Ivanhoe Australia, through its wholly owned subsidiaries, Ivanhoe Australia Operations and Ivanhoe (Osborne), owns 100% of the Osborne Operation. The Company acquired the Osborne Operation on 30 September 2010 from Barrick (PD) Australia Limited, a subsidiary of Barrick Gold Corporation.

The Osborne Operation is located approximately 50 km from Mount Dore and comprises mining and processing facilities from a recently operating copper and gold mine. The facilities include a 2 mtpa copper and gold flotation concentrator, a gas and diesel fired power station, a modern camp that can accommodate 470 personnel and an underground mining and mobile fleet.

The Osborne Operation is currently under care and maintenance.


Figure 1: Aerial photograph of Osborne Operation site showing key mining facilities

Geology

Re-Os and U-Pb dating at Osborne suggests the mineralisation pre-dates the granitic intrusions commonly linked to the IOCG mineralisation in the region and is at least temporally linked to a 1600Ma event that is the peak of regional metamorphism and compressive deformation.

The ore is most closely related to quartz alteration, which can be traced down plunge into quartz and quartz-feldspar veins and pegmatite dikes.

Both the ore and the alteration fade out into barren, unaltered migmatite and gneiss.
Osborne has previously been included in the group of IOCG deposits interpreted as genetically related to the 1550-1500Ma Williams-Naraku Batholith, given the above age dates this origin and classification is no longer tenable.
The overall model is that a local partial melt and metasomatic front has been preserved in thrust slice of amphibolite grade rocks surrounded by higher-grade metamorphics.

The alteration and mineralisation started with volatiles driven off during partial melt segregation and incorporated ore components from alteration and recrystallisation of ironstone and amphibolite host rocks.
The Cu-Au (Co) mineralisation and Ca-Fe alteration are most likely derived from leaching of amphibolites, whereas Na-K-Si alteration derives from pegmatites.

The hydrothermal fluid does have a magmatic derivation, but it is linked to pegmatites and quartz-albite alteration that originated in migmatites rather than in a pluton.

Mineral Resource Estimate

The Measured, Indicated and Inferred Mineral Resource reported for the Osborne Operation as at 30 June 2010 (after cessation of mining) is shown in the table below:

Cut-off	Area	Classification	Mt	Cu %	Au g/t
Variable (see below)	Osborne	Measured	0.2	0.8	0.9
		Indicated	2.9	1.5	0.9
		Inferred	1.7	1.3	0.8

Included in the above:

Cut-off (CuEq)(1)	Area	Classification	Mt	Cu %	Au g/t
CuEq = 0.6%	Osborne Open Pit Extension	Measured	0.1	1.1	0.8
		Indicated	0.7	0.9	0.6
		Inferred	1.1	0.8	0.5
CuEq = 1.1%	Osborne Underground (1S1SS1M Only)	Measured	0.1	2.5	1.0
		Indicated	0.1	2.3	1.0
		Inferred	0.1	2.2	0.9
CuEq = 1.2%	Kulthor Underground	Indicated	2.1	1.7	1.0
		Inferred	0.5	2.1	1.3

Notes: 1. CuEq (copper equivalent) is calculated as follows: Cu(%) + Au(g/t) * 0.6.

Planned Resumption of Production at Osborne

In late January 2011, the Ivanhoe Board approved $30 million of capital to develop the Osborne and Kulthor underground resources. Mine development is expected to commence in Q2 2011 and copper and gold production is expected to resume in Q1 2012.

Aggregate copper-gold ore sources, to be treated in the Osborne facility, have the potential to create a long and sustainable mine life. While initial sources of ore are expected to include Kulthor and Osborne underground mines and their extensions. Additional ore from both the Starra 276 and Starra 222 deposits and the existing Osborne open pit are also being examined.

The re-commencement of underground operations at Kulthor and Osborne will be undertaken in two stages, with $27 million to be invested in 2011 to begin operations at the Osborne plant. Further drilling of lower Kulthor is planned in 2012-13 to delineate additional mineralisation and this combined with other sources such as Starra 276, Starra 222 and the Osborne open pit aims to achieve the targeted initial five years of concentrator production. See Figure 1C detailing higher grade target zones south west of Kulthor.

Work to be undertaken as part of the capital development includes level development, ventilation raise-boring, drilling access and resource delineation drilling. The development will utilise the existing mine access development completed by Barrick Australia. Detailed production rates and mine costings will be developed in the course of 2011 as various operating tenders are finalised. (See Figures 1A & 1B for the planned Kulthor Development and Figures 2 & 3 for the existing development).


Figure 1A: Kulthor Decline for the Osborne Mine facilities


Figure 1B: Detail of planned Kulthor Development including new raise bore


Figure 2: Plan view of Kulthor Underground Development showing 2.35 km completed decline. 150 metres remaining to access orebody


Figure 3: Osborne Underground Mine and potential for deep extensions

Another benefit of the amalgamation of the Osborne and Cloncurry Projects assets is the potential to commence mining of the Starra 276 deposit on the Starra Line. This deposit has existing decline access which will allow copper-gold ore production within a short time frame. Potential ore from Starra 276 will be hauled to the Osborne plant for processing. The Starra 276 decline was reopened recently and the inspection indicated that, whilst some rehabilitation work is required, the decline is in excellent condition. Lower sections of the mine will also provide direct access for further close-spaced delineation drilling, providing the possibility of more resources.

The Starra 222 decline also has been found to be in very good condition. More detailed analysis of Starra 222 resource potential will be undertaken following the diamond-drill program scheduled for the second quarter of 2011.

Exploration Relating to Future Osborne Copper Gold Production

An important element of Ivanhoe Australia's exploration program is the expansion of resources for Osborne mill feed. Apart from a number of drilling programs preliminary geophysical work has been undertaken in a number of areas to identify extensions to existing systems or the identification of new systems. Specific programs include:

1. The Osborne and Kulthor systems have recently had initial geophysical evaluation completed by the Ivanhoe Group's newly established Geophysics group. Following the Ivanhoe Geological Conference held at Osborne in September 2010, geophysical data inherited from Osborne Mines was used to begin assessing the potential for ore extensions below the current mining levels at 1400 metres The results shown in Figure 4 to 7 have produced extremely promising results

Figure 4: Magnetics image of Osborne and Kulthor


Figure 5: Potential depth extension for Osborne, Kulthor and Avalon Long Section (AB) through 3D VRMI inversion


Figure 6: Image showing new Avalon anomaly relative to Kulthor and Osborne


Figure 7: New Avalon anomaly (Long Section C-D axis from Figure 6)

At Osborne the geophysical survey has indicated extension to the known mineralisation by as much as 1000 metres. EM conductor orientations showed substantial conductors that are likely caused by sulphides. Drilling to define the depth extension will be undertaken following further geophysical work defining target areas. The maximum depth extent is expected to be determined when Ivanhoe Australia's 2009 high-resolution aeromagnetic survey is inverted.

Kulthor is a copper gold deposit located 2.5km west of the Osborne Operation. Decline access to within 150m of the orebody has been developed from the Osborne underground operation. Drilling of a planned resource upgrade program was suspended as the Osborne sale process commenced.

At Kulthor the host southwest striking fault zone dips to the east and as shown in Figure 5 there is potential that this zone could continue for a further 2000 metres before being terminated by the same structure that terminates the Osborne mineralisation. This indicates that there is potentially a magnetic structure linking the Osborne and Kulthor environments. A 1000m drill hole is proposed from the Kulthor decline access to test this hypothesis.

One of the most striking new features, shown in Figure 6 and 7, indicates a newly identified five-kilometre-long magnetic structure striking parallel, and to the west of the existing Kulthor mineralisation. This target, known as Avalon, in which previous drilling intersected mineralisation at the very top of the system (as indicated in the image) extends to approximately 1500 metres depth and will be drilled after further geophysical evaluation.

2. Starra 276, which has been handed over to the company's resource definition team who are conducting a 15,000-metre, patterned diamond program (30 holes with average depths of 500 metres) on 50- x 100-metre spacing to delineate a mineable resource. This drilling program has commenced and will be completed by June 2011.
3. Starra 222, which has also been handed to the resource definition team following promising recent drill results. The team is conducting a preliminary underground study and expects to commence drilling in May/June 2011.
4. Houdini, where a patterned drilling program (100 metre by 100 metre) will be undertaken following the current wet season. The Houdini prospect, which is within 20 kilometres of the Osborne processing plant has returned a zone of strong copper-gold mineralisation in early stages of exploration of the 1km long anomaly and remains a promising resource target. Early indications are that it is near surface with good mining width and good grade. The processes for creation of a mining lease at Houdini has commenced.

These exploration programs will form a strong part of the exploration effort over the coming 12 months to enable delivery of cashflow via Osborne production which will support sustained exploration by Ivanhoe Australia over the coming years.