The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from Marketwire

Altynalmas Gold Announces a Feasibility Mineral Reserve Estimate of 5.76 Million Ounces at the Kyzyl Gold Project in Kazakhstan

Indicated Gold Mineral Resources Increase by 18% to 7.35 Million Ounces Continuous Testing of Processing Technology Successfully Completed

Monday, February 27, 2012

Altynalmas Gold Announces a Feasibility Mineral Reserve Estimate of 5.76 Million Ounces at the Kyzyl Gold Project in Kazakhstan08:30 EST Monday, February 27, 2012HOLLYWOOD, FLORIDA--(Marketwire - Feb. 27, 2012) - Robert Friedland, founder and Chief Executive Officer of Ivanhoe Mines (TSX:IVN)(NYSE:IVN)(NASDAQ:IVN) and Chairman of Altynalmas Gold, and David Woodall, President and Chief Executive Officer of Altynalmas Gold, announced today at the BMO Capital Markets Global Metals & Mining Conference that an independent Feasibility Study estimates Mineral Reserves of 5.76 million ounces of gold at the Kyzyl Gold Project in northeastern Kazakhstan. The reserve estimate is based on an underground mining operation producing an average of 337,000 ounces of gold per year during an initial mine life of up to 15 years, based on Mineral Resources as of December 1, 2010. Other highlights of the Feasiblity Study (Technical Report) include: The successful completion of performance testing of a metallurgical process that recovers at least 88% of contained gold. The development of an innovative and proprietary ore treatment process that produces an environmentally stable, iron arsenate mineral by-product that meets international environmental standards. An 18% increase in the Indicated Mineral Resources, inclusive of Mineral Reserves, at the Kyzyl Gold Project, which now contain an estimated 7.35 million ounces of gold as of December 1, 2011. The project also contains an additional 3.0 million ounces of gold in Inferred Mineral Resources. The Mineral Resources are within the Bakrychik and Bakyrchik East deposits. International mining consultants Roscoe Postle Associates (RPA) has completed an independent NI 43-101-compliant Technical Report on the Kyzyl Gold Project based on a Feasibility Study-level report completed by Fluor Canada and subsequent optimization studies undertaken by Hatch Mining and Metals Canada. The project encompasses the re-development of the Bakyrchik underground mine and the construction of a new processing plant incorporating fluidized-bed ore-roasting technology and supporting mine infrastructure. The Technical Report, based on December 1, 2010, Mineral Resources, confirms the economics supporting Mineral Reserves, and describes an extended, 20-year Life-of-Mine Sensitivity Case that includes additional Indicated and Inferred Resources. Altynalmas Gold drilling programs focused on converting Inferred Mineral Resources to Indicated Mineral Resources, before and after the December 1, 2010, Mineral Resource estimate, have been very successful, providing confidence in the Life-of-Mine Sensitivity Case. Inferred Mineral Resources are considered too speculative geologically to have the economic considerations applied to them that would allow them to be categorized as Mineral Reserves, and there is no certainty that the Life-of-Mine Sensitivity Case will be realized."With our successful and continuing resource delineation and reserve conversion, the confirmation of the gold recovery process and the support of the Government of Kazakhstan, we are pleased to be in a position now to start the construction and development of a state-of-the-art operation that will integrate the best available technology and launch a new era of gold production in the region," Mr. Woodall said. "Our gold reserves and resources are continuing to grow and we are confident that the Kyzyl Gold Project can become a substantial, long-term gold producer." Altynalmas Gold, a private company developing world-class gold assets in northeastern Kazakhstan, is 50% owned by Ivanhoe Mines (TSX:IVN)(NYSE:IVN)(NASDAQ:IVN). Mineral Reserve estimate as of February 14, 2012RPA estimated that the current total Probable Mineral Reserves contained in Lenses 1, 8, 9 and 12 of the Bakyrchik Deposit - one of several deposits comprising the Kyzyl Gold Project - total 22.21 million tonnes with a grade of 8.06 grams of gold per tonne (g/t), containing 5.76 million ounces of gold, using a cut-off grade of 3.0 g/t gold and a gold price of US$1,250 per ounce.TABLE 1. BAKYRCHIK DEPOSIT MINERAL RESERVE ESTIMATEAs of February 14, 2012LocationCategoryTonnesGold GradeContained Gold(million)(g/t)(million ounces)Lens 1Probable15.268.644.24Lens 8Probable0.684.980.11Lens 9Probable2.926.690.63Lens 12Probable3.357.270.78TotalProbable22.218.065.76Notes:CIM definitions were followed for Mineral Reserves. Mineral Reserves are estimated at a cut-off grade of 3.0 g/t Au. Mineral Reserves are estimated using an average long-term gold price of US$1,250 per ounce. A minimum mining width of 4.0 m was used. Bulk density is 2.7 t/m3. Numbers may not add due to rounding.Indicated Mineral Resources as of December 1, 2010, contained in Lenses 1, 8, 9 and 12 of the Bakyrchik Deposit were converted into Mineral Reserves for the Feasibility Study. Mineral Reserves were estimated as of February 14, 2012, in accordance with the requirements of NI 43-101 and the definitions set out by the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral Resources and Mineral Reserves. These Mineral Reserves were used for the Feasibility Study.In an after-tax economic assessment in the Technical Report, the base case economic assessment (the Base Case), which is based only on reserves, estimated a post-tax net present value of US$878 million, using a 5% discount rate and assuming a long-term gold price of US$1,250 per ounce. The Life-of-Mine Sensitivity Case, which was undertaken to better reflect the project's successful drilling undertaken during 2011 to increase the mineral resource base, calculated an after-tax net present value of US$1,141 million, using the same economical parameters. Highlights of the economic analysis included in the Technical Report include the following key parameters:Base CaseLife-Of-Mine Sensitivity CaseExpected mine life15 years20 yearsTotal mine-life gold production5,057,000 oz6,416,000 ozAverage gold priceUS$1,250/ozUS$1,250/ozAnnual production rate (tonnes)1.5 million1.5 millionMetallurgical recovery88%88%Average annual production337,000 oz321,000 ozTotal pre-production capital (Jan 2012 terms)US$1,124 millionUS$1,124 millionSustaining capital (Jan. 2012 terms)US$149 millionUS$161 millionMaximum cash draw (Jan. 2012 terms)US$1,293 millionUS$1,293 millionAll-in operating costs per tonne milledUS$88/tonneUS$88/tonneCash cost per ounce of gold soldUS$483/ozUS$500/ozTotal production cost per ounce of goldUS$759/ozUS$722/ozNotes:Cash cost per ounce sold is not a recognized measure under IFRS. The Life-of-Mine Sensitivity Case is a Preliminary Assessment, which is preliminary in nature as it includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.Mineral Resources, inclusive of Mineral Reserves, shown in Table 2 were estimated as of December 1, 2010, in accordance with the requirements of NI 43-101 and CIM definitions. Although Mineral Resource estimates have been updated since (see Table 3 below), this estimate forms the basis of the Mineral Reserve estimate.TABLE 2. BAKYRCHIK DEPOSIT MINERAL RESOURCE ESTIMATEINCLUSIVE OF MINERAL RESERVESAs of December 1, 2010IndicatedInferredLensTonnageGold GradeContained GoldTonnageGold GradeContained Gold(000s)(g/t)(ounces x1,000)(000s)(g/t)(ounces x1,000)114,2009.444,3206,1307.31,43093,1407.577609606.9210123,5008.219302,3808.23004, 5 and 74804.0860904.61487905.601401008.429Total22,1608.726,2209,6807.42,311Notes: CIM definitions were followed for Mineral Resources. Mineral Resources are estimated at a cut-off grade of 3.0 g/t Au. Mineral Resources are estimated using an average long-term gold price of US$1,100 per ounce. The Mineral Resource Estimate uses drill hole data available as of December 1, 2010. Bulk density is 2.67 t/m3. Numbers may not add due to rounding.Two-stage fluidized-bed roasting technology recovers 88% of contained goldThe processing basis of the NI 43-101 Technical Report is the use of a two-stage, fluidized-bed roasting technology. Altynalmas Gold adopted this approach following the completion of pilot test work completed under the supervision of Crescent Technology and undertaken at Hazen Research's Colorado facilities during the past three years.Metallurgical process performance testing demonstrated recoveries of at least 88% of contained gold. Integral to the process is the scrubbing of gases liberated from the roasting process and, in particular, the development of an innovative and proprietary ore treatment process that produces an environmentally stable, iron arsenate mineral by-product that meets international environmental standards. Altynalmas Gold has filed a provisional patent application with the United States Patent and Trademark Office and with Kazakh authorities covering this new technology.Mineral Resource estimate as of December 1, 2011Based on drilling results available as of December 1, 2011, RPA now estimates that inclusive of Mineral Reserves, the Bakyrchik Gold Deposit consists of 25.9 million tonnes of Indicated Mineral Resources grading 8.84 grams of gold per tonne (g/t) and containing 7.35 million ounces of gold. RPA also estimates that Inferred Mineral Resources for Bakyrchik total 6.3 million tonnes grading 7.1 grams of gold per tonne and containing 1.5 million ounces of gold (Tables 3 and 4). In the same assessment, RPA estimates that the Bakyrchik East Gold Deposit contains 7.8 million tonnes of Inferred Mineral Resources grading 6.3 grams of gold per tonne and containing 1.6 million ounces of gold. The Bakyrchik East Deposit, consisting of the Globoki Log and Promezhutochny zones, is located 800 metres east along strike from the eastern edge of the main Bakyrchik Deposit within the Kyzyl Shear Zone. The gold resources at Bakyrchik East are hosted in two lenses comprised of more than 20 sub-zones that collectively measure 2,000 metres along strike by 1,500 metres down dip, extending from surface to a depth of 800 metres (Tables 3 and 5).TABLE 3. KYZYL GOLD PROJECT MINERAL RESOURCE SUMMARYINCLUSIVE OF MINERAL RESERVESAs of December 1, 2011Mineral ResourceDepositTonnesGold GradeContained GoldClassification(million)(g/t)(ounces)IndicatedBakyrchik25.98.847,350,000Bakyrchik6.37.11,450,000InferredBakyrchik East7.86.31,570,000Total Inferred14.16.63,020,000The following Notes apply to Tables 3 to 5:CIM definitions were followed for Mineral Resources. Mineral Resources are estimated at a cut-off grade of 3.0 g/t Au. Mineral Resources are estimated using an average long-term gold price of US$1,250 per ounce. A minimum mining width of 2.0 metres was used for the Bakrychik Deposit and with a minimum mining width of 1.5 metres used for the Bakyrchik East Deposit. Bulk density is 2.67 t/m3. Numbers may not add due to rounding.The overall Bakyrchik digital drill hole database includes 2,372 historic drill holes totalling 658,954 metres of core, plus 313 recent drill holes by Altynalmas totalling 145,472 metres of core. Both data sets were verified and validated by RPA and are acceptable to estimate Mineral Resources.A subset of the overall database consisting of 905 drill holes totalling 295,144 metres of core was used to estimate Mineral Resources at the Bakyrchik Deposit. Historic former Soviet Union (FSU) drilling accounts for 42% of the total. At the Bakyrchik East Deposit, 261 drill holes totalling 1,591 metres of core were used to estimate Mineral Resources. Historic FSU drilling accounts for 90% of the total drilling. TABLE 4. BAKYRCHIK DEPOSIT MINERAL RESOURCE ESTIMATESINCLUSIVE OF MINERAL RESERVESAs of December 1, 2011IndicatedInferredLensTonnageGold GradeContained GoldTonnageGold GradeContained Gold(000s)(g/t)(ounces x1,000)(000s)(g/t)(ounces x1,000)116,7009.224,9504,3207.199093,5607.698805706.5120124,3109.511,3201,2607.33004, 5 and 74904.0460904.71487905.601401008.328Total25,8608.847,3506,3507.11,450TABLE 5. BAKYRCHIK EAST DEPOSIT INFERRED MINERAL RESOURCE ESTIMATESAs of December 1, 2011TonnesGold GradeContained Gold(000s)(g/t)(ounces x1,000)Promezhutochny5,1006.21,020Globoki Log2,7006.3550Total7,8006.31,570A set of cross-sections and plan views were interpreted to construct three-dimensional wireframe models of the mineralized lenses using the descriptive logs, a minimum grade of 3.0 grams of gold per tonne (g/t), and a minimum thickness of 1.5 metres. Prior to compositing to two-metre lengths, high grades were cut to 35 g/t gold. Gold grade was estimated using ordinary kriging. Block size is five metres by five metres by five metres. Bulk density is 2.67 t/m3. Classification into the Indicated and Inferred categories was completed manually for each lens based on drill-hole spacing, gold grade continuity and geometric continuity.The RPA estimate is based on drilling results that were available to December 1, 2011. The previous estimates were based on drilling results that were available to January 1, 2010, for the Bakyrchik Deposit and to July 11, 2011, for the Bakyrchik East Deposit. The estimated amount of gold contained in the Bakyrchik Deposit's Indicated Mineral Resources increased by approximately 1.1 million ounces, or 18%, from 6.22 million ounces reported in August 2011 to 7.35 million ounces as a result of the successful upgrading of Inferred Mineral Resources. Inferred Mineral Resources only decreased by approximately 0.6 million ounces, from 3.6 million ounces to 3.0 million ounces, as a result of additional drilling at depth at the Bakyrchik Deposit and a geological re-interpretation of the Bakyrchik East Deposit. Exploration drilling ongoingAltynalmas Gold is continuing its drilling program designed to expand and upgrade the NI 43-101-compliant Inferred and Indicated Resource estimate at the Kyzyl Gold Project. Total exploration drilling for 2011 amounted to 84,552 metres, of which 62,562 metres were drilled on the Bakyrchik Mining Licence #737. During the second quarter of 2011, drilling began on the satellite deposits within the Kyzyl Gold Project's Exploration Licence #27, resulting in the drilling of 21,990 metres. Assay results from the 2011 Exploration Licence drilling are pending. Exploration drilling in 2012 is budgeted to be 40,000 metres.The gold deposits at the Kyzyl Gold Project consist of a series of mineralized lenses, or lodes, lying within the large Kyzyl Shear Zone. Gold mineralization is hosted within sheared, carbonaceous sediments of the fault zones and principally is contained within arsenopyrite sulphide mineralization occurring in association with quartz stockworks, which crosscut and parallel the foliation of the sediments.Recent significant drill intercepts of high-grade gold mineralization, which approximate true widths and confirm the higher-grade zones within the Bakyrchik resource wireframes, include:27.0 metres @ 16.42 (g/t) gold and 22.0 metres @ 18.69 g/t gold in Lens 1;5.0 metres @ 9.71 g/t gold in Lens 9; 3.0 metres @ 46.20 g/t gold and 13.0 metres @ 8.68 g/t gold in Lens 12; and,5.0 metres @ 13.39 g/t gold and 3.0 metres @ 5.68 g/t gold in Globoki Log at Bakrychik East. Notes:Intersection grades are a composite of one-metre assays calculated from length-weighted assays over a minimum three-metre intersection length using a 2.0 g/t gold cut-off. A maximum of three metres of waste or lower grade material also may be included in the composite. No high assay values have been cut. Interval widths generally are equivalent to true widths. A complete summary of recent drill results, maps and drill sections is available on the Altynalmas Gold Project page on Ivanhoe Mines' website at www.IvanhoeMines.com.Quality assurance, quality control and data verificationAltynalmas Gold's exploration drill core was drilled HQ size (63.5-mm-diameter core) using western drill strings. Triple tube HQ3 (61.1-mm-diameter core) was used within, and on the shoulders, of the mineralized zone. Recoveries generally are greater than 95% within the mineralized zones.Assaying of Altynalmas Gold's samples was completed at ALS Minerals, an independent, ISO-credited laboratory in Vancouver, Canada, using fire assay fusion, followed by a gravimetric analysis procedure. Quality assurance and quality control is independently monitored and audited by RPA with a quality-control program, which includes the use of matrix matched assay standard reference samples, blanks, duplicates, repeats and internal ALS Minerals quality-assurance procedures. In RPA's opinion, the Altynalmas Gold historical drill-hole database recompilation and QA/QC processes have been thorough and well documented. Altynalmas Gold personnel have put a significant effort into validation of FSU gold assay values sourced from borehole logs, assay certificates and plotted values. In RPA's opinion, the main limitations on verifying data from the various sources are the lack of available FSU core to examine, as well as the lack of FSU QA/QC documentation. Recoveries for FSU reportedly averaged approximately 73% in mineralized zones for surface holes.Qualified personsDisclosures of a scientific or technical nature in this release have been approved by Ian Blakley, P. Geo., Vice President - Exploration of Altynalmas Gold and a "Qualified Person" for the purpose of National Instrument 43-101.The Mineral Resources for the Kyzyl Gold Project disclosed in this news release have been prepared by David Ross, P.Geo., an employee of RPA and independent of Ivanhoe Mines. Mr. Ross is a "Qualified Person" for the purpose of National Instrument 43-101. The Mineral Resources have been classified in accordance with CIM Definition Standards for Mineral Resources and Mineral Reserves, (November 2010). Mr. Ross has read and approved the contents of this news release as it pertains to the disclosed mineral resource estimate.The Feasibility Study Technical Report was prepared by RPA. for Altynalmas Gold Ltd. under the supervision of Jason Cox, P. Eng., an employee of RPA and independent of Ivanhoe Mines. Mr. Cox is a "Qualified Person" for the purpose of National Instrument 43-101. The Mineral Reserves have been classified in accordance with CIM Definition Standards for Mineral Resources and Mineral Reserves, (November 2010). Mr. Cox has read and approved the contents of this news release as it pertains to the disclosed mineral reserve estimate.NI 43-101 Technical ReportThe Feasibility Study Technical Report for the Kyzyl Gold Project was prepared to Canada's NI 43-101 reporting standards. Details surrounding the key assumptions, parameters and methods used to estimate the mineral resources and reserves surrounding the resource and reserve estimates, as well as information relating to the Qualified Persons data verification procedures, are found in the 43-101F1 Technical Report for the Project, a copy of which will be filed on SEDAR within 45 days and available at www.sedar.com and on Ivanhoe's website at www.IvanhoeMines.com.About Ivanhoe MinesIvanhoe Mines (TSX:IVN)(NYSE:IVN)(NASDAQ:IVN) is an international mining company with operations focused in the Asia Pacific region. Assets include the company's 66% interest in the Oyu Tolgoi copper-gold mine development project in southern Mongolia; its 58% interest in Mongolian coal miner SouthGobi Resources (TSX:SGQ)(HK:1878); a 59% interest in Ivanhoe Australia (TSX:IVA)(ASX:IVA), a copper-gold-uranium-molybdenum-rhenium exploration and development company; and a 50% interest in Altynalmas Gold, a private company developing the Kyzyl Gold Project in Kazakhstan.Ivanhoe Mines' shares are listed on the New York, NASDAQ and Toronto stock exchanges under the symbol IVN.Information contactsForward-Looking StatementsCertain statements made herein, including statements relating to matters that are not historical facts and statements of our beliefs, intentions and expectations about developments, results and events which will or may occur in the future, constitute "forward-looking information" within the meaning of applicable Canadian securities legislation and "forward-looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking information and statements are typically identified by words such as "anticipate," "could," "should," "expect," "seek," "may," "intend," "likely," "plan," "estimate," "will," "believe" and similar expressions suggesting future outcomes or statements regarding an outlook. These include, but are not limited to, statements respecting Altynalmas Gold's planned development work and the timing for completion of the planned feasibility study. All such forward-looking information and statements are based on certain assumptions and analyses made by Ivanhoe Mines' management in light of their experience and perception of historical trends, current conditions and expected future developments, as well as other factors management believes are appropriate in the circumstances. These statements, however, are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information or statements. Important factors that could cause actual results to differ from these forward-looking statements include those described under the heading "Risks and Uncertainties" elsewhere in the company's most recent MD&A. The reader is cautioned not to place undue reliance on forward-looking information or statements. This release also contains references to estimates of mineral resources. The estimation of resources is inherently uncertain and involves subjective judgments about many relevant factors. The accuracy of any such estimates is a function of the quantity and quality of available data, and of the assumptions made and judgments used in engineering and geological interpretation, which may prove to be unreliable. There can be no assurance that these estimates will be accurate or that such mineral resources can be mined or processed profitably. Mineral resources that are not mineral reserves do not have demonstrated economic viability. FOR FURTHER INFORMATION PLEASE CONTACT: Bill TrenamenIvanhoe Mines Ltd. - Investors+1.604.688.5755ORBob WilliamsonIvanhoe Mines Ltd. - Media+1.604.331.9830www.ivanhoemines.com