Ivanhoe Australia Limited - Cloncurry

Ivanhoe Australia is an Australian based minerals exploration and development company which has mining tenements located in northwest Queensland (see Figure 1).

Figure 1: The Cloncurry Region

Ivanhoe Australia has an interest in tenements ("IAL Tenements") currently covering an area of over 2,250km2 (including EPM applications) located in the Cloncurry District and has a direct investment in Exco Resources which holds about 4,100km2 of tenements also in the Cloncurry District, of which about 560km2 are held in joint venture with Ivanhoe Australia ("Exco JV Tenements"). The IAL Tenements and the Exco JV Tenements are collectively know as the Cloncurry Project and include approximately 220 prospects.

The Cloncurry Project, located within the Eastern Succession of the Mount Isa Inlier in northwest Queensland, contains prospective copper, gold, lead, zinc, silver and uranium mineral deposits and occurrences. The Mount Isa Inlier hosts the Mount Isa, Century, Hilton Group, Cannington, Lady Loretta and Dugald River lead, zinc, sliver mines and deposits as well as the Mount Isa copper mine, the Ernest Henry, Osborne and Eloise copper-gold mines, the depleted Tick Hill gold mine, and the Valhalla, Mary Kathleen and Andersons uranium deposits (see Figure 2).

Figure 2: Key Prospects on the Cloncurry Project

The Ivanhoe Australia mineral tenements contain IOCG style copper gold mineralised systems which have the potential to host large-scale deposits similar to the nearby Ernest Henry Copper Mine or the South Australian deposits including the Olympic Dam Mine, Prominent Hill project, and the Carapateena prospect.

Since acquiring the tenements in 2003, Ivanhoe Australia has invested significantly in undertaking exploration activities, expanding known areas of mineralisation, and generating new targets. These activities have significantly expanded the known area of copper gold (with minor uranium) mineralisation at the Swan Zone at Mount Elliott as well as locating several uranium prospects and confirmed significant potential for secondary copper amenable to heap leaching at Mount Dore.

IOCG Prospects

Since acquisition of the Cloncurry tenements, Ivanhoe Australia has undertaken diamond and reverse-circulation drilling at the Mount Elliott Project as well as, Amethyst Castle and Metal Ridge North prospects. Results to date have successfully identified significant copper, gold and uranium mineralisation in intense alteration zones. The chemical and mineral associations are characteristic of IOCG deposits. Exploration programs have also been developed for a number of other prospective IOCG targets. Continued exploration work to further define these targets is occurring.

Mount Elliott Project

The Mount Elliott project comprises a number of previously identified zones of mineralisation including the South West Anomaly ("Swan"), Mount Elliott, South West Elliott ("Swell") and Corbould zones.

Ivanhoe Australia focused its early work on the Swan zone, located west of the old Mount Elliott mine, with the intention of expanding the known oxide and secondary copper and gold mineralisation that had been identified by previous mine operators. The drill program undertaken by Ivanhoe Australia in 2004 was successful in expanding the area of known copper and gold mineralisation in both the oxide and secondary copper sulphide zones and encountered strong primary copper sulphide and gold mineralisation at depth.

The majority of Ivanhoe Australia's drilling at the Swan zone in 2006 focused on expanding the know mineralisation at depth along strike to the north. This drilling, which involved 12 diamond holes totalling 6,083 metres, demonstrated that the copper and gold mineralisation discovered in the 2004 program could be traced for at least another 400 metres to the north. The results from this drilling program have been interpreted as steeply dipping pipe-like zones of copper sulphide mineralisation, from which the near-surface secondary mineralisation has developed.

As at 30 June 2008, Ivanhoe had completed 125 holes totalling 94.6 kilometres. Recent drilling has focussed on exploring for a link between the Mount Elliott, Swell and Swan zones at depth and to the north and on infill drilling prior to resouce estimation. The mineralisation encountered thus far at Mount Elliott is open to the north at depth and to the west.

The discovery holes for the deeper Mount Elliott system at Swan were MEHQ 1095, which interesected 290 metres averaging 0.74% copper and 0.62 g/t gold and MEHQ 1130, which included an intersection of 81.2 metres averaging 1.71% copper and 0.90 g/t gold. As at 30 June 2008, the most recent assayed result available from the current drilling program was hole MEHQ 1166, which intersected 514 metres at 0.64% copper and 0.41 g/t gold including 3 intervals of higher grade.
Ivanhoe Australia's exploration has now defined a large zone of mineralisation over one square kilometre in area and to a depth of more than 1,200 metres at the Swan zone (see Figure 3).

FIGURE 3: Schematic Long Section of Swan Zone

Figure 4 shows the schematic long section diagram of the mineralised zone interpreted at SWAN using the results available to date with a 0.25% copper cut-off. The diagram highlights the potential size of the deposit and indicate that the surface area of influence of approximately 1 square kilometre is matched by the 1 kilometre depth extent of the mineralisation.

FIGURE 4: Mount Elliott Drill Holes and Magnetics Survey Results

Swan Zone secondary copper

The Swan zone has been deeply weathered and oxidised resulting in a vertical zonation consisting of an oxide zone to a depth of about 60m below surface and an underlying transition zone extending to a depth of up to 150m below surface.

Both the oxide and transition zones may represent material that could be treated by SXEW although metallurgical test work by previous explorers obtained poor recoveries. The oxide and transition zones contain significant gold which would not be recovered by conventional SXEW processing and some form of differential leaching may be required.

Ivanhoe Australia will continue exploration to extend known mineralisation along the northern western and southern extensions of the Mount Elliott prospect with the objective being to establish a mineral resource for future development.

Assuming an economically viable resource is established at SWAN, Ivanhoe Australia's longer term development strategy for the Cloncurry Project is to use the infrastructure associated with the SWAN development to increase the returns from its other prospects. The potential for these economies of scale are provided by the relative proximity of other IOCG targets of Amethyst Castle and Metal Ridge which are described below.

Northern Gossans

The Northern Gossans are located northwest of Mount Elliott. The geological setting is similar to the Corbould zone at Mount Elliott as strongly anomalous copper and gold is associated with an [iron stone] outcrop

Since the late 1990s the prospect has been periodically partially tested and drilled with some narrow low grade, but nevertheless encouraging, results obtained, including:

6m at 1.65% Cu, 0.91g/t Au (hole MEQ96-219)
1m at 0.62% Cu, 0.25g/t Au (hole NGRC-02)
1m at 3.17% Cu, 1.35g/t Au (hole NGRC-03)

For at least a further 1.5km along strike to the northwest of the Northern Gossans zone, further sporadic copper and gold anomalism has been indicated by soil sampling and shallow airtrac drilling at the Central Leases and Northern Leases prospects. These areas have been subjected to only limited prior exploration.

Amethyst Castle

Reconnaissance drilling conducted in 2006 by Ivanhoe Australia at the Amethyst Castle prospect, located approximately nine kilometres southwest of Mount Elliott, encountered significant intersections of IOCG-style breccias containing gold and copper mineralisation with related uranium. These encouraging intersections, and more importantly the intensity and style of the breccia-hosted mineralisation, demonstrate the potential for a large-scale system. Ivanhoe Australia has identified further drill targets at Amethyst Castle using recent IP and gravity surveys. The future exploration program for Amethyst Castle will involve diamond drilling of these targets along with geophysical studies to identify further targets.

Metal Ridge

The Metal Ridge group of prospects (including the Metal Ridge, Metal Ridge North and Metal Ridge West prospects) are located approximately four kilometres east of Amethyst Castle and approximately 10 kilometres north of the Starra series of IOCG deposits. It is more broadly located within the highly prospective Mount Dore fault zone which hosts a number of diverse styles of mineralisation. The Mount Dore deposit contains significant secondary oxide and sulphide copper mineralisation that was delineated by previous operators. This oxide style of mineralisation can be traced sporadically along strike to the Metal Ridge prospect, a distance of approximately six kilometres. This entire belt has been the centre of extensive shallow prospecting since the early 1900s in response to the numerous outcrops of high-grade copper.

In 2006, Ivanhoe Australia completed five diamond-drill holes totalling 2,581 metres at Metal Ridge. First-pass drilling at Metal Ridge North has identified several zones of highly anomalous copper and gold ± uranium-molybdenum-lead-zinc. This drilling program has established the three critical criteria for a major IOCG deposit - a favourable host rock, a major regional structure (the Mount Dore fault zone) and the fluid chemistry and fluid volumes needed to mobilise and deposit large volumes of copper, gold, uranium and iron.

The 1.5-kilometre-long magnetic and conductivity anomalies at Metal Ridge North represent a highly prospective target, that expands into a major magnetic feature to the south at Metal Ridge which has not yet been tested.

Starra Line Project

The Starra Line project is the host to 5 high-grade gold-copper orebodies on which a series of open pit and underground mines were developed by previous project owners (including the 222, 244, 251, 257 and 276 deposits). The host magnetite-rich ironstones occur as a prominent ridge over a north-south strike distance in excess of 8 kilometres before being obscured by younger sediments to the south.

The deeper exploration drilling along the Starra Line was conducted by previous owners and was limited to testing the potential immediate depth extensions of the know deposits. In general, the full strike extent of the Starra Line has only been investigated by wide spaced drilling (except in the areas of the known deposits) to a vertical depth of approximately 200-250 metres below surface.

The only deep drilling undertaken consisted of a very limited program by previous tenement holders. Of the 4 holes drilled, 3 are now considered by Ivanhoe Australia to be south of the plunge projection of the known mineralisation in the 222, 244, 251, 257 and 276 deposits. Although the overall results of this limited deep drilling program failed to extend the economic depth of the known deposits, one very high grade intercept provides encouragement that high grade deposits could occur at depth along the Starra Line.

The northern-most 276 deposit remains open at depth down plunge to the south while the 222 deposit mineralisation is open at depth to the north (see Figure 5).

FIGURE 5: Long section of previously mined Starra Line

Ivanhoe Australia has not re-estimated the resources available on the Starra Line to date. Resource estimation is underway and is expected to be completed during August 2008.

In light of the improved metal prices since closure of the mines, current development studies are focussing on the re-evaluation of the 2003 resource models, but using a lower cut-off grade to select potential mining blocks. Previous mining concentrated on extracting this high-grade zones within thick mineralised ironstone rocks. Previous drilling is also being review in order to understand the relationship between mineralisation and ironstones in order to guide interpretation of previous drilling and to plan future drill programs. As stated above there is an excellent potential to extend the currently defined mineralisation zones.

Reindeer

A group of three previously defined prospects, Rudolph, Donner and Blitzen, are located approximately 20km north west of Starra in an area with generally similar underlying geology to the Western Ironstones. Airborne magnetic surveys have shown that a strong anomalous trend extends in the area and is interpreted to indicate the sub-outcropping continuation of the Western Ironstones. Sub-outcropping ironstones with associated anomalous copper and gold values occur in the vicinity of the Donner prospect.

COPPER AND OTHER METALS - MOUNT DORE PROJECT

The Mount Dore project is situated within the meta-sedimentary rocks of the Proterozoic Kuridala Foundation to the west of and below the Mount Dore granite body shown in Figure 6. High grade surface-enriched copper was mined from Mount Dore in the early 1900's, however, total recorded production to 1961 was only 5.9 tonnes of copper. Diamond drilling in 1957 showed the copper mineralisation to extend at depth, with hole DDH-06 intersecting 8.8 metres at 1.3% Cu from 49.7 metres. Exploration undertaken from 1975 extended the known mineralisation.

FIGURE 6: Mount Dore Project Drill Status Plan as at 30 June 2008

Mount Dore is predominantly a secondary copper deposit within the Kuridala Formation. Copper-dominant mineralisation dips to the east beneath the Mount Dore granite body in a zone of about 180 metres true thickness and mineralisation is considered to be open to the north were diamond drill holes have discovered primary copper sulphide ores, with potential zinc silver, gold and molybdenum credits. This material would need to be processed through a conventional concentrator. Figure 7 presents 2 cross sections displaying the dipping mineralised zone interpreted at Mount Dore using the results available to 30 June 2008.

Surface oxidation of the primary sulphides produced overlapping zones of copper rich minerals dominated by a suite of secondary copper sulphide and copper oxide minerals, as well as native (metallic) copper.

The supergene process at Mount Dore involves the conversion of the primary copper and other sulphides to predominately chalcocite followed by further oxidation to produce chrysocolla, native copper, cuprite and pseudomalachite.

Drill spacing at depth from the historic drilling is too broad to consistently track the location of the higher grade mineralised zones such that in the past resources have been estimated within a grade shell at a cut-off grade of 0.2% Cu. To advance Mount Dore, the drill spacing has been closed up with step outs of between 50 meters and 100 meters down dip and across strike from the highest grade existing holes.

A diamond drilling program over the secondary copper zone and the northern primary copper zone at Mount Dore commenced in late 2007. As at 30 June 2008 a total of 28 diamond holes had been completed involving 11,364 metres of drilling. Full assay results are not available for 9 of the completed holes.

A reverse circulation percussion program was also carried out to define the near surface limits of the secondary copper mineralisation and to test a large area to the north-west of the main Mount Dore body. In total 36 holes were drilled in this program for 4,566 metres to 30 June 2008. Full assay results are not yet available for 11 of these holes.

Figure 7: Cross sections of the Mount Dore Project

OXIDE COPPER PROSPECTS

Over two decades of exploration, several zones of oxide mineralisation have been delineated within the Cloncurry Project. With sufficient tonnage and higher copper prices currently experienced, there is potential for exploitation of these deposits using Solvent Extraction Electrowinning {SXEW) techniques.

Victoria

The Victoria deposit, situated approximately 15 km south of the Starra, has been previously mined for high grade copper oxide as supplemental feed in the flotation plant. The deposit is similar in character to the Mount Dore Deposit, being located on the Mount Dore Fault with the mineralisation. Oxide copper mineralisation continues north of IAL's Mining Lease into the Stuart mining lease held by another party.

Straight 8

The Straight 8 prospect, located a few kilometres north of Kuridala, consists of extensive secondary copper mineralisation developed along and adjacent to the northwest trending faulted (Straight 8 Fault).

Three strong copper-in-soil anomalies associated with gossan outcrops containing secondary copper mineralisation known as Lotta Coppa (in the northwest), Central and Straight 8 Shaft (in the southeast); occur over a 3km strike length. Previous limited percussion drilling by Cyprus was undertaken at all three locations and a more detailed follow-up was undertaken by Arimco at the Central Area and in this case the samples were also assayed for cobalt. Significant down hole intersections include: Lotta Coppa Area - 6m at 1.33% Cu (hole SE 7); Straight 8 Shaft Area - 12m at 1.66% Cu (hole 40); Central Area - 17m at 1.50% Cu, 719ppm Co (hole S8RC72) and 28m at 1.65% Cu, 641ppm Co (hole S8RC56).

GOLD-COPPER SULPHIDE PROSPECTS

There are several areas on the tenements which are outside the IOCG framework, but which form substantial exploration targets in their own right. Some of these are listed below.

Slate Ridge

Slate Ridge, approximately 14km west of Starra, consists of a small near-surface gold-rich oxide deposit and a deeper copper - gold oxide and supergene sulphide deposit. The mineralisation is hosted by black shales belonging to the Answer Slate and is associated with quartz veining and faulting. The few deeper holes drilled in this area intersected primary sulphides and the deposit remains open at depth. Considerable in-fill drilling is required before a formal resource estimate can be undertaken. A mineral lease application is currently held over the Slate Ridge area and resolution of Native Title issues will be a pre-requisite to the grant of this title.

In due course a full review of the results of prior exploration will be justified to determine whether there is potential for a larger tonnage deposit to occur at depth.

Mt Cobalt

This area, which lies within a granted ML and is the site of an historical cobalt mine (estimated production to 1938 of 20,000 tonnes at 4% Co), is situated approximately 10 kilometres from Starra. The mineralisation is hosted within a shear zone at the margins of an amphibolite and drilling to test the cobalt potential during 1995 yielded a number of significant copper and gold down hole intercepts in primary sulphides including:

18m at 1.2% Cu, 1.5g/t Au from 54m (10m at 2.01% Cu, 1.9g/t Au, 543ppm Co) in hole MVH 10.
1.7 metres at 3.0% Cu, 1.4 g/t Au, 575ppm Co from 54.3m in hole MVH 12.

The results of this work, in conjunction with information from much earlier drilling, indicate that additional evaluation is warranted. Further exploration, if undertaken, is likely to include geophysical surveys followed by further drill testing.

Kuridala

The historic Hampden Kilometre area, located some 50 kilometres north of Starra, is the site of the historical Kuridala group of mine workings which lie within IAL's tenement EPM 9116. A mining lease held by Matrix Metals Limited covers the Hampton Kilometre mine area to a depth of 100m and below this depth the mineral rights belong to IAL.

Previous drilling by Arimco and others, intersected high grade copper-gold bearing sulphide mineralisation below 100m depth, in the vicinity of previously mined out stopes of the Hampden Kilometre mine. This work indicated the mineralisation occurred as discontinuous shoots in intensely deformed metasediments. Best results from earlier drilling included 19 metres at 6.0% Cu, 2.7 g/t Au, and 10 metres at 4.9% Cu, 2.2 g/t Au while the best result from Arimco's drilling was 1.7m at 2.26% Cu, 1.06g/t Au and 430ppm Co from 147.2m in hole KRCD-8. The zone remains open at depth and additional drill testing is warranted.

URANIUM PROSPECTS

Uranium was first indicated within Ivanhoe Australia's Cloncurry Project tenements in the late 1960s and mid-1970s, with work carried out at the Elizabeth Anne, Mariposa, Utah and Mount Dore uranium / copper prospects by Marathon Oil and Minerals Pty Ltd ("Marathon Oil") and separately by Amoco Minerals. Uranium was also discovered at the Dairy Bore, Old Fence, U2 and Robert Heg prospects by Rio Tinto/CRA in the Kuridala area, now the northern part of Ivanhoe Australia's tenements.

Ivanhoe Australia has undertaken a comprehensive review of the work undertaken by the previous exploration programs and has recently begun a drilling program on the most prospective of these targets. Initial assay results support the potential for uranium deposits to be identified.

In November 2006, Ivanhoe Australia commissioned three airborne radiometric surveys over areas within the northern and central tenements of the Cloncurry Project. The two surveys flown specifically for uranium exploration generated numerous substantial uranium anomalies.

Utilising the results from these radiometric surveys, Ivanhoe Australia has identified priority uranium exploration targets within the Kuridala area and has formulated a defined exploration program for these prospects. The priority prospects include the Robert Heg, Dairy Bore/Old Fence, Elizabeth Anne, Great Wall, Farley and Triga prospects. The Company intends to progress all uranium-dominant prospects to initial drill testing in the first year of the program and then, if justified, significantly accelerate the drill testing in year two.

A summary of the Kuridala area prospects follows.

Robert Heg

Robert Heg is the most explored uranium-dominant prospect within the Cloncurry Project. Early exploration work by Rio Tinto/CRA at Robert Heg involved drilling 18 holes that discovered a high-grade uranium zone spread over an area of 150 m x 100 m with extensive ore grade intersections. A summary of drill holes and assay results from the previous drilling program are shown in Tables 2.

Table 2 Robert Heg Assay Results from CRA (ext cut off 0.1% U308)

Drill Hole	Interval (m)	Grade U308	Location down hole
RH1	11	9300	Est from 14m
RH7	8	2700	Est from 70m
RH9	8	6700	Est from 34m
RH13	5	3100	Est from 30m
RH15	2	1500	Est from 8m
RH15	2	1100	Est from 24m
RH15	2	1500	Est from 36m
RH15	4	1100	Est from 70m
RH16	2	1900	Est from 38m

By comparison, a table of drilling results based on a 0.01% U308 cut off taken from our incomplete database shows the widespread lower grade mineralisation:

A cut off of 100ppm was based on a value for U3O8 of $52 per kg or $5.20 per 100ppm.

Mineralogy and metallurgical characteristics are, so far, unknown for this prospect.

Ivanhoe Australia's uranium drill program will initially attempt to replicate the information obtained through prior exploration work conducted by previous tenement holders including Rio Tinto, CRA and Marathon Petroleum. The program also seeks to better understand the geological structure and mineralisation of the area and conduct further testing at depth. In this regard, Ivanhoe Australia commenced diamond drilling at Robert Heg in May 2007. A detailed magnetic survey has also been completed and will assist in future hole targets in the prospect.

Elizabeth Anne

Elizabeth Anne is located 8.2km southeast of Kuridala at the southern extension of the Straight Eight Fault. It was initially identified by Frio Mining Pty Ltd and subsequently surveyed and then drilled by Marathon Petroleum with 56 percussion and three diamond holes. 20 of the holes had intervals of greater than 500ppm U3O8 with the best result being 1.6 metres at 7200ppm U3O8. Assay results from a sample of granite taken from this area achieved 4.29% U3O8. Secondary Copper was also identified at this prospect.

Dairy Bore

Dairy Bore contains two prospects known as DB1, located 3km west of Kuridala, and DB2, located 1km southeast of DB1. An aircore drilling program has been completed over this prospect and has returned promising results. Dairy Bore has anomalous base and precious metals in addition to uranium values. Soil sampling by Rio indicated up to 70ppm U at DB2.

Old Fence

Located along the same geological fault as Dairy Bore, 5km Southwest of Kuridala (3km southeast of DB1). Old Fence was previously explored by Rio for copper (not Uranium), with RC drilling yielding intersections including one of 18 metres at 0.38% Cu.

U2

U2, located 2 km south of Robert Heg and 12 km southeast of Kuridala, displayed two magnetic anomalies associated with a local granite contact. The sole assay sample is a single rock chip (Marathon Petroleum) of approximately 4% U.

Currajong

Currajong is located 1.6 km west of Robert Heg and has a similar geological setting to Robert Heg. Currajong is an Ivanhoe Australia geophysical target and has not previously been explored.

Great Wall

Identified by airborne radiometric analysis. Ivanhoe Australia field inspection at Great Wall located Uranium mineralisation hosted in ironstone as well as certain secondary uranium minerals within siliceous ironstone.

Triga

Located on the north eastern area of the tenements this prospect extends northwesterly for 6 kilometres to the Lanhams prospect. The prospect group is hosted in black shales with previous drilling by several companies identifying strong copper, gold and molybdenum mineralisation at shallow depths. Field work by Ivanhoe has noted the increased background uranium, detected by scintillometer, associated with this copper gold mineralisation, although to date no samples have been assayed for uranium. Several radiometric anomalies were detected by the airborne survey conducted over this prospect by Ivanhoe.

X1

Also identified by airborne radiometric analysis, X1 is an Ivanhoe Australia geophysical target as yet unexplored.

OTHER PROSPECTS

Apart from the targets outlined above, previous exploration within the Cloncurry Project area has identified a variety of up to 150 prospects that represent targets for future exploration. While many of these prospects are currently on the low priority list for Ivanhoe Australia, many represent genuine and potentially significant exploration opportunities for the future.