Following signing of the agreement, Rio Tinto announced that it would complete a $388-million, second-tranche investment in Ivanhoe Mines Ltd. to increase its ownership in the company from 9.9% to 19.7%. Under current agreements, Rio Tinto has the right to acquire up to 43.1% of Ivanhoe’s shares under fixed-price options, with a right to further increase that interest to 46.65% through on-market purchases.

With the investment agreement in place, the next major step toward Oyu Tolgoi development will be the updating of a 2005 development plan for approval by the board of Ivanhoe Mines Mongolia. Current indications are that $3 billion to $3.5 billion will be spent over the next five years to develop infrastructure, an open-pit mine, and a concentrator to produce about 450,000 mt/y of copper and 330,000 to 500,000 oz/y of gold in concentrates, with initial production in 2013 to be followed by a five-year ramp-up to full production. Concurrently, about $1 billion will be spent on underground mine development. A future decision to build a coal-powered electricity generating plant for Oyu Tolgoi would require an additional capital commitment. A report on the economic viability of building a copper smelter in Mongolia will be prepared within five years of the start of production at Oyu Tolgoi.

In a conference call on October 6, Ivanhoe Mines President and CEO John Macken said that while development costs in the updated development plan will have escalated in comparison with those in the 2005 plan, long-term projections for the prices of copper and gold have also increased. Reserves and resources at Oyu Tolgoi are also significantly higher now than they were in 2005. As a result, the current economics of Oyu Tolgoi development are expected to have improved in comparison with those in the 2005 plan.

The Oyu Tolgoi investment agreement is a comprehensive document. A 12-page summary of the agreement is posted on the Ivanhoe Mines Web site (www.ivanhoemines.com). The agreement provides for, among other things, a framework for maintaining a stable tax and operational environment for the Oyu Tolgoi project, protection of investments in the project, the amount and term of such investments, the right to realize the benefits of such investments, the undertaking of mining activities with minimum damage to the environment and human health, the rehabilitation of the environment, the social and economic development of the South Gobi region, and the creation of new jobs in Mongolia.

Ivanhoe will arrange financing for the construction of Oyu Tolgoi within two years of the investment agreement taking effect, and production must begin within five years of financing being secured.

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