for personal use only - asxpeter desmond reeve 4 4 - - - - 1 1 sam riggall 3 3 - - - - - - douglas...

1

IVANHOE AUSTRALIA LIMITED

ACN 107 689 878

Annual financial report for the year ended 31 December 2010

For

per

sona

l use

onl

y


2

Directors’ report

The directors of Ivanhoe Australia Limited present their annual financial report of the Company for the year ended 31

December 2010. The directors report as follows:

The names and particulars of the directors of the Company during or since the end of the financial year are:

Name, qualifications Particulars

Robert Martin Friedland

(BA Political Science)

Chairman and a Non-Executive Director, aged 60. Mr Friedland is the founder, Chief

Executive Officer and Executive Chairman of Ivanhoe Mines, Chairman of Ivanhoe Nickel

and Platinum, Chairman and President of Ivanhoe Capital Corporation and co-founder and

Executive Co-Chairman of Ivanhoe Energy Inc. Appointed 7 November 2007.

Peter Desmond Reeve

(BSc (Metallurgy))

Chief Executive Officer and Managing Director, aged 49. Mr Reeve was previously

employed by Newcrest Mining Ltd as part of the Executive Committee responsible for

corporate development and market related aspects of the group. Mr Reeve is a director of

Exco Resources Limited and Emmerson Resources Limited. Mr Reeve is a member of the

Safety, Health and Environment Committee. Appointed 21 February 2007.

Douglas John Kirwin

(BSc, MSc)

Non-Executive Director, a professional geologist, aged 60. Mr Kirwin joined the Board in

2006. Mr Kirwin has spent more than 35 year in the mining exploration industry. He is

currently Executive Vice President, Exploration of Ivanhoe Mines and is also a director of

various Ivanhoe Mines subsidiaries. Appointed 8 November 2006.

John Anthony Macken

(BA, BAI, Hons)

Non-Executive Director, Chartered Engineer with the Institute of Engineers in Ireland, aged

59. Mr Macken is President of Ivanhoe Mines. Mr Macken is a Director of SouthGobi

Resources Ltd and is a director of various subsidiaries of Ivanhoe Mines. Mr Macken is the

Chairman of the Safety, Health and Environment Committee. Appointed 7 November 2007.

Peter Graham Meredith

(CA., CMA)

Non-Executive Director, Chartered Accountant, aged 67. Mr Meredith joined the Board in

2006. Mr Meredith previously spent 31 years with Deloitte and Touche LLP, Chartered

Accountants. Mr Meredith is a Director, and the Deputy Chairman of Ivanhoe Mines and is

a director and the Chairman of SouthGobi Resources Ltd. Mr Meredith is a member of the

Nomination, Governance and Remuneration Committee and a member of the Audit and

Finance Committee. Appointed 8 November 2006.

Ian Rutherford Plimer

(BSc, Hons, PhD)

Lead Independent Non-Executive Director, aged 64. Professor Plimer is a Professor of

Mining Geology at the University of Adelaide, South Australia and Emeritus Professor of

Earth Science at the University of Melbourne. Professor Plimer is currently a Non-

Executive director of Kefi Minerals Plc and Ormil Energy Ltd. He is the Chairman of the

Nomination, Governance and Remuneration Committee and a member of the Safety,

Health and Environment Committee and the Audit and Finance Committee. Appointed 7

November 2007.

Kyle Wightman

(B Comm, MBA, FAICD)

Independent Non-Executive Director aged 66. Mr Wightman is an economist, financier and

business consultant with over 40 years experience, particularly relating to the feasibility,

development and financing of major projects and investments. He has held a number of

senior roles in the resources, financial and advisory sectors. Mr Wightman is currently a

Non-Executive Director and Chairman of the Board Audit Committee of Indophil Resources

NL, He is a member of the Safety, Health and Environmental Committee and Nomination,

Governance and Remuneration Committee, and is Chairman of the Audit and Finance

Committee. Appointed 4 July 2008.

William Beckwith Hayden

(BSc (Geology, Hons)

Non-Executive Director, aged 59. Mr Hayden joined the Board in 2006. Mr Hayden is a

geologist with over 36 years experience in the mineral exploration industry. Mr Hayden was

the founder and President of Ivanhoe Nickel and Platinum Ltd. Mr Hayden is President of

GoviEx Uranium Inc., a director of Globe Metals & Mining Ltd, Sky Alliance Resources Inc.,

Ivanhoe Nickel and Platinum Ltd, Sunward Resources Ltd.and holds various directorships

of Ivanhoe Mines subsidiaries. Appointed 8 November 2006, retired 27 May 2010.

David Woodall

(MSc, BSc)

Non-Executive Director. Mr Woodall, aged 50, is currently Chief Executive Officer of the

Alynalmas Gold Ltd. Appointed 7 November 2007, retired 27 May 2010.

David Morris Korbin

(CA)

Non-Executive Director, Chartered Accountant, aged 68. Mr Korbin is a management and

financial consultant. Mr Korbin is currently an independent director and chair of the Audit

Committee of Ivanhoe Mines. Appointed 7 November 2007, retired 27 May 2010.

Sam Riggall

(B Law (Hons), B Comm,

MBA)

Executive General Manager – Commercial and Executive Director, (until 12 Febuary

2011), Non-Executive Director (since 13 Febuary 2011), aged 39. Mr Riggall was

previously employed by Rio Tinto as Chief Negotiator for the Investment Agreement for the

Oyu Tolgoi project in Mongolia. Mr Riggall has extensive commercial experience in the

mining industry having worked in a variety of commodity and functional roles including

based metals, exploration, business development and capital market transactions.

Appointed 27 May 2010. He was Executive General Manager – Commercial and an

Executive Director until 12 Febuary 2011 when he resigned his position. Since that date,

he has continued as a Non-Executive Director.

For

per

sona

l use

onl

y


3

Directors’ report (con’t)

The above named directors held office during and since the end of the financial year, with the exception of Mr W Hayden, Mr

D M Korbin and Mr D Woodall.

Directorships of other listed companies

Directorships of other listed companies held by directors in the 3 years immediately before the end of the financial year are

as follows:

Name Company Period of directorship

Mr R M Friedland Ivanhoe Energy Inc. (TSX; NASDAQ) Since 1995

Ivanhoe Mines Ltd (TSX; NYSE; NASDAQ) Since 1994

Potash One Inc. (TSX) Since 2009, resigned January 2011

Mr P D Reeve Exco Resources Ltd (ASX) Since 2008

Emmerson Resources Ltd (ASX) Since 2009

Mr J A Macken SouthGobi Resources Ltd (TSX,HK) Since 2007

Western Lithium Corporate (TSX-V) Since 2008

Ivanhoe Mines Ltd (TSX; NYSE; NASDAQ) Since 2003, resigned February 2011

Mr P G Meredith Ivanhoe Mines Ltd (TSX; NYSE; NASDAQ)

Ivanhoe Energy Inc. (TSX; NASDAQ)

Since 2005

Since 2007

SouthGobi Resources Ltd (TSX, HK) Since 2003

Entrée Gold Inc (TSX; AMEX) Since 2002

Great Canadian Gaming Corporation (TSX) Since 2000

Mr W B Hayden Pan Palladium Ltd (ASX, HK) Since 2002, resigned November 2009

Global Metals & Mining Limited (ASX) Since November 2009

Mr D M Korbin Seaspan Corporation (NYSE) Since 2005, resigned September 2009

Ivanhoe Mines Ltd (TSX; NYSE; NASDAQ) Since 2006

Professor I R Plimer CBH Resources Ltd (ASX) Since 1998, resigned October 2010

Kefi Minerals Plc (AIM) Since 2006

Ormil Energy Ltd (ASX) Since February 2010

Mr K Wightman Indophil Resources NL (ASX) Since 2006

Shareholdings

The following table sets out key management personnel‟s relevant interests in shares and performance rights of the

Company as at the date of this report.

During and since the end of the financial year an aggregate 500,000 performance rights (2009: 75,000) were granted by the

Company to key management personnel (being 500,000 performance rights granted to Mr S Riggall as part of his

remuneration, of which he exercised 125,000 during the financial year). Each performance right when exercised entitles the

holder to one fully paid ordinary share in the Company (without any amount being payable for the exercise of the

performance right and receipt of the share).

During and since the end of the financial year the Company has issued a total of 5,550,000 fully paid ordinary shares to key

management personnel as a result of the exercise of performance rights.

Directors and senior management

Fully paid ordinary shares

Number

Performance Rights

Number

Directors

Mr R M Friedland 3,000,000 (i) 1,000,000

M P D Reeve 3,189,500 1,062,500

Mr S Riggall 125,000 375,000

M D J Kirwin 1,225,000 750,000

Mr J A Macken 375,000 125,000

Mr P G Meredith 375,000 125,000

Mr W B Hayden 225,000 75,000

Mr D Woodall 112,500 37,500

Mr D M Korbin - 25,000

Professor I R Plimer 87,500 25,000

Mr K Wightman 250,000 50,000

(i) Mr R M Friedland owns 101,360,740 shares in the ultimate parent company, Ivanhoe Mines Ltd. which holds

259,536,627 (at 24 March 2011) ordinary shares in Ivanhoe Australia Limited.

For

per

sona

l use

onl

y


4


Shareholdings (con’t)

Directors and senior management

Fully paid ordinary shares

Number

Performance Rights

Number

Senior Management

Mr J E Eltham - -

Mr N Valk - -

Mr B J Goss 562,500 187,500

Mr P Carter 592,500 187,500

Mr D J Millman 195,000 75,000

Directors’ meetings

The number of Directors‟ meetings (including meetings of Committees of Directors) and the number of meetings attended by

each of the Directors of the Company held during the financial year set out below. During the financial year, 4 Board

meetings, 1 Nomination, Governance and Remuneration Committee, 5 Audit and Finance Committee meetings and 1 Safety,

Health and Environment Committee meeting was held during the period.

Name

Board of Directors Audit and Finance

Committee

Nomination, Governance

and Remuneration

Committee

Safety, Health and

Environmental

Committee

Held Attended Held Attended Attended Attended Held Attended

Robert Martin Friedland 4 3 - - - - - -

Peter Desmond Reeve 4 4 - - - - 1 1

Sam Riggall 3 3 - - - - - -

Douglas John Kirwin 4 3 - - - - - -

John Anthony Macken 4 3 - - - - - -

Peter Graham Meredith 4 4 2 2 1 1 1 1

William Beckwith Hayden 1 1 - - - - - -

David Woodall 1 1 - - - - - -

David Morris Korbin 1 1 3 2 - - - -

Ian Rutherford Plimer 4 4 5 5 1 1 1 1

Kyle Wightman 4 4 5 5 1 1 1 1

Company secretary

The name(s) and particulars of the Company Secretary during or since the end of the financial year are:

Name

Darren Millman

(CA, BBus(Acc),

GradDipACG)

Chartered Accountant, aged 33. Mr Millman was appointed as Company Secretary on 20

September 2007. Mr Millman previously had management roles with KPMG in Canada in

its Mining Advisory Group.

Principal activities

The principal activity of the consolidated entity during the year was mineral exploration. No significant change in the nature of

this activity occurred during the year.

Review of operations

The consolidated loss for the year amounted to $78,786,654 (2009: $52,226,281 loss).

During 2010, Ivanhoe Australia made substantial progress on its vision to become a significant Australian base-metal producer, whilst continuing to be recognised as the pre-eminent exploration company in Australia, with an unrivalled track record for discovery. Key milestones achieved were the strategic acquisition of the Osborne copper and gold mining complex, Mineral Resource updates at the Merlin and Mount Elliott deposits and significant progress in bringing the Merlin Project closer to production. Ivanhoe Australia also achieved exploration success with high-grade copper-gold intercepts at the Starra 222 Project, Barnes Shaft and Houdini prospects. The strategic acquisition of the Osborne Copper and Gold complex in September 2010 significantly enhanced the value and reduced the development risk of the Merlin Project. In addition, the combined copper and gold ore sources at Osborne and Cloncurry have created a new copper and gold business for Ivanhoe Australia.

For

per

sona

l use

onl

y


5


Review of operations (con’t)

The successful integration of the Osborne mining complex with Ivanhoe Australia‟s exploration expertise and world-class deposits provides the building blocks for Ivanhoe to become the next large Australian base-metals company. Osborne will be established as the main operating centre for the Company‟s Cloncurry district activities. Ivanhoe Australia has assembled a significant package of Mineral Resources in the Cloncurry district, near Mount Isa, with direct and indirect interests covering 3,034 square kilometres and applications in place for 23 additional tenements covering 3,396 square kilometres. The nature of the geological systems indicate potential metal production could be both multifaceted and long term. The exploration success so far has revealed copper, molybdenum, rhenium and gold; however, other polymetallic deposits are slowly revealing themselves, which are likely to broaden this commodity base.

Exploration is the key to Ivanhoe Australia‟s growth strategy, with a focus on continuing the strong history of exploration success at Ivanhoe Australia‟s Cloncurry tenements in the discovery of new deposits and extending existing deposits. Opportunities for future exploration successes have been enhanced in 2010 with the establishment of a new geophysics group and the expanded tenement holding in the Cloncurry region resulting from the Osborne acquisition. Ivanhoe Australia has a strong development pipeline, with four main projects and other potential opportunities. The key development project is Merlin, which is the highest-grade molybdenum and rhenium project known in the world. During the year, significant progress was made in bringing Merlin closer to production with the completion of the scoping study and an updated Mineral Resource incorporating the high-grade Little Wizard domain. In addition, substantial progress was made on the pre-feasibility study that is expected to be completed in April 2011. The full feasibility study is expected to be completed in Q3 2011, with mining of ore in the third quarter of 2012. The Merlin scoping study released in March 2010 demonstrated that the project will have a high return, with strong, long-term cashflows. The acquisition of the Osborne complex has provided the project with a number of additional options relating to the design of a molybdenum roaster and the physical location of plant infrastructure. The Merlin pre-feasibility study is expected to benefit from the inclusion of the Little Wizard Deposit in the Merlin Mineral Resource and the utilisation of the Osborne mining complex. Significant progress also was made on the company‟s three other development projects: Mount Elliott, Mount Dore and the Copper Gold Study. During the year, the Mount Elliott Mineral Resource has increased significantly, making it one of the largest copper-gold mineralised systems discovered in Australia. A scoping study on Mount Elliott subsequently has begun to evaluate various mining options.

On September 10, 2010, the Company completed a successful entitlement offer, raising gross proceeds of $269 million to fund the development of projects and ongoing exploration. The new shares offered under the Entitlement Offer also will receive one half option for every new share, with each option entitling the holder to acquire one Ivanhoe Australia ordinary share until September 20, 2011, at a price of A$3.38. A total of 46.7 million options were issued under the Entitlement Offer, which could raise up to a further A$158 million, increasing the total amount raised to A$427 million.

Ivanhoe Australia completed its secondary listing on the Toronto Stock Exchange (TSX); the Company‟s ordinary shares and options (referred to as warrants for Canadian purposes) began trading in November 2010.

As at 31 December 2010, Ivanhoe Mines Ltd. owned 62% of Ivanhoe Australia, a reduction from the previous year‟s holding of 81%. Ivanhoe Mines continues to provide high-level corporate and technical guidance in assisting Ivanhoe Australia to progress projects and secure financial support.

Changes in state of affairs

There was no significant change in the state of affairs of the consolidated entity during or since the year end.

Subsequent events

There has not been any other matter or circumstance that has arisen since the end of the financial period, that has

significantly affected, or may significantly affect, the operations of the Company, the results of those operations, or the state

of affairs of the Company in future financial periods.

Future developments

Disclosure of information regarding likely developments in the operations of the consolidated entity in future years and the

expected results of those operations may result in unreasonable prejudice to the consolidated entity and therefore have not

been disclosed in this report.

Environmental regulations

The consolidated entity‟s operations are subject to environmental regulation under both Commonwealth and State legislation.

There have been no significant known breaches of these regulations by the consolidated entity.

For

per

sona

l use

onl

y


6


Dividends

No dividends have been paid, recommended or declared since the start of the year.

Indemnification of officers and auditors

The Company has entered into agreements to indemnify all the Directors and Officers named in this report against all

liabilities to persons (other than the Company), which arise out of the Directors and Officers conduct unless the liability

relates to conduct involving a lack of good faith or the indemnity is otherwise prohibited by law. The Company has agreed to

indemnify (to the extent permitted by law) the Directors and Officers against all costs and expenses incurred in defending an

action that falls within the scope of the indemnity and any resulting payments. The contract of directors and officers insurance

prohibits disclosure of the nature of the liability and the amount of the premium.

The Company has not during or since the end of the year indemnified or agreed to indemnify an auditor of the Company

against a liability incurred as auditor.

Non-audit services

Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in

note 30 to the financial statements.

The directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person or

firm on the auditor‟s behalf) is compatible with the general standard of independence for auditors imposed by the

Corporations Act 2001.

The directors are of the opinion that the non-audit services as disclosed in note 30 to the financial statements do not

compromise the external auditor‟s independence, based on advice received from the Audit and Finance Committee, for the

following reasons:

all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of

the auditor; and

none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct

APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards

Board, including reviewing or auditing the auditor‟s own work, acting in a management or decision-making capacity for

the Company, acting as advocate for the Company or jointly sharing economic risks and rewards.

Auditor’s independence declaration

The auditors independence declaration is included on page 61 of the annual report.

Rounding off of amounts

The company is a company of the kind referred to in ASIC Class Oder 98/0100, dated 10 July 1998, and in accordance with

that Class Order amounts in the directors‟ report and the financial report are rounded off to the nearest thousand dollars,

unless otherwise indicated.

For

per

sona

l use

onl

y


7


Remuneration report – audited

This remuneration report, which forms part of the directors‟ report, sets out information about the remuneration of Ivanhoe

Australia Limited‟s directors and its senior management for the financial year ended 31 December 2010. The prescribed

details for each person covered by this report are detailed below under the following headings:

key management personnel details

principles of remuneration

relationship between the remuneration policy and Company performance

remuneration of directors and senior management

key terms of employment contracts.

Key management personnel

The following persons acted as directors of the Company during or since the end of the financial year:

Executive directors

Mr P D Reeve (Managing Director & CEO)

Mr S Riggall (Director & Executive General Manager, Commercial), Appointed 27 May 2010. Resigned as

Executive General Manager – Commercial on 12 February 2011 but remains a Non-Executive Director.

Non-executive directors

Mr R M Friedland (Chairman)

M D J Kirwin

Mr J A Macken

Mr P G Meredith

Mr W B Hayden, retired 27 May 2010

Mr D Woodall, retired 27 May 2010

Mr D M Korbin, retired 27 May 2010

Professor I R Plimer (independent)

Mr K Wightman (independent)

The term „senior management‟ is used in this remuneration report to refer to the following key management personnel.

Except as noted, the named key management personnel held their current position for the whole of the financial year and

since the end of the financial year:

Mr J E Eltham (Executive General Manager, Projects)

Mr N R Valk (General Manager, Operations), appointed 7 December 2010

Mr B J Goss (General Manager, Exploration Strategy & Systems)

Mr P Carter (General Manager, Exploration)

Mr D J Millman (Finance Manager and Company Secretary)

Principles of remuneration

The Board policy for determining the nature and amount of key management personnel remuneration and other remuneration

is agreed by the Board of Directors as a whole after review, approval and recommendation by the Nomination, Governance

and Remuneration Committee.

The terms „remuneration‟ and „compensation‟ are used interchangeably throughout this report.

Key management personnel have authority and responsibility for planning, directing and controlling the activities of the Company. Key management personnel comprise the directors of the Company and senior management of the Company.

Compensation levels for key management personnel and other employees of the Company are competitively set to attract and retain appropriately qualified and experienced directors and senior management. The Nomination, Governance and Remuneration Committee obtains independent advice on the appropriateness of compensation packages in the Company given trends in comparative companies, and the objectives of the Company‟s compensation strategy.

The compensation structures explained below are designed to attract and retain suitably qualified candidates, reward the achievement of strategic objectives, and achieve the broader outcome of creation of value for shareholders. The compensation structures take into account:

the capability and experience of key management personnel and other employees; and

the ability of key management personnel and other employees to control areas of their respective responsibilities

For

per

sona

l use

onl

y


8


Remuneration report – audited (con’t)

Senior Executive Remuneration

Compensation packages for the Executive Director‟s and senior management include a mix of fixed and incentive based compensation and a consulting agreement with Mr J E Eltham.

The Board regularly reviews the policy regarding the appropriate mix of fixed and incentive based compensation for senior executives, having regard to industry practice and assistance from external remuneration advisers to ensure the Company attracts and retains the best people.

Fixed compensation

Fixed compensation consists of base compensation (which is calculated on a total cost basis and includes any fringe benefit tax charges related to employee benefits including motor vehicles), as well as employer contributions to superannuation funds.

Fixed compensation levels are reviewed annually by the Nomination, Governance and Remuneration Committee and the Board through a process that considers individual contributions and overall performance of the Group, as well as market relativity. A senior executive‟s compensation is also reviewed on promotion.

Incentive based compensation

The Company does not currently operate a short-term incentive scheme and, in 2010, no cash awards were made to the

executives. The Board is currently considering a short-term incentive scheme for the 2011 financial year, however will review

this in the context of the formal review of the Company‟s broader executive remuneration policy to be undertaken during the

2011 financial year.

From 2008, the Company issued performance rights to Directors and senior executives under the Ivanhoe Australia Limited

Employee Share Plan (Plan) that are subject to time based vesting conditions. The current approach of time based vesting is

considered appropriate in the circumstances of the Company. The Board will continue to review the appropriateness of the

time based vesting conditions for future grants of performance rights.

All performance rights expire on the earlier of their expiry date or termination of the individual‟s employment. The

performance rights granted to the Directors and executives vest in 4 equal tranches (subject to being in employment). The

vested performance rights can be exercised immediately (subject to the Company's Share Trading Policy). Upon exercise of

the performance rights, the relevant number of shares are allocated to the executives.

The number of performance rights in each tranche must be exercised within two years following vesting. Any vested

performance rights not exercised before that time will expire.

All unvested performance rights will immediately vest in the event of a change in control of the Company or its ultimate

holding company and may, at the Board‟s discretion, vest in special circumstances such as death, permanent disability or

redundancy.

Non-Executive Director Remuneration

Non-Executive Director fees are paid within an aggregate limit which must not exceed $500,000 (excluding mandatory

superannuation) per annum or such other maximum as determined by the Company in a general meeting.

The cash fees paid to Independent Non-executive Directors for the 2010 financial year were $60,000 (2009:$60,000) per annum, plus statutory superannuation. Mr Wightman, as Audit Committee Chairman received an additional amount of $12,000 (2009:$12,000) for the financial year.

Non-independent Non-Executive Directors do not receive a cash fee with the exception of Mr Korbin. The cash fees paid to Mr Korbin for the 2010 financial year was $21,800 (2009:$52,320).

All Non-Executive Directors are eligible to participate in the Plan.

All Non-Executive Directors are also entitled to be reimbursed for all reasonable travel, accommodation and other expenses incurred in attending meetings of the Board, committees or shareholders or while engaged on other Ivanhoe Australia Limited business.

Consulting Agreement Mr J Eltham is on an agreed daily charge rate of $1,125, there is no minimum termination notice required from either party. Mr J Eltham is not entitled to participate in the Plan.

For

per

sona

l use

onl

y


9



Relationship between the remuneration policy and Company performance

The achievement of Company strategic objectives is the key focus of the efforts of the Company, and it is the leadership of

the directors and senior management which makes the achievement of this aim possible. As indicated above, over the

course of the 2011 financial year, the Board, through the Nomination, Governance and Remuneration Committee will review

the Company‟s executive remuneration policy to ensure the remuneration framework remains focused on driving and

rewarding executive performance, while being closely aligned to the achievement of Company strategic objectives and the

creation of shareholder value.

The consolidated entity sets performance based remuneration with the objective of improving shareholder returns. Shareholder returns are primarily measured by the movement in share price from the start to the end of each financial year. During the year total remuneration to directors and senior management was $7,502,094 (2009: $11,367,230), an overall reduction of $3,865,136. No dividends have been declared in the past four financial years or the current financial year. As the Company remains in the growth phase of its life cycle, shareholder returns do not correlate with revenues and losses reported in any of the recent financial years. Shareholder returns are more dependent on the future expectation of Company performance rather than Company earnings.

The share price on 31 December 2010 was $3.57 (2009: $3.69), and has traded between a low of $2.45 (2008: $0.30) and a

high of $3.82 (2009: $4.24) during the financial year.

Under the Company's share trading policy, key management personnel may not deal in Company securities on

considerations of a short term nature. Further, under the Plan, holders of performance rights must not engage in any hedging

of risk in respect of their performance rights before the performance rights vest. In particular, each participant in the Share

Plan is taken to have agreed not to hedge their exposure to the economic interest they have in any performance rights,

unless and until the performance hurdles in relation to the performance rights have been satisfied. For these purposes,

hedging means the participant or its associate entering into any arrangement which has the effect or intended operation of

protecting the participant if the value of the performance right diminishes or which takes from the participant any benefit i f the

value of the performance right increases.

For

per

sona

l use

onl

y


10



Remuneration of directors and senior management (Company and Consolidated) – audited

Short-term

employment benefits

Post-

employment

Equity (Long-term)

Salary &

Fees

Non-

monetary

Superannuation

Contribution

Performance

Rights

Expensed in

Year (1)

S300A(1)(e)(vi)

Value of

performance

rights as

proportion of

total

remuneration

Total

Executive directors $ $ $ $ % $

Mr P D Reeve 2010 389,908 9,866 33,043 1,418,607 77% 1,851,424

2009 389,909 7,051 35,092 3,191,381 88% 3,623,433

Mr S Riggall 2010 114,389 8,589 28,628 1,001,098 73% 1,152,704

Non-executive

directors

Mr R M Friedland 2010 - - - 1,335,160 100% 1,335,160

2009 - - - 3,003,653 100% 3,003,653

Mr D J Kirwin 2010 - - - 500,685 100% 500,685

2009 - - - 1,126,370 100% 1,126,370

Mr J A Macken 2010 - - - 166,895 100% 166,895

2009 - - - 375,457 100% 375,457

Mr P G Meredith 2010 - - - 166,895 100% 166,895

2009 - - - 375,457 100% 375,457

Mr W B Hayden 2010 - - - 100,137 100% 100,137

2009 - - - 225,274 100% 225,274

Mr D Woodall 2010 - - - 50,068 100% 50,068

2009 - - - 112,637 100% 112,637

Mr D M Korbin 2010 21,800 - - 33,379 60% 55,179

2009 52,320 - - 75,091 59% 127,411

Professor I R Plimer 2010 60,000 - 5,400 33,379 34% 98,779

2009 60,000 - 5,400 75,091 53% 140,491

Mr K Wightman 2010 72,000 - 6,480 33,379 30% 111,859

2009 72,000 - 6,480 75,091 49% 153,571

Senior Management

Mr J E Eltham 2010 472,845 - - - - 472,845

Mr N Valk 2010 21,492 - 2,100 - - 23,592

Mr B J Goss 2010 183,486 - 16,514 250,342 56% 450,342

2009 191,132 - 13,706 563,185 73% 768,023

Mr P Carter 2010 279,321 8,710 21,950 250,342 45% 560,323

2009 210,909 9,686 18,991 563,185 70% 802,771

Mr D J Millman 2010 181,194 16,198 16,307 184,457 46% 398,156

2009 181,180 4,912 16,306 330,284 62% 532,682

TOTALS 2010 1,796,435 43,363 130,422 5,524,823 7,495,043

TOTALS 2009 1,157,450 21,649 95,975 10,092,156 11,367,230

1. Expensing of fair value performance rights on a straight-line basis over vesting period. Determined using Black

& Scholes valuation method.

Notes

No cash awards or bonuses (or any other forms of short-term employee benefits other than those described in

the above table) were paid during the 2010 financial year (2009: Nil). All awards were long-term employee

benefits made in the form of performance rights.

25% of performance rights vested during the year.

No performance rights were forfeited during the year.

Other than the superannuation contributions described in the above table, no other post employment benefits

were provided during the year.

For

per

sona

l use

onl

y


11



Equity instruments

Share Plan – Performance Rights (note 32 (ii))

In 2008, the Board of Directors approved the Employee Share Plan (“Share Plan”) and the issue of 16,675,000 performance

rights.

During the financial year the Board of Directors approved and the Company issued 2,630,000 (2009: 1,125,000) performance

rights to employees.

The Share Plan provides for the offer to, and acquisition by, selected Eligible Employees and Directors of:

rights to acquire Shares where generally no cash consideration is required to be paid for the acquisition of the

underlying Shares (Performance Rights); and

“unallocated” Shares, typically being Shares that are to be held in the Share Plan subject to a holding lock and

restrictions on voting and which are liable to be forfeited prior to allocation if any performance conditions attaching to

them are not satisfied and in certain other circumstances.

The holders of these performance rights and unallocated shares entitle the holder to acquire one share by way of issue.

Modification of terms of equity-settled share-based payment transactions No terms of equity-settled share-based payment transactions (including performance rights granted as compensation to key

management personnel) have been altered or modified by the issuing entity during the reporting period or prior period.

For

per

sona

l use

onl

y


12



Analysis of performance rights over equity instruments granted as compensation

Details of vesting profiles of the performance rights granted as remuneration by Ivanhoe Australia Limited to each key

management person of the Group and Group executives is summarised in the table below.

During the financial year

Name

Series No. granted

(i)

No.

vested (ii)

% of grant

vested

$ expensed in

year (iii)

Directors

Mr R M Friedland Issued 6 August 2008 - 1,000,000 25% 1,335,160

Mr P Reeve Issued 6 August 2008 - 1,062,500 25% 1,418,607

Mr S Riggall Issued 21 February 2010 500,000 125,000 25% 1,001,098

Mr D Kirwin Issued 6 August 2008 - 375,000 25% 500,685

Mr J A Macken Issued 6 August 2008 - 125,000 25% 166,895

Mr P G Meredith Issued 6 August 2008 - 125,000 25% 166,895

Mr W B Hayden Issued 6 August 2008 - 75,000 25% 100,137

Mr D Woodall Issued 6 August 2008 - 37,500 25% 50,068

Mr D M Korbin Issued 6 August 2008 - 25,000 25% 33,379

Professor I R Plimer Issued 6 August 2008 - 25,000 25% 33,379

Mr K Wightman Issued 6 August 2008 - 25,000 25% 33,379

Senior management

Mr J E Eltham Issued 6 August 2008 - - -

Mr N R Valk Issued 6 August 2008 - - -

Mr B J Goss Issued 6 August 2008 - 187,500 25% 250,342

Mr P Carter Issued 6 August 2008 - 187,500 25% 250,342

Mr D J Millman Issued 6 August 2008 (iv) - 75,000 25% (v) 184,457

Notes

(i) The performance rights granted to Mr S Riggall on 23 February 2010. The terms and conditions are consistent with the 2008 and

2009 performance rights issued. The performance rights were granted in 4 equal tranches, which respectively vest and can be

exercised (subject to being in employment) on 1 March of each year from 2010 to 2013.

(ii) The value of performance rights granted is recognised in compensation on a straight line basis over the vesting period of the grant,

in accordance with Australian accounting standards.

(iii) No performance rights have lapsed during the financial year. Tranche 3 vested and could be exercised from 1 September 2010 for

all directors and senior management with the exception of Mr S Riggall whose Tranche 1 (or 25% of his grant of performance rights

for the financial year) vested and could be exercised on 1 March 2010.

(iv) An additional 75,000 performance rights were issued to Mr D J Millman on the 1 December 2009.

(v) For Mr D J Millman 56,250 performance rights issued on 6 August 2008 (expense of $75,102) vested during the financial year and

18,750 performance rights issued on 1 December 2009 (expense of $109,355) vested during the financial year.

The performance rights were provided at no cost to the recipients. In general, upon vesting, the holder will be entitled to

exercise their performance rights and acquire one fully paid ordinary share in the Company for each performance right. No

amount is payable upon vesting or exercise.

The Directors and employees are entitled to exercise their performance rights and be issued with the shares in 4 equal

tranches after vesting (subject to being in employment) on 1 September of each year from 2008 to 2011 (with the exception

of Mr S Riggall as noted above). All performance rights in a tranche expire two years after the vesting date for that tranche.

The first tranche of the performance rights vested in September 2008, however the first tranche could not be exercised until 1

September 2009 with the exception of Mr S Riggall as noted above. All unvested performance rights will immediately vest in

the event of a change in control of the Company or its ultimate holding company and may, at the Board‟s discretion, vest in

special circumstances such as death, permanent disability or redundancy. A holder of a performance right does not have a

right to participate in any new issue of securities to existing shareholders by virtute of holding the performance right (such a

holder may only participate in a new issue of securities if they exercise their performace right and acquire the underlying

share before the record date for determining entitlements to the new issue and participate in the new issue as a result of

being a holder of shares).

No performance rights were forfeited during the year.

For

per

sona

l use

onl

y


13



Directors and senior management exercised performance rights

During the year, the following directors and senior management exercised performance rights that were granted to them by

Ivanhoe Australia Limited as part of their compensation. Each performance right converts into one fully paid ordinary share of

Ivanhoe Australia Limited.

Name

No. of perfomance

rights exercised (i)

No. of fully paid ordinary

shares of Ivanhoe Australia

Limited issued

Directors

Mr R M Friedland 1,000,000 1,000,000

Mr P Reeve 3,187,500 3,187,500

Mr S Riggall 125,000 125,000

Mr D Kirwin 375,000 375,000

Mr J A Macken 125,000 125,000

Mr P G Meredith 125,000 125,000

Mr W B Hayden 75,000 75,000

Mr D Woodall 37,500 37,500

Mr D M Korbin 25,000 25,000

Professor I R Plimer 25,000 25,000

Mr K Wightman - -

Senior management

Mr J E Eltham - -

Mr N R Valk - -

Mr B J Goss 187,500 187,500

Mr P Carter 187,500 187,500

Mr D J Millman 75,000 75,000

Notes

(i) The performance rights were provided at no cost to the recipients. No amount is payable for the underlying share upon exercise of a performance right.

For

per

sona

l use

onl

y


14



The following table summarises the value of performance rights granted, exercised or lapsed during the year to directors and

senior management:

Name

Value of performance

rights granted at the

grant date $ (i) (iii)

Value of performance

rights exercised at the

exercise date $ (ii)

Directors

Mr R M Friedland - 2,850,000

Mr P Reeve - 10,996,875

Mr S Riggall 1,575,000 381,250

Mr D Kirwin - 1,068,750

Mr J A Macken - 356,250

Mr P G Meredith - 418,750

Mr W B Hayden - 213,750

Mr D Woodall - 125,625

Mr D M Korbin - 71,250

Professor I R Plimer - 71,250

Mr K Wightman - -

Senior management

Mr J E Eltham - -

Mr N R Valk - -

Mr B J Goss - 534,375

Mr P Carter - 534,375

Mr D J Millman - 213,750

Notes

(i) The value of performance rights granted is recognised in compensation on a straight line basis over the vesting period of the grant,

in accordance with Australian accounting standards.

(ii) No performance rights have lapsed during the financial year. Tranche 3 vested and could be exercised from 1 September 2010 for

all directors and senior management with the exception of Mr S Riggall whose Tranche 1 vested and could be exercised on 1

March 2010.

(iii) The fair value of the performance right at grant date of $3.15 per share was based on fair value at grant date.

Service agreements The remuneration and other terms of employment for the CEO and senior management are formalised in service agreements

with the exception of Mr J E Eltham (refer to page 8 for details). Each of these agreements makes provision for a fixed

remuneration component and performance rights as a long-term incentive. The material terms of the service agreements are

set out below.

Term Conditions Position

Duration of contract Ongoing until notice is given by either

party

CEO and senior management

Voluntary termination (i.e termination

by executive by giving notice)

3 months‟ fixed compensation CEO and senior management

Termination by Company without cause 3 months‟ fixed compensation or

payment in lieu


Termination by Company for cause Employment may be terminated

immediately without notice if the

executive commits any act or omission

justifying summary dismissal at

common law.


For

per

sona

l use

onl

y


15


Signed in accordance with a resolution of the directors made pursuant to section 298(2) of the Corporations Act 2001.

On behalf of the Directors

Robert Friedland Peter Reeve

Chairman Managing Director

Melbourne, 29 March 2011

For

per

sona

l use

onl

y


16


CORPORATE GOVERNANCE STATEMENT

The Board of directors of Ivanhoe is committed to conducting the Company‟s business in an ethical manner and in accordance with corporate governance „best practices‟.

This statement outlines the Company‟s corporate governance practices for the financial year, which comply with the ASX Corporate Governance Council recommendations (as applicable to the Company for the financial year), unless otherwise stated. The statement also includes additional commentary into consideration of the Toronto Stock Exchange (TSX) Guideline 1D Corporate Governance: A Guide to Good Disclosure.

Principle 1 – Lay solid foundations for management and oversight

Role of the Board

The Board is responsible for the overall corporate governance of the Company.

The Company has adopted a Board Charter which sets out the principles for the operation of the Board and describes the powers, functions and responsibilities of the Board. The key responsibilities of the Board include:

overseeing the composition of the Board including consideration of the skills and competency of the directors;

overseeing and appraising the strategies, policies and performance of Ivanhoe;

approving annual budgets and major expenditure items;

overseeing the Company‟s risk management compliance and corporate governance policies;

approving and monitoring internal and external reporting;

approving dividends and distributions;

appointing (and if appropriate removing) and monitoring the performance of the Executive Officers; and

reviewing senior executive succession planning.

The Charter also sets out the powers, functions and responsibilities of the Chief Executive Officer and executive team. This Board Charter is available on the Company's website.

The roles and responsibilities of each sub-committee chair are not in documented form. The committee acts collectively to achieve their roles and responsibilities documented within each sub-committee charter.

Performance evaluation

The Board has established a Nomination, Governance and Remuneration Committee, which is responsible for evaluating the performance of senior executives.

The Committee has established a Work Performance System (WPS). The WPS sets performance goals for senior executives and employees of the Company. The

goals are aligned to Company strategic goals and are measured bi-annually against performance.

Performance evaluation of senior executives and employees took place during the 2010 financial year in accordance with the WPS.

Principle 2 – Structure the Board to add value

The directors of the Company and details of their skills, qualifications, attendances at meetings and the period of office held are included on pages 2 to 4.

Composition

The Board includes two independent Non-Executive Directors, Kyle Wightman and Ian Plimer. The Board considers that the composition of the Board is appropriate having regard to the experience and skills of the directors, to Ivanhoe Mines Ltd.'s majority shareholding interest in Ivanhoe Australia and to Ivanhoe Mines Ltd.'s continuing debt financing of the Company.

Independence

The Board considers that the Non-Executive Directors, Robert Friedland, John Macken, Peter Meredith and Douglas Kirwin are not independent because they are directors and/or officers of Ivanhoe Mines Ltd., which is a substantial majority shareholder in Ivanhoe Australia.

Accordingly, a majority of the Board are not independent directors. However, having regard to the above, the Board considers the present composition to be appropriate in the circumstances of the Company.

The Chairman, Robert Friedland, is not an independent director because he is the executive chairman of Ivanhoe Mines Ltd. The Board considers that it is appropriate for Robert Friedland to be Chairman of the Company because of his experience and skills and because of Ivanhoe Mines Ltd.‟s majority shareholding interest in the Company and Ivanhoe Mines Ltd‟s continuing debt financing of the Company. Mr Plimer has been appointed as lead independent director to act as Chairman, as necessary, in the event of a conflict of interest or in the absence of the Chairman.

The Board establishes information walls between the Company‟s associates and its directors and employees for any transactions when considered appropriate as a result of interests in each such associated company. In other instances, where matters arise in which directors have an interest such directors are either requested to excuse themselves from the board meeting or are not permitted to vote on the matter, in this manner the Board promotes the independent judgment of its constituent members.

In order to facilitate the exercise of independent judgment by its members, the board: (i) has a written position description for the lead independent director; and (ii) establishes sub-committees, in which independent directors are members.

The non-executive directors have convened a separate meeting of the non-executive directors when considered appropriate to do so during the year, with standing non-

For

per

sona

l use

onl

y


17

executive directors now occurring at each board meeting effective from December 2010.

Education and Qualifications

The Company takes steps to ensure that prospective directors fully understand the role of the Board and its committees and the contribution individual directors are expected to make, including in particular the commitment of time and energy that the Company expects of its directors. In addition, new directors are provided with a comprehensive information package, including pertinent corporate documents and a director‟s manual containing information on the duties, responsibilities and liabilities of directors. New directors are also briefed by management as to the status of the Company's business

Management and outside advisors provide information and education sessions to the Board and its committees on a continuing basis as necessary to keep the directors up-to-date with the Company, its business and the environment in which it operates as well as with developments in the responsibilities of directors, corporate governance, ethics and compliance.

Presentations are made to the Board from time to time to educate and keep them informed of changes within the Company and of regulatory and industry requirements and standards.

Nomination, Governance and Remuneration Committee

The Board has established a Nomination, Governance and Remuneration Committee, which has a written charter that is available on the Company's website.

The Nomination, Governance and Remuneration Committee is responsible for establishing processes for evaluating the performance of the Board, and other Board Committees both collectively and individually.

The Nomination, Governance and Remuneration consists of the Non-Executive Director Peter Meredith, CA and two Independent Non-Executive Directors (Kyle Wightman, B.Com, MBA, F.A.I.C.D. and Ian Plimer, B.Sc (Hons), PhD) and is chaired by Ian Plimer.

The Nomination, Governance and Remuneration Committee, together with the Board, reviews what competencies, skills and personal qualities it should seek in new Board members in order to add value to the Company, in light of the Company‟s current needs. The Nomination, Governance and Remuneration Committee annually assesses the current competencies and characteristics represented on the Board to determine the Board‟s strengths and identify any gaps that need to be filled. This analysis assists the Nomination, Governance and Remuneration Committee in discharging its responsibility for selecting new nominees to the Board.

While the Board functions effectively given the Company's stage of development and the size and complexity of its business, the Board, through its Nomination, Governance and Remuneration Committee, will continue to seek qualified candidates to augment its experience and expertise and to enhance the Company's ability to effectively develop its business interests.

Performance review

The Board periodically conducts a formal review of its performance, as well as each of its Committees and Directors. This review will generally be facilitated by the Lead Independent Director, Professor Ian Plimer.

A full performance review of the Board and Board Committees is currently underway to assess the 2010 performance, the review is being conducted by the lead independent director.

Independent professional advice

Directors may seek independent professional advice and, if the Chairman of the Board consents, the Company will pay a director's costs of seeking independent professional advice. That consent may not be unreasonably withheld or delayed.

Principle 3 – Promote ethical and responsible decision making

Code of Conduct

The Company has a statement of values and responsibilities, a corporate code of conduct (which applies to all directors and employees) and a code of conduct for directors and senior executives which embrace high standards of personal and corporate conduct. The statement of values and responsibilities and the codes of conduct are available on the Company's website.

The code of conduct covers the following:

compliance with laws, rules and regulations;

managing actual and potential conflicts of interest;

corporate opportunities such as preventing directors and key executives from taking improper advantage of property, information or position for personal gain;

employment practices such as occupational health and safety and equal opportunity;

responsibilities of the individual, such as use of privileged and confidential information;

usefulness of financial information by maintaining appropriate accounting policies, practices and disclosure; and

reporting of unlawful or unethical behaviour.

In 2010, the Board monitored compliance through an annual affirmation by all employees that they have complied with Ivanhoe Mines Ltd.‟s code of conduct. On a monthly basis the corporate secretary reports to the Board any human resources incidents which include those related to breaches of the Code of Conduct. IAL currently utilises Ivanhoe Mines Ltd.‟s whistle blowing system to allow an avenue for employees to report non-compliance with the Code of Conduct.

Trading in securities

The Company has established a Share Trading Policy, which is available on the Company‟s website.

In accordance with the prohibition in the Corporations Act, the Share Trading Policy states that directors, senior management and employees may not trade in Ivanhoe Securities at any time if they are in possession of inside information.

For

per

sona

l use

onl

y


18

In addition to the restrictions imposed on trading with inside information, directors, senior management and employees are not permitted to trade in the Company‟s securities during the two weeks prior to the announcement or filing of the Company‟s financial statements (quarterly, half-yearly, annually). If the Company elects to file its financial statements earlier than the deadlines set out the TSX or ASX, the Company Secretary will advise its directors, senior management and employees of the revised trading restrictions

At all times, clearance must be obtained from an „Approving Officer‟.

The Policy also sets out:

when directors, senior management and other employees may deal in listed securities of another entity (because they may obtain inside information about another entity while performing their duties for the Group); and

procedures to reduce the risk of insider trading.

Principle 4 – Safeguard integrity in financial reporting

Audit and Finance Committee

The Board has established an Audit and Finance Committee. The Committee has a formal written charter, which is available on the Company's website.

All members of the Committee have a good knowledge of finance and accounting practices (see details of their respective skills and experience in the Directors‟ Report).

The Audit and Finance Committee met 5 times during the financial year and Committee members‟ attendance record is disclosed in the table of directors‟ meetings on page 4.

The Audit and Finance Committee consists of the Non-Executive Director Peter Meredith, CA and two Independent Non-Executive Directors (Kyle Wightman, B.Com, MBA, F.A.I.C.D. and Professor Ian Plimer, B.Sc (Hons), PhD) and is chaired by Kyle Wightman.

The Company‟s external auditors are invited to attend meetings of the Audit and Finance Committee.

The Company monitors the performance of the external auditor on an annual basis and ensure the rotation of the external engagement partner occurs withing the prescribed guidance timelines.

Auditor independence

The Committee is cognisant of the Company‟s need to maintain an independent auditor.

Principle 5 – Make timely and balanced disclosure

Ivanhoe is committed to providing timely, open and accurate information to all of its stakeholders, including shareholders, regulators and the investment community.

The Company has adopted a Market Disclosure Protocol designed to ensure compliance with the disclosure requirement set out in the Corporations Act 2001 (Cth), the ASX Listing Rules and the Ontario Securities Act and to ensure accountability at a senior executive level for that compliance. The Market Disclosure Protocol is available on the Company's website.

In summary, the object of the the Market Disclosure Protocol is to:

ensures the Company immediately discloses all requisite information to the ASX and the TSX in accordance with the applicable rules and regulations;

ensures officers and employees are aware of the Company's continuous disclosure obligations; and

establishes procedures for :

the collection of all potentially price-sensitive information;

assessing if information must be disclosed to applicable security exchanges;

releasing to the ASX and the TSX, information which the Company is required to disclose; and

responding to any queries from the relevant exchanges.

The Board has established the Market Disclosure Committee to ensure compliance with its disclosure requirements. This Committee comprises the following:

Chief Executive Officer;

Chief Financial Officer;

Manager – Legal;

Investor Relations Officer;

Executive General Manager – Commercial; and

Company Secretary.

Decisions of the Market Disclosure Committee are by simple majority vote of those members of the committee available when a decision is required. If the Market Disclosure Committee cannot reach consensus on a matter, the matter must be referred to the full Board.

Principle 6 – Respect the rights of shareholders

The Board aims to ensure that shareholders and the broader investment community are fully informed of all relevant information necessary to assess the performance of the directors, management and the Company.

The Company's Market Disclosure Policy which is clearly marked under the Corporate Governance section on the Company‟s website deals with communication to shareholders through announcements on the ASX and the TSX as applicable.

The Board ensures that shareholders are informed of all major developments affecting the Company's state of affairs through the Company‟s annual and interim results announcements, annual report, quarterly mining exploration entity reports, annual general meeting, public announcements and through the Company's website. The Company publicly releases all information disclosed to the ASX or the TSX under this policy by placing it on its website.

Principle 7 – Recognise and manage risk

Oversight of the risk management system

The Board, through the Audit and Finance Committee, recognises its responsibility for ensuring that there are adequate policies, procedures and systems in place in the Company in relation to risk management, compliance and internal control systems.

For

per

sona

l use

onl

y


19

The Company has completed a formal review of its internal control procedures, and has developed a risk register and risk management policy for the oversight and management of material business risks.

The Company has established a Safety, Health and Environment Committee to ensure appropriate practices in the areas of safety, health and environmental management in all of its activities and appropriate compliance and reporting systems in these areas.

Risk reporting

The Chief Executive Officer and Finance Manager, having made the appropriate enquiries, have each given the Board:

a declaration that the financial records of the Company have been properly maintained and that the Company‟s financial statements, and notes, for the financial year present a true and fair view of the financial position and performance of the Company and comply with relevant accounting standards; and

an assurance that the declaration given by them is based on a sound system of risk management and internal compliance and control and the system is operating effectively in all material respects in relation to financial reporting risks.

Management is also required to report to the Audit and Finance Committee and the Board on whether material business risks are being managed effectively.

In accordance with this system, management has reported to the Board as to the effectiveness of the Company's management of its material business risks. The material business risks are disclosed within the Annual Information Form which is publicly reported annually to both the ASX and the TSX.

Principle 8 – Remunerate fairly and responsibly

The Board has established the Nomination, Governance and Remuneration Committee, which has a written charter that is available on the Company‟s website.

The structure of Executive and Non-Executive Director remuneration is described in detail in the Remuneration Report which forms part of the Director‟s Report.

The Independent Non-Executive Directors receive a cash fee for service, as well as statutory superannuation. One Non-Executive Director who is not independent received a cash fee from the Company.

Both Executive and Non-Executive Directors are eligible to participate in the Company‟s Employee Share Plan.

The Company considers that this remuneration structure is appropriate taking into account the fact that Ivanhoe is, at present, an exploration company and there is a need to conserve cash resources. Performance Rights are therefore considered an appropriate form of remuneration.

Further, the Company‟s remuneration structure is consistent with the remuneration policies of the Company's majority shareholder, Ivanhoe Mines Ltd.

For

per

sona

l use

onl

y


Statement of comprehensive income

20

Statement of comprehensive income for the financial year ended 31 December 2010

Consolidated

Note

2010

$’000

2009

$’000

Revenue 4 3,774 1,550

Other income 30 41

Exploration and evaluation expenses (39,492) (29,122)

Employee benefits expenses 6 (24,052) (21,417)

Administration expenses (3,453) (1,840)

Depreciation expenses 14 (934) (730)

Finance costs 5 (3,789) (5,073)

Travel expenses (4,535) (1,811)

Rehabilitation expense 19 - (548)

Share of losses of associates 11 (959) (1,371)

Impairment of associates 11 - 2,572

Initial fair value of share options received 12 (ii) - 1,437

Change in fair value of financial assets

classified through profit or loss 12(ii) (4,320) 3,086

Other expenses 6 (72) (17)

Loss before tax (77,802) (53,243)

Income tax benefit / (expense) 7 (984) 1,017

Loss for the year (78,786) (52,226)

Other comprehensive income

Gain / (loss) on available-for-sale investments

taken to equity (3,278) 3,391

Income tax relating to components of other

comprehensive income 984 (1,017)

Other comprehensive (loss) / income for the

period net of tax (2,294) 2,374

Total comprehensive income for the period (81,080) (49,852)

Loss per share

From continuing and discontinued operations:

Basic (cents per share) 31 (22.0) (16.7)

Diluted (cents per share) 31 (22.0) (16.7)

Notes to the financial statements are included on pages 25 to 59.

For

per

sona

l use

onl

y


Statement of financial position

21

Statement of financial position as at 31 December 2010

Consolidated

Note

2010

$’000

2009

$’000

Current assets

Cash and cash equivalents 158,983 11,823

Trade and other receivables 8 4,418 503

Inventories 9 6,248 137

Other financial assets 12 203 4,523

Other 10 3,919 526

Total current assets 173,771 17,512

Non-current assets

Investments accounted for using the equity

method 11 19,175 14,267

Other receivables 13 145 3,817

Other financial assets 12 3,052 6,331

Property, plant and equipment 14 58,290 4,642

Intangible assets 15 8,494 8,494

Total non-current assets 89,156 37,551

Total assets 262,927 55,063

Current liabilities

Trade and other payables 16 7,947 5,405

Provisions 19 4,439 622

Total current liabilities 12,386 6,027

Non-current liabilities

Provisions 19 40,327 3,720

Borrowings 17 28,788 52,570

Total non-current liabilities 69,115 56,290

Total liabilities 81,501 62,317

Net (liabilities) / assets 181,426 (7,254)

Equity

Issued capital and contributed equity 20 390,746 135,496

Reserves 21 29,077 16,861

Accumulated losses 22 (238,397) (159,611)

Total (deficiency) / equity 181,426 (7,254)


For

per

sona

l use

onl

y

IVANHOE AUSTRALIA PTY LIMITED

Statement of changes in equity

22

Statement of changes in equity for the financial year ended 31 December 2010

Consolidated

Issued capital

and

contributed

equity

Share option

reserve

Investment

revaluation

reserve

Share based

payments

reserve

Accumulated

losses Total

$’000 $’000 $’000 $’000 $’000 $’000

Balance at 1 January 2009 123,902 - - 13,405 (107,385) 29,922

Loss for the year - - - (52,226) (52,226)

Revaluation of other financial assets (note 21) - - 2,374 - - 2,374

Total comprehensive income for the period - - 2,374 - (52,226) (49,852)

Recognition of share-based payments (note 21) - - - 12,676 - 12,676

Performance rights exercised (note 20) 11,594 - - (11,594) - -

Balance at 31 December 2009 135,496 - 2,374 14,487 (159,611) (7,254)

Balance at 1 January 2010 135,496 - 2,374 14,487 (159,611) (7,254)

Loss for the year - - - - (78,786) (78,786)

Revaluation of other financial assets (note 21) - - (2,294) - - (2,294)

Total comprehensive income for the period - - (2,294) - (78,786) (81,080)

Recognition of share-based payments (note 21) - - - 9,340 - 9,340

Performance rights exercised (note 20) 13,748 - - (13,748) - -

Entitlement Offer (note 20 & 21) 250,243 - - - - 250,243

Options attaching to entitlement offer (note 21) - 18,918 - - - 18,918

Share issue costs (note 20) (8,741) - - - - (8,741)

Balance at 31 December 2010 390,746 18,918 80 10,079 (238,397) 181,426


For

per

sona

l use

onl

y

IVANHOE AUSTRALIA PTY LIMITED

Cash flow statement

23

Cash flow statement for the financial year ended 31 December 2010

Consolidated

Note

2010

$’000

2009

$’000

Cash flows from operating activities

Receipts from customers 30 41

Payments to suppliers and employees (64,226) (38,728)

Interest received 1,731 1,530

Interest and finance costs paid (48) (169)

Net cash (used in) / provided by operating activities 26 (62,513) (37,326)

Cash flows from investing activities

Payments for property, plant and equipment (3,379) (1,589)

Payments for asset acquisition – Barrick (Osborne) Pty Ltd (17,753) -

Payment for other financial assets - (2,939)

Payment for investment in associate (5,867) (3,409)

Refund / (payment) of security deposit 3,735 (584)

Proceeds from sale of property, plant and equipment 40 -

Net cash used in investing activities (23,224) (8,521)

-

Cash flows from financing activities

Proceeds from issues of equity securities 269,161 -

Payment for share issue costs (8,740) -

Proceeds from borrowings 29,000 -

Repayment of borrowings (56,524) -

Net cash (used in) / provided by financing activities 232,897 -

Net (decrease) / increase in cash and cash equivalents 147,160 (45,847)

Cash and cash equivalents

at the beginning of the financial year

11,823 57,670

Cash and cash equivalents

at the end of the financial year 158,983 11,823


For

per

sona

l use

onl

y


Notes to the financial statements

24

Notes to the financial statements for the financial year ended 31 December 2010

Note Contents

1 General information

2 Summary of accounting policies

3 Segment information

4 Revenue

5 Finance costs

6 Loss for the year

7 Income taxes

8 Trade and other receivables

9 Inventories

10 Other current assets

11 Investments accounted for using the equity method

12 Other financial assets

13 Non – current other receivables

14 Property, plant and equipment

15 Intangibles

16 Trade and other payables

17

18

Borrowings

Parent entity disclosures

19 Provisions

20 Issued capital and contributed equity

21 Reserves

22 Accumulated losses

23 Commitments

24 Contingent liabilities

25 Subsidiaries

26 Notes to the cash flow statement

27 Financial instruments

28 Key management personnel compensation

29 Related party transactions

30 Remuneration of auditors

31 Earnings per share

32 Share-based payments

33 Subsequent events

For

per

sona

l use

onl

y



25

1. General information

Ivanhoe Australia is a company limited by shares, incorporated and domiciled in Australia. Ivanhoe Australia‟s registered

office and its principal place of business are as follows:

Registered office Principal place of business

Ivanhoe Australia Limited Ivanhoe Australia Limited

Level 9 Level 9

479 St Kilda Road 479 St Kilda Road

Melbourne VIC 3004 Melbourne VIC 3004

2. Summary of accounting policies

Statement of compliance

The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act

2001, Accounting Standards and Interpretations, and complies with other requirements of the law.

The financial report includes the separate financial statements of the Company and the consolidated financial statements of the Group.

The financial report has been prepared in accordance with Accounting Standards and Interpretations. Accounting Standards include Australian equivalents to International Financial Reporting Standards ('A-IFRS'). Compliance with A-IFRS ensures that the financial statements and notes of the Company and the Group comply with International Financial Reporting Standards ('IFRS').

Basis of preparation

The financial report has been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted.

The financial statements were authorised for issue by the directors on 29 March 2011.

Critical Accounting Estimates and Judgements

In the application of the Group‟s accounting policies, management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Rehabilitation and dismantling provisions

The Group‟s accounting policy for rehabilitation and dismantling provisions requires significant estimates and assumptions

including estimates of the cost, timing and extent of rehabilitation activities as well as changes in discount rates. These

uncertainties may result in future actual expenditure differing from the amounts currently provided.

The provision recognised for each site is periodically reviewed and updated based on the facts and circumstances available

at the time. The provision at balance date represents management‟s best estimate of the present value of future rehabilitation

costs required.

Impairment of other tangible and intangible assets At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication of impairment exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. The determination of fair value and value in use requires management to make estimates and assumptions about items such as expected production and sales volumes, commodity prices, reserves, operating costs and discount rates. These estimates and assumptions are subject to uncertainty and changes to these factors would impact the recoverable amount of the assets.

For

per

sona

l use

onl

y



26

2. Summary of accounting policies (con’t)

Critical Accounting Estimates and Judgements (con’t) Income Taxes The Group‟s accounting policy for taxation requires management‟s judgement in determining the recognition of deferred tax assets on the statement of financial position. Deferred tax assets, including those arising from historical tax losses, capital losses and temporary differences are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised.

Assumptions about the generation of future taxable profits depend on management‟s estimates of future cash flows.

Share Based Payments Equity-settled share-based payments with employees and others providing similar services are measured at the fair value of the equity instrument at the grant date. Fair value is measured by use of a Black – Scholes pricing model. The expected life used in the model has been adjusted, based on management‟s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. Further details on how the fair value of equity-settled share-based transactions has been determined can be found in note 32.

Adoption of new and revised Accounting Standards

In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian

Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current annual reporting

period beginning 1 January 2010. Details of the impact of the adoption of these new accounting standards are set out in the

individual accounting policy notes set out below.

Standards and Interpretations issued not yet effective

At the date of authorisation of the financial report, the Standards and Interpretation listed below were in issue but not yet effective:

Standard/Interpretation

Effective for annual reporting periods

beginning on or after

AASB 124 „Related Party Disclosures (revised December 2009),

AASB 2009-12 Amedments to Australian Accounting Standards‟

1 January 2011

AASB 9 „Financial Instruments, AASB 2009-11 Amendments to

Australian Accounting Standards arising from ASSB 9‟

AASB 2009-14 „Amendments to Australian Interpretation –

Prepayments of a Minimum Funding Requirement‟

Interpretation 19 „Extinguishing Financial Liabilities with Equity

Instruments‟

1 January 2013

1 January 2011

1 July 2010


Adoption of new and revised Accounting Standards (con’t)

These Standards and Interpretations will be first applied in the financial report of the Group that relates to the annual

reporting period beginning after the effective date of each pronouncement.

The following significant accounting policies have been adopted in the preparation and presentation of the financial report:

(a) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) (referred to as 'the Group' in these financial statements). A controlled entity is any entity Ivanhoe Australia Limited has the power to control the financial and operating policies of the entity so as to obtain benefits from its activities.

All inter-company balances and transactions between entities in the consolidated entity, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the Company.

(b) Borrowing costs

All borrowing costs, except to the extent that they are directly attributable to the acquisition, construction or production of qualifying assets, are recognised in profit or loss in the period in which they are incurred.

For

per

sona

l use

onl

y



27


(c) Cash and cash equivalents

Cash comprises cash on hand, cash at call and short-term deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(d) Employee benefits

A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave when it is probable that settlement will be required and they are capable of being measured reliably.

Liabilities recognised in respect of short term employee benefits, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Liabilities recognised in respect of long term employee benefits are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date.

(e) Exploration and evaluation expenditure

Exploration costs are expensed in the year in which it is incurred until such time as it has been determined that the area of interest has economically recoverable reserves, in which case subsequent exploration costs and the costs incurred to develop the area of interest are capitalised.

Presently, all exploration and evaluation expenditure is expensed in the year in which it is incurred.

(f) Financial assets

Investments are recognised and derecognised on trade date where the purchase order or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as at fair value through profit or loss which are initially measured at fair value.

Subsequent to initial recognition, investments in subsidiaries are measured at cost in the financial statements. Subsequent to initial recognition, investments in associates are accounted for under the equity method in the consolidated financial statements and the cost method in the financial statements.

Other financial assets are classified in the following categories: financial assets 'at fair value through profit or loss', 'held-to-maturity investments', 'available-for-sale' financial assets, and 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, „at fair value through profit or loss‟.

At fair value through profit or loss

An instrument is classified as at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial Instruments are designated at fair value through profit or loss if Ivanhoe Australia manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Company‟s investment strategy. Upon initial recognition, the attributable transaction costs are recognised in profit or loss when incurred. Financial instruments that are at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss.

Available-for-sale financial assets

Ivanhoe Australia‟s investments in equity securities are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, and foreign exchange gains and losses on available for sale monetary items, are recognised as a separate component of equity. When an investment is derecognised, the cumulative gain or loss in equity is transferred to profit or loss.

Loans and receivables

Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest rate method less impairment.

Interest is recognised by applying the effective interest rate.

(g) Financial instruments issued by the Company

Interest and dividends

Interest and dividends are classified as expenses or as distributions of profit consistent with the balance sheet classification of the related debt or equity instruments.

For

per

sona

l use

onl

y



28


(h) Foreign currency

The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in Australian dollars, which is the functional currency of Ivanhoe Australia Limited, and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognised in profit or loss in the period in which they arise.

(i) Impairment of other tangible and intangible assets

At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication of impairment exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of the asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in the profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase.

(j) Income taxes

Current tax

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Deferred tax

Deferred tax is accounted for using the balance sheet liability method. Temporary differences are differences between the tax base of an asset or liability and its carrying amount in the balance sheet. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes.

In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from the initial recognition of goodwill.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, branches and associates, and interests in joint ventures except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset

and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or

substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax

consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the

carrying amount of its assets and liabilities.

For

per

sona

l use

onl

y



29


(j) Income taxes (cont’)

Deferred tax (con‟t)

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company/Group intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax for the period

Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess.

Tax consolidation

The Company and its wholly-owned Australian resident subsidiary are part of a tax consolidated group under Australian tax law, effective from 1 January 2007. Ivanhoe Australia Limited is the head entity in the tax-consolidated group. Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax consolidated group are determined using the „separate taxpayer within group‟ approach by reference to the carrying amounts in the separate financial statements of each entity and the tax values applying under tax consolidation. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and relevant tax credits of the members of the tax consolidated group are recognised by the Company (as head entity in the tax-consolidated group).

Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by the Company and each member of the group in relation to the tax contribution amounts paid or payable between the parent entity and other members of the tax-consolidated group in accordance with the arrangements.

Where the tax contribution amount recognised by each member of the tax-consolidated group for a particular period is different to the aggregate of the current tax liability or asset and any deferred tax asset arising from unused tax losses and tax credits in respect of that period, the difference is recognised as a contribution from (or distribution to) equity partic ipants.

(k) Intangible assets

Mine tenements

Mine tenements recognised by the consolidated entity are recorded at cost less accumulated amortisation and any impairment losses. Amortisation of costs is provided on a unit-of-production method. The unit-of-production basis results in an amortisation charge proportional to the depletion of the economically recoverable mineral reserves. The net carrying value of each mine tenement is reviewed regularly and, to the extent to which this value exceeds its recoverable amount, the excess amount is either fully provided against or written off in the financial year in which this is determined.

(l) Inventories

Inventories of consumable supplies and spare parts are valued at lower of cost and net realisable value.

(m) Pastoral property leases

Pastoral property leases have been included in Property, Plant and Equipment. Refer to note 2(n).

(n) Property, plant and equipment

Leasehold land

Pastoral property leases have been included in Property, Plant and Equipment and are stated at cost less accumulated amortisation and impairment.

Plant and equipment

Buildings and plant and equipment are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition.

Depreciation

Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation is calculated on a straight line basis so as to write off the net cost of each asset over its expected useful life to its estimated residual value. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period, with the effect of any changes recognised on a prospective basis.

The depreciation rates used for each class of depreciable assets are:

Buildings 10%

Plant and equipment 10-20%

Leasehold land 3.5%

For

per

sona

l use

onl

y



30


(o) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

Rehabilitation and dismantling provisions

An obligation to incur restoration, rehabilitation and environmental costs arises when an environmental disturbance is caused by the development or ongoing production of an area of interest. Costs arising from the installation of plant and other site preparation work, discounted to their net present values, are provided for and capitalised at the start of each project, as soon as the obligation to incur such costs arises. These costs are charged against profits over the life of the mine, through the depreciation of the asset and the unwinding of the discount on the provision. Costs for restoration of subsequent environmental disturbance which is created on an ongoing basis during production are provided for at their net present values and charged against profits as extraction progresses. Such costs arising from exploration activities not associated with development projects are expensed in the period incurred.

Changes in the measurement of a liability relating to the decommissioning of plant or other site preparation work that result from changes in the estimated timing or amount of the cash flow, or a change in the discount rate, are added to, or deducted from, the cost of the related asset in the current period. If a decrease in the liability exceeds the carrying amount of the asset, the excess shall be recognised immediately in the statement of comprehensive income. If the asset value is increased and there is an indication that the revised carrying value is not recoverable, an impairment test is performed in accordance with the accounting policy above.

(p) Revenue

Revenue is measured at the fair value of the consideration received or receivable, and is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured.

Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate

applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial

asset to that asset‟s net carrying amount.

(q) Goods and services tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax ('GST'), except:

i. where the amount of GST incurred is not recoverable from the Australian Taxation Office, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or

ii. for receivables and payables with are recognised inclusive of GST.

The net amount of GST recoverable from, or payable to, the Australian Taxation Office is included as part of receivables or payables.

Cash flows are included in the cast flow statement on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the Australian Taxation Authority is classified as operating cash flows.

(r) Joint venture arrangements

Jointly controlled assets

Interests in jointly controlled assets in which the Group is a venturer and has joint control are included in the financial statements by recognising the Group‟s share of jointly controlled assets (classified according to their nature), the share of liabilities incurred (including those incurred jointly with other venturers) and the Group‟s share of expenses incurred by or in respect of each joint venture. The Group also recognises income from the sale or use of output from the joint venture in accordance with the revenue policy in note 2(p).

The Group‟s interest in assets where the Group does not have joint control are accounted for in accordance with the substance of the Group‟s interest. Where such arrangements give rise to an undivided interest in the individual assets and liabilities of the joint venture, the Group recognises its undivided interest in each asset and liability and classifies and presents those items according to their nature.

Jointly controlled entities

Interests in jointly controlled entities in which the Group is a venturer (and so has joint control) are accounted for under the equity method in the consolidated financial statements. Investments in jointly controlled entities where the Group is an investor but does not have joint control over that entity are accounted for as an available-for-sale financial asset or, if the Group has significant influence, by using the equity method (refer note 2 (s)).

For

per

sona

l use

onl

y



31


(s) Investments in associates

An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a

joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but

is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of

accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with

AASB 5 „Non-current Assets Held for Sale and Discontinued Operations‟. Under the equity method, investments in

associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group‟s

share of the net assets of the associate, less any impairment in the value of individual investments.

Losses of an associate in excess of the Group‟s interest in that associate (which includes any long-term interests that, in

substance, form part of the Group‟s net investment in the associate) are recognised only to the extent that the Group has

incurred legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Group‟s share of the net fair value of the identifiable assets, liabilities and

contingent liabilities of the associate recognised at the date of the acquisition is recognised as goodwill. The goodwill is

included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any excess

of the Group‟s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of the

acquisition, after reassessment, is recognised immediately in profit or loss.

Where a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group‟s

interest in the relevant associate.

(t) Share-based payments

Equity-settled share-based payments with employees and others providing similar services are measured at the fair value of

the equity instrument at the grant date. Fair value is measured by use of a Black – Scholes pricing model. The expected life

used in the model has been adjusted, based on management‟s best estimate, for the effects of non-transferability, exercise

restrictions, and behavioural considerations. Further details on how the fair value of equity-settled share-based transactions

has been determined can be found in note 32.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis

over the vesting period, based on the Group‟s estimate of equity instruments that will eventually vest.

At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest. The impact of

the revision of the original estimates, if any, is recognised in profit or loss over the remaining vesting period, with

corresponding adjustment to the equity-settled employee benefits reserve.

Equity-settled share-based payment transactions with other parties are measured at the fair value of the goods and services

received, except where the fair value cannot be estimated reliably, in which case they are measured at the fair value of the

equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.

For cash-settled share-based payments, a liability equal to the portion of the goods or services received is recognised at the

current fair value determined at each reporting date.

(u) Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by

dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary

shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary

shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary

shares.

(v) Lease payments

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another

systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability.

The aggregate benefits of incentives are recognised as a reduction of rental expense on a straight-line basis, except where

another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are

consumed.

For

per

sona

l use

onl

y

IVANHOE AUSTRALIA LIMITED Notes to the financial statements

32

2. Summary of accounting policies (con’t) (w) Other financial liabilities Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or where appropriate a shorter period, to the net carrying amount on initial recognition. 3. Segment information Information reported to the Group’s Chief Executive Officer for the purposes of resource allocation and assessment of performance is focused on 3 key business segments. The Group’s reportable segments under AASB 8 are as follows:

• Melbourne • Cloncurry, Queensland • Tennant Creek, Northern Territory

The Melbourne office segment provides administration support and is responsible for the treasury function and the managing of investments in Exco Resources Limited and Emmerson Resources Limited. The Cloncurry segment located in Queensland, Australia undertakes exploration on the Group’s mining leases and exploration tenements. The Tennant Creek segment activities relate to the exploration of the mining leases and exploration tenements in connection with the Emmerson Resources Limited joint venture agreement. Information regarding these segments is presented below. The following is an analysis of the Group’s revenue and results by reportable operating segments for the periods under review:

Revenue Segment loss 2010

$’000 2009 $’000

2010 $’000

2009 $’000

Continuing operations Cloncurry - - (56,417) (31,525) Melbourne 3,774 1,550 (7,912) (13,864) Tennant Creek - - (8,179) (7,483) Total of all Segments 3,774 1,550 (72,508) (52,872) Unallocated items Interest revenue 3,774 1,550 Finance costs (3,789) (5,073) Iinitial fair value of share options received - 1,437 Change in fair value of financial assets classified as fair value through profit or loss (4,320) 3,086 Share of loss of associate (959) (1,371) Income tax benefit/(expense) (984) 1,017 Total loss before tax (78,786) (52,226) Gain / (loss) on available-for-sale investments taken to equity (3,278) 3,391 Income tax relating to components of other comprehensive income 984 (1,017) Total comprehensive income for the period (81,080) (49,852) The revenue reported above represents the revenue generated from external customers. Segment loss represents the loss incurred by each segment without the allocation of share of losses of associate, interest revenue, change in fair value of financial assets classified as fair value through profit or loss, finance costs and income tax expense. This is the measure reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance.

For

per

sona

l use

onl

y

IVANHOE AUSTRALIA LIMITED Notes to the financial statements

33

4. Revenue

Consolidated

2010 $’000

2009 $’000

Interest revenue:

Bank deposits 3,774 1,550 All revenue relates to continuing operations. 5. Finance costs

Consolidated

2010 $’000

2009 $’000

Interest and finance costs on bank arrangements 47 170

Interest on parent entity loan 3,742 140 Non-cash interest on parent entity loan - 4,763 3,789 5,073

6. Loss for the year (a) Gains and losses Loss for the year has been arrived at after crediting/(charging) the following gains and losses:

Consolidated

2010 $’000

2009 $’000

Loss on disposal of property, plant and equipment (32) -

Net foreign exchange gains/(losses) (40) (17) (72) (17)

(b) Other expenses Loss for the year includes the following expenses:

Consolidated

2010 $’000

2009 $’000

Rental expenses (1,556) (1,077) Employee benefit expense: Defined contribution plans (936) (578) Share based payments (note 32 (i)) (51) (28) Share based payments (note 32 (ii)) (9,341) (12,676) Salaries and wages (13,724) (8,135)

(24,052) (21,417)

For

per

sona

l use

onl

y



34

7. Income taxes

Income tax recognised in profit or loss

Consolidated

2010

$’000

2009

$’000

Deferred tax benefit / (expense) relating to

the origination and reversal of temporary

timing differences and tax losses

(984) 1,017

Total tax benefit / (expense) (984) 1,017

The prima facie income tax expense on pre-tax accounting profit / (loss) from operations reconciles to the income tax expense in the financial statements as follows:

Loss before tax from continuing operations (77,802) (53,243)

Income tax benefit calculated at 30% 23,341 15,973

Tax effect of amounts which are not deductible/(taxable) in calculating taxable income

(2,803)

(3,841)

Deferred tax losses not brought to account (18,320) (11,642)

Deferred tax assets (temporary) not brought to account

(1,699) -

Over provision not brought to account from prior year

(1,503)

508

Deductible expenses for tax not booked (investment allowance)

- 19

Total tax benefit / (expense) (984) 1,017

The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period.

Income tax recognised directly in equity

2010

Before tax

$’000

Tax (expense)

benefit

$’000

Net of tax

$’000

Investment – Emmerson Resources Shares (3,278) 984 (2,294)

(3,278) 984 (2,294)

Unrecognised deferred tax balances Consolidated

2010

$’000

2009

$’000

The following deferred tax assets have not been brought to account:

- tax losses – revenue 59,887 40,236

- other temporary differences 4,370 355

64,257 40,591

For

per

sona

l use

onl

y



35

7. Income taxes (con’t)

Recognised deferred assets and tax liabilities

Consolidated

2010

$’000

2009

$’000

The following deferred tax balances have been brought to account:

Deferred tax assets

- Equity account investments - 1,699

- Provisions 616 1,003

- Share issue costs 3,038 1,571

- Tax losses 2,475 -

Deferred tax liabilities

- Accrued income (613) (6)

- Unrealised gain (65) (1,357)

- Prepayments (84) (55)

- Property, plant & equipment (3,127) (957)

- Intangible assets (1,748) (1,898)

- Other assets (492) -

- -

Deferred tax balances

Deferred tax assets/(liabilities) arise from the following:

Consolidated

2010

Opening balance

Charged to

income

Charged to

equity

Recycled from

equity to

income Closing balance

$’000 $’000 $’000 $’000 $’000

Temporary differences

Equity accounted investments 1,699 (1,699) - - -

Provisions 1,003 (387) - - 616

Share issue costs 1,571 1,467 - - 3,038

Accrued income (6) (607) - - (613)

Fair value through profit or loss financial assets (1,357) 1,292 - - (65)

Prepayments (55) (29) - - (84)

Property, plant & equipment (957) (2,170) - - (3,127)

Intangible assets (1,898) 150 - - (1,748)

Other assets - (492) - - (492)

Tax losses - 2,475 - - 2,475

Available for sale financial assets - (984) 984 - -

- (984) 984 - -

Deferred tax (liability) (6,129)

Deferred tax asset 6,129

Presented in the statement of financial position as follows: -

For

per

sona

l use

onl

y



36

7. Income taxes (cont’d)

Consolidated

2009

Opening balance

Charged to

income

Charged to

equity

Recycled from

equity to

income Closing balance

$’000 $’000 $’000 $’000 $’000

Temporary differences

Equity accounted investments 2,059 (360) - - 1,699

Provisions (1,429) 2,432 - - 1,003

Share issue costs 2,091 (520) - - 1,571

Accrued income - (6) - - (6)

Fair value through profit or loss financial assets - (1,357) - - (1,357)

Prepayments - (55) - - (55)

Property, plant & equipment (698) (259) - - (957)

Intangible assets (1,898) - - - (1,898)

Available-for-sale financial assets - 1,017 - (1,017) -

Other financial liabilities 1,084 (1,084) - - -

Deferred tax assets not brought to account (1,209) 1,209 - - -

- 1,017 - (1,017) -

Deferred tax (liability) (4,273)

Deferred tax asset 4,273

Presented in the statement of financial position as follows: -

8. Trade and other receivables

Consolidated

2010

$’000

2009

$’000

Goods and services tax recoverable 1,620 406

Diesel fuel rebate 32 13

Accrued Interest 2,044 21

Related party receivables (note 29) 57 58

Other 665 5

4,418 503

9. Inventories

Consolidated

2010

$’000

2009

$’000

Finished goods (purchased) 16 16

Consumable supplies and spare parts (i) 6,232 121

6,248 137

(i) Forming part of the Osborne Copper Gold transaction (refer Note 14) was the aquisition of inventory of $5,730,861

recorded at fair value. The balance increasing with the purchase of inventory from the acquisition date to the

reporting date.

10. Other current assets

Consolidated

2010

$’000

2009

$’000

Prepayments (i) 3,919 526

3,919 526

(i) Forming part of the Osborne Copper Gold transaction (refer Note 14) was the prepayment of gas under contract

with the ability to utilise the gas in the future.

For

per

sona

l use

onl

y



37

11. Investments accounted for using the equity method

a) Consolidated

b)

2010

$’000

2009

$’000

Investments in associates 19,175 14,267

19,175 14,267

Reconciliation of movement in investments

accounted for using the equity method:

Balance at 1 January 14,267 9,657

Additional investment in associate 5,867 3,409

Share of losses (post significant influence) (959) (1,371)

Impairment reversal / (charge) (ii) - 2,572

Balance at 31 December 19,175 14,267

The fair value of Exco Resources Limited (“Exco”) is $45,194,520 (2009: $14,805,510), this is based on the priced quoted on

the Australia Securities Exchange as at 31 December 2010.

Name of entity

Country of incorporation Principal activity

Ownership interest

2010

%

2009

%

Associates

Exco Resources Limited Australia Mineral exploration 22.9 20.2

(i) The reporting date of Exco is 30 June. For the purposes of applying the equity method of accounting, the financial

statements of the associate for the year ended 30 June 2010 (2009: 30 June 2009) and financial statements for the six

months ended 31 December 2010 (2009: 31 December 2009) have been used.

(ii) During the 2009 financial year the impairment charge of $2,572,182 recorded on the Exco investment was reversed.

Summarised financial information in respect of the Group‟s associates is set out below:

Consolidated

2010

$’000

2009

$’000

Financial position:

Total assets 82,926 77,454

Total liabilities 6,766 (15,645)

Net assets 76,160 61,809

Group‟s share of associates‟ net assets 17,441 12,485

Financial performance:

Total revenue 38,345 683

Total profit / (loss) for the year before tax 9,597 (3,928)

Income tax expense (806) -

Net profit / (loss) for the year 8,791 (3,928)

Group‟s share of associate‟s profit / (loss) (959) (1,371)

Dividends received from associates

No dividends were received during the year (2009: Nil) from its associate.

Commitments

The Group‟s share of the exploration commitments and operating leases of associates is disclosed in note 23.

For

per

sona

l use

onl

y



38

12. Other financial assets Consolidated

2010

$’000

2009

$’000

Current

At fair value

Options – at fair value (ii) 203 4,523

203 4,523

Non-current

At fair value

Available for sale – shares at fair value (i) 3,052 6,331

3,052 6,331

(i) On 16 April 2009, Ivanhoe Australia announced that it had entered into a private placement investment in, and a

joint-venture agreement with, Emmerson Resources Limited („Emmerson‟). Emmerson is an Australian mineral

exploration company listed on the ASX. The private placement consisted of 22.61 million units at a price of $0.13

per share and for a cost of $2.939m which represents the fair value of the private placement. This has resulted in

Ivanhoe Australia holding approximately 10% of Emmerson common shares. The recorded fair value at 31

December 2010 of $3,052,350 (2009: $6,330,800) has been determined by reference to the price of $0.135 per

share quoted on the Australia Securities Exchange as at 31 December 2010 (2009: $0.28). The gain on available

for sale assets has been recognised in equity.

(ii) At the time of entering the joint venture agreement and private placement, Ivanhoe Australia received 27.9 million

share options in Emmerson. One full share option allows Ivanhoe Australia to purchase one Emmerson common

share at a price of $0.20 on, or before, April 16, 2011. These options were fair valued upon acquisition and at

period end with any gain or loss taken to the income statement. The options were acquired for nil consideration.

The recorded fair value at 31 December 2010 of $203,288 (2009: $4,523,273) has been determined using the

Black-Scholes option pricing model at $0.007 (2009: $0.162) per share. At April 16, 2009 the options were valued at

$1,437,350 at $0.052 per share.

Fair value of financial instruments

The fair values of the financial assets were determined as follows:

The fair value of the share on recognition and subsequently has been determined with reference to quoted market

prices; and

The fair value on recognition of the share options has been determined using the Black-Scholes option pricing

method; and

The subsequent fair value of the share options has been determined with reference to quoted market prices.

13. Non-current other receivables

Consolidated

2010

$’000

2009

$’000

Security deposits (i) 145 3,817

145 3,817

(i) The current year security deposits relate to Exploration Permits held by the Queensland Government Department

of Mines and Energy. The prior year deposits held by the Queensland Government Department of Mines and Energy

is a combination of a performance guarantee in relation to the rehabilitation of the mine site area and deposits for

Exploration Permits.

For

per

sona

l use

onl

y



39

14. Property, plant and equipment

Consolidated

Leasehold

land

Buildings

Plant and equipment at

cost Total

$’000 $’000 $’000 $’000

Gross carrying amount

Balance at 1 January 2009 1,351 664 2,773 4,788

Additions - 731 858 1,589

Disposals - - - -

Balance at 1 January 2010 1,351 1,395 3,631 6,377

Additions - 300 3,079 3,379

Asset Acquisition (i) - 13,584 37,691 51,275

Disposals - - (80) (80)

Balance at 31 December 2010 1,351 15,279 44,321 60,951

Accumulated depreciation

Balance at 1 January 2009 (237) (154) (614) (1,005)

Disposals - - - -

Depreciation expense (47) (111) (572) (730)

Balance at 1 January 2010 (284) (265) (1,186) (1,735)

Disposals - - 8 8

Depreciation expense (47) (149) (738) (934)

Balance at 31 December 2010 (331) (414) (1,916) (2,661)

Net book value

As at 31 December 2009 1,067 1,130 2,445 4,642

As at 31 December 2010 1,020 14,865 42,405 58,290

(i) On 30 September 2010, the Company completed its acquisition of the Osborne Copper and Gold assets.

The assets acquired consisted of property plant equipment, buildings, inventories (note 9) and prepayments (note 10).

The liabilities assumed under the terms of the transaction were the rehabilition provision and an onerous contract (note 19).

Aggregate depreciation allocated, which is recognised as an expense during the year:

Consolidated

2010

$’000

2009

$’000

Leasehold land 47 47

Buildings 149 111

Plant and equipment 738 572

934 730

For

per

sona

l use

onl

y



40

15. Intangibles

Consolidated

Mine Tenements Total $’000 $’000

Gross carrying amount

Balance at beginning of year 8,494 8,494

Balance at 31 December 2010 8,494 8,494

Accumulated amortisation and impairment

Balance at beginning of year - -

Balance at 31 December 2010 - -

Net book value

As at 31 December 2009 8,494 8,494

As at 31 December 2010 8,494 8,494

The Company did not hold any intangible assets during the current or comparative reporting period.

16. Trade and other payables

Consolidated

2010

$’000

2009

$’000

Trade payables (i) 7,212 4,723

Accrued expenses and sundry payables 735 682

7,947 5,405

(i) Payment terms for the Consolidated entity during the current year and comparative period average 30 days.

17. Borrowings

Consolidated

2010

$’000

2009

$’000

Unsecured – at amortised cost

Loans from:

Ultimate parent entity (i) 28,788 52,570

28,788 52,570

Disclosed in the financial statements as:

Non-current borrowings 28,788 52,570

28,788 52,570

(i) The amount payable to the ultimate parent entity, Ivanhoe Mines Ltd, is by way of a 5 year maturity loan from 17

June 2008 and is interest free for a period of 18 months from 17 June 2008 and thereafter accrues interest at the

rate of BBR plus 2.5% per annum. The loan is repayable in full on 17 June 2013. Interest expense accrued for the

financial year is $3,741,529 (2009: $140,268).

During the year an amount of $56,524,000 (2009: nil) was repaid to Ivanhoe Mines Ltd. The repayment amount

consisted of the repayment of the line of credit totalling $29,614,550 (including interest amount of $614,550) and

part repayment of the loan totalling $26,909,450 (including interest of $1,790,551).

On the 30 December 2009, the consolidated entity entered into a loan agreement for a $30 million Line of Credit

with Ivanhoe Mines Ltd. Each advance under this Line of Credit incurs interest at a rate of BBR plus 4% per

annum. During the year, $29,000,000 was drawn down from the line of credit (2009: nil). Borrowing costs of

$614,550 (2009: nil) were incurred on the drawn down funds (2009: nil).

For

per

sona

l use

onl

y



41

18. Parent entity disclosures

Financial position

2010

$’000

2009

$’000

Assets

Current assets 160,512 14,288

Non – current assts 49,703 31,029

Total Assets 210,215 45,317

Liabilities

Non – current liabilities 28,788 52,570

Total Liabilities 28,788 52,570

Equity

Issued capital 390,746 135,496

Retained earnings (238,396) (159,610)

Reserves

Investment revaluation 80 2,374

Share based payment 10,079 14,487

Share option 18,918 -

Total Equity 181,427 (7,253)

Financial performance

Loss for the year (i) (78,786) (51,506)

Other comprehensive income net of tax (2,294) 2,374

Total comprehensive income (81,080) (49,132)

(i) Loss for the year included an impairment charge recognised during the year based on the liquidity and recoverable

value of assets of the subsidiary entity.

Guarantees entered into by the parent entity in relation to the debts of its subsidiaries

The parent entity, Ivanhoe Australia Limited, has given a letter of financial support to guarantee that the wholly-owned

subsidiary entities will meet their debts as and when they fall due. The total liabilities of the subsidiaries, excluding amounts

owed to the parent entity, are:

2010

$’000

2009

$’000

Total liabilities of subsidiary 52,713 9,686

Contingent liabilities of the parent entity

2010

$’000

2009

$’000

Financial assurance guarantees (i) 22,014 -

(i) During the financial year, the parent entity entered into an agreement as guarantor to it‟s subsidiary entities for

Guarantees provided to the Queensland Department of Mines and Energy in satisfaction of financial assurances

required to be held to ensure compliance with relevant provisions of the Mineral Resources Act 1989, the

Environmental Protection Act 1994 and Environmental Protection and Other Legislation Amendment Act 2000.

For

per

sona

l use

onl

y



42

19. Provisions

Consolidated

2010

$’000

2009

$’000

Current

Employee benefits 841 622

Onerous contract (note 14) 3,598 -

4,439 622

Non-current

Rehabilitation provision 31,842 3,720

Onerous contract 8,485 -

40,327 3,720

44,766 4,342

Rehabilitation provision

Consolidated

2010

$’000

2009

$’000


Increase in provision (i) - 548

Additional provision acquired (ii) 28,122 -

Balance at end of year 31,842 3,720

(i) In 2009, an independent environmental consultant prepared a revised plan of operations resulting in an increase in

the provision for rehabilitation costs based on current market rates.

(ii) An additional rehabilitation provision is required for the “Osborne Project Plan of Operations” which relates to the

Osborne mine site acquired during the year (note 14).

Onerous contract provision

Consolidated

2010

$’000

2009

$’000


Provision acquired (iii) 13,666 -

Provision recognised during the year (1,583) -

Balance at end of year 12,083 -

(iii) A provision is required for minimum supply requirements in gas supply agreements. The agreements were acquired

during the year as part of the Osborne mine site acquisition (note 14).

For

per

sona

l use

onl

y



43

20. Issued capital and contributed equity

Consolidated

2010

$’000

2009

$’000

Ordinary shares 385,744 130,494

Contributed equity 5,002 5,002

390,746 135,496

Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital from

1 July 1998. Therefore, the Company does not have a limited amount of authorised capital and issued shares do not have a

par value.

2010 2009

No. $’000 No. $’000

Ordinary shares

Balance at beginning of year 318,300,203 130,494 312,500,000 118,900

Issue of shares from entitlement offer (i) 93,458,650 250,243 - -

Share issue costs - (8,741) - -

Performance rights exercised 6,651,250 13,748 5,800,203 11,594

Balance at end of financial year 418,410,103 385,744 318,300,203 130,494

Ordinary shares carry one vote per share and carry the right to dividends.

(i) Entitlement Offering: On 13 August 2010, Ivanhoe Australia offered shareholders the right to acquire 1 new share for

every 4 existing shares held and 1 free attaching option for every 2 new shares acquired under the entitlement offer

(refer note 21).

2010

$’000

2009

$’000

Contributed equity

Discount on intercompany loan 7,145 7,145

Deferred tax attributable (2.143) (2.143)

Balance at end of financial year 5.002 5,002

21. Reserves

Consolidated

2010

$’000

2009

$’000

Investment revaluation reserve 80 2,374

Share based payment reserve 10,079 14,487

Share option reserve 18,918 -

29,077 16,861

Investment revaluation reserve

Consolidated

2010

$’000

2009

$’000

Balance at beginning of year 2,374 -

Valuation gain / (loss) recognised (3,278) 3,391

Deferred tax attributable to loss/gain 984 (1,017)

Balance at end of year 80 2,374

The investments revaluation reserve arises on the revaluation of available-for-sale financial assets. Where a revalued

financial asset is sold that portion of the reserve which relates to that financial asset, and is effectively realised, is in the

profit or loss. Where a revalued financial asset is impaired the portion of the reserve which relates to that financial asset

is recognised in the profit or loss.

For

per

sona

l use

onl

y



44

21. Reserves (con’t)

Share based payments reserve

Consolidated

2010

$’000

2009

$’000


Performance rights exercised during the

year (13,748) (11,594)

Recognised during the year 9,348 12,676

Performance rights cancelled during the

year (8) -

Balance at end of year 10,079 14,487

The share based payments reserve arises on the grant of performance rights to directors and employees under the share

plan. Amounts are recognised in accordance with note 2(t). Amounts are transferred out of the reserve and into issued

capital when the performance rights are exercised. Further information about share based payment to employees is made in

note 32 to the financial statements.

Share option reserve

Consolidated

2010

$’000

2009

$’000


Recognised during the year (note 20 (i)) 18,918 -

Balance at end of year 18,918 -

As at 31 December 2010 the consolidated group has 46,729,404 share options on issue (2009: nil), exercisable on a 1:1 basis for 46,729,404 ordinary shares of the consolidated group (2009: nil) at an exercisable price of $3.38. The options expire on 20 September 2011. As at the date of this report, a total of 46,729,204 such options were on issue. During and since the end of the financial year the Company has issued a total of 200 fully paid ordinary shares as a result of the exercise of such options.

A holder of an option does not have a right to participate in any new issue of securities to existing shareholders by virtue of holding the option, unless they exercise their option, and acquire the underlying share, prior to the record date for determining entitlements to the new issue of securities and participate in the new issue as a result of being a holder of shares.

22. Accumulated losses Consolidated

2010

$’000

2009

$’000

Balance at beginning of year (159,611) (107,385)

Net (loss) attributable to members of the

parent entity (78,786) (52,226)

Balance at end of year (238,397) (159,611)

For

per

sona

l use

onl

y



45

23. Commitments Consolidated

2010

$’000

2009

$’000

(a) Exploration commitments

In order to maintain current rights of tenure to

exploration and mining tenements there is an

annual exploration expenditure requirement up

until the expiry.

These obligations, which are subject to

renegotiation upon expiry, are not

provided for in the financial statements and are

payable:

- Not longer than 1 year 5,287 7,603

- Longer than 1 year and not longer than 5 years 18,208 20,851

- Longer than 5 years - -

23,495 28,454

Group‟s share of associates exploration

commitments

- Not longer than 1 year 39 1,032

- Longer than 1 year and not longer than 5 years - -


39 1,032

(b) Operating leases

These obligations are not provided for in the financial report and are payable.

Non- cancellable operating rentals are as follows:

- Not longer than 1 year 119 163

- Longer than 1 year and not longer than 5 years - 119


119 282

Group‟s share of associates operating leases

Non- cancellable operating rentals are as follows:

- Not longer than 1 year 15 17

- Longer than 1 year and not longer than 5 years - 12


15 29

24. Contingent liabilities Consolidated

2010

$’000

2009

$’000

Guarantees

Details and estimates of maximum amounts of

contingent liabilities are as follows:

Financial assurance guarantees 22,014 3,817

In the current year the consolidated entity provided security guarantees to the Queensland Department of Mines and

Energy in satisfaction of financial assurances required to be held to ensure compliance with relevant provisions of the

Mineral Resources Act 1989, the Environmental Protection Act 1994 and Environmental Protection and Other Legislation

Amendment Act 2000. In the prior year security deposits were held in satisfaction of the financial assurances.

For

per

sona

l use

onl

y



46

25. Subsidiaries

Name of entity Country of incorporation

Ownership interest

2010 %

2009 %

Parent entity

Ivanhoe Australia Limited (i) Australia n/a n/a

Subsidiaries

Ivanhoe Cloncurry Mines Pty Limited (i)

Ivanhoe Australia Operations Pty Limited (i)

Ivanhoe (Osborne) Pty Limited (i)

Ivanhoe Australia Tennant Creek Pty Limited (i)

Australia

Australia

Australia

Australia

100

100

100

100

100

100

-

100

(i) These entities are part of the tax consolidated group.

26. Notes to the cash flow statement

Reconciliation of profit / (loss) for the period to net cash flows from operating activities

Consolidated

2010

$’000

2009

$’000

(Loss) for the year (78,786) (52,226)

Loss on disposal of property, plant and

equipment

32 -

Fair value of share options granted as income - (1,437)

Change in fair value of financial assets 4,320 (3,086)

Share of associates‟ loss 959 1,371

Depreciation of property, plant and equipment 934 730

Equity-settled share-based payment 9,341 12,676

Non-cash interest expense 3,742 141

Discount on intercompany loan - 4,763

Impairment of associate - (2,572)

Changes in net assets and liabilities:

(Increase) / decrease in assets:

Trade and other receivables (3,914) 808

Inventories (380) (110)

Other assets 2,819 (94)

Movement in deferred tax 984 (1,017)

Increase / (decrease) in liabilities:

Trade and other payables 2,543 2,000

Provisions (1,365) 727

Borrowings (3,742) -

Net cash from operating activities (62,513) (37,326)

For

per

sona

l use

onl

y



47

27. Financial instruments

(a) Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of

measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset,

financial liability and equity instrument are disclosed in note 2 to the financial statements.

(b) Financial Risk Management

The Company has exposure to various risks from the use of financial instruments. The Company‟s principal financial instruments comprise cash, receivables, payables and other financial assets and liabilities. This note presents information about the Company‟s exposure to risk from the use of financial instruments. Further quantitative disclosures are included throughout this financial report. Financial risks including credit risk, liquidity risk, and market risk (interest rate risk, commodity risk and foreign currency risk) are managed such to maintain an optimal capital structure. The Company does not enter into derivative transactions to manage financial risks.

(c) Credit risk management

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group.

The Group‟s exposure to credit risk at balance date in relation to each class of financial assets is the carrying amount of the

assets as indicated in the balance sheet. Cash and term deposits are only made with selected counterparties with a strong

Standard & Poors long term rating. Adherence to the treasury policy is monitored on a monthly basis.

(d) Liquidity risk management

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company‟s approach to managing liquidity involves monthly cash flow forecasting such to ensure that sufficient funds are always available to undertake planned activities.

The Company‟s and the Group‟s exposure to interest rate risk is set out below.

Interest rate sensitivity analysis

(i) Financial assets

As at 31 December 2010, the Group held $158,982,571 (2009:$11,822,725) in cash and cash equivalents with interest revenue of $3,774,375 (2009: $1,549,528) for the year then ended. A sensitivity of 1.5% (2009: 1.5%) has been selected as this is considered reasonable given the current interest rate and prior year movements of interest rate in the market. A 1.5% (2009: 1.5%) increase in the cash rate would have resulted in a $2,384,739 (2009:$177,341) increase in interest revenue and equity. A 1.5% (2009: 1.5%) decrease in the cash rate would have resulted in a $2,384,739 (2009:$177,341) decrease in interest revenue and equity.

(ii) Financial liabilities

As at 31 December 2009, the Group owed $28,787,605 (2009: $52,570,075) to the ultimate parent entity, Ivanhoe Mines Ltd.

The loan accrues interest at the rate of BBR plus 2.5% per annum. The loan was interest free until 17 December 2009.

Interest expense for the financial year was $3,126,978 (2009: $140,268). A sensitivity of 1.5% has been selected as this is

considered reasonable given the current interest rate and prior year movements of interest rate in the market. A 1.5%

increase in the cash rate would have resulted in an $561,300 (2009: $21,000) increase in interest expense and decrease in

equity. A 1.5% decrease in the cash rate would have resulted in an $46,905 (2009: $21,000) decrease in interest expense

and increase in equity.

For

per

sona

l use

onl

y



48

27. Financial instruments (con’t)

(d) Liquidity risk management (con’t)

Maturity profile of financial instruments

The following tables details the Company and Group‟s contractual maturity for its non-derivative financial assets and

liabilities. The tables have been drawn up based on the undiscounted cash flows of financial assets and liabilities based on

the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.

Group

Weighted Average Effective Interest Rate

1 -5

years

Less than 1 month

1 – 3 months

3 months to 1 year

5+ years

$’000 $’000 $’000 $’000 $’000

2010

Financial assets

Trade and other receivables 4,418 - - - -

Other financial assets (note 12) 3,255

Financial liabilities

Variable Interest rate

instruments

(i) 7.38% - - - 28,788

-

Trade and other payables 7,947 - - - -

2009

Financial assets

Trade and other receivables 503 - - - -

Other financial assets (note 12) 10,854


Variable Interest rate

instruments

(i) 7.38% - - - 52,570

-

Trade and other payables 5,405 - - - -

(i) The interest rate is the current BBR plus 2.5% per annum.

The consolidated entity has a loan agreement with an outstanding balance of $28.8 million. The loan must be repaid in full on 17 June 2013.

The company continues to manage operating, exploration and development costs to ensure that the company and the economic entity can continue to pay their debts as and when they fall due over the twelve months from the date of this report.

(e) Fair value of financial assets and liabilities

On-balance sheet

The net fair value of cash and cash equivalents and non-interest bearing monetary financial assets and financial liabilities of

the Group approximates their carrying amounts.

The net fair value of other monetary financial assets and liabilities is based upon discounting the expected future cash flows

by the current interest rates for assets and liabilities with similar risk profiles.

For

per

sona

l use

onl

y



49


(f) Categories of financial assets and liabilities

Consolidated

2010

$’000

2009

$’000

Financial assets

Current

Other financial assets (note

12)

203 4,523

Trade and other receivables

(note 8)

4,418 503

Non – current

Other financial assets (note

12)

3,052 6,331

7,673 11,357


Borrowings (note 17) 28,788 52,570

Trade and other payables

(note 16)

7,947 5,405

36,735 57,975

(g) Other price risks

The Group is exposed to equity price risks arising from equity instruments. Equity instruments are held for strategic rather

than trading purposes. The Group does not actively trade these investments.

Equity price sensitivity analysis

At 31 December 2010, if the equity prices had been 5% higher or lower:

Other financial assets subject to equity price risk

Consolidated 2010 2009 $’000 $’000

Options – at fair value (note 12) 203 4,523

Available for sale – shares at fair value (note 12) 3,052 6,331

-5%

2010

$’000

-5%

2009

$’000

+5%

2010

$’000

+5%

2009

$’000

Change in loss 10 226 (10) (226)

Change in reserves 153 317 (153) (317)

Change in equity (163) (543) 163 543

For

per

sona

l use

onl

y



50


(h) Foreign currency risk management

Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities and denominated in a currency that is not the entity‟s functional currency. The consolidated entity manages foreign currency risk by min imizing the amounts of foreign currency required and buying foreign currency only at the time it is required. Trade payables and trade receivables below are held in the subsidiaries in United States Dollars (USD).

Amounts of foreign currency in trade creditors

Consolidated

2010 2009 $’000 $’000

Trade Payables (USD) (196) (29)

Trade Receivables (USD) 56 53

140 24

Movement in USD against AUD

-20%

2010

$’000

-20%

2009

$’000

+20%

2010

$’000

+20%

2009

$’000

Change in loss 28 5 (28) (5)

Change in equity 28 5 (28) (5)

The sensitivity of 20% has been selected as this considered reasonable given the current level of both short term and long term exchange movement for these currencies and the above analysis assumes all other variables remain constant.

(i) Capital risk management

The Group‟s capital structure consists of deposits with banks and a loan from its ultimate parent entity (refer note 17).

The Group‟s objectives when managing capital are to safeguard the Group‟s ability to continue as a going concern, by

maintaining a strong capital base sufficient to maintain future exploration and development of its projects. In order to maintain

or adjust the capital structure, the Group may return capital to shareholders, issue new shares, re-negotiate intercompany

loan arrangements with its parent or sell assets to provide cashflow.

The Group monitors capital on the basis of the gearing ratio, however there are no external borrowings as at balance date.

Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.

Risk management policies and procedures are established with regular monitoring and reporting.

Gearing ratio

The Group‟s Board reviews the capital structure on an annual basis. The gearing ratio at year end was as follows:

Consolidated

2010

$’000

2009

$’000

Financial assets

Debt (i) 28,788 52,570

Cash and cash equivalents (158,983) (11,823)

Net debt/(cash surplus) (130,195) 40,747

Equity (ii) 181,426 (7,254)

Net debt/(cash surplus) to

equity ratio N/A (562%)

(i) Debt is defined as long- and short-term borrowings, as detailed in note 17.

(ii) Equity includes all capital and reserves.

(j) Three tier hierarchy of fair value

The following table provides an analysis of financial instruments that are measured subsequent to

initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value

is observable.

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active

markets for identical assets or liabilities.

For

per

sona

l use

onl

y



51


Level 2 fair value measurements are those derived from inputs other than quoted prices included

within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or

indirectly (i.e. derived from prices).

Level 3 fair value measurements are those derived from valuation techniques that include inputs

for the asset or liability that are not based on observable market data (unobservable inputs).

Instrument

Level 1

$’000

Level 2

$’000

Level 3

$’000

Available for sales shares in Emmerson at fair value 3,052 - -

Options in Emmerson held as fair value through profit and loss - 203 -

28. Key management personnel compensation

Details of Key management personnel

Key management is defined as directors and senior management as referred to in the remuneration report.

i. Key management personnel compensation

The aggregate compensation made to directors and other members of key management personnel of the company and the

Group is set out below:

Consolidated

2010

$’000

2009

$’000

Short-term employee benefits 1,840 1,179

Post-employment benefits 130 96

Share-based payments 5,525 10,092

7,495 11,367

ii. Key management personnel equity holdings

Fully paid ordinary shares of Ivanhoe Australia Limited

Balance at 1

January

Granted as compensati

on

Received on

exercise of rights

Net other change

Bal at 31 December

Balance held

nominally No. No. No. No. No. No.

2010

Directors

Mr P Reeve - - 3,187,500 (i) 2,000 3,189,500

Mr R M Friedland (ii) 2,000,000 - 1,000,000 - 3,000,000

Mr S Riggall - - 125,000 - 125,000

Mr D Kirwin 850,000 - 375,000 - 1,225,000

Mr J A Macken 250,000 - 125,000 - 375,000

Mr P G Meredith 250,000 - 125,000 - 375,000

Mr W B Hayden 150,000 - 75,000 - 225,000

Mr D Woodall 75,000 - 37,500 - 112,500

Mr D M Korbin 60,000 - 25,000 (85,000) -

Professor I R Plimer 50,000 - 25,000 (iii)12,500 87,500

Mr K Wightman 250,000 - - - 250,000

Senior Management

Mr J E Eltham - - - - -

Mr N Valk - - - - -

Mr B J Goss 375,000 - 187,500 - 562,500

Mr P Carter 405,000 - 187,500 - 592,500

Mr D J Millman 120,000 - 75,000 - 195,000

For

per

sona

l use

onl

y



52

28. Key management personnel compensation (con’t)

Balance at 1

January

Granted as compensati

on

Received on

exercise of rights

Net other change

Bal at 31 December

Balance held

nominally No. No. No. No. (i) No. No.

2009

Directors

Mr P Reeve - - - - -

Mr R M Friedland (ii) - - 2,000,000 - 2,000,000

Mr D Kirwin 100,000 - 750,000 - 850,000 -

Mr J A Macken - - 250,000 - 250,000

Mr P G Meredith - - 250,000 - 250,000

Mr W B Hayden - - 150,000 - 150,000

Mr D Woodall - - 75,000 - 75,000

Mr D M Korbin - - 50,000 10,000 60,000

Professor I R Plimer - - 50,000 - 50,000

Mr K Wightman 100,000 - 50,000 100,000 250,000

Senior Management

Mr B J Goss - - 375,000 - 375,000

Mr P Carter - - 375,000 30,000 405,000

Mr D J Millman - - 150,000 (30,000) 120,000

(i) Shares traded on the open market

(ii) Mr R M Friedland owns 101,360,740 shares in the ultimate parent company, Ivanhoe Mines Ltd. which holds

259,536,627 (at 24 March 2011) ordinary shares in Ivanhoe Australia Limited.

(iii) Shares rights exercised under the offering (refer note 20 (i)).

No other key personnel hold or traded ordinary shares during the year.

For

per

sona

l use

onl

y



53

28. Key management personnel compensation (con’t)

Performance Rights of Ivanhoe Australia Limited

Balance at 1

January Granted as

compensation Exercised Net other change

Bal at 31 December

Bal vested at 31

December

Vested but not

exercisable

Vested and

exercisable

Rights vested during year

No. No. No. No. No. No. No. No. No.

2010

Directors

Mr R M Friedland 2.000,000 - 1,000,000 - 1,000,000 3,000,000 - - 1,000,000

Mr P Reeve 4,250,000 - 3,187,500 - 1,062,500 3,187,500 - 1,062,500

Mr S Riggall - 500,000 125,000 - 375,000 375,000 125,000

Mr D Kirwin 750,000 - 375,000 - 375,000 1,125,000 - - 375,000

Mr J A Macken 250,000 - 125,000 - 125,000 375,000 - - 125,000

Mr P G Meredith 250.000 - 125,000 - 125,000 375,000 - - 125.000

Mr W B Hayden 150,000 - 75,000 - 75.000 225.000 - - 75,000

Mr D Woodall 75,000 - 37,500 - 37,500 112,500 - - 37,500

Mr D M Korbin 50,000 - 25,000 - 25,000 75,000 - - 25,000

Prof. I R Plimer 50,000 - 25,000 - 25,000 75,000 - - 25,000

Mr K Wightman 50,000 - - - 50,000 75,000 - 25,000 25,000

Senior

Management

Mr J E Eltham - - - - - - - - -

Mr N Valk - - - - - - - - -

Mr B J Goss 375,000 - 187,500 - 187,500 375,000 - - 187,500

Mr P Carter 375,000 - 187,500 - 187,500 375,000 - - 187,500

Mr D J Millman 150,000 - 75,000 - 75,000 150,000 - - 75,000

Balance at 1

January Granted as

compensation Exercised Net other change

Bal at 31 December

Bal vested at 31

December

Vested but not

exercisable

Vested and

exerci-sable

Rights vested during year

No. No. No. No. No. No. No. No. No.

2009

Directors

Mr R M Friedland 4.000,000 - 2,000,000 - 2.000,000 2,000,000 - - 1,000,000

Mr P Reeve 4,250,000 - - - 4,250,000 2,125,000 - 2,125,000 1,062,500

Mr D Kirwin 1,500,000 - 750,000 - 750,000 750,000 - - 375,000

Mr J A Macken 500,000 - 250,000 - 250,000 250,000 - - 125,000

Mr P G Meredith 500,000 - 250,000 - 250,000 250,000 - - 125,000

Mr W B Hayden 300,000 - 150,000 - 150.000 150.000 - - 75,000

Mr D Woodall 150,000 - 75,000 - 75,000 75,000 - - 37,500

Mr D M Korbin 100,000 - 50,000 - 50,000 50,000 - - 25,000

Prof. I R Plimer 100,000 - 50,000 - 50,000 50,000 - - 25,000

Mr K Wightman 100,000 - 50,000 - 50,000 50,000 - - 25,000

Senior

Management

Mr B J Goss 750,000 - 375,000 - 375,000 375,000 - - 187,500

Mr P Carter 750,000 - 375,000 - 375,000 375,000 - - 187,500

Mr D J Millman 225,000 75,000 150,000 - 150,000 150,000 - - 93,750

All performance rights issued to key management personnel were made in accordance with the provisions of the employee

share plan.

During the financial year 5,550,000 performance rights (2009: 4,525,000) were exercised by key management personnel.

Further details of the employee share plan and of performance rights granted during the 2010 and 2009 financial years are

contained in notes 32 to the financial statements.

29. Related party transactions

(a) Equity interests in related parties

Equity interests in subsidiaries

Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 25 to the financial statements.

(b) Equity interests in associates

Details of interests in associates are disclosed in note 11 to the financial statements.

For

per

sona

l use

onl

y



54

29. Related party transactions (con’t)

Transactions with other related parties (con’t)

(c) Transactions with key management personnel

i. Key management personnel compensation

Details of key management personnel compensation are disclosed in note 28 to the financial statements.

ii. Loans to key management personnel

There were no loans to key management personnel during the financial year.

iii. Other transactions with key management personnel of the Group

There were no other transactions with key management personnel of the Group during the financial year or in prior year.

iv. Transactions with key management personnel of Ivanhoe Australia Limited and Ivanhoe Mines Ltd

Robert M Friedland, John A Macken, Peter G Meredith, Douglas J Kirwin, David G Woodall are key management personnel

of Ivanhoe Mines Ltd. Information regarding the individual key management personnel compensation is provided in the

remuneration report section of the directors‟ report.

(d) Transactions with other related parties

Transactions between Ivanhoe Australia Limited and its related parties

During the financial year, the following transactions occurred between the Company and its other related parties:

Ultimate parent entity

Ivanhoe Australia Limited borrowed $29,000,000 (2009:nil) from Ivanhoe Mines Ltd (incorporated in Yukon, Canada).

Ivanhoe Australia Limited made repayments of $56,524,000 (2009: nil) to Ivanhoe Mines Ltd.

Ivanhoe Australia Limited entered into a $30,000,000 loan facility with Ivanhoe Mines Ltd on 31 December 2009 (note

17 (i))

The following balances arising from transactions between the Company and its related parties are outstanding at reporting

date:

Loans totalling $28,787,605 are repayable to Ivanhoe Mines Limited (2009:$52,570,075).

All amounts advanced to or payable to related parties are unsecured and are subordinate to other liabilities.

The amounts outstanding will be settled in cash.

A guarantee has been provided by the Company (refer note 18). An expense of $62,765,730 (2009:$42,010,845) has been

recognised in the period for impairment in the current year in respect of the amounts owed by related parties (refer note 18).

Transactions between the Company and its subsidiary were eliminated in the preparation of consolidated statements of the

Group.

Transactions between the Group and its related parties

During the financial year, the following transactions occurred between the Group and its other related parties:

Ultimate parent entity

Ivanhoe Mines Ltd charged Ivanhoe Cloncurry Mines Pty Limited $404,718 (2009:$ 208,273) for reimbursement of

costs incurred.

Ivanhoe Cloncurry Mines Pty Ltd charged Ivanhoe Mines Ltd $1,024,373 (2009: $448,548) for consultancy fees and

reimbursement of costs incurred.

Subsidiaries

Ivanhoe Australia mades advances of $79,811,226 (2008:$41,939,198) to Ivanhoe Cloncurry Mines Pty Ltd.

Loans totalling $219,094,878 are receivable from Ivanhoe Cloncurry Mines Pty Ltd (2009: $139,281,652 repayable).

For

per

sona

l use

onl

y



55

29. Related party transactions (con’t)

(d) Transactions with other related parties (con’t)

Other related parties

Ivanhoe Australia Limited charged Ivanhoe Nickel and Platinum $8,012 (2009:$143,343) for reimbursement of costs

incurred and services provided by Ivanhoe Australia Limited employees which includes a margin of $728

(2009:$13,031).

I2MS Pte Ltd provided IT services (including the cost and installation of a new accounting system) which were charged

to Ivanhoe Australia Limited at a cost of $1,045,214 (2009:$187,689) which includes a margin of $94,069

(2009:$15,352).

Ivanhoe Capital Services Limited charged Ivanhoe Cloncurry Mines Pty Limited consultancy fees of $46,285 (2009:

$27,677).

Ivanhoe Capital Corp. charged Ivanhoe Australia Limited $42,953 (2009: $9,892) for reimbursement of costs incurred.

Ivanhoe Philippines, Inc. charged Ivanhoe Cloncurry Mines Pty Limited for consultancy fees and reimbursement of costs

incurred of $56,883 (2009: $61,419).

GoviEx Gold Inc. charged Ivanhoe Australia Limited for reimbursement of costs incurred of $2,592 (2009: $2,239).

Global Mining Management Corp. charged Ivanhoe Australia Limited for reimbursement of costs incurred of $33,219

(2009: $22,116).

Ivanhoe Capital Aviation Ltd charged Ivanhoe Australia Ltd for management and investor related services and the

reimbursement of travel costs incurred of $986,217 (2009: nil).

The following balances arising from transactions between the Group and its related parties are outstanding at reporting date:

Loans totalling $28,787,605 are repayable to Ivanhoe Mines Ltd (2008: $52,570,075).

Net receivables totalling $57,056 are payable from Ivanhoe Mines Ltd (2009: Receivable of $46,164).

Net payables totalling $136,334 are payable to I2MS Pte Ltd (2009:$27,884).

No payables are payable to GoviEx Gold Inc. (2009: $1,909).

No payables are payable to Global Mining Management Corp. (2009: $1,410).

No receivables are payable from Ivanhoe Nickel and Platinum (2009: $12,070).

Net payables totalling $6,880 are payable to Ivanhoe Capital Services Limited (2009: $2,001).

Net payables totalling $2,609 are payable to Ivanhoe Capital Corp. (2009: nil).

All amounts advanced to or payable to related parties are unsecured and are subordinate to other liabilities.

The amounts outstanding will be settled in cash.

Other than as detailed in this note, no guarantees have been given to, or received from, other related parties. No expense

has been recognised in the period for bad or doubtful debts in respect of the amounts owed by other related parties.

Transactions between the Group and associate (if any) that were eliminated in the preparation of consolidated statements of

the Group.

(e) Parent entities

The parent entity in the Group is Ivanhoe Australia Limited. Ivanhoe Australia Limited‟s parent entity is IAL Holdings

Singapore Pte. Ltd. The ultimate parent entity is Ivanhoe Mines Ltd. Ivanhoe Mines Ltd is incorporated in Canada.

30. Remuneration of auditors

Consolidated

2010

$’000

2009

$’000

Auditor of the parent entity

Audit and review of the financial report 90 82

Taxation services - -

Other non-audit services

- Related to the capital raising 90 -

- Other - -

180 82

The auditor of Ivanhoe Australia Limited is Deloitte Touche Tohmatsu. Audit fees of the Company (and fees for non-audit

services provided by the auditor) are borne by the subsidiary company, Ivanhoe Cloncurry Mines Pty Limited.

For

per

sona

l use

onl

y



56

31. Earnings per share

Consolidated

2010

Cents

per share

2009

Cents

per share

Basic earnings (loss) per share (22.0) (16.7)

Diluted earnings (loss) per share (22.0) (16.7)

Basic earnings per share

The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as

follows:

2010

$’000

2009

$’000

Net Loss (i) (78,786) (52,226) (i) Net Loss is the same amount as loss after tax in the income statement

2010

No.

2009

No.

Weighted average number of ordinary shares for the purposes of

basic earnings per share 358,224,944 313,252,839

Diluted Earnings (Loss) Per Share

The performance rights held by rights holders have not been included in the weighted average number of ordinary shares for

the purposes of calculating diluted EPS as they do not meet the requirements for inclusion in AASB 133 “Earnings per

Share”. The rights are non-dilutive as they do not increase loss per share for continuing operations.

32. Share-based payments

Share-based payments have been made through performance rights under the “Share Acquisition Plan” and “Share Plan”.

(i) Share Acquisition Plan

On 8 September 2008, the Board of Directors approved the Employee Share Acquisition Plan (“Share Acquisition Plan”).

The Share Acquisition Plan provides for the offer to, and acquisition by the Company on behalf of selected Eligible

Employees (under the Ivanhoe Collective Agreement) of Shares:

where generally no cash consideration is required to be paid by the Eligible Employee for the acquisition of the

underlying Shares up to the value of $1,000 each year: and

where such shares continue to be held in the Share Acquisition Plan subject to a trading lock for a period of three years

after the acquisition date of the shares or as determined by the Plan Committee.

The shares are settled on the open market.

(ii) Share Plan

On 4 July 2008, (“inception”) the Board of Directors approved the Employee Share Plan (“Share Plan”) and offers of

Performance Rights to Directors and employees of the Company.

The Share Plan provides for the offer to, and acquisition by, selected Eligible Employees of:

rights to acquire Shares where generally no cash consideration is required to be paid for the acquisition of the

underlying Shares (“Performance Rights”); and

“unallocated” Shares, typically being Shares that are to be held in the Share Plan subject to a holding lock and

restrictions on voting and which are liable to be forfeited prior to allocation if any performance conditions attaching to

them are not satisfied and in certain other circumstances.

During the financial year the company issued 2,630,000 (2009:1,125,000) performance rights to employees. As at the date of

this report, a total of 9,917,000 performance rights (each convertible into one fully paid ordinary share) were on issue.

During and since the end of the financial year the Company has issued a total of 6,708,000 fully paid ordinary shares as a

result of the exercise of performance rights.

For

per

sona

l use

onl

y



57

32. Share-based payments (con’t)

The following share-based payment arrangements were in existence during the current and comparative reporting periods:

Number of Performance

Rights Expiry date

Exercise price

$

Fair value at grant date

$

Tranche 1 (Grant Date 6 August 2008) 4,168,750 1 September 2010 - $2.00




Tranche 1 (Grant Date 22 January 2009) 25,000 1 September 2010 - $0.38




Tranche 1 (Grant Date 26 October 2009) 131,250 1 September 2012 - $3.90




Tranche 1 (Grant Date 26 October 2009) 87,500 1 March 2012 - $3.90




Tranche 1 (Grant Date 1 December 2009) 37,500 1 September 2011 - $3.99







Tranche 1 (Grant Date 23 February 2010) 125,000 1 March 2012 - $3.15




Tranche 1 (Grant Date 27 May 2010) 43,750 1 March 2012 - $3.35




Tranche 1 (Grant Date 8 July 2010) 6,250 1 September 2010 - $2.57

Tranche 2 (Grant Date 8 July 2010) 6,250 1 September 2011 - $2.57

Tranche 3 (Grant Date 8 July 2010)) 6,250 1 September 2012 - $2.57

Tranche 4 (Grant Date 8 July 2010)) 6,250 1 September 2013 - $2.57

Tranche 1 (Grant Date 15 November 2010) 25,000 1 September 2012 - $3.35




Tranche 1 (Grant Date 15 November 2010) 182,500 1 March 2013 - $3.35








20,430,000

The weighted average fair value of the performance rights granted during the financial year is $3.31 (2009: $2.10). They

were priced using a Black-Scholes valuation model. Where relevant, the expected life used in the model has been adjusted

based on management‟s best estimates.

For

per

sona

l use

onl

y



58


2010

Inputs into the model

Option series Grant Date

23 February 2010 27 May 2010

8 July 2010

15 November 2010

Grant date share price $3.15 $3.35 $2.57 $3.35

Exercise price - - - -

Expected volatility 100% 100% 100% 100%

Performance right term (i) (i) (i) (i)

Dividend yield - - - -

Risk-free interest rate - - - -

2009

Inputs into the model

Option series Grant Date

6 August 2008 22 January 2009

26 October 2009

1 December 2009

Grant date share price $2.00 $0.38 $3.90 $3.99

Exercise price - - - -

Expected volatility 100% 100% 100% 100%

Performance right term (i) (i) (i) (i)

Dividend yield - - - -

Risk-free interest rate - - - -

(i) All performance rights expire on the earlier of their expiry date or termination of the individual‟s employment. The

Directors and employees are entitled to exercise their performance rights and be issued with the shares in 4 equal

tranches after vesting (subject to being in employment). However, unvested performance rights will immediately vest

in the event of a change in control of the Company or its ultimate holding company and may, at the Board‟s

discretion, vest in special circumstances such as death, permanent disability or redundancy.

The following reconciles the outstanding performance rights granted under the employee share plan at the beginning and

end of the financial year:

2010 2009

Number of

rights

Weighted

average

exercise price

$

Number of

rights

Weighted

average

exercise price

$

Balance at beginning of the financial year 11,527,500 $nil 16,675,000 $nil

Granted during the financial year 2,630,000 $nil 1,125,000 $nil

Forfeited during the financial year (12,500) $nil (472,297) $nil

Exercised during the financial year (6,651,250) $nil (5,800,203) $nil

Expired during the financial year - - - -

Balance at end of the financial year (iii) 7,493,750 $nil 11,527,500 $nil

Exercisable at end of the financial year 370,000 $nil 2,125,000 $nil

For

per

sona

l use

onl

y



59


(ii) Exercised during the financial year

The following performance rights granted under the employee share option plan were exercised during the financial year:

2010

Performance Rights series

Number exercised

Exercise date

Share price at exercise

date

(1) Issued 6 August 2008 1,100,000 12/01/10 $3.75

(2) Issued 6 August 2008 1,100,000 12/01/10 $3.75

(1) Issued 6 August 2008 18,750 23/02/10 $3.15

(2) Issued 6 August 2008 18,750 23/02/10 $3.15

(1) Issued 6 August 2008 75,000 31/03/2010 $3.45

(2) Issued 6 August 2008 75,000 31/03/2010 $3.45

(1) Issued 1 December 2009 18,750 31/03/2010 $3.45

(1) Issued 26 October 2009 87,500 31/03/2010 $3.45

(1) Issued 6 August 2008 12,500 27/05/2010 $3.35

(2) Issued 6 August 2008 12,500 27/05/2010 $3.35

(3) Issued 6 August 2008 12,500 27/05/2010 $3.35

(1) Issued 23 February 2010 125,000 27/05/2010 $3.35

(1) Issued 6 August 2008 12,500 08/07/2010 $2.57

(2) Issued 6 August 2008 12,500 08/07/2010 $2.57

(1) Issued 6 August 2008 37,500 29/07/2010 $2.82

(2) Issued 6 August 2008 37,500 29/07/2010 $2.82

(3) Issued 6 August 2008 3,337,500 17/09/2010 $2.85

(3) Issued 6 August 2008 188,000 07/10/2010 $3.11

(1) Issued 21 May 2010 43,750 07/10/2010 $3.11

(2) Issued 5 February 2009 25,000 15/11/2010 $3.35

(3) Issued 5 February 2009 25,000 15/11/2010 $3.35

(3) Issued 6 August 2008 213,750 15/11/2010 $3.35

(2) Issued 1 December 2009 18,750 15/11/2010 $3.35

(1) Issued 26 October 2009 43,750 15/11/2010 $3.35

6,651,250

2009

Performance Rights series

Number exercised

Exercise date

Share price at exercise

date

(1) Issued 6 August 2008 137,500 05/02/09 $0.36

(2) Issued 6 August 2008 33,628 05/02/09 $0.36

(1) Issued 6 August 2008 175,000 15/09/09 $3.38

(2) Issued 6 August 2008 175,000 15/09/09 $3.38

(1) Issued 6 August 2008 250,000 26/10/09 $3.90

(2) Issued 6 August 2008 250,000 26/10/09 $3.90

(1) Issued 6 August 2008 2,342,500 1/12/09 $3.99

(2) Issued 6 August 2008 2,342,500 1/12/09 $3.99

(3) Issued 6 August 2008 6,575 1/12/09 $3.99

(1) Issued 6 August 2008 43,750 14/12/09 $3.94

(2) Issued 6 August 2008 43,750 14/12/09 $3.94

5,800,203

(iii) Balance at end of the financial year

The share performance rights outstanding at the end of the financial year had an exercise price of $nil (2009: $nil), and a

weighted average remaining contractual life of 962 days (2009: 513 days).

33. Subsequent events

There has not been any other matter or circumstance that has arisen since the end of the financial period, that has

significantly affected, or may significantly affect, the operations of the Company, the results of those operations, or the state

of affairs of the Company in future financial periods.

For

per

sona

l use

onl

y



60

Directors’ declaration

The directors declare that:

(a) in the directors‟ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as

and when they become due and payable;

(b) the attached financial statementsare in compliance with International Financial Reporting Standards, as stated in

note 2 to the financial statements;

(c) in the directors‟ opinion, the attached financial statements and notes thereto are in accordance with the

Corporations Act 2001, including compliance with accounting standards and give a true and fair view of the

financial position and performance of the consolidated entity; and

(d) the directors have been given the declarations required by s.295A of the Corporations Act 2001.

Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.

On behalf of the Directors

Peter Reeve

Director and CEO


For

per

sona

l use

onl

y

Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited

61

Deloitte Touche Tohmatsu

ABN 74 490 121 060 550 Bourke Street Melbourne VIC 3000 GPO Box 78 Melbourne VIC 3001 Australia DX 111 Tel: +61 (0) 3 9671 7000 Fax: +61 (0) 3 9671 7001 www.deloitte.com.au

29 March 2011

Dear Board Members,

Ivanhoe Australia Limited

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following

declaration of independence to the directors of Ivanhoe Australia Limited.

As lead audit partner for the audit of the financial statements of Ivanhoe Australia Limited for the financial

year ended 31 December 2010, I declare that to the best of my knowledge and belief, there have been no

contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit;

and

(ii) any applicable code of professional conduct in relation to the audit.

Yours sincerely,

DELOITTE TOUCHE TOHMATSU

Ian Sanders

Partner

Chartered Accountants

The Board of Directors

Ivanhoe Australia Limited

Level 9, 479 St Kilda Road

MELBOURNE VIC 3000

For

per

sona

l use

onl

y

Liability limited by a scheme approved under Professional Standards Legislation.

Member of Deloitte Touche Tohmatsu Limited

62

Deloitte Touche Tohmatsu

ABN 74 490 121 060 550 Bourke Street Melbourne VIC 3000 GPO Box 78 Melbourne VIC 3001 Australia DX: 111 Tel: +61 (03) 9671 7000 Fax: +61 (03) 9671 7001 www.deloitte.com.au

Independent Auditor’s Report

to the members of Ivanhoe Australia Limited

Report on the Financial Report

We have audited the accompanying financial report of Ivanhoe Australia Limited, which comprises

the statement of financial position as at 31 December 2010, and the statement of comprehensive

income, the cash flow statement and the statement of changes in equity for the year ended on that date,

notes comprising a summary of significant accounting policies and other explanatory information, and

the directors’ declaration of the consolidated entity comprising the company and the entities it

controlled at the year’s end or from time to time during the financial year as set out on pages 20 to 60.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the financial

report in accordance with Australian Accounting Standards (including the Australian Accounting

Interpretations) and the Corporations Act 2001. This responsibility includes establishing and

maintaining internal control relevant to the preparation and fair presentation of the financial report that

is free from material misstatement, whether due to fraud or error; selecting and applying appropriate

accounting policies; and making accounting estimates that are reasonable in the circumstances. In

Note 2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of

Financial Statements, that compliance with the Australian equivalents to International Financial

Reporting Standards ensures that the financial report, comprising the financial statements and notes,

complies with International Financial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted

our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we

comply with relevant ethical requirements relating to audit engagements and plan and perform the

audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures

in the financial report. The procedures selected depend on the auditor’s judgement, including the

assessment of the risks of material misstatement of the financial report, whether due to fraud or error.

In making those risk assessments, the auditor considers internal control relevant to the entity’s

preparation and fair presentation of the financial report in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness

of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting

policies used and the reasonableness of accounting estimates made by the directors, as well as

evaluating the overall presentation of the financial report.

For

per

sona

l use

onl

y

63

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for

our audit opinion.

Auditor’s Independence Declaration

In conducting our audit, we have complied with the independence requirements of the Corporations

Act 2001. We confirm that the independence declaration required by the Corporations Act 2001,

provided to the directors of Ivanhoe Australia Limited on 29 March 2011 would be in the same terms

if provided to the directors as at the date of this auditor’s report.

Auditor’s Opinion

In our opinion:

(a) the financial report of Ivanhoe Australia Limited is in accordance with the Corporations Act 2001,

including:

(i) giving a true and fair view of the consolidated entity’s financial position as at 31 December

2010 and of its performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards (including the Australian Accounting

Interpretations) and the Corporations Regulations 2001; and

(b) the financial report also complies with International Financial Reporting Standards as disclosed in

Note 2.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 7 to 14 of the directors’ report for the

year ended 31 December 2010. The directors of the company are responsible for the preparation and

presentation of the Remuneration Report in accordance with section 300A of the Corporations Act

2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit

conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion the Remuneration Report of Ivanhoe Australia Limited for the year ended 31 December

2010, complies with section 300A of the Corporations Act 2001.

DELOITTE TOUCHE TOHMATSU

Ian Sanders

Partner

Chartered Accountants


For

per

sona

l use

onl

y


64

ADDITIONAL SHAREHOLDER INFORMATION

Additional information required by the ASX Listing Rules are not disclosed elsewhere in the full year report is set out below.

The shareholder information set out below was applicable as at 24 March 2011.

1. Distribution of Shareholders

Distribution of ordinary shareholders and shareholdings is set out in the table below:

Category of holding Holders Number of shares % of Issued Capital

1 – 1,000 571 328,590 0.08%

1,001 – 5,000 847 2,353,794 0.56%

5,001 – 10,000 284 2,218,764 0.53%

10,000 – 100,000 268 7,306,002 1.75%

100,001 and over 52 406,259,903 97.08%

Total 2,022 418,467,053 100%

Voting rights as governed by the Constitution of the Company provide that each ordinary shareholder present in person or by

poxy at a meeting shall have:

a. on a show of hands, one vote only; and

b. on a poll, one vote for every fully paid ordinary share held.

2. Largest shareholders

The names of the twenty largest holders by account holding of ordinary shares are listed below:

Shareholder Holding %

IAL Holding Singapore Pte Ltd 259,536,627 62.02

National Nominees Limited 45,475,751 10.87

HSBC Custody Nominees (Australia) Limited 37,993,772 9.08

J P Morgan Nominees Australia Limited 20,071,081 4.80

Citicorp Nominees Pty Limited 9,657,019 2.31

Austock Nominees Pty Ltd 6,400,000 1.53

RBC Dexia Investor Services Australia Nominees Pty Limited 4,613,693 1.10

Credit Suisse Securities (Europe) Ltd 4,610,000 1.10

UBS Wealth Management Australia Nominees Pty Ltd 2,060,503 0.49

Bond Street Custodians Ltd 1,986,527 0.47

AMP Life Limited 1,437,332 0.34

CS Fourth Nominees Pty Ltd 1,346,222 0.32

UBS Nominees Pty Limited 1,264,422 0.30

Cogent Nominees Pty Limited 1,222,302 0.29

Mr Douglas Kirwin 1,225,000 0.27

Brisport Nominees Pty Ltd 962,345 0.23

Morgan Stanley Australian Securities (Nominee) Pty Limited 564,216 0.13

Mr Paul Carter 562,500 0.13

Mr Barry Goss 512,500 0.12

Mr John Macken 375,000 0.09

3. Option holders

As at 24 March 2011, the Company had 46,729,204 listed options.

No voting rights attach to the options.

For

per

sona

l use

onl

y


65

ADDITIONAL SHAREHOLDER INFORMATION (continued)

4. Register of substantial shareholders

The names of substantial shareholders in the Company and the number of fully paid ordinary shares in which each has an

interest, as disclosed in substantial shareholder notices to the Company on the respective dates shown, are as follows:

Holder Date Number of shares % of Issued Capital

Ivanhoe Mines Ltd 10 September 2010 259,536,627 62%

5. Mining tenements The Group held the following mining tenements at Cloncurry, Queensland as at 24 March 2011.

Number Ivanhoe interest Status

ML 2454 100% Granted


















ML 90008 1 Granted

ML 90040 100%2 Granted









ML 90187 100%2 Granted on 1 September 2010

EPM 7221 100% Granted

EPM 9083 3 Granted





EPM 11169 1 Granted


EPM 11676 1 Granted

EPM 12023 1 Granted

EPM 12060 1 Granted

EPM 12285 1 Granted

EPM 12290 1 Granted

For

per

sona

l use

onl

y


66

ADDITIONAL SHAREHOLDER INFORMATION (continued)

5. Mining tenements (continued)

Number Ivanhoe interest Status


EPM 13709 1 Granted

EPM 13741 1 Granted

EPM 14033 1 Granted

EPM 14223 1 Granted

EPM 14434 1 Not renewed after expiry on 1 March 2010

EPM 14449 4 Not renewed after expiry on 26 June 2010

EPM 14520 1 Granted






EPM 15281 100%2 Granted


EPM 16177 1 Granted

EPM 16201 100% Granted on 27 January 2010

EPM 17417 100% Granted on 21 October 2010

EPM 17540 100% Granted on 20 October 2010

EPM 18205 100% Granted on 10 December 2010

EPM 17424 100% Application









EPM 18632 100% Application lodged on 9 April 2010




EPM 18684 100% Application lodged on 13 May 2010

EPM 18716 100% Application lodged on 1 June 2010




EPM 18748 100% Application lodged on 1 July 2010

EPM 18912 100% Application lodged on 5 October 2010

EPM 18996 100% Application lodged on 19 November 2010

EPM 19021 100% Application lodged on 8 December 2010

EPM 19022 100% Application lodged on 8 December 2010 1 Under the terms of a Joint Venture Exploration Agreement and a Variation to this Agreement with Exco Resources, the Company

has the right to earn an 80% interest in the Exco Resources‟ EPMs and ML listed by expending A$5.5 million before 1 November 2011. 2 100% of the tenement acquired under the terms of an Agreement between Barrick (PD) Australia Ltd, Barrick (Osborne) Pty Ltd

and the Company. The name Barrick (Osborne) was changed to Ivanhoe (Osborne). 3 Under the terms of an Agreement between Goldminco Resources Pty Ltd and Barrick (Osborne) Pty Ltd, Barrick (Osborne) earned

a 70% interest in 5 out of a total of 25 sub-blocks of EPM 9083 Duchess. The name Barrick (Osborne) was changed to Ivanhoe (Osborne). 4 Under the terms of a Farm in Agreement signed with Glengarry Resources Ltd, the Company had the right to earn an interest in

EPM 14449 Snake Creek.

For

per

sona

l use

onl

y


67

ADDITIONAL SHAREHOLDER INFORMATION (continued) 6. Exchange listings The Company's primary listing is on the Australian Securities Exchange (ASX).

The Company has a secondary listing on the Toronto Stock Exchange (TSX), with the company‟s ordinary shares and

options (referred to as warrants for Canadian purposes) commencing trading on the TSX in November 2010. 7. General Company Secretary

Mr Darren Millman

Principal Registered Office: Share Registry:

Level 9, 479 St Kilda Road Australian Registry:

Melbourne VIC 3004 Computershare Investor Services Pty Limited

Telephone: (03) 9090 8800 452 Johnston Street

Facsimile: (03) 9090 8899 Yarra Falls

Abbotsford VIC 3067

Telephone: 1300 787 272

Canadian Registry:

Computershare Investor Services Inc.

Level 9, 100 University Avenue

Toronto, Ontario M5J 2Y1

Telephone: 1-800-564-6253

ASX Code: IVA

TSX Code: IVA

For

per

sona

l use

onl

y

for personal use only - asxpeter desmond reeve 4 4 - - - - 1 1 sam riggall 3 3 - - - - - - douglas...

Documents