Oyu Tolgoi Project, Mongolia Integrated Development Plan Executive Summary IMPORTANT NOTICE This report was prepared exclusively for Ivanhoe Mines Mongolia XXK Inc. (IMMI) by AMEC Ausenco Joint Venture (AAJV), a joint venture between AMEC Americas Limited (AMEC) and Ausenco Limited (Ausenco). The quality of information, conclusions, and estimates contained herein is consistent with the level of effort involved in AAJV’s services and based on: i) information available at the time of preparation, ii) data supplied by outside sources, and iii) the assumptions, conditions, and qualifications set forth in this report. This report is intended to be used by IMMI only, subject to the terms and conditions of its contract with AAJV. Any use of, or reliance on, this report by any third party is at that party’s sole risk. Clarification regarding work performed by others: Work performed by others has been evaluated for consistency with the project design criteria and general objectives of the study. AAJV has reviewed the methodology and depth of analysis of such work and, without warranting the accuracy or results of such work, confirms that the methodology and depth of analysis are generally consistent with the requirements of the study. Cautionary statement: This assessment includes the use of Inferred resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as a Mineral Reserve. Inferred resources will require further exploration to upgrade them to the higher Measured and Indicated categories. Although the assumptions underlying the preliminary assessment are considered reasonable, there is no certainty that the predicted results will be realized. The term “ore” is used for convenience throughout this report to denote material mined or processed. The use of the term is not meant to imply that this material falls within the classification of a Mineral Reserve as determined by the Canadian Institute of Mining and Metallurgy (CIM), the Australasian Joint Ore Reserves Committee (JORC), or other similar bodies. O YU T OLGOI P ROJECT I NTEGRATED D EVELOPMENT P LAN E XECUTIVE S UMMARY EXECUTIVE SUMMARY Part 1 – Project Overview .......... Page 1 to 15 Project AAJV002 August 2005 O YU T OLGOI P ROJECT I NTEGRATED D EVELOPMENT P LAN E XECUTIVE S UMMARY Project Overview This Integrated Development Plan (IDP), The Oyu Tolgoi mineral resource estimate prepared by the AMEC Ausenco Joint Venture considered in the plan was prepared by AMEC (AAJV), presents a multi-phase conceptual and reported on previously by IMMI in June 2004 development plan for the known copper/gold and May 2005 disclosure statements. The mineralized resource at Oyu Tolgoi owned by resource estimate is based on some Ivanhoe Mines Mongolia Inc XXK (IMMI) in the 560,000 metres of drilling carried out to 15 April southern Gobi region of Mongolia. The project 2005. There are two distinct sources of ore: consists of open pit and underground mines, a processing plant, and supporting infrastructure to • the Southern Oyu deposits, consisting of the produce high-quality copper/gold concentrates. Southwest, South, Central, and Wedge zones • the Hugo Dummett deposit, consisting of the Oyu Tolgoi Project Location Map Hugo North and Hugo South zones. The Southern Oyu deposits are amenable to open pit mining, of which the gold-rich, near- surface Southwest zone will be the first mining development and will provide most of the plant feed for the first four years. The Hugo Dummett deposit is best suited to block-cave underground mining. Hugo North will be the first underground mine. The Hugo North ore is of higher value, and so underground production will be ramped up to displace production from the open pit as soon as possible. A two-phase development plan is proposed: Throughput for Phase 1, the base case, begins at 25.5 Mt/a (70,000 t/d) from the Southwest pit, increasing to 30 Mt/a (85,000 t/d) by Year 7. The open pit operation will then cease in favour of the higher-value ore from Hugo North. Phase 1 is The IDP work associated with the initial process further sub-divided: plant and open pit mining is at a feasibility quality Phase 1a level. Other aspects, including the off-site • initial plant construction for 70,000 t/d from infrastructure, power supply, underground open pit feed mining, and proposed plant expansions, are at a scoping level. Because the information used to Phase 1b prepare the economic evaluation of the project • underground exploration and shaft includes all levels of study, the overall IDP development quality is classified as a Preliminary Assessment • development of Hugo North block-cave mine in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum Standards on • ramp-up of Hugo North production to 30 Mt/a Mineral Resources and Reserves referred to in Phase 1c National Instrument 43-101. • expansion of plant facilities to 85,000 t/d Project AAJV002 Project Overview August 2005 REV 1 Page 2 O YU T OLGOI P ROJECT I NTEGRATED D EVELOPMENT P LAN E XECUTIVE S UMMARY The base case has a mine life of more than 40 Hugo mine geometry extracts 83% of the Hugo years. At a discount rate of 10%, the NPV for Dummett mineral resource (0.6% cutoff). this scenario is US$1.5 billion; at 8% the NPV is Processing the ore defined in the IDP mine plan US$2.2 billion. schedule for the expanded case recovers 35.2 billion pounds of copper and 11.7 million ounces The initial inventory for the first 10 years of the of gold. base case consists of more than 85% Measured and Indicated resources from both open pit and Cost Estimates (US Dollars) underground sources. This inventory totals Under the base case, capital expenditure of 295.6 million tonnes at 1.20% Cu and 0.35 g/t Au $1,380 million is incurred to the beginning of and represents 8.7 billion pounds of recoverable 2009. This includes $1,093 million for the copper and 4.0 million ounces of recoverable processing plant, infrastructure, and open pit gold. mining and $55 million in escalation (note: escalation not included in financial model). The Continuing at a production rate of 85,000 t/d remaining $232 million is to advance the beyond Year 10, the project has sufficient development of the Hugo North deposit. These resources to operate for at least another 50 amounts are expended over a 33-month years by expanding open pit production and construction period to July 2008 and also include exploiting the Hugo South resource. the six-month period immediately following as the plant ramps up to initial maximum capacity. Phase 2, the expanded case, realizes the The capacity at this stage of development is ability of Hugo North to produce at more than 70,000 t/d, sourced almost exclusively from the 30 Mt/a with concurrent development of Hugo open pit. South and additional open pit mining to support a process plant expansion to 52.5 Mt/a (nominal To reach the production capacity of 85,000 t/d 140,000 t/d). In this plan, open pit production (Phase 1c) possible from underground ore, would continue to Year 12 and the underground another $105 million will be required to modify mine life would extend to Year 35. the processing plant and infrastructure in 2010 and 2011 (Years 2 and 3 of operations). This Although the final decision to implement Phase 2 amount will be in addition to any sustaining does not need to be made until Year 3 of capital required in that period. In the first four operations, the significant enhancement years of operations, $719.1 million is expended (+US$339 million NPV ; +US$485 million NPV ) 10 8 to bring the underground deposit to a stage of project economics represented by timely where it represents the major source of ore to expansion of production makes Phase 2 an the mill in 2013. Capital expenditure continues integral part of the IDP. on the underground deposit, allowing the At a Cu equivalent cutoff of 0.6%, the entire IDP operation to achieve the 85,000 t/d maximum mineral resource inventory—open pit and capacity of the plant in 2015. underground—totals 2.3 billion tonnes at Therefore, the total capital to achieve 85,000 t/d 1.16% Cu and 0.35 g/t Au. Considering the from Hugo North, in the base case, is $2.4 ultimate pit shell at a Cu equivalent cutoff of billion, including all sustaining capital, over 0.3%, the Southern Oyu open pit resource totals slightly more than 9 years of phased 995 million tonnes at 0.49% Cu and 0.35 g/t Au. development. Mining plans have not been developed to fully In a base case only scenario, the average cash assess what portion of the total resource is cost of copper after gold credits is $0.39/lb over mineable as ore; however, the tonnage in the the life of mine. If Phase 2 is added to create an ultimate pit is about 88% of the complete expanded case, then the average over the life of Southern Oyu resource (0.3% cutoff), and the mine is $0.40/lb. Project AAJV002 Project Overview August 2005 Page 3 O YU T OLGOI P ROJECT I NTEGRATED D EVELOPMENT P LAN E XECUTIVE S UMMARY IMMI estimates that formal authorization to method. To increase value and/or reduce risk, proceed with the project will be received in evaluation of the possible benefits of a dedicated October 2005, with first ore feed to the milling smelter at or near the site is warranted.