Ivanhoe Australia Limited
TSX : IVA
ASX : IVA

Ivanhoe Australia Limited

May 01, 2011 20:58 ET

Ivanhoe Australia's Quarterly and Cash Flow Report for the Three Months Ending 31 March 2011

MELBOURNE, AUSTRALIA--(Marketwire - May 1, 2011) - Ivanhoe Australia Limited (TSX:IVA)(ASX:IVA) -

Key Achievements

  • $30 million approved to develop Osborne and Kulthor with copper and gold production planned to commence in Q1 2012
  • Construction of the Merlin decline is on schedule
  • Merlin Pre-Feasibility Study continues with focus on mining costs
  • Appointment of Chief Operating Officer in preparation for planned production
  • Starra 222 exploration results continue to indicate potential expansion of existing Mineral Resource
  • Houdini exploration identifies strong zone of copper gold mineralisation

Summary

Ivanhoe Australia Board approved $30 million of capital to develop the Osborne and Kulthor underground resources. Subsequent to quarter end Pybar were appointed to conduct the underground development and have commenced mobilising to site. Copper and gold production is expected to resume in the first quarter of 2012.

Construction of the Merlin decline continued during the quarter. At the end of March the decline face was on schedule having progressed 641 metres. It is currently at 796 metres (27 April 2011).

Significant work has been undertaken on the Merlin pre-feasibility study during the quarter with further study underway on the mining costs and mining method over the next few months.

Subsequent to the quarter end, the Company announced the appointment of Mike Spreadborough as Chief Operating Officer. His appointment is a critical step on the path toward building a strong management team that will guide the transformation of Ivanhoe Australia from explorer to producer.

Drilling on the Starra Line continued to intersect high-grade copper-gold mineralisation adjacent to the existing mineral resource at the Starra 222 ore body. Further work will be carried out with the objective of increasing the existing Mineral Resource.

Exploration results at the Houdini prospect identified a strong copper-gold mineralised zone which extends at least 200 metres down-dip of previous drilling.

Overview

Ivanhoe Australia is exploring within the Eastern Succession of the Mount Isa Inlier, located in Queensland, Australia. Its key projects are the Merlin molybdenum and rhenium project (Merlin), copper-gold projects including Osborne and Starra Line, Mount Elliott and the Mount Dore copper SXEW and polymetallic project. All these projects are on granted mining leases.

Ivanhoe Australia also holds significant equity stakes in Exco Resources Limited (ASX:EXS) and Emmerson Resources Limited (ASX:ERM). Ivanhoe Australia has joint venture agreements with both companies.

During the quarter, work focused on progressing the Merlin pre-feasibility study, progressing the Merlin decline and preparing for development work at the Osborne and Kulthor underground sites.

Osborne Complex and Cloncurry Site Integration

Integration of the Osborne Complex and Cloncurry sites is progressing well with the following key initiatives undertaken during the quarter:

  • Implementation of roster changes to align the sites. Introduction of regular charter flights between Townsville and both sites, in preparation for future growth of the workforce.
  • Preparations for the implementation of a high speed data connection between the Osborne and Mount Dore sites. The connection, scheduled to be completed in Q2 2011, will improve access to existing systems and allow new systems to be fully utilised between sites.
  • Tendering and contract documentation finalised for major components of the Kulthor- Osborne underground development work. Refurbishment work on the Osborne concentrator and shaft area commenced.

Project Exploration

Merlin Project

Assay results from geotechnical drilling at Merlin, were received. The seven holes drilled in Q4 2010 focused on mine engineering requirements targeting the planned stope blocks to evaluate hangingwall and footwall conditions. Significant results from the geotechnical holes include:

Hole IDFromToInter (m)Mo %Re g/t
MDQ0403239.7241.21.5815.3875
MDQ0404312.0314.02.002.5426
And375.8378.02.209.47115
And380.2386.05.805.3760
MDQ0405221.6224.32.702.5853
MDQ0407396.0406.010.000.235
MDQ0408382.0394.212.200.9522
MDQ0409285.0286.01.002.7167
And291.4294.22.764.58109
MDQ0412350.0352.52.503.6932
And414.5416.62.103.3751
And401.0404.63.605.5790

Osborne

Work was undertaken on an updated block model to confirm and validate the mineral resources at the Osborne underground and open pit and Kulthor to enable preparation of a Canadian NI 43-101 report. This will provide detailed resource models to support the Copper-Gold study.

Starra 276

The infill drilling program to better delineate the Starra 276 Mineral Resource and upgrade the inferred portion of the resource commenced during the quarter. The diamond drilling program is being conducted on a 50 by 100 metre spacing. At the end of the quarter, 4 drill rigs were operating on this programme with 7 holes out of the planned 31 completed. The drilling program highlighted in Figure 3 is targeting expansion of both the Indicated (13Mt @ 1.1%Cu, 0.8g/t Au) and Inferred (4.3Mt @ 1.2%Cu, 1.0 g/t Au) Mineral Resources. Significant results of the drilling program include:

Hole IDFromToInter (m)Cu %Au g/t
STQ1054391.5445.153.60.790.75
Inc42844517.10.671.91
Inc43844241.113.46
STQ 1056327364.337.31.530.65
Inc343355122.431.30

The additional drilling will be used to update the Mineral Resource block model later in 2011.

Development

Overview

The key projects being studied are:

  • Merlin, including Little Wizard;
  • Copper and Gold study including Osborne-Kulthor and the Starra Line;
  • Mount Dore heap leach and SXEW; and
  • Mount Elliott SWAN High-Grade zone.

Project development this quarter focussed largely on progressing Merlin, the Copper and Gold Study and the Mount Dore heap leach scoping study. The scoping study on Mount Elliott was also initiated.

Merlin

Construction of the Merlin decline continued during the quarter (see Figure 2). At the end of March, the decline face had progressed to 641 metres and is currently at 796 metres (27 April 2011). The decline is expected to be adjacent to Little Wizard by end of Q2 2011 and an access drive will be constructed to mine this ore zone. Access to the Little Wizard ore body will enable further drilling to potentially extend the mineralisation and bulk sampling for metallurgical test work.

Significant work was undertaken in progressing the Merlin pre-feasibility study with further study underway on the mining costs and mining method over the next few months to optimise the project. Prior to completion of the pre-feasibility study the decision has been made to obtain decline access to the ore body which will enable further geological, geotechnical and metallurgical test work to be undertaken. This work will ensure the most efficient mining method is selected, identification of additional higher grade zones within the mineralisation and allow time for further work to be undertaken on the location of the molybdenum and rhenium concentrate roaster.

During the quarter, the following work was undertaken:

  • Tendering the 53km-long haul road between Mount Dore and Osborne.
  • Re-estimate of the process plant capital costs by tendering the major equipment.
  • Additional process flowsheet modifications to include an acid plant to manage SO2 emissions.
  • Discussions held with Government authorities responsible for permitting and preparation and submission of data to support applications for land access, native title, environmental management plans, water and other approvals required for the project.
  • Identified potential locations offshore to process concentrates as an alternative to constructing a dedicated molybdenum and rhenium concentrate roaster at Osborne.
  • Commenced dewatering the Mount Dore aquifer to reduce the watertable ahead of the decline progress.

Copper and Gold Study

The internal study into the viability of various sources of copper and gold ore at Osborne and the Starra Line continued. The study focused on assessing the potential production rates for near-term mining opportunities and the capital and operating costs profiles required to process ore at the Osborne Complex.

The potential copper and gold ore sources recommended by the study include Osborne, Kulthor and Starra 276. Work is currently underway to confirm and validate the resource inventory, with the Canadian NI 43-101 technical report expected to be finalised by the end of July 2011.

An exploration assessment has also been undertaken as part of this study which has identified the strong potential to expand existing known resources. These included Houdini, Avalon, Lucky Luke, extensions to Kulthor, and Starra Line.

In late January, the Ivanhoe Australia Board approved $30 million of capital to develop the Osborne and Kulthor underground resources with copper and gold production planned to commence in Q1 2012. Work to be undertaken includes level development, ventilation raise-boring, drilling access and resource delineation drilling. Tendering for the underground development works at Osborne and Kulthor is now complete. Subsequent to quarter end, Pybar were appointed and commenced mobilising to site in late April 2011.

The power study for the Osborne power station was completed during the quarter with the recommendation to overhaul and upgrade the power station for dual fuel so that it may operate on upto 99% gas usage. This is expected to result in significant savings in future energy costs.

In addition, initial underground development work for Starra 276 is currently being tendered.

Mount Dore

The scoping study for the copper heap leach SXEW project was completed. The results indicate that the project is viable at rates above 3Mtpa. A Canadian 43-101 report is being compiled.

Mount Elliott

The Mount Elliott Mineral Resource is significant with the potential to provide Ivanhoe Australia with a long life production base.

The scoping study for Mount Elliott commenced during the quarter. This study will evaluate mining the high-grade SWAN zone and the remaining mineralisation around the old Mount Elliott mine. The objectives for the study are:

  • Provide a preliminary assessment of the strength of the business case.
  • Identify credible operating scenarios for subsequent study.
  • Identify any constraints to the project development.

Work completed to date includes:

  • Preparation of a project execution strategy.
  • Preliminary inspection of the Mount Elliott decline by Ivanhoe Australia staff.

The scoping study is expected to be completed by the end of Q4 2011 and would be followed by a prefeasibility study in 2012 to establish the preferred project alternative.

Regional Exploration

Exploration on the Cloncurry Project (see Figure 1) continues to target Merlin style molybdenum-rhenium deposits and IOCG deposits (Mount Elliott and Starra Line styles). Work in the first quarter focussed on drilling copper-gold targets at Houdini and along the Mount Dore trend . This drilling included 5,836 m of diamond drilling and 1,374 m of RC drilling.

Ivanhoe Australia through 100% owned subsidiaries holds 22 Exploration Permits for Minerals (EPMs) covering a total of 2,862 km2 and 28 Mining Leases (MLs) covering a total of 104.8 km2. Ivanhoe Australia also has 21 EPM applications in process, covering 3,205 km2; and three ML applications in process, covering 10.6 km2. Exco joint venture EPMs total 563 km2, and the Goldminco joint venture EPM covers 16 km2.

Mount Dore and Starra Line Exploration

Exploration on the Mount Dore Trend and Starra Line during the quarter focussed on diamond drilling from Midway, Little Arch and North Gorge. Mapping and sampling programs included those at Metal Ridge West, Victoria, North Stuart, Mount Cobalt, Groups 82, 84 85 and 87, Midway, Little Arch to North Gorge, Lady Ella West and Confucius.

A number of drill targets have been defined at the Metal Ridge group of prospects (including Metal Ridge, Metal Ridge West and Metal Ridge North). Drilling is planned during Q2 and Q3 for the Metal Ridge prospects. Forty-seven rock-chip samples from previously under-explored zones at Metal Ridge North returned strongly anomalous Cu-Au-Mo; including:

Sample IDCu %Au ppmMo ppm
IVR0032423.240.5110
IVR0063290.3251.1160
IVR0063454.760.4740
IVR006349--131
IVR0063560.137-172

Complete assay results have been received for the Mount Cobalt drilling program conducted in Q4, 2010. All holes except MCD0007 intersected weak Co with spotty Mo and Cu mineralization. MCD0007 results:

Hole IDFromToInter (m)Co ppm
MCD000796.598.521100

Eight diamond holes were completed at Midway (1 km south of Mount Elliott) in 2010. In February 2011, one hole was deepened, and two more holes were completed. Cu-Au(±Co) mineralisation at Midway occurs as chalcopyrite, chalcocite and native copper hosted by altered carbonaceous metapelite on the margins of and within clay-chlorite shears. Assay results have been returned for nine of the ten holes drilled; Cu-Au intercepts including:

Hole IDFromToInter (m)Cu %Au g/tCo ppm
MID0001737522.050.61316
MID000114615260.330.2352
MID0002824.416.40.420.1104
MID000214114760.730.1597
Inc14514721.360.3278
MID00038899110.360.09137
MID00061466520.310.24117
Inc626420.53.35224
MID000682114320.350.0542
MID0008151169180.610.1993
Inc15315413.030.78241
MID0008183.51851.52.900.3398
MID000819420061.270.3989
Inc19719922.490.74167
MID0009133188.925.90.530.19122
Inc133149160.790.14189

Mo-Re mineralisation at Midway is hosted by cross-cutting brittle faults, and is often associated with primary Cu-Au mineralisation. Significant intercepts are:

Hole IDFromToInter (m)Mo %Re g/t
MID000175.876.951.150.370.16
MID0002132.19132.610.420.757.38
MID000214414510.231.93
MID0008244.5244.80.30.41.02

Other work for Q1 2011 included drilling at Little Arch and North Gorge (2.5 km southeast of Mount Elliott). Exploration drilling is expected to continue at Midway, North Gorge, Little Arch, Confucius, Lady Ella, Metal Ridge, Mount Cobalt and Victoria in Q2 2011.

Additional assay results were returned from the Starra 222 drilling program undertaken in 2010. Hole STQ1042 intersected the following high-grade copper-gold mineralisation:

  • STQ1042 – 19.4 metres @ 1.98% copper and 4.27 g/t gold from 384.6 metres, including 13 metres @ 2.92% copper and 3.9 g/t gold from 390 metres; and including 1.4 metres @ 0.06% copper and 21.1 g/t gold from 384.6 metres.

These results follow on from the recent high-grade results in hole STQ1036 (reported in the December 2010 quarterly) and extend the mineralised zone up-plunge by at least 200 metres. This mineralised zone is located adjacent to the existing Starra 222 Mineral Resource and existing decline.

Current exploration on the Starra Line includes a ground gravity program.

Osborne Area Exploration

Mineralisation at Houdini is associated with a north trending, east-dipping shear zone and consists of chalcocite in the upper parts and chalcopyrite in the lower parts of the main shear zone. The prospect is approximately 20 km north of the Osborne Mill and 30 km south of Mount Dore and within 2 km of the proposed Osborne-Merlin haul road. Drilling during the quarter totalled 2,809 m of diamond drilling and 1,224 m of RC on five 100 m spaced sections. Mineralisation was intercepted in all seven diamond drill holes. Recent intersections indicate that the mineralised zone extends at least 200 metres down dip of previous Barrick drilling. Results returned to date are summarised below; assay results are pending for six holes in which visual mineralisation was reported:

Hole IDFromToInter (m)Cu %Au g/t
HOD003614415065.070.23
HOD0037A239262231.510.25
HOD0038A353.536612.51.950.31
HOD003916617041.240.11

Drilling continues on 100 m spaced sections north and south of the known mineralisation. RC drilling will test the projected strike extensions of the mineralised shear zone.

Greenfields Exploration

Greenfield exploration in Q1 focused on Barnes Shaft which is located on the Elana M trend approximately 50 km north of Merlin. Mineralisation at Barnes Shaft is associated with a sub-vertical structure within brecciated and altered metapelite and carbonaceous metapelites. Mineralisation has been intercepted in three zones over the area drilled to date. The main mineralised zone is generally continuous for at least 250 m along strike and over a vertical extent of 200 m, starting from near surface. The zone varies from a few metres to twenty metres in true thickness and remains open along strike and at depth. Recent intercepts from hole BAD00024 (on the main zone in Section N7652000) are:

  • 10 m @ 0.79% Cu, 0.44 g/t Au, 210 ppm Co and 0.01% Mo from 227 m
  • 25 m @ 1.31% Cu, 1.1 g/t Au, 360 ppm Co and 0.02% Pb from 260 m

Exploration within the Emmerson JV

Ivanhoe Australia has a 10% interest in Emmerson and joint-venture agreements covering all of Emmerson's tenements in the Tennant Creek Mineral Field (TCMF) in Northern Territory.

Subsequent to quarter end a HeliTEM geophysical survey was flown over the TCMF to test for gold and copper ore bodies.

Appointment of Chief Operating Officer

Mike Spreadborough has been appointed Chief Operating Officer as part of the company's preparation for the commencement of multiple operations in 2012. Mr. Spreadborough, who has extensive mining experience in large, multi-national companies in operational and senior management roles, commences with Ivanhoe Australia on May 2. He was most recently a General Manager within Rio Tinto's Pilbara iron ore operations. Mike's appointment is a critical step on the path toward building a strong management team that will guide the development of Ivanhoe Australia from explorer to producer.

To view figures 1, 2 and 3 as well as Table 1 and 2, please visit the following link: http://media3.marketwire.com/docs/iva501i.pdf.

Corporate Information

Board Members

Robert FriedlandChairman & Non Executive Director
Peter ReeveCEO & Managing Director
Sam RiggallNon Executive Director
John MackenNon Executive Director
Peter MeredithNon Executive Director
Douglas KirwinNon Executive Director
Ian PlimerIndependent Non Executive Director (Lead)
Kyle WightmanIndependent Non Executive Director

Forward Shareholder Enquiries to

Computershare Investor Services
Yarra Falls 452 Johnston Street
Abbotsford, Victoria, Australia 3067
Telephone: +61 3 9415 4000
Facsimile: +61 3 9473 2500
Email: web.queries@computershare.com.au
Website: www.computershare.com

Registered & Principal Office

Level 9, 479 St Kilda Road
Melbourne, Victoria, Australia 3004
Telephone: +61 3 9090 8800
Facsimile: +61 3 9090 8899
Email: infoaustralia@ivancorp.net
Website: www.ivanhoeaustralia.com

Issued Share Capital

At 31 March 2011 issued capital was 418.4 million ordinary shares and market capitalisation was $1.4 billion.

ASX Stock Codes: IVA / IVAO
TSX Stock Codes: IVA / IVAO.WT

Quarterly Share Price Activity

HighLowLast
$$$
Jan - Mar3.643.093.33

Ivanhoe Australia's parent company Ivanhoe Minestrades on the NYSE, NASDAQ & TSX: Code: IVN

Competent Persons Statement

The information in this Report that relates to Ivanhoe Australia's exploration results for prospects and projects other than Starra 222/276 and Merlin is based on information compiled by Paul Carter, General Manager Exploration. Paul Carter is a full time employee of Ivanhoe Australia and a member of The South African Council for Natural Scientific Professions, a 'Recognised Overseas Professional Organisation' included in the current list of such organisations promulgated by ASX. Paul Carter has sufficient experience which is relevant to the styles of mineralisation and type of deposits under consideration and to the activity which he is undertaking to qualify as a 'Competent Person' as defined in the 2004 edition of the 'Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Paul Carter consents to the inclusion in the Report of the matters based on his information in the form and context in which it appears.

The information in this announcement that relates to exploration results for the Starra 222/276 and the Merlin project, is based on information compiled by Geoff Phillips who is a full time employee of Ivanhoe Australia and a Member of the Australasian Institute of Mining and Metallurgy. Geoff Phillips has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a 'Competent Person' as defined in the 2004 edition of the 'Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Geoff Phillips consents to the inclusion in the announcement of the matters based on this information in the form and context in which it appears.

Quality Control and Qualified Person Statement

Quality control and assurance programs are implemented in line with the standards of National Instrument 43-101. The exploration programs are overseen by Paul Carter, BSc(Hons), the General Manager Exploration of the Company and a Qualified Person as defined under National Instrument 43-101. Mr Carter has overseen the exploration programs and supervised the scientific and technical information contained in this report.

QAQC Statement

Ivanhoe Australia's core sampling within mineralised zones is generally taken on continuous one-metre intervals down each drill hole, or on smaller lengths over narrow geological units, for large disseminated or weakly mineralised zones sample lengths may increase to a maximum of two metres. The core is marked with a continuous cutting line along the middle, parallel to the long axis for the purpose of preventing a sampling bias during splitting. Core is cut with a rock saw flushed continually with fresh water and one-half of NQ/HQ core or one-quarter of PQ core is taken for analysis. Reverse circulation (RC) samples are taken on continuous one- or two-metre intervals down each drill hole and collected from a rig-based cone splitter.

Sample dispatches include Certified Reference Materials (CRMs), Field Blanks, Field Duplicates, Crushed Duplicates, and Pulp Duplicates. The CRMs, Field Duplicates, and Field Blanks are randomly inserted during sampling, whereas the Crushed and Pulp Duplicates are inserted at the laboratory. CRMs are certified for gold, copper, molybdenum, and/or rhenium.

Samples are placed in plastic bags, sealed, and collected in large, labelled shipping bags that are secured and sealed with numbered tamper-proof security tags. Samples are shipped to ALS Laboratory Group's Mineral Division at Mount Isa for preparation. Gold, copper, molybdenum, and rhenium assays, and multi-element geochemical analyses are conducted at ALS Mount Isa, Townsville, and Brisbane laboratories. ALS operates in accordance with ISO/IEC 17025.

Reference material assay values are tabulated and compared to those from established Round Robin programs. Values outside of pre-set tolerance limits are rejected and samples subject to re-assay. A reference material assay fails when the value is beyond the 3SD limit and any two consecutive assays fail when the values are beyond the 2SD limit on the same side of the mean. A Field Blank fails if the assay is over a pre-set limit.

Ivanhoe Australia also performs check assays on a regular basis at an independent third party laboratory. Ivanhoe Mines Ltd regularly conducts onsite reviews, internal audits, and laboratory audits to ensure procedural compliance for maintaining industry standard best practices.

Forward-looking statements

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.

All such forward-looking information and statements are based on certain assumptions and analyses made by Ivanhoe Australia's 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. The reader is cautioned not to place undue reliance on forward-looking information or statements.

ABN: 107 689 878

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