IVN.TO · 2020-08-10

Development of the flagship Kakula Copper Mine continues to exceed expectations; with initial production well on track for third quarter of 2021 Definitive Feasibility Study for the Kakula Mine, and an updated Integrated Development Plan for multiple expansions of the entire

Technical Reports (NI 43-101)

August 10, 2020

Development of the flagship Kakula Copper Mine continues to exceed expectations; with initial production well on track for third quarter of 2021

Definitive Feasibility Study for the Kakula Mine, and an updated Integrated Development Plan for multiple expansions of the entire Kamoa-Kakula mining licence, nearing completion

Mine development work at the Platreef PGMs-gold-nickel-copper mine now focused on preparing Shaft 1 for initial production; updated Definitive Feasibility Study and phased-development plan to be issued in September

Ivanhoe issues second quarter financial results and review of mine construction progress and exploration activities

TORONTO, CANADA ‒ Ivanhoe Mines (	TSX: IVN; OTCQX: IVPAF	) today announced its
financial results for the six months ended June 30, 2020. Ivanhoe Mines is a Canadian
mining company advancing its three mining projects in Southern Africa: the Kamoa-
Kakula copper discovery in the Democratic Republic of Congo (DRC); the Platreef
palladium-platinum-nickel-copper-gold-rhodium discovery in South Africa; and the
extensive upgrading of the historic Kipushi zinc-copper-silver-lead-germanium mine,
also in the DRC.
The company also is exploring for new copper discoveries on its wholly-owned Western
Foreland exploration licences, adjacent to the Kamoa-Kakula mining licence. All figures
are in U.S. dollars unless otherwise stated.

HIGHLIGHTS

Development of the Kakula Copper Mine, the first of multiple, planned mining areas at

the Kamoa-Kakula Project, is making excellent progress. The project is a joint venture between Ivanhoe Mines (39.6%), Zijin Mining Group (39.6%), Crystal River Global Limited (0.8%) and the Government of the Democratic Republic of Congo (20%). Initial copper concentrate production is scheduled for the third quarter of 2021.

The Kakula Mine is projected to be the world’s highest-grade major copper mine with

an initial mining rate of 3.8 million tonnes per annum (Mtpa) at an estimated average feed grade of more than 6% copper over the first five years of operation. It also will have one of the smallest footprints in terms of water, electrical energy, tailings and carbon dioxide per unit of copper produced.

The Kamoa-Kakula Project is unique as it combines ultra-high copper grades in thick,

shallow and relatively flat-lying deposits – allowing for large-scale, highly-productive, mechanized underground mining operations. The ultra-high copper grades and underground mines mean that the project will use a fraction of the power, water and consumables – and produce far less tailings per unit of production – than any large, low-grade, open-pit copper porphyry mines currently in operation, or under development, anywhere in the world.

The Kamoa-Kakula Project will be powered with clean, sustainable hydro-electricity.

Ongoing upgrading work at the Mwadingusha hydro-power plant in the DRC is expected to deliver approximately 72 megawatts (MW) of power to the national power grid by early 2021.

In early March 2020, Ivanhoe in conjunction with its joint-venture partners

implemented strict quarantine and safety procedures to ensure the well-being of its employees, contractors and local communities, and to mitigate the impact of COVID- 19 on its operations. As a result, mine development at Kamoa-Kakula has continued uninterrupted. Mine development at the Platreef Project was temporarily suspended in March in compliance with government restrictions, but resumed in late April with reduced staffing levels and stringent safety protocols. Mine development at Kipushi has been temporarily suspended to reduce the risk to the workforce and local communities.

In April 2020, Ivanhoe announced cost-reduction initiatives to generate cash savings

of up to $75 million through 2021, including reducing discretionary spending at the company’s projects, lowering general and administrative costs, voluntary salary reduction for senior management, and deferral of certain exploration activities. The savings will be directed towards developing the Kakula Mine to commercial production on schedule and on budget.

At the end of June 2020, Ivanhoe had cash and cash equivalents of approximately

$496 million and no significant debt.

On June 8, 2020, Ivanhoe Mines issued its third annual Sustainability Report,

showcasing the company’s achievements towards its goal of producing the world’s “greenest copper” from the Kakula Mine.

In parallel with the development and construction of the Kakula Copper Mine, the

independent Kakula definitive feasibility study (DFS) and an updated Integrated Development Plan for the entire Kamoa-Kakula mining complex are nearing completion and is expected shortly. The Kakula DFS will provide a high level of accuracy for the project economics for Kakula’s initial 3.8-Mtpa phase of mine development, as most construction contracts and orders for significant capital items have been placed at fixed prices. The Integrated Development Plan will include details on the planned expansion phases for the entire Kamoa-Kakula mining complex.

Kamoa-Kakula is in detailed discussions with a number of parties with respect to the

marketing and smelting of its copper concentrates. Kakula is expected to produce an extremely high-grade and clean copper concentrate that will be highly coveted by copper smelters around the world. Metallurgical testwork indicate that the Kakula concentrates contain extremely low arsenic levels, by world standards – approximately 0.01%. 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 current estimate of Kakula’s initial capital costs is approximately $1.3 billion as

of January 1, 2019, which assumes commissioning of the first processing plant module in Q3 2021 and includes pre-production ore stockpiles. The capital costs incurred by the Kamoa-Kakula joint venture in 2019 was $309.1 million. Additional capital costs of $242.7 million have been incurred by the joint venture in the six months ended June 30, 2020, leaving the joint venture with an estimated $750 million capital costs remaining until initial production.

Basic engineering design and costing for Kamoa-Kakula’s planned Phase 2

expansion, from 3.8 Mtpa to 7.6 Mtpa, is complete. The scope of facilities includes underground expansion at the Kakula Mine to reach an annual production rate of 6 Mtpa, the commencement of mining operations at the Kansoko Mine at a steady state 1.6 Mtpa; a second 3.8-Mtpa concentrator module at Kakula; as well as associated surface infrastructure to support the expansion at the various sites.

Underground development at the Kakula Copper Mine continues to advance ahead of

schedule. More than 18.7 kilometres of underground development has been completed to the end of July ─ 5.5 kilometres ahead of plan. The pace of development is expected to continue to accelerate as additional mining crews are added.

Kakula’s 2,000-tonne-per-hour conveyor system that will transport ore from

underground to the surface processing plant is undergoing final commissioning and is expected to begin continuous operations shortly, which will further increase the pace of underground development.

Underground mine development at Kakula currently is taking place primarily in ore

zones grading 3% to 5% copper. Over the next three to four months, the majority of the mine development is expected to transition into a part of the ore zone near the centre of the Kakula deposit that has copper grades of approximately 5% to 8%.

At the end of July 2020, the project’s high-grade ore stockpile contained an

estimated 116,000 tonnes grading 6.08% copper. Kakula and Kansoko’s medium- grade ore stockpiles contained a combined additional 446,000 tonnes at 2.73% copper. As underground development progresses at the Kakula and Kansoko mines over the next few months, the grade of the project’s medium-grade stockpiles is forecast to increase to between 3% - 5% copper.

Construction of Kakula’s initial 3.8-Mtpa processing plant is progressing rapidly with

more than 16,000 cubic metres of concrete already poured. Assembly of structural steel and the installation of mechanical equipment also is well underway.

Manufacturing of all long-lead mechanical items for the processing plant is complete,

with the crushers, low-entrainment flotation cells and the concentrate filter delivered to site. Final deliveries of the mills, high-pressure-grinding rolls (HPGR), flotation cells and thickeners are expected in August.

At the Platreef tier-one, palladium-platinum-nickel-copper-gold-rhodium project in

South Africa, the project’s first shaft (Shaft 1) has been completed to a final depth of approximately 996 metres.

Ivanhoe is finalizing a phased development production plan for the Platreef Project.

The plan would target significantly lower initial capital, to accelerate first production by using Shaft 1 as the mine’s initial production shaft, followed by expansions to the production rate as outlined in the 2017 definitive feasibility study (DFS).

Concurrently, Ivanhoe is updating the Platreef Project’s 2017 DFS to take into

account development schedule advancement since 2017 when the DFS was completed, updated costs and refreshed metal prices and foreign exchange assumptions. The DFS and phased development production plan are scheduled to be issued in September 2020.

On July 27, 2020, Ivanhoe announced that it has had, and is continuing to have,

strategic discussions regarding its 100%-owned Western Forelands Project that adjoins its Kamoa-Kakula mining licence also in the Democratic Republic of Congo (DRC); the Kipushi zinc-copper-silver-lead-germanium mine in the DRC; as well as its Platreef palladium-platinum-nickel-copper-rhodium-gold project on the Northern Limb of South Africa’s Bushveld Igneous Complex.

At the end of June 2020, Kamoa-Kakula had reached 4.70 million work hours free of a

lost-time injury; Platreef had reached 119,686 work hours free of a lost-time injury; and Kipushi had reached 2.49 million work hours free of a lost-time injury.

Ivanhoe has set September 28, 2020, as the new date for its annual and special

meeting (AGM) of shareholders. The AGM was postponed due to restrictions on public gatherings enacted by both the Federal and Provincial governments in Canada in response to the COVID-19 pandemic.

Principal projects and review of activities

1. Kamoa-Kakula Project

39.6%-owned by Ivanhoe Mines Democratic Republic of Congo

The Kamoa-Kakula Project, a joint venture between Ivanhoe Mines and Zijin Mining, has been independently ranked as the world’s fourth-largest copper deposit by international mining consultant Wood Mackenzie. The project is 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) 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 for $8.32 million - which Crystal River will pay through a non-interest-bearing, 10-year promissory note. Since the conclusion of the Zijin transaction in December 2015, each shareholder has been required to fund expenditures at the Kamoa-Kakula Project in an amount equivalent to its proportionate shareholding interest in Kamoa Holding.

A 5%, non-dilutable interest in the Kamoa-Kakula Project was transferred to the DRC government on September 11, 2012, for no consideration, pursuant to the 2002 DRC mining code. Following the signing of an agreement with the DRC government in November 2016, in which an additional 15% interest in the Kamoa-Kakula Project was transferred to the DRC government, Ivanhoe and Zijin Mining now each hold an indirect 39.6% interest in the Kamoa-Kakula Project, Crystal River holds an indirect 0.8% interest and the DRC government holds a direct 20% interest. Kamoa Holding holds an 80% interest in the project.

Health and safety at Kamoa-Kakula

At the end of June 2020, the Kamoa-Kakula Project reached 4,704,185 work hours free of a lost-time injury. The project continues to strive toward its workplace objective of zero harm to all employees and contractors.

The project had to adapt its activities due to the COVID-19 pandemic. In accordance with new health guidelines from the DRC government reflecting the improving COVID-19 situation in the Lualaba Province, DRC, Kamoa-Kakula lowered its quarantine and lockdown measures from level 3 to level 2 on July 27th. This means that the mine’s Congolese workforce have gone back to normal rotation. Most activities on site are proceeding as normal with some delays being experienced due to reduced staff numbers and skills on-site. Rigorous testing, physical distancing, wearing face masks, frequent hand washing and contact tracing measures are still in place to protect the safety and health of the workforce and community members. All expatriate employees are still required to quarantine for two weeks upon arrival at Kamoa-Kakula.

As part of Kamoa-Kakula’s COVID-19 readiness initiatives, the project has procured a polymerize chain reaction (PCR) device from German-based Bosch (similar device to the GeneXpert). The device arrived in July, with an initial supply of 500 tests. The device’s capacity is 15 tests per 24-hour period.

PCR tests are used to directly detect the presence of an antigen, rather than the presence of the body’s immune response, or antibodies. By detecting viral RNA, which will be present in the body before antibodies form or symptoms of the disease are present, the tests can tell whether or not someone has the virus very early on.

Early detection of potential cases based on symptoms and contact tracing is imperative. PCR tests will give the project’s medical team a good indication of who is infected. This allows for fast isolation, and contact tracing of potential additional cases for quarantine.

The project has established a COVID-19 isolation facility at the Kamoa camp. Any suspected or symptomatic cases are moved to this facility, where they are isolated, treated and tested. Once the patient has recovered and is deemed no longer infectious, they can return to work only after an additional quarantine period determined by the project’s medical staff. As the pandemic evolves, the medical team at Kamoa-Kakula is purposefully reviewing and updating its risk mitigation protocols.

Definitive Feasibility Study nearing completion for the Kakula Mine

An independent definitive feasibility study (DFS) for the Kakula Mine is well advanced and is expected to be finalized shortly. At the same time, Ivanhoe expects to issue an updated Integrated Development Plan for the entire Kamoa-Kakula mining complex, which will include details on the planned expansion phases for the greater Kamoa-Kakula mining complex, incorporating updates for mineral resources, production rates and economic analysis.

A separate study for an on-site smelter has been completed in parallel to a feasibility level of detail and will be incorporated into the integrated Kamoa-Kakula PEA.

An expansion in initial plant capacity from 3.0 Mtpa to 3.8 Mtpa is planned, which requires increasing the underground mining crews in 2020 from 11 to 14 to ensure sufficient mining operations to feed the expanded plant throughput. This would have the benefit of producing a larger surface stockpile of ore before the scheduled commissioning of the processing plant, as well as accelerating the mine development schedule, providing the opportunity to bring forward the commencement of the second phase of development at Kakula. The second 3.8 Mtpa plant module will be primarily fed from the Kakula Mine at a planned full production mining rate of 6 Mtpa. It is envisaged that an additional 1.6 Mtpa will be sourced from the Kansoko Mine, or elsewhere, to maximize the full milling capacity of 7.6 Mtpa.

There are currently 10 mining crews (three owner crews and seven contractor crews) at Kakula and one mining crew at Kansoko. The project will continue to add additional crews over the next 12 months to further accelerate development. One crew is currently being trained at the Kamoa training centre.

Underground development completed to the end of July (in black) and scheduled development (green, brown, blue & black) until September 30, 2020. Shown are the 3%, 5% and 8% copper contours and the location where the northern and southern access drives are scheduled to join in Q4 2020.

+5% copper

+8% copper

+3% copper

The eastern portion of Kakula Mine ─ representing less than half of the overall 13.3-kilometre-long Kakula Deposit ─ overlain on southern Manhattan Island to give a sense of the enormous scale of the underground operations.

Aerial view of the Kakula Mine showing the tonnes and grade of the main pre- production stockpiles at the northern declines. The high-grade stockpile currently contains approximately 116,000 tonnes grading 6.08% copper, and the medium-grade stockpile currently contains approximately 325,000 tonnes grading 2.94% copper.

Geologist Kally Mbumba showing ultra-high-grade, chalcocite-rich ore at Kakula Mine. Chalcocite has the greatest percentage of copper of all the common sulphide-copper-bearing minerals ─ almost 80% copper by weight.

Kakula crews are currently mining and stockpiling ore with an average grade between 3% and 8% copper. At the end of June 2020, Kakula’s high-grade, pre-production ore stockpile contained 67,553 tonnes grading 5.90% copper, the medium-grade ore stockpiles, including satellite stockpiles at Kakula South and Kansoko, contained an additional 394,119 tonnes at 2.71% copper. This has been increased to a high-grade, pre-production ore stockpile containing approximately 116,000 tonnes grading 6.08% copper and medium-grade ore stockpiles containing an additional 446,000 tonnes at 2.73% copper at the end of July 2020. The high-grade stockpile is projected to significantly expand in the coming months as the majority of Kakula’s underground development will be in mining zones grading +5% copper.

Basic engineering design and costing for the expansion from 3.8 Mtpa to 7.6 Mtpa is complete. The scope of facilities includes underground expansion at Kakula to reach an annual production rate of 6 Mtpa, the commencement of mining operations at Kansoko at a steady-state 1.6 Mtpa, a second 3.8 Mtpa concentrator module at Kakula as well as associated surface infrastructure to support the expansion at the various sites.

Ongoing construction of the flotation section of Kakula’s 3.8 Mtpa processing plant.

The current estimate of the project’s initial capital costs is approximately $1.3 billion as of January 1, 2019, which assumes commissioning of the first processing plant module in Q3 2021 and includes expanded plant capacity and pre-production ore stockpiles.

The capital costs incurred by the Kamoa-Kakula joint venture in 2019 amounted to $309.1 million, of which $125.2 million was spent on the Kakula declines and mine development. A further capital cost of $242.7 million, that includes the costs allocated to the pre-production ore stockpiles, has been incurred in the six months ended June 30, 2020. Ivanhoe’s share of the capital costs incurred in the six months ended June 30, 2020, was $120 million, representing its share of approximately 40% of the initial capital costs, plus its share of capital associated with the 20% carried interest owned by the Government of the DRC, which will be repaid through future cash flows from the project. Ivanhoe has budgeted $257 million for its proportionate funding of approximately 50% for the Kamoa-Kakula Project for the remainder of 2020. As of June 30, 2020, the joint venture had an estimated $750 million of capital costs remaining until initial production.

Ivanhoe expects that it will continue to have sufficient cash resources or financing options available to cover its proportionate share of the remaining initial capital costs.

More than 18.7 kilometres of underground development now completed as the project tracks towards first production in Q3 2021

A total of 17.1 kilometres of underground development was completed by the end of June 2020, which was 5.2 kilometres ahead of plan. A record of 1.87 kilometres development was achieved in May 2020. At the end of July 2020, more than 18.7 kilometres had been completed.

Mine access drives 1 and 2 (interconnected, parallel tunnels that will provide access to ore zones) continue to advance towards the southern portion of the orebody and are currently developing through the 3% - 5% copper zones. Development also is well advanced on the eastern perimeter drives, western perimeter drives and the room-and-pillar mining area.

Development along south access drives 1 and 2 is progressing well and has reached the 3% - 5% copper zones, with mining crews working to establish the connection of these drives with mine access drives 1 and 2 from the north side of the orebody, this is scheduled to occur in November 2020.

Engineering, procurement and construction advancing well

Project engineering and procurement activities are nearing completion with the focus currently on logistics and construction. The current primary construction focus that runs through the project’s critical path is the construction of the processing plant and the electrical high-voltage infrastructure installation. Construction of the underground rock handling system is complete with the first rock being conveyed to surface in June 2020.

The civil construction of Ventilation Shaft 2 is underway with fan delivery scheduled in September 2020; the system is expected to be operational before the end of the year. Reaming of Ventilation Shaft North East is expected to start shortly after the completion of the pilot hole. The fan is scheduled to be operational by Q1 2021. Additional material is being procured ahead of the relocation of Ventilation Fan 1 to the North West 1 location.

One of Kakula’s high pressure grinding rolls (HPGR) for the processing plant being offloaded at the port of Durban, South Africa, for transport to Kamoa- Kakula by truck.

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