interim electrical power

    Mr. Friedland said a goal is to have the Oyu Tolgoi mine site connected
to a 220-kilovolt power line reaching into China's Inner Mongolia by the
end of July this year.

    "Contractors have begun construction of the power line and switching
station as part of the 87-kilometre link to be built within China that
will connect Oyu Tolgoi with the established distribution grid."

    Power transmission towers already have been erected along the
95-kilometre route from Oyu Tolgoi, in Mongolia's South Gobi Region, to
the Mongolia-China border.

    A separate electricity-purchase agreement establishing a supply
arrangement between Mongolian and Chinese authorities is required before
power can be imported into Mongolia. Oyu Tolgoi LLC, which owns the Oyu
Tolgoi Project and is 66%-owned by Ivanhoe Mines, will be a party to a
final power-supply agreement.

    The long-term Investment Agreement signed with the Mongolian government
in 2009 permits Oyu Tolgoi to import electrical power from China for up
to four years after the start of commercial production, following which
power will be sourced from within Mongolia.

    Comprehensive financing plan under discussion with Rio Tinto

    Mr. Friedland said that a comprehensive financing plan for the completion
and start-up of the Oyu Tolgoi Project in Mongolia remains under
discussion with Rio Tinto, which increased its holding in Ivanhoe Mines
to 51% last month.

    "The Ivanhoe Mines plan was presented to Rio Tinto earlier this month by
a team of management executives, independent directors and advisers," Mr.
Friedland said.

    "Both companies have exchanged proposals and we are continuing to work
together in an attempt to reach agreement on a comprehensive financing
approach that will accommodate our mutual interests in advancing Oyu
Tolgoi's development."

    Mr. Friedland said that Ivanhoe Mines has invested more than US$5 billion
to date in Oyu Tolgoi's exploration and development during the past
decade. The expenditures have been financed through a combination of
equity and short-term debt facilities. A proposed major project financing
facility has been under negotiation for more than a year.

    "The emergence of a majority shareholder does not diminish the
long-standing commitment of the Ivanhoe Mines Board of Directors and
management to all of our shareholders to ensure that an appropriate
financing plan is put in place as soon as possible," Mr. Friedland said.

    "More than eight years ago we dedicated ourselves to building one of the
world's greatest copper-gold complexes in Mongolia. Today, Oyu Tolgoi is
our flagship asset. We have a plan that will provide the remaining fiscal
resources to complete construction of the first phase of Oyu Tolgoi's
development and also to continue progressing development work on the
phase-two underground mine that is scheduled to begin production in

    Key elements of Ivanhoe's financing plan

    The Ivanhoe Mines comprehensive financing plan contains three principal
pillars: project finance, bridge finance and equity.

--  The cornerstone of the financing plan continues to be a US$4 billion
    project-finance facility, which now is in an advanced stage of
    discussion with a core lending group comprised of European Bank for
    Reconstruction and Development, International Finance Corporation,
    Export Development Canada, BNP Paribas and Standard Chartered Bank. An
    objective is to sign loan documentation early in the second half of this

--  Ivanhoe Mines is seeking the required approvals for the project-finance
    facility from Erdenes OT and the Mongolian government. Erdenes OT, which
    holds the Mongolian government's 34% stake in Oyu Tolgoi, presently is
    appointing a legal adviser. The comprehensive Environmental and Social
    Impact Assessment (ESIA) required by the potential lenders to finalize
    the proposed finance facility is substantially complete and will be
    released for public review following its formal approval by the Oyu
    Tolgoi LLC Board of Directors. 

--  Ivanhoe Mines, as previously announced, has approved a US$1.8 billion
    facility to be provided by a major international bank as an interim,
    bridge-financing measure. The formal loan agreement has been submitted
    to the international bank's credit committee for final approval and
    remains subject to approval by Rio Tinto. Alternative bridge-financing
    arrangements proposed by Rio Tinto also are being considered.

--  The bridge financing facility would be in addition to the existing
    US$1.8 billion interim funding facility provided by Rio Tinto last year.
    To date, Ivanhoe Mines has accessed a total of US$867 million from the
    Rio Tinto facility.

--  The Rio Tinto interim funding facility and any additional bridge
    financing facilities are expected to be repaid from the planned project-
    finance facility. 

--  The Ivanhoe Mines Board of Directors also is considering a number of
    equity alternatives, including a possible rights offering.

    Ivanhoe Mines' cash position on a consolidated basis at February 24 was
approximately US$960 million. The company's non-consolidated cash
position, excluding cash at Ivanhoe Australia and SouthGobi Resources and
including cash at Oyu Tolgoi LLC, was approximately US$683 million.

    Expressions of interest in Ivanhoe asset divestment

    Mr. Friedland said that in addition to pursuing the key elements of the
comprehensive financing plan, Ivanhoe Mines is highly encouraged by the
progress of discussions regarding asset divestment. He said Ivanhoe Mines
has received detailed, written expressions of interest on potential asset
divestments that could realize significant capital to support the ongoing
development of Oyu Tolgoi.

    Discussions on governance at Ivanhoe Mines

    Rio Tinto also has initiated discussions with independent Ivanhoe Mines
directors on a number of governance and management matters. The
independent Ivanhoe directors intend to work constructively and
expeditiously with Rio Tinto to implement various changes to reflect Rio
Tinto's majority ownership of Ivanhoe Mines while, at the same time,
seeking to ensure, to the greatest extent possible, that the rights of
the minority shareholders are not prejudiced by such changes.

    About Ivanhoe Mines

    Ivanhoe Mines (TSX:IVN)(NYSE:IVN)(NASDAQ:IVN) is an international mining
company with operations focused in the Asia Pacific region. Assets
include the company's 66% interest in the Oyu Tolgoi copper-gold mine
development project in southern Mongolia; its 58% interest in Mongolian
coal miner SouthGobi Resources (TSX:SGQ)(HK:1878); a 59% interest in
Ivanhoe Australia (TSX:IVA)(ASX:IVA), a
copper-gold-uranium-molybdenum-rhenium exploration and development
company; and a 50% interest in Altynalmas Gold, a private company
developing the Kyzyl Gold Project in Kazakhstan.

    Ivanhoe Mines' shares are listed on the New York, NASDAQ and Toronto
stock exchanges under the symbol IVN.


    Certain statements made herein, including statements relating to matters
that are not historical facts and statements of our beliefs, intentions
and expectations about developments, results and events which will or may
occur in the future, constitute "forward-looking information" within the
meaning of applicable Canadian securities legislation and
"forward-looking statements" within the meaning of the "safe harbor"
provisions of the United States Private Securities Litigation Reform Act
of 1995. Forward-looking information and statements are typically
identified by words such as "anticipate," "could," "should," "expect,"
"seek," "may," "intend," "likely," "plan," "estimate," "will," "believe"
and similar expressions suggesting future outcomes or statements
regarding an outlook. These statements include, but are not limited to,
statements with respect to: (i) that the first production line is
expected to be completed by July of 2012; (ii) that Oyu Tolgoi is on
track to meet its targeted start date of initial production in the third
quarter of this year and ramp up to commercial production during the
first half of next year; (iii) expected date for the connection of the
power line before July of 2012; (iv) the plan to obtain fiscal resources
to complete construction of the first phase of Oyu Tolgoi's development;
(v) the objective to sign loan documentation for project financing early
in the second quarter of this year; (vi) the release of the comprehensive
Environmental and Social Impact Assessment; (vii) the international
bank's credit committee approval of the interim bridge facility; (viii)
progress on asset divestment; and (ix) the implementation of governance

    All such forward-looking information and statements are based on certain
assumptions and analyses made by Ivanhoe Mines' management in light of
their experience and perception of historical trends, current conditions
and expected future developments, as well as other factors management
believes are appropriate in the circumstances. These statements, however,
are subject to a variety of risks and uncertainties and other factors
that could cause actual events or results to differ materially from those
projected in the forward-looking information or statements. Important
factors that could cause actual results to differ from these
forward-looking statements include those described under the heading
"Risks and Uncertainties" elsewhere in the Company's MD&A and under "Risk
Factors" and elsewhere in the corporation's periodic filings with
Canadian and US securities regulators. Readers are cautioned not to place
undue reliance on forward-looking information or statements.

Ivanhoe Mines Ltd. - Investors
Bill Trenaman

Ivanhoe Mines Ltd. - Media
Bob Williamson

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