Ivanhoe (NYSE:IVN) Ahead of Schedule with Oyu Tolgoi Mine

Ivanhoe Mines (NYSE:IVN) said in its recent quarterly report that construction at its Oyu Tolgoi copper and gold mine in Mongolia is moving along ahead of schedule.

Partners in the massive project are mining giant Rio Tinto (NYSE:RIO) and the Mongolian government.

Once production launches at the site, it will propel Ivanhoe into the top tier of miners in the world.

Production at Oyu Tolgoi is expected to launch in the latter part of 2012.

Ivanhoe at this time generates the majority of its revenue from its Ovoot Tolgoi coal mine in southern Mongolia.

In their last quarter they had a loss of $24.9 million, or five cents a share, improving from the same quarter last year where they lost $69.8 million or 18 cents a share.

Ivanhoe closed Thursday at $25.97, dropping $0.25, or 0.95 percent.

Rio (NYSE:RTP) Increases Ivanhoe Stake (NYSE:IVN)

Rio Tinto (NYSE:RTP) announced Monday it has increased its stake in Ivanhoe Mines to 34.9 percent. That followed a conversion of a matured convertible credit facility by Rio.

That brings the total investment by Rio in Ivanhoe to $1.73 billion. They also have rights to subscribe for common shares in Ivanhoe, which if exercised, would bring the total stake in the company to about 44 percent.

Ivanhoe has control of the extraordinary Oyu Tolgoi copper-gold project in Mongolia, which is among the largest undeveloped mines in the world.

The two companies are partnering to develop the resource, which also includes a stake by the Mongolian government in the deal.

The project is expected to cost about $5 billion to develop.

Ivanhoe has also signed a preliminary agreement valued at up to $1.8 billion with two global financial institution for financing purposes if needed.

Ivanhoe (NYSE:IVN) and Politically Unpredictable Mongolia

Mongolia is dealing with issues it hasn't had to face in the past, and it is leading to unpredictable situations in regard to mining companies, and Ivanhoe Mines (NYSE:IVN), which has a huge project in Mongolia called Oyu Tolgoi, they'll have to keep a close watch on their investment as the continuing narrative unfolds.

The major problem involves building out their infrastructure needed to make mining in the country feasible. All the mineral resources in the world won't help if there isn't the transport facilities in place to move the ore where it needs to go.

Other factors are geopolitical, with China and Russia attempting to exert great pressure on the land-locked country in order to secure many of the resources for themselves.

Mongolia is also starting to understand the economic situation they're in, and corruption has emerged in some cases where existing laws have been changed on a whim, causing licenses to be revoked, as in the case of subsidiaries of Khan Resources Inc (TSE:KRI).

Ivanhoe shouldn't be affected by the volatility, as it seems Mongolia is focusing on new projects and how to frame their resource policy and strategy.

Those in the middle of securing projects or wanting to in the future, could have a long and uncertain ride until these things are ironed out and a stronger rule of law is enacted.

It's like Mongolia has been unsuspectingly awakened from a long sleep and they're trying to figure out how to use their economically atrophied muscles.