A minor amount of copper was recovered at the Southern Oyu area during the Bronze
Age, as indicated by small circular pits and minor copper smelting slag.
During the 1980s the
district was investigated by joint Mongolian-Russian regional geochemical surveys which reported the Central Oyu
area as a molybdenum anomaly. In 1996, Mr. Garamjav (now a senior geologist at Turquoise Hill Resources), who
first visited the Oyu Tolgoi region in 1983 and noted evidence of alteration and copper staining, guided Magma
Copper to the Oyu Tolgoi area. Following the visit exploration tenements were secured by Magma
Copper.
BHP Billiton (BHP, which acquired Magma Copper in late 1996) began exploration at Oyu
Tolgoi as part of a regional reconnaissance program of the South Gobi desert during the 1997 field season. After
geological mapping, stream and soil sediment surveys, magnetic and induced polarization surveys, BHP completed
six diamond core holes totalling 1,100 metres in September and October of 1997. With encouraging results a
second phase of drilling began. Commencing in April 1998, BHP completed an additional 13 core holes totalling
2,000 metres with positive results obtained in four of the holes. A third phase of drilling was then conducted
in August and September, 1998, completing four holes totalling 800 metres. These holes failed to return
significant mineralization and the project was suspended pending a review.
In 1999, additional
drilling and exploration was recommended; however, further exploration at Oyu Tolgoi by BHP was discontinued due
to cut-backs in BHP’s exploration budgets. At this time BHP’s exploration tenements in Mongolia, including the
Oyu Tolgoi exploration concession, were offered for joint venture.
Ivanhoe Mines signed an option
agreement with BHP to earn 100% interest in the Oyu Tolgoi Concession in May 2000. A reverse circulation (RC)
drill program was initiated by Ivanhoe in June, 2000, completing 109 holes totalling 8,828 metres by September.
The program targeted the supergene-enriched, chalcocite blanket discovered in BHP’s drill hole OT-3. The results
from Ivanhoe’s drilling were encouraging, including the discovery of additional high-grade supergene copper
mineralization.
In 2001, Ivanhoe Mines continued RC drilling, mostly in the Southern Oyu area to
delineate possible oxide resources followed by three diamond drill holes in Southern Oyu, Southwest Oyu and
Central Oyu, respectively. These three holes were targeted to test the deep hypogene copper-gold potential.
These three holes were sufficiently encouraging for Ivanhoe to mount a major follow-up drill program. Ivanhoe’s
drill hole Hole OTD-150, Ivanhoe’s first deep diamond hole to test the hypogene potential of the Southwest Oyu
zone, was drilled in July 2001 to a depth of 590 metres and averaged in excess of one gram of gold per tonne and
0.81% copper over a distance of 508 metres, from 70 metres to 578 metres. It included a zone of 278 metres from
188 to 466 metres, grading in excess of 1.0% copper and approximately 1.50 grams of gold.
OTD-150
was the first deep drill hole at the Oyu Tolgoi Project to discover the new zone of porphyry mineralization
containing high-grade gold, copper and molybdenum. Given the economic potential of hole OTD-150, Ivanhoe
immediately expanded its exploration program by adding more drill rigs to further delineate the Oyu Tolgoi
mineralized system. In March 2002, Ivanhoe issued its first, independent Oyu Tolgoi resource audit for the
Southwest Oyu Discovery Zone, which estimated the deposit contained inferred resources, based on a cut-off grade
above a 0.30% copper equivalent, of 588 million tonnes, grading 0.53 grams per tonne of gold and 0.41% copper,
containing 10 million ounces of gold and 5.3 billion pounds of copper. It was the first of many independent
resource estimates to be prepared for the Oyu Tolgoi Project as drilling continued 24 hours a day, seven days a
week to expand the resources.
In early 2002, Ivanhoe earned 100% ownership of the Oyu Tolgoi project by
paying BHP Billiton US$5 million and spending US$6 million on exploration. BHP Billiton’s back-in rights expired
in mid-2002, giving Ivanhoe complete control over the project, except for a 2% net smelter royalty held by BHP
Billiton. Ivanhoe Mines subsequently purchased the 2% royalty from BHP Billiton in November 2003 for US$37
million.
In late 2002, Ivanhoe Mines drilled a hole in the far northern portion of the Oyu Tolgoi licence
(the Far North Zone) to test a broad induced polarization high. This test hole intersected 638 metres of
bornite, chalcopyrite-rich copper mineralization lying 222 metres down hole under younger sedimentary rocks.
This drill hole resulted in the discovery of the Far North Zone’s (now named Hugo Dummett) underground deposit,
one of the world’s largest and highest-grade gold/copper porphyry systems.
In 2003, Ivanhoe’s
drilling in the Far North (Hugo Dummett) discovery area was accelerated to delineate the extent of the Hugo
Deposit. By mid-2003, there were 18 exploration drill rigs on the property employing approximately 200 people,
and Oyu Tolgoi was the biggest mining exploration project in the world. Several of the new drill holes at the
Far North area contained intercepts of greater than 200 metres in thickness that average well in excess of 3%
copper. In September, 2003, the company fulfilled its earlier undertaking to rename the Far North portion of the
project to give special recognition to the work of Hugo Dummett, Ivanhoe’s former Executive Vice-President,
Project Development.
In 2004, Ivanhoe Mines entered into an earn-in and equity participation
agreement with Entrée Gold to explore and potentially develop approximately 40,000 hectares of Entrée’s
100%-owned, Shivee Tolgoi (Lookout Hill) property, adjacent to Ivanhoe’s Oyu Tolgoi copper-gold discovery in
Mongolia. By spending US$35 million on exploration and/or development of the property, Ivanhoe now holds a
participating interest of 80% in all minerals extracted below a sub-surface depth of 560 metres on the joint
venture property and a 70% interest in all minerals extracted from surface to a depth of 560 metres.
In
2006, world mining leader Rio Tinto agreed to form a strategic partnership with Ivanhoe Mines by investing in
Ivanhoe and, through an Ivanhoe-Rio Tinto Technical Committee, jointly engineer, construct and operate Ivanhoe’s
Oyu Tolgoi copper-gold mining complex in Mongolia’s South Gobi region. The agreement created a defined path for
Rio Tinto to become the largest shareholder in Ivanhoe Mines.
In 2009, Ivanhoe’s deep exploration
drilling on the Ivanhoe-Entree Joint Venture licence to the south of the Southern Oyu Deposit intersected
high-grade, copper-molybdenum and gold mineralization that led to the discovery of the Heruga Deposit.
Subsequent deep drilling along strike resulted in the discovery of the Heruga North Deposit that lies between
the Heruga and Southern Oyu deposits.
In May 2010, Ivanhoe Mines released a new, independent Integrated
Development Plan (IDP-10) produced by some of the world’s foremost engineering, mining and environmental
consultants, led by Australia-based AMEC Minproc and including U.S.-based Stantec Engineering. The new plan was
a comprehensive update of the original 2005 Integrated Development Plan and supported Ivanhoe Mines’ commitment
to advance Oyu Tolgoi into full construction. Oyu Tolgoi’s average annual production was estimated at 1.2
billion pounds of copper, 650,000 ounces of gold and 3.0 million ounces of silver for the first 10 years of
production.
In early 2011, Ivanhoe and BHP Billiton Ltd. discovered a new zone of shallow
copper-molybdenum-gold mineralization approximately 10 kilometres north of the Ivanhoe Mines Oyu Tolgoi
copper-gold mining complex currently under construction in southern Mongolia. The discovery, known as Ulaan Khud
North, extended the known strike length of the Oyu Tolgoi mineralized system by an additional three kilometres
to the north, to more than 23 kilometres.