Ivanhoe Mines announces financial results

August 12, 2016

Ivanhoe Mines announces financial results and review of operations for the second quarter of 2016

Latest drilling results from Kamoa’s Kakula, which could prove to be Africa’s most significant copper discovery, lead Ivanhoe's project news

TORONTO, CANADA ‒ Ivanhoe Mines (TSX: IVN) today announced its financial results for the second quarter ended June 30, 2016. All figures are in US dollars unless otherwise stated.

HIGHLIGHTS

• On August 11, 2016, Ivanhoe Mines announced what could prove to be Africa’s most

significant copper discovery at Kakula, on the Kamoa Copper Project, in the Democratic Republic of Congo (DRC). The massive, flat-lying, shallow, chalcocite-rich core of the Kakula Discovery zone now has been expanded to more than three kilometres in length – and still remains open in both directions.

• Based on the game-changing drill results received to date, Ivanhoe believes that Kakula’s

copper discovery is substantially richer, thicker and more consistent than other known mineralization elsewhere on the Kamoa Project. The primary objective of the current drilling program at Kakula, which is using seven rigs, is to expand the thick, flat-lying, bottom- loaded zone of very high-grade, stratabound copper mineralization at the southern part of the discovery area that has the potential to be amenable to bulk, mechanized mining and to have a significant, positive impact on the Kamoa Project’s future development plans.

• Ivanhoe expects to receive an initial, independent Mineral Resource estimate for the Kakula

Discovery around the end of Q3 2016. Upon receipt of the resource estimate, the Kamoa technical team plans to begin work on a preliminary economic assessment for Kakula.

• Underground mine development at Kamoa’s planned initial mining area at Kansoko Sud is

progressing ahead of plan and within budgeted costs. The twin declines, incorporating both a service and a conveyor tunnel, each have advanced more than 130 metres since the first excavation blast was conducted in May of this year. Development of the underground mine is designed to reach the high-grade copper mineralization at the Kansoko Sud deposit during the first quarter of 2017.

• Initial metallurgical test results received in July 2016 from a sample of drill core from

exploration drilling in the Kakula Discovery zone achieved copper recoveries of 86% and produced a copper concentrate with an extremely high grade of 53% copper. The results also indicate that material from Kamoa’s Kakula and Kansoko zones could be processed through the same concentrator plant, which would yield significant operational and economic efficiencies.

• Earlier metallurgical testwork indicated that the Kamoa concentrates contain extremely low

arsenic levels, by world standards – approximately 0.02%. Given this critical competitive marketing advantage, Kamoa’s concentrates are expected to attract a significant premium from copper-concentrate traders for use in blending with concentrates from other mines. The Kamoa concentrates will help to enable the other concentrates to meet the limit of 0.5% arsenic imposed by Chinese smelters to meet China’s new environmental restrictions.

• Constructive and cordial negotiations are continuing between Ivanhoe Mines, its Kamoa

joint-venture partner Zijin Mining Group Co., Ltd. and senior DRC government officials to complete the transfer to the DRC government of an additional 15% interest in the Kamoa Project, on terms to be negotiated. Ivanhoe expects a mutually beneficial agreement to be achieved in the near future that will provide long-lasting, positive benefits to the DRC government and the Congolese people.

• On July 8, 2016, Ivanhoe received the second installment of $41.2 million owing from a Zijin

Mining subsidiary as part of a strategic co-development agreement under which Zijin acquired 49.5% of Ivanhoe’s majority stake in the Kamoa copper discovery. Zijin agreed to pay $412 million for a 49.5% interest in Ivanhoe subsidiary Kamoa Holding Limited that presently owns 95% of the Kamoa Project.

• Also in the DRC, on May 2, 2016, Ivanhoe Mines announced a positive preliminary economic

assessment (PEA) for the redevelopment of the Kipushi zinc-copper-germanium-lead-silver mine. The PEA plan covers the redevelopment of Kipushi as an underground mine, producing an annual average of 530,000 tonnes of zinc concentrate over a 10-year mine life at a total cash cost, including copper by-product credits, of approximately $0.54 per pound of zinc. Successful planned restoration of production would make Kipushi the world’s highest grade, major zinc mine. A pre-feasibility study is underway that will further refine the optimal development scenario for the existing underground mine.

• On May 11, 2016, Ivanhoe Mines announced a 58% increase in Indicated Mineral Resources

tonnage and a 21% increase in the Inferred Mineral Resources tonnage at its Platreef platinum-group metals (PGM), nickel, copper and gold project in South Africa. The new resource estimate is further confirmation of Ivanhoe’s belief that the deposit will be a model for safe, mechanized, underground platinum mining in South Africa.

• Platreef’s Indicated Resources now contain an estimated 42.0 million ounces of PGM plus

gold, with an additional 52.8 million ounces in Inferred Resources, at the base-case cut-off grade of 2.0 grams per tonne (g/t) 3PE (platinum, palladium and rhodium) plus gold.

• At a lower cut-off grade of 1.0 g/t 3PE+gold, Platreef’s Indicated Resources now contain an

estimated 58.8 million ounces of PGM plus gold, with an additional 94.3 million ounces in Inferred Resources.

• Platreef’s Shaft 1, which entered its permanent sinking phase last month, now has reached a

depth of more than 70 metres below surface and is expected to reach the Flatreef Deposit at a depth of 777 metres below surface during the third quarter of 2017. Shaft 1 will provide early development access into the deposit and will be utilized to fast track production during the first phase of the project. Ivanhoe expects to start Shaft 2 early works in 2017, including civil work for the box cut and hitch foundation.

• Ivanhoe has made good progress on advancing the feasibility study for the first phase of

development at Platreef. The study, which began in August 2015 and is being managed by DRA Global, is expected to be completed in early 2017.

• Ivanhoe Mines’ three projects achieved a combined 10.87 million hours of lost-time-injury-

free (LTIF) work by the end of the second quarter of 2016. Ivanhoe had recorded 1.27 million LTIF hours at Platreef, 4.42 million hours at Kipushi and 5.18 million hours at Kamoa to the end of Q2 2016.

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. Ivanplats reconfirmed its Level 3 status in its second verification assessment on a B-BBEE scorecard. A Japanese consortium of ITOCHU Corporation and its affiliate, ITC Platinum, plus Japan Oil, Gas and Metals National Corporation and JGC 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. Since 2007, Ivanhoe has focused its exploration activities on defining and advancing the down-dip extension of its original Platreef discovery, 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.

Updated estimates result in substantial increases in Indicated and Inferred Mineral Resources at Platreef

On May 11, 2016, Ivanhoe Mines announced a substantial increase in Indicated and Inferred Mineral Resources at the Platreef Project. The updated Mineral Resource estimate, which included updated UMT_TCU Mineral Resources, Bikkuri Mineral Resources and the Mineral Resources in the immediate footwall of the TCU, was prepared by Ivanhoe Mines under the direction of Dr. Harry Parker, RM SME, of Amec Foster Wheeler E&C Services Inc. Dr. Parker and Timothy Kuhl, RM SME, also of Amec Foster Wheeler, have independently confirmed the Mineral Resource estimate and are the Qualified Persons for the estimate, which has an effective date of April 22, 2016.

The Flatreef Mineral Resource, with a strike length of 6.5 kilometres, lies predominantly within a flat-togently-dipping portion of the Platreef mineralized belt at relatively shallow depths of approximately 500 metres to 1,350 metres below the surface. The Flatreef Deposit is characterized by its very large vertical thicknesses of high-grade mineralization and a platinum-to-palladium ratio of approximately 1:1, which is significantly higher than other recent PGM discoveries on the Bushveld’s Northern Limb.

The Platreef Indicated Mineral Resources for all mineralized zones are 346 million tonnes at a grade of 3.77 g/t 3PE+gold (1.68 g/t platinum, 1.70 g/t palladium, 0.11 g/t rhodium, 0.28 g/t gold), 0.32% nickel and 0.16% copper at a 2.0 g/t 3PE+gold cut-off. The average thickness of the 2.0 g/t 3PE+gold grade shell used to constrain the T2MZ resources for the indicated area is 19 metres.

Inferred mineral resources for all mineralized zones are 506 million tonnes at a grade of 3.24 g/t 3PE+gold (1.42 g/t platinum, 1.46 g/t palladium, 0.10 g/t rhodium, 0.26 g/t gold), 0.31% nickel and 0.16% copper. The average thickness of the 2.0 g/t 3PE+gold grade shell used to constrain the T2MZ resources for the inferred area is 12.7 metres.

Figure 1. Mineralization at the Platreef Project is open to expansion to the south and west, beyond the area of the current Indicated Mineral Resources, shown in green, and the Inferred Mineral Resources, shown in blue.

Health and safety at Platreef

The Platreef Project reached a total of 5,903,038 million hours in terms of the Mines Health and Safety Act and the Occupational Health and Safety Act by the end of June 2016. The project recorded 1,266,480 lost-time-injury-free hours at Platreef up until the end of Q2 2016. The Platreef Project continues to strive toward its workplace objective of an environment that causes zero harm to any employees, contractors, sub-contractors or consultants.

Shaft 1 construction

Shaft 1, with an internal diameter of 7.25 metres, will provide initial access to the ore body and will enable the initial underground capital development to take place while Shaft 2 (the main production shaft) is being developed. Following the successful commissioning and licencing of the stage and kibble winders and ancillary equipment, the permanent sinking phase started in July 2016. The initial sinking rate is 1.8 metres per day and will continue until sufficient clearance between the shaft bottom and the stage has been created. The main sink is planned to commence at a depth of 107 metres below surface and the advance per day is expected to be increased to 2.7 metres. This phase will continue to a depth of 1,025 metres below surface, which is expected to be reached in early 2018.

Work now is complete on the internal substation, which has a capacity of five million volt-amperes (MVA). Construction is underway on the power transmission lines from Eskom, the South African public electricity utility, which are expected to supply the electrical power to be used for shaft sinking. Back-up generators have been installed to ensure sinking operations continue despite any interruptions in power supply.

The new transmission lines from Eskom also are expected to provide power to an adjacent community near the Platreef Project, which will be a major community benefit. Other on-site work includes the construction of the storm-water drains and ponds.

National Road (N11) intersection construction

Construction began in April of the intersection on the National Road (N11) highway to provide safe and convenient access to the Platreef mine site. The work includes adding extra lanes to the existing roadway, exit and entry ramps, storm-water management and resurfacing of the intersection.

Platreef implementing a phased approach to a large, underground, mechanized mine

Ivanhoe plans to develop the Platreef Mine in phases. The initial annual rate of four million tonnes per annum (Mtpa) is designed to establish an operating platform to support future expansions. This is expected to be followed by a potential doubling of production to 8.0 Mtpa; and then a third expansion phase to a steady-state 12 Mtpa which would establish Platreef among the largest platinum-groupmetals mines in the world.

Ivanhoe has made good progress on advancing the feasibility study of the first phase, which began in August 2015. The study is being managed by DRA Global, with specialized sub-consultants including Stantec Consulting, Murray & Roberts Cementation, SRK, Golder Associates and Digby Wells Environmental. There are expected to be opportunities to refine and modify the timing and capacities of subsequent phases of production to suit market conditions during the development and commissioning of the first phase.

Metallurgical testwork and processing

Metallurgical testwork has focused on maximizing the recovery of platinum-group metals and base metals, also while producing an acceptably high-grade concentrate grade for sale to third parties. The three main geo-metallurgical units and composites have produced concentrator grades of approximately 85 to 110 g/t 3PE+gold at good PGE recoveries (86% to 88% 3PE+gold).

Comminution and flotation testwork has demonstrated that the optimum grind size of 80% passing 75 micrometres in one stage of milling is sufficient to achieve recoveries referred to above. This simplifies the circuit and should enable Ivanhoe to optimize the capital and operating cost of the concentrator.

The flow sheet for phase one comprises a four-million-tonne-per-year, three-stage crushing circuit, which will feed into two parallel milling-flotation modules, each with a capacity of two million tonnes per year. Flotation is followed by a four-million-tonne-per-year tailings-handling and concentrate-thickening, filtration and storage circuit.

Planned mining methods to incorporate highly productive, mechanized methods

The selected mining areas in the current mine plan occur at depths ranging from approximately 700 metres to 1,200 metres below the surface. The main access to the Flatreef Deposit and ventilation system is expected to be comprised of four vertical shafts. Shaft 2 will host the main personnel transport cage, material and ore-handling systems, while Shafts 1, 3 and 4 will be utilized for ventilation to the underground workings. Shaft 1, now under development, will be used for initial access to the deposit and early underground development.

The planned mining methods are expected to use highly productive, mechanized methods, including long-hole stoping and drift-and-fill mining. Mined-out areas will be backfilled with a paste mixture that utilizes tailings from the process plant and cement. The ore will be hauled from the stopes to a series of ore passes that will connect to a main haulage level at Shaft 2, from where it will be hoisted to surface for processing.

Shaft 2 is being designed to have an internal diameter of 10 metres and capable of hoisting six million tonnes per year. The headgear design for the six-million-tonne-per-year permanent hoisting facility has been completed by South Africa-based Murray & Roberts Cementation. Ivanhoe expects to start Shaft 2 early works in 2017, including civil work for the box cut and hitch foundation.

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 Igneous 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 is a member of the ORWRDP’s Joint Water Forum. The Minister of Water & Sanitation has directed that the Trans-Caledon Tunnel Authority serve as the implementing agent for the outstanding phases of the ORWRDP scheme, which include the Phase 2B pipeline from Flag Boshielo Dam to Mokopane.

Platreef Project’s water requirement for the first phase of development is projected to peak at approximately 10 million litres per day. This requirement is to be serviced by the scheme. Ivanhoe also is investigating various alternative sources of bulk water, including an allocation of bulk grey-water from the local Mogalakwena municipality.

The Platreef Project’s electricity requirement for a four-million-tonne-per-year underground mine, concentrator and associated infrastructure has been estimated at approximately 100 million voltamperes. An agreement has been reached with Eskom for the supply of phase-one power. Ivanhoe chose a self-build option for permanent power, enabling Ivanhoe to manage the construction of the distribution lines from Eskom’s Burutho sub-station to the Platreef Mine.

Development of human resources and job skills

Work is progressing well on the further implementation of Ivanhoe’s Social and Labour Plan, to which the company has pledged a total of R160 million ($11 million) during the first five years, until November 2019. The approved plan includes R67 million ($4 million) for the development of job skills among local residents and R88 million ($6 million) for local economic development projects. Additional internal training is ongoing to provide members of the current workforce with opportunities to expand their skills.

2. Kipushi Project

68%-owned by Ivanhoe Mines Democratic Republic of Congo

The Kipushi copper-zinc-germanium-lead mine, in the Democratic Republic of Congo, is adjacent to the town of Kipushi and approximately 30 kilometres southwest of Lubumbashi. It also is located on the Central African Copperbelt, approximately 250 kilometres southeast of Ivanhoe’s Kamoa 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 at Kipushi

The Kipushi Project achieved a total of 4,418,232 lost-time-injury-free hours (1,423 days) to the end of Q2 2016. Malaria remains the most frequent health concern at Kipushi; in Q2 2016, there was an average of 12 cases each month among employees, but numbers are declining with the dry season.

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 the accumulation of ponded water, where malarial mosquitos breed.

The Fionet program to combat malaria rolled out 37 Deki Readers, which provide rapid malaria tests, and provided training of operators at medical service providers in the Kipushi Health Zone. The program is expected to expand to a total of 300 Deki Readers in Q3 2016. Results from the initial six months of the program are strongly encouraging, as unnecessary medication is no longer prescribed to approximately half of all patients, who tested negative for malaria.

National Road rehabilitation through the center of Kipushi municipality was completed by MCK under contract to Ivanhoe. As part of a Haut Katanga provincial initiative, the Office of Roads and Drainage, in conjunction with the work completed by Ivanhoe, is completing the tarmac surface on the road.

Project development and infrastructure

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. A major milestone was reached in December 2013 when Ivanhoe restored access to the mine’s principal haulage level at 1,150 metres below the surface. Since then, crews have been upgrading underground infrastructure to permanently stabilize the water levels.

Since completion of the drilling program, water levels have been lowered to approximately the 1,245metre-level in Shaft 5. Engineering work has focused on upgrading of Shaft 5 conveyances and infrastructure, cleaning the shaft bottom to facilitate the installation of new hoist ropes, repairs and upgrades to the hoisting infrastructure and cleaning and stripping of the main pump station at the 1,200-metre-level.

Figure 2. Main pump station in Shaft 5 at 1,200-metre-level with installation of Grifo centrifugal pump.

Preliminary economic assessment announced for the redevelopment of the Kipushi Project

Ivanhoe announced a positive preliminary economic assessment (PEA) for the redevelopment of the Kipushi Project on May 2, 2016. The PEA was prepared in compliance with Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects. On May 27, 2016, the NI 43-101 Technical Report on the PEA was filed on www.sedar.com and the company’s website.

Highlights of the PEA, prepared by OreWin Pty. Ltd., of Adelaide, Australia, and the MSA Group (Pty) Ltd, of Johannesburg, South Africa, include:

• After-tax net present value (NPV) at an 8% real discount rate is $533 million.
• After-tax real internal rate of return (IRR) is 30.9%.
• After-tax project payback period is 2.2 years.
• Leveraging existing surface and underground infrastructure significantly lowers the redevelopment capital compared to a greenfield development project, as well as the time required to reinstate production.
• Life-of-mine average planned zinc concentrate production of 530,000 dry tonnes per annum – with a concentrate grade of 53% zinc – is expected to rank Kipushi, once in production, among the world’s major zinc mines.
• Life-of-mine average cash cost of $0.54/lb. of zinc is expected to rank Kipushi, once in production, in the bottom quartile of the cash-cost curve for zinc producers globally.

A pre-feasibility study now is underway that will further refine the optimal development scenario for the existing underground mine at Kipushi.

3. Kamoa Project

47%-owned by Ivanhoe Mines Democratic Republic of Congo

The Kamoa Copper Project, a joint venture between Ivanhoe Mines and Zijin Mining Group Co., Ltd., is a very large, stratiform copper deposit with adjacent prospective exploration areas within the Central African Copperbelt in the Democratic Republic of Congo (DRC), approximately 25 kilometres west of the town of Kolwezi and about 270 kilometres west of Lubumbashi. Ivanhoe sold a 49.5% share interest in Kamoa Holding Limited (Kamoa Holding), the company that presently owns 95% of the Kamoa Project, to Zijin Mining in December 2015 for an aggregate consideration of $412 million. In addition, Ivanhoe sold a 1% share interest in Kamoa Holding to privately-owned Crystal River Global Limited for $8.32 million – which Crystal River will pay through a non-interest-bearing, 10-year promissory note.

A 5%, non-dilutable interest in the Kamoa Project was transferred to the DRC government on September 11, 2012, for no consideration, pursuant to the DRC Mining Code. Ivanhoe also has offered to transfer an additional 15% interest to the DRC government on terms to be negotiated. Constructive and cordial negotiations over the offer are continuing between Ivanhoe Mines, Zijin and senior DRC government officials. Ivanhoe expects a mutually beneficial agreement to be achieved in the near future that will provide long-lasting, positive benefits to the DRC government and the Congolese people.

Subsequent to the sales to Zijin and Crystal River, Ivanhoe owns an effective 47% of the Kamoa Project, which will decrease to an effective 40% should the additional 15% interest be transferred to the DRC government.

Kamoa is the world’s largest, undeveloped, high-grade copper deposit. On February 23, 2016, an updated Mineral Resource estimate was issued for the Kamoa Project, with an effective date of May 5, 2014. Kamoa’s Indicated Mineral Resources total 752 million tonnes grading 2.67% copper and containing 44.3 billion pounds of copper at a 1% copper cut-off grade and an approximate minimum true thickness of three metres. In addition to the Indicated Resources, the updated estimate included Inferred Mineral Resources of 185 million tonnes grading 2.08% copper and containing 8.5 billion pounds of copper, also at a 1.0% copper cut-off grade and an approximate minimum true thickness of three metres.

Kamoa 2016 pre-feasibility study envisages first phase mine production of three million tonnes per year at a grade of 3.86% copper

The Kamoa 2016 pre-feasibility study (PFS), which focuses on the initial phase of development, was filed on March 30, 2016.

Highlights include:

• Mine production of three million tonnes per annum (Mtpa) at an average grade of 3.86% copper over a 24-year mine life, resulting in annual copper production of approximately 100,000 tonnes.
• Initial capital cost, including contingency, is $1.2 billion, approximately $200 million lower than estimated in the Kamoa 2013 PEA.
• Life-of-mine average mine-site cash cost is $0.75/lb. of copper.
• After-tax NPV at an 8% discount rate of $986 million.
• After-tax IRR of 17.2% and a payback period of 4.6 years.
• High-grade copper concentrate with an average grade of 39.2% copper and very low arsenic levels.
• Improvements to the mining method have the potential to reduce average mine site cash cost during the first phase to $0.61/lb. of copper, and improve the after-tax NPV at an 8% discount rate to $1.182 billion, the IRR to 18.9% and the payback period to 4.3 years.

The Kamoa 2016 PFS identified several areas for further evaluation to optimize the project’s economics, including:

• The use of controlled-convergence room-and-pillar mining, which has been successfully used by KGHM Polska Miedź S.A. at its copper-mining operations in Poland for the past 20 years. Based on detailed analysis by KGHM Cuprum R&D Centre Ltd., this mining method appears to be well suited to the Kamoa Deposit. If implemented, it potentially could provide significant cost savings as there would be no requirement for cemented backfill and ore extraction ratios would increase.
• Increased production up to 4.0 Mtpa from the proposed initial mining area, with only limited adjustments to the ore-handling and ventilation systems, thereby resulting in a more efficient use of capital.

Ivanhoe and Zijin Mining are working together to define the scope of the feasibility study, taking into account the conclusions and recommendations from the PFS, while critical-path development, such as upgrading of the hydro-electrical facilities at Koni and Mwadingusha, continues to progress.

Health and safety at Kamoa

Health and safety remain key priorities for workers and management alike at the Kamoa Project, where an excellent safety record has been achieved. As of June 30, 2016, a total of 5,183,893 hours had been worked without a lost-time injury.

Exploration activities lead to a substantial expansion of the Kakula Discovery

During Q2 2016, the company began its drilling program at the new Kakula Discovery area. The contractor, Titan Drilling Congo SARL, mobilized to the Kakula site on May 17 and seven rigs now are drilling at Kakula, with two rigs on standby. A total of 30 holes were completed during the quarter, with six in progress, resulting in 11,563 metres of diamond drilling.

As a result of the ongoing success of the Kakula program and the extension along trend of the central, well-mineralized, chalcocite-rich core to the northwest and southeast at relatively shallow depths, the Kakula drilling program has been expanded by an additional 9,000 metres, to a total of 34,000 metres of exploration drilling. As the full scale of the discovery becomes apparent, further expansions to the program will be accelerated.

The 60-square-kilometre Kakula exploration area is approximately 10 kilometres southwest of the Kamoa Project’s planned initial mining area at Kansoko Sud, see Figure 3 below. The primary objective of the current drilling program at Kakula is to confirm and expand a thick, flat-lying, bottom-loaded zone of very high-grade, stratabound copper mineralization at the southern part of the Kakula Discovery area that has the potential to be amenable to bulk, mechanized mining and have a significant, positive impact on the Kamoa Project’s future development plans.

Excellent copper recoveries and concentrate grades confirmed by preliminary metallurgical tests of drill core from Kakula Discovery

In July, initial metallurgical test results from a sample of drill core from ongoing exploration in the Kakula Discovery zone achieved copper recoveries of 86% and produced a copper concentrate with an extremely high grade of 53% copper. The results also indicate that material from Kamoa’s Kakula and Kansoko zones could be processed through the same concentrator plant, which would yield significant operational and economic efficiencies.

Testing of the Kakula sample was conducted at Zijin’s laboratory in China, using the flowsheet developed during the Kamoa PFS. The material tested was a composite of drill holes DD996 and DD998, assaying 4.1% copper. As a comparison, testing of a previous development composite sample from the planned, initial mining deposit at Kamoa’s Kansoko Sud zone and the adjacent Kansoko Centrale zone, assaying 3.61% copper, achieved an 85% recovery and a concentrate grade of 37% copper. The PFS circuit was optimized on this material.

Earlier metallurgical testwork indicated that the Kamoa concentrates contain extremely low arsenic levels, by world standards – approximately 0.02%. Given this critical competitive marketing advantage, Kamoa’s concentrates are expected to attract a significant premium from copper-concentrate traders for use in blending with concentrates from other mines. The Kamoa concentrates will help to enable the other concentrates to meet the limit of 0.5% arsenic imposed by Chinese smelters to meet China’s new environmental restrictions.

Expanded drill program at Kakula Discovery

In June 2016, the company provided an update on the Kakula program, which confirmed the exceptional grades and shallow, flat-lying geometry of the Kakula mineralized zone. Highlights include:

• DD998 intersected 11.82 metres (true width) of 4.06% copper at a 2.5% copper cut-off, 11.82 metres (true width) of 4.06% copper at a 2% copper cut-off and 13.79 metres (true width) of 3.68% copper at a 1% copper cut-off.
• DD999 intersected 8.86 metres (true width) of 6.56% copper at a 2.5% copper cut-off, 11.62 metres (true width) of 5.52% copper at a 2% copper cut-off and 13.65 metres (true width) of 4.93% copper at a 1% copper cut-off.
• DD1002 intersected 6.42 metres (true width) of 5.70% copper at a 2.5% copper cut-off, 14.68 metres (true width) of 3.71% copper at a 2% copper cut-off and 32.55 metres (true width) of 2.49% copper at a 1% copper cut-off.
• DD1003 intersected 10.23 metres (true width) of 6.18% copper at a 2.5% copper cut-off, 10.23 metres (true width) of 6.18% copper at a 2% copper cut-off and 18.71 metres (true width) of 3.88% copper at a 1% copper cut-off.

Figure 3. Kamoa Project map shows the planned initial mining area at Kansoko Sud and the nearby Kakula exploration and discovery area.

Additional assays received

Ivanhoe Mines reported highlights of the latest drill results, on August 11, 2016. Significant highlights of these results include:

• DD1005 intersected 7.36 metres (true width) of 8.11% copper at a 2.5% copper cut-off, 10.13 metres (true width) of 6.52% copper at a 2% copper cut-off and 20.71 metres (true width) of 3.85% copper at a 1% copper cut-off.