Ivanhoe Australia Limited
TSX : IVA
ASX : IVA

Ivanhoe Australia Limited

September 15, 2011 22:15 ET

Ivanhoe Australia-Moving from Explorer to Producer

Osborne Project Demonstrates Robust Initial Financial Returns with Exploration Targeting Increased Life of Mine

Merlin Pre-Feasibility Study Confirms Attractive Project Returns

Corporate Interest in Ivanhoe Projects Remains Strong

MELBOURNE, AUSTRALIA--(Marketwire - Sept. 15, 2011) - Peter Reeve, Chief Executive Officer, and Robert Friedland, Chairman of Ivanhoe Australia Limited (TSX:IVA)(ASX:IVA), are pleased to release today a comprehensive update of Ivanhoe Australia's activities at its Cloncurry tenements, with the company having substantially completed studies on its Osborne Copper-Gold and Merlin Molybdenum/Rhenium projects, completed the scoping study on the Mount Dore Cathode Copper project, and progressed well with the scoping study on the Mount Elliott project.

Development activities at the Cloncurry tenements (Figure 1) have intensified to a significant level, with a workforce of over 350 people on site. An update on the projects is outlined below.

KEY HIGHLIGHTS

  • Osborne to commence production in March 2012
  • Merlin Pre-Feasibility Study expected to be completed in early Q4 2011 – indicates a robust project
  • Mount Dore scoping study indicates solid cash flow stream for moderate capital outlay
  • Mount Elliott is a significant asset, with the scoping study due for completion in Q1 2012
  • Exploration across the Cloncurry tenements continues to build a more detailed regional geological understanding and prospect targeting from this base is providing significant new opportunities for future discovery
  • Corporate interest in Ivanhoe Australia and its assets is ongoing and discussions and negotiations with several parties as potential strategic partners are progressing well

"From day one of Ivanhoe Australia's involvement in this extraordinary mineral field, the commencement of production in order to sustain a long term exploration effort has been a key goal of the company," Mr Reeve said. "The completion of these studies is an important step in realising this objective."

Key Project Financial Summary
Project Stage of
project
(target date)
Total After
tax cash
flow A$M#
IRR%# Target
Project
Approval
Target
Production
Osborne Copper-Gold1 Preliminary
Economic 2
Assessment
(Q4 2011)
162 51% Commenced Q1 2012
Merlin Molybdenum/Rhenium Pre-Feasibility
Study
(Q4 2011)
1,563 32% Q1 2012 Q1 2014
Mount Dore Cathode Copper1 Scoping Study
(complete)
492 51% Q1 2013 Q4 2014

Mount Elliott Copper Gold

Scoping Study
(Q1 2012)
Financial analysis will be
released upon scoping
study completion
2014 2016
  • Please see detail in each Project section below for assumptions

PROJECT UPDATES

Osborne Copper Gold Project–Moving Ivanhoe from Explorer to Producer

Since acquiring the Osborne Copper Gold project and tenements from Barrick (PD) Australia Limited in October 2010, Ivanhoe Australia has progressed to the point where the restart of the mine and processing plant is scheduled to commence in March 2012. The commencement of production from Osborne will be an important strategic step for Ivanhoe Australia, moving the Company firmly from explorer to producer status. The strong cashflow expected from Osborne will allow Ivanhoe Australia to support the development of other projects in the field and continue its aggressive exploration program.

Ivanhoe Australia's Osborne Copper Gold project is targeting a mine life of approximately 15 to 20 years encompassing several ore sources from Ivanhoe Australia tenements. The Preliminary Economic Assessment3 (Canadian NI 43-101 compliant report), which is expected to be finalised early in Q4 2011, evaluates ore sources for an initial four-year period only. Ore included in the initial mine plan is to be sourced from Osborne and Kulthor underground, Osborne open-pit and Starra 276 underground. Preliminary results from the Copper-Gold study for the initial four year period are:

  • Ore treated at the existing 2 Mtpa Osborne processing facility
  • Average steady state annual metal-in-concentrate production of approximately 25,000 tonnes of copper and approximately 50,000 ounces of gold
  • Measured and Indicated Mineral Resources of 13.1 Mt at 1.4% copper and 0.9 g/t gold and Inferred Mineral Resources of 7.9 Mt at 1.3% copper and 1.0 g/t gold 4
  • Mill feed4,5 of 6.6 Mt at 1.3% copper and 0.8 g/t gold
  • Initial four year mine plan
  • Overall copper and gold-in-concentrate recoveries expected to be approximately 81.7% and 66.4% respectively
  • Average cash cost including royalties and after by-product credits of US$1.67/Ib
  • Total capital cost of approximately A$137 million (from July 2011) including approximately A$30 million of initial capital to commence production from Kulthor and Osborne underground with the balance to fund Osborne open pit, Starra 276 and the project's share of infrastructure, including the Mount Dore-Osborne access road
  • Total project after tax cashflow of approximately A$162 million and project IRR of 51% assuming US$4.00/Ib copper, US$1,500/oz gold and AUD:USD exchange rates of 1.00 (2012-13) and 0.83 thereafter

Underground development work at Kulthor and Osborne commenced in Q2 2011 with access to the Kulthor ore body achieved in late August 2011 (Figure 2). Access to the Kulthor ore body will also enable further work on resource delineation and mine planning to progress.

The extension of the Osborne decline continues at depth with access completed to the first of three planned production levels and ore development is underway. Development ore has been stockpiled on the ROM (run-of-mine) pad. Stockpiled ore and planned production is expected to provide sufficient ore for sustainable mill production from March 2012.

An important part of the ongoing work program is seeking to optimise the ore sources and identify higher grade feed. Of particular interest is the potential to extend the Kulthor deposit to the south-west (Figure 3).

Exploration is focused on a number of highly prospective target areas with the goal of extending the mine plan of the Osborne Copper Gold project beyond the initial four years detailed in the Copper Gold study. The initial target is to identify additional ore sources around the existing Osborne complex. Work is currently focused on seeking to extend both the Osborne and Kulthor underground resources with an underground drilling program underway. This program will test for significant extensions of the Osborne Deeps mineralisation immediately north of the planned mining area and existing decline, where recent interpretations allow for a steep body of mineralisation to exist and no previous drilling has been undertaken.

At Kulthor, the underground drilling program will define stoping blocks within the known resource, whereas a surface drilling program will commence in Q4 2011 to test the south-west strike and down-plunge extension of the Kulthor mineralisation at depth, outside of the known resource.

The underground drilling in the Osborne system has an exploration target of between two and four million tonnes of resources at a grade of between 1.2%-1.6% copper and 0.8-1.0 g/t gold; and at Kulthor the exploration target is between five and ten million tonnes of resource at a grade of between 1.2%-1.6% copper and 0.8-1.0 g/t gold. These estimates are conceptual in nature. There has been insufficient exploration to define the targets as mineral resources, and it is uncertain if further exploration will result in the targets being delineated as mineral resources.

Geophysical analysis using downhole Sub Audio Magnetics (SAM) will target the extension of the Kulthor trend further to the south-west and the nearby Avalon prospect west of Kulthor. The Avalon prospect is a substantial five kilometre long magnetic and gravity target which extends for over two kilometres in depth. Avalon is located two kilometres west of Kulthor and, with an identical magnetic and gravity response to both Osborne and Kulthor, has strong potential to be mineralised (Figure 4). At this stage only limited drilling in the upper zone of the system has been undertaken with several holes intersecting mineralisation (Figure 5).

The proposed Osborne Deeps and Kulthor extensions and the bulk of the Avalon prospect are within current Mining Leases and potentially can be accessed from the existing underground development – demonstrating substantial capital efficiency in the event these targets are realised.

Further resources for the Osborne Copper Gold project are being targeted from a number of prospective areas on Ivanhoe's tenements within economic trucking distance of the Osborne concentrator. High priority targets include the recently announced Houdini discovery, Starra Line, Southern Extensions of the Starra Line and Lucky Luke (Figure 6).

Merlin Molybdenum and Rhenium Project – High-Grade Initial Ore Reserve

The Merlin Project, believed to be the world's highest grade known molybdenum and rhenium deposit, was discovered in late 2008 and had an initial Mineral Resource announced in mid 2009. The key strengths of the project include the high-grade of the resource and relatively shallow depth, which results in a project with forecast strong long-term cashflows and high project returns.

The Merlin decline, which began in late 2010, is progressing on time and on budget, with the decline face currently at more than 1,370 metres (Figure 7). Underground diamond drilling to delineate the resource in more detail and potentially to expand it will commence in Q4 2011. Access to the high grade Little Wizard deposit will be achieved by the end of Q3 2011.

The Merlin Pre-feasibility Study (Merlin PFS)6 is progressing towards finalisation and is expected to be completed early in Q4 2011. Preliminary results from the Merlin PFS confirm key economic outcomes of the original Merlin Project scoping study, under the same economic assumptions.

Preliminary results indicate the key features of the project are:

  • An initial mine life greater than ten years
  • 500,000 tpa (steady state) production rate
  • Average steady state production of approximately 5,030 tonnes of molybdenum per annum and 7.2 tonnes of rhenium per annum
  • Mineral Reserve of 6.7 Mt at 1.1% molybdenum and 19.1 g/t rhenium, consisting entirely of Probable Mineral Reserves7
  • A dedicated processing plant constructed adjacent to the Osborne facilities (utilising elements of the existing infrastructure, such as ROM pad, power, water, offices, warehouse, maintenance facility). This will include a molybdenum/rhenium roaster producing separate molybdenum and rhenium products (Figure 8)
  • Initial capital cost to first production of A$337 million which includes A$86m for the roaster facility, A$60m for mine development and $56m for contingency. Additional mine development expenditure of approximately A$182 million is required over the mine life
  • Overall molybdenum and rhenium metal recoveries are expected to be approximately 84.5% and 80.9% respectively
  • Average life-of-mine operating cash costs of US$6.78 per lb Mo in MoO3, after by-product credits and including royalties
  • Total after tax cashflow of A$1,563 million, annual steady state after tax cashflows of approximately A$170 million, and a project IRR of approximately 32% assuming US$16.50/lb molybdenum in 2011 increasing to US$23.77/lb molybdenum in 2016 and constant thereafter, and US$4,350/kg rhenium in 2011 increasing to US$5,018/kg in 2016 and constant thereafter.8,9 The AUD:USD exchange rate assumed is 1.00 for 2012-2013 and 0.83 thereafter
  • First production of concentrate is planned for Q3 2013 and roaster product in Q1 2014

Work is being undertaken on a number of optimisation opportunities identified during the Merlin PFS. These include: opportunities to reduce mining costs by optimising the mine design; assessing the potential to produce higher value molybdenum and rhenium products; value engineering study of the processing plant to reduce capital costs, potential capital and operating savings from locating the roaster offshore; and life extensions for the project from high-grade Mo/Re targets identified elsewhere on Ivanhoe Australia's tenements.

Mount Dore Cathode Copper Project – Pre-Feasibility Underway

The Mount Dore complex hosts (Figure 9) an extensive mineralised system that contains three main zones: the Leachable Copper Zone; the Polymetallic Zone; and the Merlin Deposit. The initial Mount Dore Mineral Resource was prepared in 2008 and updated in 2010. The Mount Dore Cathode Copper Project is based on the shallow Leachable Copper Zone only.

Details of the results from the Mount Dore Cathode Copper Project scoping study10 were released on 14 September 2011 and will be filed on SEDAR in due course. The scoping study indicated that the project would provide robust long-term cashflows for a moderate capital outlay.

The key project parameters are:

  • Open pit mining of 28.6 Mt @ 0.75% Cu derived from Indicated Mineral Resource and 1.0 Mt @ 0.70% Cu of Inferred Mineral Resource11

  • Initial 10 year mine life at a 3 Mtpa processing rate
  • Annual steady state production of approximately 19,000t of cathode copper
  • Initial project capital cost of A$83 million
  • Average life-of-mine cash costs of approximately US$2.24/lb (A$2.69/Ib)
  • Total project after-tax cashflow of approximately A$492 million, annual steady-state after tax cash flow of approximately A$60m, and project IRR of approximately 51% assuming US$4.00/Ib copper and AUD:USD exchange of 0.83

A project pre-feasibility study has commenced with completion scheduled by Q1 2012. The pre-feasibility study will examine a number of mining, processing and infrastructure options for the developments of the Mount Dore deposit (Figure 10). Current plans have mining at Mount Dore commencing in Q4 2014.

Mount Elliott Project – Ivanhoe Australia's Flagship Project

Mount Elliott is recognised as one of the largest copper-gold mineralised systems discovered in Australia and is Ivanhoe Australia's flagship project with the potential to provide Ivanhoe Australia with a long-life production base. The Mount Elliott deposit contains an estimated 1.1 Mt (2.4 billion pounds) of copper and 2.2 Moz of gold in Indicated Resources and 1.4 Mt (3.1 billion pounds) of copper and 2.5 Moz of gold in Inferred Resources (Figure 11).

The Mount Elliott Mineral Resource (cut off of 0.3% eCu12) comprises Indicated Resource of 210 Mt @ 0.52% Cu and 0.32g/t Au and Inferred Resource of 360 Mt @ 0.40% Cu and 0.22g/t Au. The higher grade SWAN portion of the resource (0.8% eCu cut off) contains Indicated Resource of 65Mt @ 0.90% Cu and 0.52g/t Au and Inferred Resource of 47 Mt @ 0.74% Cu and 0.44 g/t Au.

AMC Consultants are currently working on the Mount Elliott scoping study13 to evaluate all mining options for the large tonnage orebody, including the potential to extract copper-gold ore from the high grade SWAN zone (Figure 12) in a >5 Mtpa sub-level or block cave mine and concentrator.

The scoping study is expected to be completed in Q1 2012 and will identify the future development path for the project including additional resource drilling, metallurgical test work, and infrastructure requirements.

EXPLORATION

Ivanhoe Australia shares the philosophy of the broader Ivanhoe Group with exploration positioned as the key growth strategy for the company and a critical platform for building shareholder value.

Ivanhoe Australia's exploration tenements are located in part of the Cloncurry mineral district south-east of Mount Isa. Ivanhoe Australia's wholly-owned Exploration Permits cover a total of 2,862 km2 over a distance of greater than 120 kilometres and include over five mineralised belts, which have historically hosted several mines and currently host Ivanhoe Australia's Mineral Resource portfolio of copper, gold, molybdenum and rhenium and the company's four development projects, which are all contained within 28 wholly-owned granted mining leases covering 105 km2.

Ivanhoe Australia's geoscientists are developing a comprehensive geological model for the entire 120 kilometre belt from Osborne at the southern end to Lanham's Shaft in the north. The model is being developed by combining grass roots geological exploration data with state-of-the-art geophysical and structural information. This model will be used for detailed targeting of prospective deposits and is the first time such a comprehensive model has been used for exploration in the area.

Ivanhoe Australia's exploration team currently has over 200 identified prospects as well as numerous geophysical and geochemical targets throughout the Cloncurry tenements. The company has spent an overall amount of over A$150 million on exploration since it has owned the tenements and plans to spend an annual A$30-40 million on ongoing exploration with a focus on identifying additional resources for the Osborne Copper Gold Project, targeting further Molybdenum-Rhenium resources and exploring for world class IOCG deposits.

CORPORATE – Strategic Partnerships Under Review

Ivanhoe Australia has been actively pursuing a range of alternatives for securing further funding to progress its strategies in the Cloncurry project area. These alternatives include offtake funding for molybdenum and rhenium production, sale of project interests, and strategic equity positions at the corporate level. The involvement of a strategic partner is important for continued product offtake and a sustained long-term commitment to funding provision.

The funding around the offtake sales in both molybdenum and rhenium has the potential to provide significant finance towards the molybdenum roaster and could therefore substantially reduce the direct funding requirements of the Merlin project by Ivanhoe Australia. The rhenium offtake interest remains separate to this potential molybdenum roaster funding.

The potential for the sale of minority interests of Ivanhoe Australia projects has been previously flagged, and has recently been progressed through ongoing discussions and negotiations. The overall consideration for one or all of the Cloncurry projects is expected to provide a proportion of the development funding for these projects over the foreseeable future.

The essence of this corporate interest revolves around the productive capacity that Ivanhoe Australia has been able to secure with the acquisition of the Osborne facilities and around the significant pipeline of projects and associated exploration upside across the field. The low political risk of Ivanhoe Australia's Cloncurry tenements relative to other similar scale available opportunities has also been a key attraction.

As at 31 August 2011, Ivanhoe Australia had an available cash balance of A$53.4 million. In addition, approximately A$30.8 million is expected to be received from Exco Resources Limited. Exco Resources Limited announced on 30 June 2011 that it expects to make this distribution by 31 October 2011.

IVANHOE AUSTRALIA BACKGROUND

Ivanhoe Australia holds over 2,800km2 of tenements in one of the world's most prospective mineral areas: the historic Mt Isa-Cloncurry district in North Western Queensland. With four main projects currently under development, Ivanhoe Australia aims to become a significant base metals company, whilst leveraging its track record for discovery to establish it as Australia's pre-eminent exploration and mining company. With the integration of the Osborne mining complex, Ivanhoe Australia is well on the path to commencement of production in Q1 2012.

EXPLORATION TARGETS AT OSBORNE DEEPS AND KULTHOR

Ivanhoe has commenced underground drilling into the area immediately to the north of the current Osborne Deeps resources. A total of 10 underground holes have shown the mineralisation to be continuing to the north into an area where the host ironstones appear to be steepening. This area has not been tested by surface drilling due to the depth and attitude of the ironstones in this area being such that surface drilling would be oblique to the ironstone strike direction. Down dip three deep surface holes have intersected mineralisation and infill underground drilling is required to establish the extent of this mineralisation. This underground drilling aims to delineate between 2 and 4 million tonnes of a similar grade range to the existing resource of between 1.2 and 1.5% copper and 0.8 to 1.0 g/t of gold.

At Kulthor surface drilling is planned to commence later in 2011 to test the next 1 kilometre of strike length south west of Kulthor where geophysical surveys show deeps conductors to be present. The target here is to add between 5 and 10 million tonnes to the existing Kulthor Resource at similar grades to the Osborne Deeps target. The southern edge of Kulthor is currently tested by 5 deep holes containing copper gold mineralisation with the deepest hole SUNQ0151 returning two intersections of 6m from 843m down hole at 1.79% Cu and 1.14g/t Au and 7m from 851m at 1.97% Cu an 3.6 g/t Au.

These estimates are conceptual in nature. There has been insufficient exploration to define the targets as mineral resources, and it is uncertain if further exploration will result in the targets being delineated as mineral resources.

Ivanhoe Mines (TSX:IVN)(NYSE:IVN)(NASDAQ:IVN) is Ivanhoe Australia's largest shareholder and currently owns, indirectly, approximately 62% of Ivanhoe Australia's issued and outstanding shares.

This information is available on our website: www.ivanhoeaustralia.com.

Forward-Looking Statements

Certain statements made herein, including the development plan of the scoping study and results thereof, the timing for completion of a prefeasibility study, feasibility study, development and mining, the results of further exploration and other statements relating to matters that are not historical facts and statements of our beliefs, intentions and expectations about developments, results and events which will or may occur in the future, constitute "forward-looking information" within the meaning of applicable Canadian securities legislation and "forward-looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking information and statements typically are identified by words such as "anticipate", "could", "should", "expect", "seek", "may", "intend", "likely", "plan", "estimate", "will", "believe" and similar expressions suggesting future outcomes or statements regarding an outlook.

All such forward-looking information and statements are based on certain assumptions and analyses made by Ivanhoe Australia's management in light of their experience and perception of historical trends, current conditions and expected future developments, as well as other factors that management believes are appropriate in the circumstances. These statements, however, are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information or statements. The reader is cautioned not to place undue reliance on forward-looking information or statements.

Qualified & Competent Persons Statement

The scientific and technical information in this news release regarding:

The Osborne Copper-Gold Project was reviewed and approved by:

  • Peter Fairfield, FAusIMM who is a full time employee of SRK Consulting Pty Ltd
  • John Horton, FAusIMM (CP), MAIG for Starra 276 Mineral Resource, who is a full time employee of Golder Associates Pty Ltd;
  • Mr. Richard W Lewis FAusIMM for Osborne and Kulthor Mineral Resources who is a full time employee of Lewis Mineral Resource Consulting Pty Ltd.
  • Barry J. Goss, FAusIMM (CP) for Osborne Deeps and Kulthor exploration targets who is a full time employee of Ivanhoe Australia

The Merlin Project was reviewed and approved by:

  • Peter McCarthy, FAusIMM (CP) for mine engineering and economic evaluation, who is a full time employee of AMC Consultants Pty Ltd;
  • John Horton, FAusIMM (CP), MAIG for Mineral Resource, who is a full time employee of Golder Associates Pty Ltd;
  • Tom Hunter, FAusIMM, for the Pre-feasibility Study, who is a full time employee of Jacobs E&C, Australia Pty Ltd.

The Mount Dore Project was reviewed and approved by:

  • Peter McCarthy, FAusIMM (CP) for mine engineering and economic evaluation, who is a full time employee of AMC Consultants Pty Ltd;
  • Graeme Miller, FAusIMM (CP) for metallurgy who is a full time employee of Miller Metallurgical Services.

The Mount Elliott Mineral Resource estimate was reviewed and approved by:

  • Rod Webster, MAusIMM, for Mount Elliott Mineral Resources who is a full time employee of AMC Consultants Pty Ltd.

The Osborne Deeps and Kulthor exploration targets were reviewed and approved by:

  • Barry J. Goss, FAusIMM (CP) who is a full time employee of Ivanhoe Australia

These individuals, by virtue of their education, experience and professional association, are considered Qualified Persons (QP) as defined in the NI 43-101 standard, for the relevant report. The Qualified Persons have verified the relevant data disclosed herein during their participation in the preparation of the relevant technical reports relating to the disclosure, and as further described in the Technical Report.

Peter Fairfield, Richard Lewis, John Horton, Peter McCarthy, Graeme Miller, Tom Hunter and Barry Goss are all Fellows of the Australasian Institute of Mining and Metallurgy, Rod Webster is a Member of the Australasian Institute of Mining and Metallurgy and each has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they have undertaken to qualify as a 'Competent Person' as defined in the JORC code. Peter Fairfield, Richard Lewis, John Horton, Peter McCarthy, Graeme Miller, Tom Hunter, Barry Goss and Rod Webster consent to the inclusion in the announcement of the matters based on this information in the form and context in which it appears.

Mount Dore Mineral Resources relate to the original ASX market release on 4-Aug-2010 and subsequent NI 43-101 report listed on SEDAR in October 2010, which contain additional details.

Appendix 1

MINERAL RESOURCE ESTIMATE FOR THE OSBORNE COPPER GOLD PROJECT CLONCURRY, NORTH QUEENSLAND

A Mineral Resource estimate as outlined in the table below has been estimated for the Osborne Copper Gold Project by Mr. Richard W Lewis FAusIMM who is a full time employee of Lewis Mineral Resource Consulting Pty Ltd. and Mr. John Horton, FAusIMM (CP) who is a full time employee of Golder Associates Pty Ltd. The Osborne Project Mineral Resource has been classified and reported in accordance with the National Instrument 43-101 - Standards of Disclosure for Mineral Projects (NI 43-101). The Mineral Resource term under NI 43-101 is equivalent to Mineral Resource used by the JORC code.

The Mineral Resource estimates outlined in Table 1 and Table 2 for the Osborne Copper Gold Project include a combination of Osborne, Kulthor and Starra 276 estimates. These estimates were recently updated and are classified in accordance with JORC guidelines and with the National Instrument 43-101 - Standards of Disclosure for Mineral Projects (NI 43-101). The resources are quoted at a different equivalent copper (eCu) cut-offs depending on expected mining costs, where eCu%= Cu% + 0.6 * Au g/t.

eCu % Cut-off Tonnes (Mt ) Copper (% ) Gold (g/t ) QP
Osborne Open Pit Lewis
Measured 0.5% eCu 2.2 0.7 0.6
Indicated 0.2 0.7 0.6
Osborne Underground Lewis
Measured 1.2% eCu 2.1 1.5 0.9
Indicated 0.8 1.2 0.9
Kulthor Underground Lewis
Measured 1.2% eCu 0.3 1.6 1.0
Indicated 4.3 1.5 1.0
Starra 276 Underground Horton
Measured 1.5% eCu 0.0 0.0 0.0
Indicated 3.1 1.6 1.1
Total
Measured 4.6 1.1 0.8
Indicated 8.4 1.5 1.0
Total Measured + Indicated 13.1 1.4 0.9
Table 1 - Measured and Indicated Mineral Resources (eCu % = Cu % + 0.6 x Au g/t)
eCu % Cut-off Tonnes (Mt ) Copper (% ) Gold (g/t ) QP
Osborne Open Pit 0.5% eCu 0.1 0.6 0.6 Lewis
Osborne Underground 1.2% eCu 0.5 1.2 0.9 Lewis
Kulthor Underground 1.2% eCu 5.5 1.2 0.8 Lewis
Starra 276 Underground 1.5% eCu 1.8 1.5 1.5 Horton
Total Inferred 7.9 1.3 1.0
Table 2 -Inferred Mineral Resources (eCu % = Cu % + 0.6 x Au g/t) Note: some totals may not add due to the effects of rounding

Qualified & Competent Persons Statement

The scientific and technical information in this Mineral Resource statement regarding the Osborne Project was approved by Mr. Richard W Lewis FAusIMM who is a full time employee of Lewis Mineral Resource Consulting Pty Ltd. and Mr. John Horton, FAusIMM (CP) who is a full time employee of Golder Associates Pty Ltd.

Mr. Lewis and Mr. Horton, by virtue of their education, experience and professional association, are considered Qualified Persons (QP) as defined in the NI 43-101 standard, for this report and have verified the relevant data disclosed herein.

Mr. Lewis and Mr. Horton, are Fellows of the Australasian Institute of Mining and Metallurgy and each has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they have undertaken to qualify as a 'Competent Person' as defined in the JORC code. Mr. Lewis and Mr. Horton consent to the inclusion in the announcement of the matters based on this information in the form and context in which it appears.

Appendix 2

MINERAL RESERVE ESTIMATE FOR THE MERLIN MOLYBDENUM / RHENIUM PROJECT CLONCURRY, NORTH QUEENSLAND

A Probable Mineral Reserve of 6.7Mt at 1.1% Molybdenum (Mo) and 19.1g/t Rhenium (Re) containing approximately 75kt of Molybdenum and 128t of Rhenium, has been estimated for the Merlin Project by Mr. Peter McCarthy FAusIMM (CP) of AMC Consultants Pty. Ltd. The Merlin Mineral Reserve has been classified and reported in accordance with the National Instrument 43-101 - Standards of Disclosure for Mineral Projects (NI 43-101). Mineral Reserves under NI 43-101 are equivalent to Ore Reserves used by the JORC code.

The Mineral Reserve is based on two mining methods, underhand drift-and-fill (UDAF) and longhole stoping (LHS) using cut-off grades of $200/t and $150/t respectively (inclusive of mining, ore handling and processing). The cut-off grades for the respective mining methods are based on the metal prices (Table 1) and metallurgical recoveries (Table 2) and a AUD:USD exchange rate of $0.75.

Table 1: Metal Prices
Metal Unit Metal Price
Mo US$ / lb 13.50
Re US$ / kg 6,500.00
Cu US$ / lb 2.00
Zn US$ / lb 0.80
Ag US$ / oz 13.60
Au US$ / oz 880.00
Table 2: Metallurgical Recoveries
Metal Recovery (% )
Mo 87%
Re 76%
Cu 85%
Zn 50%
Ag 50%
Au 50%

The Mineral Reserve estimate is based on the Golder Indicated Mineral Resource of 6.5Mt at 1.3% Molybdenum, 23g/t Rhenium, containing 88kt of Molybdenum and 153t of Rhenium. The Mineral Resource was derived at a cut-off grade of 0.3% Molybdenum and has been classified and reported in accordance with NI 43-101 and the JORC code.

This is the first Mineral Reserve prepared for the Merlin Project. This is based on the Merlin Mineral Resources first stated in the ASX market release on 4-Aug-2010 and subsequently documented in the NI 43-101 report listed on SEDAR in October 2010.

Qualified & Competent Persons Statement

The scientific and technical information in this reserve statement regarding the Merlin Project was approved by Mr Peter McCarthy, FAusIMM (CP) who is a full time employee of AMC Consultants Pty Ltd.

Mr Peter McCarthy, by virtue of his education, experience and professional association, is considered a Qualified Person (QP) as defined in the NI 43-101 standard, for this report and has verified the relevant data disclosed herein, as further described in the Technical Report.

Mr. Peter McCarthy is a Fellow of the Australasian Institute of Mining and Metallurgy with Chartered Professional status and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he has undertaken to qualify as a 'Qualified Person' as defined in NI 43-101 and also as a 'Competent Person' under the JORC code. Mr McCarthy consents to the inclusion in the announcement of the matters based on this information in the form and context in which it appears.

Merlin Mineral Resources relate to the original ASX market release on 4-Aug-2010 and subsequent NI 43-101 report listed on SEDAR in October 2010, which contain additional details.

To view Figures 1 through 12 please visit the following link: http://media3.marketwire.com/docs/iva915f.pdf.

Notes:

1 The Osborne Copper Gold Preliminary Economic Assessment and the Mount Dore Cathode Copper Scoping Study are each preliminary in nature and include Inferred Mineral Resources. Inferred Mineral Resources are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorised as Mineral Reserves. There is no certainty that the preliminary economic assessment or the scoping study will be realised.

2 A Preliminary Economic Assessment is an independent technical report, compliant with Canadian NI 43-101 standards and based on the scoping study.

3 The Osborne Copper Gold Preliminary Economic Assessment is preliminary in nature and includes Inferred Mineral Resources. Inferred Mineral Resources are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorised as Mineral Reserves. There is no certainty that the preliminary economic assessment will be realised.

4 Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. The Mineral Resources statement for the Osborne Copper Gold project is included in Appendix 1.

5 The mill feed is derived from the application of modifying factors (for mining recovery & dilution) to Mineral Resources. The Mineral Resources used include Inferred Mineral Resources.

6 The Merlin Pre-Feasibility study forms the basis of an independent technical report compliant with NI 43-101 standards being compiled by AMC consultants.

7 Please refer to Appendix 2 for the Merlin Molybdenum / Rhenium Project Mineral Reserve statement.

8 Roskill have been appointed as independent consultants to provide Ivanhoe Australia an expert opinion on Mo and Re pricing and forecasts. Roskill forecasts molybdenum prices to increase from US$16.50/lb in 2011 to US$27.00/lb (US$23.77/lb in real terms) in 2016. The mid-point of Roskill's forecasts for rhenium metal is US$4,350/kg in 2011 increasing to US$5,700/kg (US$5,018/kg) in 2016.

9 Analysis is based on Roskill's molybdenum and rhenium price forecasts (real terms) to 2016. Ivanhoe has held 2016 prices constant thereafter and has selected an AUDUSD exchange rate of 1.00 for 2012-2013 and 0.83 thereafter.

10 The Mount Dore scoping study was used as the basis for an independent technical report, the NI 43-101 Mount Dore Mineral Project Preliminary Economic Assessment (PEA) compliant with NI 43-101 standards, compiled by AMC consultants. The PEA is conceptual in nature, includes inferred resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorised as mineral reserves and there is no certainty that the PEA will be realised.

11 Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.

12 eCu% cut off uses the following formula: Cu% + Au(g/t) * 0.7 + U(ppm) * 0.0017 (where Uppm>100ppm).

13 The Mount Elliott scoping study will be used as the basis for an independent technical report, a Preliminary Economic Assessment compliant with NI 43-101 standards.

Contact Information