##### Table of Contents



IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
  INTRODUCTION
  www.sedar.com
        OVERVIEW
  HIGHLIGHTS
  
    On March 31, 2010, Ivanhoe Mines announced the
    successful completion of the conditions precedent that had been
    incorporated into the landmark Investment Agreement to build and
    operate the Oyu Tolgoi copper-gold mining complex in
    Mongolias South Gobi Region, giving the agreement full
    legal effect.
    Ivanhoe Mines, with its subsidiary, Oyu Tolgoi LLC (OT LLC),
    and its strategic partner, Rio Tinto, signed and approved the
    long-awaited Investment Agreement with the Government of
    Mongolia in October 2009, establishing a comprehensive
    framework for maintaining a stable tax and operating environment
    for the construction and operation of the Oyu Tolgoi Project.
    The signing culminated nine years of exploration successes that
    have established Oyu Tolgoi as one of the worlds largest,
    undeveloped copper-gold porphyry projects, and nearly
    six years of negotiations with the Government of Mongolia
    for an Investment Agreement.
    Provisions of the Investment Agreement include protection of
    the parties investments in the Oyu Tolgoi Project, the
    amount and term of the parties investments in the Oyu
    Tolgoi Project, the right to realize the benefits of such
    investments, the conduct of mining with minimum environmental
    impact and progressive rehabilitation, the social and economic
    development of the South Gobi Region and the creation of
    thousands of new jobs in Mongolia.
    Mongolias state-owned company, Erdenes MGL LLC, will
    acquire a 34% interest in the Oyu Tolgoi Project within
    14 days of the approved Investment Agreement taking effect.
    Ivanhoe Mines will retain a controlling 66% interest in OT
    LLC.
    Given the extent of the mineral discoveries associated with
    the Oyu Tolgoi Project and the potential for additional
    discoveries, Ivanhoe Mines and the Government of Mongolia agreed
    that the approved Investment Agreement should conform with the
    provision of Mongolias current Minerals Law specifying
    that certain deposits of strategic importance qualify for
    30 years of stabilized tax rates and regulatory provisions,
    with an option of extending the term of the Investment Agreement
    for an additional 20 years. Major taxes and rates
    stabilized for the life of the agreement include: corporate
    income tax, customs duty, value-added tax; excise tax;
    royalties; exploration and mining licences; and immovable
    property
    and/or real
    estate tax. 1




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##### Table of Contents



IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
   
    In late 2009, the joint Ivanhoe Mines-Rio Tinto Oyu Tolgoi
    Technical Committee conditionally approved a $758.0 million
    budget for 2010 to begin full-scale construction of Oyu Tolgoi.
    The 2010 budget provides for an early start on a site-wide
    development program.
    In March 2010, Ivanhoe Mines issued 15.0 million common
    shares to Rio Tinto at C$16.31 per share for total proceeds of
    C$244.7 million ($241.1 million). Ivanhoe Mines used
    $195.4 million of the proceeds received to purchase from
    Rio Tinto key mining and milling equipment to be installed
    during the construction of the Oyu Tolgoi mining complex. With
    the transaction, Rio Tinto increased its ownership in Ivanhoe
    Mines from 19.6% to 22.4%. Acquisition of the equipment is
    another significant step in building one of the worlds
    largest copper-gold mines.
    In late 2009, Ivanhoe Mines completed the first comprehensive
    field test of the
    ZeusTM

    proprietary, induced polarization and resistivity (IP)
    technology, a technological breakthrough that has significantly
    increased the potential for additional gold and copper resources
    to be discovered at the Oyu Tolgoi Project.
    Ivanhoe Mines 57%-owned subsidiary, SouthGobi
    Energy Resources (SouthGobi), shipped approximately
    1.3 million tonnes of coal from its Ovoot Tolgoi Mine in
    southern Mongolia at an average realized selling price of
    approximately $29 per tonne. This compares to 0.1 million
    tonnes of coal shipped in 2008 at an average realized selling
    price of $29 per tonne. This resulted in $36.0 million of
    revenue being recognized in 2009 compared to $3.1 million
    in 2008.
    On January 29, 2010, SouthGobi closed a global equity
    offering of 27.0 million common shares at a price of
    C$17.00 per common share, for gross proceeds of
    C$459.0 million to expand SouthGobis coal mining and
    exploration activities in southern Mongolia. SouthGobi also
    commenced trading on the Main Board of the Hong Kong Stock
    Exchange (HK: 1878), the first Canadian mining company to have
    dual listings on the Hong Kong Stock Exchange and the Toronto
    Stock Exchange.
    In November 2009, SouthGobi entered into a financing
    agreement with a wholly-owned subsidiary of China Investment
    Corporation for $500.0 million in the form of a secured,
    convertible debenture.
    Ivanhoe Mines 81%-owned subsidiary, Ivanhoe Australia
    (IVA  ASX), discovered a new, high-grade molybdenum
    and rhenium deposit at its Merlin Project on its Cloncurry
    tenements in northwestern Queensland.
    Ivanhoe Mines, through its 50% interest in Altynalmas Gold
    Ltd., is advancing the Kyzyl Gold Project in Kazakhstan, one of
    the worlds largest undeveloped gold projects. Altynalmas
    has completed 21,800 metres of a 39,000-metre deep-level
    drilling program that is intended to upgrade the mineral
    resource.
    In 2009, Ivanhoe Mines incurred $177.1 million in
    exploration and development activities, compared to
    $250.6 million in 2008. In 2009, Ivanhoe Mines
    exploration activities were largely focused in Mongolia and
    Australia. 2




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##### 



IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
  INDEX
     
 1.

Selected Annual Financial Information


42.

Review of Operations


4A. Exploration Activities


5B. Discontinued Operations


18C. Administrative and Other


183.

Selected Quarterly Data


194.

Fourth Quarter


205.

Liquidity and Capital Resources


216.

Share Capital


227.

Outlook


238.

Off-Balance-Sheet Arrangements


249.

Contractual Obligations


2410.

Changes in Accounting Policies


2511.

Critical Accounting Estimates


2712.

Recent Accounting Pronouncements


2913.

International Financial Reporting Standards


2914.

Risks and Uncertainties


2915.

Related-Party Transactions


4116.

Disclosure Controls and Procedures


4317.

Managements Report on Internal Control over
    Financial Reporting


4318.

Oversight Role of the Audit Committee


4419.

Qualified Persons


4420.

Cautionary Statements


4421.

Forward-Looking Statements


4522.

Managements Report to Shareholders


46   3




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##### Table of Contents



IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
  SELECTED
    ANNUAL FINANCIAL INFORMATION    Years Ended December 31,2009


2008


2007($ in millions of U.S. dollars, except per share
    information)Revenue

$
36.0


$
3.1


$
Exploration expenses


(177.1
)


(250.6
)


(299.4
)General and administrative


(45.8
)


(27.5
)


(27.1
)Foreign exchange gains (losses)


34.1



(62.9
)


11.9Gain on sale of long-term investment and note receivable


1.4



201.4



1.0Change in fair value of embedded derivatives


(45.0
)






Write-down of carrying value of investment held for sale










(134.3
)Write-down of carrying value of long-term investments






(7.1
)


Write-down of carrying value of other long-term investments






(18.0
)


(24.5
)Net loss from continuing operations

$
(276.6
)

$
(208.4
)

$
(485.0
)Net (loss) income from discontinued operations


(3.6
)


24.3



27.3Net loss

$
(280.2
)

$
(184.1
)

$
(457.7
)Net loss per share from continuing operations

$
(0.71
)

$
(0.55
)

$
(1.29
)Net (loss) income per share from discontinued operations


(0.01
)


0.06



0.07Net loss per share

$
(0.72
)

$
(0.49
)

$
(1.22
)Total assets

$
1,534.7


$
742.2


$
530.2Total long-term financial liabilities

$
583.0


$
354.4


$
142.9  REVIEW OF
    OPERATIONS    
    The Oyu Tolgoi Copper and Gold Project in southern Mongolia,
    presently 100%-owned by Ivanhoe Mines. Ivanhoe Mines
    ownership will be reduced to 66% as Mongolias state-owned
    company, Erdenes MGL LLC (Erdenes), will acquire a 34% interest
    in the Oyu Tolgoi Project within 14 days of the approved
    Investment Agreement taking effect.
    A 57% interest in SouthGobi Energy Resources, which is
    producing and selling coal from its Ovoot Tolgoi Mine in
    southern Mongolia to customers in China and is conducting
    ongoing exploration and development programs at several other
    Mongolian coal prospects.
    An 81% interest in Ivanhoe Australia, which owns the Merlin
    Project, a high-grade molybdenum and rhenium deposit in
    Queensland, Australia. Ivanhoe Australia also is continuing to
    explore and advance its Iron-Oxide-Copper-Gold (IOCG) projects
    in the Cloncurry region. 4




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##### Table of Contents



IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
   
    A 50% interest in Altynalmas Gold, which owns the Kyzyl Gold
    Project that hosts the Bakyrchik and Bolshevik Gold Deposits in
    Kazakhstan.        A.
    EXPLORATION
    ACTIVITIES      Years Ended December 31,2009


2008(Stated in $000s of dollars)MongoliaOyu Tolgoi

$
107,381


$
155,999Coal Division


21,499



35,006Other Mongolia Exploration


2,004



6,560130,884



197,565Australia


41,465



46,457Indonesia


3,145



4,547Other


1,568



2,022$
177,062


$
250,591   MONGOLIA
  OYU
    TOLGOI COPPER-GOLD PROJECT
   5




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##### Table of Contents



IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
  www.sedar.com
    Rio Tinto
    increased its interest in Ivanhoe Mines to 22.4%
        Ivanhoe
    Mines and Rio Tinto signed long-term Investment Agreement with
    the Mongolian Government to build and operate Oyu
    Tolgoi
       6




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##### Table of Contents



IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
    A
    50-year
    assurance of stability
    and/or
    The
    Mongolian Government will join Ivanhoe Mines and Rio Tinto as a
    partner in Oyu Tolgoi
      
    Ivanhoe Mines will arrange financing for the construction of Oyu
    Tolgoi within two years of the Investment Agreement taking
    effect. Production must begin within five years of financing
    being secured.
    Ivanhoe Mines will fund the construction of the Oyu Tolgoi
    Project through loans and equity obtained during the
    construction and initial production periods. Ivanhoe Mines will
    receive loan repayments, redemption of equity, dividends and
    interest at a rate of 9.9% adjusted to the US CPI.
    Erdenes is entitled to nominate three directors and Ivanhoe
    Mines will nominate six directors to the nine-member board of
    directors of OT LLC.
    Ivanhoe Mines will nominate the management team that will be
    responsible for Oyu Tolgois core operations. Management
    services payments will be received, based on capital and
    operating costs, through the construction period and after
    production begins.
    The Government has the option to purchase an additional equity
    interest of 16% of OT LLC, at an agreed upon fair-market value,
    one year after the expiry of the initial
    30-year term
    of the Investment Agreement and following the start of the
    permitted
    20-year
    extension. If exercised, this additional equity interest would
    give the Government a total maximum interest of 50% of OT LLC
    for the remainder of the Oyu Tolgoi Projects operational
    life. Ivanhoe Mines would continue to hold management rights
    over the project and hold a deciding vote at board and
    shareholder meetings. 7




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##### Table of Contents



IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
   Procedural
    and administrative conditions have been satisfied
    Mongolian
    Government Treasury Bills purchased
    
    The initial T-Bill, with a face-value of $115.0 million,
    was purchased on October 20, 2009. The purchase price was
    $100.0 million.
    A second T-Bill, with a face value of $57.5 million, will
    be purchased for $50.0 million within 14 days of the
    satisfying of all conditions precedent of the Investment
    Agreement.
    The final T-Bill, having a face value of $115.0 million,
    will be purchased for $100.0 million within 14 days of
    OT LLC fully drawing down the financing necessary to enable the
    complete construction of the Oyu Tolgoi Project, or
    June 30, 2011, whichever date is earlier.  Ivanhoe
    Mines acquires critical mining and milling equipment for the Oyu
    Tolgoi copper-gold complex in Mongolia
       8




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
  Ivanhoe
    Mines announces construction budget of US$758.0 million for
    development work in 2010 at Oyu Tolgoi
        
    Resumption of the sinking of the 10-metre-diameter
    Shaft #2, which will be used to hoist ore to the surface
    from the deep, underground, copper-gold-rich Hugo Dummett
    Deposit.
    Construction of a 97-metre-tall (approximately 31-storey),
    reinforced-concrete headframe for Shaft #2.
    Pouring the concrete foundation for the 100,000-tonne-per-day
    concentrator and deliveries of building materials for the
    concentrator and infrastructure.
    Installation of a 20-megawatt power station and
    35-kilovolt
    distribution system.
    Initial earthworks for the open-pit mine at the Southern Oyu
    deposits.
    Continuation of lateral underground development off
    Shaft #1 at the Hugo Dummett Deposit.
    Construction of a
    105-kilometre
    highway link to the Mongolia-China border, which will be fully
    paved by the time production begins.
    Construction of a regional airport, with a concrete runway to
    accommodate Boeing 737-sized aircraft.  2009
    activities at Oyu Tolgoi
    24-hour
      1,800-person
 9




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##### Table of Contents



IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
        Oyu
    Tolgoi Exploration
  Oyu
    Tolgoi exploration continued on the area between Southwest Oyu
    and Heruga;
    ZeustmIP survey technology deployed in first full field test
    Average Assay Intercepts, New Discovery Zone DrillingHole

From


To

Interval


Au


Cu


Mo


CuEqNumber

(m)


(m)

(m)


(g/t)


(%)


(ppm)


(%)OTD1487


1978


1994


16



0.1



1.65



38



1.732028


2053.7


25.7



0.85



0.89



62



1.47OTD1487A


1978


1994


16



0.09



1.55



38



1.632028


2126


98



0.96



0.88



115



1.562258


2336.3 (EOH)


78.3



2.13



0.82



126



2.241978


2336.3


358.3



0.85



0.54



66



1.12OTD1495A


2034


2314


280



0.06



0.84



13



0.882330


2377.2 (EOH)


47.2



0.10



1.32



8



1.392034


2377.2 (EOH)


343.2



0.06



0.87



12



0.91OTD1498A


1978


2100


122



0.05



0.42



54



0.482240


2318


78



0.07



0.61



12



0.662346


2418


72



0.07



0.44



41



0.51OTD1500


1800


1910


110



0.17



0.44



189



0.65OTD1500A





in progressOTD1501





in progress     Copper equivalencies were calculated using the following metal
    prices and formula.(Au = US$650/oz, Cu=US$1.35/lb, Mo=US$10/lb).[CuEq=Cu%+((Aug/t*18.98)+(Moppm*0.01586))/29.76]   10




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##### Table of Contents



IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
      tm Follow-up
      Ivanhoe
    Mines files updated Oyu Tolgoi Technical Report
    Total Oyu
    Tolgoi Project Mineral Resources March
    2010(1)(2)(based on a 0.60% copper equivalent (CuEq)
    cut-off)
  Contained
    Metal(4)Resource




Cu


Au


Mo


CuEq(3)


Cu


Au


CuEq(3)Category

Tonnes


(%)


(g/t)


(ppm)


(%)


(000 lbs)


(ounces)


(000 lbs)Measured


101,590,000



0.64



1.10







1.34



1,430,000



3,590,000



3,000,000Indicated


1,285,840,000



1.38



0.42







1.65



39,120,000



17,360,000



46,770,000Measured + Indicated


1,387,430,000



1.33



0.47







1.63



40,680,000



20,970,000



49,860,000Inferred


2,367,130,000



0.78



0.33



50



1.02



40,610,000



25,390,000



53,280,000       (1)
    
    Resource classifications conform to CIM Standards on Mineral
    Resources and Reserves referred to in National Instrument
    43-101.
    Mineral Resources that are not Reserves do not have demonstrated
    economic viability. Measured and Indicated Resources are that
    part of a mineral resource for which quantity and grade can be
    estimated with a level of confidence sufficient to allow the
    application of technical and economic parameters to support mine
    planning and evaluation of the economic viability of the
    project. An Inferred Resource is that part 11




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##### Table of Contents



IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
  of a mineral resource for which quantity and grade can be
    estimated on the basis of geological evidence and limited
    sampling and reasonably assumed, but not verified, geological
    and grade continuity.(2)
    
    This table includes estimated resources on the Hugo North
    Extension Deposit and the Heruga Deposit. These deposits are
    located on mineral licences owned by Entrée but subject to
    the Entrée Joint Venture. These resources consist of
    indicated resources of 117,000,000 tonnes grading 1.8% copper
    and 0.61 g/t gold and inferred resources of
    910,000,000 tonnes grading 0.48% copper and 0.49 g/t gold
    and a 141 ppm molybdenum at a 0.6% cut-off grade on
    the combined Hugo North Extension and Heruga Deposits.(3)
    
    CuEq has been calculated using assumed metal prices ($1.35/lb.
    for copper and $650/oz for gold and $10/lb for
    molybdenum);%CuEq. = Cu+((Au*18.98)+(Mo*0.01586))/29.76. Mo
    grades outside of Heruga are assumed to be zero for CuEq
    calculations. The equivalence formula was calculated assuming
    that gold and molybdenum recovery was 91% and copper recovery
    was 72%.(4)
    
    The contained gold and copper represent estimated contained
    metal in the ground and have not been adjusted for the
    metallurgical recoveries of gold and copper. Differences in
    measured and indicated totals relate to rounding associated with
    tonnes and grade.  ® change-of-support
  change-of-support
    MONGOLIA
  COAL
    PROJECTS
  SOUTHGOBI
    ENERGY RESOURCES (57% owned)
  Toronto
    Stock Exchange and Hong Kong Stock Exchange listing; global
    equity offering raised C$459.0 million
     12




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
    SouthGobi
    secured $500.0 million convertible debenture financing from
    China Investment Corporation
  50-day
  50-day
        Expansion
    planned for SouthGobis Ovoot Tolgoi coal mine
       13




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
              Ovoot
    Tolgoi updated resources and reserves
    Total
    Surface and Underground Coal Resource Summary as of June 1,
    2009
  43-101-compliant
 14




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
    In-Place ResourcesResource Limits



(million tonnes)Area

Type

Depth (metres)

ASTM Group

Measured


Indicated


InferredSunrise Field

Surface

Surface to 250m

hvB to hvA


53.8



15.7



4.9Sunset Field

Surface

Surface to 250m

hvB to hvA


82.1



19.4



8.1Sub-Total








135.9



35.1



13.0Sunrise Field

Underground

250m to 600m

hvB to hvA


11.2



5.2



11.2Sunset Field

Underground

250m to 600m

hvB to hvA


34.6



27.8



9.3Sub-Total








45.8



33.0



20.5Total








181.7



68.1



33.5       AUSTRALIA
  IVANHOE
    AUSTRALIA (81% owned)
        Merlin
    molybdenum and rhenium
     15




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##### Table of Contents



IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
        Mount
    Dore Deposit
      Mount
    Elliott Project
        Emmerson
    shareholding and joint-venture agreement
     16




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##### Table of Contents



IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
    Exco
    shareholding and joint venture agreement
      Regional
    exploration
    KAZAKHSTAN
  Kyzyl
    Gold Project (50% owned)
         17




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
  OTHER
    EXPLORATION
    B.
    DISCONTINUED
    OPERATIONS    Savage
    River, Tasmania, Australia
            Mamahak
    Project, Indonesia
        C.
    ADMINISTRATIVE
    AND OTHER  General and administrative
    costs.
 18




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##### Table of Contents



IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
    Interest income.
  Interest expense.
  Foreign exchange gain.
  Share of loss on significantly influenced
    investees.
  Change in fair value of embedded derivatives in convertible
    debenture.
 SELECTED
    QUARTERLY DATA  Quarter EndedDec-31


Sep-30


Jun-30



Mar-312009


2009


2009



2009($ in millions of dollars, except per share information)Revenue

$
9.9


$
11.9


$
10.7



$
3.5Exploration expenses


(67.2
)


(40.6
)


(35.2
)



(34.1
)General and administrative


(15.0
)


(12.5
)


(10.5
)



(7.8
)Foreign exchange gains (losses)


2.2



19.5



21.7




(9.3
)Change in fair value of embedded derivatives


(45.0
)











Gain on sale of long-term investments






1.4








Net (loss) income from continuing operations


(138.7
)


(47.5
)


(27.0
)



(63.4
)Income (loss) from discontinued operations


9.2



(22.3
)


2.1




7.4Net (loss) income


(129.5
)


(69.8
)


(24.9
)



(56.0
)Net (loss) income per share  basicContinuing operations

$
(0.35
)

$
(0.12
)

$
(0.07
)


$
(0.17
)Discontinued operations

$
0.03


$
(0.06
)

$
0.00



$
0.02Total

$
(0.32
)

$
(0.18
)

$
(0.07
)


$
(0.15
)Net (loss) income per share  dilutedContinuing operations

$
(0.35
)

$
(0.12
)

$
(0.07
)


$
(0.17
)Discontinued operations

$
0.03


$
(0.06
)

$
0.00



$
0.02Total

$
(0.32
)

$
(0.18
)

$
(0.07
)


$
(0.15
)   19




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##### Table of Contents



IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
  Quarter EndedDec-31


Sep-30


Jun-30



Mar-312008


2008


2008



2008Revenue

$
3.1


$



$




$
Exploration expenses


(73.0
)


(56.8
)


(66.0
)



(54.8
)General and administrative


(8.1
)


(5.1
)


(7.5
)



(6.8
)Foreign exchange (losses) gains


(40.6
)


(20.0
)


(1.0
)



(1.3
)Writedown of other long-term investments


(18.0
)











Gain on sale of long-term investments










201.4




Net (loss) income from continuing operations


(165.0
)


(95.8
)


119.6




(67.1
)Income from discontinued operations


5.0



7.8



7.9




3.5Net (loss) income


(160.0
)


(88.0
)


127.5




(63.6
)Net (loss) income per share  basicContinuing operations

$
(0.44
)

$
(0.25
)

$
0.32



$
(0.18
)Discontinued operations

$
0.01


$
0.02


$
0.02



$
0.01Total

$
(0.43
)

$
(0.23
)

$
0.34



$
(0.17
)Net (loss) income per share  dilutedContinuing operations

$
(0.44
)

$
(0.25
)

$
0.29



$
(0.18
)Discontinued operations

$
0.01


$
0.02


$
0.02



$
0.01Total

$
(0.43
)

$
(0.23
)

$
0.31



$
(0.17
)  FOURTH
    QUARTER  Revenue.
  Exploration.
  Administrative costs.
  Foreign exchange gain.
  Change in fair value of embedded derivatives in convertible
    debenture.
  Writedown of other long-term investments.
 20




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
  LIQUIDITY
    AND CAPITAL RESOURCES  Cash
    Flow
  Operating activities.
  Investing activities.
  Financing activities.
  Liquidity
    and Capital Resources
        and/or
   21




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
  Financial
    Instruments
                 SHARE
    CAPITAL    
    441.2 million common shares outstanding.
    20.3 million incentive stock options outstanding, with a
    weighted average exercise price of C$8.82 per share. Each option
    is exercisable to purchase a common share of the Company at
    prices ranging from C$2.82 to C$16.79 per share.
    92.1 million share-purchase warrants outstanding granted to
    Rio Tinto, divided into two series. The lives of these warrants
    are determined by the date on which an approved Investment
    Agreement is reached. The Warrant Determination Date within the
    warrant terms presented below is the earlier of the date on
    which an approved Investment Agreement is reached or
    October 27, 2009.    (i)
    $8.38 during the period commencing November 30, 2006 and
    ending 180 days following the Warrant Determination
    Date; and(ii)
    $8.54 during the period commencing 181 days after the
    Warrant Determination Date and ending 365 days after the
    Warrant Determination Date. 22




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
     (i)
    $8.38 during the period commencing November 30, 2006 and
    ending 180 days following the Warrant Determination Date;(ii)
    $8.54 during the period commencing 181 days after the
    Warrant Determination Date and ending 365 days after the
    Warrant Determination Date;(iii)
    $8.88 during the period commencing 366 days after the
    Warrant Determination Date and ending 545 days after the
    Warrant Determination Date; and(iv)
    $9.02 during the period commencing 546 days after the
    Warrant Determination Date and ending 725 days after the
    Warrant Determination Date.  
    35.0 million Series C share-purchase warrants
    outstanding granted to Rio Tinto as part of the
    $350.0 million credit facility agreement, with an exercise
    price of $10.00 per share, which are exercisable until
    October 24, 2012.
    1.4 million share purchase warrants outstanding with an
    exercise price of C$3.15 per share. These warrants were granted
    to Rio Tinto under certain anti-dilution provisions in the 2006
    Private Placement Agreement (Anti-Dilution warrants), are
    divided into two series and have lives identical to the
    Series A & B warrants. OUTLOOK        
    expects to shortly fully implement the 2010 construction budget;
    expects to purchase a second T-Bill from the Government of
    Mongolia within 14 days of the approved Investment
    Agreement taking effect.
    will transfer to Mongolias state-owned company, Erdenes, a
    34% interest in the Oyu Tolgoi Project within 14 days of
    the approved Investment Agreement taking effect.  General
    Economic Conditions
   23




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
  Exchange
    rates
      Capital
    Expenditures
          Other
    information
   OFF-BALANCE-SHEET
    ARRANGEMENTS   CONTRACTUAL
    OBLIGATIONS  Payments Due by PeriodLess than 1








After 5Year


1 - 3 Years


4 - 5 Years


Years



Total($000s of U.S. dollars)Operating
    leases(1)

$
4,123


$
6,452


$
2,194


$




$
12,769Purchase
    obligations(1)


31,902



375












32,277Debt
    obligations(2)


412,934



37,979







500,000




950,913Other long-term
    obligations(3)


3,339











18,539




21,878Total

$
452,298


$
44,806


$
2,194


$
518,539



$
1,017,837  24




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
    (1)
    
    These amounts mainly represent various long-term contracts that
    include commitments for future operating payments under
    contracts for drilling, engineering, equipment purchases,
    rentals and other arrangements.(2)
    
    Debt obligations consist of amounts due under credit facilities
    and convertible credit facilities.(3)
    
    Other long-term obligations consist of asset retirement
    obligations.    
    On October 6, 2009, Ivanhoe Mines subsidiary, OT LLC
    agreed to purchase three T-Bills from the Government of Mongolia
    having an aggregate face value of $287.5 million, for the
    aggregate sum of $250.0 million. On October 20, 2009,
    OT LLC purchased the initial $100.0 million T-Bill. OT LLC
    is committed to purchase the second $50.0 million T-Bill
    within 14 days of the conditions precedent having been
    addressed and purchase the final $100.0 million T-Bill
    within 14 days of having fully drawn down the financing
    necessary to enable the full and complete construction of the
    Oyu Tolgoi Project or June 30, 2011, whichever date is
    earlier.
    In March 2010, Ivanhoe Mines used $195.4 million of the
    $241.1 million of proceeds received from the issue of
    15.0 million common shares to Rio Tinto to repurchase from
    Rio Tinto certain key mining and milling equipment to be
    installed during the construction of the Oyu Tolgoi Project. CHANGES
    IN ACCOUNTING POLICIES         25




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
             26




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
   CRITICAL
    ACCOUNTING ESTIMATES      
    Carrying Values of Property, Plant and Equipment;
    Depletion and Depreciation of Property, Plant and Equipment;
    Asset Retirement Obligations; and
    Income Taxes.  Carrying
    values of Property, Plant and Equipment
      Depletion
    and Depreciation of Property, Plant and Equipment
    unit-of-production unit-of-production
 27




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
      Asset
    Retirement Obligations
        Income
    Taxes
     28




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
   RECENT
    ACCOUNTING PRONOUNCEMENTS   INTERNATIONAL
    FINANCIAL REPORTING STANDARDS  52-321 Early adoption of International Financial Reporting
    Standards, Use of US GAAP and References to IFRS-IASB
 RISKS AND
    UNCERTAINTIES    Although
    the conditions to the effectiveness of the Investment Agreement
    have been fulfilled, Ivanhoe Mines now has obligations to the
    Government of Mongolia that must be performed within a
    relatively short period of time.
    Ivanhoe
    Mines may be limited in its ability to enforce the Investment
    Agreement against a sovereign government.
   29




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##### Table of Contents



IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
    The
    Investment Agreement includes a number of future covenants that
    may be outside of the control of Ivanhoe Mines to
    complete.
    
    Ivanhoe Mines is obligated to obtain project financing for the
    development of the Oyu Tolgoi Project within two years following
    the Effective Date of the Investment Agreement and to commence
    commercial production within five years of securing such
    financing. There is a risk that OT LLC will be unable to obtain
    sufficient project financing within the stipulated time or that,
    in order to meet the project financing requirement in a timely
    manner, OT LLC is required to accept financing terms that are
    less advantageous than those that might have been available had
    there been no deadline for obtaining such financing. There is
    also a risk that unanticipated construction delays or other
    unforeseen development problems may cause delays in commencement
    in commercial production or that unforeseen mining or processing
    difficulties are encountered that prevent OT LLC from attaining
    the required commercial production levels.
    Ivanhoe Mines is obligated to utilize only Mongolian power
    sources within four years of commencing commercial production.
    Such sources of power may not be available or may be available
    upon commercial terms that are less advantageous than those
    available from other potential power suppliers.
    Mongolian nationals must represent at least 90% of the Oyu
    Tolgoi Project work force once commercial production is attained
    and 50% of the Projects engineers must be Mongolian
    nationals within five years, increasing to 70% after
    10 years. While Ivanhoe Mines has a plan for achieving
    these targets, success in doing so is contingent upon the
    availability of a sufficient number of qualified personnel which
    is not wholly within Ivanhoe Mines control.
    Ivanhoe Mines is obligated to use Mongolian services,
    transportation and freight facilities on a priority basis. Such
    services and facilities may not be available to the extent
    required or may be available upon commercial terms that are less
    advantageous than those available from other sources.
    OT LLC has community development commitments and social
    responsibility obligations. There is a risk that OT LLC will be
    unable to meet the expectations or demands of relevant community
    stakeholders to the extent contemplated to allow OT LLC to meet
    its commitments under the Investment Agreement.
    The extension of the term of the Investment Agreement from
    30 years to 50 years is subject to a number of
    conditions, including Ivanhoe Mines having demonstrated that the
    Oyu Tolgoi Project has been operated in accordance with industry
    best practices in terms of national and community benefits,
    environment and health and safety practices. The inherently
    subjective nature of these criteria creates the risk that
    Ivanhoe Mines and 30




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
  the Government of Mongolia may disagree as to whether the
    conditions for extending the term of the Investment Agreement
    have been met.  
    Despite Ivanhoe Mines best efforts, such provisions are
    not necessarily within the control of the Company and
    non-fulfillment may result in default under the Investment
    Agreement. Such a default could result in termination of the
    Investment Agreement or damages accruing, which could have a
    material adverse effect on the Company.  The
    Oyu Tolgoi Project will be operated as a corporate/government
    joint venture and will be subject to joint venture
    risk.
    The
    Government of Mongolia T-Bills may remain illiquid beyond the
    stated maturity date.
    There
    can be no assurance that Ivanhoe Mines will be capable of
    raising the additional funding that it needs to carry out its
    development and exploration objectives.
   31




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
    Lack
    of infrastructure in proximity to Ivanhoe Mines material
    properties could adversely affect mining
    feasibility.
    The
    resource and reserve estimates for Ivanhoe Mines projects
    disclosed in this MD&A are estimates only and are subject
    to change based on a variety of factors, some of which are
    beyond Ivanhoe Mines control. Ivanhoe Mines actual
    production, revenues and capital expenditures may differ
    materially from these estimates.
       32




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
    Mining
    projects are sensitive to the volatility of metal
    prices.
        Copper

GoldYear

High

Low

Average

High

Low

Average2005

$
2.11


$
1.39


$
1.67


$
536


$
411


$
4442006

$
3.99


$
2.06


$
3.05


$
725


$
524


$
6042007

$
3.77


$
2.37


$
3.23


$
841


$
604


$
6952008

$
4.08


$
1.26


$
3.15


$
1,011


$
713


$
8722009

$
3.33


$
1.38


$
2.34


$
1,213


$
810


$
972   Ivanhoe
    Mines ability to carry on business in Mongolia is subject
    to legal and political risk.
       33




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
      Recent
    and future amendments to Mongolian laws could adversely affect
    Ivanhoe Mines mining rights in the Oyu Tolgoi Project or
    make it more difficult or expensive to develop the project and
    carry out mining.
   34




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
  Changes
    in, or more aggressive enforcement of, laws and regulations
    could adversely impact Ivanhoe Mines
    business.
      Ivanhoe
    Mines is subject to substantial environmental and other
    regulatory requirements and such regulations are becoming more
    stringent. Non-compliance with such regulations, either through
    current or future operations or a pre-existing condition could
    materially adversely affect Ivanhoe Mines.
         35




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
  Previous
    mining operations may have caused environmental damage at
    current and former Ivanhoe Mines mining projects, and if Ivanhoe
    Mines cannot prove that such damage was caused by such prior
    operators, its indemnities and exemptions from liability may not
    be effective.
    The
    actual cost of developing the Oyu Tolgoi Project may differ
    significantly from Ivanhoe Mines estimates and involve
    unexpected problems or delays.
    
    anticipated tonnage, grades and metallurgical characteristics of
    ore to be mined and processed;
    anticipated recovery rates of copper and gold from the ore;
    cash operating costs of comparable facilities and
    equipment; and
    anticipated climatic conditions.    
    the timing and cost, which can be considerable, of the
    construction of mining and processing facilities;
    the availability and cost of skilled labour, power, water and
    transportation;


    the availability and cost of appropriate smelting and refining
    arrangements;
    the need to obtain necessary environmental and other government
    permits, and the timing of those permits; and
    the availability of funds to finance construction and
    development activities.  start-up.
 36




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
  Ivanhoe
    Mines ability to obtain dividends or other distributions
    from its subsidiaries may be subject to restrictions imposed by
    law, foreign currency exchange regulations and financing
    arrangements.
    There
    can be no assurance that the interest held by Ivanhoe Mines in
    its exploration, development and mining properties is free from
    defects or that material contractual arrangements between
    Ivanhoe Mines and entities owned or controlled by foreign
    governments will not be unilaterally altered or
    revoked.
    The
    proceeds from the sale of the Savage River Project are dependent
    on iron ore prices and the remaining supply of ore at the Savage
    River Project.
    Competition
    for new mining properties by larger, more established companies
    may prevent Ivanhoe Mines from acquiring interests in additional
    properties or mining operations.
   37




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
  There
    is no assurance that Ivanhoe Mines will be capable of
    consistently producing positive cash flows.
    There
    is no guarantee that any exploration activity will result in
    commercial production of mineral deposits.
    Ivanhoe
    Mines cannot insure against all of the risks associated with
    mining.
    
    rock bursts, slides, fires, earthquakes or other adverse
    environmental occurrences;
    industrial accidents;
    labour disputes;
    political and social instability;
    technical difficulties due to unusual or unexpected geological
    formations;
    failures of pit walls, shafts, headframes, underground
    workings; and
    flooding and periodic interruptions due to inclement or
    hazardous weather condition.    
    damage to, and destruction of, mineral properties or production
    facilities;
    personal injury;
    environmental damage;
    delays in mining; 38




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
   
    monetary losses; and
    legal liability.    Insofar
    as Rio Tinto is the Companys largest shareholder, Rio
    Tinto has the ability to significantly influence the business
    and affairs of Ivanhoe Mines.
      Ivanhoe
    Mines is exposed to risks of changing political stability and
    government regulation in the countries in which it
    operates.
     39




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
    Ivanhoe
    Mines prospects depend on its ability to attract and
    retain key personnel.
    Certain
    directors of Ivanhoe Mines are directors or officers of, or have
    significant shareholdings, in other mineral resource companies
    and there is the potential that such directors will encounter
    conflicts of interest with Ivanhoe Mines.
    Business Corporations Act
  Capital
    markets are volatile.
   40




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
      Ivanhoe
    Mines is subject to the U.S. Foreign Corrupt Practices
    Act.
    Ivanhoe
    Mines and SouthGobi hold substantial funds in cash and cash
    equivalents and there is a risk that financial market turmoil or
    other extraordinary events could prevent the companies from
    obtaining timely access to such funds or result in the loss of
    such funds.
  and/or
  RELATED-PARTY
    TRANSACTIONS   41




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
    Years Ended December 31,2009


2008(Stated in $000s of U.S. dollars)Global Mining Management Corporation(a)

$
8,982


$
8,147Ivanhoe Capital Aviation LLC(b)


5,940



3,840Fognani & Faught, PLLC(c)


60



621Ivanhoe Capital Corporation(d)


211



Ivanhoe Capital Services Ltd.(e)


618



601Rio Tinto plc(f)


8,588



4,783$
24,399


$
17,992   Years Ended December 31,2009


2008Exploration

$
8,588


$
4,783Legal


60



621Office and administrative


2,432



2,451Salaries and benefits


7,379



6,297Travel (including aircraft rental)


5,940



3,840$
24,399


$
17,992                42




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
         DISCLOSURE
    CONTROLS AND PROCEDURES    Rules 13a-15(e) 15d-15(e)
   MANAGEMENTS
    REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING  Rules 13a-15(f) 15d-15(f)
 43




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
  Form 40-F
    Changes
    in internal control over financial reporting
   OVERSIGHT
    ROLE OF THE AUDIT COMMITTEE   QUALIFIED
    PERSONS  43-101)
  Relationship toProject

Qualified Person

Ivanhoe MinesOyu Tolgoi Project

Stephen Torr, P.Geo, Ivanhoe Mines

Employee of the CompanyOvoot Tolgoi Project

Stephen Torr, P.Geo, Ivanhoe Mines

Employee of the Company  CAUTIONARY
    STATEMENTS  LANGUAGE
    REGARDING RESERVES AND RESOURCES
  43-101 Standards of Disclosure for Mineral Projects 43-101)
  NOTE TO
    UNITED STATES INVESTORS CONCERNING ESTIMATES OF MEASURED,
    INDICATED AND INFERRED RESOURCES
   44




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
  43-101 Standards of Disclosure for Mineral Projects 43-101) 43-101. 43-101 43-101 43-101 43-101;
 FORWARD-LOOKING
    STATEMENTS   45




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IVANHOE
    MINES LTD.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND
    RESULTS OF OPERATIONS
    (Stated in U.S. dollars, except where noted)
     MANAGEMENTS
    REPORT TO THE SHAREHOLDERS          /s/ John Macken

/s/ Tony GiardiniJohn Macken

Tony GiardiniPresident and CEO

Chief Financial Officer     46