* Says construction of Oyu Tolgoi proceeding on schedule
* Says first ore likely to be processed in Q4 2012 (All figures in U.S. dollars, unless noted)
TORONTO, Sept 7 (Reuters) - Ivanhoe Mines (IVN.TO) expects to process the first ore from its flagship Oyu Tolgoi copper-gold project in Mongolia in the fourth quarter of 2012, the company said on Tuesday.
Ivanhoe, led by colorful dealmaker Robert Friedland, is developing Oyu Tolgoi in partnership with Anglo-Australian miner Rio Tinto (RIO.AX)(RIO.L) and the government of Mongolia. Construction of the long-delayed mine is proceeding on schedule, Ivanhoe said.
The $5 billion project -- one of the world's largest untapped copper-gold deposits -- was finally approved in October after years of negotiations with Mongolian authorities. [ID:nSP495396]
Ivanhoe said it had set the 2010 construction budget at $754 million, with an additional $195 million earmarked for operations.
"We expect to meet our declared goal of beginning full commercial production at Oyu Tolgoi in 2013," Chief Executive Officer John Macken said in a statement.
The company expects average annual production at Oyu Tolgoi during the first 10 years of operation to exceed 1.2 billion pounds (544,000 tonnes) of copper and 650,000 ounces of gold. ($1= $1.04 Canadian) (Reporting by Euan Rocha; Editing by Lisa Von Ahn)