40-F

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 40-F

o Registration Statement pursuant to Section 12 of the Securities Exchange Act of 1934

or

þ Annual Report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934.

For the fiscal year ended December 31, 2006                Commission File Number: 001-32403

IVANHOE MINES LTD.

(Exact name of Registrant as specified in its charter)

Yukon, Canada
(Province or other jurisdiction of
incorporation or organization) 1021
(Primary Standard Industrial
Classification Code Number) Not Applicable
(I.R.S. Employer Identification Number)

Suite 654, 999 Canada Place, Vancouver, British Columbia, Canada V6C 3E1, (604) 688-5755
(Address and telephone number of registrant’s principal executive offices)

CT Corporation System
111 Eighth Avenue
New York, New York
10011
(212) 894-8700
(Name, address and telephone number of agent for service in the United States)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Common Shares without par value	New York Stock Exchange/
	Nasdaq Stock Market
(Title of Class)	(Exchanges)

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

For annual reports, indicate by check mark the information filed with this Form:

þ Annual Information Form                 þ Audited Annual Financial Statements

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

373, 463, 637 Common Shares outstanding as of December 31, 2006

Indicate by check mark whether the Registrant by filing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934 (the “Exchange Act”). If “Yes” is marked, indicate the filing number assigned to the Registrant in connection with such Rule.

Yes o                 No þ

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes þ                 No o

The Annual Report on Form 40-F shall be incorporated by reference into, or as an exhibit to, as applicable, the Registrant’s Registration statement under the Securities Act of 1933: Form S-8 (File No. 333-135595; 333-128205; 333-113048).

TABLE OF CONTENTS

AIF for the year ended December 31, 2006

Audited Consolidated Financial Statements

Management's Discussion and Analysis

Consent of Deloitte & Touche LLP.

Consent of GRD Minproc Limited

Consent of Norwest Corporation

Consent of Bernard Peters

Consent of Robert Cinits

Consent of Harry Parker

Consent of Allan Haines

Consent of Dean David

Consent of Richard D. Tift III

Consent of Patrick P. Riley

Section 302 C.E.O. Certification

Section 302 C.F.O. Certification

Section 906 C.E.O. Certification

Section 906 C.F.O. Certification

PRINCIPAL DOCUMENTS

The following documents have been filed as part of this Annual Report on Form 40-F:

A. Annual Information Form

For the Annual Information Form of Ivanhoe Mines Ltd. (the “Company”) for the year ended December 31, 2006, see Exhibit 1 of this Annual Report on Form 40-F.

B. Audited Annual Financial Statements

For the Company’s audited consolidated financial statements for the year ended December 31, 2006 and 2005, including the auditor’s report with respect thereto, see Exhibit 2 of this Annual Report on Form 40-F. For a reconciliation of important differences between Canadian and United States generally accepted accounting principles, see Note 22 of the Notes to the audited consolidated financial statements.

C. Management’s Discussion and Analysis

For the Company’s Management’s Discussion and Analysis for the year ended December 31, 2006, see Exhibit 3 of this Annual Report on Form 40-F.

FORWARD-LOOKING STATEMENTS

Certain statements made herein, including statements relating to matters that are not historical facts and statements of our beliefs, intentions and expectations about developments, results and events which will or may occur in the future, which constitute “forward-looking information” within the meaning of applicable Canadian securities legislation and “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking information and statements are typically identified by words such as “anticipate,” “could,” “should,” “expect,” “seek,” “may,” “intend,” “likely,” “plan,” “estimate,” “will,” “believe” and similar expressions suggesting future outcomes or statements regarding an outlook. These include, but are not limited to, statements respecting anticipated business activities; planned expenditures; corporate strategies; proposed acquisitions and dispositions of assets; discussions with third parties respecting material agreements; the expected timing and outcome of the Company’s discussions with representatives of the Government of Mongolia for an Investment Agreement in respect of the Oyu Tolgoi Project; the estimated timing and cost of bringing the Oyu Tolgoi Project into commercial production; anticipated future production and cash flows; target milling rates; the impact of amendments to the laws of Mongolia and other countries in which Ivanhoe Mines carries on business; the timing for completion of the 2007 IDP and changes in mine plan contemplated thereunder; the timing of commencement of full construction of the Oyu Tolgoi Project; the completion of licence transfers and the closing of the Coal Division merger and completion of an updated mine plan for the Nariin Sukhait Project; the potential sale of the Monywa Copper Project by the Monywa Trust to a third party; the possibility of having to record, in the future, a significant reduction of the project’s carrying value on the Company’s financial statements; and other statements that are not historical facts.

All such forward-looking information and statements are based on certain assumptions and analyses made by the Company’s management in light of their experience and perception of historical trends, current conditions and expected future developments, as well as other factors management believes are appropriate in the circumstances. These statements, however, are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information or statements. Important factors that could cause actual results to differ from these forward-looking statements include those described under the heading “Risks

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and Uncertainties” elsewhere in this Annual Report on Form 40-F. The reader is cautioned not to place undue reliance on forward-looking information or statements.

This Annual Report on Form 40-F also contains references to estimates of mineral reserves and mineral resources. The estimation of reserves and resources is inherently uncertain and involves subjective judgments about many relevant factors. The accuracy of any such estimates is a function of the quantity and quality of available data, and of the assumptions made and judgments used in engineering and geological interpretation, which may prove to be unreliable. There can be no assurance that these estimates will be accurate or that such mineral reserves and mineral resources can be mined or processed profitably. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Except as required by law, the Company does not assume the obligation to revise or update these forward-looking statements after the date of this document or to revise them to reflect the occurrence of future unanticipated events.

NOTE TO UNITED STATES INVESTORS CONCERNING ESTIMATES OF MEASURED,
INDICATED AND INFERRED RESOURCES

This document and the documents incorporated by reference herein have been prepared in accordance with the requirements of securities laws in effect in Canada, which differ from the requirements of United States securities laws. Without limiting the foregoing, this document, and the documents incorporated by reference herein, use the terms “measured,” “indicated” and “inferred” resources. United States investors are advised that, while such terms are recognized and required by Canadian securities laws, the SEC does not recognize them. Under United States standards, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. United States investors are cautioned not to assume that all or any part of measured or indicated resources will ever be converted into reserves. Further, “inferred resources” have a great amount of uncertainty as to their existence and as to whether they can be mined legally or economically. It cannot be assumed that all or any part of the “inferred resources” will ever be upgraded to a higher category. Therefore, United States investors are also cautioned not to assume that all or any part of the inferred resources exist, or that they can be mined legally or economically. Disclosure of “contained ounces” is permitted disclosure under Canadian regulations; however, the SEC only permits issuers to report “resources” as in place tonnage and grade without reference to unit measures. Accordingly, information concerning descriptions of mineralization and resources contained in this document, or in the documents incorporated by reference, may not be comparable to information made public by United States companies subject to the reporting and disclosure requirements of the SEC. National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) is a rule developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. Unless otherwise indicated, all reserve and resource estimates contained in or incorporated by reference in this document have been prepared in accordance with NI 43-101. These standards differ significantly from the requirements of the SEC, and reserve and resource information contained herein and incorporated by reference herein may not be comparable to similar information disclosed by U.S. companies. NI 43-101 permits historical estimates made prior to the adoption of NI 43-101 that does not comply with NI 43-101 to be disclosed using the historical terminology if the disclosure: (a) identifies the source and date of the historical estimate; (b) comments on the relevance and reliability of the historical estimate; (c) states whether the historical estimate uses categories other than those prescribed by NI 43-101; and (d) includes any more recent estimates or data available.

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ADDITIONAL DISCLOSURE

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the Company’s principal executive officer and principal financial officer, on a timely basis so that appropriate decisions can be made regarding public disclosure.

As of the end of the Company’s fiscal year ended December 31, 2006, an evaluation of the effectiveness of the Company’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) was carried out by the Company’s management with the participation of the principal executive officer and principal financial officer. Based upon that evaluation, the Company’s principal executive officer and principal financial officer have concluded that as of the end of that fiscal year, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in United States Securities and Exchange Commission (“SEC”) rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

It should be noted that while the Company’s principal executive officer and principal financial officer believe that the Company’s disclosure controls and procedures provide a reasonable level of assurance that they are effective, they do not expect that the Company’s disclosure controls and procedures or internal control over financial reporting will prevent all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Management’s Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over the Company’s financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with United States generally accepted accounting principles and the requirements of the SEC in the United States, as applicable. Management of the Company excluded from its assessment the internal control over financial reporting at Myanmar Ivanhoe Copper Company Limited (“MICCL”) in which it holds a 50% interest, because the Company does not have the ability to dictate or modify controls at MICCL and does not have the ability to assess, in practice, the controls at the entity. Under U.S. generally accepted accounting principles, MICCL is accounted for using the equity method of accounting and the Company’s proportionate interest in individual assets, liabilities, revenues and expenses is excluded from the consolidated financial statement amounts of the Company. Under Canadian generally accepted accounting principles, the Company proportionately consolidates MICCL which constitutes 24% and 29% of net and total assets respectively, and 10% of net loss of the consolidated financial statement amounts as of and for the year ended December 31, 2006. The Company’s principal executive officer and principal financial officer have assessed the effectiveness of the Company’s internal control over financial reporting as at December 31, 2006 in accordance with Internal Control – Integrated Framework issued by

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the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, the Company’s principal executive officer and principal financial officer have determined that the Company’s internal control over financial reporting was effective as at December 31, 2006 and have certified the Company’s annual filings with the SEC on Form 40-F as required by the United States Sarbanes-Oxley Act and with Canadian securities regulatory authorities.

Management of the Company reviewed the results of management’s assessment with the Audit Committee of the Company’s Board of Directors. Deloitte & Touche LLP, independent registered chartered accountants, was engaged, as approved by a vote of the Company’s shareholders, to audit and provide independent opinions on the Company’s consolidated financial statements, management’s assessment of internal control over financial reporting and the effectiveness of the Company’s internal control over financial reporting as at December 31, 2006. Deloitte & Touche LLP has provided such opinions.

Changes in Internal Control Over Financial Reporting

During the year ended December 31, 2006, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ATTESTATION REPORT OF THE INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS

The Company’s independent registered chartered accountants, Deloitte & Touche LLP, has audited Management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting of the Company, and has issued an attestation report on management’s assessment of the Company’s internal control over financial reporting and the effectiveness of internal control over financial reporting of the Company, which is included in the Company’s Audited Comparative Consolidated Financial Statements for the year ended December 31, 2006 attached hereto as Exhibit 2.

AUDIT COMMITTEE

The Company’s board of directors has a separately-designated standing Audit Committee as defined by Section 3a(58)(A) of the Exchange Act for the purpose of overseeing the accounting and financial reporting processes of the Company and audits of the Company’s annual financial statements. As of the date of this annual report, the members of the Audit Committee are Messrs. John Weatherall, Kjeld Thygesen, David Korbin and Dr. Marcus Faber. Mr. Weatherall is the Chairman of the Audit Committee.

Each of the directors serving on the Audit Committee has also been determined by the board of the Company to be independent within the criteria established by the SEC, the New York Stock Exchange (the “NYSE”) and the NASDAQ Stock Market (“Nasdaq”) for audit committee membership.

AUDIT COMMITTEE FINANCIAL EXPERT

The Company’s board of directors has determined that each of Mr. John Weatherall and Mr. David Korbin are an “audit committee financial expert” (as such term is defined in Form 40-F). In addition, both Mr. Weatherall and Mr. Korbin are independent, as that term is defined by the SEC and the NYSE and Nasdaq listing standards.

Mr. Weatherall, a Chartered Financial Analyst, is currently the President of Scarthingmoor Asset Management Inc. He has over 40 years of experience as an investment analyst and also has experience as

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a portfolio manager. Mr. Korbin holds a Chartered Accountant designation and has worked as an accounting professional for over 25 years.

CODE OF BUSINESS CONDUCT AND ETHICS

The Company has adopted a written “code of ethics” (as that term is defined in Form 40-F), entitled Code of Business Conduct and Ethics, which applies to all of the Company’s employees, executive officers and directors, including the Company’s principal executive officer, principal financial officer, principal accounting officer or control, and persons performing similar functions. The Code of Business Conduct and Ethics includes, among other things, written standards for the Company’s principal executive officer, principal financial officer and principal accounting officer that are required by the SEC for a code of ethics applicable to such officers. To review or obtain a copy of the Company’s Code of Business Conduct and Ethics, see “Corporate and Social Responsibilities – Code of Business Conduct and Ethics” posted on the Company’s website, www.ivanhoe-mines.com. The Code of Business Conduct and Ethics is also available in print to any shareholder who requests it. Requests for copies of the Code should be made by contacting: Ivanhoe Mines Ltd., 654 – 999 Canada Place, Vancouver, British Columbia, Canada V6C 3E1.

Since the adoption of the Code of Business Conduct and Ethics, there have not been any amendments to the Code of Business Conduct and Ethics or waivers, including implicit waivers, from any provision of the Code of Business Conduct and Ethics.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Deloitte & Touche LLP has served as the Company’s auditing firm since January 1995. Fees billed by Deloitte & Touche LLP and its affiliates during fiscal 2006 and fiscal 2005 were approximately Canadian $2,534,000 and Canadian $1,343,000, respectively. The aggregate fees billed by the auditors in fiscal 2006 and fiscal 2005 are detailed below.

(Canadian $ in 000’s)	2006		2005
Audit Fees (a)	$	1,588	$	936
Audit Related Fees (b)	$	246	$	208
Tax Fees (c)	$	700	$	200
All Other Fees (d)		—		—
Total	$	2,534	$	1,343

(a) Fees for audit services billed or expected to be billed relating to fiscal 2006 and 2005 consisted of:

• audit of the Company’s annual statutory financial statements;

• reviews of the Company’s quarterly financial statements; and

• comfort letters, consents, and other services related to SEC and Canadian securities regulatory authorities’ matters.

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	In addition, in 2006 fees were paid for services provided in connection with review pursuant to Section 404 of the Sarbanes Oxley Act of 2002 and the required attestations relating to internal controls.
(b)	Fees for audit-related services provided during fiscal 2006 and 2005 consisted of financial accounting and reporting consultations and audit of annual statutory financial statements of the Company’s subsidiaries.
(c)	Fees for tax services provided during fiscal 2006 and 2005 consisted of income tax compliance, and tax planning and advice relating to transactions and proposed transactions of the Company and its subsidiaries.
(d)	The Company did not incur fees for products and services provided by its principal accountant during fiscal 2006 and 2005 not disclosed in subsections (a), (b) or (c) above.

Pre-Approval Policies and Procedures

All services to be performed by the Company’s independent auditor must be approved in advance by the Audit Committee or a designated member of the Audit Committee (“Designated Member”). The Designated Member is a member of the Audit Committee who has been given the authority to grant pre-approvals of permitted audit and non-audit services.

The Audit Committee has considered whether the provision of services other than audit services is compatible with maintaining the auditors’ independence and has adopted a policy governing the provision of these services. This policy requires the pre-approval by the Audit Committee or the Designated Member of all audit and non-audit services provided by the external auditor, other than any de minimus non-audit services allowed by applicable law or regulation. The decisions of the Designated Member to pre-approve a permitted service needs to be reported to the Audit Committee at its regularly scheduled meetings.

Pre-approval from the Audit Committee or Designated Member can be sought for planned engagements based on budgeted or committed fees. No further approval is required to pay pre-approved fees. Additional pre-approval is required for any increase in scope or in final fees.

Pursuant to these procedures, 100% of each of the services provided by the Company’s external auditor relating to the fees reported as audit, audit-related, tax and all other fees were pre-approved by the Audit Committee or the Designated Member.

OFF-BALANCE SHEET ARRANGEMENTS

During the most recent financial year, the Company was not a party to any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on its financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. For a discussion of the Company’s off-balance sheet arrangements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Instruments” contained in Exhibit 3 to this Annual Report on Form 40-F, incorporated by reference herein.

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

The information provided under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations,” contained in Exhibit 3 to this Annual Report on Form 40-F, is incorporated by reference herein.

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DISCLOSURES PURSUANT TO REQUIREMENTS OF THE NYSE AND NASDAQ

Corporate Governance Practices Compared to New York Stock Exchange Listing Standards

The Company has reviewed its corporate governance practices against the requirements of the NYSE and Nasdaq, and determined that its corporate governance practices do not differ in any significant way from those followed by U.S. companies under NYSE and Nasdaq listing standards. This includes the composition of the Board of Directors, because in excess of one-half of the Company’s directors (seven of twelve directors) are considered independent for purposes of the NYSE and Nasdaq corporate governance rules. The Company’s directors that the Board of Directors has determined to be independent under the NYSE and Nasdaq corporate governance rules are David Huberman, John Weatherall, Markus Faber, Robert Hanson, Kjeld Thygesen, Howard Balloch and David Korbin.

Presiding Director at Meetings of Non-Management Directors

The Company schedules regular executive sessions in which the Company’s “non-management directors” (as that term is defined in the rules of the NYSE) meet without management participation. David Huberman, the Company’s lead director (the “Lead Director”) serves as the presiding director at such sessions.

Communication with Non-Management Directors

Shareholders may send communications to the Company’s non-management directors by writing to the Lead Director, c/o Ivanhoe Mines Ltd., 654 – 999 Canada Place, Vancouver, British Columbia, Canada V6C 3E1. Communications will be referred to the Lead Director for appropriate action. The status of all outstanding concerns addressed to the Lead Director will be reported to the board of directors as appropriate.

Corporate Governance Guidelines

According to NYSE Rule 303A.09 and Rule 4350(n) of the Nasdaq Listed Company Manual, a listed company must adopt and disclose a set of corporate governance guidelines with respect to specified topics. Such guidelines are required to be posted on the listed company’s website. The Company has adopted the required guidelines and has posted them on its website at www.ivanhoe-mines.com. The required guidelines are available in print to any shareholder who requests them. Requests for copies of these documents should be made by contacting: Ivanhoe Mines Ltd., 654 – 999 Canada Place, Vancouver, British Columbia, Canada V6C 3E1.

Board Committee Mandates

The Mandates of the Company’s Audit Committee, Compensation and Benefits Committee, and Nominating and Corporate Governance Committee are each available for viewing on the Company’s website at www.ivanhoe-mines.com, and are available in print to any shareholder who requests them. Requests for copies of these documents should be made by contacting: Ivanhoe Mines Ltd., 654 – 999 Canada Place, Vancouver, British Columbia, Canada V6C 3E1.

UNDERTAKING AND CONSENT TO SERVICE OF PROCESS

Undertaking

The Company undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to the securities registered pursuant to Form 40-F; the securities in

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relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.

Consent to Service of Process

The Company filed an Appointment of Agent for Service of Process and Undertaking on Form F-X on December 17, 2003 with respect to the class of securities in relation to which the obligation to file the Form 40-F arises.

Any change to the name or address of the agent for service of process of the registrant shall be communicated promptly to the SEC by an amendment to the Form F-X referencing the file number of the Company.

SIGNATURE

Pursuant to the requirements of the Exchange Act, the Company certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereto duly authorized.

Dated: March 30, 2007

IVANHOE MINES LTD.

By:	/s/ Beverly A. Bartlett
	Name: Beverly A. Bartlett
	Title: Vice President and Corporate Secretary

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EXHIBIT INDEX

Exhibit Number	Document
1	Annual Information Form for the year ended December 31, 2006.
2	Audited Comparative Consolidated Financial Statements of Ivanhoe Mines Ltd., including the notes thereto, as of and for the years ended December 31, 2006 and 2005, including a reconciliation to Canadian generally accepted accounting principles, and together with the reports thereon of the Independent Registered Chartered Accountants.
3	Management’s Discussion and Analysis of Financial Condition and Results of Operations.
23.1	Consent of Deloitte & Touche LLP, Independent Registered Chartered Accountants.
23.2	Consent of GRD Minproc Ltd.
23.3	Consent of Norwest Corporation.
23.4	Consent of Bernard Peters.
23.5	Consent of Robert Cinits.
23.6	Consent of Harry Parker.
23.7	Consent of Allan Haines.
23.8	Consent of Dean David.
23.9	Consent of Richard D. Tifft III.
23.10	Consent of Patrick P. Riley.
31.1	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended).
31.2	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended).
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-1

IVANHOE MINES LTD.

Annual Information Form

For the year ended
December 31, 2006

Dated March 30, 2007

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TABLE OF CONTENTS

CORPORATE STRUCTURE	10
GENERAL DEVELOPMENT OF THE BUSINESS	11
Overview	11
Three Year History	11
Outlook	14
Risk Factors	14
DESCRIPTION OF THE BUSINESS	25
Overview	25
Qualified Persons	25
Oyu Tolgoi Copper and Gold Project, Mongolia	25
Mongolian Coal Division	46
Coal Reorganization Transaction	47
Nariin Sukhait Project	47
Other Coal Projects	57
Other Projects	60
Mongolia	60
Kazakhstan	61
Australia	62
China	64
Other Business Matters	64
Myanmar Trust Arrangements	64
Equity Holdings	65
Employees	66
DIVIDENDS	66
DESCRIPTION OF CAPITAL STRUCTURE	66
MARKET FOR SECURITIES	67
DIRECTORS AND OFFICERS	68
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS	72
TRANSFER AGENTS AND REGISTRARS	72
MATERIAL CONTRACTS	73
INTERESTS OF EXPERTS	73
ADDITIONAL INFORMATION	74
SCHEDULE A	75

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Forward-Looking Information

Certain statements made herein, including statements relating to matters that are not historical facts and statements of our beliefs, intentions and expectations about developments, results and events which will or may occur in the future, which constitute “forward-looking information” within the meaning of applicable Canadian securities legislation and “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking information and statements are typically identified by words such as “anticipate,” “could,” “should,” “expect,” “seek,” “may,” “intend,” “likely,” “plan,” “estimate,” “will” “believe” and similar expressions suggesting future outcomes or statements regarding an outlook. These include, but are not limited to, statements respecting anticipated business activities; planned expenditures; corporate strategies; proposed acquisitions and dispositions of assets; discussions with third parties respecting material agreements; the expected timing and outcome of the Corporation’s discussions with representatives of the Government of Mongolia for an Investment Agreement in respect of the Oyu Tolgoi Project; the estimated timing and cost of bringing the Oyu Tolgoi Project into commercial production; anticipated future production and cash flows; target milling rates; the impact of amendments to the laws of Mongolia and other countries in which the Corporation carries on business; the timing for completion of the 2007 IDP and changes in mine plan contemplated thereunder; the timing of commencement of full construction of the Oyu Tolgoi Project; the completion of licence transfers and the closing of the Coal Reorganization and completion of an updated mine plan for the Nariin Sukhait Project; the potential sale of the Monywa Copper Project by the Monywa Trust to a third party; the possibility of having to record, in the future, a significant reduction of the project’s carrying value on the Corporation’s financial statements; and other statements that are not historical facts.

All such forward-looking information and statements are based on certain assumptions and analyses made by the Corporation’s management in light of their experience and perception of historical trends, current conditions and expected future developments, as well as other factors management believes are appropriate in the circumstances. These statements, however, are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information or statements. Important factors that could cause actual results to differ from these forward-looking statements include those described under the heading “Risks and Uncertainties” elsewhere in this Annual Information Form. The reader is cautioned not to place undue reliance on forward-looking information or statements.

This Annual Information Form also contains references to estimates of mineral reserves and mineral resources. The estimation of reserves and resources is inherently uncertain and involves subjective judgments about many relevant factors. The accuracy of any such estimates is a function of the quantity and quality of available data, and of the assumptions made and judgments used in engineering and geological interpretation, which may prove to be unreliable. There can be no assurance that these estimates will be accurate or that such mineral reserves and mineral resources can be mined or processed profitably. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Except as required by law, the Corporation does not assume the obligation to revise or update these forward-looking statements after the date of this document or to revise them to reflect the occurrence of future unanticipated events.

Currency and Exchange Rates

In this Annual Information Form, all funds are quoted in United States dollars unless otherwise indicated. References to “$” and “US$” are to United States dollars and references to “Cdn.$” are to Canadian dollars.

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The Bank of Canada noon buying rates for the purchase of one United States dollar using Canadian dollars were as follows during the indicated periods:

(Stated in Canadian dollars)

	Year Ended December 31
	2006		2005		2004		2003		2002
End of period		1.1653		1.1659		1.2036		1.2924		1.5796
High for the period		1.1726		1.2704		1.3968		1.5777		1.6184
Low for the period		1.0990		1.1507		1.1774		1.2839		1.5155
Average for the period		1.1342		1.2116		1.3015		1.40146		1.5703

The Bank of Canada noon buying rate on March 29, 2007 for the purchase of one United States dollar using Canadian dollars was Cdn.$1.1578 (one Canadian dollar on that date equalled US$0.8637).

Defined Terms and Abbreviations

Throughout this AIF, there are terms that are defined in the document and used only in the relevant section in which they are defined. There are also a number of defined terms and abbreviations that are used consistently throughout the document as follows:

“AMEC” means AMEC Americas Limited;

“Asia Gold” means Asia Gold Corp.;

“Au” means gold;

“BHP Exploration” means BHP Minerals International Exploration Inc.;

“CIM” means the Canadian Institute of Mining, Metallurgy and Petroleum;

“CIM Standards” means CIM Standards on Mineral Resources and Mineral Reserve Guidelines;

“Coal Division” means a division of the IVN Group that has been established to develop coal resources in Mongolia;

“Coal Reorganization” means the transaction whereby IVN proposes to transfer its Coal Division to Asia Gold in consideration for common shares of Asia Gold, as further described in “GENERAL DEVELOPMENT OF THE BUSINESS — Three Year History — 2006”;

“Common Shares” means common shares in the capital of the Corporation;

“Corporation” means Ivanhoe Mines Ltd.;

“Cu” means copper;

“CuEq” means copper equivalent grade, calculated using assumed metal prices for copper and gold;

“Entrée” means Entrée Gold Inc.;

“Excluded Persons” means a contractually defined class of restricted persons identified as being prohibited from purchasing the Myanmar Assets from the Monywa Trust, which includes IVN, Rio Tinto, and their respective directors, officers and affiliates and citizens or residents or entities controlled by citizens or residents of Myanmar or the United States;

“g/t” means grams per tonne;

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“GSC Paper 88 — 21” means the Geological Survey of Canada Paper 88-21 “A Standardized Coal Resource / Reserve Reporting System for Canada”;

“GRD Minproc” means GRD Minproc Limited;

“Hugo Dummett Deposits” means collectively, the Hugo North, the Hugo South and Hugo North Extension deposits;

“Hugo North” means the Hugo North deposit of the Oyu Tolgoi Project;

“Hugo North Extension” means the Hugo North Extension deposit of the Oyu Tolgoi Project, representing the extension of the Hugo Dummett Deposits into Entrée’s Shivée Tolgoi Property;

“Hugo South” means the Hugo South deposit of the Oyu Tolgoi Project;

“IMMI” means Ivanhoe Mines Mongolia Inc. XXK;

“Integrated Development Plan” or “IDP” means a report on the development of the Oyu Tolgoi Project prepared by a group of independent engineering companies in October 2005;

“Investment Agreement” means a comprehensive agreement with the Government of Mongolia that addresses the development and operation of the Oyu Tolgoi Project, including taxation rates, cross-border import/export arrangements, supply of power, labour, land use and water rights;

“IVN” means Ivanhoe Mines Ltd;

“IVN Group” means, collectively, the Corporation and its subsidiaries or a group of subsidiaries, as the context requires;

“Jinshan” means Jinshan Gold Mines Inc.;

“km” means kilometres;

“km²” means square kilometres;

“lb” means pound;

“m” means metres;

“MEL” means Mongolian mineral exploration license;

“Monywa Copper Project” means the copper mine and related deposits located at Monywa, Myanmar;

“Monywa Trust” means an independent third party trust established to hold and sell the Myanmar Assets;

“Myanmar Assets” means all of IVN’s business interests and assets in Myanmar, including in the Monywa Copper Project;

“Nariin Sukhait Project” means the Nariin Sukhait coal project located in Mongolia;

“Nariin Sukhait Technical Report” means a Technical Report on the Nariin Sukhait Property dated March 29, 2007, prepared by Norwest;

“NI 43-101” means National Instrument 43-101 of the Canadian Securities Administrators;

“Norwest” means Norwest Corporation;

“OT Technical Committee” means a joint technical committee established between Rio Tinto and IVN for the development of the Oyu Tolgoi Project;

“Oyu Tolgoi Project” means the Corporation’s copper and gold exploration and development project located at Oyu Tolgoi in Mongolia;

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“Oyu Tolgoi Technical Report” means a Technical Report on the Oyu Tolgoi Project dated March 30, 2007 prepared by GRD Minproc;

“oz” means ounce;

“Preferred Shares” means preferred shares in the capital of the Corporation;

“Rio Tinto” means Rio Tinto Plc.;

“Rio Tinto Transaction” means the transaction between IVN and Rio Tinto to establish a strategic partnership for the development of the Oyu Tolgoi Project, as further described in “GENERAL DEVELOPMENT OF THE BUSINESS — Three Year History — 2006”;

“Savage River Project” means the Savage River iron ore project located in Tazmania, Australia;

“Southern Oyu Deposits” means collectively, the South Oyu, Southwest Oyu, Central Oyu and Wedge deposits of the Oyu Tolgoi Project;

“tpd” means tonnes per day; and

“tpy” means tonnes per year.

Conversion Factors

For ease of reference, the following conversion factors are provided:

Imperial Measure =	Metric Unit	Metric Unit =	Imperial Measure
2.47 acres	1 hectare	0.4047 hectares	1 acre
3.28 feet	1 m	0.3048 m	1 foot
0.62 miles	1 km	1.609 km	1 mile
0.032 ounces (troy)	1 gram	31.1 grams	1 ounce (troy)
2.205 pounds	1 kilogram	0.454 kilograms	1 pound
1.102 tons (short)	1 tonne	0.907 tonnes	1 ton
0.029 ounces (troy)/ton	1 gram/tonne	34.28 grams/tonne	1 ounce (troy)/ton

Glossary of Geological and Mining Terms

anomaly: a departure from the norm which may indicate the presence of mineralization in the underlying bedrock.

assay: the chemical analysis of an ore, mineral or concentrate of metal to determine the amount of valuable species.

chalcocite: a form of copper mineral ore that generally contains a high copper content.

chalcopyrite: a form of copper mineral ore that generally contains a low copper content.

concentrate: a product containing valuable metal from which most of the waste material in the ore has been eliminated.

concentrator: a plant for recovery of valuable minerals from ore in the form of concentrate. The concentrate must then be treated in some other type of plant, such as a smelter, to effect recovery of the pure metal.

covellite: a supergene mineral found in copper deposits; a source of copper.

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cut-off grade: the lowest grade of mineral resources considered economic; used in the calculation of reserves and resources in a given deposit.

dyke: a tabular igneous intrusion that cuts across the bedding or foliation of the country rock.

fault: a fracture in rock along which the adjacent rock surfaces are differentially displaced.

feasibility study: a comprehensive study of a mineral deposit in which all geological, engineering, legal, operating, economic, social, environmental and other relevant factors are considered in sufficient detail that it could reasonably serve as the basis for a final decision by a financial institution to finance the development of the deposit for mineral production.

flotation: a milling process by which some mineral particles are induced to become attached to bubbles of froth and float, and others to sink, so that the valuable minerals are concentrated and separated from the gangue.

gangue: valueless rock or mineral material in ore.

hypogene: primary mineralization formed by mineralizing solutions emanating up from a deep magnetic source.

HQ: diamond drilling equipment that produces a 63.5 millimetre core diameter.

indicated mineral resource: that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and test information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.

inferred mineral resource: that part of a mineral resource for which the quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.

intrusive: rock which while molten, penetrated into or between other rocks but solidified before reaching the surface.

IP: induced polarization.

kriging: A weighted, moving-average interpolation method in which the set of weights assigned to samples minimizes the estimation variance, which is computed as a function of the variogram model and locations of the samples relative to each other, and to the point or block being estimated.

leach: to dissolve minerals or metals out of ore with chemicals.

measured mineral resource: that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.

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mineral reserve: the economically mineable part of a measured or indicated mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, and economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. An ore reserve includes diluting materials and allowances for losses that may occur when the material is mined.

mineral resource (deposit): a concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource (deposit) are known, estimated or interpreted from specific geological evidence and knowledge.

NQ: diamond drilling equipment that produces a 47.5 millimetre core diameter.

porphyry: any igneous rock in which relatively large, conspicuous crystals (called phenocrysts) are set in a fine-grained ground mass.

preliminary assessment: a study that includes an economic analysis of the potential viability of mineral resources taken at an early stage of the project prior to the completion of a preliminary feasibility study.

preliminary feasibility study and pre-feasibility study: a comprehensive study of the viability of a mineral project that has advanced to a stage where the mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, has been established and an effective method of mineral processing has been determined, and includes a financial analysis based on reasonable assumptions of technical, engineering, legal, operating, economic, social, and environmental factors and the evaluation of other relevant factors which are sufficient for a qualified person, acting reasonably, to determine if all or part of the mineral resource may be classified as a mineral reserve.

probable reserve: the economically mineable part of an indicated and, in some circumstances, a measured mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.

proven reserve: the economically mineable part of a measured mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.

PQ: diamond drilling equipment that produces an 85 millimetre core diameter.

qualified person: an individual who: (a) is an engineer or geoscientist with at least five years of experience in mineral exploration, mine development or operation, or mineral project assessment, or any combination of these; (b) has experience relevant to the subject matter of the mineral project; and (c) is a member in good standing of a professional association as defined by National Instrument 43-101 of the Canadian Securities Administrators.

QMD or quartz monzodiorite: plutonic rock containing quartz, alkali feldspars, plagioclase feldspars and feldspathoid minerals.

RC: reverse circulation.

seam: A stratum or bed of coal or other mineral; generally applied to large deposits of coal.

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splits: The division of a bed of coal into two or more horizontal sections by intervening rock strata.

stock: an irregular, metalliferous mass in a rock formation.

strike: the direction, or course or bearing, of a vein or rock formation measured on a level surface.

sulphides: compounds of sulphur with other metallic elements.

supergene: ore minerals that have been formed by the effects (usually oxidization and secondary sulphide enrichment) of descending ground water.

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CORPORATE STRUCTURE

Name, Address and Incorporation

IVN was incorporated under the Company Act (British Columbia) on January 25, 1994 under the name 463212 B.C. Ltd. In February 1994, the Corporation changed its name to Indochina Goldfields Ltd. In March 1994, the Corporation increased its authorized capital from 10,000 Common Shares without par value to 100,000,000 Common Shares without par value and created 100,000,000 Preferred Shares without par value. In February 1995, the Corporation was continued under the Business Corporations Act (Yukon). In July 1997, the Corporation increased its authorized capital to an unlimited number of Common Shares without par value and an unlimited number of Preferred Shares without par value. In June 1999, the Corporation changed its name to Ivanhoe Mines Ltd.

The Corporation’s North American headquarters are located at 654 — 999 Canada Place, Vancouver, British Columbia, Canada, V6C 3E1. The Corporation’s Asian headquarters are located at 37th Floor #2, Millenia Tower, 1 Temasek Avenue, Singapore 039192. The Corporation’s registered office is located at 300 — 204 Black Street, Whitehorse, Yukon, Canada, Y1A 2M9.

Intercorporate Relationships

The following sets forth the name and jurisdiction of incorporation of IVN’s principal subsidiaries and the material property of IVN to which that subsidiary relates. Each subsidiary is directly or indirectly wholly-owned by the Corporation:

Name of Subsidiary	Jurisdiction of Incorporation	Applicable Material Property
Ivanhoe Mines Delaware Holdings, LLC	Delaware	Oyu Tolgoi
Ivanhoe Mines Aruba Holdings LLC	Aruba	Oyu Tolgoi
Ivanhoe Mines Mongolia Inc.	British Virgin Islands	Oyu Tolgoi
Ivanhoe Mines Mongolia Inc. XXK	Mongolia	Oyu Tolgoi
Ivanhoe Resources Ltd. (1)	British Columbia	Nariin Sukhait
Carbonado Holding Company Ltd. (1)	British Virgin Islands	Nariin Sukhait
Ivanhoe Coal Holding Company Ltd .(1)	British Virgin Islands	Nariin Sukhait
South Gobi Sands LLC (1)	Mongolia	Nariin Sukhait

(1) The ownership structure set forth herein for Nariin Sukhait represents the ownership chain established to effect the Coal Reorganization. Upon completion of the Coal Reorganization these corporations will become wholly-owned subsidiaries of Asia Gold. For further information see “DESCRIPTION OF THE BUSINESS — Mongolian Coal Division — Coal Reorganization Transaction”.

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GENERAL DEVELOPMENT OF THE BUSINESS

Overview

IVN is an international mineral exploration and development company. The IVN Group’s principal mineral resource properties are the Oyu Tolgoi Project and the Nariin Sukhait Project, both located in Mongolia. The IVN Group also holds interests in several other mineral resource projects, mostly in Asia, and holds significant equity interests in several junior, publicly-listed mineral exploration and development companies.

Three Year History

Throughout the period from 2004 to 2006 IVN focused substantial time and effort on the further development of its Mongolian properties, including in particular the Oyu Tolgoi Project.

2004

In February 2004, IVN completed a preliminary assessment report in respect of the Oyu Tolgoi Project. The report examined development alternatives based on three different production scenarios involving, respectively, a full-scale development in one step with a start-up production rate of 40 million tpy, a two stage build-out option involving the initial development of open pits at the Southwest Oyu and Central Oyu deposits and a start-up production rate of 17 to 20 million tpy followed by an expansion to 40 million tpy through a large open pit at the Hugo South deposit and underground block-caving at the Hugo North deposit and, finally, a stand-alone development of open pits at the Southwest Oyu and Central Oyu deposits at a start-up production rate of 17 to 20 million tpy.

In May 2004, an updated independent resource estimate in respect of the Hugo Dummett Deposits was completed. The estimate consisted of inferred resources on the Hugo Dummett Deposits of 1.16 billion tonnes, grading 1.29% copper and 0.23 g/t of gold, at a 0.60% copper equivalent cut-off. A further updated independent resource estimate was issued in August 2004 in respect of the Southern Oyu Deposits. For these deposits, the estimate included measured and indicated resources of 1.06 billion tonnes, grading 0.47% copper and 0.36 g/t of gold at a 0.30% copper equivalent cut-off down to 560 m below surface and 0.60% copper equivalent cut-off below a depth of 560 m, plus inferred mineral resources totalling 259 million tonnes grading 0.35% copper and 0.20 g/t gold.

In July 2004, IVN completed an underwritten public offering consisting of 20,000,000 Common Shares at a price of Cdn.$7.00 per share for gross proceeds of Cdn.$140 million. The bulk of the proceeds were allocated to ongoing exploration and development expenditures on the Oyu Tolgoi Project, including resource definition drilling, engineering and feasibility study activities.

In October 2004, the Corporation entered into an earn-in and equity participation agreement with Entrée to explore and potentially develop a 40,000 hectare portion of Entrée’s 100%-owned, Shivee Tolgoi (Lookout Hill) mineral exploration concession, which is adjacent to the Oyu Tolgoi Project. Under the terms of the agreement, IVN can acquire an interest of up to 80% in all minerals extracted below a sub-surface depth of 560 m and up to 70% in all minerals extracted from surface to a depth of 560 m on the optioned portion of the Shivee Tolgoi property by incurring $35 million in exploration and/or development on the property over an eight-year period. The Corporation also has the right to acquire all of Entrée’s surface rights on the property by spending a minimum of $3 million in the first year and performing sufficient condemnation drilling to ensure there is no economic mineralization below the surface of the areas directly affected. As part of the transaction, the Corporation purchased 4.6 million units of Entrée, each unit consisting of one common share and one warrant, at a price of Cdn.$1.00 per unit.

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In December 2004, the Government of Mongolia repaid to the Corporation the final instalment of principal plus interest on $50 million in treasury bills that were purchased by the Corporation from the Government in December 2003.

2005

In January 2005, the Corporation’s Common Shares commenced trading on the New York Stock Exchange and were concurrently delisted from the NASDAQ Stock Market. The Corporation’s Common Shares were delisted from the Australian Stock Exchange in April 2005.

In February 2005, IVN sold its 100% interest in the Savage River Project to Stemcor Holdings Limited for $21.5 million in cash plus a series of contingent, escalating-scale annual payments based on iron ore pellet prices over a five year period. The annual payments are based on Savage River iron-ore pellet sales of 1.8 million tonnes per year. The amount of the payment is based on an escalating pellet-price formula using the annual Nibrasco/JSM pellet price as the pricing benchmark, with the initial rate being $1.00 a tonne if the annual benchmark price exceeds $30 a tonne, and escalating to a maximum of $16.50 a tonne if annual pellet prices exceed $80 a tonne. The first payment occurred in March 2006, and the final payment is scheduled to occur in March 2010.

In April and May 2005, updated resource estimates were completed for the Hugo Dummett Deposits and Southern Oyu Deposits, respectively. The reports estimated that the Oyu Tolgoi Project contained aggregate measured and indicated resources totalling 1.15 billion tonnes grading 1.30% copper and 0.47 g/t gold at a 0.6% copper equivalent cut-off grade, with an additional 1.16 billion tonnes of inferred resources grading 1.02% copper and 0.23 g/t gold at a 0.60% copper equivalent cut-off grade.

In June 2005, IVN completed an underwritten public offering of 19,750,000 Common Shares at a price of Cdn.$8.00 per share for gross proceeds of Cdn.$158,000,000.

In September 2005, a resource estimate for the Nariin Sukhait Project in Mongolia was completed in which it was estimated that the project contained 72 million tonnes of measured and indicated coal resources and 26 million tonnes of inferred coal resources.

In September 2005, IVN released its Integrated Development Plan, a preliminary assessment report that envisions the staged development of the Oyu Tolgoi Project over a 15 year period as a major copper and gold project having an ultimate mine life of in excess of 40 years. The Integrated Development Plan contemplates the development of the Southern Oyu Deposits through open pit mining and the Hugo Dummett Deposits through underground block cave mining and establishes engineering and production parameters for mining and processing operations.

In December 2005, IVN completed a restructuring transaction with Jinshan whereby IVN received 48,552,948 new common shares of Jinshan in consideration for all of IVN’s participating interest in the CSH 217 Gold Project in China, its interests in all other joint venture arrangements between the parties, certain contractual rights to participate with Jinshan in mineral exploration and development opportunities in China and $3.4 million in cash. At the conclusion of the transaction and including shares issued pursuant to a concurrent private placement to other investors, IVN held approximately 53% of the issued and outstanding common shares of Jinshan.

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2006

In January 2006, a reserve estimate was produced upgrading the measured and indicated resources at the Southern Oyu Deposits to the proven and probable reserve categories. The estimate listed 930 million tonnes of proven and probable reserves grading 0.5% copper and 0.36 g/t gold.

In February 2006, the Corporation’s Common Shares re-commenced trading on the NASDAQ Stock Market.

In February 2006, an updated resource estimate for the Nariin Sukhait Project was completed which reported measured and indicated resources of 123.9 million tonnes and inferred resources of 33.7 million tonnes.

In February 2006, an updated independent resource estimate on the Oyu Tolgoi Project was completed, adding inferred resources from Hugo North and Entrée’s Hugo North Extension, and reporting measured and indicated resources (inclusive of reported reserves) of 1.15 billion tonnes grading 1.27% copper and 0.48 g/t gold at a 0.60% copper equivalent cut-off grade and inferred resources of 1.44 billion tonnes grading 1.11% copper and 0.28 g/t gold at the same cut-off.

In April 2006, IVN completed an underwritten public offering which, including the exercise of an over-allotment option, consisted of 18,400,000 Common Shares at a price of Cdn.$10.28 per Common Share, for gross proceeds of Cdn.$189,152,000.

In July 2006, IVN entered into definitive agreements with Asia Gold for the Coal Reorganization. Pursuant to the agreements, all of the coal assets of IVN are to be sold to Asia Gold in consideration for the issuance of 82,576,383 common shares of Asia Gold, which would, when combined with existing shareholdings, give IVN ownership of approximately 90% of Asia Gold’s issued and outstanding shares. The transaction was approved by the shareholders of Asia Gold in August 2006. In connection with the transaction, IVN also provided Asia Gold with interim funding support of up to $10,000,000, with an option to increase such funding to $15,000,000 by mutual agreement.

In September 2006, IVN and Asia Gold extended the completion date of the Coal Reorganization to provide additional time to fulfill closing conditions, including in particular the completion of relevant mineral license transfers in Mongolia.

In October 2006, IVN and a wholly-owned subsidiary of Rio Tinto completed the Rio Tinto Transaction, which transaction established a strategic partnership for the development of the Oyu Tolgoi Project. Pursuant to the Rio Tinto Transaction, Rio Tinto subscribed for 37.1 million common shares at a price of $8.18 per share, for gross proceeds of approximately $303 million and agreed to subscribe for an additional 46.3 million shares at a price of $8.38 per share, for gross proceeds of approximately $388 million, upon the completion of certain conditions precedent, including completion of the Investment Agreement. IVN also issued to Rio Tinto two tranches of approximately 46 million warrants each that entitle Rio Tinto to subscribe for common shares at prices between $8.38 and $9.02 following completion of the Investment Agreement. The relevant agreements also imposed upon Rio Tinto limits on the number of shares it can hold in the Corporation such that its holdings not exceed 40% of the outstanding shares of IVN, subject to certain exceptions. Pursuant to the transaction, the parties established the OT Technical Committee and Rio Tinto agreed to provide the technical services of Rio Tinto for the development of the project on a cost-recovery basis. Rio Tinto became entitled to board seats proportional to its share ownership of the Corporation.

2007 to date

As part of the Rio Tinto Transaction, IVN agreed to divest the Myanmar Assets, and in February 2007, transferred all of the Myanmar Assets to the Monywa Trust , an independent third party trust, in consideration for a promissory note. The sole purpose of the Monywa Trust is to facilitate the future sale of the Myanmar

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Assets to one or more arm’s length third parties that do not constitute Excluded Persons. Following the sale of the Myanmar Assets, substantially all of the proceeds will be used to repay the promissory note, with the remainder distributed to the beneficiaries of the trust. See “DESCRIPTION OF THE BUSINESS — Other Assets - Myanmar Trust Arrangements”

Outlook

IVN expects that, for the foreseeable future, it will continue to concentrate most of its business activities and financial resources on the ongoing development of the Oyu Tolgoi Project. While the Corporation will continue, in the near term, to support the incremental development of other projects, including its Coal Division, its Australian assets and its Bakyrchik project, the Corporation is attempting to restructure its operations in a manner that will make these projects largely self-funding. As an example, the Corporation expects that Asia Gold will internally address substantially all funding and operational requirements for the Mongolian coal division if, as and when the Coal Reorganization is completed.

IVN will continue its efforts to successfully complete its negotiations with the government of Mongolia for the Investment Agreement. Finalization of the Investment Agreement has taken much longer than expected to complete. There have been numerous reasons for the hampered progress, including three changes in government since the most recent election in the summer of 2005. Nevertheless, IVN believes the most significant reason for the delay has been political considerations relating to an internal debate by Mongolian stakeholders about the scope of obligations and entitlements of mining companies, the government and other interested parties in the mining industry. Amendments to the Mining Law and related laws implemented in the Spring of 2006 expanded the scope of obligations and entitlements of relevant stakeholders in the mining process, and IVN believes that these amendments represent the current government’s effort to resolve this political impasse.

As a result of the recent amendments to the Minerals Law the nature and scope of the agreement IVN has been negotiating has changed from a more narrowly-based stability agreement that fixed government inputs to a broader “investment contract” concept in which the parties address conduct of operations and an investment in the project itself.

In January 2007, senior representatives of the Corporation began detailed discussions with a nine member working group of the Mongolian Government to conclude the negotiations with the Corporation on the Investment Agreement. This Agreement is anticipated to include such matters as the employment, skills-training and minimum wages of Mongolians on the Oyu Tolgoi Project, the provision of interim power supply and the production of long-term electrical power generation in the South Gobi region, possible development of downstream smelting and refining facilities in Mongolia and the sale of an interest in the project to the Government of Mongolia for fair value and within the range of percentages established under the Mining Law.

IVN is concurrently proceeding with the development of the Oyu Tolgoi Project. This development work includes on-going engineering and mine planning, with a revised integrated development plan contemplated for completion in the second half of 2007.

Risk Factors

IVN may be unsuccessful in completing an Investment Agreement with the Government of Mongolia for the Oyu Tolgoi Project or may only be able to complete the contract on terms that effectively impair the economic viability of the project.

The Investment Agreement with the Government of Mongolia is expected to address a broad range of matters relevant to the Oyu Tolgoi Project, and the nature and scope of the Investment Agreement is of fundamental

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importance to the viability of the Oyu Tolgoi Project. The amendments to the Mining Law that were implemented in the Spring of 2006 establish a broad framework for an Investment Agreement, and a substantial portion of the terms are subject to the discretion and mutual agreement of the Government and the applicable mining license holder. Current negotiations with the Government on the terms of the Investment Agreement are proceeding in good faith and in a productive manner. Nevertheless, the Mongolian Government can, within the discretionary mandate imposed by the Mining Law, propose to complete the Agreement only on terms that would severely impact the economic viability of the Oyu Tolgoi Project or effectively prevent the Corporation from coming to an agreement with the Government on the Investment Agreement. Any such result would have a significant adverse effect on the development of the Oyu Tolgoi Project and the Corporation itself.

IVN’s ability to carry on business in Mongolia is subject to political risk.

IVN holds its interest in the Oyu Tolgoi Project, the Nariin Sukhait Project and its Mongolian exploration properties through mining licenses and exploration licenses that enable it to conduct operations or development and exploration activities. Notwithstanding these arrangements, IVN’s ability to conduct operations or exploration and development activities is subject to changes in legislation or government regulations or shifts in political attitudes beyond IVN’s control.

Government policy may change to discourage foreign investment, nationalization of mining industries may occur or other government limitations, restrictions or requirements not currently foreseen may be implemented. There can be no assurance that IVN’s assets will not be subject to nationalization, requisition or confiscation, whether legitimate or not, by any authority or body.

There is no assurance that provisions under Mongolian law for compensation and reimbursement of losses to investors under such circumstances would be effective to restore the value of IVN’s original investment. Similarly, IVN’s operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, income taxes, environmental legislation, mine safety and annual fees to maintain mineral licenses in good standing. There can be no assurance that Mongolian laws protecting foreign investments will not be amended or abolished or that existing laws will be enforced or interpreted to provide adequate protection against any or all of the risks described above.

There can be no assurance that IVN will be capable of raising the additional funding that it needs to carry out its development and exploration objectives.

The further development and exploration of the Oyu Tolgoi Project and the various other mineral properties in which it holds interests depends upon IVN’s ability to obtain financing through capital markets, sales of non-core assets or other means. While the share purchase entitlements and obligations of Rio Tinto pursuant to the Rio Tinto Transaction may, if consummated in their entirety, account for a substantial portion of the development cost of the Oyu Tolgoi Project, there is no assurance that IVN will meet the conditions necessary to trigger Rio Tinto’s purchase obligations or that Rio Tinto will exercise its entitlement to subscribe for more share capital pursuant to its warrants and other rights. In particular, Rio Tinto’s obligation to complete the second tranche private placement is subject to the Corporation obtaining an Investment Agreement on terms acceptable to Rio Tinto. Until an Investment Agreement with the Government of Mongolia is actually finalized and approved, it is not possible to predict to what extent the Corporation will be successful in negotiating and obtaining terms and conditions in an Investment Agreement that is acceptable to Rio Tinto. Meanwhile, Rio Tinto’s warrants are exercisable at the discretion of Rio Tinto, and IVN has no control over the decision to exercise those warrants. If the second tranche private placement is not completed and/or the warrants are not exercised by Rio Tinto, there is no assurance that the Corporation will be successful in obtaining financing from other sources necessary for development of the Oyu Tolgoi Project, on favourable terms or at all. Even if Rio Tinto does subscribe for the maximum amount contemplated in the Rio Tinto

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Transaction, such amount would not necessarily be sufficient to cover all contingencies relating to the Oyu Tolgoi Project or to develop related projects such as the coal deposits. Depressed markets for precious and base metals may make it difficult or impossible for IVN to obtain debt financing or equity financing. IVN operates in a region of the world that is prone to economic and political upheaval and instability, which may make it more difficult for IVN to obtain debt financing from project lenders. Failure to obtain additional financing on a timely basis may cause IVN to postpone its development plans, forfeit rights in some or all of its properties or joint ventures or reduce or terminate some or all of its operations.

The Hugo Dummett Deposit mineral resources and the Nariin Sukhait mineral resources do not have demonstrated economic viability and the feasibility of mining has not been established.

A substantial portion of the mineral resources identified to date on the Oyu Tolgoi Project and all of the resources on the Nariin Sukhait Project are not mineral reserves and do not yet have demonstrated economic viability. There can be no assurance that some or all of these resources will be upgraded to mineral reserves. With the exception of the Southern Oyu Deposits, the feasibility of mining from the Oyu Tolgoi Project and the Nariin Sukhait Project has not been, and may never be, established. There is a degree of uncertainty attributable to the estimation of reserves, resources and corresponding grades being mined or dedicated to future production. Until reserves or resources are actually mined and processed, the quantity of reserves or resources and grades must be considered as estimates only. In addition, the quantity of reserves or resources may vary depending on the prevailing metals market. Any material change in the quantity of its reserves, resources, grades or stripping ratio may affect the economic viability of a particular property. In addition, there can be no assurance that metal recoveries in small-scale laboratory tests will be duplicated in larger scale tests under on-site conditions or during production.

Lack of infrastructure in proximity to IVN’s material properties could adversely affect mining feasibility.

The Oyu Tolgoi Project is located in an extremely remote area, which currently lacks basic infrastructure, including sources of electric power, water, housing, food and transport, necessary to develop and operate a major mining project. While IVN has established the limited infrastructure necessary to conduct its current exploration and development activities, substantially greater sources of power, water, physical plant and transport infrastructure in the area will need to be established before IVN can conduct mining operations. Lack of availability of the means and inputs necessary to establish such infrastructure may adversely affect mining feasibility. Establishing such infrastructure will, in any event, require significant financing, identification of adequate sources of raw materials and supplies and necessary approvals from national and regional governments, none of which can be assured. The Nariin Sukhait Project is similarly located in a remote area.

Mining projects are sensitive to the volatility of metal prices.

The long-term viability of IVN depends in large part on the world market prices of copper and gold. The market prices for these metals are volatile and are affected by numerous factors beyond the Corporation’s control. These factors include international economic and political trends, expectations of inflation, global and regional demand, currency exchange fluctuations, interest rates and global or regional consumption patterns, speculative activities, increased production due to improved mining and production methods and economic events, including the performance of Asia’s economies.

The aggregate effect of these factors on metals prices is impossible to predict. Should prevailing metal prices fall and remain below variable production costs of the IVN’s current and planned mining operations for a sustained period, losses may be sustained and, under certain circumstances, there may be a curtailment or suspension of some or all of the Corporation’s mining, development and exploration activities. IVN would also

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have to assess the economic impact of any sustained lower metal prices on recoverability and, therefore, the cut-off grade and level of IVN’s reserves and resources. These factors could have an adverse impact on the Corporation’s future cash flows, earnings, results of operations, stated reserves and financial condition.

The following table sets forth for the periods indicated (1) the London Metals Exchange’s high, low and average settlement prices for copper in U.S. dollars per pound and (2) the high, low and average London afternoon fixing prices for gold.

	Copper						Gold
Year	High		Low		Average		High		Low		Average
2001	$	0.83	$	0.60	$	0.72	$	293	$	256	$	271
2002	$	0.77	$	0.65	$	0.71	$	349	$	278	$	310
2003	$	1.05	$	0.71	$	0.81	$	416	$	320	$	363
2004	$	1.49	$	1.06	$	1.30	$	454	$	375	$	409
2005	$	2.11	$	1.39	$	1.67	$	536	$	411	$	444
2006	$	3.99	$	2.06	$	3.05	$	725	$	524	$	604

IVN’s business in Mongolia may be harmed if the country fails to complete its transition from state socialism and a planned economy to political democracy and a free market economy.

Since 1990, Mongolia has been in transition from state socialism and a planned economy to a political democracy and a free market economy. Much progress has been made in this transition but much remains to be done, particularly with respect to the rule of law. Many laws have been enacted, but in many instances they are neither understood nor enforced. For decades Mongolians have looked to politicians and bureaucrats as the sources of the “law”. This has changed in theory, but often not in practice. With respect to most day-to-day activities in Mongolia government civil servants interpret, and often effectively make, the law. This situation is gradually changing but at a relatively slow pace. Laws may be applied in an inconsistent, arbitrary and unfair manner and legal remedies may be uncertain, delayed or unavailable.

Recent and future amendments to Mongolian laws could adversely affect IVN’s mining rights in the Oyu Tolgoi Project or make it more difficult or expensive to develop the project and carry out mining.

In 2006, Mongolia implemented revisions to the Minerals Law. These revisions continue to preserve the substance of the original Minerals Law, which was drafted with the assistance of Western legal experts and is widely regarded as progressive, internally consistent and effective legislation, but the revisions have also increased the potential for political interference and weakened the rights of mineral holders in Mongolia. A number of the provisions will require further clarification from the Government about the manner in which the Government intends to interpret and apply the relevant law, which could have a significant effect on the Corporation’s Mongolian properties, including the Oyu Tolgoi Project in particular.

The Mongolian government has, in the past, expressed its strong desire to foster, and has to date protected the development of, an enabling environment for foreign investment. However, there are political constituencies within Mongolia that have espoused ideas that would not be regarded by the international mining industry as conducive to foreign investment if they were to become law or official government policy. IVN has no reason to believe that the government of Mongolia intends to sponsor or that Parliament intends to enact amendments to the Minerals Law or other legislation that would be materially adverse to the interests of international investors in Mongolia’s mining sector, including those of IVN. Nevertheless, the Oyu Tolgoi Project has a

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high profile among the citizens of Mongolia and, as a burgeoning democracy, Mongolia has recently demonstrated a degree of political volatility. Accordingly, until these issues are addressed and clarified, there can be no assurance that the present government or a future government will refrain from enacting legislation or adopting government policies that are adverse to IVN’s interests or that impair IVN’s ability to develop and operate the Oyu Tolgoi Project on the basis presently contemplated.

IVN may experience difficulties with its joint venture partners.

IVN is currently earning an interest in a property held by Entrée which is adjacent to the Hugo Dummett Deposit. Upon earning an interest, IVN will form a joint venture with Entrée and may in the future enter into additional joint ventures in respect of other properties with third parties. IVN is subject to the risks normally associated with the conduct of joint ventures, which include disagreements as to how to develop, operate and finance a project and possible litigation between the participants regarding joint venture matters. These matters may have an adverse effect on IVN’s ability to realize the full economic benefit of its interest in the property that is the subject of the joint venture, which could affect its results of operations and financial condition.

IVN may be unable to enforce its legal rights in certain circumstances.

In the event of a dispute arising at or in respect of, IVN’s foreign operations, including the Oyu Tolgoi Project, IVN may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdiction of courts in Canada or other jurisdictions. IVN may also be hindered or prevented from enforcing its rights with respect to a governmental entity or instrumentality because of the doctrine of sovereign immunity.

The Monywa Trust may not be able to sell the interest in the Myanmar Assets on a timely basis or for its fair value.

Pursuant to the transaction establishing the Monywa Trust, the trust is obligated to sell its interest in the Myanmar Assets to a third party. Until such time as that sale occurs, IVN will not receive the consideration that it is seeking for the project. There are numerous contingencies that could constrain the sale price or otherwise prevent the sale of the Myanmar Assets, including operational problems on the Monywa Copper Project, disputes with the government-controled joint venture partner and a severe decrease in the market price for copper. In addition, there are international sanctions directed at the Government of Myanmar by several constituencies, including the United States, European Union and Canada. While the sanctions in their current form do not affect the IVN’s investments in Myanmar, they effectively reduce the number of potential purchasers for the Monywa Copper Project interest and have, in the past, hindered the orderly conduct of commercial operations. Accordingly, it may be difficult for the Monywa Trust to arrange a sale of the Myanmar Assets on reasonable commercial terms or at all.

Changes in, or more aggressive enforcement of, laws and regulations could adversely impact IVN’s business.

Mining operations and exploration activities are subject to extensive laws and regulations. These relate to production, development, exploration, exports, imports, taxes and royalties, labour standards, occupational health, waste disposal, protection and remediation of the environment, mine decommissioning and reclamation, mine safety, toxic substances, transportation safety and emergency response and other matters.

Compliance with these laws and regulations increases the costs of exploring, drilling, developing, constructing, operating and closing mines and other facilities. It is possible that the costs, delays and other effects associated with these laws and regulations may impact IVN’s decision as to whether to continue to operate in a particular jurisdiction or whether to proceed with exploration or development of properties. Since legal requirements change frequently, are subject to interpretation and may be enforced to varying degrees in practice, IVN is

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unable to predict the ultimate cost of compliance with these requirements or their effect on operations. Furthermore, changes in governments, regulations and policies and practices could have an adverse impact on IVN’s future cash flows, earnings, results of operations and financial condition.

IVN is subject to substantial environmental and other regulatory requirements and such regulations are becoming more stringent. Non-compliance with such regulations, either through current or future operations or a pre-existing condition could materially adversely affect IVN.

All phases of IVN’s operations are subject to environmental regulations in the various jurisdictions in which it operates. For example, the Oyu Tolgoi Project is subject to a requirement to develop an environmental impact assessment, as well as other environmental protection obligations. Environmental legislation is evolving in a manner which will likely require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. There is no assurance that future changes in environmental regulation, if any, will not adversely affect IVN’s operations. Environmental hazards may exist on the properties in which IVN holds interests which are presently unknown to IVN and which have been caused by previous or existing third party owners or operators of the properties.

Government approvals and permits are sometimes required in connection with IVN’s operations. To the extent such approvals are required and not obtained, IVN may be delayed or prohibited from proceeding with planned exploration or development of its mineral properties.

Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.

Amendments to current laws, regulations and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have a material adverse impact on IVN and cause increases in capital expenditures or production costs or reductions in levels of production at producing properties or require abandonment or delays in development of new mining properties.

Previous mining operations may have caused environmental damage at current and former IVN mining projects, and if IVN cannot prove that such damage was caused by such prior operators, its indemnities and exemptions from liability may not be effective.

IVN has received exemptions from liability from relevant governmental authorities for environmental damage caused by previous mining operations current and former mining projects, including at the Monywa Copper Project in Myanmar and the Bakyrchik gold project in Kazakhstan. There is a risk, however, that, if an environmental accident occurred at those sites, it may be difficult or impossible to assess the extent to which environmental damage was caused by IVN’s activities or the activities of other operators. In that event, the liability exemptions could be ineffective and possibly worthless.

The actual cost of developing the Oyu Tolgoi Project may differ significantly from IVN’s estimates and involve unexpected problems or delays.

The estimates regarding the development and operation of the Oyu Tolgoi Project are based on the Integrated Development Plan. This study establishes estimates of reserves and resources and operating costs and projects economic returns. These estimates are based, in part, on assumptions about future metal prices. The IDP derives estimates of average cash operating costs based upon, among other things:

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• anticipated tonnage, grades and metallurgical characteristics of ore to be mined and processed;

• anticipated recovery rates of copper and gold from the ore;

• cash operating costs of comparable facilities and equipment; and

• anticipated climatic conditions.

Actual operating costs, production and economic returns may differ significantly from those anticipated by the IDP and future development reports. There are also a number of uncertainties inherent in the development and construction of any new mine including the Oyu Tolgoi Project. These uncertainties include:

• the timing and cost, which can be considerable, of the construction of mining and processing facilities;

• the availability and cost of skilled labour, power, water and transportation;

• the availability and cost of appropriate smelting and refining arrangements;

• the need to obtain necessary environmental and other government permits, and the timing of those permits; and

• the availability of funds to finance construction and development activities.

The cost, timing and complexities of mine construction and development are increased by the remote location of a property such as the Oyu Tolgoi Project. It is common in new mining operations to experience unexpected problems and delays during development, construction and mine start-up. In addition, delays in the commencement of mineral production often occur. Accordingly, there is no assurance that our future development activities will result in profitable mining operations.

IVN’s ability to obtain dividends or other distributions from its subsidiaries may be subject to restrictions imposed by law, foreign currency exchange regulations and financing arrangements.

IVN conducts its operations through subsidiaries. Its ability to obtain dividends or other distributions from its subsidiaries may be subject to restrictions on dividends or repatriation of earnings under applicable local law, monetary transfer restrictions and foreign currency exchange regulations in the jurisdictions in which the subsidiaries operate. The subsidiaries’ ability to pay dividends or make other distributions to the Corporation is also subject to their having sufficient funds to do so. If the subsidiaries are unable to pay dividends or make other distributions, IVN’s growth may be inhibited unless it is able to obtain additional equity or debt financing on acceptable terms. In the event of a subsidiary’s liquidation, the Corporation may lose all or a portion of its investment in that subsidiary.

There can be no assurance that the interest held by IVN in its exploration, development and mining properties is free from defects or that material contractual arrangements between IVN and entities owned or controlled by foreign governments will not be unilaterally altered or revoked.

IVN has investigated its rights to explore and exploit its various properties and, to the best of its knowledge, those rights are in good standing but no assurance can be given that such rights will not be revoked, or significantly altered, to the detriment of IVN. There can also be no assurance that IVN’s rights will not be challenged or impugned by third parties. IVN has also applied for rights to explore, develop and mine various properties, but there is no certainty that such rights, or any additional rights applied for, will be granted on terms satisfactory to IVN or at all.

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The proceeds from the sale of the Savage River Project are dependent on iron ore prices and the remaining supply of ore at the Savage River Project.

The remaining portion of the proceeds payable to IVN from the sale of the Savage River Project are deferred, and the amount of such payments are dependent on prevailing prices for iron ore (as represented by the Nibrasco/JSM pellet price) in the year that the compensation is paid and the total tonnage of iron ore pellets sold from the Savage River Project in that year. The price of iron ore was at the high end of recent historical trends when the first payment occurred in March 2006, and it has softened since then. Such prices are very volatile and in the past prices have suffered significant declines. Lower prices means lower corresponding payments to IVN than the annual payment received in March 2006. In addition, while current reserve and resource estimates indicate that the mine will be capable of producing sufficient ore to meet the 1,800,000 tpy threshold for the term of deferred payments, there is no assurance that these estimates will actually bear themselves out. If insufficient ore is actually present to produce the maximum threshold amount of ore, then the corresponding payments to IVN will be lower.

Competition for new mining properties by larger, more established companies may prevent IVN from acquiring interests in additional properties or mining operations.

Significant and increasing competition exists for mineral acquisition opportunities throughout the world. As a result of this competition, some of which is with large, better established mining companies with substantial capabilities and greater financial and technical resources, IVN may be unable to acquire rights to exploit additional attractive mining properties on terms it considers acceptable. Accordingly, there can be no assurance that IVN will acquire any interest in additional operations that would yield reserves or result in commercial mining operations.

IVN has a limited operating history, and there is no assurance that it will be capable of consistently producing positive cash flows.

The Corporation has paid no dividends on its Common Shares since incorporation and does not anticipate doing so in the foreseeable future. IVN has a limited operating history and there can be no assurance of its ability to operate its projects profitably. While IVN may in the future generate additional working capital through the operation, development, sale or possible syndication of its properties, there is no assurance that IVN will be capable of producing positive cash flow on a consistent basis or that any such funds will be available for exploration and development programs.

A substantial portion of IVN’s operations involve exploration and development and there is no guarantee that any such activity will result in commercial production of mineral deposits.

Development of IVN’s mineral properties is contingent upon obtaining satisfactory exploration results. Mineral exploration and development involves substantial expenses and a high degree of risk, which even a combination of experience, knowledge and careful evaluation may not be able to adequately mitigate. There is no assurance that additional commercial quantities of ore will be discovered on any of IVN’s exploration properties. There is also no assurance that, even if commercial quantities of ore are discovered, a mineral property will be brought into commercial production. The discovery of mineral deposits is dependent upon a number of factors, not the least of which is the technical skill of the exploration personnel involved. The commercial viability of a mineral deposit, once discovered, is also dependent upon a number of factors, some of which are the particular attributes of the deposit, such as size, grade and proximity to infrastructure, metal prices and government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection. In addition, assuming discovery of a commercial ore body, depending on the type of mining operation involved, several years can elapse from the initial phase of drilling until commercial operations are commenced. Most of the above factors are beyond the control of IVN.

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IVN cannot insure against all of the risks associated with mining.

Exploration, development and production operations on mineral properties involve numerous risks and hazards, including:

• rock bursts, slides, fires, earthquakes or other adverse environmental occurrences;

• industrial accidents;

• labour disputes;

• political and social instability;

• technical difficulties due to unusual or unexpected geological formations;

• failures of pit walls; and

• flooding and periodic interruptions due to inclement or hazardous weather condition.

These risks can result in, among other things:

• damage to, and destruction of, mineral properties or production facilities;

• personal injury;

• environmental damage;

• delays in mining;

• monetary losses; and

• legal liability.

It is not always possible to obtain insurance against all such risks and the Corporation may decide not to insure against certain risks as a result of high premiums or other reasons. The incurrence of an event that is not fully covered, or covered at all, by insurance, could have a material adverse effect on IVN’s financial conditions, results of operations and cash flows and could lead to a decline in the value of the securities of the Corporation. The Corporation does not maintain insurance against political or environmental risks. Also, because of the recent major increases in insurance premiums and the inability to obtain full coverage, the Monywa Copper Project is self-insuring on a portion of the mine assets.

As a result of the rights to acquire common shares and other rights granted to Rio Tinto pursuant to the Rio Tinto Transaction, Rio Tinto has the ability to significantly influence the business and affairs of the Corporation.

Rio Tinto’s original subscription for Common Shares, together with the additional rights granted to Rio Tinto in the Rio Tinto Transaction to obtain additional Common Shares pursuant to a second tranche private placement and the exercise of the warrants, will give Rio Tinto the voting power to significantly influence the policies, business and affairs of the Corporation and the outcome of any significant corporate transaction or other matter, including a merger, business combination or a sale of all, or substantially all, of the Corporation’s assets. Subject to certain limited exceptions, Rio Tinto also has a right of first refusal with respect to any proposed disposition by the Corporation of an interest in the Oyu Tolgoi Project. Rio Tinto’s share position in the Corporation and its right of first refusal with respect to the Oyu Tolgoi Project may have the effect of delaying, deterring or preventing a transaction involving a change of control of the Corporation in favour of a third party that otherwise could result in a premium in the market price of the Common Shares in the future.

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Rio Tinto will also be able to significantly influence the management, development and operation of the Oyu Tolgoi Project through its representatives on the OT Technical Committee, established to manage the Oyu Tolgoi Project. Provided Rio Tinto maintains a minimum level of shareholding in the Corporation, Rio Tinto’s appointees to the OT Technical Committee will have a veto over certain specified material decisions during the five year period following closing of the first tranche private placement and, thereafter, Rio Tinto appointees will represent a majority of the members of the OT Technical Committee and will thereby be entitled to control the ongoing decisions made by the Technical Committee.

IVN is exposed to risks of changing political stability and government regulation in the countries in which it operates.

IVN holds mineral interests in countries, which may be affected in varying degrees by political stability, government regulations relating to the mining industry and foreign investment therein, and the policies of other nations in respect of these countries. Any changes in regulations or shifts in political conditions are beyond the control of IVN and may adversely affect its business. IVN’s operations may be affected in varying degrees by government regulations, including those with respect to restrictions on production, price controls, export controls, income taxes, expropriation of property, employment, land use, water use, environmental legislation and mine safety. IVN’s operations may also be affected in varying degrees by political and economic instability, economic or other sanctions imposed by other nations, terrorism, military repression, crime, extreme fluctuations in currency exchange rates and high inflation.

In certain areas where IVN is active, the regulatory environment is in a state of continuing change, and new laws, regulations and requirements may be retroactive in their effect and implementation. The laws of many of the countries in which IVN operates also contain inconsistencies and contradictions. Many of them are structured to bestow on government bureaucrats substantial administrative discretion in their application and enforcement with the result that the laws are subject to changing and different interpretations. As such, even the Corporation’s best efforts to comply with the laws may not result in effective compliance in the determination of government bureaucrats.

IVN conducts certain of its operations through co-operative joint ventures with government controlled entities. While this connection benefits IVN in some respects, there is a substantial inequality with respect to the influence of the parties with the applicable government. Governments in these countries hold a substantial degree of subjective control over the application and enforcement of laws and the conduct of business. This inequality would become particularly detrimental if a business dispute arises between joint venture parties. IVN seeks to minimize this issue by including international arbitration clauses in relevant agreements whenever possible and by maintaining positive relations with both its joint venture partners and local governments, but there can be no guarantee that these measures will be sufficient to protect IVN’s interest in these countries.

IVN’s prospects depend on its ability to attract and retain key personnel.

Recruiting and retaining qualified personnel is critical to IVN’s success. The number of persons skilled in the acquisition, exploration and development of mining properties is limited and competition for such persons is intense. The Corporation believes that it has been successful in recruiting excellent personnel to meet its corporate objectives but, as IVN’s business activity grows, it will require additional key financial, administrative, mining, marketing and public relations personnel as well as additional staff on the operations side. Although the Corporation believes that it will be successful in attracting and retaining qualified personnel, there can be no assurance of such success.

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Certain directors of IVN are directors or officers of, or have significant shareholdings, in other mineral resource companies and there is the potential that such directors will encounter conflicts of interest with IVN.

Certain of the directors of the Corporation are directors or officers of, or have significant shareholdings in, other mineral resource companies and, to the extent that such other companies may participate in ventures in which IVN may participate, the directors of IVN may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. This includes the nominees of Rio Tinto, which is entitled to nominate directors to the board of directors of the Corporation in proportion to its holdings of the Corporation’s issued and outstanding common shares from time to time. Certain of these nominees are or may be directors or officers of, or have significant shareholdings in, Rio Tinto companies or other mineral resource companies and, to the extent that such companies may engage in business relationships with the Corporation, the directors of the Corporation appointed by Rio Tinto may have conflicts of interest in negotiating and concluding terms of such relationships. In all cases where directors and officers have an interest in another resource company, such other companies may also compete with IVN for the acquisition of mineral property rights. In the event that any such conflict of interest arises, a director who has such a conflict will disclose the conflict to a meeting of the directors of the Corporation and will abstain from voting for or against the approval of such a participation or such terms. In appropriate cases, IVN will establish a special committee of independent directors to review a matter in which several directors, or management, may have a conflict. From time to time, several companies may participate in the acquisition, exploration and development of natural resource properties thereby allowing their participation in larger programs, permitting involvement in a greater number of programs and reducing financial exposure in respect of any one program. It may also occur that a particular company will assign all or a portion of its interest in a particular program to another of these companies due to the financial position of the company making the assignment. In accordance with the laws of the Yukon Business Corporations Act, the directors of the Corporation are required to act honestly, in good faith and in the best interests of the Corporation. In determining whether or not IVN will participate in a particular program and the interest therein to be acquired by it, the directors will primarily consider the potential benefits to IVN, the degree of risk to which IVN may be exposed and its financial position at that time.

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DESCRIPTION OF THE BUSINESS

Overview

The Oyu Tolgoi Project and the Nariin Sukhait Project have been identified as the mineral properties that are material to IVN.

Qualified Persons

Disclosure of a scientific or technical nature in this Annual Information Form in respect of each of the material mineral resource properties of IVN was prepared by or under the supervision of the “qualified persons” (as that term is defined in NI 43-101) listed below:

		Relationship to
Property	Qualified Person	Corporation
Oyu Tolgoi Project	Bernard Peters, GRD Minproc	Independent Consultant
Nariin Sukhait Project	Richard D. Tifft, Norwest	Independent Consultant

Oyu Tolgoi Copper and Gold Project, Mongolia

The information in this Section is based, in part, on the Oyu Tolgoi Technical Report, in accordance with the requirements of NI 43-101. The Qualified Persons for the Oyu Tolgoi Technical Report are Bernard Peters, B. Eng. (Mining), Aus.I.M.M. of GRD Minproc, who was responsible for overall preparation of the report and Southern Oyu mineral reserve estimate, Harry Parker, PhD., P. Geo. of AMEC, who was responsible for preparation of disclosure regarding mineral resources, Mr. Robert Cinits, P. Geo. of AMEC, who was responsible for preparation of disclosure regarding geology, deposit types, mineralization, exploration, drilling, sampling method and approach, sample preparation, analysis and security, data verification and adjacent properties, Allan Haines, BSc., C. Eng., Eur. Ing., MIMMM, of Steffen Robertson Kirsten (Australasia) Pty Ltd., who was responsible for preparation of the subsection on Open Pit Mine Geotechnical and Dean David, B. AppSc (Metallurgy), Aus.I.M.M., of GRD Minproc, who was responsible for preparation of the processing section.

Project Description and Location

The Oyu Tolgoi Project is located in the Aimag (province) of Omnigov, approximately 570 km south of the capital city of Ulaanbaatar and 80 km north of the border with China. The property hosts a series of deposits containing copper, gold and molybdenum in a porphyry system. Mineralization has been identified in two deposit groups, called the Southern Oyu Deposits and the Hugo Dummett deposits, contained within an aggregate area of approximately 6.3 km north-south by 3 km east-west.

IVN operates the Oyu Tolgoi Project through its wholly-owned subsidiary, IMMI. IMMI, in turn, holds its rights to the Oyu Tolgoi Project through mining license 6709A (the “OT License”), comprising approximately 8,496 hectares of property. The Mongolian government granted the OT License to IMMI in 2003 along with mining licenses for three adjacent properties identified as mining licenses 6708A, 6710A and 6711A. The OT License includes the right to explore, develop mining infrastructure and facilities and conduct mining operations on the Oyu Tolgoi Project. When originally granted, the OT License had a term of 60 years, with an option to extend the license for an additional term of up to 40 years. In 2006 the Mongolian parliament

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passed new mining legislation that changes the term of mining licenses to 30 years with two 20 year extensions. It is unclear if this law will be applied retroactively to current licenses.

IVN also holds the right to acquire an interest in approximately 20,000 hectares of MEL 3148X (the “Shivee Tolgoi License”) and approximately 20,000 hectares of MEL 3150X (the “Javkhlant License”) owned by Entrée. IVN holds its rights to the property through an Earn-in Agreement dated October 15, 2004 as amended on November 9, 2004. Pursuant to the earn-in, IVN is entitled to earn up to an 80% interest in minerals below 560 m and a 70% interest in minerals above that point. In order for IVN to earn its full interest in the property, the IVN Group must expend $35 million in exploration and development over an eight year period, which commenced in November 2004. The expenses of holding the MEL must be paid by IVN. The current term of the Shivee Tolgoi and Javkhlant Licenses expire in 2008, at which point the holder has one final right of renewal for a two year period until 2010. Thereafter, the licenses will expire if the holder does not convert the MELs into a mining license. The Shivee Tolgoi License is adjacent to the OT License, and the Hugo North deposit crosses the property boundary onto the Shivee Tolgoi License.

IMMI must pay a yearly per hectare fee to the Mongolian government in order to maintain the OT License in good standing. The license fees are $5 per hectare in years one to three, $7.50 per hectare in years four and five and $10 per hectare thereafter. The property was surveyed by an independent consultant in 2002 and by a qualified Mongolian Land Surveyor in 2004 to establish the legal boundaries of the OT License concession.

Pursuant to the Minerals Law, the Mongolian government assesses a royalty of 5% on the sale value of all minerals mined in the country except gold extracted from placer, which is assessed a royalty at a rate of 7.5% of the sales value of such mineral. IVN holds a 2% net smelter returns royalty over the property covered by the OT License (which does not cover the Entrée related licenses) that was purchased from BHP Exploration in 2003.

Environment

Holders of a mining license in Mongolia must comply with environmental protection obligations established in the Law of Environmental Impact Assessment and the Minerals Law. These obligations include preparation of an environmental impact assessment (“EIA”) for mining proposals, submitting an annual environmental protection plan, posting an annual bond against completion of the protection plan and submitting an annual environmental report.

IMMI has posted environmental bonds to the local government, Khanbogd Soum, for restoration and environmental management work required for exploration and the limited development work undertaken at the site. Following the implementation of required administrative procedures, the bonds will be transferred to and held by the national government in accordance with recent amendments to the Minerals Law. IMMI pays to the Khanbogd Soum annual fees for water and road usage, while sand and gravel use fees are paid to the Aimag government in Dalanzadgad.

IMMI has, through qualified independent consultants, prepared an EIA for Oyu Tolgoi consisting of three parts: (i) road, (ii) water supply, and (iii) mine and processing facilities. The first EIA document, for the transport corridor south of Oyu Tolgoi to the Chinese border, was submitted in April 2004 and approved in May 2004. An amendment to the approved EIA was submitted in December 2006 to allow for an alternative road route to the Chinese border. The second volume of the EIA, covering the supply of water from nearby aquifers, was submitted in June 2005 and approved in September 2005. The third document, incorporating the results of the IDP, was first submitted in January 2006 and, after review by the Mongolian government, the submission was amended in May 2006. An expert committee review of the mine and processing facilities volume of the EIA was completed in September 2006, and further information was submitted in November 2006 to address the issues raised. The EIA remains under consideration with the committee.

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IMMI has received approval for supplementary environmental assessments and management plans covering current development work associated with the underground shafts, and is working on further supplementary environmental assessments for temporary site accommodation facilities, waste water treatment, diesel power supply and the excavation of construction materials.

IMMI has retained the Institute of Archaeology at the Mongolian Academy of Science to complete archaeological studies of the Oyu Tolgoi Project. The studies have resulted in the excavation and removal of sites of historical and cultural significance within the Project area in accordance with the relevant Mongolian Laws and custom.

Accessibility, Climate, Local Resources and Physiography

The Oyu Tolgoi Project is located in the South Gobi region of Mongolia, approximately 570 km south of the capital city, Ulaanbaatar. The most prominent nearby community is Dalanzadgad, with a population of approximately 15,000, which is located approximately 220 km northwest of the Oyu Tolgoi property. Facilities at Dalanzadgad include a regional hospital, tertiary technical colleges, domestic airport and a 6 megawatt capacity coal-fired power station. The closest community to the property is Khanbogd, the centre of the Khanbogd Soum. Khanbogd has a population of approximately 2,500 and is located 45 km to the east of the property.

Road access to the property follows a well-defined track directly south from Ulaanbaatar requiring approximately 12 hours travel time in a four-wheel drive vehicle. IMMI has also developed a 2,000 m dirt airstrip within the Oyu Tolgoi property that allows the property to be serviced by a 50 passenger, turbo prop aircraft. Mongolian rail service and a large electric power line lie 350 km east of the property at the main rail line between Ulaanbaatar and China. The China-Mongolia border is located approximately 80 km south of Oyu Tolgoi. The Chinese government has upgraded a highway to the Mongolian border, which now provides a direct link between the border south of Oyu Tolgoi to the trans-China railway system.

The south Gobi region has a continental, semi-desert climate with cool springs and autumns, hot summers, and cold winters. The average annual precipitation is approximately 80 millimetres, 90% of which falls in the form of rain with the remainder as snow. Temperatures range from an extreme maximum of about 36 degrees Celsius to an extreme minimum of about -31 degrees Celsius. The area occasionally receives very high winds accompanied by sand storms that often severely reduce visibility for several hours at a time. IMMI conducts exploration activities year-round and believes that mining operations can also be run on a year-round basis.

The property ranges in elevation from 1,140 m to 1,215 m above sea level. The region is covered by sparse semi-desert vegetation and is used by nomadic herders who tend camels, goats and sheep. The topography largely consists of gravel-covered plains, with low hills along the northern and western borders. Scattered, small rock outcrops and colluvial talus are widespread within the northern, western and southern parts of the property. IMMI believes that this topography will be amenable to the construction of the necessary infrastructure for mining operations, including tailings storage sites, heap leach pads, waste disposal, and processing plant sites. Seismicity studies related to the property have been conducted and IMMI has determined that the seismicity of the project area is generally low.

The Mongolian Minerals Law and Mongolian Land Law govern IMMI’s surface rights on the Oyu Tolgoi Project. Water rights are governed by the Mongolian Water Law and the Mongolian Minerals Law. These laws permit license holders to use the land and water in connection with exploration and mining operations, subject to the discretionary authority of Mongolian national, provincial and regional governmental authorities. IVN expects that it will have to negotiate with all three levels of government to ensure access to appropriate land and water rights prior to the commencement of any mining operations.

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Power sources are currently sufficient for exploration activities. The nearest power line is 350 km away, so IMMI operates a number of diesel generators for camp electrical needs. A small power station consisting of six one MW diesel generators has been installed to provide power for sinking a shaft on the property. Additional power sources will need to be developed prior to the commencement of mine development and mining operations. IMMI is exploring the possibility of utilizing currently undeveloped coal deposits as a source of power supply.

Water is widely available from shallow wells, and is sufficient for exploration purposes. A more substantial source of water will be required for development and mining operations. Groundwater supply investigations by independent consultants for the Oyu Tolgoi Project have been ongoing since April 2002. IMMI has identified three deep sedimentary groundwater systems within 100 km of the Oyu Tolgoi Project. Investigative drilling of two of these systems and computer modeling of the systems has now been completed and indicates that these groundwater systems will be able to meet the water demand for a production rate of up to 40 million tpy. The Gunii Hooloi aquifer system has been identified as the most suitable supply, with use of water from the systems being subject to finalization of the EIA for the project and the issue of extraction licenses by the Mongolian government. There have been ongoing discussions with the Mongolian Government during 2006 on points related to the issue of extraction licenses and IMMI plans to conduct further drilling and testing to provide data in support of license applications.

Water supply drilling has also been undertaken within the bedrock formations at Oyu Tolgoi, with the aim of developing a temporary construction water supply. Approximately 20 successful, low yielding bores have been drilled, although their supply potential is dependant on aquifer testing planned during 2007 and approval for use from the Government Agencies involved.

History

Old diggings and small amounts of slag found in the area indicate that the Oyu Tolgoi area was subject to small scale mining activity in ancient times. However, modern mineral exploration did not begin in earnest in the area until 1996, when the Magma Copper Company Ltd. began a reconnaissance program which examined more than 60 copper occurrences in various parts of Mongolia. In 1996, after BHP Exploration acquired Magma Copper Company Ltd., BHP Exploration continued the reconnaissance program in western and southern Mongolia.

BHP Exploration first visited the Oyu Tolgoi Project in September 1996 as part of its regional reconnaissance program of the south Gobi region. BHP Exploration subsequently applied for, and was granted, an exploration concession covering 1,350 km². After geological mapping, stream and soil sediment surveys and magnetic and IP surveys, BHP Exploration completed 6 diamond core holes totalling 1,102 m during the 1997 field season. With encouraging results from two of the holes, a second phase of drilling was undertaken in 1998, consisting of an additional 17 widely spaced core holes totalling 2,800 m. These holes failed to return significant mineralization, and BHP Exploration suspended the project pending economic review. In 1999, following a review of past results, additional drilling and continued exploration on the property was planned but never carried out. BHP Exploration then offered the properties for joint venture.

IMMI originally acquired its interest in the property from BHP Exploration in May 2000 pursuant to an earn-in agreement. Shortly thereafter, IMMI carried out a RC drill program to delineate a chalcocite blanket intersected by one of BHP Exploration’s diamond drill holes. This program consisted of 109 RC holes totalling 8,828 m. In 2001, IMMI continued the RC drilling program to expand the chalcocite blanket and locate additional supergene resources. IMMI also completed three diamond drill holes to test deep hypogene copper and gold potential. One of these holes, OTD 150, intersected 508 m of chalcopyrite-rich mineralization grading 0.81% copper and 1.17 g/t gold, while another hole, OTD 159, intersected a 49 m thick chalcocite

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blanket grading 1.17% copper and 0.21 g/t gold and 252 m of hypogene covellite mineralization grading 0.61% copper and 0.11 g/t gold.

The diamond drill holes were sufficiently encouraging for IMMI to conduct a major follow-up drill program that resulted in the discovery of the Southwest Oyu deposit. In late 2002, drilling in the far northern section of the property intersected 638 m of bornite-chalcopyrite rich mineralization grading 1.61% copper and 0.07 g/t gold starting at a depth of 222 m. This marked the discovery of the Hugo Dummett Deposits.

IMMI completed the earn-in requirements under the Earn-in Agreement with BHP Exploration by the first quarter of 2002. After certain back-in rights held by BHP Exploration expired, BHP Exploration transferred title to the relevant mineral exploration licenses to IMMI in the summer of 2002. Pursuant to the Earn-in Agreement, BHP Exploration retained a 2% net smelter returns royalty on production from the Oyu Tolgoi Project. IVN acquired this royalty from BHP Exploration in November 2003 in consideration for the payment to BHP Exploration of $37,000,000.

In February 2004, a scoping study was prepared for development of the Oyu Tolgoi Project. The report considered mine development options ranging from a 20-year mine life to a 40-year mine life, with all deposits except Hugo North being mined by open pit and Hugo North being mined by block caving.

In 2005 the Integrated Development Plan was completed. The IDP, a preliminary assessment report, was summarized in a Technical Report dated October 1, 2005, which was filed with applicable Canadian securities regulatory authorities and is available for review at www.sedar.com. The report assesses development alternatives open to IVN and charts an implementation path for developing the Oyu Tolgoi Project.

Geology and Mineralization

The Oyu Tolgoi Project lies near the boundary of the South Mongolian and the South Gobi tectonic units, in the Kazakh Mongol Belt. The project area falls within the Gurvansayhan Terrane, which consists of highly deformed accretionary complexes and oceanic island arc assemblages. The area is dominated by a broad corridor of major strike-slip faults, contractional fault and fold belts and fault-controlled Mesozoic sedimentary basins.

The Oyu Tolgoi Project area lies within an east to west trending belt of volcanic and sedimentary rocks of continental margin and island arc affinities. The two major stratigraphic sequences recognised in the project area are a sequence of tuffs, basaltic rocks and sedimentary strata of probable island arc affinity, assigned to the Upper Devonian Alagbayan Formation and a sequence of overlying succession containing conglomerates, fossiliferous marine siltstones, sandstones, waterlain tuffs and basaltic to andesitic flows and volcaniclastic rocks, assigned to the Carboniferous Sainshandhudag Formation. There is also a thin covering of stratified clays and clay-rich gravels overlying the two main sequences, infilling paleochannels and small fault-controlled basins.

The Alagbayan Formation sequence includes four major lithological divisions. The lowest division consists of mafic volcanic flows and volcanogenic sedimentary rocks, often forming a sequence several hundred m thick. Within this division are subunits consisting of volcanogenic siltstone, porphyritic basalt and lapilli tuff to volcaniclastic conglomerate/breccia. These rocks are commonly strongly altered and host much of the contained copper found on the property. The other three divisions include a layer of volcanic rocks of dacitic composition up to 200 m thick, a sequence of clastic sedimentary rocks that overlies the dacitic composition that is up to 100 m thick and a sequence of basaltic flows and volcaniclastic rocks overlain and interstratified with thinly bedded siltstone and massive sandstone averaging up to 600 m thick.

The Sainshandhudag Formation lies above the Alagbayan Formation sequence, and consists of a lower tuffaceous sequence, an intermediate clastic package and an uppermost volcanic sequence. The lowest

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sequence consists mainly of andesitic lapilli tuff and measures up to 200 m in thickness. The intermediate sequence typically shows a progression from a lower conglomerate-sandstone-siltstone dominant unit to an overlying siltstone-waterlain tuff unit up to 200 m in thickness. The uppermost sequence consists of a thick layer of andesitic to basaltic flows and volcaniclastic rocks comprising several subunits that can be up to 800 m thick.

Interspersed within the principal stratigraphic sequences are several formations of intrusive rocks and several faults. The rock intrusions range from large batholithic intrusions to narrow discontinuous dykes and sills, and consist of at least seven different classes of rock, including mafic dykes with basalt or dolerite, rhyolite dykes and sills, horneblende biotite andesite and dacite dykes and large biotite granodiorite intrusions that forms a dyke system along the western side of the Hugo Dummett deposits. The most voluminous intrusions are a series of QMD intrusions. The porphyry style mineralization at Oyu Tolgoi is genetically linked to these QMD intrusions.

There is a complex network of faults, folds and shear zones that cross-cut and underlie the project. The southern end of the mineralized deposits is bounded by the Solongo fault. All of the significant mineralization discovered on the property is on the northern block of this fault. Other significant faults include the West Bat fault and the East Bat fault, which respectively bound the west and east side of the zone of mineralization constituting the Hugo Dummett deposits.

Southern Oyu Deposits

The Southern Oyu deposits consist of a series of deposits known as Southwest Oyu, South Oyu, Central Oyu and Wedge. These deposits form contiguous zones of mineralization representing multiple mineralizing centres, each with distinct styles of mineralization, alteration and host lithology. The boundaries of the individual deposits coincide with major fault zones.

The geology and mineralization of the Southwest Oyu deposit is characterized by a gold-rich porphyry system, with a high-grade core about 250 m in diameter and extending over 700 m vertically (the “Southwest Gold Zone”). Over 80% of the deposit is hosted by porphyritic basalt of the Alagbayan Formation, with the remainder hosted by QMD intrusions. The high-grade core is enclosed by a large, low-grade ore shell approximately 600 m by 2,000 m in area. The system is low sulphide, and the copper and gold mineralization is related to chalcopyrite.

Mineralization at Southwest Oyu consists mainly of finely disseminated pyrite-chalcopyrite with minor bornite and massive chalcopyrite veins cross-cutting and impregnating earlier deformed quartz vein stock works and the basalt and QMD host rocks. The mineralization is related to a late stage sericite and sericite-biotite-albite overprint, which affects the QMD intrusions and basaltic wall rocks. The high grade core is centred on a 10 m to 30 m wide, vein-rich QMD dyke and extends for over 100 m into the adjacent porphyritic augite basalt. Gold to copper ratios vary between 0.5 to one and one to one in the outer margin of the deposits, increasing to approximately two to one into the high grade gold core, with the highest ratios consisting of up to three to one in the deeper parts of the deposit. Outside the Southwest Gold Zone, the augite basalts contain anomalous gold contents, which become subtly gold-richer southward.

South Oyu is a copper porphyry deposit developed mainly in the Alagbayan Formation strata consisting of basalt and dacite tuff units. The deposit is cut by numerous barren dykes, including one major east-west rhyolite dyke that cuts east to west through the middle of the deposit that is up to tens of metres wide. Unlike Southwest Oyu, the South Oyu system is not gold rich. Copper mineralization at South Oyu is associated with stockworks of thin quartz and sulphide veins, and consists of finely disseminated pyrite-chalcopyrite and bornite.

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The Central Oyu deposit is hosted in a swarm of feldspar-phyric QMD intrusions, emplaced into porphyritic augite basalt and dacite tuff of the Alagbayan Formation. The basalt flows and dacite tuffs are preserved as a series of isolated, irregular bodies within the QMD dyke swarm, which are up to 200 m thick and extend several hundred metres down dip to the limit of drilling. Mineralization is high-sulphidation type with copper mineralization consisting of covellite, chalcocite, and minor enargite, a body of copper and gold porphyry mineralization consisting primarily of chalcopyrite and a shallow chalcocite enrichment blanket. The high-sulphidation mineralization and its associated advanced argillic alteration and mineralization are telescoped onto an underlying and peripheral porphyry system. The chalcocite blanket appears to overlie the covellite-rich quartz-veined zones in pyrite-rich QMD. The quartz-veined zones are also strongly covellite mineralized. Supergene mineralization underlies a leached cap extending 20 to 80 m below the surface, containing an enrichment blanket with an upper chalcocite and lower covellite zone. The style of mineralization with the largest volume is the high-sulphidation system with finely disseminated pyrite-covellite-chalcocite. The covellite mineralization generally averages about 0.7% copper and is characterized by high pyrite content and minor enargite.

The Wedge deposit occurs as a sequence of Alagbayan Formation strata similar to the South Oyu deposit, except the dacite tuff unit is significantly thicker at up to 180 m. The Wedge deposit is structurally and stratigraphically similar to Central Oyu, with numerous stratigraphic contacts that are relatively continuous, leading IMMI to believe that the two deposits are one structurally intact block that has been displaced downward relative to the other Southern Oyu deposits. Mineralized rocks are cut by numerous barren dykes, including biotite, granodiorite, horneblende, biotite andesites and rhyolite. Mineralization is found mostly in the dacitic tuff, grading downward into chalcopyrite in basalt and QMD rocks. There is little gold mineralization.

Hugo Dummett Deposits

The Hugo Dummett Deposits consist of Hugo South, Hugo North and the Hugo North Extension. These deposits represent a continuous zone of mineralization that is elongated in a north-north-easterly direction over a strike length of at least 3 km. While mineralization of the Hugo Dummett Deposits is virtually continuous, IMMI has divided the mineralized zone into two deposits (Hugo South and a combined Hugo North and Hugo North Extension) for the purposes of resource estimation, development and mine planning. Hugo South and Hugo North are separated by a 110 degree striking sub-vertical fault that displaces Hugo North vertically down a modest distance from Hugo South. Hugo North Extension represents the extension of the Hugo North deposit into the Shivee Tolgoi License.

The Hugo Dummett Deposits occur in a northerly striking, moderately to steeply east dipping monocline that is bounded and intruded by several faults, including a near vertical fault that controls the western edge of the deposit known as the West Bat Fault and a near vertical fault that controls the eastern edge of the deposit known as the East Bat Fault. The host rocks to the deposit are basalt and minor volcaniclastic strata of the Alagbayan Formation and QMD intrusive rocks. These rocks are overlain by dacite tuffs and breccias that form a sequence approximately 100 m to 200 m thick. Overlying the dacite tuffs are sedimentary and volcanic rocks of the upper Alagbayan Formation and Sainshandhudag Formation that is up to 600 m thick in places. Intrusive into main rock formations are a series of QMD intrusions that host most of the mineralization.

The width of the mineralized zone on the Hugo Dummett deposit varies along strike from 200 m to in excess of 500 m. Mineralization dips generally to the east from as low as 40 degrees to up to 80 degrees, but is generally above 60 degrees and increases to sub-vertical at the northern end of Hugo North.

Hugo South consists of a higher copper to gold ratio than Hugo North, averaging 10 to one copper to gold in most of the deposit. It is closer to the surface than Hugo North, with the lowest portion of the deposit approximately 700 m below surface compared to 1,500 m below the surface for Hugo North. Mineralization is

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centred on a high-grade zone typically grading in excess of 2% copper within a series of intense quartz stockwork veining which, in much of the deposit, is localized within narrow QMD intrusions and extends into the enclosing basalt and dacite tuff. The sulphide mineralization consists of chalcopyrite, bornite, chalcocite and pyrite. The sulphides are zoned, with bornite, chalcocite and tennantite comprising the highest grades, often in excess of 2.5% copper, then grading outwards to chalcopyrite at between 1% to 2% copper and then pyrite-chalcopyrite and other minerals grading at less than 1% copper. The gold-rich QMD does not occur in Hugo South, with the result that the gold grades are typically less than 0.1 g/t while the late, weakly mineralized QMD forms the base of the deposit.

Hugo North contains the same high-grade copper zone as Hugo South, consisting of a zone of intense stockwork to sheeted quartz veins centred on QMD intrusions and extending into the adjacent Alagbayan Formation basalt. Unlike Hugo South, the Hugo North quartz veining also hosts significant gold mineralization. The copper mineralization in the high-grade zone is also greater, at up to 3% to 5% copper, and the main zone is accompanied by a moderate to high-grade copper and gold values in nearby QMD intrusions below and to the west of the intense vein zone. In other respects, Hugo North and Hugo South have similar mineralogy and zonation patterns. Bornite is dominant in the highest grade part of the deposit, at 3% to 5% copper and is zoned outward to chalcopyrite at approximately 2% copper. Copper also occurs at grades of less than 1% in pyrite-chalcopyrite with other minerals and contained mostly in the dacitic tuff sequence.

All of the deposits display alteration zones, including K-silicate, advanced argillic, muscovite/sericite and intermediate argillic styles. The copper in the deposits also correlates with elevated abundances of silver, selenium and tellurium. Small amounts of zinc, arsenic, lead and mercury also occur with or near the high-grade zone.

On the Hugo North Extension, mineralization is similar to that characterizing the northern part of the Hugo North deposit. High copper grades are associated with equally elevated gold values, with copper and gold ratios typically around 2 to 4 to 1. The most significant geological difference between the Hugo North Extension and the main deposit to the south is the greater structural complexity present in the former. This structural complexity is manifested in a more variable strike and steeper dip to the mineralized zone, a higher prevalence of faults, and structurally-induced discontinuities in the high-grade zone. These features are the result of post-mineral deformation.

Both the mineralized zone and lithologic contacts in the enclosing and overlying rocks display an abrupt right-hand stepover of around 200 m, starting at the border of the deposit with the main Hugo North deposit. Drilling in this zone during 2006 has confirmed that this stepover is a flexure/fold with a short, east-west striking limb, rather than a fault offset. North of the flexure, grade continuity is more difficult to predict, and the western margin of the deposit consists of a zone of complex faulting. These faults typically result in a sliver of weakly- to moderately- mineralized QMD lying between the subvertical high-grade deposit core, and non-mineralized Devonian and Carboniferous rocks to the west of the fault system.

Exploration

IMMI’s exploration at Oyu Tolgoi has consisted mainly of remote sensing and geophysical methods, including satellite image interpretation, detailed ground magnetics, Bouger gravity and gradient array IP, as well as extensive drilling. These activities have enabled IMMI to construct detailed geophysical and geological mapping of the entire property, as well as the nearby mining licenses owned by IMMI, and have supplemented the understanding of the property derived from drilling. Outcropping prospects, including Southwest, South and Central Oyu, have been mapped at 1:1,000 scale, while the central part of the exploration block was mapped at 1:5,000 scale. The entire remaining exploration block has been mapped at 1:10,000 scale. In 2004, extensive surface trenching by excavators and shallow overburden RC drilling was conducted to provide

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bedrock geology over the extensive areas devoid of outcrop. As a result the geology is well defined over the entire 10 km by 8 km concession block.

Gradient array IP has been conducted on north to south, and subsequently east to west lines at 200 m line spacing, with electrode spacing up to 11 km. A further IP survey covered the deposit areas with a more detailed program using multiple electrode spacing. An airborne magnetometer was flown by BHP in the late 1990s at a height of 100 m on 300 m spaced, east to west oriented lines. IMMI conducted magnetometer surveys on the property, with the northern half using east to west oriented lines on 50 m intervals with 25 m spaced readings and Southern Oyu deposits using a north to south orientation for 5 m intervals on 25 m spaced lines.

A gravity survey was conducted, controlled by GPS, with readings on deposit areas taken on 50 m centres and on the extremities at 100 m centres. The Bouger map was reduced to residual gravity for contouring. Telluric electromagnetic surveying was conducted over the eastern half of the concession to identify smaller drainage basins that could have channelled copper-rich waters during the Cretaceous Period.

In late 2004 IMMI began to extend its exploration program to the outlying Oyu Tolgoi concessions, including the mining licences 6708A, 6710A and 6711A and exploration license 3677X that adjoins and extends the southern limits of the mining concessions. A number of chargeability anomalies with similarities to the Oyu Tolgoi anomaly were discovered on the other concessions and IMMI has conducted diamond drilling with negative results to date. Additional evaluation work will continue to be carried out to determine the extent to which other chargeability anomalies might contain sulphide mineralization or precious metals.

IMMI initiated exploration work on the Shivee Tolgoi Property in November 2004 following the signing of the earn-in agreement with Entree. Prior to that time, Entrée had undertaken geochemical remote sensing, geophysics testing, such as ground magnetics, Bouger gravity and pole-dipole geophysical surveying, and geological mapping. Starting at the northern boundary of the OT License, an IP survey was run on 100 m spaced lines oriented east-west to trace the northern projection of the Hugo North Deposit. This initial IP survey used gradient array with 11,000 m AB electrode spacing, covered an area extending 5.6 km north of the boundary and 10 km in width. Subsequent IP surveys covering smaller areas within the larger area were carried out with gradient arrays. The IP surveys resulted in the delineation of a significant chargeability feature being traced for approximately 4 km north along strike of the Hugo North deposit. Additional IP chargeability targets were also revealed 2.5 km to 3 km west of the Hugo North trend and are referred to as the Eagle anomalies.

Drilling

Diamond drill holes are the most significant source of geological and grade data for the Oyu Tolgoi Project. From the start of IMMI’s diamond core drill program in 2001 to February 1, 2007, IMMI has drilled approximately 680,000 m of core in over 1,400 drill holes. IMMI currently has 6 drill rigs operating on the property.

IMMI has relied on wireline methods for all drilling, utilizing HQ and NQ size core and some PQ size core for metallurgical testing. At Hugo North, virtually all holes are initiated in PQ size core to a depth of at least 450 m to 550 m. The rest of the drill hole is then continued using HQ or NQ sized core. On two occasions PQ coring was extended to depth of 1,450 m, allowing IMMI to collect large diameter core from the deep Hugo North deposit. Upon completion of all holes, the collar and anchor rods on drill holes are removed, and a PVC pipe is inserted in the hole. Each hole collar is marked by a cement block inscribed with the hole number. The holes are not grouted or back filled with cement so as to allow re-entry of individual holes for surveying checks or to permit IMMI to drill new daughter holes. In future, some holes may have to be grouted or cemented to keep near surface water from entering the underground mine workings.

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Drill hole collars are located respective to a property grid by either global positioning system or theodolite and electronic distance measuring instruments. Holes are drilled at an inclination of between 45° and 90°, with the majority between 60° and 70°. The drill contractors take down-hole surveys about every 50 m. Where magnetite is present that will affect the deviation of the compass readings in the survey instruments, gyro compasses are used that are not affected by magnetism in the rock.

IMMI uses standard logging and sampling conventions to capture information from the drill core. The core is logged in detail onto paper logging sheets, and the data are then entered into the project database. The core is photographed prior to being sampled, and the digital photographs are linked to the drill logs enabling the geologist to quickly access specific photographs for any given metre. Drill core is then stacked on pallets in an organized “core farm”. Core recovery in the mineralized units has been usually between 95% and 100%.

IMMI’s current drill program continues to focus on testing the extent to which the mineralized zone of Hugo North extends into the Shivee Tolgoi Property and testing satellite deposits throughout the Oyu Tolgoi Property. IVN is also conducting RC drilling to define the clay cover on the property and underlying bedrock geology for the purpose of a proposed tailings impoundment area.

Sampling, Analysis and Security

IMMI’s sampling procedure includes the collection of core samples taken on continuous 2 m intervals down each drill hole, excluding dykes that extend more than 10 m along the core length. One-half of each NQ and HQ core and one-quarter of each PQ core is taken in the sampling.

The core is split with a rock saw, flushed regularly with cool water. To prevent sampling bias, the core is marked with a continuous linear cutting line before being split. Samples are placed in cloth bags and sent to an on-site preparation facility owned and managed by SGS Mongolia LLC (“SGS Mongolia”) of Australia for processing.

Core samples are initially assembled into groups of 15 or 16, and then interspersed with four or five quality control samples to make up a batch of 20. The quality control samples comprise one duplicate split core sample and one uncrushed field blank, which are inserted prior to sample preparation, a reject or pulp preparation duplicate, which is inserted during sample preparation, and one or two standard reference material samples, which are inserted after sample preparation.

The prepared samples are placed in wooden shipping boxes, locked, sealed with tamper-proof, numbered tags and shipped under the custody of IMMI to Ulaanbaatar, where they are assayed at a facility operated by SGS Mongolia.

Split core samples are crushed to 90% minus 2 to 3 millimetres. A one kg subsample is then riffle split from the crushed sample and then pulverized to 90% minus 200 mesh pulp. A 150 gram sub-sample is split off by taking multiple scoops from the pulverized 200 mesh pulp, which is then placed in a sealed kraft envelope.

All samples are routinely assayed for gold, copper, arsenic and molybdenum. Samples are digested with nitric, hydrochloric, hydrofluoric and perchloric acids to dryness before being leached with hydrochloric acid to dissolve soluble salts and made to volume with distilled water. Gold is determined using fire assay fusion, while copper and molybdenum are determined using atomic absorption spectroscopy.

Upon receipt of assay results, values for reference material samples and filed blanks are tabulated and compared to an established round robin program. Assay results that deviate from round robin program results beyond pre-set parameters are rejected and subject to re-assay. Until January 2006, IMMI also performed check assays at the rate of one per batch of 20 samples.

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The sampling procedure used by IMMI was developed by an independent consultant hired to implement a formal quality assessment and quality control (“QA/QC”) program. IMMI adopted the program in April 2002. The original samples taken from diamond drilling at Southwest Oyu were assayed prior to implementation of the QA/QC program described above. A re-assay program of these early samples indicated a positive bias in the original gold and copper assays of certain samples. Accordingly, resource estimates covering Southwest Oyu include a proportional adjustment of the grades of a number of pre-OTD231 gold assays and copper assays to account for this bias. Since the implementation of the full QA/QC program, IMMI has not been required to conduct re-assay programs or make adjustments for bias to its assay results for subsequent resource estimations.

In preparation for feasibility level metallurgical testing IMMI has conducted a trace element analytical program to map the distribution of potential penalty elements within the deposits. Pursuant to this program, IMMI has prepared 1 in 5 sample composites from reject -200 mesh pulps representing all drill core intersections in the deposits. These samples are sent to an independent laboratory in Canada for 42 element ICP analysis plus sulphur, mercury, uranium and fluorine. Arsenic and fluorine are currently being modelled to provide a global distribution of the potential penalty elements to facilitate blending strategies if required to reduce the effects of these elements in the concentrates.

Mineral Reserves and Resources

The estimates of mineral reserves and resources on the Oyu Tolgoi Project were classified using logic consistent with the CIM definitions referred to in NI 43-101. The most current estimate of mineral resources for the Oyu Tolgoi Project were prepared under the supervision of Harry Parker P. Geo. of AMEC and are contained in the Oyu Tolgoi Technical Report. An estimate of mineral reserves on the Southern Oyu Deposits has been prepared by GRD Minproc, and is also included in the Oyu Tolgoi Technical Report.

In the Oyu Tolgoi Technical Report, a consolidated resource estimate for the Oyu Tolgoi Property is reported as follows:

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Total Oyu Tolgoi Project Resources ⁽¹⁾⁽²⁾
(based on a 0.60% copper equivalent cut-off)⁽³⁾

									Contained Metal(5)
Resource			Cu		Au		CuEq(4)		Cu		Au		CuEq(4)
Category	Tonnes		(%)		(g/t)		(%)		(‘000 lbs)		(ounces)		(‘000 lbs)
Measured		101,590,000		0.64		1.10		1.34		1,430,000		3,590,000		3,000,000
Indicated		1,285,840,000		1.38		0.42		1.65		39,120,000		17,360,000		46,770,000
Measured + Indicated		1,387,430,000		1.33		0.47		1.63		40,680,000		20,970,000		49,860,000
Inferred		1,397,130,000		0.98		0.24		1.13		30,190,000		10,780,000		34,810,000

Notes:
(1)	Mineral resources are not mineral reserves until they have demonstrated economic viability based on a feasibility study or pre-feasibility study. Mineral resources are reported inclusive of mineral reserves.
(2)	This chart includes estimated resources on the Hugo North Extension Deposits located on the Shivee Tolgoi Property, which property is owned by Entrée but subject to earn-in rights by IVN. The estimate includes indicated resources of 117,000,000 tonnes grading 1.8% copper and 0.61 g/t gold and inferred resources of 95,500,000 tonnes grading 1.15% copper and 0.31 g/t gold at a 0.6% cut-off grade on the Hugo North Extension.
(3)	The 0.6% CuEq cut-off has been used to enable comparison with previous disclosures.
(4)	CuEq has been calculated using assumed metal prices ($0.80/lb. for copper and $350/oz for gold); %CuEq. = % Cu + Au (g/t) x (11.25/17.64).
(5)	The contained gold and copper represent estimated contained metal in the ground and have not been adjusted for the metallurgical recoveries of gold and copper.

The estimates were based on 3D block models utilizing commercial mine planning software (MineSite®). Industry-accepted methods were used to create interpolation domains, these domains were based upon mineralization and geology. Grade estimation was performed by ordinary kriging. A separate resource model was prepared for each of the deposits. Only hypogene mineralization was estimated, with the exception of a zone of supergene mineralization at Central Oyu. The estimation plans, or sets of parameters used for estimating blocks, were designed using a philosophy of restricting the number of samples for local estimation, as it was found to be an effective method of reducing smoothing and producing estimates that match the Discrete Gaussian change-of-support model and ultimately the actual recovered grade-tonnage distributions.

Modelling consisted of grade interpolation by ordinary kriging. Only capped grades were interpolated in the Southern Oyu and Hugo South Deposits. Nearest neighbour grades were interpolated for validation purposes. For both copper and gold, on all deposits except Hugo South, an outlier restriction was used to control the effect of high-grade composites. In the Southern Oyu Deposits, resource grades were also adjusted to reflect likely occurrences of internal and contact dilution from unmineralized post-mineral dykes. Validation procedures included Discrete Gaussian change-of-support method, comparisons using a nearest neighbour model and visual checks.

The base case CuEq cut-off grade assumptions for each deposit were determined using cut-off grades applicable to mining operations exploiting similar deposits.

37

Southern Oyu Resources

The mineral resource grade model on the Southern Oyu Deposits was tabulated above a 0.30% copper equivalent cut-off grade within a pit shell approximating a copper price of $1.15/lb copper and $450/oz gold. These parameters were used as they approximate the effective copper equivalent cut-off grade and pit shell in the reserve estimate on the Southern Oyu Deposits. The grade and tonnages, at a range of copper equivalent cutoff grades are reported below.

Southern Oyu Deposits ⁽¹⁾⁽²⁾

									Contained Metals(4)
	CuEq		Tonnage		Cu		Au		CuEq		Cu		Au		CuEq (3)
Southern Oyu Deposits	Cutoff		(t)		(%)		(g/t)		(%) (3)		(‘000 lb)		(oz)		('000 lb)
Measured		1.0		59,550,000		0.77		1.55		1.76		1,011,000		2,970,000		2,311,000
		0.7		84,140,000		0.69		1.25		1.49		1,280,000		3,380,000		2,764,000
		0.6		101,590,000		0.65		1.09		1.34		1,456,000		3,560,000		3,001,000
		0.5		115,180,000		0.61		1.00		1.25		1,549,000		3,700,000		3,174,000
		0.4		123,440,000		0.59		0.95		1.20		1,606,000		3,770,000		3,266,000
		0.3		126,690,000		0.58		0.93		1.17		1,620,000		3,790,000		3,268,000
		0.25		127,550,000		0.58		0.92		1.17		1,631,000		3,770,000		3,290,000
		0.2		127,800,000		0.58		0.92		1.17		1,634,000		3,780,000		3,296,000
Indicated		1.0		102,330,000		0.85		0.82		1.38		1,918,000		2,700,000		3,113,000
		0.7		279,850,000		0.71		0.50		1.02		4,380,000		4,500,000		6,293,000
		0.6		430,830,000		0.63		0.40		0.89		5,984,000		5,540,000		8,453,000
		0.5		617,530,000		0.57		0.35		0.79		7,760,000		6,950,000		10,755,000
		0.4		827,050,000		0.51		0.30		0.70		9,299,000		7,980,000		12,763,000
		0.3		992,400,000		0.47		0.27		0.64		10,283,000		8,610,000		14,002,000
		0.25		1,067,830,000		0.45		0.26		0.61		10,594,000		8,930,000		14,360,000
		0.2		1,143,710,000		0.43		0.25		0.59		10,842,000		9,190,000		14,877,000
Measured+Indicated		1.0		161,880,000		0.82		1.09		1.52		2,926,000		5,670,000		5,425,000
		0.7		363,990,000		0.70		0.67		1.13		5,617,000		7,840,000		9,068,000
		0.6		532,420,000		0.64		0.54		0.98		7,512,000		9,240,000		11,503,000
		0.5		732,710,000		0.57		0.45		0.86		9,207,000		10,600,000		13,892,000
		0.4		950,490,000		0.52		0.38		0.76		10,896,000		11,610,000		15,926,000
		0.3		1,119,100,000		0.48		0.35		0.70		11,843,000		12,590,000		17,270,000
		0.25		1,195,370,000		0.46		0.33		0.67		12,123,000		12,680,000		17,657,000
		0.2		1,271,510,000		0.45		0.32		0.65		12,614,000		13,080,000		18,221,000
Inferred		1.0		3,750,000		0.91		0.48		1.22		75,000		60,000		101,000
		0.7		19,420,000		0.62		0.39		0.87		265,000		240,000		372,000
		0.6		47,390,000		0.51		0.35		0.74		533,000		530,000		773,000
		0.5		103,190,000		0.43		0.31		0.63		978,000		1,030,000		1,433,000
		0.4		181,700,000		0.38		0.26		0.55		1,522,000		1,520,000		2,203,000
		0.3		266,820,000		0.34		0.23		0.48		2,000,000		1,970,000		2,824,000
		0.25		318,380,000		0.32		0.21		0.45		2,246,000		2,150,000		3,159,000
		0.2		394,850,000		0.29		0.19		0.40		2,524,000		2,410,000		3,482,000

Notes:
(1)	Mineral resources are not mineral reserves until they have demonstrated economic viability based on a feasibility study or pre-feasibility study. Mineral resources are reported inclusive of mineral reserves.
(2)	The resources shown above at a 0.3% CuEq Cut-off are inclusive of the resources tabulated at the 0.6 CuEq cutoff in the consolidated resource statement.
(3)	CuEq has been calculated using assumed metal prices ($0.80/lb. for copper and $350/oz for gold); %CuEq. = % Cu + Au (g/t) x (11.25/17.64).
(4)	The contained gold and copper represent estimated contained metal in the ground and have not been adjusted for the metallurgical recoveries of gold and copper.

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In the Southwest Gold Zone at Southwest Oyu, drilling is approximately on a 50 m sample spacing. Inspection of the model and drill hole data on plans and sections in the Southwest Gold Zone area, combined with spatial statistical work and investigation of confidence limits in predicting planned quarterly production showed good geologic and grade continuity. When taken together with all observed factors, it was determined that the blocks covered by this data spacing in the Southwest Gold Zone area may be classified as a measured mineral resource. A three-hole rule was used where blocks containing an estimate resulting from three or more samples from different holes (all within 55 m and at least one within 30 m) were classified as measured mineral resource.

The bulk of the remainder of the Southern Oyu Deposits were estimated at an indicated resource level. The drill spacing is at a nominal 70 m on and between sections. Geologic and grade continuity is demonstrated by inspection of the model and drill hole data in plans and sections over the various zones, combined with spatial statistical work and investigation of confidence limits in predicting planned annual production. A two-hole rule was used where blocks containing an estimate resulting from two or more samples from different holes. For the Southwest Oyu Deposit the two holes needed to be within 75 m, with at least one hole within 55 m. For the remaining deposits, both holes needed to be within 65 m, with at least one hole within 45 m to be classified as indicated mineral resources. All interpolated blocks that did not meet the criteria for either measured or indicated mineral resources were assigned as inferred mineral resources if they fell within 150 m of a drill hole composite.

Hugo Dummett Mineral Resources

A drill spacing of between 135 — 150 m along strike and 75 m to 100 m down dip was adopted for the classification of indicated resource blocks at Hugo Dummett. Blocks that do not meet these criteria but that are within 150 m of a drill-hole composite are classified as inferred resource. Blocks outside of 150 m from a borehole composite are not classified.

For the Hugo North resource estimate, IMMI created three-dimensional mineralized shells or envelopes based on copper grades of 0.6%, and a quartz vein percentage of 15%. For gold interpolation IMMI created two sets of grade shells, one at 0.3 g/t gold threshold and one at 1.0 g/t gold thresh-hold. The shapes were checked for interpretational consistency in section and plan. These shells were then used as interpolation domains. Copper grades for blocks within the copper domains in each deposit or zone were estimated with a hard boundary between the shells. Gold grades for blocks within the gold zone in Hugo North were also estimated with a hard boundary. The background estimation domain used all composites outside of the grade shells.

In Hugo South, a 0.6% copper shell and a 2% copper shell were used to constrain ordinary kriging. All blocks that fell within 150 m of a drill composite were assigned to an inferred mineral resource category. All other blocks were not included in the resource estimate.

The resources of the Hugo North Deposit were updated at an effective date of February 20, 2007. This update included drilling that was completed up to the 1^st of November 2006.

39

Hugo Dummett Deposits — Mineral Resources at 0.6% copper equivalent cut-off⁽¹⁾

									Contained Metal(3)
	Tonnage		Cu		Au		CuEq(2)		Cu		Au		CuEq(2)
Deposit	(t)		(%)		(g/t)		(%)		(‘000 lb)		(oz)		('000 lb)
Indicated (Hugo North)		703,200,000		1.82		0.39		2.07		28,215,000		8,820,000		32,091,000
Indicated (Hugo North Extension)(4)		117,000,000		1.80		0.61		2.19		4,643,000		2,290,000		5,649,000
Inferred (Hugo North)		722,800,000		0.97		0.30		1.17		15,457,000		6,970,000		18,644,000
Inferred (Hugo North Extension)(4)		95,500,000		1.15		0.31		1.35		2,421,000		950,000		2,842,000
Inferred (Hugo South)		490,330,000		1.05		0.09		1.11		11,350,000		1,420,000		12,000,000
Total
Indicated (Hugo North and Hugo North Extension(4))		820,200,000		1.82		0.42		2.08		32,910,000		11,080,000		37,611,000
Inferred (Hugo North, Hugo South and Hugo North Extension(4))		1,308,630,000		1.02		0.22		1.16		29,430,000		9,260,000		33,470,000

Notes:
(1)	Mineral resources are not mineral reserves until they have demonstrated economic viability based on a feasibility study or pre-feasibility study. IVN reports mineral resources inclusive of mineral reserves.
(2)	CuEq has been calculated using assumed metal prices ($0.80/lb. for copper and $350/oz for gold); %CuEq. = % Cu + Au (g/t) x (11.25/17.64).
(3)	The contained gold and copper represent estimated contained metal in the ground and have not been adjusted for the metallurgical recoveries of gold and copper.
(4)	The Hugo North Extension is located on the Shivee Tolgoi Property, which property is owned by Entrée but subject to earn-in rights in favour of the Corporation.

A further breakdown of the mineral resource inventory of the Hugo North and Hugo North Extension Deposits is set forth below.

40

Hugo North Mineral Resource Inventory⁽¹⁾
Indicated

										Contained Metal(3)
Class	CuEq	Tonnage		Cu		Au		CuEq(2)		Cu		Au		CuEq(2)
Hugo North Deposit	Cutoff	(t)		(%)		(g/t)		(%)		(‘000 lb)		(oz)		('000 lb)
Indicated (Hugo North)	3.5		125,300,000		3.74		0.93		4.34		10,331,000		3,750,000		11,989,000
	3		175,400,000		3.49		0.84		4.03		13,496,000		4,740,000		15,584,000
	2		276,900,000		3.03		0.69		3.47		18,497,000		6,140,000		21,183,000
	1		541,600,000		2.15		0.46		2.44		25,672,000		8,010,000		29,134,000
	0.6		703,200,000		1.82		0.39		2.07		28,215,000		8,820,000		32,091,000
	0.3		798,200,000		1.65		0.35		1.87		29,036,000		8,980,000		32,907,000
Indicated (Hugo North Extension)(4)	3.5		22,300,000		3.68		1.43		4.59		1,809,000		1,030,000		2,257,000
	3		32,000,000		3.36		1.29		4.18		2,370,000		1,330,000		2,949,000
	2		52,300,000		2.84		1.09		3.53		3,275,000		1,830,000		4,070,000
	1		84,800,000		2.22		0.80		2.73		4,150,000		2,180,000		5,104,000
	0.6		117,000,000		1.80		0.61		2.19		4,643,000		2,290,000		5,649,000
	0.3		137,900,000		1.59		0.52		1.92		4,834,000		2,310,000		5,837,000
Total Indicated	3.5		147,600,000		3.73		1.01		4.38		12,138,000		4,790,000		14,253,000
(Hugo North and	3		207,400,000		3.47		0.91		4.05		15,866,000		6,070,000		18,518,000
Hugo North	2		329,200,000		3.00		0.76		3.48		21,773,000		8,040,000		25,257,000
Extension(4))	1		626,400,000		2.16		0.51		2.48		29,829,000		10,270,000		34,248,000
	0.6		820,200,000		1.82		0.42		2.08		32,910,000		11,080,000		37,611,000
	0.3		936,200,000		1.64		0.38		1.88		33,849,000		11,440,000		38,803,000

Inferred

Class										Contained Metal(3)
Hugo North	CuEq	Tonnage		Cu		Au		CuEq(2)		Cu		Au		CuEq(2)
Deposit	Cutoff	(t)		(%)		(g/t)		(%)		(‘000 lb)		(oz)		('000 lb)
Inferred (Hugo North)	>= 3.5		3,600,000		3.06		1.41		3.96		243,000		160,000		314,000
	>= 3		12,900,000		2.80		0.98		3.43		796,000		410,000		975,000
	>= 2		54,700,000		2.08		0.91		2.66		2,508,000		1,600,000		3,208,000
	>= 1		385,500,000		1.25		0.41		1.51		10,624,000		5,080,000		12,833,000
	>= 0.6		722,800,000		0.97		0.30		1.17		15,457,000		6,970,000		18,644,000
	>= 0.3		1,108,200,000		0.76		0.24		0.92		18,568,000		8,550,000		22,477,000
Inferred	>= 3.5		1,400,000		3.32		1.03		3.98		102,000		50,000		123,000
(Hugo North Extension)(4)	>= 3		3,600,000		2.97		0.88		3.53		236,000		100,000		280,000
	>= 2		11,000,000		2.20		0.86		2.75		534,000		300,000		667,000
	>= 1		62,200,000		1.39		0.39		1.64		1,906,000		780,000		2,249,000
	>= 0.6		95,500,000		1.15		0.31		1.35		2,421,000		950,000		2,842,000
	>= 0.3		152,400,000		0.85		0.23		1.00		2,856,000		1,130,000		3,360,000
Total Inferred (Hugo North and Hugo North Extension(4))	>= 3.5		5,000,000		3.13		1.30		3.96		345,000		210,000		437,000
	>= 3		16,500,000		2.84		0.96		3.45		1,033,000		510,000		1,255,000
	>= 2		65,700,000		2.10		0.90		2.68		3,042,000		1,900,000		3,882,000
	>= 1		447,700,000		1.27		0.41		1.53		12,535,000		5,900,000		15,101,000
	>= 0.6		818,300,000		1.00		0.30		1.19		18,040,000		7,890,000		21,468,000
	>= 0.3		1,260,500,000		0.77		0.24		0.93		21,398,000		9,730,000		25,844,000

Notes:
(1)	Mineral resources are not mineral reserves until they have demonstrated economic viability based on a feasibility study or pre-feasibility study.

41

(2)	The contained gold and copper represent estimated contained metal in the ground and have not been adjusted for the metallurgical recoveries of gold and copper.
(3)	CuEq has been calculated using assumed metal prices ($0.80/lb. for copper and $350/oz for gold); %CuEq. = % Cu + Au (g/t) x (11.25/17.64).
(4)	The Hugo North Extension is located on the Shivee Tolgoi Property, which property is owned by Entrée but subject to earn-in rights in favour of the Corporation.

A further breakdown of the mineral resource inventory of the Hugo South Deposit is set forth below.

Hugo South Mineral Resource Inventory⁽¹⁾

										Contained Metal (3)
Hugo South	CuEq	Tonnage		Cu		Au		CuEq (2)		Cu		Au		CuEq (3)
Deposit	Cutoff	(t)		(%)		(g/t)		(%)		(‘000 lb)		(oz)		('000 lb)
Inferred	>= 3.5		5,440,000		3.71		0.25		3.87		440,000		40,000		460,000
	>= 3		11,950,000		3.38		0.21		3.51		890,000		80,000		920,000
	>= 2		38,900,000		2.67		0.15		2.77		2,290,000		190,000		2,380,000
	>= 1		203,590,000		1.53		0.09		1.59		6,870,000		590,000		7,140,000
	>= 0.6		490,330,000		1.05		0.09		1.11		11,350,000		1,420,000		12,000,000
	>= 0.3		1,105,600,000		0.67		0.07		0.72		16,330,000		2,490,000		17,550,000

Notes:
(1)	Mineral resources are not mineral reserves until they have demonstrated economic viability based on a feasibility study or pre-feasibility study.
(2)	CuEq has been calculated using assumed metal prices ($0.80/lb. for copper and $350/oz for gold); %CuEq. = % Cu + Au (g/t) x (11.25/17.64).
(3)	The contained gold and copper represent estimated contained metal in the ground and have not been adjusted for the metallurgical recoveries of gold and copper.

Southern Oyu Mineral Reserves

In March 2007 GRD Minproc restated the mineral reserve for the Southern Oyu Deposits originally estimated in January 2006. The mineral reserve estimate upgraded the measured and indicated gold and copper resources contained within the planned open-pit deposits in the Southern Oyu Deposits established in the IDP to proven and probable mineral reserve categories. Total proven and probable open-pit reserves are estimated to be 930 million tonnes, with a grade of 0.50% copper and 0.36 g/t gold, containing 8.9 billion pounds of recovered copper and 7.6 million ounces of recovered gold.

Southern Oyu Mineral Reserves — March 2007

									CuEq		Recovered		Recovered
			NSR		Copper		Gold		Grade		Copper		Gold
Class	Ore (tonnes)		$/t		(%)		(g/t )		(%)		(‘000 lbs)		(ounces)
Proven		127,000,000		15.91		0.58		0.93		1.18		1,451,000		2,833,000
Probable		803,000,000		7.96		0.48		0.27		0.66		7,431,000		4,768,000
Total		930,000,000		9.05		0.50		0.36		0.73		8,882,000		7,601,000

The key parameters in determining the Mineral Reserves are (i) assumed metal prices of $400/oz gold and $1.00 /lb copper; and (ii) block value net smelter return (“NSR”) cut-off grades of $3.54 per tonne for Southwest Oyu and $3.39 per tonne for Central Oyu. There was no change in the mineral reserve compared to the previously stated mineral reserves.

42

In order to estimate the reserves, GRD Minproc relied on the resource model from its prior resource estimates on the Southern Oyu deposits, and then applied proposed mining parameters for mining and processing. This includes pit designs using industry standard mining software, assumed metal prices as described above and smelter terms as set forth in the Oyu Tolgoi Technical Report. The estimate was prepared on a simplified project analysis on a pre-tax basis. Key outstanding variables noted by GRD Minproc include the Stability Agreement, marketing matters, water supply and management and power supply.

Only measured resources were used to report proven reserves and only indicated resources were used to report probable reserves. The mineral reserve estimate is primarily based on the IDP and relies only on the resources and facilities necessary to support an open pit mine at Oyu Tolgoi. The report only considers mineral resources in the measured and indicated categories, and engineering that has been carried out to a pre-feasibility level or better to state the open pit mineral reserve.

Comparison of the reserve to the total tonnes in the resource model indicates that at the reserve cut-off grades 100% of measured resource tonnage has been converted to proven mineral reserve. The probable to indicated ratios are: tonnage 75%, recovered copper metal 79% and recovered gold metal 70%. Of the total reserve and total resource within the block model, the reserve resource ratios are: tonnage 55%, recovered copper metal 64% and recovered gold metal 70%.

Mineral Processing and Metallurgical Testing

IMMI initiated a metallurgical testwork program in early 2004 which extended through to 2005. This program was designed to confirm the flotation and comminution response of ores from the Southwest, Central, Hugo South, and Hugo North Deposits. Laboratory batch-scale and pilot-plant flotation testwork programs and laboratory-scale comminution testwork were conducted, as well as work to define fundamental flotation and comminution parameters and confirm laboratory-scale testwork in a SAG pilot-plant test program.

The bench-scale flotation testwork was conducted in three phases. First, a flowsheet was developed and optimized for Southwest Oyu ore. A simple, typical flowsheet for porphyry copper ore treatment was found to work well for all ore types, using a primary grind of 80% passing 150 microns, regrinding to 80% passing 25 microns and two or three stage cleaner flotation.

Following flowsheet definition, locked-cycle tests and batch tests were performed on composites corresponding to ore-release schedules, and batch flotation tests were performed on a large number of spatially distributed samples to gauge the variability of flotation response throughout each orebody. The test results were compared and algorithms developed to relate flotation response to mine model parameters, such as head grade and copper/sulphur ratio, to predict metallurgical response to each ore block in the mine plans.

In parallel with the conventional flotation program, kinetic flotation parameters were measured and fit to a flotation simulator to determine the required flotation residence times and circulating load parameters required for the mine plan.

Toward the end of the test period, additional samples were collected from areas of step-out drilling to the north of the original Hugo North sample locations. The resulting data was used to further develop preliminary algorithms to represent metallurgical parameters of Hugo North ores

Processing is amenable to a conventional mill and flotation plant. As part of the work undertaken in relation to the preparation of the mineral reserve, GRD Minproc undertook a review in late 2005 of the previous study work for the Oyu Tolgoi Project dealing with treating open cut ore and the provision of support facilities. The objective of the review was to confirm the process throughput, metal recoveries, project capital and operating costs for incorporation into this report.

43

In 2006 additional cleaner circuit kinetic testing was conducted on Southern Oyu pit samples. This program was designed to both increase confidence in the metallurgical parameter prediction algorithms and to further enhance the predictive models of flotation behaviour. Concurrent with the Southern Oyu pit program, samples representing each of the upper core of Hugo North were also subjected to kinetic composite and variability testing.

IMMI continues with metallurgical test work on one-quarter of the PQ core samples from the Hugo Dummett Deposits, focused on the southern zone of Hugo North. IMMI is currently conducting grinding tests with a view to providing engineering parameters for throughput assessment of the current grinding circuit design.

IMMI also conducted column leaching test work to assess the potential for copper recovery from heap leaching of both the chalcocite supergene mineralization overlying Central Oyu and from covellite mineralization that underlies the supergene chalcocite blanket. Results of 2006 work have not been analyzed by a qualified person and are expected to be incorporated in the update of the Integrated Development Plan in 2007.

Mine Planning

The fundamental parameters of the mine plan at Oyu Tolgoi were established in the IDP, which was produced in September 2005. The IDP is a preliminary assessment report under the NI 43-101 guidelines and includes inferred mineral resources that are considered too speculative geologically to have economic considerations applied to them that would allow them to be categorised as mineral reserves, and there is no certainty that the preliminary assessment will be realised. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Since the release of the IDP, the resources reported on the Southern Oyu deposits have been upgraded to mineral reserves and updated resource estimates have increased the confidence levels of some resources from inferred to indicated and increased the overall amount of resources on the Hugo Dummett Deposits.

IMMI has continued to advance mine planning, engineering and pre-construction work, and is preparing an updated development plan with a target completion date of the second half of 2007. The updated mine plan will include numerous changes in assumptions and development planning to that reported in the IDP. Updating of the overall mine plan shown in the IDP will be done as a sensitivity analysis to the mineral reserve case.

2005 IDP Mine Plan

The IDP envisions the staged development of the Oyu Tolgoi Project, over a 15-year period, as a major copper and gold mining complex having an ultimate mine life that is expected to exceed 40 years. The IDP consists of a feasibility-level evaluation of an initial, large open-pit mine developed on the near-surface Southern Oyu deposits and a pre-feasibility-and scoping-level evaluation of the associated infrastructure, such as power supply, and at least two very large underground block cave mines at the Hugo Dummett deposits.

It is contemplated that the open pit mine be developed in nine stages. The first three stages cover Southwest Oyu and the Wedge deposit, while later stages would expand to Southern Oyu and Central Oyu. Accordingly, the ore feed will focus on the gold-rich areas of the Southern Oyu deposits for the initial stages. Starting in stage 4 when production moves to South Oyu and Central Oyu, gold grades will drop significantly. The IDP only addresses development of the first four stages of the open pit, with the remaining five stages available to expand the project life beyond the current schedule.

On the Hugo Dummett Deposits, block cave mining is contemplated. This method will require the development of deep production shafts to provide access for personnel, equipment and supplies and for hoisting ore and waste. IMMI is in the process of developing an approximately 1,200 m shaft to access Hugo

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North. The IDP contemplates a total of four shafts for Hugo North over the 15-year build-out. At appropriate depths, IMMI would commence lateral development to extract ore. On Hugo North, IMMI would extract the ore through two rows of lateral development (lifts). Mining would target the 2% plus copper shell identified in Hugo North. The Hugo South Deposit would also be developed through block-cave mining, but only under an expanded production mining scenario.

It is proposed in the IDP that ore be treated in a conventional flotation concentrator, using conventional technology. An ore-processing flow sheet was proposed based upon a large flotation concentrator using conventional 40-foot-diameter semi-autogenous (“SAG”) mills, ball mills and flotation. The current estimates for capacity are 20 million tpy (70,000 tpd) for the plant, with a second facility being built under the expanded case to accommodate a production increase to 40 million tpy (140,000 tpd). The concentrate would then be sold to smelters. During the initial three years of operation, mill feed would be primarily sourced from the Southwest Oyu open pit while the initial underground block cave mine at the copper-rich, higher-grade Hugo North Deposit was being developed. After year 3, production from the Hugo North Deposit would commence. By year 5, Hugo North would be the predominant source of mill feed for the concentrator. By year 6, open-pit production would be curtailed and only stages 1 and 2 of the ultimate nine-stage open-pit mine plan would have been mined. In this Base Case scenario, Hugo North would provide the mill feed to beyond year 40.

Phase 2 of the IDP, the Expanded Case, would be initiated with a decision in year 3 to develop a block-cave mine at the Hugo South Deposit and proceed with the stripping of stages 3 & 4 of the open-pit mine. The capacity of the concentrator would be doubled through the addition of a second SAG milling circuit and related infrastructure increases, to increase Oyu Tolgoi’s combined open-pit and underground production to at least 140,000 tpd by year 7. Hugo North mill feed, combined initially with feed from stages 3 & 4 of the open-pit mine, would ensure that the 140,000 tpd production rate was maintained. By year 12, when production from Hugo South would commence, underground production alone is expected to reach 140,000 tpd.

The IDP indicates that Oyu Tolgoi could produce approximately 35 billion pounds of copper and 11 million ounces of gold over the projected, initial 35-year life of the mine, based on resources delineated as at the date of the IDP, with average annual production at approximately one billion lb of copper and 9,000,000 oz of gold under the Expanded Case.

Following the reporting of the mineral reserve for the Southern Oyu Deposits, the IDP remains relevant in the context of a sensitivity showing overall development of Oyu Tolgoi mineral resources. The IDP financial models were constructed using a base copper price of $1.00/lb and a base gold price of $400/oz, and are based on interpretation of tax, mining and other relevant Mongolian laws in effect at the time. The estimated net present value (“NPV”) of the Oyu Tolgoi Project, assuming the Expanded Case production is developed as scheduled to 140,000 tpd at an 8% discount rate, is $3.44 billion before tax and $2.71 billion after tax. At a 10% discount rate, the NPV is $2.40 billion before tax and $1.85 billion after tax. At an 8% discount rate, the internal rate of return (“IRR”) of the Expanded Case is 19.75% after tax, and the payback period is 6.5 years. The IDP is a preliminary assessment report under the NI 43-101 guidelines and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would allow them to be categorised as mineral reserves, and there is no certainty that the preliminary assessment will be realised. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

The engineering assessment of initial capital required to fund the open-pit mine and the associated milling complex, capable of processing 70,000 tpd, was estimated at $1.15 billion. In addition, $232 million would be expended during the same period to advance the development of the underground Hugo North Mine. This initial expenditure would carry the project through a six-month ramp-up period to reach full production of 70,000 tpd.

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The IDP’s sensitivity analysis shows that the project’s rate of return is most sensitive to changes in the copper price, followed by changes in operating costs, capital costs and copper recovery. The project is far less sensitive to changes in gold price or power costs.

The IDP was prepared in September 2005, prior to the implementation of amendments to the Minerals Law in the Spring of 2006 and without reference to a completed Investment Agreement. The Corporation expects that the updated development plan will include several adjustments to the financial inputs and conclusions set forth in the IDP based on changes to mine planning and changing assumptions regarding price and costs to reflect current realities.

Southern Oyu Open Pit Reserve Financial Results

The reserve estimate for the Southern Oyu Deposit open pit is considered to be the initial stage of development of the entire Oyu Tolgoi mineral resources, and the development parameters for the Southern Oyu Deposit that form the basis of the reserve estimate are contained in the Oyu Tolgoi Technical Report. A detailed financial model was developed based on the open pit mining plan developed for the open pit reserve study. The assumptions used for the financial analysis indicates that the pre-tax project NPV at an 8% discount rate is $177 M and after tax is $122 M. The IRR is 9.89% after tax and the payback period is 5.8 years, relying on an assumed copper price of $1.00/lb and gold price of $400/oz.

Post-IDP Engineering and Construction

Following completion of the IDP, IMMI retained Fluor Canada, Ltd. to review and assess the process criteria and infrastructure stipulated in the previous studies through a Review and Strategic Planning Period (“RSP”). In addition to a detailed review of the process and infrastructure planning, the RSP period also had as its objective the development of definitive contracts between various Fluor entities and IMMI for the design, procurement and construction management of the copper concentrator portion for the Oyu Tolgoi Project. An additional set of contracts were also developed which established Fluor as the overall project management contractor for the project.

Basic engineering was initiated with Fluor Canada Ltd. in April 2006, and by the end of 2006 engineering of the concentrator exceeded 30% complete. In the course of the RSP and engineering work, Fluor has recommended incremental design improvements and adjustments to the mine plan originally established in the IDP that are currently under review by the Corporation. Such adjustments are anticipated to be more definitively addressed in the update to the Integrated Development Plan. Some of the key adjustments contemplated are the implementation of a “starter mine” at Hugo Dummett consisting of a smaller scale block cave mine that would become operational shortly following the commencement of open pit mining operations on the Southern Oyu Deposits, processing approximately 7 million tpy of ore; an overall increase in the initial production rate from 70,000 tpd to approximately 100,000 tpd; and substitution of the large SAG mill originally contemplated in the IDP for two smaller SAG mills, each coupled with two ball mills, that will have a larger overall capacity and mitigate project risk attributed to having only one large SAG mill.

Engineering associated with the extensive infrastructure required for the Oyu Tolgoi project is also progressing and consists of temporary construction and permanent living and messing accommodations, warehousing, administration offices, shops, water supply, effluent treatment, construction and emergency power systems.

To date, only minor construction work required to support the administration and accommodation of the labour force essential to the development of the exploration shafts for Hugo North has been implemented.

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Development to Date

IMMI and the independent consultants working on the mine plan also continue to analyze the data and adjust mine planning parameters based on their increasing understanding of the deposits. IMMI expects that a revised mine plan will be completed as IMMI confirms the basis upon which it decides to amend mine plans and confirms the appropriate adjustments to the development timetable.

IMMI has installed surface facilities associated with an initial shaft on the Hugo Dummett Deposits (“Shaft #1”). In February 2006, IMMI began to sink Shaft #1 and by late March had reached a depth of close to 900 m. It is anticipated that sinking of the shaft will be complete in late 2007. The facilities include a headframe, hoisting facilities, power station, air compressors and ventilation equipment. The design allows for future conversion to permit the shaft to be used as a permanent hoisting facility.

Shaft #1 is being excavated to a diameter of 7.3 m and will be concrete lined to a finished diameter of 6.7 m. The shaft is planned to be sunk to a depth of 1,220 m. After completion of the shaft, drives will be developed at the proposed Lift 1 elevation of the contemplated Hugo North block cave mine. Two main drifts will be developed; one will be aligned with the centre of the orebody and will be developed at undercut level; a second will be developed at the perimeter of the orebody at the extraction level. The drives will enable further resource drilling and will provide geotechnical information to support completion of the mine design.

Engineering and procurement activities for a second shaft (“Shaft #2”) are in progress. Shaft #2 will be a combined production/service shaft and is being designed to accommodate two 54 tonne capacity skips and a cage with a payload capacity of 44 tonnes. The cage will be dimensioned to accept underground mobile equipment and rail equipment. This shaft will have a finished diameter of 10 m and will be sunk to an initial depth of 1,466 m. IMMI contemplates extending the Shaft by a further 300 m in depth at a later stage to provide service cage access to Lift 2 of the proposed Hugo North block cave mine.

Current Exploration Activities

The Corporation completed approximately 77,000 metres of drilling on the Oyu Tolgoi Project during 2006, including exploration on Shivee Tolgoi. Significant geotechnical drilling also was undertaken to locate the shaft farm, specifically for Shaft #2, and evaluate the access route from the shaft farm into the Hugo North block-cave production level. Sterilization drilling was done under the new concentrator site selected by Fluor, the construction camp location and the primary crusher site.

Exploration and sterilization drilling two km east of a proposed airport site, which is approximately six kilometres north of the northern end of the Hugo North extension, has resulted in the discovery of low-grade copper-gold mineralization hosted in basaltic volcanic and quartz monzodiorite intrusive rocks of similar age and composition to the Oyu Tolgoi deposits. Approximately 12,400 metres of the drilling reported was completed in this area. Drilling has been suspended on this target pending review of the results and additional surface geophysical work.

Geotechnical drilling intended to further define the geotechnical characteristics of the Hugo North Deposit continued through the end of 2006 and first quarter of 2007. A total of four holes have been collared and completed on the Hugo North Extension immediately north of the Shivee Tolgoi Property line and two additional holes are in progress. Drilling on the Hugo North Deposit is designed to provide pre-feasibility level information on the caving characteristics of the deposit and geotechnical characteristics on the North West Boundary Fault, which will influence future development decisions on the Hugo North Extension Deposit.

Mongolian Coal Division

Since 2003, IVN has actively pursued the identification and development of coal resources in Mongolia. IVN has advanced this interest through the acquisition of MELs and preservation of coal-related interests in MELs that are prospective for coal deposits, including the retention of all coal rights in connection with a transaction

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involving the transfer of substantial Mongolian landholdings to Asia Gold in 2003. To that end, IVN has established a separate ‘Coal Division’ consisting of its own personnel and operations, with Gene Wusaty appointed as President of the Coal Division in August 2006. The Coal Division has actively explored for potential coal resources in a number of areas throughout southern Mongolia since 2004.

As of the end of 2006 the Coal Division held, directly or indirectly, thirty five MELs totalling over 1.68 million hectares of land in the south Gobi area of Mongolia that are primarily prospective for coal resources. Within these landholdings the Coal Division has identified a number of separate coal deposits or areas of prospective coal mineralization on its properties, including in particular the Nariin Sukhait Project, which prospect has been advanced to the level of resource estimation and is now being subjected to economic analysis for potential mining operations. Legal ownership of the seven MELs constituting the Nariin Sukhait Project is split between Asia Gold and IMMI, with IMMI holding the beneficial right to all coal-related resources in the Asia Gold-held MELs pursuant to the Coal Rights Retention Agreement. Three of these MELs were granted in 2002, renewed in 2005 and will expire in 2007 with one further entitlement to a two year renewal. The remaining 4 MELs were issued in 2003 and renewed in 2006 until 2008, with one further entitlement to a two year renewal.

Coal Reorganization Transaction

In August 2006, Asia Gold’s minority shareholders approved the Coal Reorganization, whereby all of the coal related assets of IVN are to be transferred to Asia Gold in consideration for approximately 82.6 million shares of Asia Gold. As a result of the transaction, the Mongolian coal division will be represented by a stand-alone publicly listed operating company. Upon completion of the transaction, Asia Gold anticipates changing its name to Ivanhoe Coal Ltd.

Completion of the Coal Reorganization is conditional upon the transfer of the relevant MELs to a designated holding company that will assume direct ownership of the Mongolian coal division. These transfers have been subject to delays with the Cadastral Office of the Mineral Resources and Petroleum Authority of Mongolia (the “Cadastral Office”). The transfer applications were finally accepted by the Cadastral Office in October 2006. In March 2007, IVN was notified that twenty-five of the licences, including two key licenses for the Nariin Sukhait Project, received approval from the Cadastral Office. The Corporation and Asia Gold have agreed to extend the closing date of the Coal Reorganization on an indefinite basis in order to accommodate these delays. It is expected that the Coal Reorganization will be completed shortly after the formal license transfer process in Mongolia is concluded.

Nariin Sukhait Project

The bulk of the information in this Section is derived from the Nariin Sukhait Technical Report. Richard D. Tifft and Patrick P. Riley, both qualified persons within the meaning of NI 43-101, prepared the Nariin Sukhait Technical Report on behalf of Norwest.

Project Description and Location

The Nariin Sukhait Project is located in the southwest corner of the Omnogovi Aimag (Province) of Mongolia. The project is within the administrative unit of Gurvantes Soum, 320 km southwest of the provincial capital of Dalanzadgad and 950 km south of Ulaanbaatar.

The project property surrounds and is adjacent to an existing open-pit coal mine (the “MAK Mine”) which is owned and operated by MAK-Qin Hua Mongolian/Chinese Joint Venture (“MAK”). The MAK Mine, held under a mining license covering a 28.8km² area, currently consists of two open-pits.

The resources identified to date on the Nariin Sukhait Project are contained within two contiguous MELs that cover and area of 1,103 km². Since IMMI acquired its initial interest in the property, a total of seven MELs,

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currently encompassing an area of 3,877 km² have been granted that now constitute the Nariin Sukhait Project. The Corporation and Asia Gold are parties to a Coal Rights Retention Agreement dated July 31, 2003, as amended and restated January 31, 2005 pursuant to which the Corporation holds the rights to all coal mineralization in, on or under the properties covered by certain MELs held by Asia Gold, including those covering a portion of the Nariin Sukhait Property. Asia Gold retains the rights to any and all other minerals in, on or under the relevant properties.

MELs are granted by the Mongolian government for a period of three years with the right to extend the period twice for two additional years each. Following a successful exploration program, an exploration license holder can apply for a mining license to any potion of the exploration license. A mining license is granted for a period of 30 years, with the right to extend the period twice for 20 additional years with each extension.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

The Nariin Sukhait Project is located in south-central Mongolia, approximately 40 km north of the border with China, and within the physiographic region of the Gobi Desert. The deposit lies within the administrative unit of Gurvantes Soum within the Omnogovi Aimag. The area currently supports a traditional subsistence economy focused on raising sheep, goats, and camels.

The surface expression of the deposit ranges from flat, gravel-covered desert plains to moderately hilly terrain. Surface elevation ranges from 1515 to l555 m above sea level. Vegetation is sparse, consisting primarily of small shrubs and grasses. The region experiences a continental desert climate. Temperatures typically range from 0 degrees to -30 degrees C in the winter, increasing to 30 degrees to 35 degrees C in the summer months. High winds occur frequently particularly throughout the spring. Average rainfall is approximately 530 mm with most precipitation occurring during the summer months. The weather is acceptable for exploration activities from April through October. Exploration activities are not recommended during the harsh winters; however, the climate is expected to allow year-round mining operations.

An on-site airport has been permitted as of September 2006, and Nariin Sukhait can now be reached via chartered aircraft from Ulaanbaatar. Regular air service is also available from Ulaanbaatar to Dalanzadgad. Travel from Dalanzadgad to the property takes approximately seven hours over unpaved roads. All parts of the property can be reached with four-wheel-drive vehicles.

A new Chinese rail line was completed and became operational during 2006, connecting the Nariin Sukhait area with the interior of China. The railroad terminus is approximately 40 km south of the resource areas at Nariin Sukhait. Coal trucks travel overland from the neighbouring MAK-Mine to the railroad terminus located on the Chinese side of the border. Electrical power is available from a powerline distributing power from China to the MAK Mine. There is currently no surface water available in the immediate area of the Nariin Sukhait deposit; however water supply wells have been drilled as part of an on-going hydrological investigation.

History

The first geological investigations at Nariin Sukhait occurred between 1951 and 1952 and included mapping at a scale of 1:500,000. Coal was first identified at Nariin Sukhait in 1971. The first comprehensive study of the Nariin Sukhait deposit was undertaken in 1991. This study included field mapping, trenching, the drilling of 34 boreholes, analysis of coal quality, and the calculation of resources for the two most promising resource areas, now controlled by MAK-Quin Hua.

The Nariin Sukhait Project is adjacent to and surrounds the MAK Mine, which commenced operating in 2003. The MAK Mine is currently extracting coal from two open pits in the 5 Seam. Annual production is estimated to be approximately 2,000,000 tpy of both thermal and coking blend coal. The mine operates with a mixed

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Chinese and Mongolian workforce of approximately 100 miners. Coal and overburden are removed by excavators and front loaders. Road-hauling tractor-trailer trucks are loaded directly in the mine.

Geology

The coal-bearing rocks at Nariin Sukhait are believed to be of late Permian age. Coal was deposited along the margins of tectonically active continental basins. The region has subsequently undergone Basin and Range style extensional tectonics followed by a period of compressional folding and faulting.

Regional Setting

The South Gobi region of Mongolia reflects a complex geologic history of continental accretion and Basin and Range style crustal extension. The region is dominated by elongate, east-west trending mountain ranges and intervening basins. The intervening basins comprise sediments of Late Cretaceous to Permian age, overlain by a relatively thin Quaternary gravel layer or thin Aeolian deposit. The mountain ranges separating these sedimentary basins comprise mostly crystalline basement rocks dominated by intermediate to high angle faults that show evidence for both compressional and extensional movement.

Coal Occurrences

The most prominent feature relating to the coal deposit at Nariin Sukhait is the arcuate east-west trending Nariin Sukhait fault. The coal bearing section, interpreted to be late Permian in age, is exposed primarily in a window adjacent to the Nariin Sukhait fault. The only place where the fault is exposed is in the MAK Mine, where it appears as an intermediate angle structure (40-50 degrees) in their West pit. The Coal Division holdings at Nariin Sukhait contain two distinct resource areas within the window of upper Permian rocks the South-East Field and the West Field.

Initial work at Nariin Sukhait described the existence of 10 coal seams and estimated the overall thickness of the coal bearing section at 1,370 m. Cumulative thickness of the coal was given as a range of 68 to 250 m, with the bulk of the resources found within the 5 Seam. Exploration activities undertaken by the Coal Division have also focused on the thick coal of the 5 Seam, but additionally have defined further resources in packages of “upper seams” located above this horizon. This work has shown that what was previously named as a single seam often contains a number of discrete coal seams separated by rock partings of highly variable thickness and extent. As such, modeling efforts have required the organization of these coal packages into a number of coal series. The thick seam originally identified as the 5 Seam in outcrop has retained that designation, but the discovery of splits above and below this has required a number of additional correlatable seams to be designated as a series of seams within what is now the 5-Series.

The remainder of the resources are found in the 8, 9, and 10 Series, which each contain a number of discreet coal seams. The 4 Seam and 7 Seam are recognized in a number of drill holes, but do not appear to represent any significant resources. Coal Seams 1 through 3 described in the early work at Nariin Sukhait have not been identified on the property.

Interburden both within and between coal series is highly variable at Nariin Sukhait. Interburden between the series is generally dominated by sandstones and conglomerates, while the partings within the coals are most commonly mudstones and carbonaceous mudstones.

Structural Geology

The South-East Field is located on Coal Division controlled land surrounding the Southeast corner of the MAK mining license. The 5 Seam is currently being mined by MAK in this area along the axis of a poorly defined antiform. This structure trends to the southwest from the East Pit of the MAK Mine and forms the

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basis for the Nariin Sukhait resources here. The coal bearing section is found primarily as a southeast dipping homocline. Coal resources modelled in the South-East Field are almost entirely of the 5 Series.

The West Field is located near the southwest corner of the MAK mining license. Coal resources are found along a southwest striking trend. Previous interpretation of structure in the West Field suggested a southwest plunging antiform. New data, however, has led to the interpretation of a thrust fault system controlling the distribution of coal in this area. This interpretation requires the field to be divided into several distinct resource blocks. The majority of resources are once again found in the 5 Series coal within a southeast dipping coal-bearing sequence. Additionally, a considerable amount of resources are also found in Series 8, 9 and 10.

The geologic structure of the southwest part of the West Field is the most complicated part of the field. Current interpretation shows this area to contain a repeat of the upper series coal seams due to the presence of a thrust fault.

The more steeply dipping rocks of the south limb have been moved over the section to the north, where the units flatten out and show a number of small folds. This scenario can be followed to the northeast.

Deposit Types

The Nariin Sukhait deposit has been subjected to a relatively high degree of tectonic deformation. Coal seams explored to date sit in the hanging wall (upper plate) of an east-west trending, regional thrust fault. The hanging wall stratum has been further modified by secondary folding, normal and reverse faulting. Coal seams within the two fields are typically inclined in excess of 35 degrees. Fold segments and fault-bounded blocks however, generally retain normal stratigraphic thicknesses and continuity. The Geology Type for the South-East and West Fields has been determined to be “Complex”.

Mineralization

Mineralized zones on the Nariin Sukhait Property are found primarily within a zone of upper-Permian sediments exposed in the hanging wall of the Nariin Sukhait fault. Reported mineralization is restricted to the South-East Field and West Field resource areas. Early work adopted the seam nomenclature thereby calling the very thick coal in the middle of the sequence the 5 Seam, and naming the upper seams in ascending order. As exploration work progressed, numerous additional seams and splits were discovered within the overall packages of coal previously described. As correlation and modelling has gone forward, coal seams were named and organized into a series basis as shown in the table below. Thicknesses reported are based on drill intercepts and represent apparent thickness.

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Nariin Sukhait Property Coal Seam Characteristics
South-East Field

Seam/Series	Seam	Count		Thickness Range (m)(1)		Mean Thickness (m)(1)
5	592U		1		21.9 -21.9		21.9
	590U		14		1-23.4		8.8
	580U		15		0.96 - 8.6		4.5
	570U		17		0.6-11.7		4.5
	5U		38		1.04 -74.1		24.2
	SUB		28		0.9 - 53.1		6.0
	S80		26		1.06 - 16.6		3.6
	S70		48		1.2-30.7		8.1
	5		97		0.9 - 156.7		53.4
	SB		44		0.6 - 100.1		15.5
4	4		19		1 - 30.3		7.67

⁽¹⁾ Based on apparent thickness of drill intercepts

West Field
Seam/Series	Seam	Count		Thickness Range (m)(1)		Mean Thickness (m)(1)
10	1050		23		0.34 - 16		2.7
	1040		33		036 - 14		34
	1030		39		05 - 47		22
	1020		49		0.78 - 10.28		3.4
	1010		45		0.6 - 6.08		2.9
	10		57		1.9 - 19.76		9.4
9	998		19		0.48 - 4.16		1.8
	996		15		044 - 55		30
	990		56		0.46 - 5.1		1.6
	980		77		1 - 279		85
	970		68		06 - 918		32
	960		65		06 - 68		22
	950		67		0.46 - 11.7		1.7
	942		43		0.28 - 5.16		1.5
	940		88		2.1 - 31		13.0
	9		75		0.7 - 7		2.3
8	811		25		0.5 - 4.4		1.9
	810		84		0.16 - 17.6		4.6
	8		44		0.34 - 12		2.2
5	5		47		1.38 - 134.24		51.5
	SB		12		1.26 - 14.7		6.4
	SL		15		3.56 - 141.24		43.1

⁽¹⁾ Based on apparent thickness of drill intercepts

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Exploration

IMMI has used a multi-faceted approach in exploration to identify drilling targets for coal resource delineation. Exploration tools and techniques that have been applied at Nariin Sukhait include field mapping, surface-resistivity geophysical surveying, satellite imagery, trenching and drilling.

Field reconnaissance mapping was initiated in early 2005 and continued during 2006. Mapping and examination of images was used to define the trend of coal outcrops that led to the definition of coal resources in the South-East and West Fields. Additionally, these activities were used to locate coal occurrences in the hangingwall of the Nariin Sukhait fault along the entire length of this structure. Additional 3-D and 2-D surface resistivity surveys were used to help locate mineralization in areas of thin surficial cover. Potential targets identified with the above mentioned techniques were then tested with trenches cut perpendicular to the apparent strike, to expose coal seams close to surface. Trenching has been useful in identifying the near-surface expression of coal seams for locating exploratory drill holes. However, coal seam thickness and structure as observed in the trenches are greatly affected by near-surface erosion, alteration, and deformation. Accordingly, trenching intercepts have been found to be unreliable sources of seam characteristics and structure, and are not used in resource estimation.

Reconnaissance exploration work was contracted primarily to Sapphire Geo Ltd. and supervised by the Coal Division. Norwest provided assistance in the review of activities and interpretation of results.

Drilling

Drilling to date on Nariin Sukhait holdings includes a total of 502 exploration holes completed and 87,978 m drilled. Limited drilling took place on the MELs under the Soviet-Mongolian government sponsored exploration programs.

All holes have been geophysically logged except where holes have caved. Depending on the equipment used, logs were either examined visually, or interpreted using the Elogger software developed by Norwest. Drillhole depths were then incorporated into the geologic model. A drilling summary by method and area is presented in the table below.

Drill hole core and drill cuttings descriptions, geophysical logs and coal analyses data were used to characterize and interpret the stratigraphy of the South-East, and West Fields, particularly with respect to the coal seams. Norwest’s drill hole database for the Nariin Sukhait Property contains a total of 502 drill holes, not including holes drilled prior to 2003, amounting to 87,978 m. Intercept depths and seam thickness reported are based on the apparent thickness of the beds as seen in the drill hole data.

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Drill Hole Summary

			Reverse
			Circulation				Rotary				Core				Combination(1)
			No.		Meters		No.		Meters		No.		Meters		No.		Meters
Area	Year		Holes		Drilled		Holes		Drilled		Holes		Cored		Holes		Cored
		2004		—		—		—		—		5		750		—		—
South-East Field		2005		76		14,425		18		2,807		34		5,524		—		—
		2006		11		4,855		12		1,999		5		1,860		7	NA(2)
West Field		2005		70		12,861		17		2,223		13		2,034		—		—
		2006		48		10,203		0		0		25		5,737		—		—
Exploration Prospects		2005		62		9,625		44		5,753		14		1,256		—		—
		2006		—		—		34		5,173		7		893		—		—
Subtotals		—		267		51,969		125		17,955		103		18,054		7	NA(2)

(1)	Combination holes with RC and/or PCD rotary and/or core method.
(2)	Meters drilled and recorded as RC Rotary or Core meters.

Sampling Method and Approach

The majority of exploration holes have been drilled with rotary techniques which offer the opportunity only to sample drill cuttings. All quality analyses used for modeling have been restricted to core samples, and, for the 2005 and 2006 drill programs, this has been restricted to triple-tube coring equipment.

Reverse circulation drilling has provided cuttings samples of relatively good integrity. Samples were collected at one m intervals, and the cuttings were laid out in rows on the ground. The site geologist would then examine the cuttings and produce a geologic log. Intervals with coal were sampled and sealed in plastic bags. A portion of the reverse circulation samples collected were used for basic proximate and thermal analysis as a comparison to the core samples. The remainder have been stored in Ulaanbaatar. A number of additional holes were drilled with a conventional air-rotary system. Cuttings were generally logged in a similar fashion as for reverse circulation drilling.

Core drilling has been used where it is desirable to collect complete representative samples of the coal seams, observe structural details, and to more accurately measure the depths of lithologic contacts.

Some of the initial core holes at Nariin Sukhait were drilled with single-tube Russian made core equipment. The bulk of the core drilling at Nariin Sukhait has been done with wireline drilling systems and modern, triple-tube core barrels. All of the triple-tube coring during the 2005 and 2006 drill programs was performed under Norwest supervision. Core logging and sample handling was performed by Sapphire Geo Ltd. under Norwest supervision.

Core was retrieved, logged and sealed according to Norwest conventions. Each core run was measured for core cut and recovered. Photographs were taken at 0.5 m intervals. Coal showing distinct lithologic variation was sampled separately, as were partings over 0.05 m. Otherwise, coal intervals with a uniform appearance were bagged in 0.6 m sample increments as per the capacity of the core box length. When zones of core loss greater than 0.1 m were encountered, separate samples were collected both above and below the zone.

Sample Preparation, Analysis and Security

Samples have been collected from drill core and reverse circulation cuttings and recorded by field geologists

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employed by Sapphire Geo Ltd. under the supervision of Norwest. Collected samples were submitted for analysis using methods that are standard for the coal industry. The specific process used by Norwest for the Nariin Sukhait drilling program is described below.

Core drill Samples

Recovered core is measured to determine an overall recovery (reported in percent) by comparing the recovered core length with the coring run length recorded by the driller. Recovered core is measured and compared to the coal interval thickness determined from the geophysical log suite.

Recovered coal intervals are sampled following a standard procedure. Coal samples are broken out based on lithologic changes. In zones of uniform coal appearance, samples were bagged about every 0.60 m. In-seam partings, to a maximum thickness of 0.10 m, are included in a coal sample, where the thickness of the adjacent coal beds above and below the parting are both a minimum of twice the parting thickness. A parting will be sampled separately if it is greater than 0.05 m thick, Carbonaceous shale, bone or interbedded coal/mudstone, or deemed to be greater than 50 percent coal.

Collected samples are cleaned of any mud contamination and placed in individual, core-sleeve style, plastic bags. The bags are labelled on the outside with both the core hole and sample number and sealed with plastic tape to prevent excessive moisture loss. Samples are then placed in sequence into waxed-cardboard core boxes. Core boxes are sealed with tape. Core boxes from the 2005 exploration program were transported to IMMI in Ulaanbaatar, then shipped to SGS Mineral Labs in Denver, Colorado. Core from the 2006 exploration program was similarly transported to Coal Division offices in Ulaanbaatar, and then shipped to SGS Laboratories in Tianjin, China.

At the time of shipment, scanned geologic and geophysical logs, laboratory instructions and shipment manifest are forwarded to Norwest’s Salt Lake City office. Laboratory instructions and the shipment manifest are forwarded to the Coal Division in Ulaanbaatar. All records are compared with contents upon arrival to SGS Mineral Labs. To date, there has been no loss or compromise of samples during shipment. Core samples undergo a full suite of coal quality testing including short proximate, full proximate, thermal tests, ash analysis, washability testing, and metallurgical testing.

Reverse Circulation Samples

Samples are collected at one m intervals into plastic bags. The bags are labeled on the outside with both the drill hole and sample number and sealed with plastic tape to prevent excessive moisture loss. Samples are then grouped by hole into larger bags, packaged and transported to Ulaanbaatar. A portion of these samples have been sent to the Mining Institute Laboratory in Ulaanbaatar for proximate and thermal analysis. The remainder of the samples have been stored at Coal Division facilities.

In coal work, additional special security methods for the shipping and storage of samples are not commonly employed, as coal is a relatively low-value bulk commodity.

Data Verification

Norwest has directly managed the exploration program from conceptual planning of exploration targets, through data collection, to interpretation and analysis and has provided on-site management throughout the great majority of the exploration project.

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Data collection is performed under a defined set of protocols in which Norwest site geologists are responsible for the training and administration of data collection procedures and for reviewing all data.

Upon completion of a drill hole, the geologic and geophysical logs are reviewed by a Norwest geologist. Geologic, geophysical, and sampling data is entered into and maintained in an electronic database, while mapping is entered into and maintained in electronic format on a CAD-based system. Data entry of all geologic data is managed by Norwest at the project site. All electronic data is forwarded on a routine basis to Norwest’s office in Salt Lake City. Results from the coal quality testing is added into the database in the Salt Lake office.

Information collected prior to Norwest involvement in 2005 has been supplied to Norwest by IMMI and the Coal Division was not directly verified by Norwest.

Mineral Processing And Metallurgical Testing

Mineral processing and metallurgical testing has included testing to determine sulphur, thermal value, metallurgy in relation to coking characteristics, grindability and trace element analysis. Testing has also included proximate analysis for moisture, ash, volatile matter and fixed carbon.

Testing indicates coal seams at Nariin Sukhait have low sulphur contents averaging approximately 1.0%. Tests include the Gieseler Plastometer, Audibert — Arnu Dilatometer, Reactive Maceral Analysis (petrographics), Phosphorous content, Free Swelling Index and Trace Element Analyses. A Hardgrove Grindability index (test) has also been conducted in order to describe the coal handling characteristics.

Coal qualities are observed to be generally similar in the South-East and West Field resource areas. Coal is of high volatile bituminous rank with relatively low sulphur values. The 5-Series is observed to have the highest coal quality at Nariin Sukhait, as well as comprising the bulk of the resources. A summary of the drill hole quality data is presented in the table below.

Summary of Drill Hole Quality Data

South-East Field
					Thickness1		Mean		Total		Residual						Specific		Free
					Range		Thickness1		Moisture2		Moisture2		Ash2		Sulphur2		Energy2		Swell
Series	Seam		Count		(m)		(m)		%		%		%		%		(kCal/kg)		Index2
5-Series		592U		1		21.9 - 21.9		21.9		—		—		—		—		—		—
		590U		14		1 - 23.4		8.8		—		—		—		—		—		—
		580U		15		0.96 - 8.6		4.5		—		—		—		—		—		—
		570U		17		0.6 - 11.5		4.5		11.98		1.54		30.18		2.09		5,518		4.3
		5U		38		1.04 - 74.1		24.2		5.47		1.09		20.89		1.15		6,235		1.3
		5UB		28		0.9 - 53.1		6		5.02		1.15		15.24		1.09		6,760		1.4
		580		26		1.06 - 16.6		3.6		6.88		0.97		37.15		1.03		4,851		1.9
		570		48		1.2 - 30.7		8.1		7.04		1.40		25.17		1.26		5,896		2.2
		5		97		0.9 - 156.7		53.4		5.78		1.16		18.22		1.28		6,528		3.0
		5B		44		0.6 - 100.1		15.5		7.08		1.25		20.48		1.24		6,322		4.2
4-Series		4		19		1 - 30.3		7.67		7.22		0.83		31.01		0.71		5,564		1.0
West Field
10-Series		1050		23		0.34 - 16		2.7		2.90		1.00		35.57		1.25		4,856		1.2
		1040		33		0.36 - 14		3.4		3.63		1.26		30.78		1.40		5,157		1.5
		1030		39		0.5 - 4.7		2.2		4.59		1.47		28.37		1.29		5,628		2.2
		1020		49		0.78 - 10.28		3.4		4.65		1.55		25.20		1.03		5,915		1.5

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South-East Field
					Thickness1		Mean		Total		Residual						Specific		Free
					Range		Thickness1		Moisture2		Moisture2		Ash2		Sulphur2		Energy2		Swell
Series	Seam		Count		(m)		(m)		%		%		%		%		(kCal/kg)		Index2
		1010		45		0.6 - 6.08		2.9		3.96		1.21		28.47		0.87		5,531		1.5
		10		57		1.9 - 19.76		9.4		3.19		1.30		25.02		1.20		5,776		1.8
9-Series		998		19		0.48 - 4.16		1.8		5.43		1.92		21.13		1.39		6,275		1.0
		996		15		0.44 - 5.5		3		4.93		1.81		27.23		1.53		5,719		1.3
		990		56		0.46 - 5.1		1.6		3.85		1.59		23.94		1.60		6,076		1.4
		980		77		1 - 27.9		8.5		3.79		1.50		20.90		1.57		6,291		2.5
		970		68		0.6 - 9.18		3.2		4.43		1.43		19.02		1.31		6,488		2.4
		960		65		0.6 - 6.8		2.2		4.09		1.36		24.96		1.32		5,955		1.9
		950		67		0.46 - 11.7		1.7		3.77		1.36		23.65		1.30		6,115		2.8
		942		43		0.28 - 5.16		1.5		4.00		1.38		27.47		1.23		5,550		2.4
		940		88		2.1 - 31		13		3.77		1.25		14.64		1.40		6,838		3.0
		9		75		0.7 - 7		2.3		3.33		1.04		28.14		1.22		5,721		1.8
8-Series		811		25		0.5 - 4.4		1.9		3.41		1.54		23.53		1.35		6,215		1.8
		810		84		0.16 - 17.6		4.6		3.34		1.10		25.83		1.24		5,927		2.1
		8		44		0.34 - 12		2.2		2.93		1.07		25.39		1.16		5,916		1.3
5-Series		5		47		1.38 - 134.24		51.5		3.83		1.26		10.32		0.77		7,256		3.0
		5B		12		1.26 - 14.7		6.4		2.60		1.00		14.61		0.55		6,915		3.1
		5L		15		3.56 - 141.24		43.1		2.44		0.81		9.57		0.80		7,219		3.9

Free Swelling Index numbers show a considerable range in values from non-coking (less than 2) to coking coal (greater than 4).

Mineral Resource Estimates

Approach

Norwest used CIM Standards and referenced the GSC Paper 88-21 during the classification, estimation and reporting of coal resources for the Nariin Sukhait Project. The resources were reported in the Nariin Sukhait Technical Report.

Under these guidelines, the term “resource” is utilized to quantify coal contained in seams occurring within specified limits of thickness and depth from surface. The resource estimations contained within are based on in-situ tonnage and are not adjusted for mining losses or recovery. However, minimum mineable seam thickness and maximum removable parting thickness are considered, with coal intervals not meeting these criteria not included in the resources.

Resources are classified as to the assurance of their existence into one of three categories: measured, indicated or inferred. The category to which a resource is assigned depends on the level of confidence in the geological information available. GSC Paper 88-21 provides guidance for categorizing various types of coal deposits by levels of assurance. These were considered by Norwest during the classification of the resources.

Resources and reserves are further classified in GSC Paper 88-21 as to the assurance of their existence into one of four categories, using the criteria for coals found in Geology Type “Complex” conditions, as shown in the table below.

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Criteria Used to Define Assurance of Existence for Coals in Complex Geology Type

Criteria	Assurance of Existence Category
	Measured		Indicated		Inferred
Cross-section spacing (m)		150		300		600
Minimum # data points per section		3		3		3
Mean data point spacing (m)		100		200		400
Maximum data point spacing (m)		200		400		800

Coal Resources at Nariin Sukhait are summarized in the table below:

Classification of Resources Geology Type: Complex⁽¹⁾

		Resources at Nariin Sukhait
		Measured		Indicated		Inferred
	ASTM Coal	(million		(million		(million
Resource Area	Rank	tonnes)		tonnes)		tonnes)
South-East Field	hvB to hvA		49,752,000		15,987,000		6,502,000
West Field	hvB to hvA		55,144,000		28,698,000		22,601,000
Total			149,580,000				29,103,000

Notes:
(1)	Mineral resources are not mineral reserves until they have demonstrated economic viability based on a feasibility or pre-feasibility study.

Mine Planning

Norwest commenced mine planning in 2006, with an internally prepared preliminary mine plan completed in August 2006. Norwest recommends that a pre-feasibility study be undertaken in order to define the coal reserve and economic viability of the Nariin Sukhait project. An updated mining study and estimate of coal reserves, based in part on the updated resources reported in the Nariin Sukhait Technical Report is expected to be forthcoming upon completion of that study.

Current Exploration

Nariin Sukhait Underground

A secondary exploration focus in 2006 was deeper drilling on the Nariin Sukhait deposit. In December 2006, the Corporation commissioned Norwest to undertake a study to examine underground mining potential at Nariin Sukhait. The main focus was on 5 Seam which had very thick intersections and exhibited promising coking characteristics at depth. The study focused on identifying potential underground mining methods and their applicability to 5 Seam. Additional drilling and engineering studies will be required to delineate resources that may be amenable to extraction by underground methods.

Other Coal Projects

Tsagaan Tolgoi Project

IMMI currently holds two adjoining coal licenses in the Tsagaan Tolgoi region of the Omnogovi Aimag (South Gobi Province) Mongolia. The Tsagaan Tolgoi property is located in south-central Mongolia, and covers an area of approximately 5km² in the Gobi Desert. The property is approximately 570 km south of Ulaanbaatar and 113 km southeast of the provincial capital of Dalanzadgad. Tsagaan Tolgoi lies 90 km south of Tavan Tolgoi, 115 km west of Oyu Tolgoi and approximately 100 km north of the Chinese border. The

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Omnogovi Aimag is one of the least populated areas of Mongolia and the population level is negligible in the Tsagaan Tolgoi area.

Access to the property is by unimproved tracks or cross-country trails. A regular track has been established from Oyu Tolgoi that takes approximately 3 hours travel-time via Land Cruiser. The low-lying terrain comprising much of the property is suitable for helicopter landing. The nearest in-country rail line is the Trans-Mongolia Railway that runs northwest to southeast and connects Ulaanbaatar to Beijing. The nearest point on this line is approximately 400km to the east at the Chinese border.

Initial work to delineate adequate coal fuel resources for supplying power to the Corporation’s proposed Oyu Tolgoi Project was carried out in 2003. Tsagaan Tolgoi was identified by IMMI due to its proximity to Oyu Tolgoi, from previous work that indicated potentially significant resources, and the fact that the Corporation already controlled a coal lease covering a portion of the property.

A coal delineation program was first carried out in 2004. The 2004 exploration program consisted of 45 exploration boreholes. No exploration was conducted in 2005. A 2006 exploration program consisted of 65 exploration holes and 8 hydrology holes. Past work by Russian and Mongolian teams, primarily field maps of coal exposures were also used to assess the approximate extent of the potential resource area. The 2006 exploration was carried out to define these potential resources to an assurance level that is compliant with the reporting requirements of NI 43-101. These programs consisted of a combination of data acquisition methods that included field mapping, exploration trenching, and rotary and core drilling. Drilling and trenching has intersected coal seams that exhibit sufficient thickness, continuity, spatial extents, and suitable quality to make them amenable to resource estimation.

The coals at Tsagaan Tolgoi are thought to be Permo-Carboniferous in age and likely are correlative to the Upper Permian coals found at Tavan Tolgoi. Seven coal seams have been identified at Tsagaan Tolgoi, of which five are of sufficient thickness and continuity to have economic potential (Seams 1, 3, 3 Rider, 4 and 5). The coals encountered through exploration have been found to be of sufficient thickness and continuity to be modeled and considered as part of a potential resource.

Tsagaan Tolgoi Seam Quality

	As-Received Basis
Seam	Moisture %		Ash %		Sulfur %		Kcal/Kg.		Ave. Thickness
5		12.56		15.21		0.53		5,545		5.64
4U		12.97		13.70		0.58		5,746		6.31
4L		13.10		9.48		0.75		6,096		4.92

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	As-Received Basis
Seam	Moisture %		Ash %		Sulfur %		Kcal/Kg.		Ave. Thickness
3		17.55		16.24		0.61		5,145		5.77
1U		9.24		29.04		0.65		4,798		12.74
1L		9.22		32.80		0.65		4,440		16.39
TOTAL		10.55		24.75		0.62		4,785

The coal seams at Tsagaan Tolgoi display rapid fluctuations in seam thickness and in the number and size of in-seam rock partings. This is likely due to the tectonic nature of the basin, which likely resulted in periods of rapid fluctuations in sediment supply and water depth within the basin.

Coal seams at Tsagaan Tolgoi are developed in an eastward plunging syncline modified by secondary smaller-scale folding. The flanks of the syncline are steep, and limbs are overturned both to the north and south margins of the property. Known faulting occurs on the property, however it has not been mapped in detail. Thrusting is evident at the observed contacts between the sedimentary strata and the bounding igneous/metamorphic massifs to the north and southeast. Two faults identified trend in an arcuate north-south direction and are thought to be downthrown on the west.

The coal quality based on the geologic model indicates Tsagaan Tolgoi coal is suitable for thermal power generation.

Tavan Tolgoi Area

In 2006 the Coal Division indirectly obtained 7 coal exploration licences which closely surround the Tavan Tolgoi coal project to the north, east and south. The land area covers over 665,000 hectares. This area is overlain by sand and has few outcrops, and to the knowledge of the Coal Division it has never been properly explored for coal.

The Tavan Tolgoi Project is located approximately 90 km east of Dalanzagad, the provincial capital in the Omnigovi Aimag. The coalfield was discovered in the 1950’s by a joint Mongolian/Soviet team. Since that time there have been numerous exploration and evaluation programs carried out. In 1990 a major study on the feasibility of developing the Tavan Tolgoi coal project was performed, with the study suggesting that the project contained significant coal reserves, of which a substantial portion included coking coal.

A field reconnaissance program was carried out indirectly by the Corporation in 2006 on the newly acquired coal licences. The exploration area has been flown for copper/gold exploration using BHP Falcon aerial geophysics. The Corporation has obtained the aeromagnetic and aerogravity survey data and will be using the results of the upcoming analysis of the Falcon data to assist delineating potential coal targets. A significant exploration program is being planned for this project in 2007.

South Gobi Greenfield’s Exploration

The Coal Division is conducting additional exploration and development work on 13 other coal occurrences and potential resources that are located on the Nariin Sukhait Project property. The Coal Division is also conducting ongoing work on 16 MELs that are prospective for coal located over an east/west distance of almost 600 kilometres from the far west part of the South Gobi almost to Oyu Tolgoi in the east. Many of these licences are virtually unexplored. Work will be carried out on these licences to determine coal potential. The 2007 programs will focus on defining future areas of interest on these properties.

Recent exploration has been dedicated in particular to a prospect identified approximately 16 km east — southeast of the South — East field of Nariin Sukhait. This coal occurrence was initially called N Field. An additional coal occurrence located approximately 8 km east of N Field has been identified as O Field. The

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Coal Division has focused its exploration on the Upper Permian strata exposed in the Nariin Sukhait trend. Extensive trenching has been carried out on both coal occurrences and has been followed up by drilling in 2005 and 2006. Nine individual seams have been identified in the N Field and two in the O field. This project is included in the 2007 exploration program.

Other Projects

Mongolia

In addition to the Oyu Tolgoi Project and the Coal Division, the IVN Group operates an extensive mineral exploration program in Mongolia. The field program is conducted by IMMI from base camps at Manlai and Kharmagtai in the Gobi desert.

IMMI’s exploration properties are predominantly located throughout southeastern, southern and central Mongolia. These include the South Gobi, Saran Uul, Bayan Uul and Chandman Uul licence blocks. IMMI holds 100 MELs, totalling 5,165,036 hectares, including 3 MELs at Kharmagtai, totalling 25,936 hectares, pursuant to agreements with QGX Ltd. A further 109 MELs, totalling 2,288,793 hectares are held by IVN’s 45% owned affiliate, Asia Gold.

IMMI’s Mongolian exploration program commenced in 2001. Initial reconnaissance consisted of satellite imaging and helicopter reconnaissance surveys on most of its MELs. IMMI has developed a detailed and extensive countrywide database that incorporates the information gathered from reconnaissance and other sources. Using this database, IMMI has conducted more comprehensive field reconnaissance at numerous prospective sites, including rock chip samples, mapping and ground magnetic surveys. First-pass visits have been made to all mineral occurrences and targets known within the licences. On advanced properties, IMMI has conducted gradient-array IP, ground magnetic surveys, RC and diamond drilling. Work in 2006 focussed on trenching programmes at the Baruun Tal and Undur Naran projects, regional reconnaissance, soil geochemical and stream sediment surveys, and sterilisation reconnaissance of large areas (much of it under deep cover) to allow large scale relinquishment. Starting in 2005 IMMI reduced its exploration activity in Mongolia outside of Oyu Tolgoi and Nariin Sukhait, as it focuses more time and effort on the development of those core properties. Approximately 2.1 million hectares of the approximately 8.8 million hectares held at the beginning of 2006 were relinquished and an additional 3.7 million hectares are scheduled to be relinquished in 2007.

The Kharmagtai property is the most advanced of the exploration properties. It is located approximately 120 km northwest of Oyu Tolgoi, and comprises a group of three MELs of which QGX Ltd. is entitled to a 10% interest in one and a 20% interest in the other two. Work to date includes extensive IP, ground magnetic surveys, excavator trenching, reverse circulation drilling (208 holes totalling 27,959 m) and diamond drilling (172 holes totalling 54,190 m) at nine separate copper and gold porphyry targets. At one of these targets (Gold Hill) IMMI has identified porphyry copper and gold mineralization in two pipe-like stockwork zones 100 m apart. The mineralization extends from surface to depths over 700 m, is gold-rich and open on strike and at depth. It occurs predominantly in stockwork and sheeted veins as well as in the matrix of tourmaline breccias. Mineralization in the southern stockwork zone is approximately 550 m long, 70 m wide and 600 m deep, whilst mineralization in the northern stockwork zone is approximately 250 m long, 150 m wide and 350 m deep. While IMMI conducted only minimal exploration at Kharmagtai during 2006, a drill programme is planned for 2007. Inferred resources (not NI 43-101 compliant) for the three main deposits were calculated in 2005. Surpac modelling of the deposit is currently underway to revise these figures subsequent to later intercepts. A dipole-dipole IP survey over the Central Kharmagtai region is also underway.

A 2005 earn-in agreement with BHP Exploration allows BHP Exploration the right to earn up to a 50% interest by spending $8 million in exploration costs in the “BHPB Joint Venture Area”. This area consists of approximately 35,640 km² comprising non-core exploration licences of IMMI in southern Mongolia. The

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BHPB Joint Venture Area, which represents approximately 40% of IMMI’s land holdings in this region, excludes all coal potential, as well as IMMI’s advanced exploration and development-stage projects (the Oyu Tolgoi Project, the Kharmagtai, Bronze Fox and Oyut Ulaan prospects). The Falcon airborne gravity gradiometer survey commenced in September 2005 and was completed in April 2006, covering 29,979 km². The programme’s primary objective is to define deposits under cover. Gradient array and vector IP follow-up programmes were also completed in 2006, followed by dipole-dipole IP of the higher priority targets. Drilling of these targets commenced in November 2006 and is ongoing. Under the agreement BHP Exploration is paying tenement fees of areas that would otherwise have been relinquished by the IVN Group.

Kazakhstan

IVN’s subsidiary Central Asian Mining Limited (“CAML”) holds a 70% interest in the Bakyrchik Mining Venture (“BMV”) that owns and operates the Bakyrchik gold project in north-eastern Kazakhstan. BMV was originally established as a joint venture with the government of Kazakhstan, but in 2006 the Government privatized its 30% interest via tender, and sold it to and entity named JSC Altynalmas of Almaty, Kazakhstan.

The Bakyrchik property is located in the village of Auezov in north-eastern Kazakhstan, approximately 1,100 km north-east of Almaty, the country’s largest city and about 100 km from Ust Kamenogorsk which is considered the industrial centre of East Kazakhstan. The property hosts the Bakyrchik gold mine, which originally commenced production in 1956 to provide gold bearing flux to copper smelters in Ust-Kamenogorsk and later to smelting facilities in Russia. The mine consists of a number of mine shafts and associated facilities, process plant, workshops, warehouses, administration buildings and accommodations. A total of five shafts were sunk on the Bakyrchik deposit, and the underground has been explored and developed for mining from a series of development drifts driven at 40 m vertical intervals.

CAML acquired its interest in BMV in 1996 pursuant to a Sale and Purchase Agreement with the government of Kazakhstan. BMV holds its rights in the Bakyrchik property through a Sub-soil Use Contract with the government of Kazakhstan and through a combined Mining and Exploration license. The Sub-soil Use Contract entitles BMV to extract ore, use the Bakyrchik mine facilities, export concentrate for sale and establishes a framework for the taxation and regulation of BMV’s operations in Kazakhstan. The mining portion of the combined Mining and Exploration license entitles BMV to mine for a term of 25 years, with extension rights. It covers the area surrounding the Bakyrchik gold mine and the resources identified from previous exploration.

The exploration portion of the license surrounds the mining portion. The original term of the exploration portion expired in 2001. It was renewed at the time for 2 years and renewed a second time in 2003. Each renewal has resulted in a loss of 50% of land size, and the property is now approximately 21 km² in size. The exploration portion of the license expired in April 2005 but CAML has negotiated an agreement with the government to further extend the exploration rights until 2010. CAML successfully negotiated with the government for a similar extension to the term of CAML’s investment program under the Sale and Purchase Agreement.

The gold deposits at Bakyrchik consist of a series of mineralized lenses or lodes lying within a large shear zone, which is 11.5 km in length. Gold mineralization is hosted within sheared carbonaceous sediments of the fault zones, and is principally contained within sulphide mineralization occurring in association with quartz stockworks, which crosscuts and parallels the foliation of the sediments. Mineralogical studies indicate that the majority of the gold is encapsulated by arsenopyrite and, to a lesser extent, pyrite. As the associated sediments contain up to 4% carbon, the deposit is said to be “double-refractory” in nature, which makes processing very difficult.

Engineering studies commissioned by the IVN Group in 1996 and 1997 recommended development of a mining operation capable of producing between 500,000 and 1,000,000 tpy at a capital cost ranging from $100

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million to $222 million. However, a precipitous decline in the price of gold at the end of 1997 dramatically changed the economic assumptions upon which these engineering studies were based and the IVN Group’s development plans for the Bakyrchik gold project were indefinitely postponed. In January 1998, the IVN Group placed the Bakyrchik gold project on care and maintenance status. Since 2001, BMV has processed limited quantities of existing stockpiles of ore on an intermittent basis. Recoveries have generally been below expectations.

During this time of low gold price BMV completed a number of studies to find a lower capital way to process the double-refractory sulphide ore on the property. BMV has successfully completed metallurgical testwork that determined that roasting Bakyrchik sulphide ore using rotary kilns and production of doré alloy is achievable. The calcine from the rotary kiln will be ground and leached using carbon in leach (“CIL”) technology. BMV commissioned independent consultants to produce a development proposal for the project based on this process. BMV has started to carry out the development proposed in the consulting report, which recommends construction and operation of a 150,000 to 200,000 tpy commercial demonstration roasting plant at the Bakyrchik mine using the rotary kiln roasting technology.

During 2004, operation of a pilot-sized rotary kiln roaster continued, which confirmed that the technology can be applied to roast whole ores, concentrates and technogenics (man-made materials) in an environmentally safe manner. Recoveries nearing 85% are consistently being achieved by CIL. To confirm the pilot plant results, a series of confirmatory and process optimization roasting tests were planned in a fully instrumented pilot scale direct fired rotary kiln. The initial battery of tests confirmed that in the rotary kiln the levels of arsenic and sulphur in Bakyrchik ore can be reduced to equal or lower levels than previously obtained in a circulating fluidized bed pilot plant.

In 2004, BMV began to implement the development proposal. This included engineering of the roasting plant, which was completed and submitted to the controlling agencies of the government of Kazakhstan for approval in August 2004, the acquisition of material for the new processing operation and further metallurgical testing. BMV has installed a used 40 m rotary kiln, began site preparation and foundation work for the discharge section of the rotary kiln, entered into agreements with a specialized contractor for the fabrication of non-standard gas handling equipment and purchased a near-new crusher capable of crushing the ore to the recommended size of — 1 mm. The commercial demonstration roasting plant was scheduled for commissioning during the third quarter of 2005 however this has been delayed and is now scheduled for completion during 2007.

During 2007, subject to funding and other contingencies, BMV contemplates construction of a 40 m rotary kiln roaster and delineation drilling to confirm the open pit potential of the top 300 m at the Bakyrchik mine. IVN is considering future financing alternatives for the further development of the project.

Australia

In September 2003, the IVN Group acquired a series of mining and exploration tenements in Australia from the receivers of Selwyn Mines Limited for Aus$6 million. The IVN tenements are held through an Australian wholly owned subsidiary, Ivanhoe Cloncurry Mines Pty Limited (“ICM”), and consist of mineral leases (“MLs”) and Exploration Permits for Minerals (“EPMs”) located in north-western Queensland, Australia. The tenements cover an area of 2140.49/km² of EPMs and 4529.37/ha of MLs. In addition, applications have been lodged with the Queensland Department of Natural Resources Mines and Water for three new MLs totalling 241.24 hectares and two new EPMs totalling 54 sub-blocks (172.26/km²). ICM has a 100% interest in these properties and has the exclusive right to explore for all precious and base metals within the boundaries of their tenements with the exception of a joint venture area in the southern part of EPM 10783, where 36 sub-blocks, totalling 114.5/km² are under option to Barrick (Osborne) Pty. Ltd. (“Barrick Osborne”). Barrick Osborne has a 50% interest in 31 sub blocks and an 85% interest in 5 sub blocks.

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Copper-Gold-Uranium

IVN is continuing an exploration program aimed at testing the copper, gold and uranium targets adjacent to mine areas, and exploring new targets. ICM has identified two prospects, known as Swan and Amethyst Castle, containing gold, copper and uranium mineralization. Both prospects were subjected to advanced exploration in 2006, including diamond drill programs, with further exploration in progress throughout 2007.

ICM intends to advance uranium exploration in particular in 2007. Uranium has been identified on ICM’s tenements by prior prospectors, and ICM believes the geological conditions are generally favourable for uranium prospects. In November, 2006, ICM commissioned an airborne radiometric survey over the northern tenements of ICM’s holdings. This survey has generated numerous uranium anomalies that will be the subject of high-priority follow-up in 2007. Exploration efforts in 2007 include diamond drilling with two rigs in operation since January 2007 and three more expected to arrive in the second quarter of 2007, and detailed gravity surveys.

Other Prospects

ICM has identified copper mineralization in diamond drill testing at the metal ridge prospect, located near Amethyst Castle and at the Lucky Luke prospect. The Lucky Luke prospect falls within an area of property in which IVN has a farm-in and exploration agreement with Barrick Osborne to explore for deposits of gold and copper on 114.5 km2 at the southern end of IVN’s Cloncurry Project. The 2007 exploration program includes drilling at metal ridge.

IVN is considering future financing alternatives for the further development of its Australian assets.

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China

IVN has conducted an active exploration program in Inner Mongolia, China since 2003, principally through two joint ventures with Chinese governing bodies.

In August 2003, a subsidiary of IVN entered into a joint venture agreement with the China Geology and Mining Inner Mongolia Company, a subsidiary of Inner Mongolia Bureau of Geology and Minerals Exploration and Development (the “Bureau”). The joint venture agreement entitles IVN to earn an 80% interest, increasing to 90% under certain circumstances, in the Yahao joint venture company, which has been established under the laws of China to explore, develop, mine and process minerals within China. Properties included in the joint venture cover 282 km² within Inner Mongolia, including six exploration licenses and one mining license. To date the joint venture group has conducted exploration on several prospects, largely with mixed success. In 2007 the joint venture will focus on conducting secondary level exploration on two prospects in western Inner Mongolia.

In April 2003, a subsidiary of IVN entered into a joint venture agreement with the Inner Mongolia Huayu Geology and Minerals Exploration Co. Ltd (“Huayu”). Throughout 2004 and 2005, the joint venture conducted exploration on its principal property with modest results. After completion of its drilling program in 2005, the joint venture decided to terminate its interests in the exploration project. Following its decision to relinquish the original property, the joint venture continued to examine additional exploration projects and has obtained approval from the provincial government to transfer an additional exploration project known as “Anomaly Five” into the joint venture. Due to the termination of the joint venture’s interests in the Oblaga Project, and the return of the exploration licenses and mining license to Huayu in late 2005, the “earn-in” terms of the joint venture have been re-negotiated and adjusted to a 95% interest held by IVN and a 5% interest held by Huayu. Final Government approvals are currently being sought for this interest adjustment.

Other Business Matters

Myanmar Trust Arrangements

As part of the Rio Tinto Transaction, IVN agreed to divest the Myanmar Assets, and in February 2007, established the Monywa Trust, an independent third party trust, and transferred ownership of the Myanmar Assets to the trust. The sole purpose of the Monywa Trust is to facilitate the future sale of the Myanmar Assets to one or more arm’s length third parties who do not constitute Excluded Persons.

In consideration for the purchase of the Myanmar Assets, a company wholly-owned by the Monywa Trust (“Trust Holdco”) issued to a subsidiary of IVN a promissory note. The principal amount of the promissory note entitles IVN to receive cash proceeds realized upon the future sale of the Myanmar Assets plus 50% of any cash generated by the Monywa Copper Project that is available for distribution to the project participants but remains undistributed at the time of any such sale, less certain contractually specified deductions, including any fees and expenses incurred in carrying out the sale. IVN retains no ownership interest in the Myanmar Assets, directly or indirectly, except as a creditor of Trust Holdco pursuant to the promissory note.

Trust Holdco’s mandate is to engage one or more qualified third parties who are not Excluded Persons (each, a “Sale Service Provider”). The Sale Service Provider will be responsible for identifying potential third party purchasers who are also not Excluded Persons, soliciting expressions of interest from such potential purchasers, negotiating sale terms and facilitating the sale of the Myanmar Assets on behalf of Trust Holdco. A Sale Service Provider who successfully facilitates the sale of the Myanmar Assets to a purchaser who is not an Excluded Person will be entitled to a fee equal to a percentage of the proceeds realized by Trust Holdco on the sale of the Myanmar Assets.

Following a sale of the Myanmar Assets, Trust Holdco will use the proceeds to pay the Sale Service Provider’s fee and any other expenses or liabilities incurred in carrying out the sale. Trust Holdco will then use the

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remaining proceeds of sale, less contractually specified deductions, to repay the promissory note held by IVN’s subsidiary. Upon having retired the promissory note, the Monywa Trust will wind up Trust Holdco and distribute the remaining assets of the Trust, which are expected to consist solely of cash, to the designated beneficiaries of the Trust. The designated beneficiaries will be one or more recognized charitable organizations selected by the trustee. Following that distribution the Monywa Trust will terminate.

The Monywa Copper Project was originally established as a joint venture of IVN and Mining Enterprise No. 1 (“ME1”), an agency of the Myanmar government, through a Myanmar holding company (“Monywa JVCo”), producing copper from open pit mining operations on three adjacent deposits commencing in 1999. The project also includes a fourth, larger deposit called Letpadaung that is located seven km away and is slated for development under mine expansion scenarios. The mine was originally designed to produce 25,000 tpy of cathode copper using heap-leach, solvent extraction electrowinning technology. Through an internally financed expansion process Monywa JVCo managed to increase production capacity to approximately 39,000 tpy. Until December 31, 2006, Monywa JVCo sold all of its copper to Marubeni Corporation, the original project finance lender, pursuant to a copper sales agreement. All project finance loans have been repaid and the copper sales agreement expired, and since January 1, 2007 ME1 requires that cathode copper be sold based on a spot price system after the end of each month when production quantities are confirmed.

Since 2005, Monywa JVCo has had to address several issues that have hindered the orderly conduct of its operations. The mine experienced expected decreases in copper grades from its main Sabetaung open pit; this, and decreased production tonnage, has resulted in declining copper production. Monywa JVCo has also experienced operating difficulties arising from its dealings with government-related entities, including a lack of consensus on operational decisions with ME1 and delays in obtaining necessary government support for the conduct of operational matters. This includes in particular the timely supply of mining equipment. In 2005 and 2006 Monywa JVCo experienced long delays in receiving from the Myanmar authorities the necessary import permits for trucks and other equipment. During 2006 there were two instances when cathode production was suspended due to lack of materials, reflecting delays imposed on the Monywa JVCo purchasing system by the Myanmar Government, the more extensive period being in March when the mining operations were also suspended due to lack of diesel.

There has also been a disagreement with the Myanmar tax authorities on the purported imposition of an eight percent commercial tax on export sales. The tax provisions in the joint venture agreement exempt the Monywa JVCo’s copper exports from all forms of tax of a commercial nature, and Monywa JVCo has asserted that the new tax is thereby not applicable. The imposition of such a commercial tax, equivalent to an additional 8% royalty, would have a significant negative impact on cash flows. The commercial tax is claimed from 2003, on all copper export sales. If the Myanmar government’s position on this issue prevails, Monywa JVCo’s estimated commercial tax liability at December 2006 would total several million dollars. The Myanmar Government has also increased income tax to 30%. Monywa JVCo has lodged necessary appeals against the assessment for financial year 2004-05 as the first appeal and for financial year 2002-03 and 2003 -04 as the second appeal because the first appeal for these two financial years has been rejected. The tax has been paid pending resolution of the appeals.

Equity Holdings

IVN holds equity investments in a number of other mineral exploration and development companies. These holdings include, in particular, an approximately 46% interest in Jinshan, a corporation listed on the Toronto Stock Exchange that is developing the CSH 217 Gold Mine in China. Other equity investments include Asia Gold, Intec Limited, Entrée and Asia Now Resources Corp. which are all publicy listed companies. Both Jinshan and Asia Gold, which is owned as to approximately 45% by IVN, are affiliates of the Corporation, sharing office space and several management and administrative personnel. Upon completion of the Coal Reorganization IVN will substantially increase its shareholdings of Asia Gold. For more information see “DESCRIPTION OF THE BUSINESS - Mongolian Coal Division — Coal Reorganization Transaction.” A

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description of the business of Jinshan and Asia Gold can be found through their continuous disclosure filings on SEDAR at www.sedar.com.

The following table outlines the publicly listed equity investments held by the IVN Group and their quoted market value as at December 31, 2006:

			Value
Company	Number of Shares		(US$)
Jinshan Gold Mines Inc.		67,250,060		88,251,644
Entrée Gold Inc.		10,435,489		16,200,562
Asia Now Resources Corp.		969,036		203,631
Asia Gold Corp.		7,469,201		12,940,892
Intec Limited		34,312,366		7,034,035

IVN also holds shares in certain non-public junior resource-related companies.

Employees

As at December 31, 2006, IVN had approximately 1,169 employees working at various locations.

DIVIDENDS

The Corporation has not paid any dividends on its outstanding Common Shares since its incorporation and does not anticipate that it will do so in the foreseeable future. The declaration of dividends on the Common Shares is, subject to certain statutory restrictions described below, within the discretion of the Board of Directors based on their assessment of, among other factors, the Corporation’s earnings or lack thereof, its capital and operating expenditure requirements and its overall financial condition. Under the Yukon Business Corporations Act, the Board of Directors has no discretion to declare or pay a dividend on the Common Shares if they have reasonable grounds for believing that the Corporation is, or after payment of the dividend would be, unable to pay its liabilities as they become due or that the realizable value of its assets would, as a result of the dividend, be less than the aggregate sum of its liabilities and the stated capital of the Common Shares.

DESCRIPTION OF CAPITAL STRUCTURE

The authorized share capital of IVN consists of an unlimited number of Common Shares without par value and an unlimited number of Preferred Shares. As at March 29, 2007 there were 373,917,043 Common Shares and no preferred Shares issued and outstanding. Rights and restrictions in respect of the Common Shares and the Preferred Shares are set out in IVN’s articles of continuance, IVN’s by-laws and in the Business Corporations Act (Yukon), and its regulations.

Common Shares

The holders of Common Shares are entitled to one vote per Common Share at all meetings of shareholders except meetings at which only holders of another specified class or series of shares of the Corporation are entitled to vote separately as a class or series. Subject to the prior rights of the holders of Preferred Shares, the holders of Common Shares are entitled to receive dividends as and when declared by the directors, and to receive a pro rata share of the remaining property and assets of the Corporation in the event of liquidation, dissolution or winding up of the Corporation. The Common Shares have no pre-emptive, redemption, purchase or conversion rights. Neither the Business Corporations Act (Yukon) nor the constating documents

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of the Corporation impose restrictions on the transfer of Common Shares on the register of the Corporation, provided that the Corporation receives the certificate representing the Common Shares to be transferred together with a duly endorsed instrument of transfer and payment of any fees and taxes which may be prescribed by the Board of Directors from time to time. There are no sinking fund provisions in relation to the Common Shares and they are not liable to further calls or to assessment by the Corporation. The Business Corporations Act (Yukon) provides that the rights and provisions attached to any class of shares may not be modified, amended or varied unless consented to by special resolution passed by a majority of not less than two-thirds of the votes cast in person or by proxy by holders of shares of that class.

Preferred Shares

The Preferred Shares are issuable in one or more series, each consisting of such number of Preferred Shares as may be fixed by the Corporation’s directors. The Corporation’s directors may from time to time, by resolution passed before the issue of any Preferred Shares of any particular series, alter the constating documents of the Corporation to determine the designation of the Preferred Shares of that series and to fix the number of Preferred Shares therein and alter the constating documents to create, define and attach special rights and restrictions to the shares of that series, including, without limitation, the following: (i) the nature, rate or amount of dividends and the dates, places and currencies of payment thereof; (ii) the consideration for, and the terms and conditions of, any purchase of the Preferred Shares for cancellation or redemption; (iii) conversion or exchange rights; (iv) the terms and conditions of any share purchase plan or sinking fund; and (v) voting rights and restrictions.

Registered holders of both the Preferred Shares and Common Shares are entitled, at their option, to a certificate representing their shares of the Corporation.

MARKET FOR SECURITIES

The Common Shares of the Corporation are traded in Canada on the TSX, and in the United States on the New York Stock Exchange and Nasdaq Stock Market. The closing price of the Corporation’s Common Shares on the TSX on March 29, 2007 was Cdn.$12.98.

The following sets forth the high and low market prices and the volume of the Common Shares traded on the TSX during the periods indicated:

(stated in Canadian dollars)

PERIOD	HIGH		LOW		VOLUME
January 2006	$	9.98	$	8.35		29,479,462
February 2006	$	9.62	$	8.52		16,676,479
March 2006	$	11.22	$	8.56		36,074,791
April 2006	$	12.00	$	10.25		19,209,581

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PERIOD	HIGH		LOW		VOLUME
May 2006	$	11.05	$	7.01		47,982,483
June 2006	$	8.07	$	6.51		18,733,470
July 2006	$	7.75	$	6.30		12,413,699
August 2006	$	7.21	$	6.45		30,822,096
September 2006	$	7.71	$	6.75		30,327,496
October 2006	$	13.09	$	6.37		76,442,406
November 2006	$	12.46	$	10.00		29,915,950
December 2006	$	13.18	$	10.76		21,534,978

DIRECTORS AND OFFICERS

The name, province or state, and country of residence and position with the Corporation of each director and executive officer of the Corporation, and the principal business or occupation in which each director or executive officer has been engaged during the immediately preceding five years is as follows:

Name and Municipality of		Principal Occupation
Residence	Position with Corporation	During Past Five Years
ROBERT M. FRIEDLAND Singapore	Chairman and Director (Director since March 1994)	Chairman of the Corporation (March 1994 to present); Chief Executive Officer of the Corporation (March 1994 to May 2006); Chairman and President, Ivanhoe Capital Corporation (a venture capital company) (1988 to present)
PETER G. MEREDITH B.C., Canada	Deputy Chairman and Director (Director since March 2005)	Deputy Chairman of the Corporation (May 2006 to present); Chief Financial Officer of the Corporation (May 2004 to May 2006); Chief Financial Officer of Ivanhoe Capital Corporation (a venture capital company) (1996 to present)
JOHN MACKEN Massachusetts, USA	Director, President and Chief Executive Officer (Director since January 2004)	Chief Executive Officer of the Corporation (May 2006 to present); President of the Corporation (January 2004 to present); Consultant (2000 to January 2004); Senior Vice President of Freeport McMoran Copper & Gold (a mining company) (1996 to 2000)

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Name and Municipality of		Principal Occupation
Residence	Position with Corporation	During Past Five Years
DAVID HUBERMAN B.C., Canada	Director (lead director) (Director since September 2003)	President, Coda Consulting Corp. (business consulting firm) (1993 to present)
R. EDWARD FLOOD Idaho, USA	Director (Director since March 1994)	Managing Director, Investment Banking, Haywood Securities (UK) Limited (investment dealer) (March 2007 to present); Deputy Chairman of the Corporation (May 1999 to February 2007); Senior Mining Analyst, Haywood Securities Inc. (investment dealer) (May 1999 to November 2001)
JOHN WEATHERALL Ontario, Canada	Director (Director since June 1996)	President of Scarthingmoor Assets Management Inc. (an asset management company) (April 1996 to present)
KJELD THYGESEN England	Director (Director since February 2001)	Managing Director, Lion Resources Management (investment firm and fund manager) (May 1989 to present)
HON. ROBERT HANSON England	Director (Director since February 2001)	Chairman, Hanson Capital Limited (investment and finance company) (February 1998 to present); Chairman, Hanson Transport Group (May 1990 to present); Hanson Westhouse (City of London merchant bank) (2006 to present)
DR. MARKUS FABER Hong Kong, China	Director (Director since February 2002)	Managing Director, Marc Faber Limited (investment advisory firm and fund manager) (June 1990 to present)
HOWARD BALLOCH Beijing, China	Director (Director since March 2005)	President, The Balloch Group (investment and consulting company) (July 2001 to present); Vice-Chairman, China-Canada Business Council (July 2001 to present); Canadian Ambassador to China, Mongolia and Democratic Republic of Korea (April 1996 to July 2001)
DAVID KORBIN B.C., Canada	Director (Director since May 2006)	Independent Management and Financial Consultant (May 1998 to present)
TOM ALBANESE England	Director (Director since November 2006)	Director Group Resources, Rio Tinto (a mining company) (July 2006 to present); Chief Executive and head of Exploration of the Rio Tinto Copper group (a mining company) (May 2004 to present)

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Name and Municipality of		Principal Occupation
Residence	Position with Corporation	During Past Five Years
TONY GIARDINI B.C., Canada	Chief Financial Officer	Chief Financial Officer of the Corporation (May 2006 to present); Vice-President and Treasurer, Placer Dome Inc. (a mining company) (December 2003 to April 2006); Treasurer, Placer Dome Inc. (November 2002 to December 2003); Director, Treasury and Operations, Placer Dome Inc. (May 2000 to October 2002)
GENE WUSATY Alberta, Canada	President, Coal Division	President of the Corporation’s Coal Division (August 2006 to present); Vice President of Operations and Chief Operating Officer, Grande Cache Coal Corp. (a mining company) (2004 to September 2005); Mining Manager, Elk Valley Coal Corp. (a mining company) (2003); Mine Manager and Project Manager, Fording Coal Limited (a mining company) (1989 to 2002)
DOUGLAS KIRWIN Queensland, Australia	Executive Vice-President, Exploration	Executive Vice-President, Exploration of the Corporation (September 1995 to present)
STEVEN GARCIA North Carolina, USA	Executive Vice President	Executive Vice President of the Corporation (October 2005 to present); Project Director of the Corporation (May 2005 to present); CEO Chamoa Farm, Inc. (a wholesale landscaping and nursery company) (2001 to present)
JAY GOW B.C., Canada	Vice President, Marketing	Vice President, Marketing of the Corporation (May 2004 to present); Marketing Manager, Copper & Molybdenum, Compania Minera Antamina S.A. (a mining company) (January 2001 to December 2003)
PIERRE MASSE B.C., Canada	Vice President and Treasurer	Vice President and Treasurer of the Corporation (May 2004 to present); Chief Financial Officer of the Corporation (November 2001 to May 2004); Controller of the Corporation (October 1998 to November 2001)

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Name and Municipality of		Principal Occupation
Residence	Position with Corporation	During Past Five Years
BEVERLY A. BARTLETT B.C., Canada	Vice President and Corporate Secretary	Vice President of the Corporation, Asia Gold and Ivanhoe Energy Inc. (May 2006 to present); Corporate Secretary of the Corporation (June 2001 to present); Corporate Secretary, Asia Gold (August 2003 to present); Corporate Secretary, Jinshan Gold Mines Inc. (May 2003 to present); Corporate Secretary, Ivanhoe Energy Inc. (oil and gas company) (June 2001 to present);
DAVID WOODALL Western Australia, Australia	President, Gold Division	President, Gold Division of the Corporation (August 2006 to present); Operations Manager of Robe River Associates (a mining company) (March 2005 to August 2006); General Manager, Operations of Sino Gold Limited (a mining company) (April 2004 to January 2005); Mine General Manager of Placer Dome Inc. (a mining company) (July 2001 to 2004)

Each director’s term of office expires at the next annual general meeting of the Corporation.

Shareholdings of Directors and Senior Officers

As at March 29, 2007, the directors and executive officers, as a group, beneficially owned, directly or indirectly, or exercised control or direction over, 101,772,370 Common Shares of the Corporation representing approximately 27.12% of the outstanding Common Shares of the Corporation.

Committees of the Board

The committees of the Board of Directors of the Corporation consist of an Audit Committee, a Compensation and Benefits Committee, a Corporate Governance and Nominating Committee, an Executive Committee and a Currency Advisory Committee (effective November 10, 2006). The members of the Audit Committee are John Weatherall, Kjeld Thygesen, Markus Faber and David Korbin. The members of the Compensation and Benefits Committee are David Huberman, Kjeld Thygesen, Robert Hanson, David Korbin and Howard Balloch. The members of the Corporate Governance and Nominating Committee are David Huberman, John Weatherall, Kjeld Thygesen, Robert Hanson, Markus Faber, David Korbin and Howard Balloch. The members of the Executive Committee are Robert Friedland, John Macken, Peter Meredith and David Huberman. The members of the Currency Advisory Committee are John Weatherall, Tony Giardini and Peter Meredith.

Conflicts of Interest

Certain directors of the Corporation and its subsidiaries are associated with other reporting issuers or other corporations which may give rise to conflicts of interest. In accordance with the Yukon Business Corporations Act, directors and officers of the Corporation are required to disclose to the Corporation the nature and extent of any interest that they have in a material contract or material transaction, whether made or proposed, with the Corporation, if the director or officer is: (a) a party to the contract or transaction; (b) is a director or an officer,

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or an individual acting in a similar capacity, of a party to the contract or transaction; or (c) has a material interest in a party to the contract or transaction.

IVN has adopted a Code of Business Conduct and Ethics (the “Ethics Policy”) that applies to all directors, officers and employees of IVN and its subsidiaries. As required by the Ethics Policy, individuals representing IVN must not enter into outside activities, including business interests or other employment, that might interfere with or be perceived to interfere with their performance at IVN.

Audit Committee Information

Information concerning the Audit Committee of the Corporation, as required by Multilateral Instrument 52-110, is provided in Schedule A to this Annual Information Form.

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

Other than as disclosed below or elsewhere in this Annual Information Form, no insider, director nominee or associate or affiliate of any such insider or director nominee, has any material interest, direct or indirect, in any material transaction since the commencement of the Corporation’s last financial year or in any proposed transaction, which, in either case, has materially affected or would materially affect the Corporation.

At the end of 2006 and 2005 subsidiaries of the Corporation holding the Savage River Project owed approximately $5.1 million to Mr. Robert M. Friedland, Chairman of the Corporation, which indebtedness originated as a result of the December 2000 acquisition by the Corporation of the Savage River Project. Following the sale of the Savage River operations in February 2005, repayment of this balance is contingent upon the Corporation receiving proceeds in excess of approximately $111 million from the sale of the Savage River Project. To date, $49.7 million has been received from the sale with an additional $21 million expected to be received on Match 31, 2007.

The Corporation is a party to cost sharing agreements with other companies in which Mr. Friedland has a material direct or indirect beneficial interest. Through these agreements, the Corporation shares, on a cost-recovery basis, office space, furnishings, equipment and communications facilities in Vancouver, Singapore, Beijing and London, and an aircraft. The Corporation also shares the costs of employing administrative and non-executive management personnel in these offices. During the year ended December 31, 2006, the Corporation’s share of these costs was $11.7 million. The companies with which the Corporation is a party to the cost sharing agreements, and Mr. Friedland’s ownership interest in each of them, are as follows:

	Robert Friedland
Corporation Name	Ownership Interest
Ivanhoe Energy Inc.		20.24	%
Ivanhoe Capital Corporation		100	%
Ivanhoe Nickel & Platinum Ltd.		50	%
Jinshan Gold Mines Inc.		(1)
Asia Gold Corp.		(1)

⁽¹⁾ Mr. Friedland owns 27.03% of the Common Shares of the Corporation, which owns 46.26 % of the common shares of Jinshan and 44.5% of the common shares of Asia Gold as at December 31, 2006.

TRANSFER AGENTS AND REGISTRARS

The registrar and transfer agent for the Common Shares in Canada is CIBC Mellon Trust Company at its principal offices in Vancouver and Toronto.

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MATERIAL CONTRACTS

Reference is made to the material contracts that the Corporation has filed with Canadian securities regulatory authorities, coincident with the filing of this Annual Information Form, on the SEDAR website at www.sedar.com.

Below is a list of the contracts, including particulars, that are material to the Corporation and were entered into between January 2006 and December 2006 or were entered into before that date but are still in effect, other than those entered into in the ordinary course of business. No disclosure is made regarding any contract that was entered into prior to January 1, 2002.

1. Equity Participation and Earn-in Agreement dated October 15, 2004 between IVN and Entrée Gold Inc., as amended November 9, 2004. See “GENERAL DEVELOPMENT OF THE BUSINESS — Three Year History — 2004” for further details.

2. Coal Reorganization Agreement dated July 7, 2006 among IVN, IMMI, Ivanhoe Coal Ltd. (now called Ivanhoe Resources Ltd.), Ivanhoe Mongolia Coal LLC, Asia Gold and ASG Resources Ltd. In conjunction with this transaction, IVN and Asia Gold also entered into an Interim Funding Agreement dated April 25, 2006 and an Acquisition Agreement dated July 7, 2006. See “GENERAL DEVELOPMENT OF THE BUSINESS — Three Year History — 2006” for further details.

3. Head Agreement dated February 4, 2005 among IVN, Stemcor Pellets AG, Stemcor Holdings Ltd. and Dominant Holdings AG, setting forth the terms and conditions of the sale of the Savage River Project.

4. An Underwriting Agreement dated April 6, 2006 among IVN, GMP Securities Ltd. and HSBC Securities (Canada) Inc. Pursuant to this agreement, a syndicate of Canadian Underwriters, following the exercise of an over-allotment option, bought 18,400,000 common shares at a price of Cdn.$10.28 per share for gross proceeds of Cdn.$189,152,000.

5. Private Placement Agreement dated October 18, 2006 as amended as of November 16, 2006 between IVN and Rio Tinto International Holdings Limited. See “GENERAL DEVELOPMENT OF THE BUSINESS - Three Year History — 2006” for further details.

INTERESTS OF EXPERTS

Deloitte & Touche LLP is the independent auditor of the Corporation.

The Corporation has relied on the work of the following experts in connection with the verification of the Corporation’s mineral reserve and resource estimates and certain other scientific and technical information in respect of its material mineral properties, as referenced in the Annual Information Form:

• GRD Minproc for the Oyu Tolgoi Project in the Oyu Tolgoi Technical Report; and

• Norwest Corporation for the reporting of resources on the Nariin Sukhait Project in the Nariin Sukhait Technical Report.

The Technical Reports are available for review on SEDAR at www.sedar.com.

To the knowledge of the Corporation, none of the corporations referred to above nor the qualified persons employed by the companies responsible for preparation of those reports or other qualified persons who contributed to the reports hold any outstanding Common Shares.

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ADDITIONAL INFORMATION

Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of the Corporation’s securities, options to purchase the Corporation’s Common Shares and interests of insiders in material transactions is contained in the management information circular for the annual general meeting of the Corporation to be held on May 11, 2007, which will be made available on SEDAR concurrent with the delivery of the document to the Corporation’s shareholders. Additional financial information is contained in the Corporation’s comparative financial statements and MD&A as at and for the years ended December 31, 2006 and 2005. Copies of the information circular (when filed), financial statements and MD&A are available on SEDAR, and may also be obtained upon request from the Corporation at 654 — 999 Canada Place, Vancouver, British Columbia, V6C 3E1.

Additional information relating to IVN may be found on SEDAR at www.sedar.com.

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SCHEDULE A

Audit Committee Information

Composition of Audit Committee

IVN’s Audit Committee consists of Messrs. John Weatherall, Kjeld Thygesen, David Korbin and Dr. Markus Faber. Mr. Weatherall is the Chairman of the Audit Committee. The Board of Directors has determined that all members of the Audit Committee are “independent” and “financially literate” as defined in Multilateral Instrument 52-110. In addition, in accordance with New York Stock Exchange corporate governance listing standards, the Board of Directors has determined that John Weatherall and David Korbin are audit committee financial experts.

Relevant Education and Experience

John Weatherall

Mr. Weatherall holds a Chartered Financial Analyst designation. He is currently the President of Scarthingmoor Asset Management Inc. Prior thereto, he was Chairman of Toronto Dominion Asset Management, the investment unit of a Canadian Chartered Bank and head of Institutional Equity with responsibility for investment research at Wood Gundy Inc. and Greenshields Inc. Mr. Weatherall has previously served on the audit committee of five publicly traded companies.

Markus Faber

Dr. Faber holds a PhD in economics from the University of Zurich. He has over 35 years experience in the finance industry, including acting as manager of an investment bank in the United States in which he routinely performed financial analysis of a range of different companies. His current occupation is principal of Marc Faber Limited, an investment advisory firm and fund manager. He also acts as a director and advisor to a number of investment funds.

Kjeld Thygesen

Mr. Thygesen holds a bachelor of commerce, majoring in economics and accounting. He has been a resource investment analyst and fund manager for over 30 years. He has been the Managing Director of Lion Resources Management since 1989, and prior thereto was the Director, Natural Resources Department and fund manager for Rothschild Asset Management.

David Korbin

Mr. Korbin holds a Chartered Accountant designation. For 16 of his 25 years in the accounting profession, he was managing partner of a number of firms including the Vancouver office of Deloitte Haskins & Sells and Deloitte & Touche LLP. He is currently working as a management and financial consultant and has been a director of E-Comm Emergency Communications for Southwest British Columbia Incorporated since 2001 serving as Chair of the board of directors since 2004 and Chair of the audit committee from 2002 to 2003. Prior thereto, Mr. Korbin served on the board of directors for Vancouver General Hospital and the Vancouver Hospital and Health Sciences Centre.

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Audit Fees

Deloitte & Touche LLP has served as the Corporation’s auditing firm since January 1995. Fees billed by Deloitte & Touche LLP and its affiliates during fiscal 2006 and fiscal 2005 were approximately Canadian $2,534,000 and Canadian $1,343,000, respectively. The aggregate fees billed by the auditors in fiscal 2006 and fiscal 2005 are detailed below.

(Canadian $ in 000’s)	2006		2005
Audit Fees (a)	$	1,588	$	936
Audit Related Fees (b)	$	246	$	208
Tax Fees (c)	$	700	$	200
All Other Fees (d)		—		—
Total	$	2,534	$	1,343

(a) Fees for audit services billed or expected to be billed relating to fiscal 2006 and 2005 consisted of:

• audit of the Company’s annual statutory financial statements;

• reviews of the Company’s quarterly financial statements; and

• comfort letters, consents, and other services related to SEC and Canadian securities regulatory authorities’ matters.

In addition, in 2006 fees were paid for services provided in connection with review pursuant to Section 404 of the Sarbanes Oxley Act of 2002 and the required attestations relating to internal controls.

(b) Fees for audit-related services provided during fiscal 2006 and 2005 consisted of financial accounting and reporting consultations and audit of annual statutory financial statements of the Company’s subsidiaries.

(c) Fees for tax services provided during fiscal 2006 and 2005 consisted of income tax compliance, and tax planning and advice relating to transactions and proposed transactions of the Company and its subsidiaries.

(d) The Corporation did not incur fees for products and services provided by its principal accountant during fiscal 2006 and 2005 not disclosed in subsections (a), (b) or (c) above.

Pre-Approval Policies and Procedures

All services to be performed by the Corporation’s independent auditor must be approved in advance by the Audit Committee or a designated member of the Audit Committee (“Designated Member”). The Designated Member is a member of the Audit Committee who has been given the authority to grant pre-approvals of permitted audit and non-audit services.

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The Audit Committee has considered whether the provision of services other than audit services is compatible with maintaining the auditors’ independence and has adopted a policy governing the provision of these services. This policy requires the pre-approval by the Audit Committee or the Designated Member of all audit and non-audit services provided by the external auditor, other than any de minimis non-audit services allowed by applicable law or regulation. The decisions of the Designated Member to pre-approve a permitted service need to be reported to the Audit Committee at its regularly scheduled meetings.

Pre-approval from the Audit Committee or Designated Member can be sought for planned engagements based on budgeted or committed fees. No further approval is required to pay pre-approved fees. Additional pre-approval is required for any increase in scope or in final fees.

Pursuant to these procedures, 100% of each of the services provided by the Corporation’s external auditor relating to the fees reported as audit, audit-related, tax and other fees were pre-approved by the Audit Committee or the Designated Member.

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IVANHOE MINES LTD.
AUDIT COMMITTEE CHARTER

I. Purpose

The primary objective of the Audit Committee (the “Committee”) of Ivanhoe Mines Ltd. (“IVN”) is to act as a liaison between the Board and IVN’s independent auditors (the “Auditors”) and to assist the Board in fulfilling its oversight responsibilities with respect to (a) the financial statements and other financial information provided by IVN to its shareholders, the public and others, (b) IVN’s compliance with legal and regulatory requirements, (c) the qualification, independence and performance of the Auditors and (d) IVN’s risk management and internal financial and accounting controls, and management information systems.

Although the Committee has the powers and responsibilities set forth in this Charter, the role of the Committee is oversight. The members of the Committee are not full-time employees of IVN and may or may not be accountants or auditors by profession or experts in the fields of accounting or auditing and, in any event, do not serve in such capacity. Consequently, it is not the duty of the Committee to conduct audits or to determine that IVN’s financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. These are the responsibilities of management and the Auditors.

The responsibilities of a member of the Committee are in addition to such member’s duties as a member of the Board.

II. Organization

The Committee shall consist of three or more directors and shall satisfy the laws governing IVN and the independence, financial literacy, expertise and experience requirements under applicable securities law, stock exchange and any other regulatory requirements applicable to IVN.

The members of the Committee and the Chair of the Committee shall be appointed by the Board on the recommendation of the Nominating & Corporate Governance Committee. A majority of the members of the Committee shall constitute a quorum. A majority of the members of the Committee shall be empowered to act on behalf of the Committee. Matters decided by the Committee shall be decided by majority votes. The chair of the Committee shall have an ordinary vote.

Any member of the Committee may be removed or replaced at any time by the Board and shall cease to be a member of the Committee as soon as such member ceases to be a director.

The Committee may form and delegate authority to subcommittees when appropriate.

III. Meetings

The Committee shall meet as frequently as circumstances require, but not less frequently than four times per year. The Committee shall meet at least quarterly with management, IVN’s financial and accounting officer(s) and the Auditors in separate executive sessions to discuss any matters that the Committee or each of these groups believe should be discussed privately.

The Chair of the Committee shall be an independent chair who is not Chair of the Board. In the absence of the appointed Chair of the Committee at any meeting, the members shall elect a chair from those in attendance at

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the meeting. The Chair, in consultation with the other members of the Committee, shall set the frequency and length of each meeting and the agenda of items to be addressed at each upcoming meeting.

The Committee will appoint a Secretary who will keep minutes of all meetings. The Secretary may be IVN’s Corporate Secretary or another person who does not need to be a member of the Committee. The Secretary for the Committee can be changed by simple notice from the Chair.

The Chair shall ensure that the agenda for each upcoming meeting of the Committee is circulated to each member of the Committee as well as the other directors in advance of the meeting.

The Committee may invite, from time to time, such persons as it may see fit to attend its meetings and to take part in discussion and consideration of the affairs of the Committee. The Company’s accounting and financial officer(s) and the Auditors shall attend any meeting when requested to do so by the Chair of the Committee.

IV. Authority and Responsibilities

The Board, after consideration of the recommendation of the Committee, shall nominate the Auditors for appointment by the shareholders of IVN in accordance with applicable law. The Auditors report directly to the Audit Committee. The Auditors are ultimately accountable to the Committee and the Board as representatives of the shareholders.

The Committee shall have the following responsibilities:

(a) Auditors

1. Recommend to the Board the independent auditors to be nominated for appointment as Auditors of IVN at IVN’s annual meeting and the remuneration to be paid to the Auditors for services performed during the preceding year; approve all auditing services to be provided by the Auditors; be responsible for the oversight of the work of the Auditors, including the resolution of disagreements between management and the Auditors regarding financial reporting; and recommend to the Board and the shareholders the termination of the appointment of the Auditors, if and when advisable.

2. When there is to be a change of the Auditors, review all issues related to the change, including any notices required under applicable securities law, stock exchange or other regulatory requirements, and the planned steps for an orderly transition.

3.	Review the Auditors’ audit plan and discuss the Auditors’ scope, staffing, materiality, and general audit approach.
4.	Review on an annual basis the performance of the Auditors, including the lead audit partner.
5.	Take reasonable steps to confirm the independence of the Auditors, which include:

(a)	Ensuring receipt from the Auditors of a formal written statement in accordance with applicable regulatory requirements delineating all relationships between the Auditors and IVN;
(b)	Considering and discussing with the Auditors any disclosed relationships or services, including non-audit services, that may impact the objectivity and independence of the Auditors;
(c)	Approving in advance any non-audit related services provided by the Auditor to IVN, and the fees for such services, with a view to ensure independence of the Auditor, and in accordance with applicable regulatory standards, including applicable stock exchange requirements with respect to approval of non-audit related services performed by the Auditors; and

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(d) As necessary, taking or recommending that the Board take appropriate action to oversee the independence of the Auditors.

6.	Review and approve any disclosures required to be included in periodic reports under applicable securities law, stock exchange and other regulatory requirements with respect to non-audit services.
7.	Confirm with the Auditors and receive written confirmation at least once per year (i) indicating that the Auditors are a member in good standing with the Canadian Public Accountability Board (CPAB) and comparable bodies in the United States, Australia and elsewhere to the extent required and disclosing any sanctions or restrictions imposed by the CPAB and such other comparable bodies; and (ii) responding to any other reasonable request of the Audit Committee for confirmation as to their qualifications to act as IVN’s Auditors.
8.	Consider the tenure of the lead audit partner on the engagement in light of applicable securities law, stock exchange or applicable regulatory requirements.
9.	Review all reports required to be submitted by the Auditors to the Committee under applicable securities laws, stock exchange or other regulatory requirements.
10.	Receive all recommendations and explanations which the Auditors place before the Committee.
(b)	Financial Statements and Financial Information
11.	Review and discuss with management, the financial and accounting officer(s) and the Auditors, IVN’s annual audited financial statements, including disclosures made in management’s discussion and analysis, prior to filing or distribution of such statements and recommend to the Board, if appropriate, that IVN’s audited financial statements be included in IVN’s annual reports distributed and filed under applicable laws and regulatory requirements.
12.	Review and discuss with management, the financial and accounting officer(s) and the Auditors, IVN’s interim financial statements, including management’s discussion and analysis, and the Auditors’ review of interim financial statements, prior to filing or distribution of such statements.
13.	Review any earnings press releases of IVN before IVN publicly discloses this information.
14.	Be satisfied that adequate procedures are in place for the review of IVN’s disclosure of financial information and extracted or derived from IVN’s financial statements and periodically assess the adequacy of these procedures.
15.	Discuss with the Auditors the matters required to be discussed by applicable auditing standards requirements relating to the conduct of the audit including:

(a)	the adoption of, or changes to, IVN’s significant auditing and accounting principles and practices;
(b)	the management letter provided by the Auditors and IVN’s response to that letter; and

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(c) any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to requested information, or personnel and any significant disagreements with management.

16.	Discuss with management and the Auditors major issues regarding accounting principles used in the preparation of IVN’s financial statements, including any significant changes in IVN’s selection or application of accounting principles. Review and discuss analyses prepared by management and/or the Auditors setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative approaches under generally accepted accounting principles.
17.	Prepare any report under applicable securities law, stock exchange or other regulatory requirements, including any reports required to be included in statutory filings, including in IVN’s annual proxy statement.
(c)	Ongoing Reviews and Discussions with Management and Others
18.	Obtain and review an annual report from management relating to the accounting principles used in the preparation of IVN’s financial statements, including those policies for which management is required to exercise discretion or judgments regarding the implementation thereof.
19.	Periodically review separately with each of management, the financial and accounting officer(s) and the Auditors; (a) any significant disagreement between management and the Auditors in connection with the preparation of the financial statements, (b) any difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information and (c) management’s response to each.
20.	Periodically discuss with the Auditors, without management being present, (a) their judgments about the quality and appropriateness of IVN’s accounting principles and financial disclosure practices as applied in its financial reporting and (b) the completeness and accuracy of IVN’s financial statements.
21.	Consider and approve, if appropriate, significant changes to IVN’s accounting principles and financial disclosure practices as suggested by the Auditors or management and the resulting financial statement impact. Review with the Auditors or management the extent to which any changes or improvements in accounting or financial practices, as approved by the Committee, have been implemented.
22.	Review and discuss with management, the Auditors and IVN’s independent counsel, as appropriate, any legal, regulatory or compliance matters that could have a significant impact on IVN’s financial statements, including applicable changes in accounting standards or rules, or compliance with applicable laws and regulations, inquiries received from regulators or government agencies and any pending material litigation.
23.	Enquire of IVN’s financial and accounting officer(s) and the Auditors on any matters which should be brought to the attention of the Committee concerning accounting, financial and operating practices and controls and accounting practices of IVN.
24.	Review the principal control risks to the business of IVN, its subsidiaries and joint ventures; and verify that effective control systems are in place to manage and mitigate these risks.
25.	Review and discuss with management any earnings press releases, including the use of “pro forma” or “adjusted” non-GAAP information, as well as any financial information and earnings guidance

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	provided to analysts and rating agencies. Such discussions may be done generally (i.e. discussion of the types of information to be disclosed and the types of presentations made).
26.	Review and discuss with management any material off-balance sheet transactions, arrangements, obligations (including contingent obligations) and other relationships of IVN with unconsolidated entities or other persons, that may have a material current or future effect on financial condition, changes in financial condition, results of operations, liquidity, capital resources, capital reserves or significant components of revenues or expenses. Obtain explanations from management of all significant variances between comparative reporting periods.
27.	Review and discuss with management IVN’s major risk exposures and the steps management has taken to monitor, control and manage such exposures, including IVN’s risk assessment and risk management guidelines and policies.
(d)	Risk Management and Internal Controls
28.	Review, based upon the recommendation of the Auditors and management, the scope and plan of the work to be done by IVN’s financial and accounting group and the responsibilities, budget and staffing needs of such group.
29.	Ensure that management has designed and implemented effective systems of risk management and internal controls and, at least annually, review and assess the effectiveness of such systems
30.	Approve and recommend to the Board for adoption policies and procedures on risk oversight and management to establish an effective system for identifying, assessing, monitoring and managing risk.
31.	In consultation with the Auditors and management, review the adequacy of IVN’s internal control structure and procedures designed to insure compliance with laws and regulations, and discuss the responsibilities, budget and staffing needs of IVN’s financial and accounting group.
32.	Establish procedures for (a) the receipt, retention and treatment of complaints received by IVN regarding accounting, internal accounting controls or auditing matters and (b) the confidential, anonymous submission by employees of IVN of concerns regarding questionable accounting or auditing matters.
33.	Review the internal control reports prepared by management, including management’s assessment of the effectiveness of IVN’s internal control structure and procedures for financial reporting and (ii) the Auditors’ attestation, and report, on the assessment made by management.
34.	Review the appointment of the chief financial officer and any key financial executives involved in the financial reporting process and recommend to the Board any changes in such appointment.
(e)	Other Responsibilities
35.	Create an agenda for the ensuing year and confirm a timetable for the Audit Committee for the ensuing year.
36.	Review and approve related-party transactions if required under applicable securities law, stock exchange or other regulatory requirements.

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37.	Review and approve (a) any change or waiver in IVN’s code of ethics applicable to senior financial officers and (b) any disclosures made under applicable securities law, stock exchange or other regulatory requirements regarding such change or waiver.
38.	Establish, review and approve policies for the hiring of employees or former employees of IVN’s Auditors.
39.	Review and reassess the duties and responsibilities set out in this Charter annually and recommend to the Nominating and Corporate Governance Committee and to the Board any changes deemed appropriate by the Committee.
40.	Review its own performance annually, seeking input from management and the Board.
41.	Perform any other activities consistent with this Charter, IVN’s articles and by-laws and governing law, as the Committee or the Board deems necessary or appropriate.
V.	Reporting

The Committee shall report regularly to the Board and shall submit the minutes of all meetings of the Audit Committee to the Board (which minutes shall ordinarily be included in the papers for the next full board meeting after the relevant meeting of the Committee). The Committee shall also report to the Board on the proceedings and deliberations of the Committee at such times and in such manner as the Board may require. The Committee shall review with the full Board any issues that have arisen with respect to quality or integrity of IVN’s financial statements, IVN’s compliance with legal or regulatory requirements, the performance or independence of the Auditors or the performance of IVN’s financial and accounting group.

VI. Resources and Access to Information

The Committee shall have the authority to retain independent legal, accounting and other consultants to advise the Committee.

The Committee has the authority to conduct any investigation appropriate to fulfilling its responsibilities. The Committee has direct access to anyone in the organization and may request any officer or employee of IVN or IVN’s outside counsel or the Auditors to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee with or without the presence of management. In the performance of any of its duties and responsibilities, the Committee shall have access to any and all books and records of IVN necessary for the execution of the Committee’s obligations.

The Committee shall consider the extent of funding necessary for payment of compensation to the Auditors for the purpose of rendering or issuing the annual audit report and recommend such compensation to the Board for approval. The Audit Committee shall determine the funding necessary for payment of compensation to any independent legal, accounting and other consultants retained to advise the Committee.

EX-2

Deloitte & Touche LLP

2800 - 1055 Dunsmuir Street

4 Bentall Centre

P.O. Box 49279

Vancouver BC V7X 1P4

Canada

Tel: 604-669-4466

Fax: 604-685-0395

www.deloitte.ca

Report of independent registered chartered accountants

To the Board of Directors and Shareholders of
Ivanhoe Mines Ltd.

We have audited the accompanying consolidated balance sheets of Ivanhoe Mines Ltd. and subsidiaries (the “Company”) as of December 31, 2006 and 2005, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

With respect to the financial statements for the year ended December 31, 2006, we conducted our audit in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). With respect to the financial statements for the year ended December 31, 2005, we conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Ivanhoe Mines Ltd. and subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 21, 2007 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Independent Registered Chartered Accountants
March 21, 2007

Deloitte & Touche LLP

2800 - 1055 Dunsmuir Street

4 Bentall Centre

P.O. Box 49279

Vancouver BC V7X 1P4

Canada

Tel: 604-669-4466

Fax: 604-685-0395

www.deloitte.ca

Report of independent registered chartered accountants

To the Board of Directors and Shareholders of
Ivanhoe Mines Ltd.

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting, that Ivanhoe Mines Ltd. and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Myanmar Ivanhoe Copper Company Limited (“MICCL”) in which it holds a 50% interest, because the Company does not have the ability to dictate or modify controls at MICCL and does not have the ability to assess, in practice, the controls at the entity. Under U.S. generally accepted accounting principles, MICCL is accounted for using the equity method of accounting and the Company’s proportionate interest in individual assets, liabilities, revenues and expenses is excluded from the consolidated financial statement amounts of the Company. Under Canadian generally accepted accounting principles, the Company proportionately consolidates MICCL which constitutes 24% and 29% of net and total assets respectively, and 10% of net loss of the consolidated financial statement amounts as of and for the year ended December 31, 2006. Accordingly, our audit did not include the internal control over financial reporting at MICCL. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered it necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded

as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2006 is fairly stated, in all material respects, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2006 of the Company and our report dated March 21, 2007 expressed an unqualified opinion on those financial statements.

Independent Registered Chartered Accountants
March 21, 2007

IVANHOE MINES LTD.
Consolidated Balance Sheets
(Stated in thousands of U.S. dollars)

	December 31,
	2006			2005
ASSETS
CURRENT
Cash and cash equivalents	$	363,572		$	101,681
Accounts receivable (Note 5)		24,739			33,350
Inventories		5,313			3,547
Prepaid expenses		7,941			6,353
Other current assets (Note 6)		286			3,286
TOTAL CURRENT ASSETS		401,851			148,217
INVESTMENT HELD FOR SALE (Note 4)		157,738			139,874
LONG-TERM INVESTMENTS (Note 7)		36,879			18,417
PROPERTY, PLANT AND EQUIPMENT (Note 8)		101,994			85,706
DEFERRED INCOME TAXES (Note 12)		481			171
OTHER ASSETS (Note 9)		4,216			4,394
TOTAL ASSETS	$	703,159		$	396,779
LIABILITIES
CURRENT
Accounts payable and accrued liabilities (Note 10)	$	37,201		$	20,594
TOTAL CURRENT LIABILITIES		37,201			20,594
LOANS PAYABLE TO RELATED PARTIES (Note 11)		5,088			5,088
DEFERRED INCOME TAXES (Note 12)		660			315
ASSET RETIREMENT OBLIGATIONS (Note 13)		6,353			6,231
TOTAL LIABILITIES		49,302			32,228
MINORITY INTERESTS (Note 14)		—			8,928
COMMITMENTS AND CONTINGENCIES (Note 20)
SHAREHOLDERS’ EQUITY
SHARE CAPITAL (Note 15)
Authorized
Unlimited number of preferred shares without par value
Unlimited number of common shares without par value
Issued and outstanding
373,463,637 (2005 - 315,900,668) common shares		1,462,039			994,442
SHARE PURCHASE WARRANTS AND SHARE ISSUANCE COMMITMENT (Note 15 (b))		23,062			—
ADDITIONAL PAID-IN CAPITAL		33,705			25,174
ACCUMULATED OTHER COMPREHENSIVE INCOME (Note 16)		13,233			6,711
DEFICIT		(878,182	)		(670,704	)
TOTAL SHAREHOLDERS’ EQUITY		653,857			355,623
TOTAL LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS’ EQUITY	$	703,159		$	396,779

APPROVED BY THE BOARD:

/s/ J. Weatherall	/s/ D. Korbin
J. Weatherall, Director	D. Korbin, Director

The accompanying notes are an integral part of these consolidated financial statements.

IVANHOE MINES LTD.
Consolidated Statements of Operations
(Stated in thousands of U.S. dollars, except for share and per share amounts)

	Year ended December 31,
	2006			2005
OPERATING EXPENSES
Exploration (Note 8 (b))	$	(212,955	)	$	(133,286	)
General and administrative		(28,170	)		(17,704	)
Accretion (Note 13)		(458	)		(354	)
Depreciation		(4,117	)		(2,558	)
Mining property care and maintenance		(4,421	)		(3,706	)
Gain on sale of other mineral property rights		2,724			—
Write-down of carrying values of property, plant and equipment		(700	)		(609	)
OPERATING LOSS		(248,097	)		(158,217	)
OTHER INCOME (EXPENSES)
Share of income from investment held for sale (Note 4)		18,471			23,036
Interest income		8,187			3,421
Foreign exchange gains		398			7,751
Share of loss of significantly influenced investees (Note 7 (a))		(1,648	)		(2,651	)
Gain on sale of long-term investments (Note 7 (b) and (f))		2,724			115
Write-down of carrying value of long-term investment (Note 7 (e) and (f))		(1,000	)		(1,438	)
LOSS BEFORE TAXES AND OTHER ITEMS		(220,965	)		(127,983	)
Provision for income taxes (Note 12)		(683	)		(433	)
Minority interests (Note 14)		3,369			2,714
NET LOSS FROM CONTINUING OPERATIONS		(218,279	)		(125,702	)
NET INCOME AND GAIN ON SALE FROM
DISCONTINUED OPERATIONS (Note 3)		19,622			35,916
NET LOSS	$	(198,657	)	$	(89,786	)
BASIC AND DILUTED (LOSS) EARNINGS PER SHARE FROM
CONTINUING OPERATIONS	$	(0.65	)	$	(0.41	)
DISCONTINUED OPERATIONS		0.06			0.12
	$	(0.59	)	$	(0.29	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (000’s)		336,128			305,160

The accompanying notes are an integral part of these consolidated financial statements.

IVANHOE MINES LTD.
Consolidated Statements of Shareholders’ Equity

(Stated in thousands of U.S. dollars, except for share amounts)

					Share Purchase					Accumulated
	Share Capital				Warrants and		Additional			Other
	Number				Share Issuance		Paid-In			Comprehensive
	of Shares		Amount		Commitment		Capital			Income		Deficit			Total
Balances, December 31, 2004		292,870,998	$	868,606	$	—	$	16,283		$	2,879	$	(580,918	)	$	306,850
Net loss		—		—		—		—			—		(89,786	)		(89,786	)
Other comprehensive income (Note 16):		—		—		—		—			3,832		—			3,832
Comprehensive loss		—		—		—		—			—		—			(85,954	)
Shares issued for:
Private placement, net of issue costs of $6,095		19,750,000		119,801		—		—			—		—			119,801
Exercise of stock options		3,213,172		5,555		—		(1,835	)		—		—			3,720
Property, plant and equipment purchased (Note 18 (b))		50,000		362		—		—			—		—			362
Share purchase plan		16,498		118		—		—			—		—			118
Dilution gain on issuance of shares by a subsidiary		—		—		—		3,012			—		—			3,012
Stock compensation charged to operations		—		—		—		7,714			—		—			7,714
Balances, December 31, 2005		315,900,668	$	994,442	$	—	$	25,174		$	6,711	$	(670,704	)	$	355,623
Net loss		—		—		—		—			—		(198,657	)		(198,657	)
Other comprehensive income (Note 16):		—		—		—		—			6,522		—			6,522
Comprehensive loss		—		—		—		—			—		—			(192,135	)
Shares issued for:
Private placements, net of issue costs of $14,731		55,489,883		455,819		—		—			—		—			455,819
Exercise of stock options		1,921,498		10,488		—		(3,475	)		—		—			7,013
Bonus shares		124,657		1,097		—		—			—		—			1,097
Share purchase plan		26,931		193		—		—			—		—			193
Share purchase warrants and share issuance
commitment (Note 15 (b))		—		—		23,062		(14,240	)		—		(8,821	)		1
Dilution gain on issuance of shares by a subsidiary		—		—		—		6,288			—		—			6,288
Stock compensation charged to operations		—		—		—		19,958			—		—			19,958
Balances, December 31, 2006		373,463,637	$	1,462,039	$	23,062	$	33,705		$	13,233	$	(878,182	)	$	653,857

The accompanying notes are an integral part of these consolidated financial statements.

IVANHOE MINES LTD.
Consolidated Statements of Cash Flows
(Stated in thousands of U.S. dollars)

	Year ended December 31,
	2006			2005
OPERATING ACTIVITIES
Net loss	$	(198,657	)	$	(89,786	)
Net income and gain on sale from discontinued operations		(19,622	)		(35,916	)
Items not involving use of cash
Stock-based compensation		19,958			7,714
Accretion expense		458			354
Depreciation		4,117			2,558
Gain on sale of other mineral property rights		(2,724	)		—
Write-down of carrying values of property, plant and equipment		700			609
Share of income from investment held for sale, net of cash distribution		(18,471	)		(13,036	)
Unrealized foreign exchange gains		108			(7,691	)
Share of loss of significantly influenced investees		1,648			2,651
Gain on sale of long-term investments		(2,724	)		(115	)
Write-down of carrying value of long-term investments		1,000			1,438
Deferred income taxes		13			(15	)
Minority interests		(3,369	)		(2,714	)
Bonus shares		1,097			—
Net change in non-cash operating working capital items (Note 18 (a))		5,789			(1,756	)
Cash used in operating activities of continuing operations		(210,679	)		(135,705	)
Cash provided by operating activities of discontinued operations		—			2,592
Cash used in operating activities		(210,679	)		(133,113	)
INVESTING ACTIVITIES
Proceeds from sale of discontinued operations		34,674			15,000
Purchase of long-term investments		(2,452	)		(6,310	)
Purchase of subsidiary, net of cash acquired of $15,414		—			12,022
Proceeds from sale of other mineral property rights		2,724			—
Proceeds from sale of long-term investments		1,777			4,539
Cash reduction on commencement of equity accounting (Note 7 (a))		(4,202	)		—
Expenditures on property, plant and equipment		(34,253	)		(32,180	)
Proceeds from (expenditures on) other assets		222			(794	)
Other		494			(2,007	)
Cash used in investing activities of continuing operations		(1,016	)		(9,730	)
Cash used in investing activities of discontinued operations		—			(502	)
Cash used in investing activities		(1,016	)		(10,232	)
FINANCING ACTIVITIES
Issue of share capital		463,025			123,639
Minority interests’ investment in subsidiaries		10,564			1,104
Cash provided by financing activities of continuing operations		473,589			124,743
Cash used in financing activities of discontinued operations		—			(37	)
Cash provided by financing activities		473,589			124,706
EFFECT OF EXCHANGE RATE CHANGES ON CASH		(3	)		7,842
NET CASH INFLOW		261,891			(10,797	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		101,681			112,478
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	363,572		$	101,681
CASH AND CASH EQUIVALENTS IS COMPRISED OF:
Cash on hand and demand deposits	$	32,179		$	33,240
Short-term money market instruments		331,393			68,441
	$	363,572		$	101,681

Supplementary cash flow information (Note 18 (b) and (c))

The accompanying notes are an integral part of these consolidated financial statements.

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

1.	NATURE OF OPERATIONS
	Ivanhoe Mines Ltd. (the “Company”), together with its subsidiaries and joint venture (collectively referred to as “Ivanhoe Mines”), is an international mineral exploration and development company holding interests in and conducting operations on mineral resource properties principally located in Southeast and Central Asia and Australia.
2.	SIGNIFICANT ACCOUNTING POLICIES
	These consolidated financial statements have been prepared in accordance with United States of America generally accepted accounting principles (“U.S. GAAP”). In the case of the Company, U.S. GAAP differs in certain respects from accounting principles generally accepted in Canada (“Canadian GAAP”) as explained in Note 22. The significant accounting policies used in these consolidated financial statements are as follows:

(a)	Principles of consolidation
	These consolidated financial statements include the accounts of the Company and all of its subsidiaries. The principal subsidiaries of the Company are Ivanhoe Mines Mongolia Inc. (B.V.I.), Ivanhoe Mines China (B.V.I.), Ivanhoe Cloncurry Mines Pty Limited (Australia), and their respective subsidiaries, and Bakyrchik Mining Venture (Kazakhstan) (70% owned) (“BMV”).
	Jinshan Gold Mines Inc. (B.C., Canada) (“Jinshan”) became a subsidiary of the Company in December 2005 and ceased being a subsidiary in August 2006. From September 1, 2006 it has been accounted for as an equity investment (Note 7 (a)). At December 31, 2006, Ivanhoe Mines owns 46% of Jinshan.
	Ivanhoe Mines’ investment in Asia Gold Corp. (“Asia Gold”) (B.C., Canada) (45% owned) remains consolidated at December 2006 due to Ivanhoe Mines having control over the operating, financing and strategic decisions of Asia Gold.
	Ivanhoe Mines’ investment in Myanmar Ivanhoe Copper Company Limited (“JVCo”) (Myanmar) (50% owned), which is subject to joint control, is accounted for using the equity method (Note 4).
	All intercompany transactions and balances have been eliminated, where appropriate.
	Variable Interest Entities (“VIE’s”), which include, but are not limited to, special purpose entities, trusts, partnerships, and other legal structures, as defined by Financial Accounting Standards Board (“FASB”) Interpretation No. 46 (Revised 2003) (“FIN 46R”) “Consolidation of Variable Interest Entities — an Interpretation of ARB No. 51”, are entities in which equity investors do not have the characteristics of a “controlling financial interest” or there is not sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. VIE’s are subject to consolidation by the primary beneficiary who will absorb the majority of the entities’ expected losses and/or expected residual returns.

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

(b)	Measurement uncertainties
	Generally accepted accounting principles require management to make assumptions and estimates that affect the reported amounts and other disclosures in these consolidated financial statements. Actual results may differ from those estimates.
	Significant estimates used in the preparation of these consolidated financial statements include, among other things, the recoverability of accounts receivable and investments, the proven and probable ore reserves, the estimated recoverable tonnes of ore from each mine area, the estimated net realizable value of inventories, the provision for income taxes and composition of deferred income tax assets and deferred income tax liabilities, the expected economic lives of and the estimated future operating results and net cash flows from property, plant and equipment, stock-based compensation, estimated fair value of share purchase warrants, estimated fair value of share issuance commitment, and the anticipated costs and timing of asset retirement obligations.
(c)	Foreign currencies
	The Company considers the U.S. dollar to be its functional currency as it is the currency of the primary economic environment in which the Company and its subsidiaries operate. Accordingly, monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect at the balance sheet date and non-monetary assets and liabilities are translated at the exchange rates in effect at the time of acquisition or issue. Revenues and expenses are translated at rates approximating the exchange rates in effect at the time of the transactions. All exchange gains and losses are included in operations.
(d)	Cash and cash equivalents
	Cash and cash equivalents include short-term money market instruments with terms to maturity, at the date of acquisition, not exceeding 90 days.
(e)	Inventories
	Mine stores and supplies are valued at the lower of the weighted average cost, less allowances for obsolescence, and replacement cost.

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

(f)	Long-term investments
	Long-term investments in companies in which Ivanhoe Mines has voting interests of 20% to 50%, or where Ivanhoe Mines has the ability to exercise significant influence, are accounted for using the equity method. Under this method, Ivanhoe Mines’ share of the investees’ earnings and losses is included in operations and its investments therein are adjusted by a like amount. Dividends received are credited to the investment accounts.
	The other long-term investments are classified as “available-for-sale” investments. Unrealized gains and losses on these investments are recorded in accumulated other comprehensive income as a separate component of shareholders’ equity, unless the declines in market value are judged to be other than temporary, in which case the losses are recognized in income in the period. Realized gains and losses from the sale of these investments are included in income in the period.
(g)	Exploration and development
	All direct costs related to the acquisition of mineral property interests are capitalized in the period incurred.
	Generally, exploration costs are charged to operations in the period incurred until such time as it has been determined that a property has economically recoverable reserves, in which case subsequent exploration costs and the costs incurred to develop a property are capitalized. Exploration costs include value-added taxes incurred in foreign jurisdictions when recoverability of those taxes is uncertain.
	Certain costs incurred constructing surface assets for an exploration shaft were capitalized (Note 8). These surface assets included the shaft head frame, control room, hoisting equipment and ancillary facilities. The Company determined that these costs met the definition of an asset and that they were recoverable through salvage value or transfer of the assets to other locations. These costs were tested for impairment using estimated future cash flows based on reserves and resources beyond proven and probable reserves, in accordance with accounting policy Note 2(h) for property, plant and equipment.

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

(h)	Property, plant and equipment
	Property, plant and equipment are carried at cost (including development and preproduction costs, capitalized interest, other financing costs and all direct administrative support costs incurred during the construction period, net of cost recoveries and incidental revenues), less accumulated depletion and depreciation including write-downs. Following the construction period, interest, other financing costs and administrative costs are expensed as incurred.
	On the commencement of commercial production, depletion of each mining property is provided on the unit-of-production basis, using estimated proven and probable reserves as the depletion basis.
	Property, plant and equipment are depreciated, following the commencement of commercial production, over their expected economic lives using either the unit-of-production method or the straight-line method (over one to twenty years).
	Capital works in progress are not depreciated until the capital asset has been put into operation.
	Ivanhoe Mines reviews the carrying values of its property, plant and equipment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. An impairment is considered to exist if total estimated future cash flows, or probability-weighted cash flows on an undiscounted basis, are less than the carrying value of the assets. An impairment loss is measured and recorded based on discounted estimated future cash flows associated with values beyond proven and probable reserves and resources. In estimating future cash flows, assets are grouped at the lowest level for which there is identifiable future cash flows that are largely independent of cash flows from other asset groups. Generally, in estimating future cash flows, all assets are grouped at a particular mine for which there is identifiable cash flows.

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

(i)	Stripping costs
	Stripping costs incurred during the production phase of a mine are variable production costs that are included in the costs of inventory produced during the period that the stripping costs are incurred.
(j)	Asset retirement obligations
	Ivanhoe Mines recognizes liabilities for statutory, contractual or legal obligations associated with the retirement of property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, a liability for an asset retirement obligation is recognized at its fair value in the period in which it is incurred. Upon initial recognition of the liability, the corresponding asset retirement cost is added to the carrying amount of that asset and the cost is amortized as an expense over the economic life of the related asset. Following the initial recognition of the asset retirement obligation, the carrying amount of the liability is increased for the passage of time and adjusted for changes to the amount or timing of the underlying cash flows needed to settle the obligation.
(k)	Revenue recognition
	Revenue at JVCo (Note 4) from the sale of copper is recognized, net of related royalties and sales commissions, when: (i) persuasive evidence of an arrangement exists; (ii) the risks and rewards of ownership pass to the purchaser including delivery of the product; (iii) the selling price is fixed or determinable; and (iv) collectibility is reasonably assured. Revenue from copper cathode includes provisional pricing arrangements accounted for as embedded derivative instruments under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended.
	JVCo sells its copper cathode with pricing based on the averaged London Metal Exchange Grade – A Copper Cash Settlement Price during the second calendar month following the contractual month of shipment. Revenues are recorded under these contracts at the time title passes to the buyer based on the forward price for the expected settlement period. These contracts provide for a provisional payment based upon provisional assays and the previous month’s average quoted copper price. JVCo’s provisionally priced sales contain an embedded derivative that, because it is closely related to the commodity sale, is not required to be accounted for separately from the host contract. At December 31, 2006 and 2005, JVCo had accrued a loss of $594,000 and a gain of $320,000, respectively, in accounts receivable and revenue in relation to the embedded derivative.

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

(l)	Stock-based compensation
	The Company has an Employees’ and Directors’ Equity Incentive Plan which is disclosed in Note 15. On January 1, 2006, the Company adopted the provisions of SFAS No. 123(R), “Share-Based Payment”, on a modified prospective basis. Prior to January 1, 2006, the Company recorded compensation costs using the fair value based method in accordance with SFAS No. 123, “Accounting for Stock-Based Compensation”. The adoption of SFAS No. 123(R) did not have an impact on the Company’s consolidated financial position and results of operations (Note 15). The fair value of stock options at the date of grant is amortized to operations, with an offsetting credit to additional paid-in capital, on a straight-line basis over the vesting period. If and when the stock options are ultimately exercised, the applicable amounts of additional paid-in capital are transferred to share capital.
(m)	Deferred income taxes
	The Company computes income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes”. SFAS 109 requires that the provision for deferred income taxes be based on the liability method. Deferred taxes arise from the recognition of the tax consequences of temporary differences by applying statutory tax rates applicable to future years to differences between the financial statement’s carrying amounts and the tax bases of certain assets and liabilities. The Company records a valuation allowance against any portion of those deferred income tax assets that management believes will, more likely than not, fail to be realized.
(n)	Loss per share
	The Company follows SFAS No. 128, “Earnings Per Share”, which requires the presentation of basic and diluted earnings per share. The basic loss per share is computed by dividing the net loss attributable to common stock by the weighted average number of common shares outstanding during the year. All stock options and share purchase warrants outstanding at each period end have been excluded from the weighted average share calculation. The effect of potentially dilutive stock options and share purchase warrants was antidilutive in years ending December 31, 2006 and 2005.
	Details of potentially dilutive shares excluded from the loss per share calculation due to antidilution:

	December 31,
	2006		2005
Options		13,644,434		7,416,700
Share purchase warrants		92,629,044		576,000
Total potentially dilutive shares		106,273,478		7,992,700

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

(o)	Segmented reporting
	The Company operates in a single reportable segment, being exploration and development of mineral properties.
(p)	Comparative figures
	Certain of the comparative figures have been reclassified to conform with the presentation as at and for the year ended December 31, 2006. In particular, $6,121,000 of stock-based compensation charged to operations has been reclassified from general and administrative expenses to exploration expenses.
(q)	Recent accounting pronouncements
	In February 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 155, “Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140” (“SFAS 155”). This Statement amends FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, and FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS 155 resolves issues addressed in Statement 133 Implementation Issue No. D1, “Application of Statement 133 to Beneficial Interests in Securitized Financial Assets”. This Statement will be effective for financial instruments acquired or issued by the Company after the beginning of its 2007 fiscal year. The Company expects that the adoption of this Statement will not have a material effect on its financial condition or results of operations.
	In March 2006, the FASB issued Statement of Financial Accounting Standards No. 156, “Accounting for Servicing of Financial Assets — an amendment of FASB Statement No. 140” (“SFAS 156”). This Statement provides guidance addressing the recognition and measurement of separately recognized servicing assets and liabilities, common with mortgage securitization activities, and provides an approach to simplify efforts to obtain hedge accounting treatment. SFAS 156 is effective after the beginning of an entity’s fiscal year that begins after September 15, 2006. The Company expects that the adoption of this Statement will have no impact on its financial condition or results of operations.
	In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”). This interpretation clarifies the recognition threshold and measurement of a tax position taken or expected to be taken on a tax return, and requires expanded disclosure with respect to the uncertainty in income taxes. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company expects that the adoption of FIN 48 will not have a material effect on its financial condition or results of operations.

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

(q)	Recent accounting pronouncements (Continued)
	In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”). This Statement defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. SFAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The Company expects that adoption of SFAS 157 will not have a material impact on its financial condition or results of operations.
	In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108 (“SAB 108”). SAB 108 provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 permits companies to record the cumulative effect of initially applying this approach in the first fiscal year ending after November 15, 2006 by recording necessary correcting adjustments to the carrying values of assets and liabilities as of the beginning of that year with the offsetting adjustment recorded to the opening balance of retained earnings. Adoption of SAB 108 did not have a material impact on the Company’s financial condition and results of operations.
	In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – including an amendment of FASB Statement No. 115” (“SFAS 159”) which permits entities to choose to measure many financial instruments and certain other items at fair value. This statement is effective for fiscal periods beginning after November 15, 2007. The Company is currently evaluating the impact, if any, that adoption of SFAS 159 will have on its financial condition or results of operations.

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

3.	DISCONTINUED OPERATIONS
	In February 2005, the Company disposed of the Savage River Iron Ore Project (the “Project”).
	Ivanhoe Mines sold the Project for two initial payments totalling $21.5 million, plus a series of contingent, annual payments that commenced on March 31, 2006. The annual payments are based on annual iron ore pellet tonnes sold and an escalating price formula based on the prevailing annual Nibrasco/JSM pellet price.
	To date, Ivanhoe Mines has received $49.7 million in proceeds from the sale of the Project. The first initial payment of $15.0 million was received in 2005 and the second initial payment of $6.5 million was received in January 2006. In March 2006, Ivanhoe Mines received its first contingent annual payment of $28.0 million with an additional $0.2 million adjustment received in May 2006. This $28.2 million payment included $7.9 million in contingent income which was recognized in the first quarter of 2006 for tonnes sold during the quarter.
	At December 31, 2006, Ivanhoe Mines has accrued $11.7 million as receivable in relation to the tonnes of iron ore sold during the nine month period ended December 31, 2006. This amount will form part of the second contingent annual payment to be received in March 2007.
	The following table presents summarized financial information related to discontinued operations:

	Years ended December 31,
	2006		2005 (1)
REVENUE	$	—	$	18,031
COST OF OPERATIONS		—		(11,965	)
DEPRECIATION AND DEPLETION		—		—
GENERAL AND ADMINISTRATIVE				(195	)
OPERATING PROFIT		—		5,871
Interest expense		—		(203	)
INCOME BEFORE THE FOLLOWING		—		5,668
Interest income		—		16
Foreign exchange losses		—		(285	)
INCOME BEFORE INCOME TAXES		—		5,399
Recovery of income and capital taxes		—		7
NET INCOME		—		5,406
Contingent income		19,622		20,243
Gain on sale of Savage River		—		10,267
NET INCOME AND GAIN ON SALE FROM DISCONTINUED OPERATIONS	$	19,622	$	35,916

(1) Net income for the year ended December 31, 2005, includes only two months of results for the Project as it was sold on February 28, 2005.

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

4.	INVESTMENT HELD FOR SALE
	Ivanhoe Mines has a 50% interest in JVCo, a joint venture formed to develop open-pit copper mining operations located at Monywa in the Union of Myanmar.
	As part of the Rio Tinto Plc (“Rio Tinto”) strategic partnership that was announced in October 2006, Ivanhoe Mines agreed to divest all of its business interests and assets in Myanmar, including its indirect interest in the Monywa Copper Project. During February 2007 the Myanmar assets were transferred to an independent third-party trust (the “Trust”), pending their sale. The sole purpose of the Trust is to sell the assets to one or more arm’s-length third parties. Ivanhoe Mines’ only interest in the Trust is as an unsecured creditor under a promissory note — issued by the Trust on the transfer of the Myanmar assets — that is to be repaid once the assets are sold.
	In consideration for the Myanmar Assets, a company wholly-owned by the Trust (“Trust Holdco”) issued a promissory note to a subsidiary of the Company. The principal amount of the promissory note is equal to the cash proceeds to be realized upon the future sale of the Myanmar Assets, plus 50% of any cash generated by the Monywa Copper Project that is available for distribution to the project participants but remains undistributed at the time of any such sale, less certain contractually specified deductions, including any fees and expenses incurred in carrying out the sale. Ivanhoe Mines retains no ownership interest in the Myanmar Assets, directly or indirectly, except as a creditor of Trust Holdco pursuant to the promissory note.
	Trust Holdco’s mandate is to engage one or more qualified third parties (a “Sale Service Provider”) who will be responsible for identifying potential third-party purchasers, soliciting expressions of interest from such potential purchasers, negotiating sale terms and facilitating the sale of the Myanmar Assets on behalf of Trust Holdco. A Sale Service Provider who successfully facilitates the sale of the Myanmar Assets to a purchaser will be entitled to a fee equal to a percentage of the proceeds realized by Trust Holdco on the sale of the Myanmar Assets.
	Following the sale of the Myanmar Assets, Trust Holdco will use the proceeds to pay the Sale Service Provider’s fee and any other expenses or liabilities incurred in carrying out the sale. Trust Holdco then will use the remaining proceeds of sale, less contractually specified deductions, to repay the promissory note held by the Company’s subsidiary. Upon having retired the promissory note, the Trust will wind up Trust Holdco and distribute the remaining assets of the Trust, which are expected to consist solely of cash, to the designated beneficiaries of the Trust, whereupon the Trust will terminate.
	During 2006, JVCo continued the appeal process with the Myanmar tax authorities regarding the imposition of an 8% commercial tax on all export sales since April 1, 2003. JVCo believes that the tax provisions in the S&K mine joint venture agreement clearly exempt the mine’s copper exports from all tax of a commercial tax nature. In September 2006, JVCo received an unfavourable ruling from the tax authorities on its appeal and in October 2006, JVCo filed a second appeal. Notwithstanding the appeal, JVCo has paid the disputed commercial tax for the period April 2003 to March 2005 and has accrued in accounts payable at December 31, 2006, an amount of $20.1 million (net $10.0 million to Ivanhoe Mines) for the period April 1, 2005 to December 31, 2006.

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

4.	INVESTMENT HELD FOR SALE (Continued)
	During 2006, JVCo received a ruling from the Myanmar tax authorities regarding its 2003 and 2004 income tax returns. JVCo had filed its 2003 and 2004 returns on the basis that it would receive a 50% exemption on the 30% corporate tax rate; however, this did not occur. Notwithstanding an appeal of the corporate tax ruling, JVCo in 2006 paid the disputed additional tax and has increased its provision for income tax for the 2005 and 2006 tax years, which cover the period from April 1, 2004 to December 31, 2006. At December 31, 2006, JVCo’s accounts payable balance included $39.3 million (net $19.6 million to Ivanhoe Mines) in income tax for the period April 2005 to December 2006.
	Subsequent to year end, dividends of $30.0 million (net $15.0 million to Ivanhoe Mines) were paid by JVCo.
	The following table summarizes Ivanhoe Mines’ investment in JVCo:

	December 31,
	2006			2005
Balance, at beginning of year	$	139,874		$	126,911
Share of income from JVCo		18,471			23,036
Cash distribution		—			(10,000	)
Other		(607	)		(73	)
Balance, at end of year	$	157,738		$	139,874

The following table summarizes Ivanhoe Mines’ 50% share of the financial position of JVCo as at December 31, 2006 and 2005.

	December 31,
	2006			2005
Cash and cash equivalents	$	57,462		$	22,843
Accounts receivable		104			11,364
Inventories		18,465			16,754
Prepaid expenses		1,574			1,558
Property, plant and equipment		148,772			128,405
Deferred income tax assets		1,250			432
Other assets		1,313			1,585
Accounts payable and accrued liabilities		(33,400	)		(14,784	)
Deferred income tax liabilities		(29,487	)		(11,321	)
Other liabilities		(8,315	)		(16,962	)
Share of Net Assets of JVCo	$	157,738		$	139,874

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

4.	INVESTMENT HELD FOR SALE (Continued)
	The following table summarizes Ivanhoe Mines’ 50% share of the results of operations of JVCo for the years ending December 31, 2006 and 2005.

	Years ended December 31,
	2006			2005
Revenue (1)	$	58,731		$	54,584
Cost of operations		(15,927	)		(17,768	)
Depreciation and depletion		(4,577	)		(5,657	)
General and administrative		(649	)		(484	)
Interest expense		(300	)		(489	)
OPERATING PROFIT		37,278			30,186
Interest income		985			374
Foreign exchange gains (losses)		1,234			(50	)
INCOME BEFORE TAXES		39,497			30,510
Provision for income taxes		(21,026	)		(7,474	)
SHARE OF INCOME FROM JOINT VENTURE	$	18,471		$	23,036
Cash flows
From operating activities	$	55,278		$	24,805
For investing activities		(20,659	)		(4,561	)
For financing activities		—			(7,500	)
	$	34,619		$	12,744

(1) Revenue is net of commercial tax.

5. ACCOUNTS RECEIVABLE

	December 31,
	2006		2005
Contingent income (Note 3)	$	11,691	$	20,243
Proceeds from sale of Project (Note 3)		—		6,500
Sale of investment (Note 7(b))		1,324		—
Refundable taxes		9,053		4,423
Related parties (Note 17)		319		451
Accrued interest		910		340
Other		1,442		1,393
	$	24,739	$	33,350

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

6. OTHER CURRENT ASSETS

	December 31,
	2006		2005
Loan receivable	$	—	$	3,000
Restricted cash		286		286
	$	286	$	3,286

	In 2006, the Company received full repayment from Lepanto Consolidated Mining Company of the $3.0 million plus interest originally loaned to them in December 2004.
7.	LONG-TERM INVESTMENTS

	December 31, 2006									December 31, 2005
	Equity			Cost/Equity		Unrealized		Fair/Equity		Equity			Cost/Equity		Unrealized		Fair/Equity
	Interest			Basis		Gain		Value		Interest			Basis		Gain		Value
Investment in companies subject to significant influence:
Jinshan Gold Mines Inc. (a)		46.3	%	$	10,866		N/a	$	10,866		N/a			N/a		N/a		N/a
Investments “available-for-sale”:
Intec Ltd. (b)		7.1	%	$	1,062	$	7,088	$	8,150		12.5	%	$	1,446	$	1,331	$	2,777
Entrée Gold Inc. (c)		14.7	%		10,156		6,044		16,200		15.0	%		10,157		5,380		15,537
Redox Diamonds Ltd. (d)		13.8	%		1,451		—		1,451		—			—		—		—
Wind Energy Group Inc. (e)		21.3	%		—		—		—		—			—		—		—
Asia Now Resources Corp.		2.0	%		103		101		204		3.1	%		103		—		103
Other		—			8		—		8		—			—		—		—
				$	12,780	$	13,233	$	26,013				$	11,706	$	6,711	$	18,417
				$	23,646	$	13,233	$	36,879				$	11,706	$	6,711	$	18,417

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

7. LONG-TERM INVESTMENTS (Continued)

(a)	In November 2005, the Company and Jinshan restructured their participating arrangements to simplify Jinshan’s corporate structure. The Company transferred to Jinshan its entire participating interest in the 217 Gold Project, its interests in other joint venture arrangements between the parties, its existing contractual rights to participate in Jinshan projects in China and cash proceeds of $3,392,000 in exchange for Jinshan issuing Ivanhoe Mines 48,552,948 of its common shares. As a result of this transaction, in December 2005, Ivanhoe Mines ceased equity accounting for its investment in Jinshan as it held approximately 53% of the issued and outstanding common shares of Jinshan, thereby making Jinshan a controlled subsidiary, requiring consolidation.
	On August 31, 2006, Jinshan completed a private placement which diluted Ivanhoe Mines’ investment in Jinshan to 48.9%. As a result of this transaction, Ivanhoe Mines ceased consolidating Jinshan on August 31, 2006 and commenced equity accounting for its investment. During the year Ivanhoe Mines recorded a $1,648,000 (2005 — $2,651,000) equity loss on this investment. At December 31, 2006, the carrying value of the Company’s investment in Jinshan was lower than its share of the underlying book value of Jinshan’s net assets by approximately $1,476,000. This difference relates to unrecognized dilution gains associated with warrants issued by Jinshan during the year. These dilution gains will be recognized as the warrants are exercised.
	At December 31, 2006 the quoted market value of the Company’s investment in Jinshan was $88,250,000.
(b)	During the fourth quarter of 2006, Ivanhoe Mines’ sold 14,391,586 shares of its investment in Intec Ltd. for $3,099,000. These transactions resulted in a gain on sale of $2,724,000 being recognized in operations. At December 31, 2006, $1,777,000 in proceeds had been received and $1,324,000 was included in accounts receivable (Note 5).
(c)	During 2004, the Company purchased 4.6 million units of Entrée Gold Inc. (“Entrée”) at a cost of $3,846,000 (Cdn$4,600,000). Each unit consisted of one Entrée common share and one share purchase warrant exercisable until October 2006 to purchase an additional Entrée common share at a price of Cdn$1.10. In 2005, the Company exercised these share purchase warrants to acquire 4.6 million common shares of Entrée at a cost of $4,111,000 (Cdn$5,060,000).
	Also during 2005, the Company acquired 1.2 million units in Entrée at a cost of $2,199,000 (Cdn$2,718,000). Each unit consisted of one Entrée common share and two share purchase warrants. These share purchase warrants are outstanding at December 31, 2006, and if not exercised will expire in July 2007.
(d)	During 2006, the Company purchased 8.3 million units of Redox Diamonds Ltd. (“Redox”) at a cost of $1.5 million. Each unit consists of one Redox common share and one Redox share option exercisable until April 2008 to purchase an additional Redox common share at a price ranging from Cdn$0.30 to Cdn$0.35.

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

7. LONG-TERM INVESTMENTS (Continued)

(e)	During 2006, the Company purchased 2.0 million common shares of Wind Energy Group Inc. (“Wind Energy”), in two $0.5 million tranches, at a cost of $1.0 million. In September 2006, the Company recorded an impairment provision of $1.0 million against this investment based on an assessment of the underlying book value of Wind Energy’s net assets. This investment is not being accounted for using the equity method as the Company does not have significant influence over Wind Energy.
(f)	In March 2005, the share price of Olympus Pacific Minerals Inc. (“Olympus”) deteriorated, with the result that the market value of Ivanhoe Mines’ investment in Olympus decreased significantly below carrying value. Accordingly, the Company recorded an other-than-temporary impairment of $1,438,000, reducing the carrying value of this investment to $4,424,000.
	In May 2005, Ivanhoe Mines sold its investment in Olympus, generating proceeds of $4,539,000. This transaction resulted in a gain on sale of $115,000 being recognized in operations.

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

8. PROPERTY, PLANT AND EQUIPMENT

	December 31,
	2006							2005
			Accumulated							Accumulated
			Depletion and							Depletion and
			Depreciation,							Depreciation,
			Including			Net Book				Including			Net Book
	Cost		Write-downs			Value		Cost		Write-downs			Value
Mining properties
Bakyrchik Mining Venture, Kazakhstan (a)	$	87,541	$	(87,541	)	$	—	$	87,541	$	(87,541	)	$	—
Mining plant and equipment
Bakyrchik Mining Venture, Kazakhstan (a)	$	3,107	$	(3,107	)	$	—	$	3,107	$	(3,107	)	$	—
Other mineral property interests
Oyu Tolgoi, Mongolia (b)	$	43,190	$	(6,251	)	$	36,939	$	43,562	$	(6,244	)	$	37,318
Cloncurry, Australia (c)		6,293		(126	)		6,167		6,293		(126	)		6,167
Other exploration projects		1,647		(115	)		1,532		1,530		(115	)		1,415
	$	51,130	$	(6,492	)	$	44,638	$	51,385	$	(6,485	)	$	44,900
Other capital assets
Oyu Tolgoi, Mongolia (b)	$	22,192	$	(6,377	)	$	15,815	$	14,334	$	(3,326	)	$	11,008
Cloncurry, Australia (c)		1,518		(131	)		1,387		1,833		(174	)		1,659
Other exploration projects		2,489		(1,406	)		1,083		2,961		(2,181	)		780
	$	26,199	$	(7,914	)	$	18,285	$	19,128	$	(5,681	)	$	13,447
Capital works in progress
Oyu Tolgoi, Mongolia (b)	$	34,295	$	—		$	34,295	$	22,939	$	—		$	22,939
Bakyrchik Mining Venture, Kazakhstan (a)		4,776		—			4,776		4,420		—			4,420
	$	39,071	$	—		$	39,071	$	27,359	$	—		$	27,359
	$	207,048	$	(105,054	)	$	101,994	$	188,520	$	(102,814	)	$	85,706

(a)	Ivanhoe Mines placed the Bakyrchik Mining Venture on a care and maintenance basis in prior years.
(b)	Ivanhoe Mines has a 100% interest in the Oyu Tolgoi copper-gold project located in Mongolia. In 2003, Ivanhoe Mines converted its four exploration licences on the project into 60-year mining licences, which are renewable for an additional 40 years.
	Capital works in progress at December 31, 2006 consisted mainly of surface assets being constructed for the Shaft No. 1 at Oyu Tolgoi ($27.4 million (2005 - $21.4 million)).
	A significant portion of exploration expenses incurred during the year relate directly to the development of the Oyu Tolgoi project located in Mongolia. Included in exploration expenses are shaft sinking, engineering, and development costs that have been expensed and not capitalized.
(c)	Ivanhoe Mines owns certain copper-gold and uranium mining and exploration leases in Queensland, Australia.

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

9. OTHER ASSETS

	December 31,
	2006		2005
Advances to suppliers	$	1,333	$	1,711
Environmental bond (Queensland, Australia)		2,883		2,683
	$	4,216	$	4,394

10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

	December 31,
	2006		2005
Accounts payable	$	33,101	$	11,902
Payroll and other employee related payables		454		546
Accrued construction costs		2,227		7,044
Amounts payable to related parties (Note 17)		1,419		1,102
	$	37,201	$	20,594

11.

LOANS PAYABLE TO RELATED PARTIES

These loans are payable to the Chairman of the Company or a company controlled by him. They are non-interest bearing, unsecured and repayable in U.S. dollars. Repayment of these loans has been postponed until Ivanhoe Mines receives an aggregate of $111.1 million from the sale of the Savage River Project. At December 31, 2006, $49.7 million has been received from the sale with a further $11.7 million accrued as receivable (Note 3 and 5).

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

12.	INCOME TAXES
	As referred to in Note 2(b), Ivanhoe Mines must make significant estimates in respect of its provision for income taxes and the composition of its deferred income tax assets and liabilities. Ivanhoe Mines’ operations are, in part, subject to foreign tax laws where interpretations, regulations and legislation are complex and continually changing. As a result, there are usually some tax matters in question that may, on resolution in the future, result in adjustments to the amount of deferred income tax assets and liabilities, and those adjustments may be material to Ivanhoe Mines’ financial position and results of operations.
	Ivanhoe Mines’ provision for income and capital taxes for continuing operations consists of the following:

	Years ended December 31,
	2006		2005
Deferred income taxes	$	13	$	(15	)
Capital taxes		670		448
	$	683	$	433

Deferred income tax assets and liabilities for continuing operations at December 31, 2006 and 2005 arise from the following:

	December 31,
	2006			2005
Deferred income tax assets
Long-term investments	$	3,921		$	279
Loss carry-forwards		208,965			133,562
Other		14,379			10,107
		227,265			143,948
Valuation allowance		(226,784	)		(143,777	)
Net deferred income tax assets		481			171
Deferred income tax liabilities
Property, plant and equipment		660			315
		660			315
Deferred income tax liabilities, net	$	179		$	144

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

12.	INCOME TAXES (Continued)
	A reconciliation of the provision for income and capital taxes for continuing operations is as follows:

	Years ended December 31,
	2006			2005
Recovery of income taxes based on the combined
Canadian federal and provincial statutory tax rates of 34.1% in 2006 and 34.9% in 2005 applied to the loss before taxes and other items	$	75,393		$	44,666
(Deduct) add
Lower foreign tax rates		(17,253	)		(7,109	)
Tax benefit of losses not recognized		(136,278	)		(78,836	)
Change in valuation allowance for deferred income tax assets		84,935			43,986
Capital taxes		(670	)		(448	)
Other, including non-deductible expenses		(6,810	)		(2,692	)
Provision for income and capital taxes	$	(683	)	$	(433	)

At December 31, 2006, Ivanhoe Mines had the following unused tax losses from continuing operations, for which no deferred income tax assets had been recognized:

			Local		U.S. Dollar		Expiry
			Currency		Equivalent (i)		Dates
Non-capital losses:
Canada	Cdn.		$	127,632	$	109,471	2007 to 2026
Australia		A	$	17,101	$	13,486	(a)
Mongolia	Mongolian Tugrik			551,908,121	$	473,741	(b)
Kazakhstan	Kazakhstan Tenge			15,369,664	$	121,212	2007 to 2013
Capital losses:
Canada	Cdn.		$	119,455	$	102,457	(c)

(i)	Translated using the year-end exchange rate.
(a)	These losses are carried forward indefinitely, subject to continuity of ownership and business tests.
(b)	These losses are carried forward until production from a mine commences; thereafter, they can be amortized on a straight-line basis over a period of five years.
(c)	These losses are carried forward indefinitely for utilization against any future net realized capital gains.

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

12.	INCOME TAXES (Continued)
	Ivanhoe Mines also has deductible temporary differences and unused tax losses in certain other foreign jurisdictions that are not disclosed above, as it is currently highly unlikely that these items will be utilized.
13.	ASSET RETIREMENT OBLIGATIONS

	December 31,
	2006			2005
Balance, beginning of year	$	6,231		$	5,267
(Decrease) increase in obligations for:
Changes in estimates		(485	)		651
Foreign exchange		149			(41	)
Accretion expense		458			354
Balance, end of year	$	6,353		$	6,231

	The total undiscounted amount of estimated cash flows required to settle the obligations is $19,841,000 (2005 — $20,458,000), which has been discounted using credit adjusted risk free rates ranging from 7.6% to 8.2%. The majority of reclamation obligations are not expected to be paid for several years and will be funded from Ivanhoe Mines’ cash balances and environmental bonds restricted for the purpose of settling asset retirement obligations (Note 9).
14.	MINORITY INTERESTS
	At December 31, 2006 there were minority interests in BMV and Asia Gold. Jinshan ceased being consolidated on August 31, 2006 (Note 7(a)).
	Currently, losses applicable to the minority interests in BMV and Asia Gold are being allocated to Ivanhoe Mines since those losses exceed the minority interests in the net assets of BMV and Asia Gold.

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

14. MINORITY INTERESTS (Continued)

	Minority Interests
	Asia Gold			Jinshan			BMV		Total
Balances, December 31, 2004	$	3,713		$	—		$	—	$	3,713
Minority interests’ share of loss		(2,714	)		—			—		(2,714	)
Increase in minority interest arising from share issuances by subsidiary		582			—			—		582
Initial interest arising from acquisition of Jinshan in December 2005		—			7,347			—		7,347
Balances, December 31, 2005	$	1,581		$	7,347		$	—	$	8,928
Minority interests’ share of loss		(2,063	)		(1,306	)		—		(3,369	)
Increase in minority interest arising from share issuances by subsidiary		482			5,388			—		5,870
Commencement of equity accounting for investment in Jinshan		—			(11,429	)		—		(11,429	)
Balance, December 31, 2006	$	—		$	—		$	—	$	—

15. SHARE CAPITAL

(a)	Equity Incentive Plan
	The Company has an Employees’ and Directors’ Equity Incentive Plan (the “Equity Incentive Plan”), which includes three components: (i) a Share Option Plan; (ii) a Share Bonus Plan; and (iii) a Share Purchase Plan.

(i)	The Share Option Plan authorizes the Board of Directors of the Company to grant options to directors and employees of Ivanhoe Mines to acquire Common Shares of the Company at a price based on the weighted average trading price of the Common Shares for the five days preceding the date of the grant. Options vest over four years and have five year contractual terms unless otherwise determined from time to time by the Board of Directors, on the recommendation of the Compensation and Benefits Committee. The Share Option Plan also provides that these options may, upon approval of the Board of Directors, be converted into stock appreciation rights.
(ii)	The Share Bonus Plan permits the Board of Directors of the Company to authorize the issuance, from time to time, of Common Shares of the Company to employees of the Company and its affiliates.
(iii)	The Share Purchase Plan entitles each eligible employee of Ivanhoe Mines to contribute up to seven percent of each employee’s annual basic salary in semi-monthly instalments. At the end of each calendar quarter, each employee participating in the Share Purchase Plan is issued Common Shares of the Company equal to 1.5 times the aggregate amount contributed by the participant, based on the weighted average trading price of the Common Shares during the preceding three months.

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

15. SHARE CAPITAL (Continued)

(a)	Equity Incentive Plan (Continued)
	The Company is authorized to issue a maximum of 32,000,000 Common Shares pursuant to the Equity Incentive Plan. At December 31, 2006, an aggregate of 2,961,648 Common Shares were available for future grants of awards under the plan.
	Under SFAS No. 123 (R), the value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the input of subjective assumptions, including the expected term of the option award and stock price volatility. The expected term of options granted is derived from historical data on employee exercise and post-vesting employment termination behaviour. Expected volatility is based on the historical volatility of the Company’s stock. These estimates involve inherent uncertainties and the application of management judgment. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those options expected to vest. As a result, if other assumptions had been used, the recorded stock-based compensation expense could have been materially different from that reported.
	The weighted average grant-date fair value of stock options granted during 2006 and 2005 was Cdn$4.31 and Cdn$4.95, respectively. The fair value of these options was determined using a Black-Scholes option pricing model, recognizing forfeitures as they occur, using the following weighted average assumptions:

	2006			2005
Risk-free interest rate		4.12	%		3.76	%
Expected life	3.3 years			5.0 years
Expected volatility		50	%		61	%
Expected dividends	$	Nil		$	Nil

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

15. SHARE CAPITAL (Continued)

(a)	Equity Incentive Plan (Continued)
	A summary of stock option activity and information concerning outstanding and exercisable options at December 31, 2006 is as follows:

	Options Outstanding
	Options			Number of			Weighted
	Available			Common			Average
	for Grant			Shares			Exercise Price
							(Expressed in
							Canadian dollars)
Balances, December 31, 2004		104,734			9,890,942		$	5.02
Increase in amount authorized		9,000,000			—			—
Options granted		(1,125,000	)		1,125,000			8.86
Options exercised		—			(3,256,542	)		1.48
Options cancelled		342,700			(342,700	)		2.41
Shares issued under share purchase plan		(16,498	)		—			—
Balances, December 31, 2005		8,305,936			7,416,700		$	7.27
Increase in amount authorized		3,000,000			—			—
Options granted		(8,519,000	)		8,519,000			9.39
Options exercised		—			(1,964,966	)		4.28
Options cancelled		326,300			(326,300	)		8.80
Bonus shares		(124,657	)		—			—
Shares issued under share purchase plan		(26,931	)		—			—
Balances, December 31, 2006		2,961,648			13,644,434		$	8.99

At December 31, 2006, the U.S. dollar equivalent of the weighted average exercise price was $7.70 (December 31, 2005 — $6.26).

The total intrinsic value of options exercised during the years ended December 31, 2006 and 2005 was $9.1 million and $19.9 million, respectively.

As at December 31, 2006, options vested and expected to vest totalled 13,644,434 (December 31, 2005 – 7,416,700) and had an aggregate intrinsic value of $29.4 million (December 31, 2005 — $6.9 million).

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

15. SHARE CAPITAL (Continued)

(a)	Equity Incentive Plan (Continued)
	The following table summarizes information concerning outstanding and exercisable options at December 31, 2006:

	Options Outstanding						Options Exercisable
			Weighted		Weighted				Weighted
Range of			Average		Average				Average
Exercise	Number		Remaining		Exercise Price		Number		Exercise Price
Prices	Outstanding		Life (in years)		Per Share		Exercisable		Per Share
(Expressed in					(Expressed in				(Expressed in
Canadian					Canadian				Canadian
dollars)					dollars)				dollars)
$3.25 to $3.50		667,100		1.26	$	3.29		607,100	$	3.29
$3.51 to $6.75		253,500		1.66		6.75		197,500		6.75
$6.76 to $7.69		1,433,334		3.41		7.23		467,400		7.29
$7.70 to $8.20		2,015,500		5.46		7.90		989,500		7.87
$8.21 to $8.99		940,000		3.09		8.65		370,000		8.66
$9.00 to $10.27		6,995,000		6.03		9.72		2,863,500		9.72
$10.28 to $12.70		1,340,000		6.21		12.22		1,055,500		12.60
		13,644,434		5.17	$	8.99		6,550,500	$	8.98

	As at December 31, 2006 there was $21.5 million of total unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of approximately 1.69 years.
	As at December 31, 2006 the aggregate intrinsic value for fully vested stock options was $14.1 million (December 31, 2005 — $5.9 million).
(b)	Rio Tinto Placement
	On October 18, 2006, Ivanhoe Mines and Rio Tinto announced that they had reached an agreement to form a strategic partnership whereby Rio Tinto would invest in Ivanhoe Mines and form a joint Ivanhoe Mines — Rio Tinto Technical Committee, to engineer, construct and operate Ivanhoe Mines’s Oyu Tolgoi project in Mongolia.
	On October 27, 2006, Rio Tinto completed the first private placement tranche under the agreement consisting of approximately 37.1 million shares at a price of $8.18 per share, for proceeds totalling $303.4 million.
	The agreement provides for Rio Tinto to make investments in the equity of Ivanhoe Mines, under defined conditions, totalling approximately $1.5 billion. Ivanhoe Mines has agreed to use at least 90% of the proceeds received from Rio Tinto to finance the development of Oyu Tolgoi.

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

15. SHARE CAPITAL (Continued)

(b)	Rio Tinto Placement (Continued)
	Rio Tinto will take up a second tranche private placement following the satisfactory conclusion of an Investment Agreement between Ivanhoe Mines and the Mongolian Government. Rio Tinto has the option to exercise the second tranche earlier. This second tranche consists of approximately 46.3 million shares at a subscription price of $8.38 per share, for proceeds totalling $388.0 million.
	In addition to the two private placements, Rio Tinto has been granted approximately 92.0 million warrants, divided into two series. The lives of these warrants are determined by the date an approved Investment Agreement for the Oyu Tolgoi Project is reached with the Mongolian government. The Warrant Determination Date within the warrant terms presented below is the earlier of the date an approved Investment Agreement is reached or October 27, 2009:
	The 46,026,522 Series A Warrants are non-transferable. Each warrant entitles Rio Tinto to purchase one Common Share of the Company at a price of:

(i)	$8.38 during the period commencing November 30, 2006 and ending 180 days following the Warrant Determination Date; and
(ii)	$8.54 during the period commencing 181 days after the Warrant Determination Date and ending 365 days after the Warrant Determination Date.

The 46,026,522 Series B Warrants are non-transferable. Each warrant entitles Rio Tinto to purchase one Common Share of the Company at a price of:

(i)	$8.38 during the period commencing November 30, 2006 and ending 180 days following the Warrant Determination Date;
(ii)	$8.54 during the period commencing 181 days after the Warrant Determination Date and ending 365 days after the Warrant Determination Date;
(iii)	$8.88 during the period commencing 366 days after the Warrant Determination Date and ending 545 days after the Warrant Determination Date; and
(iv)	$9.02 during the period commencing 546 days after the Warrant Determination Date and ending 725 days after the Warrant Determination Date.

	Ivanhoe Mines has recorded an amount of $23.1 million in shareholders’ equity, attributable to the fair value of the Rio Tinto share purchase warrants and second tranche share issuance commitment.
(c)	Share Purchase Warrants
	At December 31, 2006, the Company had 5,760,000 share purchase warrants outstanding that were issued in 2004. These warrants entitled the holder to acquire one-tenth of a common share of the Company at any time on or before February 15, 2007, at a price of $8.68 per common share. On February 13, 2007, 28,600 of the share purchase warrants were exercised with the remaining 5,731,400 warrants expiring unexercised.

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

16. ACCUMULATED OTHER COMPREHENSIVE INCOME

	December 31,
	2006			2005
Balance, beginning of year	$	6,711		$	2,879
Other comprehensive income for the year:
Changes in fair value of long-term investments		7,534			3,539
Reclassification for (gains) losses recorded in earnings		(1,012	)		293
Other comprehensive income before tax:		6,522			3,832
Income tax recovery related to other comprehensive income		—			—
Other comprehensive income, net of tax:		6,522			3,832
Balance, end of year	$	13,233		$	6,711

17.

OTHER RELATED PARTY TRANSACTIONS

The following tables summarize related party expenses incurred by Ivanhoe Mines, primarily on a cost-recovery basis, with an officer of a subsidiary of Ivanhoe Mines, a company subject to significant influence by Ivanhoe Mines, a company affiliated with Ivanhoe Mines, or with companies related by way of directors or shareholders in common. The tables summarize the transactions with related parties and the types of expenditures incurred with related parties:

	Years ended December 31,
	2006		2005
Global Mining Management Corporation (a)	$	7,015	$	4,169
Ivanhoe Capital Aviation LLC (b)		3,840		3,421
Fognani & Faught, PLLC (c)		1,394		823
Jinshan Gold Mines Inc. (d)		—		1,122
Ivanhoe Capital Pte. Ltd. (e)		78		60
Ivanhoe Capital Services Ltd. (f)		743		755
Ivanhoe Energy Inc. (g)		—		175
	$	13,070	$	10,525

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

17. OTHER RELATED PARTY TRANSACTIONS (Continued)

	Years ended December 31,
	2006		2005
Exploration	$	—	$	1,122
Legal		1,394		823
Office and administrative		2,306		2,216
Salaries and benefits		5,530		2,943
Travel (including aircraft rental)		3,840		3,421
	$	13,070	$	10,525

The above noted transactions were in the normal course of operations and were measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

Accounts receivable and accounts payable at December 31, 2006, included $319,000 and $1,419,000, respectively (December 31, 2005 — $451,000 and $1,102,000, respectively), which were due from/to a company under common control, a company affiliated with Ivanhoe Mines, or companies related by way of directors in common.

(a)	Global Mining Management Corporation (“Global”) is a private company based in Vancouver owned equally by seven companies, one of which is Ivanhoe Mines. Global has a director in common with the Company. Global provides administration, accounting, and other office services to the Company on a cost-recovery basis.
(b)	Ivanhoe Capital Aviation LLC (“Aviation”) is a private company 100% owned by the Company’s Chairman. Aviation operates an aircraft which is rented by the Company on a cost-recovery basis.
(c)	An officer of a subsidiary of Ivanhoe Mines is a partner with Fognani & Faught, PLLC, a legal firm which provides legal services to Ivanhoe Mines.
(d)	During 2005, the Company incurred exploration expenditures as part of several joint-venture agreements with Jinshan.
(e)	Ivanhoe Capital Pte. Ltd. (“Ivanhoe Capital”) is a private company 100% owned by the Company’s Chairman. Ivanhoe Capital provides for administration, accounting, and other office services in Singapore and London on a cost-recovery basis.
(f)	Ivanhoe Capital Services Ltd. (“Services”) is a private company 100% owned by the Company’s Chairman. Services provides for salaries associated with certain employees of the Company located in Singapore on a cost-recovery basis.
(g)	Ivanhoe Energy Inc. (“Ivanhoe Energy”) is a public company in which the Company’s Chairman has a significant interest and holds the position of Deputy Chairman. During 2005 Ivanhoe Energy provided administration and other office services in Beijing on a cost-recovery basis.

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

18. CASH FLOW INFORMATION

(a) Net change in non-cash operating working capital items

	Years ended December 31,
	2006			2005
(Increase) decrease in:
Accounts receivable	$	(10,729	)	$	522
Inventories		(1,766	)		(1,355	)
Prepaid expenses		(2,025	)		(5,132	)
Other current assets		3,000			—
Increase in:
Accounts payable and accrued liabilities		17,309			4,209
	$	5,789		$	(1,756	)

(b)	Supplementary information regarding other non-cash transactions
	The non-cash investing and financing activities relating to continuing operations not already disclosed in the Consolidated Statement of Shareholders’ Equity or the Consolidated Statements of Cash Flows were as follows:

	Years ended December 31,
	2006		2005
Investing activities:
Acquisition of property, plant and equipment	$	—	$	440

(c) Other supplementary information

	Years ended December 31,
	2006		2005
Interest paid	$	—	$	—
Income taxes paid	$	670	$	448

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

19.	SEGMENT DISCLOSURES
	Ivanhoe Mines has one operating segment; its exploration division with projects located primarily in Mongolia.

	December 31,
	2006		2005
Property, plant and equipment at the end of the year:
Mongolia	$	87,509	$	71,666
Inner Mongolia, China		1,408		2,459
Australia		7,555		6,767
Kazakhstan		4,776		4,419
Canada		203		131
Other		543		264
	$	101,994	$	85,706

20.	COMMITMENTS AND CONTINGENCIES
	Ivanhoe Mines has, in the normal course of its business, entered into various long-term contracts, which include commitments for future operating payments under contracts for drilling, engineering, equipment rentals and other arrangements as follows:

2007	$	118,084
2008		837
2009		137
2010 onwards		9
	$	119,067

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

21. DISCLOSURES REGARDING FINANCIAL INSTRUMENTS

(a) The estimated fair value of Ivanhoe Mines’ financial instruments was as follows:

	December 31,
	2006				2005
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Cash	$	363,572	$	363,572	$	101,681	$	101,681
Accounts receivable		24,739		24,739		33,350		33,350
Other current assets		286		286		3,286		3,286
Long-term investments		36,879		36,879		18,417		18,417
Accounts payable and accrued liabilities		37,201		37,201		20,594		20,594
Loans payable to related parties		5,088		4,106		5,088		3,733

	The fair value of Ivanhoe Mines’ long-term investments was determined by reference to published market quotations, which may not be reflective of future values.
	The fair value of loans payable to related parties was estimated by discounting future payments to their present value.
	The fair value of Ivanhoe Mines’ remaining financial instruments was estimated to approximate their carrying value, due primarily to the immediate or short-term maturity of these financial instruments.
(b)	Ivanhoe Mines is exposed to credit risk with respect to its accounts receivable. The significant concentrations of credit risk are situated in Mongolia and Australia. Ivanhoe Mines does not mitigate the balance of this risk in light of the credit worthiness of its major debtors.

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

22.	DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
	As indicated in Note 2, these consolidated financial statements have been prepared in accordance with U.S. GAAP, which, in the case of the Company, conform in all material respects with Canadian GAAP, except as set forth below.
	Consolidated Balance Sheets

	December 31,
	2006		2005
Total assets in accordance with U.S. GAAP	$	703,159	$	396,779
Reverse equity accounting for investment held for sale (a)		71,202		43,067
Reversal of amortization of other mineral property interests (b)		6,329		6,329
Adjustment to carrying value of long-term investments (c)		—		(6,711	)
Total assets in accordance with Canadian GAAP	$	780,690	$	439,464
Total liabilities in accordance with U.S. GAAP	$	49,302	$	32,228
Reverse equity accounting for investment held for sale (a)		71,202		43,067
Income tax effect of U.S. GAAP adjustments for:
Reversal of amortization of other mineral property interests (b)		882		882
Total liabilities in accordance with Canadian GAAP	$	121,386	$	76,177
Total minority interests in accordance with U.S. and Canadian GAAP	$	—	$	8,928
Total shareholders’ equity in accordance with U.S. GAAP	$	653,857	$	355,623
Decrease in the deficit for:
Reversal of amortization of other mineral property interests (b)		5,447		5,447
Other comprehensive income (c)		—		(6,711	)
Total shareholders’ equity in accordance with Canadian GAAP	$	659,304	$	354,359

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

22.	DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)
	Consolidated Statements of Operations (in thousands, except for share and per share amounts)

	Years ended December 31,
	2006			2005
Net (loss) from continuing operations in accordance with U.S. GAAP	$	(218,279	)	$	(125,702	)
Dilution gain on issuance of shares by a subsidiary (d)		6,288			3,012
Share of income from investment held for sale (a)		(18,471	)		(23,036	)
Net (loss) from continuing operations in accordance with Canadian GAAP	$	(230,462	)	$	(145,726	)
Net income from discontinued operations in accordance with U.S. GAAP	$	19,622		$	35,916
Share of income from investment held for sale (a)		18,471			23,036
Write-down of other mineral property interests (b)		—			(192	)
Gain on sale of Savage River Project (e)		—			(19,692	)
Net income from discontinued operations in accordance with Canadian GAAP	$	38,093		$	39,068
Net (loss) in accordance with Canadian GAAP	$	(192,369	)	$	(106,658	)
Weighted-average number of shares outstanding under Canadian GAAP (in thousands)		336,128			305,160
Basic and diluted (loss) earnings per share in accordance with Canadian GAAP from:
Continuing operations	$	(0.68	)	$	(0.48	)
Discontinued operations		0.11			0.13
	$	(0.57	)	$	(0.35	)

Under Canadian GAAP, the components of shareholders’ equity would be as follows:

	December 31,
	2006			2005
Share capital	$	1,466,969		$	999,372
Share purchase warrants and share issuance commitment		23,062			—
Additional paid-in capital		33,792			17,952
Accumulated other comprehensive income (c)		13,233			—
Deficit		(877,752	)		(662,965	)
	$	659,304		$	354,359

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

22.	DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)
	Consolidated Statements of Cash Flows

	Years ended December 31,
	2006			2005
Cash used in operating activities in accordance with U.S. GAAP	$	(210,679	)	$	(133,113	)
Reverse equity accounting for investment held for sale (a)		55,278			24,805
Cash used in operating activities in accordance with Canadian GAAP		(155,401	)		(108,308	)
Cash used in investing activities in accordance with U.S. GAAP		(1,016	)		(10,232	)
Reverse equity accounting for investment held for sale (a)		(20,659	)		(4,561	)
Cash used in investing activities in accordance with Canadian GAAP		(21,675	)		(14,793	)
Cash provided by financing activities in accordance with U.S. GAAP		473,589			124,706
Reverse equity accounting for investment held for sale (a)		—			(7,500	)
Cash provided by financing activities in accordance with Canadian GAAP		473,589			117,206
Effect of exchange rate changes on cash		(3	)		7,842
Net cash inflow in accordance with Canadian GAAP		296,510			1,947
Cash, beginning of year in accordance with Canadian GAAP		124,524			122,577
Cash, end of year in accordance with Canadian GAAP	$	421,034		$	124,524

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

22. DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

(a)	Investment held for sale
	Under U.S. GAAP, Ivanhoe Mines has accounted for its joint venture interest in JVCo (Note 4) using the equity method. Under Canadian GAAP, interests in joint ventures are accounted for on a proportionate consolidation basis.
	Under Canadian GAAP, the carrying amount of Ivanhoe Mines’ investment and its share of equity of JVCo is eliminated. Ivanhoe Mines’ proportionate share of each line item of JVCo’s assets, liabilities, revenue and expenses is reported as discontinued operations within Ivanhoe Mines’ financial statements in accordance with CICA 3475, “Disposal of Long-Lived Assets and Discontinued Operations”. All intercompany balances and transactions would be eliminated. Note 4 discloses the assets and liabilities of JVCo that would have been disclosed as held for sale and the revenues and expenses of JVCo that would have been included as discontinued operations within Ivanhoe Mines’ financial statements had Canadian GAAP been applied.
(b)	Other mineral property interests
	Under U.S. GAAP, where the mineral property interests are, at the date of acquisition, without economically recoverable reserves, these costs are generally considered to be exploration costs that are expensed as incurred. Under Canadian GAAP, the costs of the acquisition of mineral property interests are capitalized.
	In accordance with EITF 04-02, “Whether Mining Rights are Tangible or Intangible Assets”, the Company classifies its mineral exploration licenses as tangible assets and there is no difference between Canadian and U.S. GAAP. Prior to January 2004, the costs of acquisition of Ivanhoe Mines’ mineral exploration licenses were classified as intangible assets under U.S. GAAP and amortized over the term of the licenses. As a result, for Canadian GAAP purposes, the $6,329,000, net of deferred income taxes of $882,000, in amortization or write-offs of other mineral property interests under U.S. GAAP needs to be reversed.

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

22. DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

(c)	Financial instruments
	On January 1, 2006, the Company adopted CICA Section 1530, “Comprehensive Income”, Section 3855, “Financial Instruments – Recognition and Measurement”, Section 3861, “Financial Instruments – Disclosure and Presentation” and Section 3865, “Hedges”. These new standards increased harmonization between U.S. and Canadian GAAP.
	Under U.S. and Canadian GAAP, portfolio investments are classified as available-for-sale securities, which are carried at market value (Note 7). The resulting unrealized gains or losses are included in the determination of comprehensive income, net of income taxes where applicable. Prior to adopting Section’s 3855 and 1530, these investments were carried at their original cost less provisions for impairment under Canadian GAAP. Upon adoption, the Company recorded a retroactive balance representing the unrealized gains on available-for-sale securities of $6,711,000 at January 1, 2006. Available-for-sale securities generated comprehensive income of $6,522,000 under both Canadian and U.S. GAAP for the year ended December 31, 2006.
(d)	Dilution gain on investment in subsidiary
	Under U.S. GAAP the $6,288,000 (2005 — $3,012,000) dilution gain on investment in a subsidiary was accounted for as part of additional paid-in capital. Under Canadian GAAP, the dilution gain would have been included in the net loss for the year.
(e)	Gain on sale of Savage River Project
	Under U.S. GAAP, the net book value of the Savage River Project when it was sold in February 2005 was $11,200,000, whereas under Canadian GAAP the carrying value was $30,900,000. During 2005, total proceeds from the sale were $41,700,000, representing cash instalments including interest of $21,500,000, plus escalating payments of $20,200,000. Therefore, under Canadian GAAP the gain on sale was $19,700,000 less than under U.S. GAAP.
(f)	Income taxes
	Under U.S. GAAP, deferred income taxes are calculated based on enacted tax rates applicable to future years. Under Canadian GAAP, future income taxes are calculated based on enacted or substantively enacted tax rates applicable to future years. This difference in GAAP did not have a material effect on the financial position or results of operations of the Company for the years ended December 31, 2006 and 2005.

IVANHOE MINES LTD.
Notes to the Consolidated Financial Statements
(Stated in U.S. dollars unless otherwise noted; tabular amounts in thousands)

22. DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

(g)	Recently released Canadian accounting standards
	There are no recently issued Canadian accounting standards which have not yet been adopted by the Company and would be expected to have a material impact on the Company’s financial position and results of operations.

EX-3

IVANHOE MINES LTD.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

INTRODUCTION

This discussion and analysis of the financial position and results of operations (MD&A) of Ivanhoe Mines Ltd. should be read in conjunction with the audited consolidated financial statements of Ivanhoe Mines Ltd. and the notes thereto for the year ended December 31, 2006. These financial statements have been prepared in accordance with United States of America generally accepted accounting principles (U.S. GAAP). Differences between Canadian generally accepted accounting principles (Canadian GAAP) and U.S. GAAP that would have materially affected the Company’s reported financial results are set out in Note 22. In this MD&A, unless the context otherwise dictates, a reference to the Company refers to Ivanhoe Mines Ltd. and a reference to Ivanhoe Mines refers to Ivanhoe Mines Ltd., together with its subsidiaries.

The effective date of this MD&A is March 30, 2007.

Additional information about the Company, including its Annual Information Form, is available at www.sedar.com.

OVERVIEW

MONGOLIA

OYU TOLGOI PROJECT

Ivanhoe Mines forms a strategic partnership with Rio Tinto

The principal event for Ivanhoe Mines in 2006 was the announcement on October 18, 2006, that Rio Tinto plc (Rio Tinto) and the Company had reached an agreement (the Rio Tinto Agreement) to form a strategic partnership involving an equity investment in the Company by Rio Tinto and, through a joint Technical Committee, to oversee the engineering, construction and operation of Ivanhoe Mines’ Oyu Tolgoi copper-gold mining complex in Mongolia’s South Gobi region. The Rio Tinto Agreement creates a defined path for Rio Tinto to become the largest shareholder in the Company.

Under the terms of the agreement, Rio Tinto purchased approximately 37.1 million common shares at a price of US$8.18, representing a 25% premium to the closing price on October 17, 2006, and a premium of 30% to the 20-day moving-average share price prior to October 17. Rio Tinto now owns approximately 9.92% of the Company’s issued share capital.

The Rio Tinto Agreement provides for Rio Tinto to make investments in the equity of the Company, under defined conditions, of up to approximately US$1.5 billion, inclusive of the first tranche of financing. The Company has agreed to use at least 90% of the proceeds received from Rio Tinto to finance the development of Oyu Tolgoi.

The next major milestone in the overall development of Oyu Tolgoi will be the receipt of all remaining governmental approvals. Senior representatives of Ivanhoe Mines and Rio Tinto began detailed discussions in January 2007 with a nine-member working group of Mongolian Government officials. The discussions, which remain ongoing, are intended to produce a draft Investment Agreement for

1

IVANHOE MINES LTD.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

Oyu Tolgoi that will be submitted for approvals by the Cabinet of the Mongolian Government and the national Parliament.

Economics of high-grade starter mine at Hugo North under study

During 2006, Ivanhoe Mines continued construction, engineering and planning for the development of the Oyu Tolgoi copper-gold project. The activity positioned Oyu Tolgoi to achieve first production as early as possible following the start of full-scale construction. Ivanhoe Mines expects that the first production from Oyu Tolgoi could begin within 30 months of the receipt of the necessary government approvals, contingent upon timely delivery of key long-lead-time equipment.

Planning and development activities throughout 2006 were focused on the underground, high-grade Hugo North Deposit — although it is expected that the initial production at Oyu Tolgoi will consist mainly of ore mined from the open pit on the Southern Oyu Deposits.

Work underway on a new Integrated Development Plan (2007 IDP) suggests that an underground “starter mine” at the Hugo North Deposit would enhance the project’s initial development. This scenario is one of the leading cases being evaluated by the Ivanhoe Mines-Rio Tinto joint development team.

Conceptually, a starter mine would target a high-grade portion of Hugo North that is accessible from the Shaft No. 1 infrastructure already being developed for the larger block-cave mine. Beginning in mid-2010, the ore from this area likely would supply the concentrator with a mill feed of approximately seven million tonnes per annum at a copper grade of between 2.0% and 2.5% — in addition to ore being supplied from the Southern Oyu open pit.

Projected benefits of developing an underground starter mine could include:

§	a reduction in the initial capital costs and technical risks associated with a large, underground block-cave mining operation;
§	enhanced overall value of the Oyu Tolgoi Project by enabling mining of high-grade copper and gold mineralization earlier than previously estimated;
§	generation of a significant source of near-term cash-flow that could be used to fund development of the larger Hugo North block-cave mining operation; and,
§	an expected reduction of up to one year in the time required to complete the underground exploration and development program for the starter mine as a result of expected shorter and shallower underground drifting distances than previously projected by the 2005 Integrated Development Plan (2005 IDP).

The Company is continuing to assess whether an underground starter mine would provide a significant and realistic benefit to the project’s economics and risk profile. Adoption of the starter mine concept could, among other things, positively affect the timing of the upgrading of underground resources to reserve status.

2

IVANHOE MINES LTD.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

Oyu Tolgoi updated Integrated Development Plan to be released in 2007

In 2006, Ivanhoe Mines engaged GRD Minproc Limited (GRD Minproc), of Perth, Australia, to consolidate the work of other outside consultants and, with input from Rio Tinto, prepare the 2007 IDP for Oyu Tolgoi. The 2007 IDP, expected to be completed in the second half of 2007, will update the work done for the 2005 IDP and build on GRD Minproc’s previous reserve estimation work.

Ivanhoe Mines has instructed GRD Minproc to integrate into its current work revisions that have been made to the planned production process during the past 18 months and to present detailed assessments of two mining scenarios:

• The first scenario combines the open-pit reserves, as previously determined, with high-grade, sub-level-caved material at a pre-feasibility level from the Hugo North Deposit.

• The second scenario, a sensitivity analysis of the first scenario, envisages a high-grade “starter” block cave instead of the sub-level cave as the initial underground development, to be followed by the larger block caves at the Hugo North Deposit and also at the Hugo South Deposit, as outlined in the 2005 IDP.

The engineers also have been asked to assess the impact of a change in the concentrator design and confirm early indications in the development of both scenarios that the concentrator’s throughput likely will be significantly higher than the original 70,000 tonnes per day projected in the 2005 IDP and that the initial throughput approaching 100,000 tonnes per day is likely to increase further as softer ore from the underground is brought into production.

The 2007 IDP is also expected to address the ultimate throughput at the Oyu Tolgoi mining complex, which Ivanhoe Mines believes — based on production from the open pit, having an estimated 29-year mine life, being combined with production from block-caving at the Hugo North and Hugo South deposits — eventually could increase to a level of between 200,000 and 250,000 tonnes of ore per day.

Oyu Tolgoi development engineering advanced to 30% completion during 2006

The development profile of the Oyu Tolgoi Project envisioned in the 2005 IDP has improved with the introduction of Rio Tinto as Ivanhoe Mines’ strategic partner. Although the Ivanhoe Mines-Rio Tinto partnership still is in its early stages, Rio Tinto’s resources and expertise are expected to significantly benefit the project. The most tangible benefit to date has been the involvement of Rio Tinto’s mine planning group, which has some of the most extensive block-caving expertise in the international mining industry.

Fluor Corporation (Fluor), one of the world’s largest engineering and design companies, was appointed as the engineering, procurement and construction manager for Oyu Tolgoi in 2005. Fluor, supported by the Ivanhoe Mines project team and anticipating that the decision to proceed with mine construction will be made during 2007, has made it a priority to ensure that Ivanhoe Mines is positioned to meet the earliest possible start of production.

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(Stated in U.S. dollars, except where noted)

Engineering was advanced to 30% completion during 2006, key procurement activities were begun and development of construction facilities progressed at the Oyu Tolgoi site.

During 2006, the project team, in a further step to mitigate project risk, made important changes to the design of the concentrator plant. A principal change was the replacement of the original large, single-SAG-and-dual-ball-mill configuration with a circuit comprised of two smaller SAG mills, each coupled with two ball mills. The electric motors on the smaller SAG mills have a proven operational record and will significantly reduce the perceived technical risk associated with the single larger unit. The Company also expects that the dual-circuit configuration will allow Oyu Tolgoi to continue production at reduced rates in the event of mill outages and that larger throughput tonnages ultimately can be achieved with a dual-circuit operation.

With engineering and procurement activities well advanced, activities on site slowed during the 2006-2007 winter period, resulting in a reduced workforce. Site preparation to allow full construction to commence on July 1, 2007, is scheduled to be complete in late May. Activities on site are continuing to focus on the sinking of Shaft No. 1, excavation for the concentrator building and development of the water-supply bore field.

Oyu Tolgoi resources expanded with ongoing drilling program

Ivanhoe Mines completed approximately 77,000 metres of drilling on the Oyu Tolgoi Project during 2006, including exploration on the adjoining Entrée Gold-Ivanhoe Mines earn-in joint venture property, Shivee Tolgoi. Significant geotechnical drilling also was undertaken to locate the shaft farm, specifically Shaft No. 2, and evaluate the access route from the shaft farm into the Hugo North block-cave production level. Sterilization drilling was done under the new concentrator site selected by Fluor, the construction camp location and the primary crusher site.

The results of this drilling are included in the new Oyu Tolgoi Technical Report, and include indicated resources on the 650-metre-long extension of Hugo North onto the Entrée-Ivanhoe Mines Shivee Tolgoi property.

Exploration and sterilization drilling two kilometres east of a proposed airport site, which is approximately six kilometres north of the northern end of the Hugo North extension, has resulted in the discovery of low-grade copper-gold mineralization hosted in basaltic volcanic and quartz monzodiorite intrusive rocks of similar age and composition to the Oyu Tolgoi deposits. Approximately 12,400 metres of the drilling completed during the year were conducted in this area. Drilling has been suspended on this target pending a review of the results and additional surface geophysical work.

In March 2007, an updated Oyu Tolgoi Technical Report prepared by GRD Minproc was released. It contained a revised estimate of the Project’s mineral resources that had been independently estimated by AMEC Americas Ltd. (AMEC) and is disclosed in detail starting on page 17.

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(Stated in U.S. dollars, except where noted)

MONGOLIA

COAL PROJECTS

Ivanhoe Mines’ Coal Division being merged with Asia Gold

In the second quarter of 2006, Ivanhoe Mines announced a plan to transfer the Company’s Mongolian Coal Division to Asia Gold Corp (Asia Gold) in exchange for approximately 82.6 million shares of Asia Gold. This transaction was approved by the minority shareholders of Asia Gold on August 8, 2006. Closing of the transaction is subject to the fulfillment of certain conditions precedent, including completion of the transfer of certain mineral exploration licences in Mongolia.

Ivanhoe Mines’ Coal Division holds 35 coal exploration licences that cover 1.68 million hectares of land in the South Gobi area of Mongolia. In March 2007, Ivanhoe Mines was notified that 25 of these licences, including two key licences at Nariin Sukhait — which include all the main coal resources — had been transferred by the Mongolian Government’s Cadastral Office. Ivanhoe Mines and Asia Gold expect to close the transaction once the remainder of the coal exploration licences have been approved for transfer — which is expected to occur shortly.

Mine planning underway at Nariin Sukhait coal deposit

The Nariin Sukhait property is in the southwest corner of the Omnogovi Aimag (province) in southern Mongolia. The deposit is within the Gurvantes Soum (township), 320 kilometres southwest of the provincial capital of Dalanzadgad and 950 kilometres south of the national capital, Ulaanbaatar. Nariin Sukhait is 45 kilometres north of the Mongolia-China border. At present, one north-south, 450-kilometre-long rail line has been built in China up to the China-Mongolia border at Ceke. A second east-west railway line to Ceke has been started and completion is estimated to be in late 2007.

Total coal resources are contained in two separate fields, the South-East Field and the West Field. An updated resource report was prepared in March 2007 by Norwest Corporation (Norwest) and is disclosed on page 21.

Norwest commenced mine planning in 2006, with an internally prepared preliminary mine plan completed in August 2006. Norwest recommends that a pre-feasibility study be undertaken in order to define the coal reserve and economic viability of the Nariin Sukhait project. An updated mining study and estimate of coal reserves, based in part in the updated resources reported in the Norwest Report will be forthcoming upon completion of that study.

A secondary exploration focus in 2006 was deeper drilling on the Nariin Sukhait deposit. In December 2006, Ivanhoe Mines commissioned Norwest to undertake a study to examine underground mining potential at Nariin Sukhait. The main focus was on 5 Seam which had very thick intersections and exhibited promising coking characteristics at depth. The study focused on identifying potential underground mining methods and their applicability to 5 Seam. Additional drilling and engineering studies will be required to delineate resources that may be amenable to extraction by underground methods.

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Exploration continuing at Tsagaan Tolgoi coal deposit

The Tsagaan Tolgoi coal project is approximately 105 kilometres west of Oyu Tolgoi. Initial exploration in 2004, including deep-trenching and 46 drill holes, encountered significant coal thicknesses along a strike length of six kilometres. During the fourth quarter of 2006, a 73-hole drilling program was completed at Tsagaan Tolgoi. The geological model will be updated in 2007.

The objective of the drilling program is to delineate sufficient thermal coal resources to support the preparation of a formal study on the development of a long-life, coal-fired power plant. This plant is projected to have the capacity to supply electricity to the Oyu Tolgoi Project and the residents of the sparsely populated southern part of Mongolia. Norwest Corporation developed a preliminary mine design and mine plans in 2006. Preliminary engineering was conducted on various power plant options that would use Tsagaan Tolgoi coal.

2007 exploration program to target new coal licences near Tavan Tolgoi coal deposit

In 2006, Ivanhoe Mines indirectly obtained seven coal exploration licences that closely surround the Tavan Tolgoi coal project to the north, east and south. The land area covers over 665,000 hectares and has never been properly explored for coal. A field reconnaissance program on the licences was carried out indirectly by Ivanhoe Mines in 2006. The exploration area has been flown for copper-gold exploration using BHPB Falcon geophysics. Ivanhoe Mines has obtained the aeromagnetic and aerogravity survey data and will be using the results of the upcoming analysis to assist in delineating potential coal targets. A significant exploration program is being planned for this project in 2007.

AUSTRALIA

Cloncurry IOCG Project expanding exploration

The Cloncurry Project covers an area of approximately 2,140 square kilometres in northwestern Queensland, in Australia’s storied Mount Isa-Cloncurry mining district. Ivanhoe Mines’ recent exploration at the Cloncurry Project has discovered a series of related Iron Oxide Copper Gold (IOCG) systems, some of which have associated uranium.

Ivanhoe Mines has confirmed that the area hosts several high-grade IOCG systems, with associated uranium, that are geologically similar to the nearby Ernest Henry Mine, and to the Olympic Dam and Prominent Hill mines in South Australia. The Northwest Queensland Mineral Belt is one of the most significant mineral producers in the world. It hosts the Century, Mount Isa, Hilton Group, Cannington, Lady Loretta and Dugald River base-metal deposits, the Ernest Henry, Osborne and Eloise IOCG mines, the Tick Hill gold deposit and the Mary Kathleen uranium deposit. Ivanhoe Mines believes that the Cloncurry Project is one of the most prospective land positions in Australia for the discovery of new, large-scale IOCG deposits.

The historic Kuridala copper mining district, situated in the northern part of Ivanhoe Mines’ tenements, has numerous copper, gold and uranium prospects that were covered in a low-level magnetic/radiometric aerial survey in November 2006. The survey results confirmed the existence of uranium targets along structural zones, with associated magnetic anomalies. These targets will be

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tested by geochemical surveys and drilling during 2007. Several uranium targets previously drill tested by other companies, including Robert Heg, Elizabeth Anne, Dairy Bore and the Old Fence, are being prepared for a drilling program in the second quarter of 2007.

Ivanhoe Mines’ increased exploration efforts at Cloncurry in 2007 also will include detailed gravity surveys, closely-spaced diamond drilling to define a copper-gold resource at Swan, and an aggressive reconnaissance drilling program to delineate additional mineralization at the highly prospective Amethyst Castle and Metal Ridge targets. Two rigs that have been drilling since January 2007 will be joined by three additional rigs in the second quarter of 2007. A total of 10 new holes had been completed at the Swan, Amethyst Castle and Metal Ridge targets before the end of March 2007.

KAZAKHSTAN

Bakyrchik Gold Project

The mine facilities remained on care-and-maintenance status during 2006. During the year, Ivanhoe Mines reached an agreement with the Kazakhstan Government to extend the project’s exploration licences for five years, until 2010. The Company also received a similar five-year extension for its investment commitment for the project.

On November 24, 2006, the Kazakhstan Government’s 30% participatory interest was privatized via tender. JSC Altynalmas, of Almaty, Kazakhstan, was the successful bidder.

A work program is being developed, including construction of a test rotary kiln, delineation drilling to define the potential of an open-pit mine and the continuation of care-and-maintenance requirements.

The Company is continuing to assess financing alternatives.

CHINA

Jinshan Gold Mines planning to start production in 2007

In September 2006, the Ministry of Land and Resources in Beijing, China, granted Jinshan Gold Mines Inc. (Jinshan) (46% owned) the mining permit to commence commercial mining activities at the CSH (217) Gold project in China’s Inner Mongolia Autonomous Region. Jinshan’s application for project registration was approved by the provincial government of the Inner Mongolia Autonomous Region in July 2006.

In October 2006, Jinshan signed a 10-year mining contract with China National Railway Corporation, a major Chinese mining contractor. The contractor commenced haul-road construction and open pit preparation in January 2007, and began placing ore on the heap-leach pad in March. A 500-person camp is housing contract miners and most of Jinshan’s start-up work force. The process plant is expected to begin operations in the second quarter and Jinshan expects to be capable of commencing commercial gold production in June or July of 2007.

Ivanhoe Mines’ equity accounts for its investment in Jinshan.

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(Stated in U.S. dollars except where noted)

MYANMAR

Monywa Copper Project Joint Venture

Copper cathode production for the S&K Mine at the Monywa Copper Project in 2006 totalled 19,544 tonnes, representing a decrease of 43% over 2005. The copper price on the London Metal Exchange averaged $3.05 a pound in 2006, compared to $1.67 a pound in 2005, representing an increase of 83%. Subsequent to year end, Ivanhoe Mines received $15 million in dividend payments from the joint venture.

During 2005 and 2006, Ivanhoe Mines engaged in discussions with interested parties, including a South Korea-based corporation, about the potential sale of a significant portion of Ivanhoe Mines’ 50% interest in the S&K Mine. The discussions were initiated as part of Ivanhoe Mines’ stated priorities of enhancing asset value for shareholders and generating capital for the development of the Oyu Tolgoi project in Mongolia.

Separately, as part of the subsequent negotiation of the Rio Tinto strategic partnership that was announced in October 2006, Ivanhoe Mines agreed to divest all of its business interests and assets in Myanmar, including its indirect interest in the Monywa Copper Project. The Myanmar assets have been transferred to an independent third-party trust (the Trust), pending their sale. The sole purpose of the Trust is to sell the assets to one or more arm’s-length third parties. Ivanhoe Mines’ only interest in the Trust is as an unsecured creditor under a promissory note — issued by the Trust on the transfer of the Myanmar assets — that is to be repaid once the assets are sold.

For financial statement purposes, the Monywa Copper Project will be classified as “investment held for sale” and will continue to be accounted for as such until the Monywa Copper Project is sold by the Trust.

EXECUTIVE CHANGES

•	During the third quarter of 2006, David Woodall was appointed President of the Ivanhoe Mines gold division. His responsibilities include overseeing the advancement of the Company’s gold exploration and mine development projects, which include the Bakyrchik gold mine development project in Kazakhstan.
	Mr. Woodall has more than 21 years of professional experience in mining operations. Prior to joining Ivanhoe Mines, he acquired extensive mine management experience at underground and open-pit mines in Canada, Australia, Fiji and China. Among numerous mine operation assignments, he worked as Mine General Manager for Placer Dome at the Musselwhite gold mine in Ontario, Canada, the Kanowna Belle gold mine in Western Australia and the Osborne copper and gold mine in Australia. He also worked in senior mine management positions with Robe River, Sino Gold and WMC Resources.
•	In the first quarter of 2007, Peter Reeve was appointed Chief Executive Officer of Ivanhoe Australia Pty. Limited, a wholly-owned subsidiary company. The appointment is a significant step in the development of Ivanhoe Mines’ Australian mineral exploration and development projects, particularly the discoveries of iron oxide copper gold, with associated uranium, at the Cloncurry project in the Mount Isa District of northwestern Queensland.

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Mr. Reeve has been involved in the Australian resources industry for approximately 25 years after qualifying as a metallurgist in the early 1980s. His industry experience included positions with Rio Tinto, Shell-Billiton and metallurgical consultant Normet Consulting before he joined Goldman Sachs JBWere in investment management and corporate finance roles in the Australian resource industry. Between 2001 and 2006, Mr. Reeve was a member of the Executive Committee of Newcrest Mining, Australia’s largest gold producer, with responsibility for corporate development and market-related duties for the group.

• Also in the first quarter of 2007, Edward Flood stepped down as Deputy Chairman of Ivanhoe Mines to pursue personal interests. Mr. Flood will continue to serve as a member of the Board of Directors.

FINANCIAL RESULTS

In 2006, Ivanhoe Mines recorded a net loss of $198.7 million (or $0.59 per share), compared to a net loss of $89.8 million (or $0.29 per share) in 2005. The $108.9 million increase in the loss from 2005 to 2006 was primarily due to a $79.7 million increase in exploration expenses. Included in exploration expenses are shaft sinking and engineering and development costs for the Oyu Tolgoi Project that have been expensed and not capitalized. Exploration costs are charged to operations in the period incurred and often constitute the bulk of the Company’s operations loss for that period. It is expected that the Company will commence capitalizing costs of this nature once an Investment Agreement is finalized. Results for the year also were affected by a $10.5 million increase in general and administrative costs, a $4.8 million increase in interest income, less a $7.4 million decrease in foreign exchange gains and a $16.3 million decrease in income from discontinued operations.

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INDEX

The MD&A is comprised of the following sections:

1.	Selected Annual Financial Information
2.	Review of Operations

A.	Exploration Activities
B.	Myanmar Assets Held for Sale
C.	Discontinued Operations
D.	Administrative and Other Expenses

3.	Selected Quarterly Data
4.	Fourth Quarter
5.	Liquidity and Capital Resources
6.	Share Capital
7.	Outlook
8.	Off-Balance-Sheet Arrangements
9.	Contractual Obligations
10.	Changes in Accounting Policies
11.	Critical Accounting Estimates
12.	Recent Accounting Pronouncements
13.	Risks and Uncertainties
14.	Related-Party Transactions
15.	Disclosure Controls and Procedures
16.	Management’s Report on Internal Control over Financial Reporting
17.	Qualified Persons
18.	Oversight Role of the Audit Committee
19.	Cautionary Statements
20.	Forward-Looking Statements
21.	Management’s Report to Shareholders

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SELECTED ANNUAL FINANCIAL INFORMATION

This selected financial information is in accordance with U.S. GAAP. Please see Note 22 of the annual consolidated financial statements for the reconciliation to Canadian GAAP.

($ in millions of U.S. dollars, except per share information)

	Years ended December 31,
	2006			2005			2004
Exploration expenses	$	(213.0	)	$	(133.3	)	$	(98.2	)
General and administrative		(28.2	)		(17.7	)		(22.2	)
Share of income from investment held for sale		18.5			23.0			21.4
Foreign exchange gains		0.4			7.8			4.6
Net (loss) from continuing operations	$	(218.3	)	$	(125.7	)	$	(99.0	)
Net income from discontinued operations		19.6			35.9			4.5
Net loss	$	(198.7	)	$	(89.8	)	$	(94.5	)
Net (loss) per share from continuing operations	$	(0.65	)	$	(0.41	)	$	(0.35	)
Net income per share from discontinued operations	$	0.06		$	0.12		$	0.01
Net loss per share	$	(0.59	)	$	(0.29	)	$	(0.34	)
Total assets	$	703.2		$	396.8		$	376.3

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REVIEW OF OPERATIONS

In 2006, Ivanhoe Mines recorded a net loss of $198.7 million (or $0.59 per share), compared to a net loss of $89.8 million (or $0.29 per share) in 2005. The $108.9 million increase in the loss from 2005 to 2006 was primarily due to a $79.7 million increase in exploration expenses. Included in exploration expenses are shaft sinking and engineering and development costs for the Oyu Tolgoi Project that have been expensed and not capitalized. Exploration costs are charged to operations in the period incurred and often constitute the bulk of the Company’s operations loss for that period. It is expected that the Company will commence capitalizing costs of this nature once an Investment Agreement is finalized. Results for the year also were affected by a $10.5 million increase in general and administrative costs, a $4.8 million increase in interest income, less a $7.4 million decrease in foreign exchange gains and a $16.3 million decrease in income from discontinued operations.

A. EXPLORATION ACTIVITIES

Summary of exploration expenditures by location:

	Years ended December 31,
	2006			2005			2004
Exploration expense ($ in millions)	$	213.0		$	133.3		$	98.2
Percentage allocation
Mongolia		93.1	%		92.0	%		86.9	%
China		4.3	%		3.3	%		4.1	%
Australia		1.0	%		1.1	%		4.9	%
Bulgaria		0.6	%		1.8	%		1.0	%
Myanmar		0.5	%		1.0	%		2.3	%
Other		0.5	%		0.8	%		0.8	%
		100.0	%		100.0	%		100.0	%

Ivanhoe Mines is engaged primarily in exploration activities, although a significant portion of its expenditures in Mongolia relate directly to development activities at its Oyu Tolgoi Project.

In 2006, Ivanhoe Mines expensed $213.0 million in exploration and development activities, compared to $133.3 million in 2005. Included in exploration costs are engineering and development costs for the Oyu Tolgoi Project. It is expected that the Company will commence capitalizing costs of this nature once an Investment Agreement is finalized.

The majority of the $213.0 million was spent on Ivanhoe Mines’ Mongolian properties ($198.2 million in 2006, compared to $122.6 million in 2005), which consisted of the following exploration and development costs:

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(Stated in U.S. dollars except where noted)

MONGOLIA EXPLORATION EXPENSES

	2006		% of Total
($ in million’s)
Oyu Tolgoi
Concentrator and Infrastructure Engineering	$	28.9		15	%
Site Construction		53.2		27	%
Shaft No. 1 Sinking		35.5		18	%
Exploration		14.2		7	%
Owner’s Costs (includes non-cash stock-based compensation)		29.4		15	%
		161.2
Coal Division		10.1		5	%
Other Mongolia Exploration (including Asia Gold)		12.3		6	%
UB Office		14.6		7	%
	$	198.2		100	%

Exploration and development expenditures capitalized in 2006 totalled $34.3 million, compared to $32.2 million in 2005. During 2005, the $32.2 million capitalized mostly comprised the Oyu Tolgoi Project’s surface and collar infrastructure for Shaft No. 1. Expenditures related to the deepening of Shaft No. 1 and related underground workings have been expensed. During 2006, the $34.3 million capitalized related mainly to $16.8 million capitalized at Oyu Tolgoi for plant and equipment, camp and office buildings and some remaining Shaft No. 1 surface costs. Also included in 2006 capital expenditures was $12.8 million capitalized by Jinshan during January to August 2006, when it was a subsidiary, representing construction costs for its CSH (217) gold mine.

MONGOLIA

OYU TOLGOI

The Oyu Tolgoi Project consists of two deposit groups — the Southern Oyu Deposits and the Hugo Dummett Deposits — that are contained within an aggregate area of approximately 6.3 kilometres north-south by 3 kilometres east-west.

Ivanhoe Mines forms a strategic partnership with Rio Tinto

The principal event for Ivanhoe Mines in 2006 was the announcement on October 18, 2006, that Rio Tinto plc (Rio Tinto) and the Company had reached an agreement (the Rio Tinto Agreement) to form a strategic partnership involving an equity investment in the Company by Rio Tinto and, through a joint Technical Committee, to oversee the engineering, construction and operation of Ivanhoe Mines’ Oyu Tolgoi copper-gold mining complex in Mongolia’s South Gobi region. The Rio Tinto Agreement creates a defined path for Rio Tinto to become the largest shareholder in the Company.

Under the terms of the agreement, Rio Tinto purchased approximately 37.1 million common shares at a price of US$8.18, representing a 25% premium to the closing price on October 17, 2006, and a premium of 30% to the 20-day moving-average share price prior to October 17. Rio Tinto now owns approximately 9.92% of the Company’s issued share capital.

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(Stated in U.S. dollars except where noted)

The Rio Tinto Agreement provides for Rio Tinto to make investments in the equity of the Company, under defined conditions, of up to approximately US$1.5 billion, inclusive of the first tranche of financing. The Company has agreed to use at least 90% of the proceeds received from Rio Tinto to finance the development of Oyu Tolgoi.

The next major milestone in the overall development of Oyu Tolgoi will be the receipt of all remaining governmental approvals. Senior representatives of Ivanhoe Mines and Rio Tinto began detailed discussions in January 2007 with a nine-member working group of Mongolian Government officials. The discussions, which remain ongoing, are intended to produce a draft Investment Agreement for Oyu Tolgoi that will be submitted for approvals by the Cabinet of the Mongolian Government and the national Parliament.

Oyu Tolgoi development engineering advanced to 30% completion during 2006

The development profile of the Oyu Tolgoi Project envisioned in the 2005 IDP has improved with the introduction of Rio Tinto as Ivanhoe Mines’ strategic partner. Although the Ivanhoe Mines-Rio Tinto partnership still is in its early stages, Rio Tinto’s resources and expertise are expected to significantly benefit the project. The most tangible benefit to date has been the involvement of Rio Tinto’s mine planning group, which has some of the most extensive block-caving expertise in the international mining industry.

Fluor Corporation (Fluor), one of the world’s largest engineering and design companies, was appointed as the engineering, procurement and construction manager for Oyu Tolgoi in 2005. Fluor, supported by the Ivanhoe Mines project team and anticipating that the decision to proceed with mine construction will be made during 2007, has made it a priority to ensure that Ivanhoe Mines is positioned to meet the earliest possible start of production.

Engineering was advanced to 30% completion during 2006, key procurement activities were begun and development of construction facilities progressed at the Oyu Tolgoi site.

During 2006, the project team, in a further step to mitigate project risk, made important changes to the design of the concentrator plant. A principal change was the replacement of the original large, single-SAG-and-dual-ball-mill configuration with a circuit comprised of two smaller SAG mills, each coupled with two ball mills. The electric motors on the smaller SAG mills have a proven operational record and will significantly reduce the perceived technical risk associated with the single larger unit. The Company also expects that the dual-circuit configuration will allow Oyu Tolgoi to continue production at reduced rates in the event of mill outages and that larger throughput tonnages ultimately can be achieved with a dual-circuit operation.

With engineering and procurement activities well advanced, activities on site slowed during the 2006-2007 winter period, resulting in a reduced workforce. Site preparation to allow full construction to commence on July 1, 2007, is scheduled to be complete in late May. Activities on site are continuing to focus on the sinking of Shaft No. 1, excavation for the concentrator building and development of the water-supply bore field.

Shaft No. 1, the first deep underground development project of its type in Mongolia, passed the 900-metre mark in late March 2007. Shaft No. 1 will allow for additional exploration of the Oyu Tolgoi underground mine and also will provide limited initial production, and ultimately ventilation, to the

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underground mine. The completion of Shaft No. 1 will provide the key geotechnical information required to advance the underground deposit to a feasibility level, a milestone currently expected to be reached in 2008.

Shaft No. 2 is expected to be the initial primary underground production and service shaft. Work completed in 2006 involved shaft engineering and surface infrastructure. Additional technical evaluation on the shaft location is nearing completion and a decision to commence the pre-sink and collar construction is expected in April 2007.

Shaft No. 2 is critical for underground production and it is one of the key elements on which Rio Tinto’s input was sought before major decisions concerning its construction were made. In January 2007, Ivanhoe Mines ordered the auxiliary hoist for Shaft No. 2 and began seeking bids for the main friction hoists to allow for the expected start of full construction in July 2007.

Economics of high-grade starter mine at Hugo North under study

During 2006, Ivanhoe Mines continued construction, engineering and planning for the development of the Oyu Tolgoi copper-gold project. The activity positioned Oyu Tolgoi to achieve first production as early as possible following the start of full-scale construction. Ivanhoe Mines expects that the first production from Oyu Tolgoi could begin within 30 months of the receipt of the necessary government approvals, contingent upon timely delivery of key long-lead-time equipment.

Planning and development activities throughout 2006 were focused on the underground, high-grade Hugo North Deposit – although it is expected that the initial production at Oyu Tolgoi will consist mainly of ore mined from the open pit on the Southern Oyu Deposits.

Work underway on a new Integrated Development Plan (2007 IDP) suggests that an underground “starter mine” at the Hugo North Deposit would enhance the project’s initial development. This scenario is one of the leading cases being evaluated by the Ivanhoe Mines-Rio Tinto joint development team.

Conceptually, a starter mine would target a high-grade portion of Hugo North that is accessible from the Shaft No. 1 infrastructure already being developed for the larger block-cave mine. Beginning in mid-2010, the ore from this area likely would supply the concentrator with a mill feed of approximately seven million tonnes per annum at a copper grade of between 2.0% and 2.5% — in addition to ore being supplied from the Southern Oyu open pit.

Projected benefits of developing an underground starter mine could include:

§	a reduction in the initial capital costs and technical risks associated with a large, underground block-cave mining operation;
§	enhanced overall value of the Oyu Tolgoi Project value by enabling mining of high-grade copper and gold mineralization earlier than previously estimated;
§	generation of a significant source of near-term cash-flow that could be used to fund development of the larger Hugo North block-cave mining operation; and,

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(Stated in U.S. dollars except where noted)

§ an expected reduction of up to one year in the time required to complete the underground exploration and development program for the starter mine as a result of expected shorter and shallower underground drifting distances than previously projected by the 2005 IDP.

The Company is continuing to assess whether an underground starter mine would provide a significant and realistic benefit to the project’s economics and risk profile. Adoption of the starter-mine concept could, among other things, positively affect the timing of the upgrading of underground resources to reserve status.

Oyu Tolgoi updated Integrated Development Plan to be released in 2007

In 2006, Ivanhoe Mines engaged GRD Minproc Limited (GRD Minproc), of Perth, Australia, to consolidate the work of other outside consultants and, with input from Rio Tinto, prepare the 2007 Integrated Development Plan for Oyu Tolgoi. The 2007 IDP, expected to be completed in the second half of 2007, will update the work done for the 2005 IDP and build on GRD Minproc’s previous reserve estimation work.

Ivanhoe Mines has instructed GRD Minproc to integrate into its current work revisions that have been made to the planned production process during the past 18 months and to present detailed assessments of two mining scenarios:

• The first scenario combines the open-pit reserves, as previously determined, with high-grade, sub-level-caved material at a pre-feasibility level from the Hugo North Deposit.

• The second scenario, a sensitivity analysis of the first scenario, envisages a high-grade “starter” block cave instead of the sub-level cave as the initial underground development, to be followed by the larger block caves at the Hugo North Deposit and also at the Hugo South Deposit, as outlined in the 2005 IDP.

The engineers also have been asked to assess the impact of a change in the concentrator design, and confirm early indications in the development of both scenarios that the concentrator’s throughput likely will be significantly higher than the original 70,000 tonnes per day projected in the 2005 IDP and that the initial throughput approaching 100,000 tonnes per day is likely to increase further as softer ore from the underground is brought into production.

The 2007 IDP is also expected to address the ultimate throughput at the Oyu Tolgoi mining complex, which Ivanhoe Mines believes — based on production from the open pit, having an estimated 29-year mine life, being combined with production from block-caving at the Hugo North and Hugo South deposits — eventually could increase to a level of between 200,000 and 250,000 tonnes of ore per day.

Oyu Tolgoi resources expanded with ongoing drilling program

Ivanhoe Mines completed approximately 77,000 metres of drilling on the Oyu Tolgoi Project during 2006, including exploration on the adjoining Entrée Gold-Ivanhoe Mines earn-in joint venture property, Shivee Tolgoi. Significant geotechnical drilling also was undertaken to locate the shaft farm, specifically Shaft No. 2, and evaluate the access route from the shaft farm into the Hugo North block- cave production level. Sterilization drilling was done under the new concentrator site selected by Fluor, the construction camp location and the primary crusher site.

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RESULTS OF OPERATIONS

(Stated in U.S. dollars except where noted)

The results of this drilling are included in the new Oyu Tolgoi Technical Report, published below, and include indicated resources on the 650-metre-long extension of Hugo North.

Exploration and sterilization drilling two kilometres east of a proposed airport site, which is approximately six kilometres north of the northern end of the Hugo North extension, has resulted in the discovery of low-grade copper-gold mineralization hosted in basaltic volcanic and quartz monzodiorite intrusive rocks of similar age and composition to the Oyu Tolgoi deposits. Approximately 12,400 metres of the drilling completed during the year were conducted in this area. Drilling has been suspended on this target pending a review of the results and additional surface geophysical work.

Geotechnical drilling intended to further define the geotechnical characteristics of the Hugo North Deposit continued through Q4’06 and into Q1’07. A total of four holes have been collared immediately north of the Entrée JV property line and completed and two additional holes are in progress. Drilling south into the axis of Ivanhoe Mines’ 100%-owned Hugo North Deposit is designed to provide pre-feasibility-level information on the caving characteristics of the deposit and geotechnical characteristics of the North West Boundary Fault, which will influence future development decisions on the Hugo North Extension Deposit.

In March 2007, an updated Oyu Tolgoi Technical Report prepared by GRD Minproc was released. It contained a revised estimate of the Project’s mineral resources at the Hugo North Deposit that had been independently estimated by AMEC Americas Ltd. (AMEC).

Total Oyu Tolgoi Project Resources ⁽¹⁾⁽²⁾
(based on a 0.60% copper equivalent cut-off ) ⁽³⁾

									Contained Metal(5)
Resource			Cu		Au		CuEq(4)		Cu				CuEq(4)
Category	Tonnes		(%)		(g/t)		(%)		(‘000 lbs)		Au (ounces)		(‘000 lbs)
Measured		101,590,000		0.64		1.10		1.34		1,430,000		3,590,000		3,000,000
Indicated		1,285,840,000		1.38		0.42		1.65		39,120,000		17,360,000		46,770,000
Measured + Indicated		1,387,430,000		1.33		0.47		1.63		40,680,000		20,970,000		49,860,000
Inferred		1,397,130,000		0.98		0.24		1.13		30,190,000		10,780,000		34,810,000

Notes:
(1)	Mineral resources are not mineral reserves until they have demonstrated economic viability based on a feasibility study or pre-feasibility study. Mineral resources are reported inclusive of mineral reserves.
(2)	This chart includes estimated resources on the Hugo North Extension Deposits located on the Shivee Tolgoi Property, which is owned by Entrée but subject to earn-in rights by Ivanhoe Mines. The estimate includes indicated resources of 117,000,000 tonnes grading 1.8% copper and 0.61 g/t gold and inferred resources of 95,500,000 tonnes grading 1.15% copper and 0.31 g/t gold at a 0.6% cut-off grade on the Hugo North Extension.
(3)	The 0.6% CuEq cut-off has been used to enable comparison with previous disclosures.
(4)	CuEq has been calculated using assumed metal prices ($0.80/lb. for copper and $350/oz for gold); %CuEq. = % Cu + Au (g/t) x (11.25/17.64).
(5)	The contained gold and copper represent estimated contained metal in the ground and have not been adjusted for the metallurgical recoveries of gold and copper.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars except where noted)

Resources for Oyu Tolgoi can be further split into the Southern Oyu open-pit resources, tabulated at a 0.3% copper equivalent cut-off, and the Hugo Dummett underground resources, tabulated at a 0.6% copper equivalent cut-off. The base case CuEq cut-off grade assumptions for each deposit were determined using cut-off grades applicable to mining operations exploiting similar deposits. The updated resource tables are shown below:

Southern Oyu Deposits⁽¹⁾⁽²⁾

									Contained Metals(4)
Resource	Tonnage		Cu		Au		CuEq		Cu		Au		CuEq (3)
Category	(t)		(%)		(g/t)		(%) (3)		(‘000 lb)		(oz)		(‘000 lb)
Measured		126,690,000		0.58		0.93		1.17		1,620,000		3,790,000		3,268,000
Indicated		992,400,000		0.47		0.27		0.64		10,283,000		8,610,000		14,002,000
Measured + Indicated		1,119,100,000		0.48		0.35		0.70		11,843,000		12,590,000		17,270,000
Inferred		266,820,000		0.34		0.23		0.48		2,000,000		1,970,000		2,824,000

Notes:
(1)	Mineral resources are not mineral reserves until they have demonstrated economic viability based on a feasibility study or pre-feasibility study. Mineral resources are reported inclusive of mineral reserves.
(2)	The resources shown above at a 0.3% CuEq cut-off are inclusive of the resources tabulated at the 0.6 CuEq cut-off in the consolidated resource statement.
(3)	CuEq has been calculated using assumed metal prices ($0.80/lb. for copper and $350/oz for gold); %CuEq. = % Cu + Au (g/t) x (11.25/17.64).
(4)	The contained gold and copper represent estimated contained metal in the ground and have not been adjusted for the metallurgical recoveries of gold and copper.

Hugo Dummett Deposit — Mineral Resources at 0.6% copper equivalent cut-off⁽¹⁾

									Contained Metal(3)
	Tonnage		Cu		Au		CuEq(2)		Cu		Au		CuEq(2)
Deposit	(t)		(%)		(g/t)		(%)		(‘000 lb)		(oz)		(‘000 lb)
Indicated (Hugo North)		703,200,000		1.82		0.39		2.07		28,215,000		8,820,000		32,091,000
Indicated (Hugo North Extension)(4)		117,000,000		1.80		0.61		2.19		4,643,000		2,290,000		5,649,000
Inferred (Hugo North)		722,800,000		0.97		0.30		1.17		15,457,000		6,970,000		18,644,000
Inferred (Hugo North Extension )(4)		95,500,000		1.15		0.31		1.35		2,421,000		950,000		2,842,000
Inferred (Hugo South)		490,330,000		1.05		0.09		1.11		11,350,000		1,420,000		12,000,000
Total
Indicated (Hugo North and Hugo North Extension (4))		820,200,000		1.82		0.42		2.08		32,910,000		11,080,000		37,611,000
Inferred (Hugo North, Hugo South and Hugo North Extension (4))		1,308,630,000		1.02		0.22		1.16		29,430,000		9,260,000		33,470,000

Notes:
(1)	Mineral resources are not mineral reserves until they have demonstrated economic viability based on a feasibility study or pre-feasibility study. Mineral resources are reported inclusive of mineral reserves.

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(Stated in U.S. dollars except where noted)

(2)	CuEq has been calculated using assumed metal prices ($0.80/lb. for copper and $350/oz for gold); %CuEq.= % Cu + Au (g/t) x (11.25/17.64).
(3)	The contained gold and copper represent estimated contained metal in the ground and have not been adjusted for the metallurgical recoveries of gold and copper.
(4)	The Hugo North Extension is located on the Shivee Tolgoi Property, which property is owned by Entrée but subject to earn-in rights in favour of Ivanhoe Mines.

The new GRD Minproc report also restated the previously published Open Pit Reserves for the Southern Oyu Deposits. The reserve tabulation as of March 2007 is shown below:

Southern Oyu Mineral Reserves – March 2007

									CuEq		Recovered		Recovered
			NSR		Copper		Gold		Grade		Copper		Gold
Class	Ore (tonnes)		$/t		(%)		(g/t )		(%)		(‘000 lbs)		(ounces)
Proven		127,000,000		15.91		0.58		0.93		1.18		1,451,000		2,833,000
Probable		803,000,000		7.96		0.48		0.27		0.66		7,431,000		4,768,000
Total		930,000,000		9.05		0.50		0.36		0.73		8,882,000		7,601,000

The key parameters in determining the Mineral Reserves are (i) assumed metal prices of $400/oz gold and $1.00/lb copper; and (ii) block value Net Smelter Return (NSR) cut-off grades of $3.54 per tonne for Southwest Oyu and $3.39 per tonne for Central Oyu. There were no changes in the mineral reserves compared to the previously stated mineral reserves.

Further details are available in the 2006 Annual Information Form on www.sedar.com.

MONGOLIA

Other copper-gold exploration projects

Ivanhoe Mines’ exploration activities during 2006 focused on the Baruun Tal and Undur Naran porphyry targets in the East Gobi region, north of Oyu Tolgoi. Trenching, soil geochemistry and ground magnetic surveys were carried out at both projects. Fieldwork at remote sites ceased in October due to the onset of winter. Work in late 2006 mainly involved analysis of results and preparation of an annual exploration report for each licence to be submitted to the Mongolian Government’s Cadastral Office.

The Undur Naran project is 20 kilometres northeast of the Oyut Ulaan Project. Trenching totalled 3,768 metres (13 trenches) and targeted two areas (the North and the Central zones) of subcropping stockworked syenites that returned anomalous gold and copper rock-chip assays. The most significant intercepts are associated with stockwork quartz-sulphide veins. Further mapping and rock-chip sampling is planned at the Undur Naran project.

The Baruun Tal project is 50 kilometres west of Ivanhoe Mines’ Kharmagtai Project. The numerous prospects at the Baruun Tal project, including the BTT and BTU prospects, are located in an area 12 kilometres by 5 kilometres, much of it under cover. Preliminary trenching totalled 7,625 metres over 32 trenches and was mostly in the areas under cover along strike from anomalous rock-chip samples. Porphyry, epithermal and mesothermal vein targets are defined. At the BTU prospect, an area 20 metres by 100 metres, of sheeted to stockwork quartz-hematite-malachite-chalcopyrite veins hosted in silica-sericite-albite altered monzodiorite, returned 10 metres at 2.4 ppm gold and 0.36% Cu (including 2 metres at 10.60 ppm gold). A trench on the tourmaline breccias at BTT intercepted 22 metres at 0.81% Cu, including narrow gold intercepts. Trench intercepts at BTU included 18 metres at

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RESULTS OF OPERATIONS

(Stated in U.S. dollars except where noted)

0.51% Cu from granodiorites with hematite-malachite fracture fill. Further reconnaissance is required over this large prospect.

Work at other advanced prospects included the definition of drill sites, based on previous data and infill work, at the Chandman Uul and Southeast prospects (the latter at the Oyut Ulaan prospect). Soil geochemistry surveys were carried out at the Bronze Fox prospect, as well as at the gold-anomalous Target 6429 immediately north of the Tsagaan Suvarga deposit. Stream sediment sampling defined anomalies west of Tsagaan Suvarga and in The Gap area, (the zone between the Bronze Fox and Oyut Ulaan trends, where there are few known mineral occurrences). These stream-sediment anomalies will be followed up in 2007.

New medium-priority targets include Baga Haich, near Tsagaan Tolgoi, where granite-hosted quartz-chalcopyrite veins outcrop over an area of 560 metres by 360 metres. Eleven of the 67 samples assayed 0.24% to 1.78% copper, while 18 returned 104 to 6340 ppm molybdenum.

The Falcon airborne gravity survey was completed in April 2006 by BHP Billiton Exploration (BHPB). After BHPB and Ivanhoe Mines geologists reviewed the data, BHPB carried out gradient-array IP and Vector IP over the numerous targets defined by the survey. First-pass IP targets were followed up with dipole-dipole surveys. Drilling of BHPB’s higher priority targets began in November 2006 at the Ulaan Khud prospect, immediately north of Oyu Tolgoi. Results at this prospect were not significant. BHPB’s dipole-dipole surveys and drilling will continue in 2007. BHPB had spent approximately $6 million by the end of 2006.

The tenement relinquishment program, based on further sterilization reconnaissance, continued throughout 2006. Approximately 2.1 million hectares of the approximately 8.8 million hectares held at the beginning of 2006 were relinquished and an additional 3.7 million hectares are scheduled to be relinquished in 2007.

MONGOLIA

COAL PROJECTS

Ivanhoe Mines’ Coal Division being merged with Asia Gold

In the second quarter of 2006, Ivanhoe Mines announced a plan to transfer the Company’s Mongolian Coal Division to Asia Gold in exchange for approximately 82.6 million shares of Asia Gold. This transaction was approved by the minority shareholders of Asia Gold on August 8, 2006. Closing of the transaction is subject to the fulfillment of certain conditions precedent, including completion of the transfer of certain mineral exploration licences in Mongolia.

Ivanhoe Mines’ Coal Division holds 35 coal exploration licences that cover 1.68 million hectares of land in the South Gobi area of Mongolia. In March 2007, Ivanhoe Mines was notified that 25 of these licences, including two key licences at Nariin Sukhait — which include all the main coal resources — had been transferred by the Mongolian Government’s Cadastral Office. Ivanhoe Mines and Asia Gold expect to close the transaction once the remainder of the coal exploration licences have been approved for transfer — which is expected to occur shortly.

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(Stated in U.S. dollars except where noted)

Mine planning underway at Nariin Sukhait coal deposit

The Nariin Sukhait property is in the southwest corner of the Omnogovi Aimag (province) in southern Mongolia. The deposit is within the Gurvantes Soum (township), 320 kilometres southwest of the provincial capital of Dalanzadgad and 950 kilometres south of the national capital, Ulaanbaatar. Nariin Sukhait is 45 kilometres north of the Mongolia-China border. At present, one north-south, 450-kilometre-long rail line has been built in China up to the China-Mongolia border at Ceke. A second east-west railway line to Ceke has been started and completion is estimated to be in late 2007.

Total coal resources are contained in two separate fields, the South-East Field and the West Field. An updated resource report was prepared in March 2007 by Norwest Corporation (Norwest); the details are summarized as follows:

CLASSIFICATION OF RESOURCES GEOLOGY TYPE: COMPLEX ⁽¹⁾

		Resources at Nariin Sukhait
	ASTM	Measured		Indicated		Inferred
Resource Area	Coal Rank	(million tonnes)		(million tonnes)		(million tonnes)
South-East Field	hvB to hvA		49,752,000		15,987,000		6,502,000
West Field	hvB to hvA		55,144,000		28,698,000		22,601,000
Total		149,580,000					29,103,000

(1) Mineral resources are not mineral reserves until they have demonstrated economic viability based on a feasibility study or pre-feasibility study.

Criteria Used To Define Assurance of Existence For Coals In Complex Geology Type

	Assurance of Existence Category
Criteria	Measured		Indicated		Inferred
Cross-section spacing (metres)		150		300		600
Minimum number of data points per section		3		3		3
Mean data point spacing (metres)		100		200		400
Maximum data point spacing (metres)		200		400		800

Norwest commenced mine planning in 2006, with an internally prepared preliminary mine plan completed in August 2006. Norwest recommends that a pre-feasibility study be undertaken in order to define the coal reserve and economic viability of the Nariin Sukhait project. An updated mining study and estimate of coal reserves, based in part in the updated resources reported in the Norwest Report will be forthcoming upon completion of that study.

A secondary exploration focus in 2006 was deeper drilling on the Nariin Sukhait deposit. In December 2006, Ivanhoe Mines commissioned Norwest to undertake a study to examine underground mining potential at Nariin Sukhait. The main focus was on 5 Seam which had very thick intersections and exhibited promising coking characteristics at depth. The study focused on identifying potential underground mining methods and their applicability to 5 Seam. Additional drilling and engineering studies will be required to delineate resources that may be amenable to extraction by underground methods.

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RESULTS OF OPERATIONS

(Stated in U.S. dollars except where noted)

Recent other coal exploration in the South Gobi

Recent exploration has been dedicated to a prospect identified approximately 16 kilometres east–southeast of the South–East field of Nariin Sukhait. This coal occurrence initially was called N Field. An additional coal occurrence located approximately 8 kilometres east of N Field has been identified as O Field.

The Coal Division has focused its exploration on the Upper Permian strata exposed in the Nariin Sukhait trend. Extensive trenching has been carried out on both coal occurrences and has been followed up by drilling in 2005 and 2006. Five individual seams have been identified in the N Field and two in the O Field. Coal thicknesses of over 60 metres have been logged in the 2006 program. This project will be included in the 2007 exploration program.

Exploration continuing at Tsagaan Tolgoi coal deposit

The Tsagaan Tolgoi coal project is approximately 105 kilometres west of Oyu Tolgoi. Initial exploration in 2004, including deep-trenching and 46 drill holes, encountered significant coal thicknesses along a strike length of six kilometres. During the fourth quarter of 2006, a 73-hole drilling program was completed at Tsagaan Tolgoi. The geological model will be updated in 2007.

The objective of the drilling program is to delineate sufficient thermal coal resources to support the preparation of a formal study on the development of a long-life, coal-fired power plant. This plant is projected to have the capacity to supply electricity to the Oyu Tolgoi Project and the residents of the sparsely populated southern part of Mongolia. Norwest developed a preliminary mine design and mine plans in 2006. Preliminary engineering was conducted on various power plant options that would use Tsagaan Tolgoi coal.

2007 exploration program to target new coal licences near Tavan Tolgoi coal deposit

In 2006, Ivanhoe Mines indirectly obtained seven coal exploration licences that closely surround the Tavan Tolgoi coal project to the north, east and south. The land area covers over 665,000 hectares and has never been properly explored for coal. A field reconnaissance program on the licences was carried out indirectly by Ivanhoe Mines in 2006. The exploration area has been flown for copper-gold exploration using BHPB Falcon geophysics. Ivanhoe Mines has obtained the aeromagnetic and aerogravity survey data and will be using the results of the upcoming analysis to assist in delineating potential coal targets. A significant exploration program is being planned for this project in 2007.

Other

The remainder of the licences being held by Ivanhoe Mines Coal Division are in various stages of assessment for additional exploration or drilling to determine their viability for coal development.

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RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

AUSTRALIA

Cloncurry IOCG Project expanding exploration

Ivanhoe Mines’ tenements are located in northwestern Queensland, Australia, centred approximately 90 kilometres south of Cloncurry and 150 kilometres southeast of Mount Isa. The tenements cover approximately 2,100 square kilometres of Exploration Permits for Minerals (13 EPMs) and 4,500 hectares of mineral leases (20 MLs). In addition, applications have been lodged with the Queensland Department of Natural Resources, Mines and Water for three new MLs totalling approximately 240 hectares and three new EPMs totalling 101 sub-blocks (320 square kilometres). Ivanhoe Mines has a 100% interest in these properties and has the exclusive right to explore for all precious and base metals within the boundaries of the tenements — with the exception of a joint venture area totalling 115 square kilometres, designated the Osborne Joint Venture, which is under option to Barrick (Osborne) Pty. Ltd. Barrick has a 50% interest in 31 sub-blocks and an 85% interest in five sub-blocks, known as the Mill Feed JV.

Ivanhoe Mines’ recent exploration at the Cloncurry project has discovered a series of related iron oxide copper gold (IOCG) systems, some of which have associated uranium.

At Amethyst Castle, the 2006 RC drilling, followed by a diamond drilling program, confirmed the presence of a large-scale breccia body hosting IOCG mineralization, with gold, copper and associated uranium. Further drilling is planned in 2007 after a gravity survey.

Six diamond holes totalling 2,200 metres were drilled into additional geophysical and geological targets. High-grade, breccia-hosted chalcocite mineralization was intersected in two of the drill holes. These intercepts are IOCG fluidized hematite matrix multi-clastic breccias, with chalcocite present in both the clasts and matrix. Chalcocite, bornite, chalcopyrite with carbonate veins and vein breccias occur in one of the drill holes, while similar assemblages also were noted with silica, albite and hematite alteration in the second drill hole.

At the Swan discovery, 12 diamond holes, totalling 6,083 metres, were drilled during 2006 and further drilling is extending mineralization 300 metres to the north. Copper and gold mineralization is associated with widespread, intense alteration with native copper, chalcocite, magnetite, pyrite and chalcopyrite veinlets. Swan is located within a large, distinctive magnetic anomaly that also underlies the former Mt. Elliot mine and Swell and northern Gossan prospects. This deep-seated feature appears to have a circular form, with a diameter of approximately one kilometre. Preliminary drilling and the widespread alteration at these targets indicate that they are all related to one large mineralized system that remains to be tested at depth. Extensive drilling is being planned to test this concept. Testing for potential oxide and primary copper-gold resources at Swan will be evaluated by pattern drilling, initially at 100-metre drill centres.

In October 2006, drilling moved onto a third prospect, Metal Ridge North, where surface copper geochemical anomalies, combined with magnetic and conductivity features, were the target for a six-hole diamond-drill program and a six-hole RC-drill program. The mineralization occurs along a northerly trend for several kilometres associated with carbonaceous shales and intense magnetite, albite, diopside alteration.

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(Stated in U.S. dollars, except where noted)

The historic Kuridala copper mining district, situated in the northern part of Ivanhoe Mines’ tenements, has numerous copper, gold and uranium prospects that were covered in a low-level magnetic/radiometric aerial survey in November 2006. The results from the survey confirmed the existence of uranium targets along structural zones, with associated magnetic anomalies. These targets will be tested by geochemical surveys and drilling during 2007. Several uranium targets previously drill-tested by other companies, including Robert Heg, Elizabeth Anne, Dairy Bore and the Old Fence, are being prepared for a drilling program in the second quarter of 2007.

Ivanhoe Mines’ increased exploration efforts at Cloncurry in 2007 also will include detailed gravity surveys, closely-spaced diamond drilling to define a copper-gold resource at Swan, and an aggressive reconnaissance drilling program to delineate additional mineralization at the highly prospective Amethyst Castle and Metal Ridge targets. Two rigs that have been drilling since January 2007 will be joined by three additional rigs in the second quarter of 2007. A total of 10 new holes had been completed at the Swan, Amethyst Castle and Metal Ridge targets before the end of March 2007.

KAZAKHSTAN

Bakyrchik Gold Project

The mine facilities remained on care–and-maintenance status during 2006. Expenditures for 2006 totalled $4.4 million compared to $3.7 million in 2005.

During the year, Ivanhoe Mines reached an agreement with the Kazakhstan Government to extend the project’s exploration licences for five years, until 2010. The Company also received a similar five-year extension for its investment commitment for the project.

On November 24, 2006, the Kazakhstan Government’s 30% participatory interest was privatized via tender. JSC Altynalmas, of Almaty, Kazakhstan, was the successful bidder.

A work program is being developed to meet the obligations of the Sale and Purchase Agreement and Subsoil Use Contract amendments. This program includes construction of a test rotary kiln, delineation drilling to define the potential open-pit mine and the continuation of the operation’s care–and-maintenance requirements.

Work was started in November 2006 on a data compilation and verification program as part of the development of an updated 3D geological model. Once complete, a program of diamond drilling and surface exploration aimed at delineating the project’s open-pit potential will be prepared and submitted for regulatory approval in Kazakhstan. Ivanhoe Mines plans to re-establish a team of Kazakh geologists at the mine site, which will be assisted by key senior geologists seconded from the exploration team at Oyu Tolgoi.

The Company is continuing to assess financing alternatives.

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(Stated in U.S. dollars, except where noted)

ASIA GOLD (45% owned)

The status of the coal transaction between Ivanhoe Mines and Asia Gold is discussed on page 20 in the Mongolian Coal Project section of this MD&A.

Exploration results from the Khongor porphyry copper-gold project in Southern Mongolia confirm a mineralized strike length of two kilometres. About half of this strike length (Khongor North) is within the West Falcon Gobi Property, a joint venture property with BHP Billiton (BHPB). The balance is on the Tsakhir licence, referred to as Khongor South, which is optioned by Asia Gold from Solomon Resources Limited (Solomon) and Gallant Minerals Ltd (Gallant).

In August 2006, further work was completed to improve the resolution of the IP survey conducted in April 2006. The Phase 2 drilling program, which was completed in early July 2006, intersected high-grade mineralization and further mapping, sampling and ground magnetic surveys have defined four new drill targets. Two new zones of strong quartz stock work also were discovered in August 2006.

On March 6, 2007, Solomon issued a notice of termination of the Gallant-Solomon agreements. Pursuant to these agreements, Asia Gold held a 30-day option, beginning on March 6, 2007, to an assignment of the Gallant-Solomon agreements to Asia Gold. On March 12, 2007, Asia Gold signed a Memorandum of Agreement with Gallant to earn an 80% interest in the Tsakhir license.

Pursuant to an Option Agreement with BHPB dated June 30, 2005, BHPB can earn a 50% interest in the West Falcon Gobi Property by spending $3.5 million on exploration prior to December 31, 2007, and an additional 20% interest by funding a feasibility study up to a maximum value of $45 million.

BHPB conducted a Falcon airborne gravity gradiometer survey over the joint venture property in May 2006. Potential coal-bearing basins and prospective areas for porphyry copper systems were identified. Further IP surveys commenced in March 2007.

After the Falcon survey, a multi-purpose drill rig was mobilized. Drilling commenced at the end of July 2006 and was completed in October 2006. A total of 34 holes were drilled, mostly consisting of percussion with diamond tails. Coal was intersected in the southeastern part of the region. The results are being reviewed.

In Indonesia, Asia Gold signed a definitive Joint Venture Agreement and Cooperation Agreement with Harita Mineral, effective September 7, 2006. Asia Gold has earned an 85% interest in the Kaputusan prospect by spending $300,000 on exploration during the first year of the joint venture.

Camp construction, line cutting and logistical preparation have been conducted on the Kaputusan porphyry copper-gold project. A first-stage exploration program, comprising geological mapping, an IP geophysical survey and trenching, began in March 2006. Detailed geological mapping by Asia Gold has confirmed the presence of porphyry copper-gold mineralization. A follow-up trenching program consisting of 2,958 metres in 15 trenches was completed in November 2006. The trenches expanded the initial program in the North and South zones and resulted in the discovery of the new West Zone of porphyry-style copper-gold mineralization. A 3,000-metre diamond-drill program began in February 2007.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

Asia Gold completed a nine-hole diamond drilling program totalling 1,441 metres on its Bulgarian joint venture earn-in properties during 2006. Under its joint venture agreement with Hereward Ventures Bulgaria AD, Asia Gold was eligible to earn up to an 80% interest in certain licences by completing two $2 million exploration programs. During September 2006, Asia Gold completed the first stage and earned a 51% participating interest in the joint venture. During February 2007, Asia Gold decided to terminate its mineral exploration activities in Bulgaria and withdrew from the joint venture effective March 2, 2007.

CHINA

Inner Mongolia exploration

Ivanhoe Mines continued exploration efforts on various prospects in Inner Mongolia during 2006.

A total of 2,995 metres of diamond drilling (22 holes) were completed and 16.9 infill line kilometres (683 soil samples) were taken from the primary Anomaly Five target area. Holes were targeted on zones with anomalous surface and soil gold-silver geochemistry and all zones were adequately tested by the completed program. Gold and gold-silver mineralized vein zones were intercepted in several holes; however, the narrow (15 centimetres to 70 centimetres), erratic nature of mineralization and lack of gold-silver grade continuity within veins and lodes has downgraded the property.

Two potential gold-silver-copper targets were identified through the reconnaissance exploration program. Follow-up exploration, consisting of detailed geological-structural mapping, systematic rock-chip sampling, trenching and ground geophysics will be completed over both prospects in early 2007, with an aim of defining drill targets for testing in the later part of 2007.

Jinshan (46% owned)

Jinshan Gold Mines Inc. (Jinshan) announced the results of its final feasibility study for the CSH (217) Gold project, in China’s Inner Mongolia Autonomous Region, in April 2006. The study increased the measured and indicated resources by approximately 700,000 ounces of gold, using a 0.5 grams per tonne (g/t) gold cut-off. The new resource estimate reported by Jinshan, based on a 0.5 g/t gold cut-off, is 42 million tonnes of measured resources and 68 million tonnes of indicated resources grading 0.85 g/t gold and 0.81 g/t gold. A copy of the 43-101F1 technical report filed by Jinshan in June 2006 is available on www.sedar.com.

In September 2006, the Ministry of Land and Resources in Beijing granted Jinshan’s mining permit to commence commercial mining activities at the CSH (217) Gold project. Jinshan’s application for project registration was approved by the provincial government of the Inner Mongolia Autonomous Region in July 2006.

In October 2006, Jinshan signed a 10-year mining contract with China National Railway Corporation, a major Chinese mining contractor. The contractor commenced haul-road construction and open pit preparations in January 2007, and in March began placing ore on the heap-leach pad. A 500-person camp is housing contract miners and most of Jinshan’s start-up work force. The process plant is expected to begin operations in the second quarter and Jinshan expects to be capable of commencing commercial gold production in June or July of 2007.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

B. MYANMAR ASSETS HELD FOR SALE

Trust Arrangements

As part of the Rio Tinto strategic partnership that was announced in October 2006, Ivanhoe Mines agreed to divest all of its business interests and assets in Myanmar, including its indirect interest in the Monywa Copper Project (Monywa). The Myanmar assets have been transferred to an independent third-party trust (the Trust), pending their sale. The sole purpose of the Trust is to sell the assets to one or more arm’s-length third parties. Ivanhoe Mines’ only interest in the Trust is as an unsecured creditor under a promissory note — issued by the Trust on the transfer of the Myanmar assets — that is to be repaid once the assets are sold.

In consideration for the Myanmar Assets, a company wholly-owned by the Trust (Trust Holdco) issued a promissory note to a subsidiary of the Company. The principal amount of the promissory note is equal to the cash proceeds to be realized upon the future sale of the Myanmar Assets, plus 50% of any cash generated by Monywa that is available for distribution to the project participants but remains undistributed at the time of any such sale, less certain contractually specified deductions, including any fees and expenses incurred in carrying out the sale. Ivanhoe Mines retains no ownership interest in the Myanmar Assets, directly or indirectly, except as a creditor of Trust Holdco pursuant to the promissory note.

Trust Holdco’s mandate is to engage one or more qualified third parties (a Sale Service Provider) that will be responsible for identifying potential third-party purchasers, soliciting expressions of interest from such potential purchasers, negotiating sale terms and facilitating the sale of the Myanmar Assets on behalf of Trust Holdco. A Sale Service Provider that successfully facilitates the sale of the Myanmar Assets to a purchaser will be entitled to a fee equal to a percentage of the proceeds realized by Trust Holdco on the sale of the Myanmar Assets.

Following the sale of the Myanmar Assets, Trust Holdco will use the proceeds to pay the Sale Service Provider’s fee and any other expenses or liabilities incurred in carrying out the sale. Trust Holdco then will use the remaining proceeds of the sale, less contractually specified deductions, to repay the promissory note held by the Company’s subsidiary. Upon having retired the promissory note, the Trust will wind up Trust Holdco and distribute the remaining assets of the Trust, which are expected to consist solely of cash, to the designated beneficiaries of the Trust, whereupon the Trust will terminate.

Monywa has been classified as “investment held for sale” for financial statement purposes and will continue to be accounted for as such until Monywa is sold by the trustee.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

Monywa Copper Project 2006 Operating Results

		Years ended December 31,
		Total Operation									Company’s 50% Net Share
								% Increase							% Increase
		2006			2005			(Decrease)			2006		2005		(Decrease)
Total tonnes moved (1)	Tonnes (000’s)		14,050			13,527			4	%
Tonnes of ore to heap	Tonnes (000’s)		7,704			9,544			-19	%
Ore grade	CuCN%		0.36	%		0.49	%		-27	%
Strip ratio	Waste/Ore		1.25			0.45			178	%
Cathode production	Tonnes		19,544			34,478			-43	%		9,772		17,239		-43	%
Tonnes sold	Tonnes		19,202			34,969			-45	%		9,601		17,485		-45	%
Average sales price received	US$/pound										$	3.29	$	1.83		80	%
Sales	US$(000)										$	58,731	$	54,584		8	%
Cost of operations	US$(000)										$	15,927	$	17,768		-10	%
Operating profit	US$(000)										$	37,278	$	30,186		23	%
Unit cost of operations	US$/pound										$	0.75	$	0.46		63	%

⁽¹⁾ Includes ore and waste material

Copper prices on the London Metal Exchange (LME) averaged $3.05 per pound in 2006, compared to $1.67 per pound in 2005, representing an increase of 83%. In 2006 and 2005, all exports of copper were settled using the average LME copper price for the second month following the month of shipment. Monywa sold 19,202 tonnes of copper cathode in 2006, a 45% decrease from 2005. Monywa was able to realize a higher copper price than the average LME due to the timing of its copper sales.

During 2006, mine operations continued to be affected by a shortage of trucking capacity caused by delays in obtaining the necessary import permits for the mining equipment that had been previously ordered in 2005. The permits were received in the third quarter and the equipment was commissioned in September 2006. Total tonnage moved in 2006 increased by 4% compared to 2005. Total cathode production in 2006 decreased by 43% due to a 19% decrease in tonnages placed on the heaps and a 27% decrease in copper grades.

During 2006, the unit operating cash costs increased by approximately 63% compared to 2005. The net increase in operating cash costs was mainly attributed to increases in fuel and power less decreases in chemicals used in the leaching process.

At the end of 2006, Monywa had $114.9 million in cash (net $57.5 million to Ivanhoe Mines). Subsequent to year end, dividends of $30.0 million (net $15.0 million to Ivanhoe Mines) were paid by Monywa. Monywa also paid accrued amounts relating to income and commercial taxes for the year ended March 31, 2006. As at February 28, 2007, Monywa’s cash balance was approximately $50.1 million (net $25.1 million to the Trust).

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

C. DISCONTINUED OPERATIONS

Gain on sale from discontinued operations consisted of the following amounts:

	Years ended December 31,
($ in 000’s)	2006		2005
Book gain on sale of Savage River	$	—	$	10,267
Net income for two months ended February 2005				5,406
Contingent annual payment:
Period January to March		7,931		—
Period April to December (accrued)		11,691		20,243
	$	19,622	$	35,916

In February 2005, the Company sold its Savage River mining operations (Savage River) in Tasmania, Australia, for two initial payments totalling $21.5 million ($15.0 million received in 2005 and $6.5 million received in January 2006), plus a series of five contingent, annual payments that commenced on March 31, 2006.

On March 31, 2006, Ivanhoe Mines received its first contingent annual payment of $28.0 million, with an additional $0.2 million adjustment received in April 2006. This $28.2 million payment included $7.9 million in contingent income recognized in the first quarter of 2006.

To date, Ivanhoe Mines has received $49.7 million in proceeds from the sale of Savage River.

At December 31, 2006, Ivanhoe Mines had accrued an $11.7 million receivable in relation to the second contingent annual payment due in March 2007. This amount is calculated based upon the actual tonnes of iron ore sold during the nine-month period ended December 31, 2006, and the escalating price formula.

In June 2006, the mine’s concentrator was damaged by a fire. As a result, pellet production for the 12-month period ending March 31, 2007, is estimated by the management of Savage River to total 1.7 million tonnes — down from a previous estimate of 2.2 million tonnes. Also, based on the 3% reduction in pellet prices negotiated in Q2’06, the Company is expecting to receive approximately $19.5 million in total pellet premium at the end of March 2007, representing approximately a 31% reduction from the $28.2 million received for the year ended March 2006.

D. ADMINISTRATIVE AND OTHER

General and administrative. The $10.5 million increase in general and administrative expenditures in 2006 primarily was due to a $5.6 million increase in non-cash, stock-based compensation charges charged to corporate, a $2.8 million increase in salaries and overhead and a $1.8 million increase in consulting expenses primarily due to contract accounting and auditing services for Sarbanes-Oxley work.

Interest Income. The $4.8 million increase in interest income is due to higher average cash balances in 2006, coupled with higher interest rates in 2006 compared to 2005.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

Foreign exchange gains. The Company has benefited from the strengthening of the Canadian dollar ($Cdn) in 2005 and 2006 as it maintained a portion of its cash balances in Canadian dollars.

Share of loss on significantly influenced investee. The $1.6 million share of loss on significant influenced investee represents the Company’s share of Jinshan’s net loss for the period September to December 2006, prior to this, Ivanhoe Mines’ investment in Jinshan was consolidated.

SELECTED QUARTERLY DATA

($ in millions of U.S. dollars, except per share information)

	QUARTER ENDED												Year Ended
	Mar-31			Jun-30			Sep-30			Dec-31			Dec-31
2006
Exploration expenses	($	31.6	)	($	43.7	)	($	67.3	)	($	70.4	)	($	213.0	)
General and administrative		(6.4	)		(6.0	)		(6.9	)		(8.9	)		(28.2	)
Share of income from investment held for sale		4.5			(2.4	)		9.0			7.4			18.5
Foreign exchange gains (losses)		(0.2	)		4.7			(0.4	)		(3.7	)		0.4
Net (loss) from continuing operations		(31.1	)		(45.7	)		(68.0	)		(73.5	)		(218.3	)
Net income from discontinued operations		7.9			5.4			1.5			4.8			19.6
Net (loss)		(23.2	)		(40.3	)		(66.5	)		(68.7	)		(198.7	)
Net (loss) income per share
Continuing operations	($	0.10	)	($	0.14	)	($	0.20	)	($	0.21	)	($	0.65	)
Discontinued operations	$	0.03		$	0.02		$	0.00		$	0.01		$	0.06
Total	($	0.07	)	($	0.12	)	($	0.20	)	($	0.20	)	($	0.59	)
2005
Exploration expenses	($	25.6	)	($	35.5	)	($	30.5	)	($	41.7	)	($	133.3	)
General and administrative		(3.6	)		(4.2	)		(5.7	)		(4.2	)		(17.7	)
Share of income from investment held for sale		7.7			7.8			8.0			(0.5	)		23.0
Foreign exchange gains (losses)		(0.6	)		1.7			7.1			(0.4	)		7.8
Net (loss) from continuing operations		(24.2	)		(31.1	)		(20.6	)		(49.8	)		(125.7	)
Net income from discontinued operations		15.7			5.9			6.4			7.9			35.9
Net (loss)		(8.5	)		(25.2	)		(14.3	)		(41.8	)		(89.8	)
Net (loss) income per share
Continuing operations	($	0.08	)	($	0.10	)	($	0.07	)	($	0.16	)	($	0.41	)
Discontinued operations	$	0.05		$	0.02		$	0.02		$	0.03		$	0.12
Total	($	0.03	)	($	0.08	)	($	0.05	)	($	0.13	)	($	0.29	)

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

FOURTH QUARTER

Exploration. In Q4’06, Ivanhoe Mines expensed $70.4 million in exploration and development activities, compared to $41.7 million in Q4’05. The majority of the $70.4 million was spent on Ivanhoe Mines’ Mongolian properties ($65.6 million in 2006, compared to $37.6 million in 2005). Approximately $56.0 million was spent on the Oyu Tolgoi Project, $1.8 million on coal exploration and the remainder was spent on various exploration activities, including the Undur Naran and Baruun Tal projects, regional reconnaissance, licence holding fees and general in-country administrative charges.

Administrative costs. Administrative costs in Q4’06 were $4.7 million higher than Q4’05. This was mainly due to a $0.8 million increase in non-cash, stock-based compensation charges, a $2.3 million increase in salaries and overhead and a $0.8 million increase in consulting expenses primarily due to contract accounting and auditing services for Sarbanes-Oxley work.

Income from investment held for sale. In Q4’06, net income from the S&K Mine totalled $7.4 million, compared to a loss of $0.5 million in Q4’05. This increase was mainly due to Q4’05, including $11.2 million in commercial tax expense that previously had not been accrued.

Net income from discontinued operations. Income from the Savage River mine operations totalled $4.8 million in Q4’06, compared to $7.9 million in Q4’05. The decrease from 2005 was due to 186,000 tonnes less sold in Q4’06 versus Q4’05 and the reduction in pellet premium being achieved in 2006.

Foreign exchange loss. The Rio Tinto financing in October 2006 was completed in U.S. dollars; however, the Company still maintained some Canadian dollar resources in Q4’06 from its April 2006 placement. The foreign exchange loss during the quarter was mainly attributable to the weakening of the Canadian dollar against the U.S. dollar.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow

Operating activities. The $210.7 million of cash used in operating activities from continuing operations in 2006 primarily was the result of $213.0 million in exploration expenditures.

Investing activities. In 2006, $1.0 million of cash was provided by investing activities, mainly consisting of $34.3 million in property, plant and equipment acquisitions and construction for the Mongolia, Jinshan and Bakyrchik projects, less $34.7 million in proceeds received from the sale of the Savage River operation.

Financing activities. Financing activities of $473.6 million in 2006 largely consisted of the two 2006 private placements. In April 2006, the Company issued 18.4 million shares for net proceeds of $159.0 million and in October 2006 the Company issued to Rio Tinto 37.1 million shares for net proceeds of $296.8 million.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

Liquidity and Capital Resources

At December 31, 2006, consolidated working capital was $364.7 million, including cash of $363.6 million, compared with working capital of $127.6 million and cash of $101.7 million at the end of 2005.

The bulk of the Company’s expenditures is of a discretionary nature and as such can be deferred based on the status of the Company’s cash resources. The Company’s cash resources are considered sufficient to maintain the Company’s minimum level of activities for the next 12 months.

Based on the Company’s financial position at December 31, 2006, the Company believes that existing funds should be sufficient to fund its minimum obligations, including planned Australian and Bakyrchik obligations and general corporate activities, for at least the next 12 months. Should the Company be unable to negotiate an Investment Agreement that is acceptable to Rio Tinto, with the result that Rio Tinto elects not to proceed with the second tranche private placement, Ivanhoe Mines may delay, postpone or curtail certain of its planned activities for 2007 and thereafter. The Company will continue to assess the need for project financing relating to the development of power and other infrastructure-related activities in association with the Oyu Tolgoi Project. See “Outlook” for further details.

Financial Instruments

The Company’s financial instruments consist of cash, accounts receivable, other current assets, long-term investments, accounts payable and accrued liabilities and loans payable to related parties.

The fair value of Ivanhoe Mines’ long-term investments was determined by reference to published market quotations, which may not be reflective of future values.

The fair value of Ivanhoe Mines’ loan payable to related parties was estimated by discounting future payments to their present value.

The fair value of Ivanhoe Mines’ remaining financial instruments was estimated to approximate their carrying value, due primarily to the immediate or short-term maturity of these financial instruments.

Ivanhoe Mines is exposed to credit risk with respect to its accounts receivable. The significant concentrations of credit risk are situated in Mongolia and Australia. Ivanhoe Mines does not mitigate the balance of this risk in light of the credit worthiness of its major debtors.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

SHARE CAPITAL

At March 30, 2007, the Company had a total of:

o 373.9 million common shares outstanding.

o 13.4 million incentive stock options outstanding, with a weighted average exercise price per share of Cdn$9.20. Each option is exercisable to purchase a common share of the Company at prices ranging from Cdn$2.31 to Cdn$13.29 per share.

o 92.1 million share purchase warrants outstanding granted to Rio Tinto. The exercise term of these warrants is determined with reference to the earlier of the following dates (the Warrant Determination Date):

(a)	the date upon which Ivanhoe Mines enters into an Investment Agreement with the Government of Mongolia that is mutually acceptable to Ivanhoe Mines and Rio Tinto; or
(b)	October 27, 2009.

• Series A Warrants:
The Series A Warrants are non-transferable and entitle Rio Tinto to purchase up to 46,026,522 Common Shares at a price of:

(a)	US$8.38 per share for proceeds of up to US$385,702,254 during the period commencing November 30, 2006 and ending 180 days following the Warrant Determination Date; and
(b)	US$8.54 per share for proceeds of up to US$393,066,498 during the period commencing 181 days after the Warrant Determination Date and ending 365 days after the Warrant Determination Date.

• Series B Warrants:
The Series B Warrants are non-transferable and entitle Rio Tinto to purchase up to 46,026,522 Common Shares at a price of:

(a)	US$8.38 per share for proceeds of up to US$385,702,254 during the period commencing November 30, 2006 and ending 180 days following the Warrant Determination Date;
(b)	US$8.54 per share for proceeds of up to US$393,066,498 during the period commencing 181 days after the Warrant Determination Date and ending 365 days after the Warrant Determination Date;
(c)	US$8.88 per share for proceeds of up to US$408,715,515 during the period commencing 366 days after the Warrant Determination Date and ending 545 days after the Warrant Determination Date; and
(d)	US$9.02 per share for proceeds of up to US$415,159,228 during the period commencing 546 days after the Warrant Determination Date and ending 725 days after the Warrant Determination Date.

o Under the terms of the Rio Tinto Agreement, Rio Tinto will take up the second tranche of the private placement following the date upon which Ivanhoe Mines enters into an Investment Agreement with the Government of Mongolia that is mutually acceptable to Ivanhoe Mines

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

and Rio Tinto. Rio Tinto has the option to exercise the second tranche earlier. This second tranche will consist of 46.3 million shares at a price of US$8.38 per share, for total proceeds of US$388 million. Ivanhoe Mines has recorded an amount of $23.1 million in shareholders’ equity, attributable to the fair value of the Rio Tinto share purchase warrants and second tranche share issuance commitment.

OUTLOOK

Development of the Oyu Tolgoi Project. Since its inception in 1994, mineral exploration has been the Company’s principal business focus. During 2006, the Company devoted its management and financial resources to furthering the exploration and development of the Oyu Tolgoi Project while at the same time continuing to explore for minerals in other parts of Mongolia, Eastern Asia and Australia. The Company also is assessing the development potential, extent, and value of the strategically located coal resources discovered on Ivanhoe Mines’ exploration concessions in Southern Mongolia.

Strategic Partnership with Rio Tinto plc. On October 27, 2006, Rio Tinto purchased approximately 37.1 million shares of the Company at a price of $8.18. This investment gave Rio Tinto 9.95% of the Company’s issued share capital as enlarged by the placement, for a total initial investment of $303 million.

The strategic partnership with Rio Tinto is expected to provide sufficient funds for the Company to build Oyu Tolgoi at the current planned production levels. The Company has agreed to use a minimum of 90% of the proceeds of Rio Tinto’s investment for the development of Oyu Tolgoi.

The Company cannot predict how soon the ongoing negotiations for an Investment Agreement (previously called a Stability Agreement) can be finalized. Accordingly, there can be no assurance that an Investment Agreement containing all of the terms sought by Ivanhoe Mines and/or Rio Tinto can be obtained in the foreseeable future, or at all. In addition, there can be no assurance that the Company will be able to close future financings, including private placement and warrant transactions with Rio Tinto, obtain project financing or otherwise raise capital before its existing cash resources are expended. See “Risks and Uncertainties”.

Investment Agreement with the Government of Mongolia. Ivanhoe Mines will continue its efforts to successfully complete its negotiations with the Government of Mongolia for an Investment Agreement. Finalization of the Investment Agreement has taken much longer than expected to complete. There have been numerous reasons for the hampered progress, including three changes in government since the most recent election in the summer of 2005. Nevertheless, Ivanhoe Mines believes the most significant reason for delay has been political considerations relating to an internal debate by Mongolian stakeholders about the scope of obligations and entitlements of mining companies, the government and other interested parties in the mining industry. Amendments to the Minerals Law and related laws implemented in the spring of 2006 expanded the scope of obligations and entitlements of relevant stakeholders in the mining process, and Ivanhoe Mines believes that these amendments represent the current government’s effort to achieve political cooperation.

In March 2006, a delegation of Ivanhoe Mines’ senior management met with leaders and senior officials of the Government of Mongolia and presented a series of investment-related initiatives aimed

34

IVANHOE MINES LTD.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

at facilitating the completion of the Investment Agreement. The meetings coincided with a series of encouraging statements from Mongolia’s political leadership reaffirming a commitment to the early conclusion of an Investment Agreement with Ivanhoe Mines and to maintaining a positive environment for foreign direct investment.

In May 2006, an excess profits tax was passed by the Mongolian Parliament. This was followed by a series of revisions to the Tax Law and, on July 8, 2006, by a sweeping revision of the Minerals Law. The final Mongolian text of these legislative enactments was released in August 2006 and on October 30, 2006, the official English translation of the Minerals Law was released.

The Company has devoted considerable time and attention to assessing the impacts of the excess profits tax and the revisions to both the Minerals Law and the Tax Law. The Company has reviewed available translations of the revised Minerals Law and Tax Law to assess the effect that the changes would or could have on Ivanhoe Mines’ plan to develop the Oyu Tolgoi Project. Based on this review, the Company has determined that the underlying value of the Oyu Tolgoi Project, as reflected in the 2005 IDP, had not been materially affected.

Following passage of the revisions to the Minerals Law and the Tax Law, the Company and the Government of Mongolia resumed negotiations on a formal, long-term Investment Agreement. In August 2006, the Mongolian Government announced that its Cabinet had instructed the Minister of Finance, the Minister of Industry and Trade and the Minister of Nature and Environment to form a new Working Group to conclude the negotiations with Ivanhoe Mines on the Investment Agreement. Also in August, the Government of Mongolia established a Working Group of representatives from the ministries of Finance, Industry and Trade, Justice and Home Affairs and Nature and Environment to work with Ivanhoe Mines on a formal Investment Agreement. To date, representatives of the Company and Rio Tinto have met on several occasions with the Working Group to discuss the Oyu Tolgoi Project, the Company’s plans, the resolution of remaining issues necessary for the satisfactory conclusion of the Investment Agreement — particularly in light of the amendments to the Minerals Law and the Tax Law — and the process to be followed to achieve a prompt resolution of the Investment Agreement.

Once a draft Investment Agreement has been prepared by the Working Group, it will be submitted to the Mongolian Government’s Cabinet for approval. Thereafter, if the Investment Agreement is approved by the Cabinet, as prepared, it will be submitted to Parliament for approval. Parliament does not reconvene until April 5, 2007.

Amendments to Minerals Law and Tax Law. Significant amendments to the Minerals Law and Tax Law include, but are not limited to, the following:

Strategic Deposit. The Government of Mongolia has the option to acquire interests in mineral deposits deemed to be “strategic”. The law defines a strategic deposit as one with potential to have an impact on Mongolia’s national security, economic and social development, with minerals that are in strong international demand; or a deposit capable of annual mineral production that exceeds 5% of Mongolia’s gross domestic product. The Government will have 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 former Soviet era. The Oyu Tolgoi discoveries on the Company’s licences, and on the adjoining Entrée Gold joint venture

35

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

property, were financed entirely by private capital. The Company’s coal discoveries in the Nariin Sukhait region, and at Tsagaan Tolgoi, west of the Oyu Tolgoi Project, also have been funded solely by private capital.

The 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. Although specific provisions of the revised Minerals Law need to be evaluated, addressed and interpreted, the extent of state participation will be determined in part on a project-by-project basis by the proportion of the project capital that the state is prepared to invest. For the last several years, the Company has stated that it was prepared to consult closely with Mongolian Government leaders to assess all strategic alternatives available for the development of the Oyu Tolgoi Project, including the possibility of accepting one or more minority investments from official, government-owned entities whose involvement could be profoundly beneficial to the project’s long-term success.

It is anticipated that the Government of Mongolia will initiate a process to develop regulations that address and provide greater meaning to the amended Minerals Law.

Increased royalty. The Government’s royalty on all metals increased from 2.5% to 5.0% and is based on gross sales.

Lower 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%.

Amendments to 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 70 years. At this time, it is not clear if those amendments will or should apply retroactively to existing licences.

Employment requirements. A licence holder is obligated to employ no more than 10% foreign citizens and faces a monthly surcharge of 10 times the minimum monthly salary for each foreign citizen employee above the 10% limit.

Listing requirements. Entities holding a mining licence for a deposit classified as a deposit of strategic importance now are required to list at least 10% of their 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.

Amendments to the maximum duration of Investment Agreements. The maximum duration of Investment Agreements has been set 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 a 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

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

depreciation allowances. These amendments are expected to compensate for the elimination of the tax holidays that previously applied only to foreign-owned companies, although at present mining is not considered by the Government of Mongolia to qualify for the investment tax credit.

Excess Profit Tax. In May 2006, an excess profit tax was approved by the Mongolian Parliament. The tax, at a rate of 68%, will apply to sales revenue, net of all selling and treatment charges, which exceeds certain threshold levels for copper and gold. Based on the Company’s initial assessment, the effective price at which the tax will apply to Oyu Tolgoi copper is currently 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. The Oyu Tolgoi Project will be a producer of copper concentrate and gold produced at Oyu Tolgoi will be contained in copper concentrate.

In meetings with leaders and senior officials of the Government, the Company reaffirmed its willingness to work with the Government to have or arrange downstream smelting capacity built in Mongolia. The 2005 IDP financial results were based on metal prices that are below the metal-price thresholds set by this new tax on revenue. As a result, the management of the Company believes that the new tax on excess profits should not compromise the basis for the development of the Oyu Tolgoi Project.

OFF-BALANCE-SHEET ARRANGEMENTS

During the year ended December 31, 2006, Ivanhoe Mines was not a party to any off-balance-sheet arrangements that have, or are reasonably likely to have, a current or future effect on the results of operations, financial condition, revenues or expenses, liquidity, capital expenditures or capital resources of the Company.

CONTRACTUAL OBLIGATIONS

($000’s of U.S. dollars)

	Payments Due by Period
	Less than 1
	year		1 - 3 years		4 - 5 years		After 5 years		Total
Operating leases (1)	$	1,290	$	884	$	9	$	—	$	2,183
Purchase obligations (1)		116,794		90		—		—		116,884
Other long-term obligations (2)		315		2,194		—		17,333		19,842
Total	$	118,399	$	3,168	$	9	$	17,333	$	138,909

(1)	These amounts mainly represent various long-term contracts that include commitments for future operating payments under contracts for drilling, engineering, equipment purchases, rentals and other arrangements.
(2)	Other long-term obligations mainly consist of asset retirement obligations.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

CHANGES IN ACCOUNTING POLICIES

On January 1, 2006, the Company adopted the provisions of SFAS No. 123(R), “Share-Based Payment”, on a modified prospective basis. Prior to January 1, 2006, the Company recorded compensation costs using the fair value based method in accordance with SFAS No. 123, “Accounting for Stock-Based Compensation”. The adoption of SFAS No. 123(R) did not have an impact on the Company’s consolidated financial position and results of operations. The fair value of stock options at the date of grant is amortized to operations, with an offsetting credit to additional paid-in capital, on a straight-line basis over the vesting period. If and when the stock options are ultimately exercised, the applicable amounts of additional paid-in capital are transferred to share capital.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires the Company to establish accounting policies and to make estimates that affect both the amount and timing of the recording of assets, liabilities, revenues and expenses. Some of these estimates require judgments about matters that are inherently uncertain.

A detailed summary of all of the Company’s significant accounting policies and the estimates derived therefrom is included in Note 2 to the annual Consolidated Financial Statements for the year ended December 31, 2006. While all of the significant accounting policies are important to the Company’s consolidated financial statements, the following accounting policies and the estimates derived therefrom have been identified as being critical:

Ø	Carrying Values of Property, Plant and Equipment;
Ø	Depletion and Depreciation of Property, Plant and Equipment;
Ø	Asset Retirement Obligations; and
Ø	Income Taxes.

Carrying values of Property, Plant and Equipment

Ivanhoe Mines reviews the carrying values of its property, plant and equipment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. An impairment is considered to exist if total estimated future cash flows, or probability-weighted cash flows on an undiscounted basis, are less than the carrying value of the assets. An impairment loss is measured and recorded based on discounted estimated future cash flows associated with values beyond proven and probable reserves and resources. In estimating future cash flows, assets are grouped at the lowest level for which there is identifiable future cash flows that are largely independent of cash flows from other asset groups. Generally, in estimating future cash flows, all assets are grouped at a particular mine for which there is identifiable cash flows.

The estimates used by management are subject to various risks and uncertainties. It is reasonably possible that changes in estimates could occur which may affect the expected recoverability of the Company’s investments in property, plant and equipment.

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IVANHOE MINES LTD.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

Depletion and Depreciation of Property, Plant and Equipment

Property, plant and equipment comprise one of the largest components of Ivanhoe Mines’ assets and, as such, the amortization of these assets has a significant effect on the Company’s financial statements.

On the commencement of commercial production, depletion of each mining property is provided on the unit-of-production basis using estimated proven and probable reserves as the depletion basis. The mining plant and equipment and other capital assets are depreciated, following the commencement of commercial production, over their expected economic lives using either the unit-of-production method or the straight-line method.

Capital projects in progress are not depreciated until the capital asset has been put into operation.

The proven and probable reserves are determined based on a professional evaluation using accepted international standards for the assessment of mineral reserves. The assessment involves the study of geological, geophysical and economic data and the reliance on a number of assumptions. The estimates of the reserves may change, based on additional knowledge gained subsequent to the initial assessment. This may include additional data available from continuing exploration, results from the reconciliation of actual mining production data against the original reserve estimates, or the impact of economic factors such as changes in the price of commodities or the cost of components of production. A change in the original estimate of reserves would result in a change in the rate of depletion and depreciation of the related mining assets, or could result in impairment, resulting in a write-down of the assets.

Asset Retirement Obligations

The Company has obligations for site restoration and decommissioning related to its mining properties. The Company, using mine closure plans or other similar studies that outline the requirements planned to be carried out, estimates the future obligations for mine closure activities. Because the obligations are dependent on the laws and regulations of the countries in which the mines operate, the requirements could change — resulting from amendments in those laws and regulations relating to environmental protection and other legislation affecting resource companies.

Ivanhoe Mines recognizes liabilities for statutory, contractual or legal obligations associated with the retirement of property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, a liability for an asset retirement obligation is recognized at its fair value in the period in which it is incurred. Upon initial recognition of the liability, the corresponding asset retirement cost is added to the carrying amount of that asset and the cost is amortized as an expense over the economic life of the related asset. Following the initial recognition of the asset retirement obligation, the carrying amount of the liability is increased for the passage of time and adjusted for changes to the amount or timing of the underlying cash flows needed to settle the obligation.

Because the estimate of obligations is based on future expectations in the determination of closure provisions, management makes a number of assumptions and judgments. The closure provisions are more uncertain the further into the future the mine closure activities are to be carried out. Actual costs

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

incurred in future periods in relation to the remediation of Company’s existing assets could differ materially from the $19.8 million undiscounted future value of Ivanhoe Mines’ estimated asset retirement obligations at December 31, 2006.

Income Taxes

The Company must make significant estimates in respect of the provision for income taxes and the composition of its deferred income tax assets and deferred income tax liabilities. Ivanhoe Mines’ operations are, in part, subject to foreign tax laws where interpretations, regulations and legislation are complex and continually changing. As a result, there are usually some tax matters in question which may, on resolution in the future, result in adjustments to the amount of deferred income tax assets and deferred income tax liabilities, and those adjustments may be material to the Ivanhoe Mines’ financial position and results of operations.

The Company computes the provision for deferred income taxes under the liability method. Deferred taxes arise from the recognition of the tax consequences of temporary differences by applying statutory tax rates applicable to future years to differences between the financial statement’s carrying amounts and the tax bases of certain assets and liabilities. The Company records a valuation allowance against any portion of those deferred income tax assets that management believes will, more likely than not, fail to be realized.

The determination of the ability of the Company to utilize tax loss carry-forwards to offset deferred income taxes payable requires management to exercise judgment and make assumptions about the future performance of the Company. Management is required to assess whether the Company is “more likely than not” to be able to benefit from these tax losses. Changes in economic conditions, metal prices and other factors could result in revisions to the estimates of the benefits to be realized or the timing of utilizing the losses.

RECENT ACCOUNTING PRONOUNCEMENTS

Recently issued United States accounting pronouncements have been outlined below.

In February 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 155, “Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140” (SFAS 155). This Statement amends FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, and FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS 155 resolves issues addressed in Statement 133 Implementation Issue No. D1, “Application of Statement 133 to Beneficial Interests in Securitized Financial Assets.” This Statement will be effective for financial instruments acquired or issued by the Company after the beginning of its 2007 fiscal year. The Company expects that the adoption of this Statement will not have a material effect on its financial condition or results of operations.

In March 2006, the FASB issued Statement of Financial Accounting Standards No. 156, “Accounting for Servicing of Financial Assets — an amendment of FASB Statement No. 140” (SFAS 156). This Statement provides guidance addressing the recognition and measurement of separately recognized

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

servicing assets and liabilities, common with mortgage securitization activities, and provides an approach to simplify efforts to obtain hedge accounting treatment. SFAS 156 is effective after the beginning of an entity’s fiscal year that begins after September 15, 2006. The Company expects that the adoption of this Statement will have no impact on its financial condition or results of operations.

In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109” (FIN 48). This interpretation clarifies the recognition threshold and measurement of a tax position taken or expected to be taken on a tax return, and requires expanded disclosure with respect to the uncertainty in income taxes. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company expects that the adoption of FIN 48 will not have a material effect on its financial condition or results of operations.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (SFAS 157). This Statement defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. SFAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The Company expects that adoption of SFAS 157 will not have a material impact on its financial condition or results of operations.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108 (SAB 108). SAB 108 provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 permits companies to record the cumulative effect of initially applying this approach in the first fiscal year ending after November 15, 2006 by recording necessary correcting adjustments to the carrying values of assets and liabilities as of the beginning of that year with the offsetting adjustment recorded to the opening balance of retained earnings. Adoption of SAB 108 did not have a material impact on the Company’s financial condition and results of operations.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FASB Statement No. 115” (SFAS 159) which permits entities to choose to measure many financial instruments and certain other items at fair value. This statement is effective for fiscal periods beginning after November 15, 2007. The Company is currently evaluating the impact, if any, that adoption of SFAS 159 will have on its financial condition or results of operations.

RISKS AND UNCERTAINTIES

Material risks and uncertainties affecting Ivanhoe Mines, their potential impact, and the Company’s principal risk management strategies, are as follows:

Ivanhoe Mines may be unsuccessful in completing an Investment Agreement with the Government of Mongolia for the Oyu Tolgoi Project or may only be able to complete the contract on terms that effectively impair the economic viability of the project.

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IVANHOE MINES LTD.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

The Investment Agreement with the Government of Mongolia is expected to address a broad range of matters relevant to the Oyu Tolgoi Project, and the nature and scope of the Investment Agreement is of fundamental importance to the viability of the Oyu Tolgoi Project. The amendments to the Mining Law that were implemented in the Spring of 2006 establish a broad framework for an Investment Agreement, and a substantial portion of the terms are subject to the discretion and mutual agreement of the Government and the applicable mining license holder. Current negotiations with the Government on the terms of the Investment Agreement are proceeding in good faith and in a productive manner. Nevertheless, the Mongolian Government can, within the discretionary mandate imposed by the Mining Law, propose to complete the Agreement only on terms that would severely impact the economic viability of the Oyu Tolgoi Project or effectively prevent the Company from coming to an agreement with the Government on the Investment Agreement. Any such result would have a significant adverse effect on the development of the Oyu Tolgoi Project and the Company itself.

Ivanhoe Mines’ ability to carry on business in Mongolia is subject to political risk.

Ivanhoe Mines holds its interest in the Oyu Tolgoi Project, the Nariin Sukhait Project and its Mongolian exploration properties through mining licences and exploration licences that enable it to conduct operations or development and exploration activities. Notwithstanding these arrangements, Ivanhoe Mines’ ability to conduct operations or exploration and development activities is subject to changes in legislation or government regulations or shifts in political attitudes beyond Ivanhoe Mines’ control.

Government policy may change to discourage foreign investment, nationalization of mining industries may occur or other government limitations, restrictions or requirements not currently foreseen may be implemented. There can be no assurance that Ivanhoe Mines’ assets will not be subject to nationalization, requisition or confiscation, whether legitimate or not, by any authority or body.

There is no assurance that provisions under Mongolian law for compensation and reimbursement of losses to investors under such circumstances would be effective to restore the value of Ivanhoe Mines’ original investment. Similarly, Ivanhoe Mines’ operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, income taxes, environmental legislation, mine safety and annual fees to maintain mineral licences in good standing. There can be no assurance that Mongolian laws protecting foreign investments will not be amended or abolished or that existing laws will be enforced or interpreted to provide adequate protection against any or all of the risks described above.

There can be no assurance that Ivanhoe Mines will be capable of raising the additional funding that it needs to carry out its development and exploration objectives.

The further development and exploration of the Oyu Tolgoi Project and the various other mineral properties in which it holds interests depends upon Ivanhoe Mines’ ability to obtain financing through capital markets, sales of non-core assets or other means. While the share purchase entitlements and obligations of Rio Tinto pursuant to the Rio Tinto Transaction may, if consummated in their entirety, account for a substantial portion of the development cost of the Oyu Tolgoi Project, there is no assurance that Ivanhoe Mines will meet the conditions necessary to trigger Rio Tinto’s purchase obligations or that Rio Tinto will exercise its entitlement to subscribe for more share capital pursuant to its warrants and other rights. In particular, Rio Tinto’s obligation to complete the second tranche

42

IVANHOE MINES LTD.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

private placement is subject to the Company obtaining an Investment Agreement on terms acceptable to Rio Tinto. Until an Investment Agreement with the Government of Mongolia is actually finalized and approved, it is not possible to predict to what extent the Company will be successful in negotiating and obtaining terms and conditions in an Investment Agreement that is acceptable to Rio Tinto. Meanwhile, Rio Tinto’s warrants are exercisable at the discretion of Rio Tinto, and Ivanhoe Mines has no control over the decision to exercise those warrants. If the second tranche private placement is not completed and/or the warrants are not exercised by Rio Tinto, there is no assurance that the Company will be successful in obtaining financing from other sources necessary for development of the Oyu Tolgoi Project, on favourable terms or at all. Even if Rio Tinto does subscribe for the maximum amount contemplated in the Rio Tinto Transaction, such amount would not necessarily be sufficient to cover all contingencies relating to the Oyu Tolgoi Project or to develop related projects such as the coal deposits. Depressed markets for precious and base metals may make it difficult or impossible for Ivanhoe Mines to obtain debt financing or equity financing. Ivanhoe Mines operates in a region of the world that is prone to economic and political upheaval and instability, which may make it more difficult for Ivanhoe Mines to obtain debt financing from project lenders. Failure to obtain additional financing on a timely basis may cause Ivanhoe Mines to postpone its development plans, forfeit rights in some or all of its properties or joint ventures or reduce or terminate some or all of its operations.

The Hugo Dummett Deposit mineral resources and the Nariin Sukhait resources do not have demonstrated economic viability and the feasibility of mining has not been established.

A substantial portion of the mineral resources identified to date on the Oyu Tolgoi Project and all of the resources on the Nariin Sukhait Project are not mineral reserves and do not yet have demonstrated economic viability. There can be no assurance that additional mineral reserves will be identified on the property. With the exception of the Southern Oyu Deposits, the feasibility of mining from the Oyu Tolgoi Project and the Nariin Sukhait Project has not been, and may never be, established.

There is a degree of uncertainty attributable to the estimation of reserves, resources and corresponding grades being mined or dedicated to future production. Until reserves or resources are actually mined and processed, the quantity of reserves or resources and grades must be considered as estimates only. In addition, the quantity of reserves or resources may vary depending on the prevailing metals market. Any material change in the quantity of its reserves, resources, grades or stripping ratio may affect the economic viability of a particular property. In addition, there can be no assurance that metal recoveries in small-scale laboratory tests will be duplicated in larger scale tests under on-site conditions or during production.

Lack of infrastructure in proximity to the Oyu Tolgoi Project could adversely affect mining feasibility.

The Oyu Tolgoi Project is located in an extremely remote area which currently lacks basic infrastructure, including sources of electric power, water, housing, food and transport, necessary to develop and operate a major mining project. While Ivanhoe Mines has established the limited infrastructure necessary to conduct its current exploration and development activities, substantially greater sources of power, water, physical plant and transport infrastructure in the area will need to be established before Ivanhoe Mines can conduct mining operations. Lack of availability of the means and inputs necessary to establish such infrastructure may adversely affect mining feasibility.

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IVANHOE MINES LTD.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

Establishing such infrastructure will, in any event, require significant financing, identification of adequate sources of raw materials and supplies and necessary approvals from national and regional governments, none of which can be assured.

The Nariin Sukhait Project is similarly located in a remote area.

Mining projects are sensitive to the volatility of metal prices.

The long-term viability of Ivanhoe Mines depends in large part on the world market prices of copper and gold. The market prices for these metals are volatile and are affected by numerous factors beyond Ivanhoe Mines’ control. These factors include international economic and political trends, expectations of inflation, global and regional demand, currency exchange fluctuations, interest rates and global or regional consumption patterns, speculative activities, increased production due to improved mining and production methods and economic events, including the performance of Asia’s economies.

The aggregate effect of these factors on metals prices is impossible for Ivanhoe Mines to predict. Should prevailing metal prices fall and remain below variable production costs of Ivanhoe Mines’ current and planned mining operations for a sustained period, losses may be sustained and, under certain circumstances, there may be a curtailment or suspension of some or all of Ivanhoe Mines’ mining, development and exploration activities. Ivanhoe Mines would also have to assess the economic impact of any sustained lower metal prices on recoverability and, therefore, the cut-off grade and level of Ivanhoe Mines’ reserves and resources. These factors could have an adverse impact on Ivanhoe Mines’ future cash flows, earnings, results of operations, stated reserves and financial condition.

The following table sets forth for the periods indicated (1) the London Metals Exchange’s high, low and average settlement prices for copper in U.S. dollars per pound and (2) the high, low and average London afternoon fixing prices for gold.

	Copper						Gold
Year	High		Low		Average		High		Low		Average
2001	$	0.83	$	0.60	$	0.72	$	293	$	256	$	271
2002	$	0.77	$	0.65	$	0.71	$	349	$	278	$	310
2003	$	1.05	$	0.71	$	0.81	$	416	$	320	$	363
2004	$	1.49	$	1.06	$	1.30	$	454	$	375	$	409
2005	$	2.11	$	1.39	$	1.67	$	536	$	411	$	444
2006	$	3.99	$	2.06	$	3.05	$	725	$	524	$	604

Ivanhoe Mines’ business in Mongolia may be harmed if the country fails to complete its transition from state socialism and a planned economy to political democracy and a free market economy.

Since 1990, Mongolia has been in transition from state socialism and a planned economy to a political democracy and a free market economy. Much progress has been made in this transition but much remains to be done, particularly with respect to the rule of law. Many laws have been enacted, but in many instances they are neither understood nor enforced. For decades Mongolians have looked to politicians and bureaucrats as the sources of the “law”. This has changed in theory, but often not in

44

IVANHOE MINES LTD.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

practice. With respect to most day-to-day activities in Mongolia, government civil servants interpret, and often effectively make, the law. This situation is gradually changing but at a relatively slow pace. Laws may be applied in an inconsistent, arbitrary and unfair manner and legal remedies may be uncertain, delayed or unavailable.

Recent and future amendments to Mongolian laws could adversely affect Ivanhoe Mines’ mining rights in the Oyu Tolgoi Project or make it more difficult or expensive to develop the project and carry out mining.

In 2006, Mongolia implemented revisions to the Minerals Law. A summary of these amendments is contained in the “Outlook” section of this report.

Although these amendments have been enacted into law, clarification is required from the Government as the affect of these laws on the Oyu Tolgoi Project depends on the processing and development options considered for the project.

Accordingly, until these issues are addressed and clarified, there can be no assurance that the present government or a future government will refrain from enacting legislation or adopting government policies that are adverse to Ivanhoe Mines’ interests or that impair Ivanhoe Mines’ ability to develop and operate the Oyu Tolgoi Project on the basis presently contemplated.

Ivanhoe Mines may experience difficulties with its joint venture partners.

Ivanhoe Mines is currently earning an interest in a property held by Entrée which is adjacent to the Hugo Dummett Deposit. Upon earning an interest, Ivanhoe Mines will form a joint venture with Entrée and may in the future enter into additional joint ventures in respect of other properties with third parties. Ivanhoe Mines is subject to the risks normally associated with the conduct of joint ventures, which include disagreements as to how to develop, operate and finance a project and possible litigation between the participants regarding joint venture matters. These matters may have an adverse effect on Ivanhoe Mines’ ability to realize the full economic benefit of its interest in the property that is the subject of the joint venture, which could affect its results of operations and financial condition.

Ivanhoe Mines may be unable to enforce its legal rights in certain circumstances.

In the event of a dispute arising at or in respect of, Ivanhoe Mines’ foreign operations, including the Oyu Tolgoi Project, Ivanhoe Mines may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdiction of courts in Canada or other jurisdictions. Ivanhoe Mines may also be hindered or prevented from enforcing its rights with respect to a governmental entity or instrumentality because of the doctrine of sovereign immunity.

The Trust may not be able to sell the interest in the Myanmar Assets on a timely basis or for its fair value

Pursuant to the transaction establishing the Trust, the Trust is obligated to sell its interest in the Myanmar Assets to a third party. Until such time as that sale occurs, Ivanhoe Mines will not receive the consideration that it is seeking for the project. There are numerous international sanctions directed at the Government of Myanmar by several constituencies, including the United States, European Union and Canada. While the sanctions in their current form do not affect Ivanhoe Mines’ investments in Myanmar, they effectively reduce the number of potential purchasers for the Myanmar Assets and

45

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

have, in the past, hindered the orderly conduct of commercial operations. Accordingly, it may difficult for the Trust to arrange a sale of the Myanmar Assets on reasonable commercial terms or at all.

Changes in, or more aggressive enforcement of, laws and regulations could adversely impact Ivanhoe Mines’ business.

Mining operations and exploration activities are subject to extensive laws and regulations. These relate to production, development, exploration, exports, imports, taxes and royalties, labour standards, occupational health, waste disposal, protection and remediation of the environment, mine decommissioning and reclamation, mine safety, toxic substances, transportation safety and emergency response and other matters.

Compliance with these laws and regulations increases the costs of exploring, drilling, developing, constructing, operating and closing mines and other facilities. It is possible that the costs, delays and other effects associated with these laws and regulations may impact Ivanhoe Mines’ decision as to whether to continue to operate in a particular jurisdiction or whether to proceed with exploration or development of properties. Since legal requirements change frequently, are subject to interpretation and may be enforced to varying degrees in practice, Ivanhoe Mines is unable to predict the ultimate cost of compliance with these requirements or their effect on operations. Furthermore, changes in governments, regulations and policies and practices could have an adverse impact on Ivanhoe Mines’ future cash flows, earnings, results of operations and financial condition.

Ivanhoe Mines is subject to substantial environmental and other regulatory requirements and such regulations are becoming more stringent. Non-compliance with such regulations, either through current or future operations or a pre-existing condition could materially adversely affect Ivanhoe Mines.

All phases of Ivanhoe Mines’ operations are subject to environmental regulations in the various jurisdictions in which it operates. For example, the Oyu Tolgoi Project is subject to a requirement to develop an environmental impact assessment, as well as other environmental protection obligations. Environmental legislation is evolving in a manner which will likely require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. There is no assurance that future changes in environmental regulation, if any, will not adversely affect Ivanhoe Mines’ operations. Environmental hazards may exist on the properties in which Ivanhoe Mines holds interests which are presently unknown to Ivanhoe Mines and which have been caused by previous or existing third party owners or operators of the properties.

Government approvals and permits are sometimes required in connection with Ivanhoe Mines’ operations. To the extent such approvals are required and not obtained, Ivanhoe Mines may be delayed or prohibited from proceeding with planned exploration or development of its mineral properties.

Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.

Amendments to current laws, regulations and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have a material adverse impact on Ivanhoe Mines and cause increases in capital expenditures or production costs or reductions in levels of production at producing properties or require abandonment or delays in the development of new mining properties.

Previous mining operations may have caused environmental damage at Ivanhoe Mines mining sites, and if Ivanhoe Mines cannot prove that such damage was caused by such prior operators, its indemnities and exemptions from liability may not be effective.

Ivanhoe Mines has received exemptions from liability from relevant governmental authorities for environmental damage caused by previous mining operations at the Monywa Copper Project in Myanmar and the Bakyrchik gold project in Kazakhstan. There is a risk, however, that, if an environmental accident occurred at those sites, it may be difficult or impossible to assess the extent to which environmental damage was caused by Ivanhoe Mines’ activities or the activities of previous operators. In that event, the liability exemptions could be ineffective and possibly worthless.

The actual cost of developing the Oyu Tolgoi Project may differ significantly from Ivanhoe Mines’ estimates and involve unexpected problems or delays.

The estimates regarding the development and operation of the Oyu Tolgoi Project are based on the 2005 IDP. This study establishes estimates of reserves and resources and operating costs and projects economic returns. These estimates are based, in part, on assumptions about future metal prices. The 2005 IDP derives estimates of average cash operating costs based upon, among other things:

• anticipated tonnage, grades and metallurgical characteristics of ore to be mined and processed;

• anticipated recovery rates of copper and gold from the ore;

• cash operating costs of comparable facilities and equipment; and

• anticipated climatic conditions.

Actual operating costs, production and economic returns may differ significantly from those anticipated by the 2005 IDP and future development reports.

There are also a number of uncertainties inherent in the development and construction of any new mine including the Oyu Tolgoi Project. These uncertainties include:

• the timing and cost, which can be considerable, of the construction of mining and processing facilities;

• the availability and cost of skilled labour, power, water and transportation;

• the availability and cost of appropriate smelting and refining arrangements;

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(Stated in U.S. dollars, except where noted)

• the need to obtain necessary environmental and other government permits, and the timing of those permits; and

• the availability of funds to finance construction and development activities.

The cost, timing and complexities of mine construction and development are increased by the remote location of a property such as the Oyu Tolgoi Project. It is common in new mining operations to experience unexpected problems and delays during development, construction and mine start-up. In addition, delays in the commencement of mineral production often occur. Accordingly, there is no assurance that Ivanhoe Mines’ future development activities will result in profitable mining operations.

Ivanhoe Mines ability to obtain dividends or other distributions from our subsidiaries may be subject to restrictions imposed by law, foreign currency exchange regulations and our financing arrangements.

Ivanhoe Mines conducts its operations through subsidiaries. Its ability to obtain dividends or other distributions from its subsidiaries may be subject to restrictions on dividends or repatriation of earnings under applicable local law, monetary transfer restrictions and foreign currency exchange regulations in the jurisdictions in which the subsidiaries operate. The subsidiaries’ ability to pay dividends or make other distributions to Ivanhoe Mines is also subject to their having sufficient funds to do so. If the subsidiaries are unable to pay dividends or make other distributions, Ivanhoe Mines growth may be inhibited unless it is able to obtain additional equity or debt financing on acceptable terms. In the event of a subsidiary’s liquidation, Ivanhoe Mines may lose all or a portion of its investment in that subsidiary.

There can be no assurance that the interest held by Ivanhoe Mines in its exploration, development and mining properties is free from defects or that material contractual arrangements between Ivanhoe Mines and entities owned or controlled by foreign governments will not be unilaterally altered or revoked.

Ivanhoe Mines has investigated its rights to explore and exploit its various properties and, to the best of its knowledge, those rights are in good standing but no assurance can be given that such rights will not be revoked, or significantly altered, to the detriment of Ivanhoe Mines. There can also be no assurance that Ivanhoe Mines’ rights will not be challenged or impugned by third parties. Ivanhoe Mines has also applied for rights to explore, develop and mine various properties, but there is no certainty that such rights, or any additional rights applied for, will be granted on terms satisfactory to Ivanhoe Mines or at all.

The proceeds from the sale of the Savage River Project are dependent on iron ore prices and the remaining supply of ore at the Savage River Project.

The remaining portion of the proceeds payable to Ivanhoe Mines from the sale of the Savage River Project are deferred, and the amount of such payments are dependent on prevailing prices for iron ore (as represented by the Nibrasco/JSM pellet price) in the year that the compensation is paid and the total tonnage of iron ore pellets sold from the Savage River Project in that year. The price of iron ore was at the high end of recent historical trends when the first payment occurred in March 2006 and it has softened since then. Such prices are very volatile and in the past prices have suffered significant declines. Lower prices means lower corresponding payments to Ivanhoe Mines than the annual payment received in March 2006. In addition, while current reserve and resource estimates indicate that the mine will be capable of producing sufficient ore to meet the 1,800,000 tonnes per

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RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

year threshold for the term of deferred payments, there is no assurance that these estimates will actually bear themselves out. If insufficient ore is actually present to produce the maximum threshold amount of ore, then the corresponding payments to Ivanhoe Mines will be lower.

Competition for new mining properties by larger, more established companies may prevent Ivanhoe Mines from acquiring interests in additional properties or mining operations.

Significant and increasing competition exists for mineral acquisition opportunities throughout the world. As a result of this competition, some of which is with large, better established mining companies with substantial capabilities and greater financial and technical resources, Ivanhoe Mines may be unable to acquire rights to exploit additional attractive mining properties on terms it considers acceptable. Accordingly, there can be no assurance that Ivanhoe Mines will acquire any interest in additional operations that would yield reserves or result in commercial mining operations.

Ivanhoe Mines has a limited operating history, and there is no assurance that it will be capable of consistently producing positive cash flows.

Ivanhoe Mines has paid no dividends on its Common Shares since incorporation and does not anticipate doing so in the foreseeable future. Ivanhoe Mines has a limited operating history and there can be no assurance of its ability to operate its projects profitably. While Ivanhoe Mines may in the future generate additional working capital through the operation, development, sale or possible syndication of its properties, there is no assurance that Ivanhoe Mines will be capable of producing positive cash flow on a consistent basis or that any such funds will be available for exploration and development programs.

As an exploration and development company that has a limited production history, Ivanhoe Mines has incurred losses since its inception, and it expects to continue to incur losses until sometime after the start-up of production at Oyu Tolgoi. As at December 31, 2006, Ivanhoe Mines had an accumulated deficit of $878.2 million. There can be no assurance that Ivanhoe Mines will achieve or sustain profitability in the future.

A substantial portion of Ivanhoe Mines’ operations involve exploration and development and there is no guarantee that any such activity will result in commercial production of mineral deposits.

Development of Ivanhoe Mines’ mineral properties is contingent upon obtaining satisfactory exploration results. Mineral exploration and development involves substantial expenses and a high degree of risk, which even a combination of experience, knowledge and careful evaluation may not be able to adequately mitigate. There is no assurance that additional commercial quantities of ore will be discovered on any of Ivanhoe Mines’ exploration properties. There is also no assurance that, even if commercial quantities of ore are discovered, a mineral property will be brought into commercial production. The discovery of mineral deposits is dependent upon a number of factors, not the least of which is the technical skill of the exploration personnel involved. The commercial viability of a mineral deposit, once discovered, is also dependent upon a number of factors, some of which are the particular attributes of the deposit, such as size, grade and proximity to infrastructure, metal prices and government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection. In addition, assuming discovery of a commercial ore body, depending on the type of mining operation involved, several years can elapse

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RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

from the initial phase of drilling until commercial operations are commenced. Most of the above factors are beyond the control of Ivanhoe Mines.

Ivanhoe Mines cannot insure against all of the risks associated with mining.

Exploration, development and production operations on mineral properties involve numerous risks and hazards, including:

• rock bursts, slides, fires, earthquakes or other adverse environmental occurrences;

• industrial accidents;

• labour disputes;

• political and social instability;

• technical difficulties due to unusual or unexpected geological formations;

• failures of pit walls; and

• flooding and periodic interruptions due to inclement or hazardous weather condition.

These risks can result in, among other things:

• damage to, and destruction of, mineral properties or production facilities;

• personal injury;

• environmental damage;

• delays in mining;

• monetary losses; and

• legal liability.

It is not always possible to obtain insurance against all such risks and Ivanhoe Mines may decide not to insure against certain risks as a result of high premiums or other reasons. The incurrence of an event that is not fully covered, or covered at all, by insurance, could have a material adverse effect on Ivanhoe Mines’ financial conditions, results of operations and cash flows and could lead to a decline in the value of the securities of Ivanhoe Mines. Ivanhoe Mines does not maintain insurance against political or environmental risks. Also, because of the recent major increases in insurance premiums and the inability to obtain full coverage, the Monywa Copper Project is self-insuring on a portion of the mine assets.

As a result of the rights to acquire common shares and other rights granted to Rio Tinto pursuant to the Rio Tinto Transaction, Rio Tinto has the ability to significantly influence the business and affairs of Ivanhoe Mines.

The first tranche of the private placement, together with the additional rights granted to Rio Tinto in the Rio Tinto Transaction to obtain additional common shares pursuant to a second tranche private placement and the exercise of the warrants, will give Rio Tinto the voting power to significantly influence the policies, business and affairs of the Company and the outcome of any significant corporate transaction or other matter, including a merger, business combination or a sale of all, or substantially all, of the Company’s assets. Subject to certain limited exceptions, Rio Tinto also has a

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

right of first refusal with respect to any proposed disposition by the Company of an interest in the Oyu Tolgoi Project. Rio Tinto’s share position in the Company and its right of first refusal with respect to the Oyu Tolgoi Project may have the effect of delaying, deterring or preventing a transaction involving a change of control of the Company in favour of a third party that otherwise could result in a premium in the market price of the common shares in the future.

Rio Tinto will also be able to significantly influence the management, development and operation of the Oyu Tolgoi Project through its representatives on the OT Technical Committee, established to manage the Oyu Tolgoi Project. Provided Rio Tinto maintains a minimum level of shareholding in the Company, Rio Tinto’s appointees to the OT Technical Committee will have a veto over certain specified material decisions during the five year period following closing of the first tranche private placement and, thereafter, Rio Tinto appointees will represent a majority of the members of the OT Technical Committee and will thereby be entitled to control the ongoing decisions made by the OT Technical Committee.

Ivanhoe Mines is exposed to risks of changing political stability and government regulation in the countries in which it operates.

Ivanhoe Mines holds mineral interests in countries which may be affected in varying degrees by political stability, government regulations relating to the mining industry and foreign investment therein, and the policies of other nations in respect of these countries. Any changes in regulations or shifts in political conditions are beyond the control of Ivanhoe Mines and may adversely affect its business. Ivanhoe Mines’ operations may be affected in varying degrees by government regulations, including those with respect to restrictions on production, price controls, export controls, income taxes, expropriation of property, employment, land use, water use, environmental legislation and mine safety. Ivanhoe Mines’ operations may also be affected in varying degrees by political and economic instability, economic or other sanctions imposed by other nations, terrorism, military repression, crime, extreme fluctuations in currency exchange rates and high inflation.

In certain areas where Ivanhoe Mines is active, the regulatory environment is in a state of continuing change, and new laws, regulations and requirements may be retroactive in their effect and implementation. The laws of many of the countries in which Ivanhoe Mines operates also contain inconsistencies and contradictions. Many of them are structured to bestow on government bureaucrats substantial administrative discretion in their application and enforcement with the result that the laws are subject to changing and different interpretations. As such, even Ivanhoe Mines’ best efforts to comply with the laws may not result in effective compliance in the determination of government bureaucrats.

Ivanhoe Mines conducts certain of its operations through co-operative joint ventures with government controlled entities. While this connection benefits Ivanhoe Mines in some respects, there is a substantial inequality with respect to the influence of the parties with the applicable government. Governments in these countries hold a substantial degree of subjective control over the application and enforcement of laws and the conduct of business. This inequality would become particularly detrimental if a business dispute arises between joint venture parties. Ivanhoe Mines seeks to minimize this issue by including international arbitration clauses in relevant agreements whenever possible and by maintaining positive relations with both its joint venture partners and local

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

governments, but there can be no guarantee that these measures will be sufficient to protect Ivanhoe Mines’ interest in these countries.

Ivanhoe Mines’ prospects depend on its ability to attract and retain key personnel.

Recruiting and retaining qualified personnel is critical to Ivanhoe Mines’ success. The number of persons skilled in the acquisition, exploration and development of mining properties is limited and competition for such persons is intense. Ivanhoe Mines believes that it has been successful in recruiting excellent personnel to meet its corporate objectives but, as Ivanhoe Mines’ business activity grows, it will require additional key financial, administrative, mining, marketing and public relations personnel as well as additional staff on the operations side. Although Ivanhoe Mines believes that it will be successful in attracting and retaining qualified personnel, there can be no assurance of such success.

Certain directors of Ivanhoe Mines are directors or officers of, or have significant shareholdings, in other mineral resource companies and there is the potential that such directors will encounter conflicts of interest with Ivanhoe Mines.

Certain of the directors of the Company are directors or officers of, or have significant shareholdings in, other mineral resource companies and, to the extent that such other companies may participate in ventures in which Ivanhoe Mines may participate, the directors of Ivanhoe Mines may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. This includes the nominees of Rio Tinto, which is entitled to nominate directors to the board of directors of the Company in proportion to its holdings of the Company’s issued and outstanding common shares from time to time. Certain of these nominees are or may be directors or officers of, or have significant shareholdings in, Rio Tinto companies or other mineral resource companies and, to the extent that such companies may engage in business relationships with the Company, the directors of the Company appointed by Rio Tinto may have conflicts of interest in negotiating and concluding terms of such relationships. In all case where directors and officers have an interest in another resource company, such other companies may also compete with Ivanhoe Mines for the acquisition of mineral property rights. In the event that any such conflict of interest arises, a director who has such a conflict will disclose the conflict to a meeting of the directors of the Company and will abstain from voting for or against the approval of such a participation or such terms. In appropriate cases, Ivanhoe Mines will establish a special committee of independent directors to review a matter in which several directors, or management, may have a conflict. From time to time, several companies may participate in the acquisition, exploration and development of natural resource properties thereby allowing their participation in larger programs, permitting involvement in a greater number of programs and reducing financial exposure in respect of any one program. It may also occur that a particular company will assign all or a portion of its interest in a particular program to another of these companies due to the financial position of the company making the assignment. In accordance with the laws of the Yukon Business Corporations Act, the directors of the Company are required to act honestly, in good faith and in the best interests of the Company. In determining whether or not Ivanhoe Mines will participate in a particular program and the interest therein to be acquired by it, the directors will primarily consider the potential benefits to Ivanhoe Mines, the degree of risk to which Ivanhoe Mines may be exposed and its financial position at that time.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

RELATED-PARTY TRANSACTIONS

The following tables summarize related party expenses incurred by Ivanhoe Mines, primarily on a cost recovery basis, with an officer of a subsidiary of Ivanhoe Mines, a company subject to significant influence by Ivanhoe Mines, a company affiliated with Ivanhoe Mines, or with companies related by way of directors or shareholders in common. The tables below summarize the transactions with related parties and the types of expenditures incurred with related parties:

	Years ended December 31,
	2006		2005
Global Mining Management Corporation (a)	$	7,015	$	4,169
Ivanhoe Capital Aviation LLC (b)		3,840		3,421
Fognani & Faught, PLLC (c)		1,394		823
Jinshan Gold Mines Inc. (d)		—		1,122
Ivanhoe Capital Pte. Ltd. (e)		78		60
Ivanhoe Capital Services Ltd. (f)		743		755
Ivanhoe Energy Inc. (g)		—		175
	$	13,070	$	10,525

	Years ended December 31,
	2006		2005
Exploration	$	—	$	1,122
Legal		1,394		823
Office and administrative		2,306		2,216
Salaries and benefits		5,530		2,943
Travel (including aircraft rental)		3,840		3,421
	$	13,070	$	10,525

The above noted transactions were in the normal course of operations and were measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

Accounts receivable and accounts payable at December 31, 2006, included $319,000 and $1,419,000, respectively (December 31, 2005 — $451,000 and $1,102,000, respectively), which were due from/to a company under common control, a company affiliated with Ivanhoe Mines, or companies related by way of directors in common.

(a) Global Mining Management Corporation (Global) is a private company based in Vancouver owned equally by seven companies, one of which is Ivanhoe Mines. Global has a director in common with the Company. Global provides administration, accounting, and other office services to the Company on a cost-recovery basis.

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RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

(b)	Ivanhoe Capital Aviation LLC (Aviation) is a private company 100% owned by the Company’s Chairman. Aviation operates an aircraft which is rented by the Company on a cost-recovery basis.
(c)	An officer of a subsidiary of Ivanhoe Mines is a partner with Fognani & Faught, PLLC, a legal firm which provides legal services to Ivanhoe Mines.
(d)	During 2005, the Company incurred exploration expenditures as part of several joint venture agreements with Jinshan.
(e)	Ivanhoe Capital Pte. Ltd. (Ivanhoe Capital) is a private company 100% owned by the Company’s Chairman. Ivanhoe Capital provides for administration, accounting, and other office services in Singapore and London on a cost-recovery basis.
(f)	Ivanhoe Capital Services Ltd. (Services) is a private company 100% owned by the Company’s Chairman. Services provides for salaries associated with certain employees of the Company located in Singapore on a cost-recovery basis.
(g)	Ivanhoe Energy Inc. (Ivanhoe Energy) is a public company in which the Company’s Chairman has a significant interest and holds the position of Deputy Chairman. During 2005, Ivanhoe Energy provided for administration and other office services in Beijing on a cost-recovery basis.

At the end of 2006 and 2005, Ivanhoe Mines’ discontinued Savage River operations owed approximately $5.1 million to the Company’s Chairman. This debt originated as a result of the December 2000 acquisition, by Ivanhoe Mines, of the Savage River operation. Following the sale of the Savage River operations in February 2005, repayment of this balance is contingent upon Ivanhoe Mines receiving proceeds in excess of approximately $111.1 million from the sale of the Savage River operations. To date, $49.7 million has been received from the sale with an additional $19.5 million expected to be received on March 31, 2007.

DISCLOSURE CONTROLS AND PROCEDURES

Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the Company’s principal executive officer and principal financial officer, on a timely basis so that appropriate decisions can be made regarding public disclosure.

As of the end of the Company’s fiscal year ended December 31, 2006, an evaluation of the effectiveness of the Company’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) was carried out by the Company’s management with the participation of the principal executive officer and principal financial officer. Based upon that evaluation, the Company’s principal executive officer

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(Stated in U.S. dollars, except where noted)

and principal financial officer have concluded that as of the end of that fiscal year, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

It should be noted that while the Company’s principal executive officer and principal financial officer believe that the Company’s disclosure controls and procedures provide a reasonable level of assurance that they are effective, they do not expect that the Company’s disclosure controls and procedures or internal control over financial reporting will prevent all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over the Company’s financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with United States generally accepted accounting principles and the requirements of the Securities and Exchange Commission in the United States, as applicable. Management excluded from its assessment the internal control over financial reporting at Myanmar Ivanhoe Copper Company Limited (MICCL) in which it holds a 50% interest, because the Company does not have the ability to dictate or modify controls at MICCL and does not have the ability to assess, in practice, the controls at the entity. Under U.S. generally accepted accounting principles, MICCL is accounted for using the equity method of accounting and the Company’s proportionate interest in individual assets, liabilities, revenues and expenses is excluded from the consolidated financial statement amounts of the Company. Under Canadian generally accepted accounting principles, the Company proportionately consolidates MICCL which constitutes 24% and 29% of net and total assets respectively, and 10% of net loss of the consolidated financial statement amounts as of and for the year ended December 31, 2006. The Company’s principal executive officer and principal financial officer have assessed the effectiveness of the Company’s internal control over financial reporting as at December 31, 2006 in accordance with Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, the Company’s principal executive officer and principal financial officer have determined that the Company’s internal control over financial reporting was effective as of December 31, 2006 and have certified Ivanhoe Mines’ annual filings with the U.S. Securities and Exchange Commission on Form 40-F as required by the United States Sarbanes-Oxley Act and with Canadian securities regulatory authorities.

Management reviewed the results of management’s assessment with the Audit Committee of the Company’s Board of Directors. Deloitte & Touche LLP, independent registered chartered accountants, was engaged, as approved by a vote of the Company’s shareholders, to audit and provide

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RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

independent opinions on the Company’s consolidated financial statements, management’s assessment of internal control over financial reporting and the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006. Deloitte & Touche LLP has provided such opinions.

Changes in internal control over financial reporting

During the year ended December 31, 2006 there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

QUALIFIED PERSONS

Disclosure of a scientific or technical nature in this MD&A in respect of each of the material mineral resource properties of Ivanhoe Mines was prepared by or under the supervision of the “qualified persons” (as that term is defined in NI 43-101) listed below:

		Relationship to
Property	Qualified Person	Ivanhoe Mines
Oyu Tolgoi Project	Bernard Peters, GRD Minproc Limited	Independent consultant
Nariin Sukhait Project	Richard D. Tifft and Patrick P. Riley, Norwest Corporation	Independent consultant

OVERSIGHT ROLE OF THE AUDIT COMMITTEE

The Audit Committee reviews, with management and the external auditors, the Company’s MD&A and related consolidated financial statements and approves the release of such information to shareholders. For each audit or quarterly review, the external auditors prepare a report for members of the Audit Committee summarizing key areas, significant issues and material internal control weaknesses encountered, if any.

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(Stated in U.S. dollars, except where noted)

CAUTIONARY STATEMENTS

LANGUAGE REGARDING RESERVES AND RESOURCES

Readers are advised that National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101) of the Canadian Securities Administrators requires that each category of mineral reserves and mineral resources be reported separately. For detailed information related to Company resources and reserves, readers should refer to the Annual Information Form of the Company for the year ended December 31, 2006, and other continuous disclosure documents filed by the Company since January 1, 2007, at www.sedar.com.

NOTE TO UNITED STATES INVESTORS CONCERNING ESTIMATES OF MEASURED, INDICATED AND INFERRED RESOURCES

This document, including the documents incorporated by reference herein, has been prepared in accordance with the requirements of securities laws in effect in Canada, which differ from the requirements of United States securities laws. Without limiting the foregoing, this document, including the documents incorporated by reference herein, uses the terms “measured”, “indicated” and “inferred” resources. United States investors are advised that, while such terms are recognized and required by Canadian securities laws, the SEC does not recognize them. Under United States standards, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. United States investors are cautioned not to assume that all or any part of measured or indicated resources will ever be converted into reserves. Further, “inferred resources” have a great amount of uncertainty as to their existence and as to whether they can be mined legally or economically. It cannot be assumed that all or any part of the “inferred resources” will ever be upgraded to a higher category. Therefore, United States investors are also cautioned not to assume that all or any part of the inferred resources exist, or that they can be mined legally or economically. Disclosure of “contained ounces” is a permitted disclosure under Canadian regulations; however, the SEC only permits issuers to report “resources” as in place tonnage and grade without reference to unit measures. Accordingly, information concerning descriptions of mineralization and resources contained in this document, or in the documents incorporated by reference, may not be comparable to information made public by United States companies subject to the reporting and disclosure requirements of the SEC. National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101) is a rule developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. Unless otherwise indicated, all reserve and resource estimates contained in or incorporated by reference in this document have been prepared in accordance with NI 43-101. These standards differ significantly from the requirements of the SEC, and reserve and resource information contained herein and incorporated by reference herein may not be comparable to similar information disclosed by U.S. companies. NI 43-101 permits a historical estimate made prior to the adoption of NI 43-101 that does not comply with NI 43-101 to be disclosed using the historical terminology if the disclosure: (a) identifies the source and date of the historical estimate; (b) comments on the relevance and reliability of the historical estimate; (c) states whether the historical estimate uses categories other than those prescribed by NI 43-101; and (d) includes any more recent estimates or data available.

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(Stated in U.S. dollars, except where noted)

FORWARD-LOOKING STATEMENTS

Certain statements made herein, including statements relating to matters that are not historical facts and statements of our beliefs, intentions and expectations about developments, results and events which will or may occur in the future, which constitute “forward-looking information” within the meaning of applicable Canadian securities legislation and “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking information and statements are typically identified by words such as “anticipate,” “could,” “should,” “expect,” “seek,” “may,” “intend,” “likely,” “plan,” “estimate,” “believe” and similar expressions suggesting future outcomes or statements regarding an outlook. These include, but are not limited to, statements respecting anticipated business activities; planned expenditures; corporate strategies; proposed acquisitions and dispositions of assets; discussions with third parties respecting material agreements; the expected timing and outcome of Ivanhoe Mines’ discussions with representatives of the Government of Mongolia for an Investment Agreement in respect of the Oyu Tolgoi Project; the estimated timing and cost of bringing the Oyu Tolgoi Project into commercial production; anticipated future production and cash flows; target milling rates; the impact of amendments to the laws of Mongolia and other countries in which Ivanhoe Mines carries on business; the timing for completion of the 2007 IDP and changes in mine plan contemplated thereunder; the timing of commencement of full construction of the Oyu Tolgoi Project; the completion of licence transfers and the closing of the Coal Division merger and completion of an updated mine plan for the Nariin Sukhait Project; the potential sale of the Monywa Copper Project by the Trust to a third party; the possibility of having to record, in the future, a significant reduction of the project’s carrying value on the Company’s financial statements; and other statements that are not historical facts.

All such forward-looking information and statements are based on certain assumptions and analyses made by Ivanhoe Mines’ management in light of their experience and perception of historical trends, current conditions and expected future developments, as well as other factors management believes are appropriate in the circumstances. These statements, however, are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information or statements. Important factors that could cause actual results to differ from these forward-looking statements include those described under the heading “Risks and Uncertainties” elsewhere in this MD&A. The reader is cautioned not to place undue reliance on forward-looking information or statements.

This MD&A also contains references to estimates of mineral reserves and mineral resources. The estimation of reserves and resources is inherently uncertain and involves subjective judgments about many relevant factors. The accuracy of any such estimates is a function of the quantity and quality of available data, and of the assumptions made and judgments used in engineering and geological interpretation, which may prove to be unreliable. There can be no assurance that these estimates will be accurate or that such mineral reserves and mineral resources can be mined or processed profitably. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Except as required by law, the Company does not assume the obligation to revise or update these forward-looking statements after the date of this document or to revise them to reflect the occurrence of future unanticipated events.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

(Stated in U.S. dollars, except where noted)

MANAGEMENT’S REPORT TO THE SHAREHOLDERS

The Consolidated Financial Statements and the management’s discussion and analysis of financial condition and results of operations (MD&A) are the responsibility of the management of Ivanhoe Mines Ltd. These financial statements and the MD&A have been prepared by management in accordance with accounting principles generally accepted in United States and regulatory requirements, respectively, using management’s best estimates and judgment of all information available up to March 30, 2007.

The Board of Directors has approved the information contained in the consolidated financial statements and the MD&A. The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal controls. The Audit Committee of the Board of Directors, consisting solely of outside directors, meets regularly during the year with financial officers of the Company and the external auditors to satisfy itself that management is properly discharging its financial reporting responsibilities to the Directors who approve the consolidated financial statements.

These financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the accounting policies summarized in Note 2 to the Consolidated Financial Statements.

The consolidated financial statements have been audited by Deloitte & Touche LLP, independent registered chartered accountants, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). They have full and unrestricted access to the Audit Committee.

John Macken	Tony Giardini
President and CEO	Chief Financial Officer
March 30, 2007
Vancouver, BC, Canada

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS

We consent to the incorporation by reference of our reports dated March 21, 2007 relating to the consolidated financial statements of Ivanhoe Mines Ltd. and management’s report on the effectiveness of internal control over financial reporting in this Annual Report on Form 40-F of Ivanhoe Mines Ltd. for the year ended December 31, 2006.

We also consent to the incorporation by reference in Registration Statements No. 333-135595; 333-128205 and 333-113408 on Form S-8 of the above mentioned reports.

(Signed) Deloitte & Touche LLP

Independent Registered Chartered Accountants
Vancouver, Canada
March 30, 2007

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EX-23.2

EXHIBIT 23.2

CONSENT OF EXPERT

     Reference is made to the Annual Report on Form 40-F (the “40-F”) of Ivanhoe Mines Ltd. (the “Company”) to be filed with the United States Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

     We hereby consent to the use of and reference to our name and the Oyu Tolgoi Technical Report dated March 2007 (the “Technical Report”) and the inclusion of information derived from the Technical Report under the heading “Item 3: Description of the Business – Oyu Tolgoi Copper and Gold Project” and the use of and reference to our name in “Item 11: Interest of Experts” in the Company’s Annual Information Form for the year ended December 31, 2006 dated March 30, 2007 and in the 40-F.

Sincerely,

GRD Minproc Limited

/s/ Peter Bryant Name: Peter Bryant

Title: Director

Date: March 30, 2007

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EX-23.3

EXHIBIT 23.3

CONSENT OF EXPERT

     Reference is made to the Annual Report on Form 40-F (the “40-F”) of Ivanhoe Mines Ltd. (the “Company”) to be filed with the United States Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

     We hereby consent to the use of and reference to our name and the Nariin Sukhait Technical Report dated March 2007 (the “Technical Report”), and the inclusion of information derived from the Technical Report, under the heading “Item 3: Description of the Business – Mongolian Coal Division - - Nariin Sukhait Coal Project” and the use of and reference to our name in “Item 11: Interests of Experts” in the Company’s Annual Information Form for the year ended December 31, 2006, dated March 30, 2007 and in the 40-F.

Sincerely,

Norwest Corporation

/s/ Richard D. Tifft III Name: Richard D. Tifft III, PG
Title: Vice President Geologic Service

Date: March 30, 2007

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EX-23.4

EXHIBIT 23.4

CONSENT OF EXPERT

     Reference is made to the Annual Report on Form 40-F (the “40-F”) of Ivanhoe Mines Ltd. (the “Company”) to be filed with the United States Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

     I hereby consent to the use of and reference to my name as a Qualified Person for the Oyu Tolgoi Technical Report dated March 2007, under the heading “Item 3: Description of the Business – Oyu Tolgoi Copper and Gold Project” in the Company’s Annual Information Form for the year ended December 31, 2006, dated March 30, 2007, and in the 40-F.

Sincerely,

/s/ Bernard Peters Title: Principal Mining Consultant

Company: GRD Minproc Limited

Date: March 30, 2007

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EX-23.5

EXHIBIT 23.5

CONSENT OF EXPERT

     Reference is made to the Annual Report on Form 40-F (the “40-F”) of Ivanhoe Mines Ltd. (the “Company”) to be filed with the United States Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

     I hereby consent to the use of and reference to my name as a Qualified Person for Sections 7 to 15 of the Oyu Tolgoi Technical Report dated March 2007 under the heading “Item 3: Description of the Business – Oyu Tolgoi Copper and Gold Project” in the Company’s Annual Information Form for the year ended December 31, 2006, dated March 30, 2007, and in the 40-F.

Sincerely,

/s/ Robert Cinits Title: Principal Geologist

Company: AMEC Americas Limited

Date: March 30, 2007

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EX-23.6

EXHIBIT 23.6

CONSENT OF EXPERT

     Reference is made to the Annual Report on Form 40-F (the “40-F”) of Ivanhoe Mines Ltd. (the “Company”) to be filed with the United States Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

     I hereby consent to the use of and reference to my name as a Qualified Person for Sections 1.3, 17 to 17.8, 19.1 and 20.1 of the Oyu Tolgoi Technical Report dated March 30, 2007 under the heading “Item 3: Description of the Business – Oyu Tolgoi Copper and Gold Project” in the Company’s Annual Information Form for the year ended December 31, 2006, dated March 30, 2007, and in the 40-F.

Sincerely,

/s/ Harry Parker Company: AMEC Americas Limited

Date: March 30, 2007

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EX-23.7

EXHIBIT 23.7

CONSENT OF EXPERT

     Reference is made to the Annual Report on Form 40-F (the “40-F”) of Ivanhoe Mines Ltd. (the “Company”) to be filed with the United States Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

     I hereby consent to the use of and reference to my name as a Qualified Person for the subsection on open pit mine geotechnical in the Oyu Tolgoi Technical Report dated March 30, 2007, under the heading “Item 3: Description of the Business – Oyu Tolgoi Copper and Gold Project” in the Company’s Annual Information Form for the year ended December 31, 2006, dated March 30, 2007, and in the 40-F

Sincerely,

/s/ Allan Haines Title: Principal Geotechnical Consultant

Company: Steffen Robertson Kirsten (Australia) Pty Ltd.

Date: March 30, 2007

EX-23.8

EXHIBIT 23.8

CONSENT OF EXPERT

     Reference is made to the Annual Report on Form 40-F (the “40-F”) of Ivanhoe Mines Ltd. (the “Company”) to be filed with the United States Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

     I hereby consent to the use of and reference to my name as a Qualified Person for the Oyu Tolgoi Technical Report dated March 2007, under the heading “Item 3: Description of the Business – Oyu Tolgoi Copper and Gold Project” in the Company’s Annual Information Form for the year ended December 31, 2006, dated March 30, 2007, and in the 40-F.

Sincerely,

/s/ Dean David Title: Process Consultant

Company: GRD Minproc Limited

Date: March 30, 2007

EX-23.9

EXHIBIT 23.9

CONSENT OF EXPERT

     Reference is made to the Annual Report on Form 40-F (the “40-F”) of Ivanhoe Mines Ltd. (the “Company”) to be filed with the United States Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

     I hereby consent to the use of and reference to my name as a Qualified Person for the Nariin Sukhait Technical Report under the heading “Item 3: Description of the Business – Mongolian Coal Division – Nariin Sukhait Project” in the Company’s Annual Information Form for the year ended December 31, 2006, dated March 30, 2007, and in the 40-F.

Sincerely,

/s/ Richard D. Tift III Title: Vice President Geologic Service

Company: Norwest Corporation

Date: March 30, 2007

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EX-23.10

EXHIBIT 23.10

CONSENT OF EXPERT

     Reference is made to the Annual Report on Form 40-F (the “40-F”) of Ivanhoe Mines Ltd. (the “Company”) to be filed with the United States Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

     I hereby consent to the use of and reference to my name as a Qualified Person for the Nariin Sukhait Technical Report under the heading “Item 3: Description of the Business – Mongolian Coal Division – Nariin Sukhait Project” in the Company’s Annual Information Form for the year ended December 31, 2006, dated March 30, 2007, and in the 40-F.

Sincerely,

/s/ Patrick P. Riley, CPG Title: Senior Associate Geologist

Company: Norwest Corporation

Date: March 30, 2007

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, John Macken, certify that:

1.	I have reviewed this annual report on Form 40-F of Ivanhoe Mines Ltd.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;
4.	The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

5. The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and

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(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.

Date: March 30, 2007
By:	/s/ “John Macken”
	John Macken
	Chief Executive Officer

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EX-31.2

EXHIBIT 31.2

CERTIFICATIONS PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Tony Giardini, certify that:

1.	I have reviewed this annual report on Form 40-F of Ivanhoe Mines Ltd.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;
4.	The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

5. The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and

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(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.

Date: March 30, 2007
By:	/s/ “Tony Giardini” Tony Giardini
	Chief Financial Officer

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EX-32.1

EXHIBIT 32.1

CERTIFICATIONS PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

In connection with this annual report of Ivanhoe Mines Ltd. (the “Company”) on Form 40-F for the fiscal year ending December 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Macken, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 30, 2007

By:	/s/ “John Macken”
	John Macken
	Chief Executive Officer

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EX-32.2

EXHIBIT 32.2

CERTIFICATIONS PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

In connection with this annual report of Ivanhoe Mines Ltd. (the “Company”) on Form 40-F for the fiscal year ending December 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Tony Giardini, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 30, 2007

By:	/s/ “Tony Giardini” Tony Giardini
	Chief Financial Officer

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