TORONTO (miningweekly.com) – The Kyzyl gold project in northeastern Kazakhstan could be in production by 2013, Ivanhoe Mines, which owns 50% of the asset, said on Monday.

A drilling programme to test the size of the mineralised system is more than half complete, and is expected to form the basis for upgrading the current indicated resources at Kyzyl into reserves, Ivanhoe reported on Monday.

The Vancouver-based firm and a privately-owned Kazakh entity are joint owners in Altynalmas Gold, which holds the Kyzyl project.

An independent prefeasibility study is currently under way and once that is completed, Altynalmas plans to go ahead with the detailed design for a 1,5-million ton a year commercial plant, that will treat head grades of around nine grams of gold per ton or higher.

The company will seek finance and the necessary permitting approvals for the project, Altynalmas Gold CEO and Ivanhoe Mines gold division president David Woodall said in a statement.

The plan is to start construction in 2011, followed by first production in 2013, he said.

Last week, Ivanhoe Mines chairperson Robert Friedland said that the company had retained senior investment-banking advisers and was in “detailed discussions” with potential strategic investors for the project.

These included “established gold-industry players and sovereign-wealth funds”, he said.

Ivanhoe and its partner also plan to seek a stock exchange listing for Altynalmas.

Ivanhoe's most high profile asset is its large Oyu Tolgoi copper/gold project, in Mongolia, for which it and shareholder Rio Tinto signed an investment last year with the Mongolian government.

The company also owns 65% of Mongolian coal miner SouthGobi Energy Resources and 81% in Ivanhoe Australia.

Shares in Ivanhoe Mines rose 3,8% on Monday, to CUSD17,45 apiece by 16:17 in Toronto.