Some details of the draft agreement between Ivanhoe Mines (TSE:IVN, NYSE:IVN), Rio Tinto and the Government of Mongolia as provided by Ivanhoe in their recent press release.

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In April 10, 2007, after several months of negotiations, Ivanhoe Mines and Rio Tinto reached an agreement in principle with the Mongolian Government's Working Group on a draft Investment Agreement for the development and long-term operation of the Oyu Tolgoi copper-gold project in the South Gobi Region. The terms of the draft Investment Agreement provide a necessary period of development and longterm operational stability and certainty of principal tax and fiscal issues that will allow for the realization of Oyu Tolgoi's benefits for the people of Mongolia and for shareholders of the investors: Ivanhoe Mines and Rio Tinto. The agreement would have an initial term of 30 years, with the opportunity to extend the agreement for additional 20-year terms. The draft Investment Agreement remains subject to consideration and approval by Mongolia's State Great Hural (National Parliament) and also is subject to review and approval by the respective boards of directors of Ivanhoe Mines and Rio Tinto. In accordance with revised terms of Mongolia's Mineral Law enacted last year, Oyu Tolgoi is designated a "strategic" deposit. As a result, the draft Investment Agreement provides for Mongolia to acquire 34% of the shares of Ivanhoe Mines Mongolia Inc. (IMMI), the Ivanhoe subsidiary that owns and is developing Oyu Tolgoi. As a shareholder, the State of Mongolia would be responsible for its share of the total capital required by IMMI to develop an initial open-pit mine, projected to be in roduction in 2010, and a phase-two underground mine projected to be in operation in 2014. If necessary, Ivanhoe Mines would contribute, some or all, of Mongolia's share of capital costs during he first six years of the project, which then would be repaid, with interest, from Mongolia's share of dividends from ownership of IMMI's shares.

• The Mongolian Government would be entitled to appoint three of the nine directors of IMMI. The project's management team would be nominated by Ivanhoe. • The rates of more than 20 taxes, fees and charges under Mongolian laws would be stabilized for the term of the agreement. While current rates would apply, any lower rates introduced in the future also would be applied to Oyu Tolgoi.
• Gold produced at Oyu Tolgoi would be sold to the Central Bank of Mongolia at international market prices, and therefore would be exempt from the 68% Windfall Profits Tax enacted by the Mongolian Parliament last year. IMMI has pledged to facilitate,possibly with other parties, the construction of a copper smelter in Mongolia within five years of the start of production at Oyu Tolgoi, ensuring that copper ore and copper produced at Oyu Tolgoi also would be exempt from the Windfall Profits Tax for the full term of the agreement. • During operation of the mines, a minimum of 90% of Oyu Tolgoi project employees would be Mongolian nationals. During construction, a maximum of 25% of employees would be foreign nationals.
• IMMI is committed to an extensive skills training program. The Company's goal is to ensure that Mongolians fill 51% of engineering positions within 10 years of start up. The company would establish a graduate scholarship program, targeting engineering-related fields, at Mongolian and international universities to help qualify 100 Mongolians for advanced mining jobs in six years.

The draft Investment Agreement was presented to Mongolia's National Parliament on July 9, 2007. Consideration and approval by the National Parliament is expected to be the final step in the process being conducted in accordance with the revised Minerals Law enacted by Parliament last year. The Parliament's Standing Committee on Economics discussed the draft agreement on August 6 and 7. The Parliament has extended its spring session into August, but nodate for the adjournment of the current session has been announced. Ivanhoe Mines – with the encouraging public support of its Mongolian employees, suppliers and contractors – has expressed its concern to all the Members of Parliament, the Government's Cabinet and the President about potential adverse impacts on the cost and timing for the project that would result from any further delays in the parliamentary approval process. Ivanhoe Mines will monitor the deliberations of the National Parliament and continue to assess the implications for the Oyu Tolgoi development schedule.
The final substantive step in achieving the approval of the draft Investment Agreement rests with the National Parliament. There can be no assurance that Parliament will approve the existing draft agreement, as presently written, or that the approved agreement will contain all of the terms and conditions sought by Ivanhoe Mines and/or Rio Tinto as presently negotiated. In addition, there can be no assurance that the Company will receive approval by Parliament in the foreseeable future or at all. Consequently, without final approval or timely approval by Parliament, the Company may not be able to close future financings, including the private placement and warrant transactions with Rio Tinto, obtain project financing or otherwise raise capital before its existing cash resources are expended with the result that the Oyu Tolgoi Project may not be constructed in a timely manner, or at all. See "Risks and Uncertainties" in Ivanhoe Mines' Management's Discussion and Analysis for the year ended December 31, 2006.
The Investment Agreement that was negotiated with the Mongolian Government's Working Group addressed the various salient issues presented by amendments that were enacted by Parliament in 2006 to the Minerals Law and Tax Laws. These issues include, but arenot necessarily limited to, the following:

Strategic Deposit. Pursuant to the 2006 Amended Minerals Law, the Government of Mongolia was provided the option to acquire interests in mineral deposits deemed to be "mineral deposits of strategic importance". The Government gained a qualified right to acquire an interest of 1) up to 34% in strategic deposits discovered through privately financed exploration; and 2) up to 50% in deposits that were discovered through the use of state funds during the era of the former Soviet Union. The Oyu Tolgoi discoveries on the Company's licences, and on the adjoining Entrée Gold joint venture property, were financed entirely by private capital. The Amended Minerals Law states that any acquisition of a state interest in a mining project will be subject to negotiation with the licence holder as part of the Investment Agreement process. Royalty rates. The Government's royalty on all metals increased from 2.5% to 5.0% and is based on gross sales.

Tax rates. The 30% income tax rate on personal and corporate income was reduced to 10% and 25% respectively. The value-added tax was reduced from 15% to 10%. Licence maturity. The term of an exploration licence was increased from seven to nine years. The maximum term for a mining licence, including possible extensions, was reduced from 100 years to 50 years (30 years with a possible extension of 20 years). Employment requirements. A licence holder is obligated to employ no more than 10% foreign citizens or face a monthly surcharge of 10 times the minimum monthly salary for each foreign citizen employee above the 10% limit. Listing requirements. An entity holding a mining licence for a deposit classified as a "mineral deposit of strategic importance" now is required to list at least 10% of its shares on the Mongolian Stock Exchange. It is uncertain, at present, how this requirement will be implemented in practice and what steps may need to be taken to accomplish such listing. Maximum duration of Investment Agreements. The maximum duration of Investment Agreements has been prescribed in the Amended Minerals Law as follows:

• Investment between $50-$100 million — 10-year term
• Investment between $100-$300 million — 15-year term
• Investment greater than $300 million — 30-year term.

The Oyu Tolgoi Project qualifies for an Investment Agreement with an initial 30-year term. Other income tax amendments. Amendments to the Tax Law also include the introduction of a 10% investment tax credit, the introduction of a two-year loss-carry-forward provision and improved depreciation allowances. These amendments are expected to compensate for the elimination of the tax holidays that previously applied only to foreign-owned companies as licence holders. Presently, mining is not considered by the Government of Mongolia to qualify for the investment tax credit. Excess Profits Tax. In May 2006, a 68% excess profits tax was approved by the Mongolian Parliament. The tax applies to sales revenue, net of all selling and treatment charges, which exceeds certain threshold levels for gold and copper ore and concentrates. Based on the Company's initial assessment, the effective price at which the tax will apply to Oyu Tolgoi copper currently is estimated to be $1.45 per pound, since the legislated base price of $1.18 per pound, along with the cost of external smelting and realization costs, can be deducted from sales proceeds. The Government also has confirmed that the new excess profits tax would not be applied to copper smelted in Mongolia and would not apply to the gold contained in copper concentrate. It is envisaged that the Oyu Tolgoi Project will be a producer of copper concentrate and gold produced at Oyu Tolgoi will be contained in copper concentrate.

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