Ivanhoe Australia Approves $30 Million Budget for Kulthor/Osborne Development

Ivanhoe Australia Approves $30 Million Budget for Kulthor/Osborne Development

Robert Friedland, Chairman, and Peter Reeve, Chief Executive Officer of Ivanhoe Australia Limited announced today that $30 million of development capital has been approved for the Kulthor/Osborne development on the company’s Cloncurry district tenements in Queensland

This investment, which will see the resumption of production at the Osborne complex in the first quarter of 2012, includes level development, ventilation raise-boring, drilling access and resource delineation drilling.

“The decision to proceed with the work to get the Osborne complex back into production is an important corporate step as it will enable Ivanhoe Australia to join the ranks of copper-gold producers within approximately a year,” Mr Reeve said.

“As our integrated site plan develops, it is clear that the aggregate copper-gold ore sources, to be treated in the Osborne facility, have the potential to create a long and sustainable mine life. While initial sources of ore are expected to include Kulthor and Osborne mines and their extensions, we are also examining the possibility of sourcing additional ore from both the Starra 276 and Starra 222 deposits and the existing Osborne open pit.”

Tendering has been completed for both raise-boring of the Kulthor 4.0 metre diameter ventilation shaft and the Kulthor and Osborne underground development. Work under the ventilation-shaft contract will begin in May 2011. The contract for mine development work is expected to be awarded in February and work is scheduled to begin in March 2011. (See Figures 2A and 2B for the planned Kulthor Development.) This development will utilise the existing mine access development completed by Barrick Australia. (See Figures 3 and 4). Detailed production rates and mine costings will be developed in the course of 2011 as various operating tenders are finalised.

“Following the purchase of the Osborne complex, the vision for the site was to link the Osborne and Cloncurry fields to create a regional presence in exploration and production that was greater than the sum of the parts,” Mr. Reeve said.

“This mine development is the first tangible step towards creating such a comprehensive mine complex that will build on much of the past development in the region.

The re-commencement of underground operations at Kulthor and Osborne will be undertaken in two stages, with $27 million to be invested in 2011 to begin operations at the Osborne plant. Further drilling of lower Kulthor is planned in 2012-13 to delineate additional mineralisation and this combined with other sources such as Starra 276, Starra 222 and the Osborne open pit aims to achieve the targeted initial five years of concentrator production.” See Figure 2C detailing higher grade target zones south west of Kulthor.

Mr. Reeve said that another benefit of the amalgamation of the Osborne and Cloncurry Projects assets is the potential to commence mining of the Starra 276 deposit on the Starra Line. This deposit has existing decline access which will allow copper-gold ore production within a short time frame. Potential ore from Starra 276 will be hauled to the Osborne plant for processing. The Starra 276 decline was reopened recently and the inspection indicated that, whilst some rehabilitation work is required, the decline is in excellent condition. Lower sections of the mine will also provide direct access for further close-spaced delineation drilling, providing the possibility of more resources.

The Starra 222 decline also has been found to be in very good condition. More detailed analysis of Starra 222 resource potential will be undertaken following the diamond-drill program scheduled for the second quarter of 2011.

Exploration Relating to the Osborne Copper Gold Study

An important element of Ivanhoe Australia’s exploration program is the expansion of resources for Osborne mill feed. Apart from a number of drilling programs preliminary geophysical work has been undertaken in a number of areas to identify extensions to existing systems or the identification of new systems. Specific programs include:

1. The Osborne and Kulthor systems have recently had initial geophysical evaluation completed by the Ivanhoe Group’s newly established Geophysics group (see Figure 5). Following the Ivanhoe Geological Conference held at Osborne in September 2010, geophysical data inherited from Osborne Mines was used to begin assessing the potential for ore extensions below the current mining levels at 1400 metres The results shown in Figures 6 to 9 have produced extremely promising results.

At Osborne the geophysical survey has indicated extension to the known mineralisation by as much as 1000 metres. EM conductor orientations showed substantial conductors that are likely caused by sulphides. Drilling to define the depth extension will be undertaken following further geophysical work defining target areas. The maximum depth extent is expected to be determined when Ivanhoe Australia’s 2009 high-resolution aeromagnetic survey is inverted.

At Kulthor its host southwest striking fault zone dips to the east and as shown in Figure 6 there is potential that this zone could continue for a further 2000 metres before being terminated by the same structure that terminates the Osborne mineralisation. This indicates that there is potentially a magnetic structure linking the Osborne and Kulthor environments. A 1000m drill hole is proposed from the Kulthor decline access to test this hypothesis.

One of the most striking new features, shown in Figures 7 and 8, indicates a newly identified five-kilometre-long magnetic structure striking parallel, and to the west of the existing Kulthor mineralisation. This target, known as Avalon, in which previous drilling intersected mineralisation at the very top of the system (as indicated in the image) extends to approximately 1500 metres depth and will be drilled after further geophysical evaluation.

2. Starra 276, which has been handed over to the company’s resource definition team who are conducting a 15,000-metre, patterned diamond program (30 holes with average depths of 500 metres) on 50- x 100-metre spacing to delineate a mineable resource. This drilling program has commenced and will be completed by June 2011 (see Figure 9).

3. Starra 222, which has also been handed to the resource definition team following promising recent drill results. The team is conducting a preliminary underground study and expects to commence drilling in May/June 2011

(see Figure 10).

4. Houdini, where a patterned drilling program (100 metre by 100 metre) will be undertaken following the current wet season. The Houdini prospect, which is within 20 kilometres of the Osborne processing plant has returned a zone of strong copper-gold mineralisation in early stages of exploration of the 1km long anomaly and remains a promising resource target. Early indications are that it is near surface with good mining width and good grade. The processes for creation of a mining lease at Houdini has commenced.

These exploration programs will form a strong part of the exploration effort over the coming 12 months to enable delivery of cashflow via Osborne production which will support sustained exploration by Ivanhoe Australia over the coming years.

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

To view Figure 1: Location of Kulthor, please visit the following link: http://media3.marketwire.com/docs/670016_fig_1.pdf

To view Figure 2A: Kulthor Decline for the Osborne Mine, Figure 2B: Detail of planned Kulthor Development including new raise bore, and Figure 2C: Kulthor Copper Grade Blocks showing higher grade areas in south western end, please visit the following link: http://media3.marketwire.com/docs/670016_fig_2.pdf

To view Figure 3: Plan view of Kulthor Underground Development showing 2.35 km completed decline. 150 metres remaining to access orebody, please visit the following link: http://media3.marketwire.com/docs/670016_fig_3.pdf

To view Figure 4: Osborne Underground Mine and potential for deep extensions, please visit the following link: http://media3.marketwire.com/docs/670016_fig_4.pdf

To view Figure 5: Magnetics image of Osborne and Kulthor, please visit the following link: http://media3.marketwire.com/docs/670016_fig_5.pdf

To view Figure 6: Potential depth extension for Osborne, Kulthor and Avalon Long Section (AB) through 3D VRMI inversion, please visit the following link: http://media3.marketwire.com/docs/670016_fig_6.pdf

To view Figure 7: Image showing new Avalon anomaly relative to Kulthor and Osborne, please visit the following link: http://media3.marketwire.com/docs/670016_fig_7.pdf

To view Figure 8: New Avalon anomaly (Long Section C-D axis from Figure 7), please visit the following link: http://media3.marketwire.com/docs/670016_fig_8.pdf

To view Figure 9: Starra 276 Long Section Showing Deep Target Zones, please visit the following link: http://media3.marketwire.com/docs/670016_fig_9.pdf

To view Figure 10: Starra 222 and recent drilling results, please visit the following link: http://media3.marketwire.com/docs/670016_fig_10.pdf

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