The predominately copper miner has signed a merger agreement with Australian iron ore producer ABM Mining. Ivanhoe will issue common shares to ABM shareholders at a ratio that will leave ABM with about 40% of the merged entity.
ABM produces 2 million tonnes of iron ore pellets and concentrate annually from its Savage River Mine in Tasmania, and also owns the production assets of the Bjo rnevatn Mine and the integrated pellet plant and shipping facilities at Krikenes in northern Norway.
Its 1999 gross sales revenues of US56.6 million were more than double those of Ivanhoe. However, the merged company is expected to generate revenues in excess of US$200 million from production of 80,000t a year of LME grade A cathode copper and 5Mt of high-grade iron ore pellets and concentrate from Savage River and Bjo rnevatn.
ABM bought Savage River from US-based Picklands Mather International in 1997 after PMI said it was preparing to close the 30-year-old mine. It spent US$84 million until the end of 1999 upgrading the mine and processing facilities, and is currently undertaking an expansion that will boost production of pellets and concentrate to 2.95Mt a year by 2002.
Current resources are sufficient for more than 15 years at the expanded rates.
In Norway, ABM bought established iron ore operations at Bjo rnevatn and the integrated pellet plant and shipping facilities at Kirkenes in the north of the country for US$8 million at the end of 1997. Sydvaranger ASA, 87% owned by the Norwegian government, had spent US$470 million on plant and equipment at the operation over 15 years.
The resources at Bjo rnevatn are sufficient for more than 16 years of production at a rate of 2.25Mt per anum of pellets. High grade magnetite concentrate production is also possible, depending on market conditions.
Ivanhoe will bring to the merged company its major production asset, the S&K Copper Mine in Myanmar, which is the first phase development of the Monywa copper mine. The project is operated by MICCL, a 50:50 joint venture between Ivanhoe and state-owned Mining Enterprise No 1.
The operation produced 13,451t of cathode copper in the first six months of this year, up 5% on the first half of 1999. Copper sales totalled US$22.8 million against US$18.9 million the year before on increased production and higher prices.
The project realised a first half copper price of US80c a pound with a cash cost of US34c/lb. Total costs including depletion, depreciation, interest and royalties were US62c/lb.
After modifications currently underway at the S&K plant are finished, annual copper production will rise to 30,000tpa, and a further capacity increase to 35,000t is planned for 2001.
A development plan for the Letpadaung copper deposit, the second phase of the Monywa Project, has been completed by Australia’s Minproc. It estimates the deposit will produce 125,000t of cathode copper with minegate cash costs of US35c/lb over a 20 year mine life.
Ivanhoe is currently negotiating financing for the estimated US$390 million construction cost.
Once Letpadaung comes on stream in April 2003, full production at Monya is expected to rise to 160,000t of pure cathode a year.
Ivanhoe’s Bakyrchik gold mine in Kazakhstan remains on care and maintenance. The company is looking at reopening it with new ore processing technology, but says decisions on the timing and scale of any future operation depend on a stronger gold price.
Ivanhoe is also currently exploring in Myanmar, South Africa, Indonesia and Mongolia.
