Ivanhoe Australia to raise up to A$150 million net proceeds

Ivanhoe Australia to raise up to A$150 million of net proceeds and extinguish approximately A$30.6 million of debt owed to Ivanhoe Mines. Ivanhoe Australia will issue up to approximately A$180 million of new fully paid ordinary shares to institutional, sophisticated and accredited investors (including Ivanhoe Mines) at A$1.39 (C$1.41) per share (“Issuance”).

Ivanhoe Mines Ltd. (through its wholly owned subsidiary, IAL Holdings Singapore Pte. Ltd.) (“Ivanhoe Mines”), Ivanhoe Australia’s largest shareholder, has committed to a A$62 million net funding contribution through the Issuance, subject to shareholder approval at an extraordinary general meeting and receipt of Foreign Investment Review Board (“FIRB”) approval.

Approximately A$88 million will be issued via an underwritten placement to selected institutional shareholders and investors (“Institutional Placement”).

The offer price per share under the Institutional Placement and the issue price of shares to Ivanhoe Mines is A$1.39 (C$1.41), representing a 6.7% discount to the last close of A$1.49.

Ivanhoe Australia’s CEO, Peter Reeve commented, “This equity issuance, together with existing cash balances and the Exco dividend, will facilitate Ivanhoe Australia’s plan to bring Osborne into production in the first quarter of 2012 and further the development of Merlin. Our primary focus is on commencement of production at the Osborne Copper-Gold Project while at the same time continuing preparations for production at Merlin in 2013. Merlin is the highest grade molybdenum and rhenium project known in the world today.”

The net proceeds of A$150 million will be used for the following purposes:

1. ready Osborne for production;
2. further the development of Merlin;
3. continue development of shared infrastructure for Osborne and Merlin;
4. continue Ivanhoe Australia’s strategy of deep drilling with an aggressive and well funded exploration program; and
5. general corporate purposes.

In addition the outstanding loan from Ivanhoe Mines (approximately $30.6 million) will be extinguished.

Ivanhoe Australia’s major shareholder, Ivanhoe Mines, has confirmed that it remains committed to its investment in Ivanhoe Australia, and considers the Issuance to be an important step in seeking to achieve the continued growth of Ivanhoe Australia and the realisation of the inherent underlying value of Ivanhoe Australia and its assets. Ivanhoe Mines has committed to acquiring A$92 million worth of shares under the Issuance, which will result in it providing a net A$62 million funding contribution (after the extinguishment of the intercompany debt of approximately A$30.6 million). Following completion of the Issuance, Ivanhoe Mines will hold approximately 59% of Ivanhoe Australia (having held approximately 62% before the Issuance).

Ivanhoe Mines has lodged its application with FIRB, seeking approval to participate in the Issuance.

The issuance of shares to Ivanhoe Mines will also require shareholder approval. In the coming weeks, Ivanhoe Australia will release a Notice of Meeting, detailing the particulars of the general meeting and the resolutions being sought at it.

A maximum of 129,647,137 shares will be issued under the Issuance (with 63,028,432 shares to be issued under the Institutional Placement and up to 66,618,705 shares issued to Ivanhoe Mines).

The new shares issued under the Issuance will rank equally from allotment in all respects with existing Ivanhoe Australia fully paid ordinary shares.

The Issuance will be made pursuant to exemptions from registration and prospectus requirements under applicable securities laws and is subject to receipt of all applicable regulatory approvals, including approval of the Toronto Stock Exchange.

Ivanhoe Australia has requested that ASX place Ivanhoe Australia shares in a trading halt for the duration of the Institutional Placement. Ivanhoe Australia shares are expected to re-commence trading on ASX at 10am on 19 September 2011. Ivanhoe Australia expects that trading will continue normally on the TSX on 16 September 2011.

Ivanhoe Mines (TSX:IVN)(NYSE:IVN)(NASDAQ:IVN) is Ivanhoe Australia’s largest shareholder.

Important information

Some statements in this release are forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation. Forward-looking statements also include those containing such words as “may”, “should”, “will”, “expects”, or similar expressions. Forward-looking statements involve known and unknown risks and uncertainties that may cause actual outcomes to be different from the forward-looking statements, many of which are beyond the control of Ivanhoe Australia and which may cause material differences in actual results, performance or other expectations.

Forward-looking statements that reference past trends or activities should not be taken as a representation that such trends or activities will necessarily continue in the future. Ivanhoe Australia does not undertake any obligations to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements which speak only as of the date of the relevant document.

This announcement has been prepared for publication in Australia and Canada and may not be distributed or released in the United States or to, or for the account or benefit of “U.S. persons” (as defined in Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”)) (“U.S. Persons”). This announcement does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States, or to any person that is, or is acting for the account or benefit of, a U.S. Person. The securities described in this announcement have not been, and will not be, registered under the Securities Act or the securities laws of any state or other jurisdiction of the United States and may not be offered or sold, directly or indirectly, in the United States or to, or for the account or benefit of, any U.S. Person absent registration, except in a transaction exempt from, or not subject to, the registration requirements of the Securities Act and any other applicable securities laws.

Investors should be aware that as an Australian company with securities listed on the Australian Securities Exchange (the “ASX”), Ivanhoe Australia is subject to Australian disclosure requirements and standards, including the continuous disclosure requirements of the Australian Corporations Act 2001 (Cth) and the ASX listing rules. Australian disclosure requirements and standards are different from those of other jurisdictions. In addition, investors should note that it is a requirement of the ASX listing rules that the reporting of ore reserves and mineral resources in Australia comply with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the “JORC Code”), whereas mining companies in other countries may be required to report their mineral reserves and/or resources in accordance with other guidelines (for example, SEC Industry Guide 7 in the United States). Investors should note that while Ivanhoe Australia’s mineral resource estimates comply with the JORC Code, they may not comply with the relevant guidelines in other countries, and do not comply with SEC Industry Guide 7. For example, the reporting regime in the United States under SEC Industry Guide 7 prohibits the reporting of estimates other than proven or probable reserves. While under the JORC Code, Ivanhoe Australia has reported “indicated and inferred” mineral resources, under the U.S. reporting regime, Ivanhoe Australia would not be able to report these mineral resources. Investors should not assume that quantities reported as “resources” will be converted to reserves under the JORC Code or any other reporting regime, or that quantities reported as “reserves” under the JORC Code would be classified as “reserves” under SEC Industry Guide 7.

This document does not constitute a prospectus or other disclosure document under the Corporations Act 2001 (Cth) (“Australian Corporations Act”) and does not purport to include the information required of a disclosure document under the Australian Corporations Act. This document has not been, and will not be, lodged with the Australian Securities and Investments Commission (whether as a disclosure document under the Australian Corporations Act or otherwise). Offers in Australia of new shares under the Issuance are only being made to persons who are “sophisticated investors” or “professional investors” (within the meaning of section 708(8) and section 708(11) of the Australian Corporations Act respectively) or otherwise pursuant to one or more exemptions under section 708 of the Australian Corporations Act so that it is lawful to offer the new shares in Australia without disclosure to investors under Part 6D.2 of the Australian Corporations Act.

Ivanhoe Australia is not licensed in Australia to provide financial product advice in relation to its shares. Any advice contained in this document is general advice only. This document has been prepared without taking account of any investor’s objectives, financial situation or needs. No cooling off period applies to an acquisition of Ivanhoe Australia shares, subject to applicable legislation in the Province of Ontario, which provides subscribers with a right of rescission in certain enumerated circumstances, there is no cooling off period applicable to an acquisition of Ivanhoe Australia shares.

Purchasers of Ivanhoe Australia shares under the Issuance, who are, and whose first trade in the shares would be, subject to applicable Canadian law, will be subject to a four month hold period following the closing of the Issuance.