Ivanhoe Mines announces record copper production and operating profit as part of 2004 year-end financial results
March 23 2005 - 8:42AM
PR Newswire (US)
Ivanhoe Mines announces record copper production and operating
profit as part of 2004 year-end financial results TORONTO, March 23
/PRNewswire-FirstCall/ -- Ivanhoe Mines today reported its
financial results for the year ended December 31, 2004. Major
factors in the 2004 results included a record operating profit from
mining operations of US$27.5 million, achieved largely through
record production at the Monywa Copper Project joint venture and
strong metal prices. Exploration spending of US$98.2 million was
primarily incurred on the ongoing Oyu Tolgoi (Turquoise Hill)
copper and gold mine development project, and other projects, in
Mongolia. The company recorded a net loss of US$89.6 million (or
US$0.32 per share) in 2004, compared to a net loss of US$73 million
(or US$0.30 per share) in 2003. Ivanhoe is continuing to follow a
conservative accounting policy of expensing all exploration,
development and engineering costs. Significant advances - On
January 18, 2005, Ivanhoe common shares began trading on the New
York Stock Exchange (NYSE) under the ticker symbol IVN. - In
February, 2005, Ivanhoe completed the sale of its Savage River iron
ore mine in Australia. The purchase price consisted of two initial
payments totalling US$21.5 million, plus a series of contingent,
escalating-scale annual payments based on the annual Nibrasco/JSM
pellet price. The escalating-scale payments are to be made over
five years, beginning March, 2006. For the year starting April 1,
2005, the iron ore pellet price benchmark was increased by 71.5%,
to approximately US$65 per tonne. As a result, Ivanhoe expects to
receive cumulative payments totalling approximately US$44 million
by the end of March, 2006. If the US$65 a tonne benchmark price and
the Savage River pellet production are maintained over the next
five years, Ivanhoe would expect to receive total consideration of
approximately US$123 million from the sale of this operation. Due
to the sale, the iron ore division has been reported as
discontinued operations in the financial statements. - In May and
August, 2004, AMEC of Canada prepared independent, updated resource
estimates for Oyu Tolgoi. AMEC currently is working on a new
independent resource estimate for Oyu Tolgoi, which is expected to
be announced in the second quarter of 2005. - The Oyu Tolgoi
Project's Southern Oyu deposits, (comprised of the Southwest Oyu,
South Oyu, Far South Oyu and Central Oyu deposits), appear to have
been largely defined. In contrast, at the Hugo Dummett Deposit,
containing the Hugo South and the Hugo North deposits, drilling is
ongoing and the Hugo North deposit remains open both at depth and
to the north. The extent of high-grade mineralization at the Hugo
North deposit has yet to be established. - An Integrated
Development Plan for Oyu Tolgoi is expected to be issued late in
the second quarter of 2005. The plan will combine the findings and
economics from the open-pit feasibility study on the Southern Oyu
deposits and the underground pre-feasibility study on the
large-scale, underground block-caving operation at the Hugo North
deposit. In management's view, the Integrated Development Plan will
present a more informative, overall picture of the future
development of the Oyu Tolgoi Project, especially given the recent
exploration success in Hugo North and the expected 40-year mine
life under the current plan. To bring the underground resources
into a proven and probable category for feasibility purposes,
actual underground development and characterization within the Hugo
North deposit is required. This will be accomplished by the sinking
of an exploration shaft, expected to begin in April and be
completed in early 2007, and subsequent horizontal development. -
Assuming timely completion of the Integrated Development Plan and
the availability of project financing, Ivanhoe Mines expects that
initial commercial production from Oyu Tolgoi's Southern Oyu
deposits could commence in mid-2007, with some underground ore from
development work on Hugo North being milled in 2008. These plans
remain subject to change, based on unforeseen circumstances. -
During 2004, Ivanhoe Mines was engaged in ongoing discussions with
several major, Asia-based international mining finance institutions
concerning project financing and off-take arrangements in
connection with the proposed development of the Oyu Tolgoi Project.
- In November, 2004, Ivanhoe closed an agreement with Entree Gold
to explore and potentially develop approximately 40,000 hectares of
Entree's Shivee Tolgoi property contiguous to the northern property
boundary of the Hugo North Deposit at Oyu Tolgoi. By spending US$35
million over eight years, including US$15 million in the first
three years, Ivanhoe has the option to earn up to 80% in
mineralization deeper than 560 metres and up to 70% in
mineralization above the 560-metre level. Ivanhoe also has the
right to acquire all of Entree's surface rights on the Shivee
Tolgoi property by spending a minimum of US$3 million in
exploration in the first year. - Negotiations are continuing with a
formally designated working group of the Mongolian government for a
long-term stability agreement for Oyu Tolgoi. That agreement is
expected to establish the critical terms and conditions that will
apply to the Oyu Tolgoi Project during its developmental and
operational phases. Although the stability agreement negotiations
were delayed by the June, 2004, national elections in Mongolia,
Ivanhoe expects to successfully finalize these negotiations
shortly. - In 2004, regional Mongolian reconnaissance work, rock
sampling, induced-polarization surveys and diamond drilling were
carried out mainly on the Kharmagtai property, the Bronze Fox
District and the extension of the existing Nariin Sukhait coal
mine, a coal discovery located in the South Gobi Region. In
addition, Ivanhoe announced in December, 2004, its intention to
initiate the development of what the company currently believes to
be extensive coal deposits in the South Gobi Region. - In December,
2004, Ivanhoe received the final US$12.5 million tranche from the
Government of Mongolia, completing ahead of schedule the full
repayment of the US$50 million Treasury Bill purchased by the
company in December, 2003. During the one-year term of the
investment, Ivanhoe received interest payments totalling
approximately US$1.3 million from the Mongolian government. - In
July, 2004, Ivanhoe completed an equity financing by issuing 20
million common shares for gross proceeds of Cdn$140 million.
Financial results - The joint-venture Monywa Copper Project in
Myanmar reported a net profit of US$22.1 million in 2004, compared
to a net profit of US$2.1 million in 2003. The mine produced 31,756
tonnes of copper cathode (15,878 tonnes net to Ivanhoe) in 2004, an
increase of 14% over 2003 production. The average copper price
received in 2004 was US$1.34 a pound, compared to 79 cents US a
pound in 2003. Minegate cash costs in 2004 were approximately 42
cents US a pound. Following the debt obligation payment at the end
of February, 2005, the balance on the original, US$90 million
project debt was reduced to US$7.5 million. Projected copper
production for 2005 is estimated at 39,000 tonnes at minegate cash
costs of approximately 42 cents US a pound. The current copper
price is approximately US$1.55 a pound. The project currently
receives a premium of approximately US$125 per tonne of copper (5.7
cents US a pound) for its LME Grade A quality. - Exploration
expenses for all projects in 2004 totalled US$98.2 million,
compared to US$68 million in 2003. The increase in exploration
expenses was mainly attributed to 1) Ivanhoe's drilling activities
at Oyu Tolgoi, especially on the Hugo North deposit, 2) the
engineering expenses related to the Integrated Development Plan for
the Oyu Tolgoi deposit, and 3) exploration activities at other
Mongolian properties. Ivanhoe follows a conservative accounting
policy of expensing all exploration, development and engineering
costs related to all of its projects. - Expenditures at the
Bakyrchik Gold Mine in Kazakhstan were US$3.8 million in 2004. In
2005, Ivanhoe is planning to obtain funding from outside investors
to finance Bakyrchik's development plans. Full details of Ivanhoe's
2004 financial results are contained in the 2004 audited
Consolidated Financial Statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations,
available on the SEDAR website at http://www.sedar.com/ and
Ivanhoe's website at http://www.ivanhoemines.com/. Ivanhoe's shares
are listed on the New York, Toronto and Australian stock exchanges
under the symbol IVN. Information contacts: Investors: Bill
Trenaman, +1.604.688.5755 / Media: Bob Williamson, +1.604.688.5755
Forward-Looking Statements: This document includes forward-looking
statements. Forward-looking statements include, but are not limited
to, statements concerning estimates of planned or expected copper
and iron ore pellet production, prices and minegate cash costs,
statements relating to the continued advancement of Ivanhoe Mines'
projects and other statements which are not historical facts. When
used in this document, the words such as "could," "plan,"
"estimate," "expect," "intend," "may," "potential," "should," and
similar expressions are forward-looking statements. Although
Ivanhoe Mines believes that its expectations reflected in these
forward-looking statements are reasonable, such statements involve
risks and uncertainties and no assurance can be given that actual
results will be consistent with these forward-looking statements.
Important factors that could cause actual results to differ from
these forward-looking statements are disclosed under the heading
"Risk Factors" and elsewhere in the corporation's periodic filings
with Canadian and Australian securities regulators. DATASOURCE:
Ivanhoe Mines Ltd. CONTACT: Information contacts: Investors: Bill
Trenaman, (604) 688-5755; Media: Bob Williamson, (604) 688-5755; To
request a free copy of this organization's annual report, please go
to http://www.newswire.ca/ and click on reports@cnw.
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