He said an international consortium was being formed to undertake the project.

Friedland said Ivanhoe was in talks with possible strategic partners for the mine as well, including Chinese and Japanese companies and also governments. He expected the initial open-pit mine to start operation in late 2007.

"The Chinese deserve to be there because they are the market and they are right next door," he said. "And Japanese interests are favoured because Japan is the largest source of bilateral economic assistance to Mongolia."

He did not identify possible partners in the mine, saying an announcement would be made in the near future, but said they might take minority stakes.

The Canadian exploration company describes Oyu Tolgoi as one of the world's largest underdeveloped copper and gold deposits. Friedland said a recent estimate put the value of the metal underground at approximately $100 billion.

KEEN FOR INVESTMENT

He said the Mongolian government was keen to attract large-scale investment to the southern Gobi Desert area where the mine is located.

"The Mongolian government is very interested in having the whole value chain in downstream in Mongolia," he said. "The government is considering a package of laws .. to attract foreign investment in southern Gobi."

While a bankable feasibility study on the open-pit section will not be available until June, Friedland estimated the initial investment at $1.2-1.3 billion, including $200-300 million for an environment-friendly coal-fired power plant.

The open-pit mine would produce about 80,000-90,000 tonnes of ore a day, he said.

Asked when the refinery would be built, Friedland said: "Sooner is better than later."

He said the consortium for the refinery might be different from that for the mine. It would include Jiangxi Copper, China's largest producer of the metal, and other companies from Japan, China and Mongolia.

It was not clear if the refinery would be built in addition to another refinery across the border in the Chinese city of Baotou, which a local Chinese official said was to be built for concentrate coming from Oyu Tolgoi.

Friedland, attending an investment conference, said he had discussed with Jiangxi Copper the pluses and minuses for the location of a new refinery, which was to be fed by Oyu Tolgoi.

He said the second stage of the underground mine -- which would cost another $1 billion or more -- could start in late 2009, to reach full capacity in 2011 or 2012.