Rio Tinto Invests in Ivanhoe Mines

On October 18, 2006, Rio Tinto, one of the world's leading mining groups, entered into an agreement with Vancouver-based Ivanhoe Mines to make an equity investment of up to US$1.5 billion in Ivanhoe in order to jointly manage Ivanhoe's Oyu Tolgoi copper-gold mining project in Mongolia's South Gobi region. The Oyu Tolgoi project is the world's largest undeveloped copper-gold resource and, when completed, is expected to account for 25 per cent of Mongolia's GDP. A joint Ivanhoe-Rio Tinto technical committee will manage all aspects of the engineering, construction, development and operation of the Oyu Tolgoi mining project. Representatives of Rio Tinto will also sit on Ivanhoe's board. Robert Friedland, currently the largest shareholder of Ivanhoe, has agreed to support the transactions contemplated by the agreement between Rio Tinto and Ivanhoe.

The first 9.95 per cent equity investment in Ivanhoe, valued at US$303 million, was taken up by Rio Tinto on October 27, 2006. The second 9.95 per cent investment, valued at US$388 million, will be taken up at the conclusion of a satisfactory long-term investment agreement with the Mongolian government in respect of the Oyu Tolgoi project. Rio Tinto also has warrants to reach a 33.35 per cent investment in Ivanhoe which, if exercised, will represent a total investment of approximately US$1.5 billion. The price at which Rio Tinto has agreed to acquire shares of Ivanhoe is at a premium of at least 25 per cent to the closing price of Ivanhoe's shares the day before the transaction was announced.

Under the terms of the agreement between Rio Tinto and Ivanhoe, at least 90 per cent of the proceeds received from Rio Tinto must be used by Ivanhoe to finance the development of the Oyu Tolgoi project. In addition, Rio Tinto has been granted a right of first refusal over the Oyu Tolgoi project.

Rio Tinto was represented in Canada by McCarthy Tétrault LLP, with a team led by Shea Small and Owen Johnson, which included Andrew Armstrong, Brian Graves, Oliver Borgers (regulatory), Jerald Wortsman (tax) in Toronto and Roger Taplin, Michael Urbani, Sam Adkins and Christopher Beardsmore in Vancouver; and in England by Shearman and Sterling LLP.

Ivanhoe Mines was represented in Canada by Goodmans LLP, with a Vancouver-based team led by Paul Goldman and Steven Robertson, that included Bruce Wright, David Redford, Jonathan O'Connor and Alex Bayer; and in the US by Paul, Weiss, Rifkind, Wharton & Garrison LLP with a team that included Edwin Maynard, Mark Underberg, Daniel Sobol and Kevin Nah.
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