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Ivanhoe Australia, through its wholly-owned subsidiary, Ivanhoe Cloncurry Mines, holds 100% title to the Merlin Project.
The discovery of the high-grade Merlin molybdenum-rhenium deposit at the base of the Mount Dore orebody (Figure 1) has presented Ivanhoe Australia with the opportunity to become a significant producer of molybdenum and the world's first direct source of rhenium. 
Figure 1 Long Section of Mount Dore showing spatial relationship of Mineralised Zones Studies into developing the deposit commenced in December 2008 when initial estimates for the Merlin Project indicated a broadly viable operation. Early work evaluated the production of a high value saleable flotation concentrate to allow fast-tracking of a simple concentrator project. Following this early metallurgical testwork it was decided that in order for Ivanhoe Australia to maximise the value of the Merlin deposit it would have to process its molybdenite concentrate further producing two higher value products; molybdenum oxide and ammonium perrhenate (a rhenium oxide powder). After the completion of the initial Mineral Resource estimate in late April 2009, Ivanhoe Australia considered the following key aspects of the Project;
Following a further drilling the resource was re-estimated by Quantitative Group Pty Ltd. This work provided the resource used for the preparation of the NI 43-101 compliant Merlin Scoping Study completed by SRK Consulting, which was released in March 2010. The study envisaged a standalone Merlin operation. The mining component of this study was based on conceptual mine designs and a mining sequence derived by AMC Consultants. The key outputs of the Merlin Scoping Study are:
IAL adopted a market based pricing case of US$16/lb Mo and US$7,000/kg rhenium for the economic evaluation of the Merlin project in the Scoping Study. The total project after tax cashflow under this scenario is $1,225 million. The project NPV8 is $531 million and has an IRR of 24% (after tax). The annual steady state after tax cashflow is approximately $130 million per annum. To indicate the metal price sensitivity of the Merlin project taking recent "Peak Pricing" for both molybdenum at US$35/lb and rhenium at US$11,000/kg, would increase the NPAT in a steady state year from approximately $90 million to over $330 million, an increase of $240 million. Ivanhoe Australia's subsequent purchase of the Osborne Operation in September 2010 offers the Merlin Project the opportunity use infrastructure at Osborne. This is expected to enhance the project economics as described and set out in the Merlin Scoping Study. On 26 August 2010 Ivanhoe announce the award of the contract for the Merlin Decline and associated work to Byrnecut Australia Limited for a 2.4 km long decline and 0.5 km of access cross cuts and drives into the Merlin orebody. Work commenced in September 2010  Figure 2 Plan showing proposed path of Merlin Decline and Merlin mineralised zones The following work continues:
The Merlin deposit, and the potential for similar discoveries in the region, provides Ivanhoe Australia with the opportunity to develop the market for rhenium in a similar manner to how Inco developed the world market for nickel. The Merlin deposit is located on a granted mining lease with a Plan of Operations (PoO) that allows mining development to commence. The Osborne site is fully permitted and is on care and maintenance. Further information on the Osborne Operation is provided on this website. View the Osborne page. Geology The Merlin Deposit is contained within the Mount Dore Mining Leases and is situated within the meta-sedimentary rocks of the Proterozoic Kuridala Formation to the west of and below the Mount Dore granite body. High-grade, surface-enriched copper was mined from Mount Dore in the early 1900s.  Figure 3 Drilling at Merlin, December 2008 The discrete copper and zinc rich polymetallic sulphide zones of the Mount Dore orebody, which are covered by the Mount Dore granite, overlie the Merlin deposit. The Merlin deposit starts near the surface, dips east at between 45 and 55 degrees and has been intersected to approximately 500 m down dip. Merlin has an average true thickness of approximately 20 m and consists of high-grade breccias and a lower-grade generally thicker disseminated zone. Mineralisation has been found over a strike length of 1300 m in step-out holes. The mineralisation thins to the north, where it is also noted that the copper, zinc and gold content increases, while to the south it flattens and pinches out. Little Wizard represents the southernmost extent of molybdenum mineralisation of economic interest found to date.  Figure 4 Plan showing location of mineralised zones at Merlin and Mount Dore The Merlin deposit consists of high-grade molybdenite in a breccia zone within shales. Two sub-zones are apparent within the Merlin mineralisation as shown in Figure 4 a cross section through Merlin. The lower sub-zone, at or near the base of the shales above the silicified footwall siltstones, dips at 55 degrees to the east and consists of high-grade molybdenum and rhenium mineralisation with lesser amounts of copper. The upper sub-zone, along the sheared interface between the overlying phyllites and underlying black shales, dips at a shallower angle of between 30 and 45 degrees to the east and also contains molybdenum and rhenium but with higher copper, zinc and silver content. Proterozoic aged molybdenite deposits are rare in the world and they may have unique characteristics in terms of ore grade and host rocks. Merlin is the world's highest grade molybdenum and rhenium deposit. Most pure molybdenum deposits are related to porphyry deposits and have a low rhenium content within the molybdenite, while most of the high-rhenium content molybdenite is produced as a by-product of large copper deposits either porphyry copper or sediment hosted copper deposits, the latter has very high rhenium content within the molybdenite.  Figure 5 Section N7,605,450 through Merlin The current interpretation is that Merlin is related to a potentially very large, sediment hosted copper deposit. The Mount Dore orebody and the Merlin deposit, have strong geochemical and geological similarities to other very large sediment hosted copper deposits, such as at Lubin in Poland and Dzhezkazgan in Kazakhstan. Geochemically anomalous copper and molybdenite in recent termite mound surveys and early copper soil surveys extend for a distance of 8 km from Mount Dore to Metal Ridge North. Consequently there is strong potential to discover additional molybdenite mineralisation and polymetallic copper-zinc-lead-silver--cobalt-gold-molybdenum mineralisation in similar geological situations to Mount Dore and Merlin, either as discrete deposits, or as a nearly continuous mineralised zone. Cave Hill, north of Mount Dore, and Lanham's Shaft north east of Mount Elliott, are both existing molybdenum targets, deposits located at these prospects would allow a longer term or larger project to be developed. Mineral Resource Estimate The Merlin deposit has currently been defined by drilling more than 253 diamond and RC drill holes as part of the Mount Dore project drilling campaign which now totals 469 holes for 113,928 m. The estimate of the Identified Mineral Resource, at 0.3% Mo cut-off, is shown in Table 1. Table 1 Identified Mineral Resources as at 4 August 2010
Mining Engineering and Mine Design A Mineral Reserve was not prepared by IAL as part of the Scoping Study for Merlin due to insufficient data and engineering work being available for the determination of the modifying factors and additional data required to convert the 4 August 2010 Mineral Resources to Mineral Reserves. IAL commissioned independent mining consultants to prepare a preliminary mine design, based on decline access from the surface, ventilation connections and secondary egress by vertical connections to the surface and standard stoping and truck haulage via the decline. The highest value ores at Merlin occur from 150 m to 500 m below the surface. A decline from the surface would allow the molybdenum to be the prime focus of mining and treatment options to be studied and could start independent of the other mining scenarios for other ore types and their associated studies. The decline to access the Merlin deposit is based on the following assumptions: A single 5.5 x 5.8 m arched profile decline at a gradient of 1:7 from a portal at the centre of gravity of the Merlin and Mount Dore Polymetallic zones. Geotechnical drilling is required prior to final design of the stopes. The decline will be extended to reach the base of the Merlin lower zone within 18 months to two years from the establishment of the portal. The decline would initially allow infill drilling from underground into the upper part of the orebody which would allow for detail design and establishment of the production phase.  Figure 6 Section looking north through Merlin showing mineralisation and proposed decline path At the portal location, a boxcut has been commenced to establish a portal this should be complete by December 2010. Ore will be stockpiled at the decline portal on a suitable cleared site until the metallurgical plant at Osborne has been modified to handle directly fed ore. Mining operations envisaged for Merlin would be typical of a moderate scale - trackless mining operation. Development and ground support would used diesel/ electric hydraulic drill jumbos, diesel power truck, LHDs and support equipment for face charging, installation of mine services, and transport of people and equipment. Plant feed and waste handling from the mine would be via truck haulage with LHDs direct loading truck from development headings and stopes. A paste fill plant would be required to place the de-slimed tails into the completed stopes via large diameter surface drill holes. Metallurgy The Merlin orebody is metallurgically complex, containing economic quantities of molybdenum, rhenium, copper, silver and potentially zinc, cobalt and gold. The overall aim of the processing plant would be to maximise the value realised from the orebody. Molybdenite (MoS2) is the only molybdenum mineral identified at Merlin with high concentrations of rhenium. Given current knowledge on the mineralogy of rhenium, it can be assumed that this element is present in the molybdenite crystal lattice and does not exist as a separate mineral species. The conventional processing route for material containing molybdenite with payable rhenium is outlined below. Comminution of the material to liberate the molybdenite from the host rock-forming minerals. Separation of the molybdenite into a concentrate using froth flotation. Normal practice includes regrinding and multistage dilution cleaning and/or washed froth cleaning to make a high grade sulphide concentrate. Roasting of the leached molybdenite concentrate to produce molybdenum trioxide (MoO3). This technical grade product is the input for all metallurgical and most chemical uses for molybdenum. Rhenium with its highest oxidation number +7 gives the chemical formula of Re2O7. Rhenium oxide is very volatile having a boiling point of 350oC whereas molybdenum oxide starts to sublime at 750oC. Thus in a roasting process with a maximum temperature of around 625oC and furnace exit temperature of 425oC molybdenum oxide stays in the solid phase while rhenium oxide is vaporized. Roaster gases are cooled and the solid rhenium oxide water leached with the solution purified by ion exchange. Ammonia is added to the concentrated eluate with ammonium perrhenate (APR) crystallized. This is the starting material for the production of rhenium metal. An alternative to roasting for production of technical grade molybdenum oxide and rhenium recovery is pressure leaching of the molybdenite concentrate in an autoclave. Infrastructure The Osborne Operation was acquired from Barrick Gold in September 2010 and its purchase was accompanied by a significant amount of usable infrastructure. Ivanhoe is conducting studies to investigate the optimal strategy for using this infrastructure to fast-track the development of the Merlin Mo-Re deposit. The main assets of the Osborne Operation are:
The key benefits to Ivanhoe Australia of the Osborne Operation acquisition are expected to be:
The previous water supply for the Mount Dore mine was from bores, both in the Mount Dore aquifer and the Burke River area. The existing southern tailings dam will be used to store water produced from the dewatering of the Mount Dore aquifer. |