Rhenium is a remarkable metal which does not fail at high temperatures and attracts an exclusive industrial high-end clientele which includes some of world's largest industrial companies.

1. Very rare metal

Global rhenium resources are estimated at approximately 10,000 tonnes. IAL's Merlin project is believed to hold around 155 tonnes of contained rhenium in declared mineral resources (152 tonnes indicated and 3 tonnes inferred), representing approximately 2% of the estimated global mineral resources.

2. Merlin -- world's first major direct source of rhenium

Rhenium supply typically depends on the production of by-product molybdenite with high rhenium content which in turn depends on the production of copper from very large deposits. Primary grades of rhenium in these deposits tend to be very low and in the better deposits range from 0.1 to 0.2 g/t Re in ore. Most rhenium is therefore produced as a by-product of a by-product. This dispersed sourcing of rhenium leads to significant risk for the rhenium end users who require certainty of rhenium supply in their long lead time manufacturing chains (primarily aerospace and catalyst manufacturers) because these mine plans will be dependent on copper prices, not prices for rhenium.
In contrast to typical rhenium supply, Merlin has an average grade of 23 g/t or about 100 times higher than the best of the copper-molybdenum deposits. Because of its extremely high rhenium grade, development of Merlin is not dependent on the market price of other metals. Merlin could be mined solely for its rhenium content, making it the world's first direct source of this metal, minimising supply risk for end users.

3. No real substitutes

There is limited scope for substitution of rhenium in its primary use --- superalloy applications. Rhenium has one of the highest melting points (3,186°C) and densities of all elements and is extremely resistant to heat and wear. Rhenium is extremely stable and rigid under stress, and remains ductile from absolute zero to its melting point without fracturing. These characteristics lead to its primary use in making superalloys for high-temperature turbine engine components (~80% of 2009 global consumption, Roskill).

Comparison of rhenium and non-rhenium turbines1
Operating property	Non-rhenium turbine	Rhenium turbine
Operating temperature	~2000-2200°F	~3000°F
Power and thrust	X	Approximately 2X
Fuel efficiency	Y	1.4Y -- 1.6Y
Emissions2	Carbon dioxide Nitrogen oxide Sulphur dioxide Particulates	64% reduction 88% reduction 99.9% reduction Eliminated
Approximate rhenium contained per turbine	0	~25 kg (3% alloy)

1. Sourced by Ivanhoe Australia unless noted
2. Source: Rio Tinto December 2008 Review

4. Significant future demand expected

Major customers for rhenium are turbine and engine manufacturers including Rolls Royce, General Electric and Pratt & Whitney. Demand for rhenium can be estimated by the demand of turbines, with approximately 25 kg of rhenium being required for each rhenium-alloy turbine produced today. Almost all new aerospace turbines and land based turbines now use rhenium. Boeing estimates that 29,000 planes are needed by 2029 (Boeing Review 2009, implying that 1,450 tonnes of rhenium is required). China and Russia have just commenced aircraft manufacture, such that further demand increases are likely.

The rhenium market is, in Ivanhoe Australia's opinion, a supply-constrained market and has strong potential for demand expansion in current uses. Further, given the early lifecycle of rhenium in the industrial sphere, very little study in the expansion into parallel or new uses has been conducted and may provide an ongoing strength to the market.

5. IAL plans to become a significant producer in 2012

The market aspects of Merlin's rhenium production present Ivanhoe Australia with the opportunity to be a long term supplier in the rhenium market with a low risk profile.

With the planned start-up of Little Wizard in late 2011 and Merlin in 2012, IAL is expected to produce around 7.5 tonnes of rhenium annually (average steady state), making it one of the top three producers of rhenium globally (based on estimated 2009 global production of ~50 tonnes, Roskill). Given the difficulty of the process, rhenium recycling yield remains uncertain, meaning that (subject to innovation in recycling technologies) primary producers such as IAL, will continue to dominate the supply market for rhenium.