Khanbogd soum center

Mongolia

6/10/2009

The agreement is executed in both the Mongolian and English languages and are treated equally, except in the event of legal dispute in the interpretation between the two language versions, the English version will prevail.

Location of the contract area is set out in Anneuxre.

Ivanhoe Mines Mongolia Inc LLC (Ivanhoe Mines Mongolia); Ivanhoe Mines Ltd. (Ivanhoe Mines Ltd); Rio Tinto International Holdings Limited (Rio Tinto)

Oyu Tolgoi Deposit

Oyu Tolgoi Deposit

Copper, gold, silver and molybdenum

Ministry of Finance; Ministry of Mineral Resources and Energy; Ministry of Nature, Environment and Tourism

The agreement is for an initial period of thirty years. It can be extended up to 2 times for a period of 20 years each.

Investment agreement

Ivanhoe Mines Mongolia shall obtain detailed environmental impact assessment reports in accordance with the Law on Environmental Impact Assessment, prepared by a competent and professional independent firm. Ivanhoe Mines Mongolia has the right to review and comment on the environmental impact assessment report prior to it being submitted to the government. Ivanhoe Mines Mongolia shall meet all costs for each year of implementing an environmental protection plan and environmental monitoring and analysis program, in connection with implementation of the project. Ivanhoe Mines Mongolia shall provide to the government a report, prepared by a certified, independent, professional firm, that addresses Ivanhoe Mines Mongolia's implementation of the measures specified in the environmental protection plans every 3 years.

Ivanhoe Mines Mongolia shall establish cooperation agreements with local administrative organizations. These agreements may include the establishment of local environmental monitoring committees.

Ivanhoe Mines Mongolia shall take necessary measures to eliminate any material adverse impacts on air, water, soil, animals, plants and subsoil that is found by the environmental monitoring and analysis program. Ivanhoe Mines Mongolia shall also pay compensation for unanticipated and irreversible ecological damage directly caused by the operations to the extent prescribed by the Law on the Environmental Protection and other relevant laws and regulations.

Ivanhoe Mines Mongolia is granted the right to access and use its self-discovered water resources for the purposes connected to the project. This includes constructing, commissioning, operating and rehabilitating the project. In respect of Ivanhoe Mines Mongolia’s self-discovered water resources, the approved volume of those water resources is only sufficient to meet the project’s water requirements. The rights to use such self-discovered water resources shall not be granted to other economic entities. In respect of self-discovered water resources discovered or approved after the date of this contract, and where these water resources fully satisfy and exceed the requirements of the project, the government may provide the portion of such excess water resources for use of other economic entities on terms to be agreed with Ivanhoe Mines Mongolia. Ivanhoe Mines Mongolia shall be compensated for its exploration costs in proportion to the volume of water made available to the other economic entities. Ivanhoe Mines Mongolia shall make its self-discovered water resources available to be used for household purposes, herder families and agricultural activities of the local soum communities. Ivanhoe Mines Mongolia shall pay fees to the budget for surface and underground water removed and consumed for the purpose of mine development and mining of minerals at the rate specified in the Law on Fees for Use of Water and Mineral Water. These fees shall be treated as a deductible expense from the taxable income. However such fees, and the terms upon which Ivanhoe Mines Mongolia may use the water, shall be no less favorable than those applicable from time to time to other domestic and international users, and shall take into account whether the water is suitable for industrial or household use. Ivanhoe Mines Mongolia shall support the government in the establishment of safe drinking water for the local soum center directly impacted by the project. Recognizing that the quality of self discovered water may vary considerably, Ivanhoe Mines Mongolia shall support the government to upgrade or treat these water resources for household purposes and agricultural activities of the local soum communities, or provide infrastructure for water transportation for local household use only. The government shall ensure that a contract on water utilization is awarded upon request of Ivanhoe Mines Mongolia in accordance with the Water Law, the Law on Fees for Use of Water and Mineral Water and other laws and regulations. As the Oyu Tolgoi Deposit is classified as a mineral deposit of strategic importance, the contract with Ivanhoe Mines Mongolia on water utilization shall have a term of 30 years in accordance with the Water Law, and may be extended for periods of 20 years each time in accordance with the Water Law. Ivanhoe Mines Mongolia shall have the following obligations in regard to water utilization: - abide in all material respects with the conditions and requirements set forth in the Water Law, the contract on water utilization and the EIA Reports. Compliance with these conditions and requirements will be audited once every 5 years by an independent, competent, professional firm, and the audit outcome shall be provided to the government; and - not reduce from the current level the quality and quantity of the existing potable and livestock water supplies used by existing users at the date of this contract within the water resources area defined in the EIA Reports. Ivanhoe Mines Mongolia will apply modern technology and procedures to minimize the volume of water used by the project, maximize the efficiency of water usage, and recycle used water where reasonably practicable to do so having regard to technology and procedures used in similar operations.

After the annual financial statements of Ivanhoe Mines Mongolia are available for each financial year, an internationally recognized and reputable accounting firm is to undertake an audit of the capital costs and operating costs among other things.

Tax shall be imposed on the following income of the Investor at the following rates: - Dividends shall be taxed at the rate of 10%; - Income from royalties shall be taxed at the rate of 10%; - Income from disposal of an immovable property shall be taxed at the rate of 2%; - Income from interest shall be taxed at the rate of 10%; - Income from sale of rights shall be taxed at the rate of 30%.

For the purposes of tax required to be withheld by Ivanhoe Mines Mongolia under Art. 17.2.9 of the Corporate Income Tax Law, the following income of a non-resident taxpayer, which are earned in Mongolia, shall be taxed when transferred to the non-resident taxpayer at the following rates: - loan interest and payment for issuing a guarantee shall be taxed at the rate of 20%; - income from royalties, income from interest on financial leases, payments for administrative expenses, rent payments, lease payments and income from use of tangible and non-tangible assets shall be taxed at the rate of 20%; - income from goods sold, work performed and services provided within the territory of Mongolia shall be taxed at the rate of 20%. In accordance with the Corporate Income Tax Law, tax losses are to be carried forward and deducted from the taxable income of the investor in the next 8 consecutive years after the tax year in which the loss was incurred; the amount of loss to be deducted annually is not to exceed 100% of the investor's taxable income for that year. In accordance with Government Resolution Number 287, the tax loss of Ivanhoe Mines Mongolia shall be carried forward and deducted from the taxable income of Ivanhoe Mines Mongolia in the next 8 consecutive years after the tax year in which such tax loss was incurred. This will not apply for losses specified in tax statements for the tax year occurring before 1 January 2007 which will be carried forward and deducted from Ivanhoe Mines Mongolia’s taxable income in the next 2 consecutive years after the tax year in which such tax loss was incurred. The amount of loss to be deducted annually shall not exceed 50% of the Ivanhoe Mines Mongolia’s taxable income for that year. In accordance with Art. 20.3 of the Corporate Income Tax Law, the amount of tax loss carry forward to be deducted from the taxable income of the company in any tax year will not be limited, except as provided above. Accordingly, 100% of the company’s taxable income can be offset with carry forward tax losses in a particular year.

If Ivanhoe Mines Mongolia's annual taxable income is between 0-3.0 billion togrogs the income tax rate under the Corporate Income Tax Law shall be 10%. If annual taxable income exceeds 3 billion togrogs, the income tax shall be 300 million togrogs plus 25% of the taxable income exceeding 3 billion togrogs. The provisions of this contract shall remain in effect during the term of this contract irrespective of the provisions of taxation laws and regulations ratified after the effective date. If a law or regulation enters into force after the date of this contract, or an international treaty becomes available to Ivanhoe Mines Mongolia, and such law, regulation or international treaty contains tax rates that are less than those specified in this contract or which would otherwise have the effect of reducing taxes payable under this contract then Ivanhoe Mines Mongolia may notify the government that it wishes to enjoy the benefit of that law, regulation or international treaty. In such event: - the lower rates or reduced tax liability will apply in determining Ivanhoe Mines Mongolia’s tax liability under this contract; - if a later amendment to a law, regulation or international treaty changes the rates or tax liability so it is no longer at a lower rate or reduced tax liability, Ivanhoe Mines Mongolia shall be returned to the status or position it occupied before it gave notice to the government.

If Ivanhoe Mines Mongolia sells or buys goods, performs work, renders services or transfers goods or assets to or from an affiliate at a lower or higher price than the market price, then the price for determining the taxable income for these goods and services is to be determined to be the price of similar goods or services sold or transferred by independent entities, in accordance with transfer pricing principles of the Organization for Economic Cooperation and Development.

The royalty rate shall be equal to 5% of the sales value of all products mined from the contract area. This royalty is stabilized

The government shall own 34% of the common shares in Ivanhoe Mines Mongolia, and, within 1 year after the agreement is extended, have the option to own a further 16% of the common shares. This satisfies all obligations to issue or transfer shares in Ivanhoe Mines Mongolia to the government.

Ivanhoe Mines Mongolia shall conduct its local and regional socio-economic development programs based on transparency, accountability and public participation. Ivanhoe Mines Mongolia shall continue to prepare, conduct, implement and update, and make public, socio-economic baseline studies, socio-economic impact assessments, socio-economic risk analyses, as well as multi-year communities plans, community relations management systems, policies, procedures and guidelines, and mine closure plans, which must all be produced with community participation and input, and be consistent with international best practice. Ivanhoe Mines Mongolia shall give priority focus to those Umnugovi Aimag citizens and groups directly and indirectly impacted by the project, as determined by socio-economic and environmental impact assessments and other relevant documents. For this purpose, Ivanhoe Mines Mongolia shall regularly engage with and support the public and local stakeholders in Umnugovi Aimag. Ivanhoe Mines Mongolia shall establish cooperation agreements with local administrative organizations in accordance with the Minerals Law and these agreements may include the establishment of local development and participation funds and local participation committees.

Ivanhoe Mines Mongolia shall provide reasonable assistance to regional development, assistance to local regions and creation of new business and employment opportunities. The government is to establish a Southern Gobi Regional Development Council, and Ivanhoe Mines Mongolia will be one of the members of the Council's governing board. The Council shall focus on preparing and implementing the Southern Gobi local and regional development strategy, plans and budgets including: - support to local and regional development and encouraging transparent and responsible governance; - coordination of in-migration influx; - resolving matters of urban planning and development, including power, roads, water supply, heating and sewerage; - organization of formal and non-formal education, including English language and vocational training; - focus on human health care, construction of diagnostic centers, cultural facilities, sport facilities, improvement of veterinary services; and - support to capacity building for local governments and civil society. In addition, Ivanhoe Mines Mongolia will support socio-economic development policies and activities undertaken by Southern Gobi local administration and will develop partnerships to ensure that sustainable benefits from the project reach Mongolian people, including people in Umnugovi Aimag. Ivanhoe Mines Mongolia shall in priority supply mineral concentrate to any third party operated copper smelters located in Mongolia in which the government has a whole or partial ownership interest on agreed commercial terms based on international prices and standards. This is to increase the value added to the products in Mongolia. This supply will be made on the following basis: - if Ivanhoe Mines Mongolia has a whole or partial ownership interest in, or operates, a smelter located in Mongolia, it is entitled to first satisfy the mineral concentrate needs of that smelter; and - if the third party operated copper smelters can demonstrate in advance an ability to meet all technical criteria and specifications for effectively accepting and smelting copper concentrate from the project.

Ivanhoe Mines Mongolia shall make training, recruitment and employment of citizens of local communities in the Southern Gobi region, with preference to Umnugovi Aimag, a priority. In accordance with Article 43.1 of the Minerals Law, not less than 90% of Ivanhoe Mines Mongolia’s employees will be citizens of Mongolia. In accordance with government Resolution Number 286, Ivanhoe Mines Mongolia will utilize best efforts to work with entities it contracts with to provide labor to the project to ensure that: - for construction work during the construction period and expansion periods, not less than 60% of the entities’ employees will be citizens of Mongolia; and - for mining and mining-related work, not less than 75% of the entities’ employees will be citizens of Mongolia. If Ivanhoe Mines Mongolia provides employment and income earning works and services to a number of foreign nationals within the specified percentage, it shall pay a monthly workplace charge of twice the minimum monthly wage established by the government for each foreign national to the Employment Promotion Fund. If Ivanhoe Mines Mongolia employs more foreign nationals than the specified percentage, it shall pay a monthly fee of 10 times the minimum monthly salary for each foreign national in excess of the specified percentage. A portion of these fees shall be allocated on the training strategy and plan to train citizens of Mongolia to upgrade their skills or learn new skills. Ivanhoe Mines Mongolia will use its best endeavors to maximize the participation on a competitive basis of qualified citizens of Mongolia as engineers for the project. Within 5 years of the commencement of production Ivanhoe Mines Mongolia must use its best endeavors to ensure that no fewer than 50% of its employed engineers, and within 10 years of the commencement of production that no fewer than 70% of its employed engineers, shall be citizens of Mongolia.

Ivanhoe Mines Mongolia shall support special business development programs to assist in starting and growing local businesses so they can supply the project, as well as the expansion and diversification of Mongolian business partners so that they are not fully dependent on the project.

Ivanhoe Mines Mongolia will consult with local administrative organizations to provide appropriate compensation upon resettlement of herder families located in the contract area who are directly impacted by the project.

Ivanhoe Mines Mongolia will submit to the government for public release a detailed and comprehensive 5 year Mongolian nationals training strategy and plan for the project. The plan will focus on training skilled workers for the project and training them for professions, and improving their vocational and professional skills, relevant to the project and mining in Mongolia generally and specifically in the Southern Gobi region. Ivanhoe Mines Mongolia shall, in accordance with its annual training plan: - organize training of its employees at its core operations to upgrade employees’ skills and provide further practical experience; - train employees in line with Ivanhoe Mines Mongolia’s short and mid-term human resource plans; and - upgrade selected employees’ qualifications by enrolling them in studies inside or outside Mongolia on a contractual basis to further upgrade their professional qualifications. Ivanhoe Mines Mongolia shall establish a graduate scholarship program for assisting in the education of Mongolian nationals in mining related disciplines, with an emphasis on engineering related disciplines. Scholarships over a 6 year period will be granted to 120 students studying at Mongolian universities and to 30 Mongolian students studying at international universities. Ivanhoe Mines Mongolia shall provide the students holding scholarships with an opportunity to participate in work experience and training at the project or at a suitable international mining operation. To enable all employees on the project to be trained to international standards, the government shall render all support for the adoption of an international mining education and training curricula at selected domestic universities and vocational training institutions.

The government and Ivanhoe Mines Mongolia will work together in good faith to determine the most optimal and reliable solutions for power supply in order to meet the requirements of the project and its development schedule. Ivanhoe Mines Mongolia will have the right to secure all the power requirements for the project from inside or outside Mongolia by the construction of any transmission infrastructure required. It will also have the right to install and operate (or procure installation and operation by an affiliate) power generation facilities within Mongolia at a site most appropriate for the short and long-term power requirements of the project and to determine the source of coal to be used for such power generation. After 4 years, Ivanhoe Mines Mongolia is to secure its total power requirements from one or more source including coal-fired power plants developed by Ivanhoe Mines Mongolia, a third party, or the Mongolian electricity grid. All roads, pipelines and other transportation infrastructure must be constructed to meet the requirements of the project only. Ivanhoe Mines Mongolia may construct and fund a road between the project and the Gashuun Sukhait border crossing. Maintenance of the road is subcontracted to Ivanhoe Mines Mongolia at its cost. Ivanhoe Mines Mongolia may construct, manage and use an aerodrome in connection with the project. The government may construct and manage, or permit a third party to construct and manage, a railway to the China-Mongolia border, and the government is to make use of the railway available to Ivanhoe Mines Mongolia. Within 3 years after the commencement of production, Ivanhoe Mines Mongolia will, if requested by the government, prepare a research report on the economic viability of constructing and operating a copper smelter in Mongolia to process mineral concentrate products. If the government either alone or in conjunction with others or a third party plans for the construction of a smelter in Mongolia, Ivanhoe Mines Mongolia will, if requested by the government, provide on agreed terms, with preferential access, Rio Tinto's (or its affiliates) proprietary technologies held in joint venture with Outokumpu, for the operation of the smelter. If Ivanhoe Mines Mongolia constructs a smelter in connection with the implementation of the project, that smelter will be located in Mongolia.

Ivanhoe Mines Mongolia may provide the public, government and third parties with access to certain infrastructure/services, provided the access does not interfere with the project. Public use infrastructure/services includes roads, power, water/heating systems, water drawing facilities, urban planning and township development, schools, hospitals, formal and non-formal training and education, an airport, community centers, and local governance/administration capacity building. Without affecting its rights, Ivanhoe Mines Mongolia may transfer the ownership and/or governance of public use infrastructure/services for the local community use, to local authorities, provided the transfer does not restrict or impair the access of the project to infrastructure/services, or interfere with the operation of the project. Ivanhoe Mines Mongolia may recover costs by way of payments or collection of tolls from persons using the public use infrastructure/services.

Ivanhoe Mines Mongolia has invested a significant amount of capital in exploring and developing the project. As provided in the feasibility study, Ivanhoe Mines Mongolia will make an additional investment of an estimated US$ 4 billion over a period of 5 years. The schedule for this planned expenditure is contained in the feasibility study. The development of the project may occur in stages as reflected in the feasibility study, taking into account market conditions and financing issues. If Ivanhoe Mines Mongolia materially changes its proposed sequence for the development of the project, it shall inform the government. Ivanhoe Mines Mongolia shall commence production within 5 years of the completion of financing. Ivanhoe Mines Mongolia shall submit estimated annual production figures for the life of the open pit and underground mines. If Ivanhoe Mines Mongolia estimates that it will mine and process over 20% more than forecast, it will obtain the consent from the state authority to proceed.

Any disputes between the parties that cannot be settled through negotiation within 60 days, it is to be resolved by binding arbitration in accordance with the procedures under the Arbitration Rules of the United Nations Commission on International Trade Law. The arbitration will take place in London in English. The award of the arbitration will be final and binding on the parties. Judgment on the award may be entered by any court having competent jurisdiction.

The agreement shall be made public. Ivanhoe Mines Mongolia shall comply with laws, regulations and policies adopted with respect to the Extractive Industries Transparency Initiative, make appropriate information public and undertake to ensure that its activities are consistent with equivalent international initiatives.

The agreement is governed and interpreted by the laws of Mongolia and the international treaties to which Mongolia is a party.

Except as provided elsewhere in this contract, Ivanhoe Mines Mongolia shall only be subject to the taxes listed in Art. 7 of the General Taxation Law as in force on the date of this contract. The parties agree that, in accordance with Art. 29.1.1 of the Minerals Law, the following taxes are stabilized: Income tax of business entities (corporate income tax); Customs duty; Value-added tax; Excise tax (except as provided for in Clause 2.23); Payment for use of mineral resources (royalty); Payment for mineral exploration and mining licenses; Immovable property tax and/or real estate tax; and Tax on price increase of some products, which as from 1 January 2011 shall be invalidated by the WPT Invalidating Law. Taxes listed in Art. 7 of the General Taxation Law (on the date of this contract) that are not listed above are not stabilized and will be payable in accordance with the laws and regulations effective in that tax year. Ivanhoe Mines Mongolia shall not be subject to or liable to pay the following taxes: - taxes that are not listed in Art. 7 (of the General Taxation Law) at the date of this contract; - taxes arising from an amendment or addition to any law or regulation establishing a non-stabilized tax to levy taxes that are not listed in Article 7; and - taxes arising from an amendment or addition to any law or regulation establishing a non-stabilized tax to levy a tax of the nature of a stabilized tax.