The underground development program is advancing at Ivanhoe Mines’ high-grade Hugo Dummett North Deposit in preparation for production. The deposit is part of the company’s Oyu Tolgoi Copper-Gold Project in Mongolia.

Shaft No 1 has been completed and is the deepest underground shaft in Mongolia. It is 6.7 metres in diameter, concrete lined and has a final depth of 1385 metres.

Lateral development activities on the 1300-metre level have started and will involve tunnelling into the Hugo Dummett North copper and gold deposit, facilitating access for exploration and initial production from the underground mine. The shaft eventually will help to ventilate the deep mine.
The Oyu Tolgoi site infrastructure has been significantly expanded, including construction of a centralized camp and the supply of power and other utilities. Site efforts have focused on the sinking of the shaft, completion of sub-surface works at Shaft No 2 and the winterization of the camp.

Prior to the winter break there had been progress made on Shaft No 2, including completing the concrete headframe to 14 metres below grade and extending the conveyor gallery and ventilation system. Shaft No. 2 is planned to be the initial, primary underground production and service shaft at Oyu Tolgoi.

Also engineering of the Oyu Tolgoi concentrator had reached 80% completion and site excavation work was about 25% complete. The focus for 2008 has been to maintain procurement for the concentrator equipment.

Infrastructure engineering has been completed or started on 27 different packages, including a diesel power station, operations water supply and a road to the border with China. Principal activities have included engineering for the diesel power station, which will provide construction power to the project, and engineering on the Gunii Hooloi bore field, which will serve as a long-term water source for the mine. Engineering design is continuing and implementation options will be assessed.

The design contract for a coal-fired power plant was awarded in 2007 and the first phase is expected to be completed this month. Operation of the power plant will support the concentrator schedule.

During the fourth quarter of 2007, members of the Mongolian National Parliament's Standing Committee on Economics visited large-scale, international mining operations to gather information about mining issues and approval processes that guide mine developments in other countries.

The committee had been given the responsibility to review and report to parliament on the draft investment agreement for Oyu Tolgoi that had been negotiated by Ivanhoe Mines and its strategic partner, Rio Tinto, with the Government of Mongolia's Working Group in April 2007. Mines owned or operated by Rio Tinto were among those visited by the MPs.

While the committee's travel and review was underway, the governing Mongolian People's Revolutionary Party voted to replace its leader resulting in the installation of a new Prime Minister and formation of a new cabinet. The new government assumed office on December 13, 2007.

On the same day, new Prime Minister Sanjaa Bayar said that any review and evaluation of the draft investment agreement by the government would be more reliable if the government retained the services of an internationally recognized, independent financial organization to assist in concluding a ‘world standard’ agreement for Oyu Tolgoi. He withdrew the draft Investment Agreement from Parliament to end what he said was a legislative stalemate and said that finalizing an agreement to permit the construction of Oyu Tolgoi to proceed was one of his government's priorities before the national general election scheduled for June 29, 2008.

The government subsequently declared that it intended to make a series of revisions to Mongolia's Minerals Law before attempting to complete an agreement for Oyu Tolgoi.

Ivanhoe Mines is monitoring the deliberations of parliament and is continuing to assess the implications for the Oyu Tolgoi development schedule.

www.ivanhoe-mines.com