TORONTO (miningweekly.com) – Full-scale construction is running on schedule at Ivanhoe Mining's Oyu Tolgoi project, in Mongolia, and the company said on Tuesday it is now planning to process the first ore by the fourth quarter of 2012.

“The steady progress being logged across the Oyu Tolgoi site every week means we are on track to be ahead of our construction schedule by the end of this year,” Ivanhoe CEO John Macken commented.

At this rate, commissioning of the major production systems will start about two years from now, with the initial ore running through the primary crusher and into storage, Macken said.

At the same time, at least one of the concentrator's two ore-grinding circuits will be in the commissioning stage, he said.

Vancouver-based Ivanhoe still expects to hit full commercial production at the $4,6-billion copper/gold project.

The mine is expected to produce more than 1,2-billion pounds of copper and 650 000 oz of gold a year in the first ten years of operations.

The budget for Oyu Tolgoi construction in 2010 has been set at $754-million, with an additional $195-million earmarked for operations, Ivanhoe said on Tuesday.

Ivanhoe is 29,6% owned by the world's third-biggest miner Rio Tinto, which can increase its holding to 46,6%.

The Mongolian government has a minority stake in the Oyu Tolgoi project, after Ivanhoe clinched a long-awaited investment agreement for the operation in October last year.