Tobert Friedland, Executive Chairman
and Chief Executive Officer of Ivanhoe Mines, and John Macken, President,
announced today that a USD2.3-billion capital budget has been approved for 2011
in what will be the peak year of construction activity on the first phase of
the Oyutolgoi copper-gold project in southern Mongolia. Approval of the budget
by the Ivanhoe Mines Board of Directors followed earlier full approval of the
100,000-ton-per-day project by the Ivanhoe Mines-Rio Tinto joint Technical
Committee, which is overseeing the Oyutolgoi Project, and the board of Oyutolgoi
LLC, the Mongolian company that holds the Oyutolgoi licenses and is 66% owned
by Ivanhoe Mines and 34% owned by the Mongolian government.

“Our ramp-up to full-scale
construction during 2010 was so successful that we now are targeting to deliver
the first ore to the concentrator up to six months earlier than previously projected.
Oyutolgoi should be making its first sales of copper and gold in concentrate
produced from ore from the Southern Oyu open pit during the fourth quarter of
2012,” Macken said.

“Outstanding work by our
project team, which currently includes 3,000 Mongolian men and women, means that
the accelerated development program will generate earlier revenues from the
gold-rich open-pit ore while we also are maintaining the pace of development of
the future underground block-cave mine at the copper-rich Hugo Dummett Deposit.

“The announcement of a series
of financing measures last week as part of a new agreement with Rio Tinto will
enable us to proceed in coming weeks with the signing of the largest contracts
of the entire phase-one construction program.”

Principal elements of the 2011 construction
program include:

—  US$561 million for
the copper-gold concentrator, which will see complete
    enclosure of the building, completion
of steel work for the overland ore
    conveyor, installation of one of four
ball mills and installation of all
    material-handling equipment in the
pebble crusher.
—  US$186 million to purchase the
initial mining fleet of trucks, shovels
    and ancillary equipment, and to start
pre-stripping of the Southern Oyu
    open-pit mine.
—  US$713 million for project
infrastructure and electrical power,
    including completion of the central
substation, completion of the
    process-water supply, completion of
the truck maintenance shop and
    phases one and two of the operations
camp.
—  US$211 million for ongoing
underground mine development at the Hugo
    North Deposit , construction of the
headframe on Shaft #2 and further
    sinking of Shaft #2, which are
critical elements of the development of
    the block-cave mine planned to begin
production in 2015.

The commissioning will be followed
later in 2012 by initial phase-one production, and then by commercial
production expected during the first half of 2013. Capital required from
January 1, 2011, through to completion of the phase-one, 100,000-tonne-per-day project
is expected to total approximately US$4.5 billion. This estimate makes no
allowance for potential revenues from the sale of copper-gold concentrate
produced from the milling of a projected nine million tons of stockpiled ore in
the weeks of initial production in 2012.

Macken said that the engineering and
construction stages have recognized the need to accommodate a major increase in
ore processing capacity in the future while minimizing potential disruption to
operations that will be underway at the time.

“Wherever possible, we have
taken the opportunity to allow for expansion with minimal impact on operations.
Our plans call for initial production of 100,000 tons of ore per day and we
expect to move to between 150,000 and 160,000 tons per day when ore from the
underground mine becomes available.

“To facilitate this expansion,
we are building a third reclaim tunnel that will increase the capacity to feed
ore to the concentrator by 50% to 60% over our initial rate of production. To
cater to future increased production, we have installed a pipeline that, with
minor modifications, can supply water for processing up to 160,000 tons a
day,”  Macken added.

“We”ve allowed for expansion in
the concentrator by adding space in the flotation area and installing other
equipment to handle higher production. We also have on-going studies examining
options to process additional underground ore and stockpiled open-pit
ore.”

In another development, the Oyutolgoi
Technical Committee has decided to increase the capacity of the mining fleet”s
trucks, opting for 290-tonne units that will help to move an estimated 112
million tons per year of ore and waste – a 12% increase over an earlier plan.
Pre-stripping of the open-pit mine will begin in 2011 to ensure that planned
production levels can be achieved.