Ivanhoe Mines has budgeted $2.3 billion in capital spending during 2011 for the first phase of its Oyu Tolgoi copper-gold project in southern Mongolia. The coming year will be the peak year for construction activity on the project. Approval of the budget by the Ivanhoe Mines board of directors followed earlier full approval of the 100,000-mt/d project by the Ivanhoe Mines-Rio Tinto joint technical committee, which is overseeing the Oyu Tolgoi project, and the board of Oyu Tolgoi LLC, the Mongolian company that holds the Oyu Tolgoi licenses and is 66%-owned by Ivanhoe Mines and 34%-owned by the Mongolian government.

Principal elements of the 2011 construction program include:
• $561 million for the copper-gold concentrator, which will see complete enclosure of the building, completion of steel work for the overland ore conveyor, installation of one of four ball mills, and installation of all material handling equipment in the pebble crusher.
• $186 million to purchase the initial mining fleet of trucks, shovels and ancillary equipment, and to start prestripping of the Southern Oyu openpit mine. The Oyu Tolgoi technical committee has decided to increase the capacity of the mining fleet’s trucks, opting for 290-mt units that will help to move an estimated 112 million mt/y of ore and waste. Prestripping of the open-pit mine will begin in 2011 to ensure that planned production levels can be achieved.
• $713 million for project infrastructure and electrical power, including completion of the central substation, completion of the process-water supply, completion of the truck maintenance shop, and phases one and two of the operations camp.
• $211 million for ongoing underground mine development at the Hugo North Deposit, construction of the headframe on Shaft No. 2, and further sinking of Shaft No. 2, which are critical elements of the development of the block-cave mine planned to begin production in 2015.

Total capital required for Oyu Tolgoi phase one from January 1, 2011, to the start of commissioning of the ore processing plant, which is planned for the second half of 2012, is projected to be $3.5 billion. This includes approximately $2.9 billion to complete construction of the Southern Oyu open-pit mine, processing plant and essential infrastructure, including electricity, water, roads, a paved airport runway and a Mongolian-designed passenger terminal. It also includes taxes and continued underground development of the phase-two Hugo North mine.

Commissioning will be followed later in 2012 by initial phase-one production and then by commercial production, expected during the first half of 2013.

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