For all the fanfare garnered by the world's largest gold miners, you might think they have a monopoly on the world's largest gold mines.
Sure, the primary gold miners have staked their fair share of buried treasure. Gold Fields'
By and large, gold mother lodes like the 33.6 million ounces of proven and probable reserves at the Donlin Creek property in Alaska -- owned jointly by Barrick Gold
Because the two metals are so often found in tandem, many of the world's largest gold mines are actually copper mines. If you're wondering how Freeport-McMoRan Copper & Gold
But Grasberg may not remain the world's premier copper and gold mine for long.
Tomorrow's copper-gold mother lode
The company has built an estimated resource (measured and indicated, plus inferred) of 81 billion pounds of copper with a monster gold kicker of 46 million ounces. While the company proceeds with a construction schedule that targets open-pit production beginning in 2013, exploration drilling will endeavor to convert resources to reserves and further expand the known deposit. If their most recent drill result is any indication, investors may be in for quite a ride. In September, Ivanhoe revealed that a single drill hole encountered 938 meters of continuous copper and gold mineralization.
Ivanhoe recently announced a share offering to raise between $800 million and $1 billion toward construction of the mine. The offering is structured such that existing shareholders will be encouraged to participate in order to avoid dilution of their existing stake. Leading the charge, executive chairman and CEO Robert Friedland announced he intends to maintain his own 18.3% stake in the company. It is not yet clear whether strategic partner and 34.9% stakeholder Rio Tinto
Moving and shaking -- Mongolia-style
The pending share offering itself is billed as a bridge to a multibillion-dollar chunk of debt financing for Oyu Tolgoi to follow during the first half of next year. Core lenders are slated to include the International Finance Corporation, BNP Paribas, and Export Development Canada. Given China's explicit policy objective to finance global gold production, I will not be surprised to see a Chinese financing entity come forward as well.
Considering the enormous scale of this project and the stakes involved, the shifts in management structure also announced this week are well received by this Fool. Executive chairman Robert Friedland is retaking the CEO position from John Macken and will lead a newly created Office of the Chairman to pursue strategic initiatives for Ivanhoe. Friedland previously served as Ivanhoe CEO through 2006. Serving as President, Macken will now hone his focus more fully upon supervising the construction effort at Oyu Tolgoi ... where a workforce of 5,300 is already onsite.
The bi-metallic bottom line
As attractive as Oyu Tolgoi's giant gold kicker may be for those like me with a bullish outlook for gold, there is no escaping the fact that the mine remains primarily a copper play. But oyu, what a copper play! Whereas significant zinc and molybdenum by-product credits permitted Southern Copper
I believe Ivanhoe Mines presents a compelling opportunity to get in on the ground floor with a mine that is likely to oust Freeport's Grasberg as the world's largest copper / gold deposit. With additional exploration upside highlighted by recent drill results, favorable cost metrics through a range of metal price scenarios, and the scent of additional strategic opportunities waiting in the wings, Ivanhoe may just be the world's next Freeport-McMoRan. I have added Ivanhoe Mines to my silverminer CAPS portfolio, and encourage you to cast your own vote within Motley Fool CAPS today.
Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of Freeport-McmoRan Copper & Gold and NovaGold Resources. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.