Ivanhoe Mines announces an independent pre-feasibility study (PFS) for the Tier One Kakula copper mine in the Democratic Republic of Congo The stage one, six million-tonne-per-annum (6 Mtpa) operation at Kakula, with estimated development capital of US$1.1 billion, yields an after-tax

February 6, 2019

Ivanhoe Mines announces an independent pre-feasibility study (PFS) for the Tier One Kakula copper mine in the Democratic Republic of Congo

The stage one, six million-tonne-per-annum (6 Mtpa) operation at Kakula, with estimated development capital of US$1.1 billion, yields an after-tax NPV8% of US$5.4 billion and an IRR of 47% over a 25-year mine life

The Kakula Mine’s first stage will average 6.8% copper over the first 5 years, with mine-site cash costs of US$0.43/lb copper

Ivanhoe also announces an updated independent preliminary economic assessment (PEA) for an expanded Kakula-Kamoa production rate of 18 Mtpa, supplied initially by a 6 Mtpa mine at Kakula, followed by two 6 Mtpa mines at Kansoko and Kakula West, and a world-scale direct-to-blister smelter

The PEA envisions the staged mine expansions and smelter will be funded from internal cash flows and yields an after-tax NPV8% of US$10.0 billion and an IRR of 41%

Once the expanded PEA production rate of 18 Mtpa is achieved, Kamoa-Kakula is projected to become the world’s second largest copper mine, with peak annual production of more than 700,000 tonnes of copper

CAPE TOWN, SOUTH AFRICA – Robert Friedland, Co-Chairman of Ivanhoe Mines (TSX:

IVN; OTCQX: IVPAF), announced today in a keynote address at the 25^th annual Mining Indaba that the company and its Chinese partners, Zijin Mining Group and Crystal River Global Limited, welcome the extremely positive findings of an independent pre-feasibility study (PFS) for the development of the Kakula copper mine and an updated, expanded preliminary economic assessment (PEA) for the overall development plan of the Kamoa and Kakula copper discoveries at the Kamoa-Kakula Project on the Central African Copperbelt, in the Democratic Republic of Congo (DRC).

“It has been a remarkable 25 years since my first keynote presentation at the very first Mining Indaba, in this beautiful city of Cape Town, South Africa. In that inaugural speech in 1994, we shared with delegates how African Minerals, the founding, corporate trailblazer for Ivanhoe Mines, was focused on its quest for major discoveries in and around Southern Africa’s legendary mineral fields,” said Mr. Friedland.

“Now, after more than a quarter of a century of exceptional field work by our team of visionary and tenacious exploration geologists, we are about to make the ‘Great Leap Forward’ from one of the modern world’s top mine finders to one of the world’s leading producers of copper – as well as palladium, platinum, zinc, nickel, gold, silver and rhodium from the other two major mining projects that Ivanhoe is developing in Southern Africa.

“To all of our African Brothers and Sisters, you now can clearly see the fruits of the incredibly intensive efforts by our people over the past two decades, while overcoming countless challenges, to initially discover, then extensively expand, the Kamoa and Kakula resource base with a massive drilling and engineering effort.

“The Kamoa-Kakula Project now stands as the ‘Beacon that Shines Light’ on the fundamental importance of stable and transparent legal and fiscal frameworks. Looking back on the last 25 years, we reiterate the obvious fact that mining is a very long-term business that requires stability to attract capital. Future generations of young Congolese people will massively benefit from the establishment of a stable and predictable fiscal environment to attract foreign investment.

“Today, together with our strategic shareholder CITIC Metal, our Co-Chairman Yufeng “Miles” Sun, our Chinese joint-venture partner Zijin Mining, and the newly elected DRC government, led by His Excellency Félix Antoine Tshisekedi Tshilombo, we are proud to share with the world these outstanding, independently-prepared, engineering studies conducted over the past two years.

“These studies clearly prove our long-standing conviction that Kamoa-Kakula is firmly on track to become one of the absolute greatest copper mining complexes in the world, helping to restore Katanga’s rightful position as the world’s largest copper producing region. This would not have happened without the extraordinary efforts of the Ivanhoe discovery team and our investment of more than US$800 million in exploration and development.

“We now look forward to working with the new government of the DRC and the Congolese people to develop Kamoa-Kakula to its full potential, generating widely shared economic benefits that will help to uplift local communities, and provide skills training to help ensure that young Congolese can qualify for the thousands of meaningful direct and indirect jobs that will be created.”

Today's PFS and updated PEA build on the outstanding results of the previous PEA announced in November 2017. The PFS has advanced the detailed design and engineering in that earlier study and has confirmed the viability of the project. As well, the re-scoped and expanded PEA shows the potential to develop the project to a larger scale and with a larger production capacity.

The Kamoa-Kakula Project has been independently ranked as the world’s largest high- grade copper discovery by international mining consultant Wood Mackenzie of London in the United Kingdom.

The PFS and PEA encompass two development scenarios:

1. Pre-feasibility study for stage one Kakula mine development. The Kakula 2019 PFS evaluates the development of a stage one, 6 Mtpa underground mine and surface processing complex at the Kakula Deposit – a 2016 discovery that occurred just three years ago.

2. Expanded, subsequent development to three producing mines. The Kamoa-Kakula 2019 PEA also includes an option for an integrated, 18 Mtpa, three-stage development, beginning with initial production from the Kakula Mine, to be followed by a subsequent, separate underground mining operation at the nearby Kansoko and Kakula West mines, along with the construction of a direct-to-blister smelter. A further four separate mines will be developed in the Kamoa North area as resources are mined out, to maintain the production rate at 18 Mtpa.

The Kakula 2019 PFS and Kamoa-Kakula 2019 PEA were independently prepared by Amec Foster Wheeler E&C Services Inc. (a division of Wood PLC) of Reno, USA; DRA Global of Johannesburg, South Africa; KGHM Cuprum R&D Centre Ltd. of Wroclaw, Poland; OreWin Pty Ltd. of Adelaide, Australia; Stantec Consulting International LLC of Arizona, USA, and SRK Consulting Inc. of Johannesburg, South Africa.

The Kamoa-Kakula 2019 PEA is preliminary in nature and includes an economic analysis that is based, in part, on Inferred Mineral Resources. Inferred Mineral Resources are considered too speculative geologically for the application of economic considerations that would allow them to be categorized as Mineral Reserves – and there is no certainty that the results will be realized. Mineral Resources do not have demonstrated economic viability and are not Mineral Reserves.

A National Instrument 43-101 technical report will be filed on SEDAR at www.sedar.com and on the Ivanhoe Mines website at www.ivanhoemines.com within 45 days of the issuance of this news release. The technical report also will include an updated Kamoa pre-feasibility study, which evaluates the development of the Kansoko Mine as a stand- alone 6 Mtpa underground mine and surface processing complex that would be supplied with ore from the planned development of the Kansoko Sud and Kansoko Centrale areas of the Kamoa Deposit. The Kamoa 2019 PFS will restate the findings of the Kamoa 2017 PFS with economics based on updated assumptions.

Map of the Kamoa-Kakula mining licence showing the Kakula and Kansoko mining areas, as well as Kakula West, Kamoa North, and a portion of Ivanhoe’s adjacent, 100%-owned Western Foreland exploration-licences area.

“The new PFS and PEA, independently prepared by six of the world’s top engineering firms, reinforces the fact that Kamoa-Kakula is unquestionably the world’s best undeveloped copper discovery,” said Mr. Friedland. “Kamoa-Kakula is unique as it combines ultra-high copper grades in thick, shallow and flat-lying orebodies ─ allowing for large-scale, highly-productive, mechanized underground mining operations. Kakula is projected to have an average grade of 6.8% copper over the initial five years of operations, and 6.4% copper over the first 10 years ─ grades that are orders of magnitude higher than the majority of the world’s other major copper mines.

“This mine is getting built. And, most importantly, it is being built to international best practices that will be a showcase for responsible mine development.

“As good as the economic numbers are in this PFS for Kakula, you simply cannot apply conventional discounted cash flow analysis to Tier One projects like Kamoa-Kakula and expect to get a sensible answer on long-term value. Massive, high-grade deposits like we have found at Kamoa-Kakula ─ which have the potential to produce large quantities of copper for multiple generations ─ are very long-term plays. The real value is generated over time, in the phased expansions.

“Ten years ago at the World Copper Conference in Santiago, Chile, we announced to the world that Ivanhoe Mines had “made a major copper discovery of historic importance” in a previously unrecognized area that was beyond the western end of the Copperbelt in the Congo, and that “Kamoa will become a world-class mining camp of great importance to the Democratic Republic of Congo”.

“Today, together with our partners, Zijin Mining and the government of the DRC, and the outstanding work by our exceptionally talented team at Kamoa-Kakula, comprised mainly of bright, young Congolese men and women, we are making these bold predictions come true.

“We invite institutional investors and analysts to visit the DRC, meet the people, and see first-hand how our team is transforming the original Kamoa discovery we announced 10 years ago into a state-of-the-art mining operation with the potential to become one of the world’s three largest copper mines, with peak annual production of more than 700,000 tonnes of copper.

Photo. Robert Friedland greeting Kamoa-Kakula employees during a site visit.

Mr. Johansson, Chief Executive Officer and President of Ivanhoe Mines, said that discussions for financing the construction of the initial 6 Mtpa mine at Kakula are progressing well with China-based financial institutions. CITIC Metal, Ivanhoe’s largest shareholder, is assisting with the discussions.

Mr. Johansson also noted that today’s economic assessments do not factor in the recent exploration success at Kamoa North, which is a prospective new mining area. The current study also does not factor in the ongoing drilling programs on new targets at Kamoa-Kakula or the company’s 100%-owned Western Foreland exploration area.

Additional exploration successes that already have occurred may well have a significant positive influence on the size, value, and timing of the overall development plan; as such, the Kamoa-Kakula development plans will be continuously reassessed and amended as the project moves forward to reflect ongoing exploration success.

“The 18 million-tonne-per-annum development scenario clearly shows the economic potential for a phased development plan for Kamoa-Kakula to become one of the largest copper mines in existence,” said Mr. Johansson. “However, as evidenced by our remarkable discovery hole drilled at Kamoa North announced last week ─ the thickest high-grade intersection yet at Kamoa-Kakula returning 13.05% copper over 22.3 metres starting at a depth of only 190 metres below surface ─ we are confident that there are more high-grade copper discoveries to be made in the area and the ultimate scale of operations at Kamoa-Kakula can be much larger. We see no geological limitation to the goal of eventually producing one million tonnes of copper per year.

“While our engineers are focused on expediting the development of the initial Kakula Mine, our geological team remains focused on unlocking the full potential of the Kamoa- Kakula and Western Foreland copper districts. We plan to keep the drills turning as we continue our search for the next Kakula, or perhaps an even better discovery.

Mr. Johansson also said that the implementation of community-support initiatives at Kamoa-Kakula are central to mine-planning considerations. “Ivanhoe and Zijin are proud of our community-support initiatives that include fish and chicken farming, agricultural projects, and the construction of new schools, houses, clinics, roads and power infrastructure.

“We already have made significant improvements in the lives of the Congolese people living in the communities near Kamoa-Kakula that will help promote and define their children’s health and education for the foreseeable future.”

Photo. Secondary students in one of the new schools built in a village near the Kamoa-Kakula Project, as part of the project's community relations program.

HIGHLIGHTS

Initial 6 Mtpa mine at Kakula

• The Kakula 2019 PFS analyzes the development of an initial 6 Mtpa Kakula Mine at the

Kakula Deposit in the southerly portion of the Kamoa-Kakula Project’s discovery area. For this option, the PFS envisages an average annual production rate of 291,000 tonnes of copper at a mine-site cash cost of US$0.46 per pound (lb) copper and total cash cost of US$1.11/lb copper for the first 10 years of operations, and copper annual production of up to 360,000 tonnes by year four.

• An initial capital cost of US$1.1 billion for this option would result in an after-tax net

present value at an 8% discount rate (NPV8%) of US$5.4 billion. The internal rate of return of 46.9% and project payback period of 2.6 years confirm the compelling economics for the Kamoa-Kakula Project’s stage one of production.

• Kakula benefits from an ultra-high, average feed grade of 6.8% copper over the first

five years of operations, and 5.5% copper on average over a 25-year mine life.

• Basic engineering is underway, expected to be completed around mid-year, running in

parallel with a definitive feasibility study expected to be completed around year-end.

• Development of twin underground declines has been completed at Kakula, with

ongoing underground development activities, including access drives and ventilation raises. In addition, a box cut for a ventilation decline on the southern side of the Kakula orebody is nearing completion.

Modular, integrated, expanded development option of Kakula and Kamoa deposits, mining a total of 18 Mtpa, with construction of a direct-to-blister smelter

• The Kamoa-Kakula 2019 PEA presents the alternative development option of a three-

phase, sequential operation on Kamoa-Kakula’s high-grade copper deposits.

• Initial production would occur at a rate of 6 Mtpa from the Kakula Mine, before

increasing to 12 Mtpa with mill feed from the Kansoko Mine. A third 6 Mtpa mine then will be developed at Kakula West, bringing total production rate to 18 Mtpa. As resources at Kakula and Kansoko are mined, the PEA envisages that production would begin at several mines in the Kamoa North area to maintain 18 Mtpa throughput over a 37-year mine life.

• For the three-phase sequential operation, the PEA envisages US$1.1 billion in initial

capital costs. Future expansion at the Kansoko Mine, Kakula West Mine and subsequent extensions could be funded by cash flows from the Kakula Mine, resulting in an after-tax net present value at an 8% discount rate (NPV8%) of US$10.0 billion and an internal rate of return of 41%.

• Under this approach, the PEA also includes the construction of a direct-to-blister flash

copper smelter at the Kakula plant site with a capacity of one million tonnes of copper concentrate per annum to be funded from internal cash flows. This would be completed in year five of operations, achieving significant savings in treatment charges and transportation costs.

• The 18 Mtpa scenario delivers average annual production of 382,000 tonnes of copper

at a total cash cost of US$0.93/lb copper during the first 10 years of operations and production of 740,000 tonnes by year 12. At this future production rate, Kamoa-Kakula would rank as the world’s second largest copper mine.

Figure 1 describes the expanded development scenario for the Kamoa-Kakula 2019 PEA and Figure 2 shows an overview of deposits included within the Kakula 2019 PFS (6 Mtpa case), Kamoa 2019 PFS (6 Mtpa) and Kamoa-Kakula 2019 PEA (18 Mtpa). Additional exploration success at Kakula West, Kamoa North or regional exploration targets may well have a significant, positive influence on the size, value and timing of the overall development plan.

Figure 1. Kamoa-Kakula 18 Mtpa PEA long-term development plan.

Figure by OreWin 2019.

Figure 2. Overview of deposits included within the Kakula 2019 PFS (6 Mtpa ─ outlined in red box), Kamoa 2019 PFS (6 Mtpa ─ outlined in blue box) and Kamoa-Kakula 2019 PEA (outlined in green box).

Figure by OreWin 2019.

Summary of the PFS’s key results for an initial Kakula Mine

1. Very-high-grade, stage-one production is projected to have a grade of 7.1% copper in the second year of production and an average grade of 6.4% copper over the initial 10 years of operations, resulting in estimated average annual copper production of 291,000 tonnes.

2. Annual copper production is estimated at 360,000 tonnes in year four.

3. Initial capital cost, including contingency, is estimated at US$1.1 billion.

4. Average total cash cost of US$1.11/lb copper during the first 10 years, inclusive of royalties.

5. After-tax NPV, at an 8% discount rate, of US$5.4 billion.

6. After-tax internal rate of return (IRR) of 46.9%, and a payback period of 2.6 years.

7. Kakula is expected to produce a very-high-grade copper concentrate in excess of 55% copper, with extremely low arsenic levels.

Key initial projections from the Kakula 2019 PFS

The study assesses the potential development of the Kakula Deposit as a 6 Mtpa mining and processing complex. The Kakula mill would be constructed in two smaller phases of 3 Mtpa each as the mining operations ramp-up to full production of 6 Mtpa. The life-of- mine production scenario provides for 119.7 million tonnes to be mined at an average grade of 5.48% copper, producing 9.8 million tonnes of high-grade copper concentrate, containing approximately 12.4 billion pounds of copper.

The economic analysis uses a consensus, long-term copper price of US$3.10/lb and returns an after-tax NPV at an 8% discount rate of US$5.4 billion. It has an after-tax IRR of 46.9% and a payback period of 2.6 years.

The estimated initial capital cost, including contingency, is US$1.1 billion. The capital expenditure for off-site power, which is included in the initial capital cost, includes advances to the DRC state-owned electricity company, Société Nationale d'Electricité (SNEL), to upgrade two hydropower plants (Koni and Mwadingusha) to provide the Kamoa-Kakula Project with access to clean electricity for its planned operations.

Photo. Kakula’s initial two declines intersected the mineralized reef on the northern edge of the Kakula Deposit in late January and underground mine development now is progressing toward the initial, high-grade mining area.

Key results of the Kakula 2019 PFS for a single 6 Mtpa mine are summarized in Table 1.

Table 1. Kakula Mine results summary for 6 Mtpa production.

Item	Unit	Total
Total Processed Quantity Milled Copper Feed Grade	kt %	119,728 5.48
Total Concentrate Produced Copper Concentrate Produced Copper Recovery Copper Concentrate Grade Contained Copper in Concentrate Contained Copper in Concentrate Peak Annual Recovered Copper Production	kt (dry) % % Mlb kt kt	9,776 85.35 57.32 12,354 5,604 360
10-Year Average Copper Concentrate Produced Contained Copper in Concentrate Mine-Site Cash Cost Total Cash Cost	kt (dry) kt US$/lb payable US$/lb payable	508 291 0.46 1.11
5-Year Average Copper Concentrate Produced Contained Copper in Concentrate Mine-Site Cash Cost Total Cash Cost	kt (dry) kt US$/lb payable US$/lb payable	465 267 0.43 1.08
Key Financial Results Peak Funding Initial Capital Costs Expansion Capital Costs LOM Average Mine Site Cash Costs LOM Average Total Cash Costs Site Operating Costs After-Tax NPV8% After-Tax IRR Project Payback Period Project Life	US$M US$M US$M US$/lb payable US$/lb payable US$/t Milled US$M % Years Years	1,099 1,078 778 0.59 1.24 59.4 5,440 46.9 2.6 25

Table 2 summarizes the financial results and Table 3 summarizes potential mine production and processing statistics.

Table 2. Kakula Mine financial results for 6 Mtpa production.

Net Present Value (US$M)	Discount Rate	Before Taxation	After Taxation
	Undiscounted 4.0% 6.0% 8.0% 10.0% 12.0%	19,317 12,053 9,693 7,875 6,457 5,336	13,575 8,411 6,733 5,440 4,432 3,635
Internal Rate of Return Project Payback Period (Years)	– –	55.6% 2.4	46.9% 2.6

Table 3. Kakula Mine average estimated production and processing statistics for 6 Mtpa production.

Item	Unit	YEARS 1-5	YEARS 1-10	LOM AVERAGE
Total Processed Quantity Milled Copper Feed Grade	kt %	4,589 6.79	5,321 6.39	4,789 5.48
Annual Concentrate Produced Copper Concentrate Produced Copper Recovery Copper Concentrate Grade	kt (dry) % %	465 85.6 57.3	508 85.6 57.3	391 85.3 57.3
Contained Copper in Concentrate Copper Copper	Mlb kt	588 267	642 291	494 224
Payable Copper Copper Copper	Mlb kt	575 261	628 285	483 219

The Kakula concentrator production is shown in Figure 3 and the concentrate and copper production is shown in Figure 4.