BHP Billiton’s Turquoise Hill rights expire

BHP Billiton‘s (BHP-N) back-in rights for a 40% stake in Ivanhoe Mines‘ (IVN-T) Turquoise Hill project in southern Mongolia have expired.

The major’s rights would have become exercisable if a potential resource of 250 million tonnes of supergene copper mineralization grading at least 1% copper or 300 million tonnes of hypogene copper mineralization grading at least 1% copper had been identified by June 7.

Late last month, Ivanhoe tabled an inferred resource of 821 million tonnes grading 0.52 grams of gold per tonne and 0.38% copper for the Southwest zone, one of four known mineralized zones at the Turquoise Hill. The estimate employs a cutoff grade of 0.3% copper equivalent. At a cutoff grade of 0.5% copper equivalent, the inferred resource falls to 469 million tonnes running 0.7grams of gold and 0.48% copper.

The project is still subject to a 2% net smelter royalty payable to BHP Billiton, and Ivanhoe must also pay the major US$4 million in cash under an outstanding promissory note.

Ivanhoe’s in-house engineering review of the current inferred resource block model indicates that open-pit mining would recover about two-thirds of the current resource at a 0.5% copper equiv. cutoff. Mining would target the resource to a depth of about 500 metres. Below this, the high-grade core appears amenable to high-volume underground mining.

Ivanhoe has a program of infill and step-out drilling under way on the Southwest and Central zones. Deeper drilling will test for an increase in the gold-to-copper ratios. The junior believes the two systems could merge at depth.

Ivanhoe recently signed a contract with Major Pontil Drilling, an Australian subsidiary of Major Drilling of Canada, send another seven drill rigs to the property to sink at least 50,000 metres of diamond drilling. The new rigs double to 14 the number of rigs on-site.