EXHIBIT 19.7
www.ivanhoemines.com
IVANHOE MINES LTD.
Quarterly Technical Report
FOR THE THREE MONTHS ENDED JUNE 30TH, 2003
INDEX PAGE
- -----------------------------------------------
Copper Production Summary 2
- -----------------------------------------------
Iron Production Summary 2
- -----------------------------------------------
Production:
Monywa/Letpadaung, Myanmar 2
Eunsan Mine, Korea 3
Savage River, Tasmania 6
Bakyrchik, Kazakhstan 7
- -----------------------------------------------
Development:
Modi Taung, Myanmar 8
Oyu Tolgoi/Turquoise Hill, 8
Mongolia
- -----------------------------------------------
Exploration:
Mongolia:
Oyu Tolgoi/Turquoise Hill 12
Kharmagtai & Ovoot Hyar 16
Gold Hill 16
Chun 17
Saran Uul 18
Oyut Ulaan 19
Shuteen 19
Mongolia Reconnaissance 20
Korea: 21
China: 21
Vietnam: 21
For further information, please contact:
Bill Trenaman
Investor Relations
Ivanhoe Mines Ltd.
654-999 Canada Place
Vancouver, British Columbia
Canada V6C 3E1
Telephone: 604-688-5755
Facsimile: 604-688-7168
E-mail: bill@ivancorp.com
This information is available on our website at
www.ivanhoemines.com
KEY POINTS:
- On July 21, 2003, AMEC E&C Services Limited issued a new resource
estimate for the Turquoise Hill Project. AMEC now estimates that the
Turquoise Hill Project contains inferred resources totalling 2.4
billion tonnes grading 0.61% copper and 0.14 g/t gold, at a 0.30%
copper equivalent cut-off, containing approximately 14.7 million tonnes
(32.4 billion pounds) of copper and 11.2 million ounces of gold. This
represents an increase of 45% in the amount of copper and a 24%
increase in the amount of gold since the previous estimate in February
2003. In addition to the inferred resources, the project also contains
509 million tonnes of indicated resources in the Southwest Zone grading
0.40% copper and 0.59 g/t gold, containing approximately 2.1 million
tonnes (4.5 billion pounds) of copper and 9.7 million ounces of gold,
at the same cut-off grade.
- Drilling at the Far North Zone at Turquoise Hill has delineated a
high-grade core of inferred resources greater than 2% copper equivalent
that contains 68.8 million tonnes grading 2.92% copper and 0.28 g/t
gold. The tonnage in the high-grade zone is more than double the amount
of AMEC's previous estimate issued in February this year.
OVERVIEW PRODUCTION
- Copper cathode production for the quarter from the Monywa Mine was
6,744 tonnes. Ivanhoe's 50% net share of sales revenue was US$5.54
million.
- Iron pellet production for the quarter from ABM's Savage River Mine was
534,000 tonnes. Pellet sales were 558,000 tonnes. Sales revenue was
A$27.7 million, US$17.8 million tonnes.
- Gold production for the quarter from oxide ores at the Bakyrchik Mine
was 921 ounces. There was no gold production at the Eunsan Mine as the
mill remained on care-and-maintenance status during the quarter.
DEVELOPMENT
- AMEC-Ausenco Joint Venture is conducting advanced scoping studies of
the Turquoise Hill Project.
EXPLORATION
- Resource delineation drilling continues with 13 drill rigs at Turquoise
Hill and exploration scout drilling is continuing at several of
Ivanhoe's gold and copper prospects elsewhere in Mongolia.
- Surface exploration continued during the quarter at the Eunsan Gold
Project, with the main focus being placed on the Gasado Island
Lighthouse Vein and the Central Vein.
2
COPPER PRODUCTION SUMMARY
TONNES OF ORE CATHODE MINEGATE CASH SALES
TO HEAP HEAD GRADE PRODUCTION COST 50% NET SHARE
JUNE 2003 QUARTER (000'S) (% CU) (TONNES) (US$/LB) US$(000)
- ------------------------------------------------------------------------------------------------------
Monywa, 2,220,178 0.57 6,744 0.46 5,535
S&K,
Myanmar
IRON PRODUCTION SUMMARY
PELLET
SAVAGE RIVER, TONNES MILLED CONCENTRATE GRADE PRODUCTION PELLET SALES
AUSTRALIA WET PRODUCTION (DTR) (TONNES) (TONNES)
- -------------------------------------------------------------------------------------------------
Q2 - 2003 1,277,730 513,390 42.3 534,172 558,243
Q2 - 2002 1,237,602 587,456 50.00 576,264 607,275
SAVAGE RIVER,
AUSTRALIA
TOTAL IRON ORE TOTAL OPERATING CAPITALIZED
PRODUCT SALES REVENUE COSTS PRE-STRIPPING COSTS
SALES RESULTS TONNES SOLD (A$ MILLION) (A$ MILLION) (A$ MILLION)
- ----------------------------------------------------------------------------------------------
Q2 - 2003 648,120 27.7 28.2 4.3
Q2 - 2002 629,144 26.9 26.4 4.8
PRODUCTION:
OVERVIEW
MONYWA COPPER JOINT VENTURE, MYANMAR:
The S&K Mine produced 6,744 tonnes of LME grade A cathode copper during the
quarter. This is an average of 2,248 tonnes per month and equivalent to annual
production of 26,976 tonnes per annum ("tpa").
An expanded pilot plant electrowinning facility was commissioned at the
beginning of April. Cathode production is now averaging over 80 tonnes per day
("tpd") and is approaching a nominal annual rate of 31,000 tpa. In May and June,
cathode production was 2,601 and 2,535 tonnes respectively, reflecting an
average of 82 tpd. This higher than normal production level, was made possible
due to high heap leach solution levels and the electrowinning pilot plant
expansion.
Production in April was limited to 1,608 tonnes due to a ten day shutdown at the
S&K Commercial Plant electrowinning facility. The shutdown was caused by a break
down in the rectiformer unit; however production prior to and after the shutdown
averaged in excess of 80 tpd. Repairs were completed and the plant is now
operating normally.
The three new Caterpillar 777 haul trucks continued to perform well at 96%
availability. Operating costs are significantly lower than for the older 773B
and contract mining fleet.
High heap leach solution grades assisted cathode production reagent usage and
power efficiency. Although unit costs were affected by the ten day shutdown,
cash costs were low at approximately $0.46/lb.
3
Ore grade remained relatively high at 0.57% assisted by production from the
newly developed stage 3 and Sabetaung South pit.
Preparations for test pit mining at Letpadaung were made with the design
completed on a new 10,000 tonnes per day test mini pit. Commencement of mining
operations at the new Letpadaung test pit site is planned for July.
QTR END
JUNE 2003
S&K COPPER MINE ACTUAL
- -------------------------------------------
Tonnes ore to heap (000's) 2,220
- -------------------------------------------
Total tonnes mined (000's) 4,163
- -------------------------------------------
Grade (Cu CN %) 0.57
- -------------------------------------------
Strip Ratio 0.897
- -------------------------------------------
Tonnes Sold (000's) 7,112
- -------------------------------------------
Cathode Production (tonnes) 6,744
- -------------------------------------------
Revenue ($000's) 11,070
- -------------------------------------------
Price of Copper (US$ per Lb.) 0.74
===========================================
EUNSAN GOLD-SILVER MINE, SOUTH KOREA:
Underground mining for the quarter focused on stoping the high grade eastern
shoot from the minus 30 level, extending development along strike on the minus
50 level and establishing a minus 70 level access.
Ore haulage from underground during the quarter totalled 6,215 tonnes grading
26.0 g/t gold equivalent. Surface stocks at the end of the quarter were 9,621
tonnes grading 21.5 g/t gold equivalent.
Three consecutive benches were mined below the minus 30 east high-grade ore
shoot. The base of the stope was backfilled with concrete to a height of three
meters and then mullock to the original minus 30 level floor height. The
concrete will act as a crown pillar support for deeper level mining. The tonnes
and grade mined from the eastern high grade shoot during the quarter are
provided in the table below:
LEVEL (RL) TONNES AU (G/T) AG (G/T) AUEQ(G/T)
- ---------------------------------------------------------------------------
-26 to -33 993 23.65 1930 53.3
- ---------------------------------------------------------------------------
-30 to -34 956 12.05 844 25.0
- ---------------------------------------------------------------------------
-34 to -36.5 739 18.07 1711 44.4
- ---------------------------------------------------------------------------
- -36.5 to -39.5 381 12.76 1245 31.9
===========================================================================
The intention over the coming quarter is to continue stoping the high grade
eastern shoot using a cut and fill mining method between the minus 26 and minus
20 RL and then use a shrinkage stoping method to mine the shoot to the base of
the open pit.
Development on the western half of the minus 30 level was placed on hold during
the quarter due to the intersection of a system of mud filled cavities
associated with faulting.
Development was extended along strike in the minus 50 level east and minus 55
level west. The minus 50 level east proved that the high grade shoot currently
being
4
stoped from the minus 30 level extends in depth to the minus 50 level. There are
currently three deeper level diamond drill intercepts at minus 60 RL that
evidence extensions of the high grade shoot at depth. A pneumatic bazooka
diamond drill rig will be used to test this shoot to a depth of minus 70 level
over the coming quarter.
A second mine access, via an open pit, was mined during the quarter. The purpose
of the second mine access is to allow for the mining of the high grade eastern
shoot beneath the original open pit.
The mill remained on care-and-maintenance status during the quarter. The Sang
Bon (a local open pit) mining lease was transferred to Sun Shin Mining during
the third quarter. Means of dewatering and transporting milled tailings to the
Sang Bon pit are presently being investigated in connection with a possible
re-commissioning of the mill in the quarter.
Surface exploration continued during the quarter with the main focus being
placed on the Gasado Island Lighthouse Vein and Central Vein. Significant
intercepts made during the quarter are provided in the table below:
GASADO CENTRAL VEIN DRILLING
FROM TO INTERV. AU AG AU EQ.
DDH (M) (M) (M) (G/T) (G/T) (G/T) PEAK ASSAYS (G/T)
- -------------------------------------------------------------------------------------------------------------------------
GS03DD-59 158.70 159.70 1.00 1.73 112 3.34
- -------------------------------------------------------------------------------------------------------------------------
160.90 161.80 0.90 4.68 115 6.33
- -------------------------------------------------------------------------------------------------------------------------
162.50 167.00 4.50 2.44 132 4.33 1.0m @ 2.70Au, 244Ag, 6.18AuEq.
- -------------------------------------------------------------------------------------------------------------------------
168.00 171.00 3.00 2.24 84 3.44 1.0m @ 2.48Au, 129Ag, 4.33AuEq.
=========================================================================================================================
SEONGSAN PROSPECT
FROM TO INTERV. AU AG AU EQ.
DDH (M) (M) (M) (G/T) (G/T) (G/T) PEAK ASSAYS (G/T)
- ------------------------------------------------------------------------------------------------------------------------------
SS011 31.00 32.00 1.00 1.10 10 1.24
- ------------------------------------------------------------------------------------------------------------------------------
69.00 71.00 2.00 1.58 10 1.72 1.00m @ 2.03Au, 10 Ag, 2.17 Au Eq.
- ------------------------------------------------------------------------------------------------------------------------------
121.00 123.00 2.00 4.65 10 4.79 1.00m @ 8.03Au, 10 Ag, 8.17 Au Eq.
- ------------------------------------------------------------------------------------------------------------------------------
139.00 142.00 3.00 2.43 13 2.62 1.00m @ 3.70Au, 15 Ag, 3.91 Au Eq.
==============================================================================================================================
5
GASADO LIGHTHOUSE VEIN DRILLING
FROM TO INTERV. AU AG AU EQ.
DDH (M) (M) (M) (G/T) (G/T) (G/T) PEAK ASSAYS (G/T)
- ----------------------------------------------------------------------------------------------------------------------------------
GSO3DD-50 102.00 105.00 3.00 1.27 96 2.64 1.0m @ 1.68Au, 141Ag, 3.70AuEq.
- ----------------------------------------------------------------------------------------------------------------------------------
110.00 112.00 2.00 1.03 62 1.91 1.0m @ 1.02Au, 69Ag, 2.00AuEq.
- ----------------------------------------------------------------------------------------------------------------------------------
116.40 118.00 1.60 2.01 124 3.78 1.0m @ 2.53Au, 150Ag, 4.68AuEq.
- ----------------------------------------------------------------------------------------------------------------------------------
133.00 135.00 2.00 1.99 170 4.43 1.0m @ 3.02Au, 285Ag, 7.09AuEq.
- ----------------------------------------------------------------------------------------------------------------------------------
GS03DD-51 40.00 41.00 1.00 0.97 156 3.20
- ----------------------------------------------------------------------------------------------------------------------------------
65.40 69.00 3.60 2.24 101 3.68 1.0m @ 3.02Au, 120Ag, 4.73AuEq.
- ----------------------------------------------------------------------------------------------------------------------------------
GS03DD-52 79.55 79.90 0.35 1.27 44 1.90
- ----------------------------------------------------------------------------------------------------------------------------------
82.00 86.00 4.00 4.03 344 8.95 1.0m @ 5.47Au, 435Ag, 11.67AuEq.
- ----------------------------------------------------------------------------------------------------------------------------------
86.00 90.00 4.00 27.27 2250 59.41 1.0m @ 39.88Au, 3398Ag, 88.43AuEq.
- ----------------------------------------------------------------------------------------------------------------------------------
90.00 94.00 4.00 1.37 104 2.85 1.0m @ 2.57Au, 253Ag, 6.18AuEq.
- ----------------------------------------------------------------------------------------------------------------------------------
94.00 100.00 6.00 19.89 2242 51.91 1.0m @43.18Au, 4693Ag, 110.23AuEq.
- ----------------------------------------------------------------------------------------------------------------------------------
GS03DD-56 83.00 88.00 5.00 2.33 156 4.55 1.0m @3.47Au, 303Ag, 7.79AuEq.
- ----------------------------------------------------------------------------------------------------------------------------------
90.00 92.00 2.00 5.32 228 8.58 1.0m @7.12Au, 320Ag, 11.69AuEq.
- ----------------------------------------------------------------------------------------------------------------------------------
GS03DD-57 83.50 86.00 2.50 2.33 92 3.65 0.5m @ 4.77Au, 78Ag, 5.88AuEq.
- ----------------------------------------------------------------------------------------------------------------------------------
97.00 98.00 1.00 1.13 41 1.72
- ----------------------------------------------------------------------------------------------------------------------------------
114.00 116.00 2.00 1.70 40 2.28 1.0m @ 1.85Au, 43Ag, 2.31AuEq.
- ----------------------------------------------------------------------------------------------------------------------------------
117.00 119.00 2.00 2.57 149 4.70 1.0m @ 3.88Au, 232Ag, 7.19AuEq.
=================================================================================================================================
6
KEUNSAN PROSPECT DRILLING
FROM TO INTERV. AU AG AU EQ.
DDH (M) (M) (M) (G/T) (G/T) (G/T) PEAK ASSAYS (G/T)
- --------------------------------------------------------------------------------------------------------------------------
KN 016 50.00 51.00 1.00 2.72 31 3.16
- --------------------------------------------------------------------------------------------------------------------------
64.00 66.00 2.00 1.30 57 2.11 1.0m @ 1.72Au, 66Ag, 2.66AuEq.
- --------------------------------------------------------------------------------------------------------------------------
67.00 68.00 1.00 7.30 231 10.60
- --------------------------------------------------------------------------------------------------------------------------
69.00 70.00 1.00 1.15 26 1.52
- --------------------------------------------------------------------------------------------------------------------------
96.50 98.00 1.50 1.42 18 1.67 1.0m @2.00Au, 32Ag, 2.45AuEq.
- --------------------------------------------------------------------------------------------------------------------------
106.00 107.00 1.00 1.07 13 1.25
- --------------------------------------------------------------------------------------------------------------------------
115.00 116.00 1.00 2.15 50 2.86
- --------------------------------------------------------------------------------------------------------------------------
KN 017 51.00 51.50 0.50 13.85 531 21.44
- --------------------------------------------------------------------------------------------------------------------------
51.50 53.00 1.50 1.17 55 1.96 0.5m @ 1.75Au, 65Ag, 2.68AuEq.
- --------------------------------------------------------------------------------------------------------------------------
59.00 64.30 5.30 1.35 33 1.82 1.0m @ 3.27Au, 66Ag, 4.21AuEq.
- --------------------------------------------------------------------------------------------------------------------------
90.00 91.00 1.00 1.15 22 1.46
- --------------------------------------------------------------------------------------------------------------------------
136.50 138.00 1.50 1.53 332 6.27 0.6m @ 2.67Au, 605Ag, 11.31AuEq.
==========================================================================================================================
SAVAGE RIVER, TASMANIA:
The iron-ore market has been characterized by strong market conditions and tight
supply prompting steel mills to secure long-term iron ore pellet contracts. Most
of Australian Bulk Mineral's planned production over the next 3 - 4 years has
now been taken up in supply contracts.
Iron price negotiations have been protracted, with lumps and fines prices only
recently settled and pellet prices still to be finalized, though a 9 - 10%
increase now seems likely. This will help reduce the impact of a strengthening
Australian dollar, which has increased by approximately 15% against the US
dollar since the beginning of the year.
Total iron ore sales were slightly higher than the same quarter last year,
largely due to the timing of shipments, as all available production was sold.
An extended maintenance shut down in the mill caused concentrate production to
fall slightly below plan. It is anticipated that the shortfall will be recovered
in the second half of the year with improving grades from the South Deposit.
7
Mine operations progressed well with material movement slightly ahead of plan
due to high availabilities and utilization of equipment.
A redesign in North Pit Extension Three was completed during the quarter and is
expected to improve the continuity of ore supply over the mine's five year plan.
By reducing strip ratios and improved scheduling of the various cut back
sequences, an ore body model for the South Center Pit is nearing completion and
results will add to ore supply planning for the mine.
Four of the five furnaces at Port Latta have been converted to gas. Conversion
of the fifth furnace has been postponed indefinitely as four furnaces are
adequate for the current levels of production.
Pellet quality over the quarter has been consistent with the previous quarter.
BAKYRCHIK GOLD MINE, KAZAKHSTAN:
- - GOLD PRODUCTION FOR 2ND QUARTER, 2003:
April Nil
- --------------
May 508 oz
- --------------
June 413 oz
- --------------
Total 921 oz
==============
Oxide ore production resumed again in May with in excess of 900 oz being
produced during the second quarter. With the existing stockpiles anticipated to
be depleted around mid July, preparation for the production of concentrate from
the sulphide ores commenced.
In parallel with this operational aspect, work continued on the sulphide ore
feasibility and test work program. Test work has focussed on a roasting process,
but other processes including bacterial and chemical oxidation are also being
tested.
8
DEVELOPMENT:
MODI TAUNG GOLD PROJECT BLOCK 10, MYANMAR:
At the Modi Taung quartz-gold vein project in Block 10, exploration continued
through the quarter in order to increase tonnage of the potentially mineable
stopes. This increased from 50,000 tonnes early in the year to 70,000 tonnes in
late June.
Underground advances totalled 829 m, of which 648 m were on the Shwesin vein
system and 181 m on the Htongyi Taung veins. At Shwesin, work included opening
of Level 1200 to a 2.2 m width; this adit will continue the south-eastward
advance towards Momi Taung as the advance in Level 1225 nears the surface and is
suspended. On Level 1025 cross-cuts demonstrated the presence of a second vein
about 8 m east of the main vein. On the Htongyi Taung vein system, 750 m east of
Shwesin, drifting on the deepest (950 m) Level intercepted an eastern vein,
grading at an average of 310 g/t over 37 cm. Intercepts on the new 975 Level at
Htongyi Taung exhibit upward continuation of the two veins, which at this Level
contain visible gold. Test stoping above the Shwesin 1000 m Level from raise 2
defined a continuous vein along the hanging wall of the 25 m long undercut. This
vein averaged 29 g/t of gold and 41 cm in width. The first test cut, above the
undercut, is in progress. Waste rock is readily separated from the veins with
light blasting and arching of the back. Only 10% dilution occurred and explosive
consumption was less than expected. Daily production is expected to improve with
the use of longer drill steel and light blasting products. Diamond core drilling
continued with five inclined holes on the southeast projection of the Htongyi
Taung vein, and extended a minimum of 100 m in strike length beyond the then
adit face on the 950 m Level. Drill Hole 28 produced an assay of 170 g/t over 20
cm. Three short inclined holes (33 to 35) were drilled on the continuation of
the southeast projection of the vein in the suspended Theingi adits, north of
the Shwesin vein. In these holes shear zone intercepts containing quartz
fragments reflect the thick sandstone host rocks in which veins disperse and
dissipate. The drilling program was completed on the 23rd of May. During the
quarter a total of 1,393 m was drilled, bringing the overall total drilled to
5,385 m.
Surface exploration (grid mapping, soil sampling and trenching) and assessment
were undertaken on 12 quartz-gold vein prospects in Block 10 north of Modi
Taung. As a result, the Kankaung prospect is expected to justify exploration
aditing.
A revised and updated draft scoping study for development of the Modi Taung
veins was prepared in June for submittal to the Myanmar Mines Ministry.
OYU TOLGOI/TURQUOISE HILL:
PRE-FEASIBILITY AND SCOPING STUDIES:
The AMEC Ausenco Joint Venture was appointed to undertake advanced scoping
studies of the Oyu Tolgoi Project in the first quarter of 2003. The Oyu Tolgoi
scoping study was certified for ISO 14001 accreditation. Studies are on-going
and achievements for the current quarter are highlighted below.
9
UNDERGROUND MINING:
Minproc created a variety of mining and treatment schedules for open pit and
combined open pit/underground development scenarios. SRK Consulting continued
work on preliminary studies for the project including examination of potential
mining concepts for the Southwest ore body (that portion which would not be
removed by means of open pit mining) and the Far North ore body. Mining layouts
have been developed to encompass sub level caving and block caving.
Investigations have been underway to determine the most suitable locations for
an exploratory decline and an exploration shaft. It is likely that the decline
will be driven into the southern portion of the Far North deposit to provide
drill stations for definition drilling of the deposit for mine planning and
feasibility studies as well as bulk samples for advanced metallurgical test
work. It is also likely that the shaft will be sunk on the northeast side of the
Far North Extension to expedite entry to the high grade zones in the Far North
Extension for definition drilling and bulk sampling. By utilizing a shaft, the
time lag between extending the decline from the southern portion to the Far
North Extension can be shortened significantly.
METALLURGICAL TEST WORK:
A pre-feasibility level test program with PQ half core samples from the
Southwest and Central Oyu has commenced. Test work on material from the Far
North Oyu has been conducted using quarter core samples.
The Far North samples represent the southern portion of the currently identified
resource. Larger diameter PQ core samples are required from the Far North and
will be included in the pre-feasibility program at a later date.
The HQ & NQ quarter samples from the Far North were divided into two ore types,
chalcopyrite and chalcocite. There is the presence of both arsenic and fluorine
in the final copper concentrate from the Far North ore. A test utilising a
caustic thiosulphate and sulphide regime proved to be successful in removing 95%
of the arsenic. Tests are being conducted to evaluate the ability to remove
fluorine from the concentrate as well as to quantify the abundance of fluorine
bearing minerals in the concentrate and the content of fluorine contained within
these minerals.
Results were obtained from preliminary batch flotation tests on the Far North
quarter samples. The results, summarized in the table below, were performed on
composite samples from diamond drill holes 355 and 367A. These samples
represented the host lithologies and copper mineralization within the deposit.
10
SGS LAKEFIELD FLOTATION TEST RESULTS:
INTERVALS TEST GRADE RECOVERY
----------------------------------------------------------------------------------------
SAMPLE COPPER GOLD COPPER GOLD
NUMBER DRILL HOLE FROM TO METRES PRODUCT (%) (G/T) (%) (%)
- ----------------------------------------------------------------------------------------------------------------
FNE1 OTD355 868 898 30 FEED 1.82 0.18
- ----------------------------------------------------------------------------------------------------------------
CONCENTRATE 30.6 2.58 87.0 73.7
- ----------------------------------------------------------------------------------------------------------------
FNE2 OTD355 898 1002 104 FEED 2.43 0.10
- ----------------------------------------------------------------------------------------------------------------
CONCENTRATE 33.6 1.02 92.3 71.9
- ----------------------------------------------------------------------------------------------------------------
FNE3 OTD367A 830 1084 254 FEED 1.58 NA
- ----------------------------------------------------------------------------------------------------------------
CONCENTRATE 30.6 NA 89.7 NA
- ----------------------------------------------------------------------------------------------------------------
FNE4 OTD367A 1084 1154 70 FEED 5.72 1.85
- ----------------------------------------------------------------------------------------------------------------
CONCENTRATE 53.4 17.2 96.9 96.6
================================================================================================================
The quarter core sample test program tested the dependence of rougher copper
recovery to grind. It was determined that the rougher performance is improved at
finer grinds but the chalcopyrite ore has a steeper dependence above 200
microns. Cycle tests were conducted where chalcopyrite ore did not show any
change in metallurgical performance as a result of a coarsening of the primary
grind. The chalcocite sample had slightly inferior performance at the coarser
primary grind.
The PQ half core sample test program has tested four ore types from Central Oyu
and three ores from Southwest Oyu. The sample composites from the Southwest Oyu
samples were evaluated for metallurgical performance as a function of primary
grind. Locked cycle tests were also performed at the selected combination of
primary grind and regrind.
Sample one and three from Southwest Oyu were similar and showed a linear
dependence of copper recovery to grind from 74 to 200 microns. The second sample
was insensitive to grinds between 74 and 150 microns but at coarser grinds up to
300 microns the copper rougher recovery degraded rapidly.
The samples tested for Central Oyu showed little rougher recovery sensitivity
from 60 to 150 microns. At 150 microns, the copper rougher recovery decreased.
The exception to this was the final sample from Central Oyu that exhibited a
more pronounced decrease in rougher recovery at 100 microns.
The larger particle size material has been prepared for grinding tests
specifically designed to provide engineering parameters for semi-autogenous
grinding ("SAG"). The ores from both Southwest and Central Oyu have been
determined not to be abrasive. The autogenous work indexes range from 17-19
kWh/t for Southwest and 9 - 13 kWh/t for Central ores. Bond rod mill and ball
mill work indexes follow the same trend with Southwest ranging from 17 - 20
kWh/t and Central from 10-13 kWh/t. The SAG Power Index (SPI) determinations
show the same trend as the autogenous and bond work indexes.
11
ACID ROCK DRAINAGE ("ARD"):
A study was commissioned to determine the ARD potential of the mine rock and
waste materials and to advise on the management of waste materials. Phase one of
this study was completed in May 2003. To date, samples from Southwest Oyu and
Central Oyu have been tested for ARD potential. Results have shown that 72% of
host lithology samples from Central Oyu and 46% of host lithology samples from
Southwest Oyu were classified as potentially acid forming (PAF). All three
tailings samples tested were classified as PAF. At the time of development and
production the appropriate management strategies will be utilized in order to
minimize the risk of acid generation and associated ARD impacts. As the project
advances further ARD studies will be conducted.
GROUNDWATER INVESTIGATIONS:
Drilling for groundwater resources to meet the expected development and
production water requirements has continued throughout this quarter. Drilling in
the Galbyn Gobi area has been met with success. The Galbyn Gobi region along
with the Javkhlant areas host the largest aquifers identified by Aquaterra
(Consultant retained by Ivanhoe for groundwater investigations). An assessment
of the aquifers discovered to date suggests that they could provide sufficient
water to meet the mine process requirements of at least a 50,000 tonne per day
mining operation. Water exploration continues and drilling of test holes for
aquifer testing will commence during the third quarter of this year.
TRANSPORTATION:
Assessment of routes for roads and railways continued during the quarter.
Chinese authorities in the province of Inner Mongolia issued formal approval
announcing the construction of an upgraded 226-kilometre highway that will
provide a direct highway link between the Mongolian border crossing, 80
kilometres south of Ivanhoe's Oyu Tolgoi project, and the Trans-China Railway
system.
The highway, which is scheduled to be completed before the end of this year,
will provide access for heavy construction equipment and supplies to Oyu Tolgoi
and can subsequently be used to send copper and gold concentrates from Oyu
Tolgoi to smelters and consumers in China.
Ivanhoe has initiated discussions with Mongolian and Chinese government
authorities to extend the highway the final 80 kilometres to the Oyu Tolgoi
project site.
12
EXPLORATION:
Ivanhoe continued to increase its landholding throughout Mongolia during the
second quarter of 2003. Ivanhoe now holds 111 exploration licences covering
9,560,586 hectares (95,605.86 km2) and has applied for another 3 licences
totalling 243,111 hectares (2,431.11 km(2)).
TURQUOISE HILL/OYU TOLGOI:
Exploration drilling continues and has been accelerated, utilizing thirteen
drill rigs to delineate the extent of the Far North Zone. To date, the Far North
has been extended at least 800 metres beyond the northern limit of the area used
to calculate the resource estimate prepared by AMEC E&C Services Limited in the
first quarter of 2003. A revised resource estimate, to include the latest
results from the Far North, was announced on July 21, 2003.
The north-south strike length of the Far North Zone now extends more than two
kilometres. The estimated width of the Far North Zone currently ranges between
200 and 800 metres. The deposit remains open for expansion along strike, margins
and depth.
Diamond core drilling is currently focused on delineating the Far North
Extension zone. Recent significant assay results include 144 metres at 4.41%
copper and 1.61 g/t gold in Hole 367A, and 66 metres at 3.52% copper and 1.88
g/t gold in Hole 409. Hole 367E encountered 204 metres grading 3.73% copper and
0.39 g/t gold. Hole 367E is 200 metres east of 367A and 100 metres east of 367B
which intersected 108 metres grading 3.73% copper and 0.26 g/t gold. Hole 367D,
150m east of 367E intersected 232m grading 1.06% copper and 0.08 g/t gold.
Assays are pending for Hole 367F drilled midway between 367A and B. Hole 367F
has intersected an additional 250 metres of strong copper mineralization
starting at 896m and currently remains in high-grade copper at a depth of 1,400
metres after encountering a post mineral dyke from 1162m to 1296m. Six high
capacity drill rigs are currently drilling deep holes utilizing the navi drill
system which allows multiple holes to be drilled from a single mother hole. For
example, OTD367 has now had 6 holes fanned from a depth of 420m with a
subsequent net cost savings of approximately US$20,000 per daughter hole.
In addition to delineating the high-grade core, Ivanhoe continues to explore for
a porphyry intrusion that could lie beneath the high-grade Far North Extension.
An induced polarization survey indicates that this zone may extend for 1 km
beyond Hole 367, where it appears to be cut off by a major cross-structure near
the northern boundary of the concession. Drilling north of the cross-structure
intersected a large, unmineralized, granodiorite complex that could be a
potential source of water for the project.
Core drilling on the southern half of Far North is also continuing utilizing
smaller capacity LY44 drill rigs. Infill holes are being drilled on selected
sections to provide better definition of the hanging wall and footwall contacts
and where hole spacing exceeds 150m to 200m, as a precursor to indicated
resources. Hole 423 encountered 240m grading 1.80% copper and 0.06 g/t gold
including 88m grading 2.88% copper and 0.12g/t gold. Hole 442, drilled 250m up
dip on the same section intersected 360m grading 1.43% copper and 0.03g/t. These
two holes were drilled up and down
13
dip of OTRCD340 which had previously drilled 270m grading 1.77% copper and 0.08
gold including 78m of 3.12% copper and 0.14g/t gold.
Geotechnical drilling has also begun with four core holes drilled on the western
side of Far North to evaluate ground conditions for a decline. The holes
encountered generally poor ground conditions including moderate to strong
mineralization. Geotech drilling has now shifted to the east side of the Far
North where 3 holes are now in progress. Here the rocks are sediments and basalt
with little chance of encountering copper mineralization. While sections of the
sedimentary rocks are broken and faulted, the preferred route for the decline
appears to be on the eastern side. Drilling for the Far North Extension shaft
will commence in July.
At Southwest Oyu, two LY44 rigs are drilling geotech holes to evaluate future
pit wall stabilities.
Expenditures for the quarter were approximately US$7.6 million.
SUBSEQUENT EVENTS:
As of July 21, 2003 AMEC provided an updated inferred resource estimate to
include holes drilled in the Far North Extension. AMEC's February, 2003,
inferred resource estimate for the Far North deposit, using a 0.60% copper
equivalent cut-off grade, was 489 million tonnes grading 1.08% copper and 0.07
g/t gold, or 5.2 tonnes of copper and 1.17 million ounces of gold. The Far North
now contains an estimated inferred resource of 618 million tonnes grading 1.19%
copper and 0.10 g/t of gold, at a 0.60% copper equivalent cut off, containing
7.4 million tonnes of copper and 2.0 million ounces of gold.
FAR NORTH OYU ZONE - INFERRED RESOURCES JULY 2003 VS. FEBRUARY 2003
COPPER
DATE OF CU. EQ. CUT- TONNES COPPER GOLD (MILLION GOLD
ESTIMATE OFF GRADE (%) (MILLIONS) (%) (G/T) TONNES) (OUNCES)
- -------------------------------------------------------------------------------------------------------
July 21, 2003 > = 2.00 68.8 2.92 0.28 2.01 620,000
-------------------------------------------------------------------------------------
> = 0.60 618 1.19 0.10 7.38 1,950,000
- -------------------------------------------------------------------------------------------------------
Feb. 26, 2003 > = 2.00 29.3 2.69 0.19 0.79 175,000
-------------------------------------------------------------------------------------
> = 0.60 489 1.08 0.07 5.26 1,170,000
=======================================================================================================
The current Far North inferred resource estimate incorporates results from 100
drill holes where as the February estimate incorporated results from 41 drill
holes. A detailed analysis of the current estimated inferred mineral resources
for the Far North Zone, at various copper equivalent cut-off grades, are
provided in the following table.
14
FAR NORTH OYU ZONE - INFERRED RESOURCES JULY 2003
(VARIOUS CU EQUIVALENT CUT-OFF GRADES)
COPPER CONTAINED METAL
CU. EQ. CUT- GOLD EQUIVALENT -----------------------------
OFF GRADE (1) COPPER GRADE GRADE GRADE COPPER GOLD
(%) TONNES (%) (G/T) (%) (TONNES) (OUNCES)
- -----------------------------------------------------------------------------------------------------------------
>= 3.50 16,400,000 3.74 0.45 4.03 610,000 240,000
- -----------------------------------------------------------------------------------------------------------------
>= 3.00 34,900,000 3.36 0.38 3.60 1,170,000 430,000
- -----------------------------------------------------------------------------------------------------------------
>= 2.50 55,700,000 3.09 0.32 3.29 1,720,000 570,000
- -----------------------------------------------------------------------------------------------------------------
>= 2.00 68,800,000 2.92 0.28 3.10 2,010,000 620,000
- -----------------------------------------------------------------------------------------------------------------
>= 1.50 118,600,000 2.35 0.20 2.48 2,790,000 750,000
- -----------------------------------------------------------------------------------------------------------------
>= 1.25 228,700,000 1.85 0.14 1.94 4,240,000 1,010,000
- -----------------------------------------------------------------------------------------------------------------
>= 1.00 326,800,000 1.62 0.12 1.70 5,300,000 1,260,000
- -----------------------------------------------------------------------------------------------------------------
>= 0.90 357,800,000 1.56 0.12 1.63 5,570,000 1,360,000
- -----------------------------------------------------------------------------------------------------------------
>= 0.80 432,600,000 1.43 0.11 1.50 6,160,000 1,540,000
- -----------------------------------------------------------------------------------------------------------------
>= 0.70 529,800,000 1.29 0.10 1.36 6,850,000 1,740,000
- -----------------------------------------------------------------------------------------------------------------
>= 0.60 618,400,000 1.19 0.10 1.26 7,380,000 1,950,000
- -----------------------------------------------------------------------------------------------------------------
>= 0.50 824,200,000 1.02 0.09 1.08 8,370,000 2,490,000
- -----------------------------------------------------------------------------------------------------------------
>= 0.40 1,157,700,000 0.84 0.09 0.89 9,710,000 3,200,000
- -----------------------------------------------------------------------------------------------------------------
>= 0.30 1,610,500,000 0.69 0.08 0.74 11,110,000 3,990,000
=================================================================================================================
*1) Copper equivalent cut-off grades have been calculated using assumed metal
prices (US$0.80/lb. for copper and US$350/oz. for gold); %Cu eq. = %Cu + Au
(g/t) x (11.25/17.64).
2) Copper equivalent grades have been calculated using assumed metal prices of
US$350 per ounce gold and US$0.80 per pound copper. The contained gold and
copper represent estimated contained metal in the ground and have not been
adjusted for the metallurgical recoveries of gold and copper. The
determination of an adjustment factor to account for differences in relative
metallurgical recoveries between gold and copper will depend upon the
completion of definitive metallurgical testing.
3) Resource classifications conform to CIM Standards on Mineral Resources and
Reserves referred to in National Instrument 43-101. Mineral resources that
are not reserves do not have demonstrated economic viability. An indicated
mineral resource is that part of a mineral resource for which quantity and
grade can be estimated with a level of confidence sufficient to allow the
application of technical and economic parameters to support mine planning
and evaluation of the economic viability of the deposit. An inferred mineral
resource is that part of a mineral resource for which quantity and grade can
be estimated on the basis of geological evidence and limited sampling and
reasonably assumed, but not verified.
AMEC now estimates that the Oyu Tolgoi Project contains estimated inferred
resources totalling 2.4 billion tonnes grading 0.61% copper and 0.14 g/t gold,
at a 0.30% copper equivalent cut-off, containing approximately 14.7 million
tonnes of copper and 11.2 million ounces of gold. This represents an increase of
45% in the amount of copper and a 24% increase in the amount of gold since
AMEC's previous estimate issued in February this year. In addition, 509 million
tonnes of indicated resources are estimated in the Southwest Zone grading 0.4%
copper and 0.59 g/t gold, containing approximately 2.1 million tonnes (4.5
billion pounds) of copper and 9.7 million ounces of gold at the same cut-off
grade.
15
TURQUOISE HILL RESOURCE TABLE BY ZONE
(BASED ON A 0.30% COPPER EQUIVALENT CUT-OFF)*
CONTAINED METAL
COPPER -----------------------------------------
RESOURCES COPPER GOLD EQUIV. COPPER GOLD COPPER EQUIV.
(MILLION GRADE GRADE GRADE (MILLION (MILLION (MILLION
ZONE TONNES) (%) (G/T) (%) TONNES) OUNCES) TONNES)(2)
- -----------------------------------------------------------------------------------------------------------
SOUTHWEST ZONE
- -----------------------------------------------------------------------------------------------------------
Indicated 508.9 0.40 0.59 0.78 2.06 9.69 3.98
- -----------------------------------------------------------------------------------------------------------
Inferred 290.8 0.32 0.50 0.64 0.92 4.70 1.86
- -----------------------------------------------------------------------------------------------------------
SOUTH ZONE
- -----------------------------------------------------------------------------------------------------------
Inferred 270.3 0.39 0.13 0.48 1.07 1.10 1.28
- -----------------------------------------------------------------------------------------------------------
CENTRAL ZONE
- -----------------------------------------------------------------------------------------------------------
Inferred 236.8 0.67 0.18 0.79 1.59 1.36 1.86
- -----------------------------------------------------------------------------------------------------------
FAR NORTH ZONE
- -----------------------------------------------------------------------------------------------------------
Inferred 1,610.5 0.69 0.08 0.74 11.11 3.99 11.93
- -----------------------------------------------------------------------------------------------------------
GRAND TOTAL:
INDICATED 508.9 0.40 0.59 0.78 2.06 9.69 3.98
- -----------------------------------------------------------------------------------------------------------
GRAND TOTAL:
INFERRED 2,408.4 0.61 0.14 0.70 14.69 11.15 16.90
===========================================================================================================
UPDATED TURQUOISE HILL RESOURCE TABLE BY DEPOSIT
(BASED ON A 0.60% COPPER EQUIVALENT CUT-OFF).*
CONTAINED METAL
-----------------------------------
COPPER COPPER
RESOURCES COPPER GOLD EQUIV. COPPER GOLD EQUIV.
(MILLION GRADE GRADE GRADE (MILLION (MILLION (MILLION
ZONE TONNES) (%) (G/T) (%) TONNES) OUNCES) TONNES)(2)
- ----------------------------------------------------------------------------------------------------------------
SOUTHWEST ZONE
- ----------------------------------------------------------------------------------------------------------------
Indicated 267.0 0.53 0.86 1.08 1.42 7.35 2.88
- ----------------------------------------------------------------------------------------------------------------
Inferred 126.6 0.44 0.68 0.87 0.55 2.78 1.10
- ----------------------------------------------------------------------------------------------------------------
SOUTH ZONE
- ----------------------------------------------------------------------------------------------------------------
Inferred 48.4 0.61 0.26 0.77 0.29 0.40 0.37
- ----------------------------------------------------------------------------------------------------------------
CENTRAL ZONE
- ----------------------------------------------------------------------------------------------------------------
Inferred 147.5 0.84 0.24 0.99 1.24 1.14 1.46
- ----------------------------------------------------------------------------------------------------------------
FAR NORTH ZONE
- ----------------------------------------------------------------------------------------------------------------
Inferred 618.4 1.19 0.10 1.26 7.38 1.95 7.77
- ----------------------------------------------------------------------------------------------------------------
GRAND TOTAL: INDICATED 267.0 0.53 0.86 1.08 1.42 7.35 2.88
- ----------------------------------------------------------------------------------------------------------------
GRAND TOTAL: INFERRED 940.9 1.01 0.21 1.14 9.50 6.26 10.71
================================================================================================================
* The resource estimates for the Southwest, South and Central deposits were
prepared by AMEC E&C Services Limited, of Canada, in February, 2003.
16
KHARMAGTAI AND OVOOT HYAR PROJECTS:
A second phase of diamond drilling was completed at the Gold Hill prospect and a
first phase of diamond drilling completed at the Chun Prospect during the second
quarter of 2003. Work at the Copper Hill, White Vein, Eagle and Falcon Prospects
was suspended until later in the year, allowing field teams to concentrate on
regional reconnaissance during the summer months.
Expenditures at Kharmagtai were approximately US$1.2 million, of which
approximately US$0.9 million was spent directly on field mapping, diamond
drilling, trenching and associated assaying.
GOLD HILL PROJECT:
Thirty seven diamond holes totalling 11,762 metres have been drilled at the Gold
Hill Prospect, of which 19 holes totalling 5,528 metres were drilled in the
second quarter of 2003. Holes were drilled off mainly 80 or 120 metres centres
at dips of -45(degree) to -70(degree). Highlights of second quarter results
include:
FROM TO INTERVAL GOLD COPPER
HOLE (M) (M) (M) (G/T) (%)
================================================================================================
KHD187 22 56 34 0.45 0.53
================================================================================================
KHD226 210 256 46 0.46 0.35
================================================================================================
KHD229 104 132 28 0.43 0.43
================================================================================================
KHD230 38 70 32 0.46 0.57
================================================================================================
KHD233 20 54 34 0.36 0.48
================================================================================================
KHD240 3 248 245 2.48 0.75
================================================================================================
KHD241 150 214 64 1.24 0.53
================================================================================================
KHD242 94 138 44 0.60 0.44
================================================================================================
KHD246 10 44 34 0.66 0.54
================================================================================================
KHD247 30 112 82 0.55 0.64
================================================================================================
KHD248 206 244 38 2.34 0.77
================================================================================================
KHD250 224 266 42 1.69 0.63
================================================================================================
KHD256 146 190 44 1.35 0.48
================================================================================================
Drilling during the second quarter of 2003 has indicated that the gold-copper
mineralized system at Gold Hill is much larger than previously thought and is
still open towards the northwest. Economic and highly anomalous mineralization
crops out at surface, or subcrops beneath shallow Quaternary cover, over an area
of approximately 300 metres by 450 metres and extends to a depth of at least 500
metres. Several vertical high grade pipes are present within the broader zone of
mineralization, one of which remains largely untested below 50 metres.
Copper-gold mineralization at Gold Hill is associated with a dioritic intrusive
complex
17
consisting of microdiorites, diorites, pyroxene-hornblende diorites, quartz
diorites and monzodiorites. The wallrocks are hornfelsed tuffaceous sediments
which have undergone low grade regional metamorphism. The higher grade
copper-gold mineralization is associated with well developed quartz +
chalcopyrite vein stockworks which locally comprise 5-15 % of the rock by
volume. Individual veins are typically between 5-20 mm wide and consist of
granular quartz with indistinct sulphide-rich centres. Alteration associated
with these veins has been largely obscured by later alteration events, but was
probably of a moderate intensity potassic type comprising albite + quartz +
biotite + epidote + chalcopyrite + pyrite +/- magnetite.
Hydrothermal breccias have been intercepted in some Gold Hill drill holes and
contain up to 10% matrix pyrite, chalcopyrite and tourmaline. They occur as
pipe-like bodies metres to tens of metres in thickness and their potential
remains largely untested. Younger tourmaline breccias containing mostly pyrite
are also present and appear to postdate the main copper mineralizing event.
Recent work at Gold Hill has focused on better understanding the structural
controls on mineralization and the effects of post-mineralization faulting. This
has indicated that several of the higher grade zones are offset by
west-northwest/east-southeast trending faults and that mineralization remains
open to the northwest.
A third phase of diamond drilling totalling approximately 5,000 metres is
planned for the fourth quarter of 2003 to test the strike and depth extension of
mineralization. Further work is also required to test coincident chargeability
and magnetic anomalies, which occur proximal to Gold Hill and display similar
geophysical signatures. Most of these anomalies occur beneath Quaternary and
Recent cover and will require drill testing.
CHUN PROJECT:
A detailed geological mapping program of the Chun Prospect was completed during
the second quarter of 2003. As part of this program 21 trenches totalling 8,513
metres and eight diamond holes totalling 2,400 metres were completed. The
trenches and diamond drill holes were designed to test an area of highly gold
anomalous quartz vein float and coincident circular magnetic high.
Mapping of limited outcrop and continuous trench exposure indicate that the Chun
Prospect comprises a series of granodiorite, diorite, quartz diorite and
microdiorite intrusives that have been emplaced into a volcanoclastic sandstone
and siltstone package. Mineralization is characterised by several broadly
circular to northeast-southwest trending zones of malachite and
hematite-stained, quartz +/- pyrite +/- magnetite +/- chalcopyrite stockwork
veins, which crop out over several hundred square metres. Rock-chip grab samples
of veined material routinely assayed over 0.5 g/t gold. Highly gold-anomalous
quartz-tourmaline breccias are locally developed. Post-mineralization
north-south and northeast-southwest trending latite, trachyte and monzonite
dykes are common in the northwest of the prospect.
Diamond drill holes were designed to test the shallow depth extension of surface
mineralization and were drilled at -45(degree) to depths of between 250 metres
to 425 metres. All holes intercepted a variety of dioritic, granodioritic and
quartz dioritic intrusives, localised quartz diorite breccias and narrow
intervals of volcanoclastic sandstone/siltstone. Patchy mineralization was
encountered as weakly developed quartz +/- chalcopyrite +/- pyrite +/- magnetite
vein stockworks hosted in granodiorites and diorites. Occasional breccias and
shears are infilled with quartz + blebby pyrite +/-
18
magnetite +/- minor tourmaline +/- minor chalcopyrite. Unmineralized latite,
trachyte and monzonite dykes are common in some holes.
Gold and copper assay results from trenches and diamond drill holes were of low
significance and further work is not planned at the Chun Prospect. However,
immediately north of the Chun Prospect a significant chargeability high occurs
beneath Quaternary cover, which will require drill testing at a later date.
SARAN UUL PROJECT:
Geological mapping of the Saran Uul Project during the fourth quarter of 2002
and the first quarter of 2003 identified a porphyry copper target comprising a
series of monzodiorite, granodioirite, hornblende-biotite granodiorite and
diorite stocks. Stockwork quartz veins are variably developed within the
intrusives and copper and iron oxides are common throughout the prospect. Assays
from over 100 rock chip grab samples defined an area of approximately 900 metres
by 450 metres averaging 0.40 g/t gold, 0.70 % copper and 90 g/t molybdenum.
Within this zone is a higher grade core of approximately 250 metres by 400
metres where rock chips assays averaged 1.1 g/t gold.
A gradient array induced polarization survey totalling 220 line kilometres was
completed during the first quarter of 2003. The survey defined a broadly
east-west trending chargeability up to 350 metres wide and 1.2 kilometres in
length, which occurs coincident with the main zone of copper oxide and gold
anomalism.
Twenty five trenches totalling 17,413 metres and 13 diamond drill holes
totalling 3,844 metres were completed at Saran Uul during the second quarter of
2003. The trench program comprised a grid of north-south and east-west oriented
trenches which were designed to test areas with anomalous surface geochemistry
and geology. Samples were collected as continuous five metre composites and
assayed for gold, copper and molybdenum. Several zones with abundant copper and
iron oxides were identified in some trenches and returned anomalous gold and
copper assays. However, overall trench assay results were of low significance.
Diamond drill holes were designed to test the depth extension of mineralization
associated with surface copper oxides, gold and copper anomalous rock-chip grab
and trench samples, and IP chargeability anomalies. Holes were drilled off 120
metre and 240 metre centres at -50(degree) to depths of between 200 metres to
340 metres. All holes intercepted a sequence of weakly to moderately mineralized
monzodiorites, granodiorites, diorites and occasional tuffaceous sandstones. The
basal contact of the intrusives occurs at down hole depths of between 250 metres
to 350 metres and is defined by sheared and fractured coal beds, carbonaceous
siltstone and sandstones, and interbedded siltstones, sandstone, conglomerates
and ash-fall tuffs. That these sediments are unmineralized, show no evidence of
hornfels development and are in sheared contact with the overlying intrusives,
indicates a thrust contact.
Mineralization within the intrusives is characterized by rare to locally common
quartz + chalcopyrite +/- molybdenite veins and fracture fill, disseminated
chalcopyrite and rare quartz + K-feldspar + dolomite + sulphide veins. Assay
results were generally anomalous and the more significant intercepts include:
150 m @ 0.08 g/t Au and 0.37 % Cu (16-166 metres: SUD001)
64 m @ 0.06 g/t Au and 0.44 % Cu (30-94 metres: SUD002)
80 m @ 0.07 g/t Au and 0.35 % Cu (22-102: SUD007)
19
Drilling at Saran Uul has identified a weak copper mineralized intrusive package
that has been thrust over unmineralized sediments. Further work is required to
locate the roots of this system. In addition, Ivanhoe holds a large area of
contiguous licences around the Saran Uul prospect which are highly prospective
for economic mineralization. Detailed ground follow-up of these licenses is
planned for the last quarter of 2003.
Expenditures at Saran Uul during the second quarter of 2003 were approximately
US$600,000, of which approximately US$450,000 was spent on field mapping and
sampling, diamond drilling, trenching and associated assaying.
OYUT ULAAN PROJECT:
The Oyut Ulaan project comprises a variety of targets which extend over an area
of approximately 12 kilometres by 6 kilometres. These include a copper
mineralized tourmaline-breccia pipe complex (Oyut Ulaan), an extensive area of
colluvium with abundant copper oxides and gold anomalous quartz vein float
(Stariy), several gold-copper anomalous quartz vein stockwork zones (Stockwork,
Southeastern and Diorite Trench), a series of chargeability anomalies with
peripheral magnetic highs and scattered subcrop hosting gold anomalous quartz
veins (Hulan, Hulan East, Hulan Far East and Temee) and a gold-copper anomalous
magnetite skarn (Nowie).
Detailed geological mapping and surface rock chip sampling was completed during
September and October 2002. This program included 890 kilometres of ground
magnetics and 700 line kilometres of gradient array induced polarization.
Expenditures for this phase of the exploration were approximately US$100,000.
Diamond drilling commenced at Oyut Ulaan in June 2003 and is ongoing. Drilling
to date has focused on the Stockwork prospect which is characterized by a
broadly east-west trending zone of diorite and monzodiorite, which hosts a well
developed stockwork of malachite-stained, quartz +/- chalcopyrite +/- bornite
veins. The surface expression of the mineralization is approximately 300 metres
by 30 metres and is associated with a moderate intensity chargeability and
magnetic anomaly. Assay results of rock chip grab samples and select vein phases
assayed up to 5 g/t gold.
Several shallow drill holes have been completed and have intercepted weakly to
moderately developed quartz + chalcopyrite + bornite +/- magnetite vein
stockworks over downhole intervals of 30 metres to 50 metres. Individual veins
are between two to ten millimetres wide and have sulphide rich centres. Assay
results are pending.
Approximately US$300,000 was spent at Oyut Ulaan during the second quarter of
2003, of which almost US$230,000 was spent directly on diamond drilling and
associated assaying.
SHUTEEN PROJECT:
The Shuteen Project is located approximately 500 kilometres south-southeast of
Ulaan Bataar and occurs within the Southern Mongolian Mineralized belt that
hosts Oyu Tolgoi. It is characterised by an extensive, broadly north-south
trending silica-clay lithocap, with a strike length of over six kilometres and
width of up to one kilometre. Multiphase, strongly hematitic, matrix to clast
supported breccias form a series of knobbly outcrops to the south of the main
lithocap and may represent a cluster of breccia pipes.
20
Detailed mapping and rock-chip grab sampling of the Shuteen Prospect was
conducted over several periods during the third and fourth quarters of 2002. As
part of this program trenches were excavated to better define geology and
structure in several key areas blanketed by shallow Quaternary cover. A total of
1,800 line kilometres of ground magnetics and 1,000 kilometres of gradient array
induced polarization geophysics were also completed. The program identified a
series of broadly east-west trending chargeability highs which occur beneath the
lithocap coincident with areas of subdued field magnetic response. Assay results
from rock chip and trench samples were generally highly anomalous in molybdenum.
Overall gold and base metal assay results were not significant.
Four diamond drill holes totalling almost 2,000 metres were completed in the
second quarter of 2003. Two holes targeted the depth extension of the southern
hematitic breccias and two holes were designed to test chargeability anomalies
beneath the silica-clay lithocap. All holes drilled beneath areas off highly
anomalous molybdenum rock-chip geochemistry and intercepted sulphides.
An andesitic volcanoclastic sequence comprising autobreccited lavas, tuff
breccias, lapilli tuffs, ash-fall tuffs and tuffaceous sandstones and siltstones
was intercepted in all drill holes. Porphyritic andesite dykes and sills may be
present. Weak to strong silica - clay - pyrite +/- sericite +/- alunite is the
dominant type of alteration and is pervasive in the more porous auto-brecciated
and tuffaceous interval. Very narrow (<20 centimetres) zones of vughy silica
occur rarely. Pyrite is the dominant sulphide and occurs as fine disseminations,
fracture fill and as a matrix infill in brecciated units. Chalcopyrite and
bornite occur in trace amounts.
Diamond drill core was assayed as two metre composites for gold, copper and
molybdenum. Assay results from all holes were of low significance and no further
work is planned for the immediate future at Shuteen.
Approximately US$1 million has been spent at Shuteen to date, of which
approximately US$400,000 was spent in the second quarter of 2003.
GENERAL RECONNAISSANCE, MONGOLIA:
Detailed prospect mapping and rock-chip sampling of several high priority
targets commenced during the second quarter of 2003 and has been completed at
the Nergui Project.
The Nergui Project is located approximately 1,000 kilometres west-northwest of
Ulaan Bataar and was first visited by Ivanhoe in 2001 as part of a regional
helicopter-based reconnaissance survey. Two prospects have so far been
identified: Central Nergui and South Nergui.
CENTRAL NERGUI comprises an east-west trending zone with a strike length of
approximately four kilometres and a width of up to 500 metres. Mineralization is
hosted in a series of coarsely crystalline gabbroic bodies and occurs in outcrop
and subcrop as malachite and lesser azurite. Disseminated and fracture filling
chalcopyrite and pyrite were noted in some samples.
The SOUTH NERGUI prospect is characterized by a series of granitic stocks which
have intruded into a medium grained granodiorite. Individual stocks are up to
500 metres
21
by 300 metres and are locally biotite - magnetite - K-feldspar altered. Minor
chalcopyrite - pyrite +/- bornite is present in several less altered samples.
Expenditures at Nergui during the second quarter of 2003 were approximately
US$8,000. Further work is planned once assay results have been received.
KOREA:
Exploration activities are currently focused on the nearby Kunsan and Gasado
Island prospects, with an emphasis on delineating resources that could be
processed in the Eunsan mill.
CHINA:
Ivanhoe is exploring for gold, copper and platinum-group metals (PGMs) in China
primarily through a joint venture with Pacific Minerals Inc. Ivanhoe has the
right to participate in the development of Pacific's 217 Gold Project in Inner
Mongolia, the JBS Platinum Palladium Project in Yunnan Province, and a right of
first refusal to participate in any new mineral projects discovered by Pacific
in China (excluding Anhui Province). In each case, Ivanhoe will have the right
to gain the majority interest in the property by advancing it to production.
VIETNAM:
Ivanhoe holds a minority interest in a gold exploration joint venture in Vietnam
with Olympus Pacific Minerals, a public Canadian mineral exploration company,
and Zedex Ltd. a New Zealand registered investment company. The Joint Venture's
principal project is the Phuoc Son gold project, in northwestern Quang Nam
Province, Central Vietnam.