Ivanhoe banks on Merlin rhenium deposit in Oz

When Peter Reeve describes Ivanhoe Australia’s “remarkable” Merlin deposit he likens it to some of the great mineral discoveries in Australian history such as the discovery of the country’s legendary Kambalda nickel field.

The Melbourne-based chief executive of Ivanhoe Australia, in which Ivanhoe Mines (IVN-T, IVN-N) holds an 83% stake, says the discovery of the rhenium/molybdenum deposit in northwestern Queensland will have an enormous impact on the company and has the potential to make it the “dominant and most reliable supplier” of rhenium in the world.

Indeed Ivanhoe Australia asserts that Merlin is a “new type of molybdenum (rhenium) deposit with average grades an order of magnitude higher than the highest grade existing molybdenum producers.”

Rhenium is a very rare, silvery metal that sells for about US$350 per oz., up from between US$35-US$70 per oz. as recently as 2005.

The element is used in high-temperature super alloys that are used to make jet engine parts like turbines and in platinum-rhenium catalysts that are primarily used to make lead-free, high-octane gasoline.

Rhenium’s extremely high melting point (3180 degrees Celsius) is surpassed only by tungsten and carbon and makes it ideal for use in aircraft engine turbine blades. Ivanhoe estimates about 25 kilograms of rhenium are needed for each rhenium-alloy turbine manufactured by GE, Pratt & Whitney and Rolls-Royce. And global production is just 50 tonnes of rhenium a year.

One barrier to commercial recovery is the high cost of the smelter technology that is required. Typically rhenium is extracted from flue gases from roasting molybdenum concentrates.

Reeve calculated that at current spot prices, the Merlin deposit would be the equivalent of a six million ounce gold deposit grading 14 grams gold per tonne, or a 1.1 million tonne copper deposit with an average grade of 8.5%.

A resource estimate released on Apr. 21 has pinpointed 13 million tonnes grading 0.8% molybdenum, 14 grams rhenium per tonne, 0.2% copper and 4.8 grams silver per tonne.

Those figures add up to about 110,000 tonnes of molybdenum, 180,000 kilograms (or six million ounces) of rhenium, 30,000 tonnes of copper and 2 million ounces of silver.

The estimate was based on a strike length of 500 metres and used results from just 60 drill holes. A total of 100 holes have been drilled so far with assay results completed for 87 of them.

Some of the highlights from the assay results include hole 115, which returned 38 metres grading 1.2% molybdenum, 17.29 grams rhenium per tonne and 0.17% copper from 246 metres, and hole 119 that cut 58 metres grading 2.25% molybdenum, 28.99 grams rhenium and 0.09% copper from 408 metres including 20 metres grading 6.26% molybdenum, 81.83 grams rhenium and 0.14% copper from 408 metres.

The initial resource estimate suggests a high-grade deposit in both molybdenum and rhenium with an in-ground metal value of about US$4.6 billion based on current metal prices, the company says, and because Merlin’s mineralization is close to surface and relatively shallow, mine development can be done at a fairly low cost.

Starting at a depth of 100 metres, the mineralized zone extends down-dip for more than 400 metres with an average width of 25 metres. So far Ivanhoe has identified a strike length of 900 metres but the deposit remains open to the north along strike and down-dip.

A scoping study has been started and will be completed before the end of the year.