Ivanhoe Mines issues financial results and review of operations for the second quarter of 2017 Updated Mineral Resource estimate in May boosts tonnage of the Kakula Discovery’s Indicated Resources by 75% to 116 million tonnes at 6.09% copper,

August 9, 2017

Ivanhoe Mines issues financial results and review of operations for the second quarter of 2017

Updated Mineral Resource estimate in May boosts tonnage of the Kakula Discovery’s Indicated Resources by 75% to 116 million tonnes at 6.09% copper, and combined Indicated Resources at Kamoa-Kakula to approximately one billion tonnes at 3.02% copper

Start of mine development work at Kakula Discovery highlights another busy quarter at Ivanhoe’s three mine development projects in Southern Africa

TORONTO, CANADA ‒ Ivanhoe Mines (	TSX: IVN; OTCQX: IVPAF	) today announced its financial
results for the second quarter ended June 30, 2017. All figures are in U.S. dollars unless
otherwise stated. Ivanhoe Mines is a Canadian mining company focused on advancing its three
mine-development projects in Southern Africa: the Platreef platinum-palladium-gold-nickel-
copper discovery in South Africa; and the Kamoa-Kakula copper discovery and the Kipushi
zinc-copper-silver-germanium mine in the Democratic Republic of Congo (DRC).

HIGHLIGHTS

• On May 17, 2017, Ivanhoe issued an updated resource estimate showing that the Kakula

Discovery at the Kamoa-Kakula Project contains Indicated Mineral Resources of 116 million tonnes at 6.09% copper, plus Inferred Resources of 12 million tonnes at 4.45% copper, at a 3% cut-off. Kakula’s new estimate boosts combined Indicated Mineral Resources at both the Kamoa and Kakula discoveries to approximately one billion tonnes at 3.02% copper, plus another 191 million tonnes of Inferred Resources at 2.37% copper, at a 1.4% cut-off.

• The May 2017 Kakula estimate establishes the Kamoa-Kakula Project in the ranks of the five

largest copper deposits in the world. The project’s copper grades are the highest, by a wide margin, of the world’s top 10 copper deposits. Both the subsequent Kakula Discovery and the original Kamoa Discovery continue to remain open for significant expansion.

• In late June, excavation began on the surface box cut at the Kakula Discovery. The box cut

will be excavated to a depth of approximately 18 metres below surface and is expected to be completed in October. Construction of twin declines, similar to those at Kamoa’s Kansoko Mine, will begin once construction of the box cut has been completed.

• Kamoa Copper has retained OreWin Pty. Ltd., of Australia, to prepare a follow-up preliminary

economic assessment (PEA) for the development of the Kakula and Kamoa deposits. It is expected that the increased resource base at Kakula will support a mine capacity of approximately six million tonnes per annum (Mtpa). The capacity of the Kansoko Mine also is expected to be six Mtpa, giving the revised PEA a projected peak mine production of approximately 12 Mtpa from the presently delineated Kamoa and Kakula deposits. In light of the successful step-out drilling at Kakula West, as well as the potential to find additional resources in high-priority targets located in the untested parts of the Kamoa-Kakula Project area, the Kamoa-Kakula development plans will be reassessed and amended as the project moves forward.

• Drill intercepts rich in chalcocite and bornite continue to be returned at Kakula West and in

the saddle area between the Kakula Mineral Resource area and the Kakula West discovery area. Drilling now has extended the strike length of the Kakula West copper-rich mineralized system to approximately 2.9 kilometres, and the high-grade Kakula mineralized system to more than 12 kilometres.

• Ivanhoe expects to issue a comprehensive drilling update for the Kakula Discovery in early

September, which will include assays received since the May 2017 resource estimate. An updated Mineral Resource estimate for the entire 12-kilometre-long Kakula mineralized system defined to date, including the Kakula West Discovery, is expected before the end of the year.

• The Kakula Discovery remains open for significant expansion along trend to the west and

the southeast, while the remainder of the Kakula Exploration Area remains virtually untested. More than 68,000 metres have been drilled at Kakula since the start of the year. A total of 14 rigs are drilling at the Kamoa-Kakula Project.

• Nearly 200 square kilometres of the approximately 400-square-kilometre Kamoa-Kakula

Project area remain untested. The Kamoa-Kakula geology team, with the assistance of technical advisors, has intensively evaluated the structural and stratigraphic controls on mineralization of the broader Kamoa-Kakula basin. This work has highlighted at least nine high-priority targets located in untested portions of the Kamoa-Kakula mining licence. Drill testing of two of the targets — Kamoa Ouest (West) and Makalu/Kakula NE — is underway.

• Ivanhoe holds an extensive, 100%-owned exploration land position in the Western Foreland

region, just to the west of the Kamoa-Kakula mining licence, which is highly prospective for Kamoa-Kakula-type copper discoveries. Ivanhoe’s DRC exploration team has begun an initial, $4 million exploration program on the Western Foreland licences.

• Underground development at Kamoa’s Kansoko Mine, consisting of service and conveyor

declines, made excellent progress in Q2 and mining of the high-grade copper ore began in July. Decline development work at Kansoko is expected to be completed by September.

• On July 31, Ivanhoe announced the positive results of an independent definitive feasibility

study for the planned first phase of its Platreef platinum-group elements, nickel, copper and gold mine in South Africa. The study envisages an initial annual throughput rate of four million tonnes a year, producing 476,000 ounces of platinum, palladium, rhodium and gold (3PE+Au), plus 33 million pounds of nickel and copper.

• The Platreef Mine is projected to be Africa’s lowest-cost producer of platinum-group metals,

with a cash cost of $351 per ounce of 3PE+Au, net of by-products, including sustaining capital cost. There is good potential for relatively quick and capital-efficient expansion to six and eight million tonnes a year, and beyond, using start-up infrastructure.

• Ivanhoe now has appointed five leading mine-financing institutions as Initial Mandated Lead

Arrangers to arrange debt financing for the development of the Platreef Mine. They are: KfW IPEX-Bank, a German government owned institution; Swedish Export Credit Corporation; Export Development Canada; Nedbank Limited (acting through its Corporate and Investment Banking division); and Societe Generale Corporate & Investment Banking. Expressions of interest have been received for approximately $900 million of the targeted $1 billion project financing. Discussions have begun around the financing of the broad-based, black economic empowerment structure. Strategic discussions regarding the Platreef Project also are continuing with significant global mining companies and investors.

• Sinking of Platreef’s Shaft 1 has reached a depth of 451 metres below surface and

development of the first of four planned shaft stations – the 450-metre-level substation – is underway. Shaft 1 is expected to reach the Flatreef Deposit, at a depth of 777 metres below surface, in the first half of 2018. Sinking will continue to a planned final depth of 980 metres below surface.

• Early-works construction for Platreef’s Shaft 2 began in April 2017. Construction will consist

of excavation of a box cut to a depth of approximately 29 metres below surface and construction of the concrete hitch (foundation) for the 103-metre-tall concrete headgear (headframe) that will house the shaft’s permanent hoisting facilities and support the shaft collar.

• A 6,500-metre drilling program at Kipushi is underway. The program includes six

metallurgical holes in the Big Zinc Deposit and resource drilling in the Fault Zone, the Nord Riche and Southern Zinc zones to expand and upgrade Inferred Resources.

• A pre-feasibility study for the redevelopment of the Kipushi zinc-copper-germanium-lead-

silver mine is being prepared by OreWin, of Australia. The comprehensive study is progressing and will refine Ivanhoe’s May 2016 preliminary economic assessment of Kipushi’s proposed redevelopment.

• Ivanhoe Mines’ three projects achieved a combined 12.3 million work hours free of lost-time

injuries (LTIF) by the end of Q2 2017. Ivanhoe had recorded almost 43,000 LTIF hours at Platreef, 5.5 million hours at Kipushi and more than 6.8 million hours at Kamoa-Kakula to the end of Q2 2017.

Principal projects and review of activities

1. Platreef Project

64%-owned by Ivanhoe Mines South Africa

The Platreef Project is owned by Ivanplats (Pty) Ltd, which is 64%-owned by Ivanhoe Mines. A 26% interest is held by Ivanplats’ historically-disadvantaged, broad-based, black economic empowerment (B-BBEE) partners, which include 20 local host communities with a total of approximately 150,000 people, project employees and local entrepreneurs. In January 2017, Ivanplats reconfirmed its Level 3 status in its third verification assessment on a B-BBEE scorecard. A Japanese consortium of ITOCHU Corporation, Japan Oil, Gas and Metals National Corporation and Japan Gas Corporation owns a 10% interest in Ivanplats, which it acquired in two tranches for a total investment of $290 million.

The Platreef Project hosts an underground deposit of thick, platinum-group metals, nickel, copper and gold mineralization in the Northern Limb of the Bushveld Igneous Complex, approximately 280 kilometres northeast of Johannesburg and eight kilometres from the town of Mokopane in Limpopo Province.

On the Northern Limb, platinum-group-metals mineralization is hosted primarily within the Platreef, a mineralized sequence that is traced more than 30 kilometres along strike. Ivanhoe’s Platreef Project, within the Platreef’s southern sector, is comprised of three contiguous properties: Turfspruit, Macalacaskop and Rietfontein. Turfspruit, the northernmost property, is contiguous with, and along strike from, Anglo Platinum’s Mogalakwena group of mining operations and properties.

Since 2007, Ivanhoe has focused its exploration and development activities on defining and advancing the down-dip extension of its original discovery at Platreef, now known as the Flatreef Deposit, which is amenable to highly mechanized, underground mining methods. The Flatreef area lies entirely on the Turfspruit and Macalacaskop properties, which form part of the company’s mining right.

Positive independent definitive feasibility study for Platreef’s first phase development; Platreef projected to be Africa’s lowest-cost producer of platinum-group metals

On July 31, 2017, Ivanhoe Mines announced the positive results of an independent, definitive feasibility study (DFS) for the planned first phase of the Platreef Project’s platinum-group elements, nickel, copper and gold mine in South Africa.

The independent Platreef DFS covers the first phase of development that would include construction of a state-of-the-art underground mine, concentrator and other associated infrastructure to support initial concentrate production by 2022. As Phase 1 is being developed and commissioned, there would be opportunities to refine the timing and scope of subsequent phases of expanded production.

Highlights include:

• Indicated Mineral Resources contain an estimated 41.9 million ounces of platinum, palladium, rhodium and gold with an additional 52.8 million ounces of platinum, palladium, rhodium and gold in Inferred Resources.
• Increased Mineral Reserves containing 17.6 million ounces of platinum, palladium, rhodium and gold – an increase of 13% – following stope optimization and mine sequencing work.
• Development of a large, safe, mechanized, underground mine with an initial four Mtpa concentrator and associated infrastructure.
• Planned initial average annual production rate of 476,000 ounces (oz) of platinum, palladium, rhodium and gold (3PE+Au), plus 21 million pounds of nickel and 13 million pounds of copper.
• Estimated pre-production capital requirement of approximately $1.5 billion, at a ZAR:USD exchange rate of 13 to 1.
• Platreef would rank at the bottom of the cash-cost curve, at an estimated $351 per ounce of 3PE+Au produced, net of by-products and including sustaining capital costs, and $326 per ounce before sustaining capital costs.
• After-tax Net Present Value (NPV) of $916 million, at an 8% discount rate.
• After-tax Internal Rate of Return (IRR) of 14.2%.

The study was prepared for Ivanhoe Mines by principal consultant DRA Global, with economic analysis led by OreWin, and specialized sub-consultants including Amec Foster Wheeler E&C Services Inc. (Amec Foster Wheeler), Stantec Consulting, Murray & Roberts Cementation, SRK Consulting, Golder Associates and Digby Wells Environmental.

Construction of first shaft station now underway in Shaft 1

Shaft 1, with an internal diameter of 7.25 metres, will provide access to the Flatreef Deposit and enable the initial, underground capital development to take place during the development of Shaft 2. Ultimately, Shaft 1 will become the primary ventilation intake shaft during the project’s four-million-tonne-perannum production case. An average sinking rate of 45 metres per month is expected during the main sinking phase. The shaft includes a 300-millimetre-thick, concrete-lined shaft wall. The main sinking phase is expected to reach its projected, final depth of 980 metres below surface in 2018. Shaft stations to provide access to horizontal mine workings for personnel, materials, pump stations and services will be developed at depths of 450 metres, 750 metres, 850 metres and 950 metres below surface. The permanent sinking phase, which started in July 2016, had reached a depth of 451 metres below surface on July 31, 2017. The first off-shaft lateral development is underway at the 450-metre level, which will serve as an intermediate water-pumping and shaft cable-termination station.

Figure 1: Platreef’s Shaft 1 headgear.

Health and safety at Platreef

By the end of June 2017, the Platreef Project reached a total of 7,544,626 million hours and 42,817 lost-time, injury-free hours worked in terms of the Mines Health and Safety Act and the Occupational Health and Safety Act of South Africa. Four lost-time accidents occurred during Q2 2017. The Platreef Project continues to strive toward its workplace objective of an environment that causes zero harm to employees, contractors, sub-contractors and consultants.

Shaft 2 early-works construction underway

Shaft 2 will be located approximately 100 metres northeast of Shaft 1. Shaft 2, with an internal diameter of 10 metres, will be lined with concrete and sunk to a planned, final depth of more than 1,100 metres below surface. It will be equipped with two 40-tonne rock-hoisting skips with a capacity to hoist a total of six million tonnes of ore per year – which will be the single largest hoisting capacity at any mine in Africa. The headgear for the permanent hoisting facility was designed by South Africa-based Murray & Roberts Cementation. The early-works for Shaft 2 include the excavation of a surface box cut to a depth of approximately 29 metres below surface and the construction of the concrete hitch (foundation) for the 103-metre-tall concrete headgear (headframe) that will house the shaft’s permanent hoisting facilities and support the shaft collar. The early-works commenced in June 2017 and will take approximately 12 months to complete.

Underground mining to use highly productive mechanized methods

The mining zones in the current Platreef mine plan occur at depths ranging from approximately 700 metres to 1,200 metres below surface. Primary access to the mining zones will be by way of Shaft 2 and secondary access to the mine will be via Shaft 1. During mine production, both shafts also will serve as ventilation intakes. Three additional ventilation exhaust raises are planned to achieve steadystate production.

Planned mining methods will use highly productive mechanized methods, including long-hole stoping and drift-and-fill. Each method will utilize cemented backfill for maximum ore extraction. The ore will be hauled from the stopes to a series of internal ore passes and fed to the bottom of Shaft 2, where it will be crushed and hoisted to surface.

The current mine plan has been improved over the 2015 PFS mine plan by optimizing stope design, employing a declining Net Smelter Return (NSR) strategy and targeting higher-grade zones early in the mine life. This strategy has increased the grade profile by 23% on a 3PE+Au basis in the first 10 years of operation and 10% over the life of the mine.

Shaft 2 engineered to allow for future expansion options

Given the size and potential of the Platreef Mineral Resource, Shaft 2 has been engineered with a crushing and hoisting capacity of six Mtpa.

This allows for a relatively quick and capital-efficient first expansion of the Platreef Project to six Mtpa by increasing underground development and commissioning a third, two-Mtpa processing module and associated surface infrastructure as required.

A further expansion to more than eight Mtpa would entail converting Shaft 1 from a ventilation shaft into a hoisting shaft. This would require additional ventilation exhaust raises, as well as a further increase of underground development, commissioning of a fourth, two-Mtpa processing module and associated surface infrastructure, as described in the Platreef preliminary economic assessment as Phase 2 of the project.

Preliminary expressions of interest have been received for approximately $900 million of the targeted $1 billion Platreef project financing

On July 19, 2017, Ivanhoe Mines announced the appointment of another two leading mine-financing institutions – KfW IPEX-Bank, a German government owned institution, and the Swedish Export Credit Corporation (SEK) – as Initial Mandated Lead Arrangers (IMLAs) to arrange debt financing for the ongoing development of the Platreef Mine.

KfW IPEX-Bank and SEK joined the three initial IMLAs – Export Development Canada, Nedbank Limited (acting through its Corporate and Investment Banking division) and Societe Generale Corporate & Investment Banking – that were appointed earlier this year.

The five IMLAs will make best efforts to arrange a total debt financing of up to $1 billion for the development of Platreef’s first-phase, four Mtpa mine. Preliminary expressions of interest now have been received for approximately $900 million of the targeted $1 billion project financing. Negotiation of a term sheet is ongoing. In addition, preliminary discussions have commenced with leading financial institutions around the financing of the contribution by the black economic empowerment partners to the development capital.

Figure 2: Representatives of the five banking institutions appointed to arrange debt financing for the Platreef Mine visited the site in July.

Metallurgical test work and processing methods

Metallurgical test work has focused on maximizing recovery of platinum-group elements (PGE) and base metals, mainly nickel, while producing an acceptably high-grade concentrate suitable for further processing and/or sale to a third party. The three main geo-metallurgical units and composites tested produced smelter-grade final concentrates of approximately 85 grams per tonne PGE+Au at acceptable PGE recoveries. Test work also has shown that the material is amenable to treatment by conventional flotation without the need for mainstream or concentrate ultrafine re-grinding. Extensive bench-scale test work comprising open-circuit and locked-cycle flotation testing, comminution testing, mineralogical characterization, dewatering and rheological characterization was performed at Mintek in South Africa, which is an internationally accredited metallurgical testing facility and laboratory.

Comminution and flotation test work has indicated that the optimum grind for beneficiation is 80% passing 75 micrometres. Platreef ore is classified as being ‘hard’ to ‘very hard’ and thus not suitable for semi-autogenous grinding; a multi-stage crushing and ball-milling circuit has been selected as the preferred size-reduction route.

Improved flotation performance has been achieved using high-chrome grinding media as opposed to carbon-steel media. The inclusion of a split-cleaner flotation circuit configuration, in which the fastfloating fraction is treated in a cleaner circuit separate from the medium- and slow-floating fractions, resulted in improved PGE, copper and nickel recoveries and concentrate grades.

As with the pre-feasibility study (PFS), a two-phased development approach was used for the DFS flowsheet design. The selected flow sheet comprises a common four-Mtpa, three-stage crushing circuit that feeds crushed material to two parallel milling-flotation modules, each with a nominal capacity of two Mtpa. Flotation is followed by a common concentrate thickening, concentrate filtration, tailings disposal and tailings-handling facility.

Bulk water and electricity supply

The Olifants River Water Resource Development Project (ORWRDP) is designed to deliver water to the Eastern and Northern limbs of South Africa’s Bushveld Complex. The project consists of the new De Hoop Dam, the raised wall of the Flag Boshielo Dam and related pipeline infrastructure that ultimately is expected to deliver water to Pruissen, southeast of the Northern Limb. The Pruissen Pipeline Project is expected to be developed to deliver water onward from Pruissen to the municipalities, communities and mining projects on the Northern Limb. Ivanhoe Mines is a member of the ORWRDP’s Joint Water Forum.

The Platreef Project’s water requirement for the first phase of development is projected to peak at approximately 7.5 million litres per day, which is expected to be supplied by the water network. Ivanhoe also is investigating various alternative sources of bulk water, including an allocation of bulk grey-water from a local source.

The Platreef Project’s electrical power requirement for the phase one, four Mtpa, underground mine, concentrator and associated infrastructure has been estimated at approximately 100 million voltamperes. An agreement has been reached with Eskom, the South African public electricity utility, for the supply of phase-one power. Ivanhoe chose a self-build option for permanent power that will enable Ivanhoe to manage the construction of the distribution lines from Eskom’s Burutho sub-station to the Platreef Mine. The self-build and electrical supply agreements are being formulated.

2. Kipushi Project

68%-owned by Ivanhoe Mines Democratic Republic of Congo

The Kipushi copper-zinc-germanium-silver mine in the DRC is adjacent to the town of Kipushi and approximately 30 kilometres southwest of Lubumbashi. It is located on the Central African Copperbelt, approximately 250 kilometres southeast of the Kamoa-Kakula Project and less than one kilometre from the Zambian border. Ivanhoe acquired its 68% interest in the Kipushi Project in November 2011; the balance of 32% is held by the state-owned mining company, La Générale des Carrières et des Mines (Gécamines).

Health, safety and community development

The Kipushi Project achieved a total of 5,506,908 work hours free of lost-time injuries, equivalent to 1,783 days, to the end of June 2017. Malaria remains the most frequently occurring health concern at Kipushi, which increased after the rainy season to an average of 19 cases per month for project employees during the quarter.

In an effort to reduce the incidence of malaria in the Kipushi community, a Water Sanitation and Health (WASH) program has been initiated in cooperation with the Territorial Administrator and the local community. The main emphasis of the program’s first phase is cleaning storm drains in the municipality to prevent accumulations of ponded water, where malarial mosquitos breed.

The Fionet program to improve malaria diagnostics and treatment expanded to 300 Deki readers installed in 252 medical service providers in Haut-Katanga and Lualaba provinces in Southern DRC, which host Ivanhoe’s Kipushi and Kamoa-Kakula projects. Deki readers provide automated readings of rapid diagnostic tests to remove the human-error factor and avoid prescription of unnecessary medication. The data is uploaded to a cloud server for analysis by the Ministry of Health in planning malaria-control measures. There were more than 80,000 patient encounters where Deki readers provided diagnostic testing during the past 18 months, with only approximately 48% of Kipushi Project employees who were symptomatic testing positive for malaria.

Underground drilling program includes metallurgy, infill and resource expansion drilling

Ivanhoe initiated a second phase of underground drilling at Kipushi in April 2017. The planned drilling program totals 6,500 metres in 41 drill holes and includes metallurgy, resource infill and expansion and exploration drilling. A total of 15 holes had been completed at the end of Q2 2017, including six metallurgy holes for comminution and flotation variability test work.

Resource drilling initially has focused on the Southern Zinc to confirm and expand the resource and to upgrade it into an Indicated Mineral Resource. This area was not targeted in the previous underground program and therefore was classified as Inferred Mineral Resources. As of June 30, 2017, 10 of the initial 15 Southern Zinc holes have been completed and all of the holes have intersected zinc and copper mineralization, including holes that intersected mineralization outside the outline of the current Inferred Mineral Resource.

The remainder of the underground program will focus on exploring the extent of an additional zinc pod in the footwall of the Big Zinc, the Nord Riche and potentially extending the Série Récurrente resource outline. The drilling program is expected to be completed next month.

Figure 3: Section showing the Kipushi decline (in yellow) in relation to the zinc and copper-rich mineralized zones being tested by the drilling program.

Figure 4: Kipushi underground drilling with one of Titan’s drill rigs.

Project development and infrastructure upgrading

The Kipushi Mine, which had been placed on care and maintenance in 1993, flooded in early 2011 due to a lack of pump maintenance over an extended period. At its peak, water reached 851 metres below the surface. Ivanhoe restored access to the mine’s principal haulage level at 1,150 metres below surface in December 2013. Since then, crews have been upgrading underground infrastructure to permanently stabilize the water levels.

Since completion of the 2014/2015 drilling program, water levels have been lowered to the bottom of Shaft 5, which is planned to be the mine’s main production shaft. The shaft is eight metres in diameter, 1,240 metres deep and approximately 1.5 kilometres from the planned main mining area. It provides the primary access to the lower levels of the mine, including the Big Zinc Deposit, through the 1,150metre haulage level and underground ramp decline.

Engineering work in Q2 2017 focused on the upgrading of Shaft 5 conveyances, rock handling (conveyors, crusher) and related infrastructure, refurbishment of bearer sets on the main rising water pipes and the replacement of shaft buntons (struts that reinforce the shaft walls). A new, twinned, highvolume surface ventilation fan was commissioned at Shaft 4 to provide fresh air to the underground workings.

Figure 5: New ore haulage truck being moved down to Kipushi’s 1,150-metre level.

Figures 6 and 7: Installation of conveyor belt rollers in Shaft 5 ore load-out system.