The International Resource Journal: Ivanhoe Australia

Ivanhoe Australia
================================================================================
admin on 26 July, 2010 03:36:00
 
In October, IRJ met with Peter Reeves, CEO at Ivanhoe Australia Limited, (ASX:
IVA) a multi-resource explorer focused on building “a substantial
Australian based company focused on the exploration and development of its
portfolio of mineral projects.” He carefully noted that the only way to
forge a proper mining company is to retain a strong exploration focus, despite
the many today whose strategy bears a growing reliance on acquisition.
“You can acquire, but only if you believe you can build organically upon
what you acquire, so the message is to build companies by exploration, have the
guts to drill deeply and aggressively, and to get these good tenements
together,” Reeves memorably said.
“The difficult thing is to have the strategy and the plan to actually step
out and find a piece of ground that you think you can then put a lot of money
into and then find multiple resources.”
Reeves told us that Ivanhoe believes there are four things a company needs to
do: Find a large set of tenements situated on a known historical geological
belt; assemble a team of top geologists; amass a whole lot of funding; and as a
company, “you have to have the internal fortitude to drill, and drill, and
drill.”
Revisiting Ivanhoe this issue, IRJ looks first-hand at how the company is
playing out these four key actions and continuing to uphold that all-important
exploration focus showcased by its flagship Merlin project; the largest
molybdenum/rhenium play in the world. This sort of project, and in turn, the
exploration work Ivanhoe continues to carry out on it is, as Reeves says, what
really makes a mining house.
Revisiting Cloncurry
Since the company’s August 2008 flotation, Ivanhoe has four significant
mineral resources within its Cloncurry District tenements; The Mount Elliot and
the Swan High Grade zone copper/gold project, Mount Dore (copper oxide) and
Starra Line— the previously developed copper play with numerous high grade
zones already identified. Additionally, in our October interview Reeves spoke
excitedly about the discovery of the company’s Merlin project—
poised to come into production first and sharing Ivanhoe’s flagship focus
with Mount Elliot Swan. True to Reeves’ words, on March 31 Ivanhoe
announced the completion of Merlin’s Scoping Study. As the highest grade
molybdenum and rhenium deposit in the world, all eyes were truly on Merlin and
when the study delivered results of a robust, high grade, relatively shallow
depth, high return project with strong long term cashflows, it proved to be a
great milestone for the company. The project was given an initial nine-year mine
life, average steady state production rates of 5,300 molybdenum per annum and
7.5 tonnes of rhenium per annum, and first production expected 30 months
following the commencement of the decline. A separate evaluation of the high
grade Little Wizard zone was planned for the June quarter as an early cashflow
project, “as part of the prefeasibility work to establish its viability
and cash generation potential,” the company told the ASX. The Merlin
prefeasibility study is well underway, having commenced immediately following
the scoping study, and results are expected by November 2010.
Building on every decision
On June 13, following approval from the Foreign Investment Review Board, Ivanhoe
made another incremental announcement; the acquisition of Barrick Gold Australia
Limited’s Osborne Copper Gold Operation including the mine, processing
facilities and tenements. This acquisition is set to significantly reduce the
capital cost of developing Merlin by an estimated $100 million and could make
Ivanhoe a producer by as early as 2011 with the Little Wizard, then bring Merlin
into production in 2012 too. Considering when Reeves told IRJ that you can only
acquire if you can build organically on that which you take on, it would be
tough to ask for a more apt example of how Ivanhoe is doing so successfully.
There are approximately 220 identified copper, gold, and uranium targets within
the Cloncurry project area and, according to Ivanhoe’s ‘Strategy and
Vision,’ a good number of these have already undergone surface exploration
and drilling at relatively shallow depths.
“Ivanhoe Australia intends to conduct a systematic drilling program of
these targets with a view to discovering large IOCG ore bodies, other copper
dominated ore bodies and uranium deposits,” the company says.
The Ivanhoe way works
The Cloncurry District, Ivanhoe’s true project stronghold, looks set to
deliver great success for the company and may enable it to seek out other
opportunities including joint ventures and strategic corporate transactions
further afield in the future. The company’s four-part approach to
exploring, developing previously defined targets early on, confirming previously
unidentified potential and keeping mindful of corporate initiatives has allowed
it to hold court with Merlin and now, evident in its purchase of Barrick’s
Osborne mine, build and build again on all that it has previously achieved. When
Reeves said the company planned to “drill, and drill, and drill,”
some eight months ago, he surely meant it. Now Ivanhoe has passed its Scoping
Study milestone at Merlin, recently moved to strengthen its cost and local hold
for future production, retained a strong and diverse assets register,
demonstrated quite how affective its strategy is, and looks set for great
results come November, likely soon followed by becoming a producer.
ivanhoeaustralia.com