Sanctions affect Ivanhoe's Myanmar operation

Sanctions affect Ivanhoe's Myanmar operation

by Wendy Stueck, Toronto Globe and Mail

6th April 2006

http://www.theglobeandmail.com/servlet/story/LAC.20060406.RIVANHOE06/TPStory

VANCOUVER -- A copper mine in Myanmar partly owned by Ivanhoe Mines Ltd. was forced to temporarily close last month after the mine's bank and insurance broker cut off relationships with the project as a result of U.S. economic sanctions against the country, according to regulatory filings by the company.

The mine resumed production earlier this week, an Ivanhoe official said yesterday. But U.S. sanctions against Myanmar, formerly known as Burma, have started to "seriously impact the mine's ability to function in a normal way," the filing states.

The company is also wrangling with Myanmar authorities over import permits for mining equipment.

The lack of that equipment, combined with falling grades in the area being mined, resulted in lower production at Monywa in the last quarter of 2005 and is expected to hurt production in coming years.

Ivanhoe now expects copper cathode production of about 16,000 tonnes from Monywa next year, compared with about 34,000 tonnes in 2005.

Ivanhoe reported sales of $23-million from the joint venture last year. Their flagship asset is Oyu Tolgoi, a copper-gold deposit in Mongolia considered one of the prime undeveloped deposits in the world.

Ivanhoe is negotiating a stability agreement for that project with the government of Mongolia. Yesterday, thousands of protesters, some carrying signs objecting to Oyu Tolgoi, rallied in Mongolia's capital of Ulan Bator. With the project's potential to dominate the country's mining industry for years to come, it has become a lightning rod for debate over how Mongolia should manage its emerging mining sector.

Company estimates say Oyu Tolgoi could churn out more than 1.6 billion pounds of copper and 900,000 ounces of gold a year at peak production and have a mine life of more than 40 years.

In its filing, Ivanhoe said management remained "optimistic" that an agreement could be reached in a time frame that would not unduly delay the Oyu Tolgoi project. The company has been negotiating the agreement since 2003.

Ivanhoe periodically comes under fire for operating in Myanmar where a military junta has ruled since the 1960s. The junta refused to recognize results of a 1990 opposition election victory.

In a fact sheet on its website, Vancouver-based Ivanhoe says it has been working in Myanmar through a subsidiary company since 1992, five years before Canada imposed limited economic sanctions.

Ivanhoe says it had invested about $60-million (U.S.) in Myanmar by the end of 2000 and that its joint venture is "voluntarily improving pre-existing conditions at the Monywa site," including waste rock and untreated water.

Some activists and shareholders, however, reject those claims and say any foreign investment in Myanmar serves to prop up a corrupt military regime.