IVANHOE MINES LTD.


                            Annual Information Form

                               For the year ended
                               December 31, 2007



                              Dated March 28, 2008















<PAGE>
                                       2


                               TABLE OF CONTENTS


CORPORATE STRUCTURE..........................................................10


GENERAL DEVELOPMENT OF THE BUSINESS..........................................11

   Overview..................................................................11
   Three Year History........................................................11
   Outlook...................................................................14
   Risk Factors..............................................................14

DESCRIPTION OF THE BUSINESS..................................................25

   Overview..................................................................25
   Qualified Persons.........................................................25
   Oyu Tolgoi Copper and Gold Project, Mongolia..............................25
   Ovoot Tolgoi Coal Property, Mongolia......................................49
      Ovoot Tolgoi Project (open pit)........................................49
      Ovoot Tolgoi Project (Underground).....................................58
   Other Projects............................................................65
      Mongolia...............................................................65
      Kazakhstan.............................................................66
      Australia..............................................................68
      China..................................................................70
   Other Business Matters....................................................70
      Myanmar Trust Arrangements.............................................70
      Equity Holdings........................................................71
      Employees..............................................................72

DIVIDENDS....................................................................72


DESCRIPTION OF CAPITAL STRUCTURE.............................................72


MARKET FOR SECURITIES........................................................73


DIRECTORS AND OFFICERS.......................................................74


INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS...................77


TRANSFER AGENTS AND REGISTRARS...............................................78


MATERIAL CONTRACTS...........................................................78


INTERESTS OF EXPERTS.........................................................78


ADDITIONAL INFORMATION.......................................................79


SCHEDULE A...................................................................80



<PAGE>

                                      3



Forward-Looking Information

Certain statements made herein,  including  statements relating to matters that
are  not  historical  facts  and  statements  of our  beliefs,  intentions  and
expectations about developments,  results and events which will or may occur in
the future, which constitute  "forward-looking  information" within the meaning
of applicable Canadian securities legislation and "forward-looking  statements"
within the meaning of the "safe harbor" provisions of the United States Private
Securities  Litigation  Reform  Act of 1995.  Forward-looking  information  and
statements  are typically  identified by words such as  "anticipate,"  "could,"
"should,"  "expect,"  "seek," "may," "intend,"  "likely,"  "plan,"  "estimate,"
"will"  "believe"  and  similar  expressions   suggesting  future  outcomes  or
statements  regarding  an  outlook.  These  include,  but are not  limited  to,
statements  respecting  anticipated business activities;  planned expenditures;
corporate  strategies;   proposed  acquisitions  and  dispositions  of  assets;
discussions with third parties  respecting  material  agreements;  the expected
timing and outcome of IVN's discussions with  representatives of the Government
of Mongolia for an Investment  Agreement in respect of the Oyu Tolgoi  Project;
the  estimated  timing  and  cost of  bringing  the  Oyu  Tolgoi  Project  into
commercial  production;  anticipated  future production and cash flows;  target
milling  rates;  the impact of  amendments  to the laws of  Mongolia  and other
countries in which IVN carries on business;  the timing of commencement of full
construction of the Oyu Tolgoi Project; the potential sale of the Monywa Copper
Project by the Monywa  Trust to a third party;  the  potential of plans to make
non-core  projects  self-funding  and other  statements that are not historical
facts.

All such  forward-looking  information  and  statements  are  based on  certain
assumptions and analyses made by IVN's  management in light of their experience
and perception of historical  trends,  current  conditions and expected  future
developments,  as well as other factors management  believes are appropriate in
the circumstances. These statements, however, are subject to a variety of risks
and  uncertainties  and other factors that could cause actual events or results
to differ materially from those projected in the forward-looking information or
statements.  Important  factors that could cause actual  results to differ from
these  forward-looking  statements  include those  described  under the heading
"Risks and Uncertainties" elsewhere in this Annual Information Form. The reader
is cautioned  not to place undue  reliance on  forward-looking  information  or
statements.

This Annual  Information Form also contains  references to estimates of mineral
reserves and mineral  resources.  The  estimation  of reserves and resources is
inherently  uncertain  and involves  subjective  judgments  about many relevant
factors.  The accuracy of any such  estimates is a function of the quantity and
quality of available  data, and of the  assumptions  made and judgments used in
engineering  and geological  interpretation,  which may prove to be unreliable.
There can be no assurance  that these  estimates  will be accurate or that such
mineral  reserves and mineral  resources can be mined or processed  profitably.
Mineral  resources  that are not  mineral  reserves  do not  have  demonstrated
economic  viability.  Except  as  required  by law,  IVN  does not  assume  the
obligation to revise or update these forward-looking  statements after the date
of this  document  or to  revise  them to  reflect  the  occurrence  of  future
unanticipated events.

Currency and Exchange Rates

In this Annual  Information Form, all funds are quoted in United States dollars
unless  otherwise  indicated.  References to "$" and "US$" are to United States
dollars and references to "Cdn.$" are to Canadian dollars.


<PAGE>

                                       4

The Bank of Canada noon  buying  rates for the  purchase  of one United  States
dollar using Canadian dollars were as follows during the indicated periods:

                          (Stated in Canadian dollars)


<TABLE>
<CAPTION>

                                             Year Ended December 31
                                -----------------------------------------------
                                 2007      2006       2005      2004      2003
<S>                             <C>       <C>        <C>       <C>       <C>

End of period                   0.9881    1.1653     1.1659    1.2036    1.2924
High for the period             1.1853    1.1726     1.2704    1.3968    1.5777
Low for the period              0.9170    1.0990     1.1507    1.1774    1.2839
Average for the period          1.0748    1.1342     1.2116    1.3015   1.40146
</TABLE>


The Bank of Canada noon  buying rate on March 27, 2008 for the  purchase of one
United  States  dollar using  Canadian  dollars was  Cdn.$1.0147  (one Canadian
dollar on that date equalled US$0.9855).

Defined Terms and Abbreviations

Throughout  this AIF, there are terms that are defined in the document and used
only in the relevant section in which they are defined. There are also a number
of defined terms and abbreviations  that are used  consistently  throughout the
document as follows:

"Au" means gold;

"BHP Exploration" means BHP Minerals International Exploration Inc.;

"CIM" means the Canadian Institute of Mining, Metallurgy and Petroleum;

"CIM  Standards"  means CIM Standards on Mineral  Resources and Mineral Reserve
Guidelines;

"Coal Division"  means a division of the IVN Group  established to develop coal
resources in Mongolia and subsequently transferred to SouthGobi in 2007;

"Coal  Reorganization"  means the transaction  whereby IVN transferred its Coal
Division to SouthGobi  in  consideration  for common  shares of  SouthGobi,  as
further described in "GENERAL  DEVELOPMENT OF THE BUSINESS - Three Year History
- 2006";

"Common Shares" means common shares in the capital of IVN;

"Cu" means copper;

"CuEq" means copper equivalent grade, calculated using assumed metal prices for
copper, gold and, where applicable, molybdenum;

"Entree" means Entree Gold Inc.;

"Entree Earn-in Agreement" means the Equity Participation and Earn-in Agreement
dated October 15, 2004 between Entree and IVN, as amended November 9, 2004;

"Entree Joint Venture"  means the joint venture of IVN and Entree  contemplated
pursuant to the Entree  Earn-in  Agreement  and covering the portion of the Oyu
Tolgoi Project currently held by Entree;

"Excluded  Persons" means a contractually  defined class of restricted  persons
identified as being  prohibited  from  purchasing  the Myanmar  Assets from the
Monywa Trust,  which includes IVN, Rio Tinto, and their  respective  directors,
officers and  affiliates  and citizens or residents or entities  controlled  by
citizens or residents of Myanmar or the United States;

<PAGE>

                                       5

"g/t" means grams per tonne;

"GSC  Paper 88 - 21" means the  Geological  Survey  of  Canada  Paper  88-21 "A
Standardized Coal Resource / Reserve Reporting System for Canada";

"GRD Minproc" means GRD Minproc Limited;

"Hugo Dummett Deposits" means collectively,  the Hugo North, the Hugo South and
Hugo North Extension deposits;

"Hugo North" means the Hugo North deposit of the Oyu Tolgoi Project;

"Hugo North Extension" means the Hugo North Extension deposit of the Oyu Tolgoi
Project,  representing the extension of the Hugo Dummett Deposits into Entree's
Shivee Tolgoi Property;

"Hugo South" means the Hugo South deposit of the Oyu Tolgoi Project;

"IMMI" means Ivanhoe Mines Mongolia Inc. XXK;

"Integrated Development Plan 2005" or "IDP05" means a report on the development
of the Oyu  Tolgoi  Project  prepared  by a group  of  independent  engineering
companies in October 2005;

"Integrated Development Plan 2008" or "IDP08" means a report on the development
of the Oyu Tolgoi Project being prepared by a group of independent  engineering
companies for release in 2008;

"Investment  Agreement" means a comprehensive  agreement with the Government of
Mongolia  that  addresses  the  development  and  operation  of the Oyu  Tolgoi
Project,  including taxation rates,  cross-border  import/export  arrangements,
supply of power, labour, land use and water rights;

"IVN" means Ivanhoe Mines Ltd;

"IVN  Group"  means,  collectively,  IVN and  its  subsidiaries  or a group  of
subsidiaries, as the context requires;

"Jinshan" means Jinshan Gold Mines Inc.;

"km" means kilometres;

"km(2)" means square kilometres;

"lb" means pound;

"m" means metres;

"MEL" means Mongolian mineral exploration licence;

"Mo" means molybdenum;

"Monywa Copper Project" means the copper mine and related  deposits  located at
Monywa, Myanmar;

"Monywa Trust" means an independent  third party trust  established to hold and
sell the Myanmar Assets;

"Myanmar  Assets" means all of IVN's business  interests and assets in Myanmar,
including in the Monywa Copper Project;

"NI  43-101"  means  National  Instrument  43-101  of the  Canadian  Securities
Administrators;

"Norwest" means Norwest Corporation;

"OT Technical Committee" means a joint technical committee  established between
Rio Tinto and IVN for the development of the Oyu Tolgoi Project;

"Ovoot Tolgoi  Project" means the  SouthGobi's  Ovoot Tolgoi  (formerly  Nariin
Sukhait) coal exploration and development project in Mongolia;

<PAGE>

                                       6


"Ovoot Tolgoi Open Pit Technical  Report" means a Technical Report on the Ovoot
Tolgoi Project dated March 2008, prepared by Norwest;

"Ovoot Tolgoi  Underground  Technical  Report" means a Technical  Report on the
Ovoot Tolgoi Project dated March 2008, prepared by TAG;

"Oyu Tolgoi  Project" means IVN's copper and gold  exploration  and development
project located at Oyu Tolgoi in Mongolia;

"Oyu  Tolgoi  Technical  Report"  means a  Technical  Report on the Oyu  Tolgoi
Project dated March 2008 prepared by GRD Minproc;

"oz" means ounce;

"ppm" means parts per million;

"Preferred Shares" means preferred shares in the capital of IVN;

"Rio Tinto" means Rio Tinto Plc.;

"Rio Tinto Credit Agreement" means the transaction between IVN and Rio Tinto to
establish a convertible  credit facility to finance ongoing mine development of
the Oyu Tolgoi  Project,  as further  described in "GENERAL  DEVELOPMENT OF THE
BUSINESS - Three Year History - 2007";

"Rio Tinto  Transaction"  means the  transaction  between  IVN and Rio Tinto to
establish  a  strategic  partnership  for the  development  of the  Oyu  Tolgoi
Project,  as further described in "GENERAL  DEVELOPMENT OF THE BUSINESS - Three
Year History - 2006";

"Savage  River  Project"  means the Savage  River iron ore  project  located in
Tazmania, Australia;

"SouthGobi" means SouthGobi Energy Resources Ltd. (formerly Asia Gold Corp.);

"Southern Oyu  Deposits"  means  collectively,  the South Oyu,  Southwest  Oyu,
Central Oyu and Wedge deposits of the Oyu Tolgoi Project;

"TAG" means The Americas Group of Lakewood, Colorado;

"tpd" means tonnes per day; and

"tpy" means tonnes per year.

Conversion Factors

For ease of reference, the following conversion factors are provided:

<TABLE>
<CAPTION>

Imperial Measure =                         Metric Unit                       Metric Unit =                     Imperial Measure
------------------                         -----------                       -------------                     ----------------
<S>                                       <C>                               <C>                               <C>
2.47 acres                                 1 hectare                         0.4047 hectares                   1 acre
3.28 feet                                  1 m                               0.3048 m                          1 foot
0.62 miles                                 1 km                              1.609 km                          1 mile
0.032 ounces (troy)                        1 gram                            31.1 grams                        1 ounce (troy)
2.205 pounds                               1 kilogram                        0.454 kilograms                   1 pound
1.102 tons (short)                         1 tonne                           0.907 tonnes                      1 ton
0.029 ounces (troy)/ton                    1 gram/tonne                      34.28 grams/tonne                 1 ounce (troy)/ton
</TABLE>


<PAGE>

                                       7


Glossary of Geological and Mining Terms


anomaly:  a  departure  from  the norm  which  may  indicate  the  presence  of
mineralization in the underlying bedrock.

assay:  the chemical  analysis of an ore,  mineral or  concentrate  of metal to
determine the amount of valuable species.

chalcocite:  a form of copper mineral ore that generally contains a high copper
content.

chalcopyrite: a form of copper mineral ore that generally contains a low copper
content.

concentrate:  a product containing  valuable metal from which most of the waste
material in the ore has been eliminated.

concentrator: a plant for recovery of valuable minerals from ore in the form of
concentrate.  The concentrate must then be treated in some other type of plant,
such as a smelter, to effect recovery of the pure metal.

covellite: a supergene mineral found in copper deposits; a source of copper.

cut-off grade: the lowest grade of mineral resources considered economic;  used
in the calculation of reserves and resources in a given deposit.

dyke: a tabular igneous  intrusion that cuts across the bedding or foliation of
the country rock.

fault:  a  fracture  in  rock  along  which  the  adjacent  rock  surfaces  are
differentially displaced.

feasibility  study:  a  comprehensive  study of a mineral  deposit in which all
geological,  engineering, legal, operating, economic, social, environmental and
other  relevant  factors  are  considered  in  sufficient  detail that it could
reasonably  serve as the basis for a final decision by a financial  institution
to finance the development of the deposit for mineral production.

flotation:  a milling  process by which some mineral  particles  are induced to
become attached to bubbles of froth and float,  and others to sink, so that the
valuable minerals are concentrated and separated from the gangue.

gangue: valueless rock or mineral material in ore.

hypogene:  primary mineralization formed by mineralizing solutions emanating up
from a deep magnetic source.

HQ: diamond drilling equipment that produces a 63.5 millimetre core diameter.

indicated mineral resource: that part of a mineral resource for which quantity,
grade  or  quality,  densities,  shape  and  physical  characteristics  can  be
estimated  with a level  of  confidence  sufficient  to allow  the  appropriate
application  of technical and economic  parameters to support mine planning and
evaluation of the economic  viability of the deposit.  The estimate is based on
detailed  and  reliable  exploration  and  test  information  gathered  through
appropriate  techniques  from  locations  such  as  outcrops,  trenches,  pits,
workings  and drill holes that are spaced  closely  enough for  geological  and
grade continuity to be reasonably assumed.

inferred  mineral  resource:  that  part of a  mineral  resource  for which the
quantity  and grade or  quality  can be  estimated  on the basis of  geological
evidence  and  limited  sampling  and  reasonably  assumed,  but not  verified,

<PAGE>

                                       8


geological and grade continuity.  The estimate is based on limited  information
and sampling  gathered  through  appropriate  techniques from locations such as
outcrops, trenches, pits, workings and drill holes.

intrusive:  rock which while molten, penetrated into or between other rocks but
solidified before reaching the surface.

IP: induced polarization.

kriging: A weighted,  moving-average  interpolation  method in which the set of
weights  assigned  to  samples  minimizes  the  estimation  variance,  which is
computed  as a function of the  variogram  model and  locations  of the samples
relative to each other, and to the point or block being estimated.

leach: to dissolve minerals or metals out of ore with chemicals.

measured mineral resource:  that part of a mineral resource for which quantity,
grade or quality,  densities,  shape and physical  characteristics  are so well
established that they can be estimated with confidence  sufficient to allow the
appropriate  application  of  technical  and  economic  parameters  to  support
production  planning and  evaluation of the economic  viability of the deposit.
The  estimate is based on  detailed  and  reliable  exploration,  sampling  and
testing information gathered through appropriate techniques from locations such
as outcrops,  trenches,  pits, workings and drill holes that are spaced closely
enough to confirm both geological and grade continuity.

mineral  reserve:  the  economically  mineable  part of a measured or indicated
mineral resource demonstrated by at least a preliminary feasibility study. This
study must include adequate information on mining,  processing,  metallurgical,
and  economic  and other  relevant  factors  that  demonstrate,  at the time of
reporting,  that economic extraction can be justified.  An ore reserve includes
diluting  materials and  allowances for losses that may occur when the material
is mined.

mineral resource  (deposit):  a concentration or occurrence of natural,  solid,
inorganic or  fossilized  organic  material in or on the earth's  crust in such
form  and  quantity  and of  such a grade  or  quality  that it has  reasonable
prospects for economic extraction.  The location,  quantity,  grade, geological
characteristics  and  continuity  of a mineral  resource  (deposit)  are known,
estimated or interpreted from specific geological evidence and knowledge.

NQ: diamond drilling equipment that produces a 47.5 millimetre core diameter.

porphyry:  any igneous rock in which  relatively  large,  conspicuous  crystals
(called phenocrysts) are set in a fine-grained ground mass.

preliminary  assessment:  a study that  includes  an  economic  analysis of the
potential viability of mineral resources taken at an early stage of the project
prior to the completion of a preliminary feasibility study.

preliminary  feasibility study and pre-feasibility study: a comprehensive study
of the  viability  of a mineral  project that has advanced to a stage where the
mining method, in the case of underground mining, or the pit configuration,  in
the case of an open  pit,  has been  established  and an  effective  method  of
mineral processing has been determined, and includes a financial analysis based
on  reasonable  assumptions  of  technical,   engineering,   legal,  operating,
economic,  social,  and  environmental  factors  and the  evaluation  of  other
relevant  factors  which  are  sufficient  for  a  qualified   person,   acting
reasonably,  to  determine  if  all or  part  of the  mineral  resource  may be
classified as a mineral reserve.

probable reserve:  the economically  mineable part of an indicated and, in some
circumstances,   a  measured  mineral  resource  demonstrated  by  at  least  a
preliminary  feasibility study. This study must include adequate information on

<PAGE>

                                       9


mining,  processing,  metallurgical,  economic and other relevant  factors that
demonstrate,  at  the  time  of  reporting,  that  economic  extraction  can be
justified.

proven reserve:  the economically  mineable part of a measured mineral resource
demonstrated  by at least a  preliminary  feasibility  study.  This  study must
include adequate information on mining, processing, metallurgical, economic and
other  relevant  factors  that  demonstrate,  at the  time of  reporting,  that
economic extraction can be justified.

PQ: diamond drilling equipment that produces an 85 millimetre core diameter.

qualified person: an individual who: (a) is an engineer or geoscientist with at
least five years of  experience in mineral  exploration,  mine  development  or
operation, or mineral project assessment,  or any combination of these; (b) has
experience relevant to the subject matter of the mineral project;  and (c) is a
member in good standing of a  professional  association  as defined by National
Instrument 43-101 of the Canadian Securities Administrators.

QMD or quartz monzodiorite:  plutonic rock containing quartz, alkali feldspars,
plagioclase feldspars and feldspathoid minerals.

RC: reverse circulation.

seam:  A stratum or bed of coal or other  mineral;  generally  applied to large
deposits of coal.

splits:  The division of a bed of coal into two or more horizontal  sections by
intervening rock strata.

stock: an irregular, metalliferous mass in a rock formation.

strike:  the  direction,  or course  or  bearing,  of a vein or rock  formation
measured on a level surface.

sulphides: compounds of sulphur with other metallic elements.

supergene:  ore  minerals  that  have  been  formed  by  the  effects  (usually
oxidization and secondary sulphide enrichment) of descending ground water.

<PAGE>

                                      10


CORPORATE STRUCTURE

Name, Address and Incorporation

IVN was  incorporated  under the Company Act (British  Columbia) on January 25,
1994 under the name 463212 B.C. Ltd. In February  1994, IVN changed its name to
Indochina  Goldfields Ltd. In March 1994, IVN increased its authorized  capital
from 10,000  Common  Shares  without  par value to  100,000,000  Common  Shares
without par value and created  100,000,000  Preferred Shares without par value.
In  February  1995,  IVN was  continued  under the  Business  Corporations  Act
(Yukon).  In July 1997,  IVN increased its  authorized  capital to an unlimited
number of Common Shares without par value and an unlimited  number of Preferred
Shares  without par value.  In June 1999, IVN changed its name to Ivanhoe Mines
Ltd.

IVN's  North  American  headquarters  are  located at 654 - 999  Canada  Place,
Vancouver,  British  Columbia,  Canada,  V6C 3E1. IVN's Asian  headquarters are
located at 150 Beach Road, #25-03 The Gateway West,  Singapore,  189720.  IVN's
registered  office is located  at 300 - 204 Black  Street,  Whitehorse,  Yukon,
Canada, Y1A 2M9.

Intercorporate Relationships

The following sets forth the name and  jurisdiction of  incorporation  of IVN's
principal  subsidiaries  and  the  material  property  of  IVN  to  which  that
subsidiary  relates.  Each subsidiary is  wholly-owned,  except as described in
note 1 below.

<TABLE>
<CAPTION>
Name of Subsidiary                               Jurisdiction of Incorporation           Applicable Material Property
------------------                               -----------------------------           ----------------------------
<S>                                             <C>                                     <C>

Ivanhoe Mines Delaware Holdings, LLC             Delaware                                Oyu Tolgoi

Ivanhoe Mines Aruba Holdings LLC                 Aruba                                   Oyu Tolgoi

Ivanhoe Oyu Tolgoi (BVI) Ltd.
(formerly Ivanhoe Mines Mongolia Inc.)           British Virgin Islands                  Oyu Tolgoi

Ivanhoe Mines Mongolia Inc. LLC                  Mongolia                                Oyu Tolgoi

SouthGobi Energy Resources Ltd.(1)               British Columbia                        Ovoot Tolgoi

SGQ Coal Investment Pte. Ltd. (1)                Singapore                               Ovoot Tolgoi

Southgobi sands LLC(1)                           Mongolia                                Ovoot Tolgoi
</TABLE>


(1)  SouthGobi  is  owned  as to  approximately  81% by IVN.  Each of SGQ  Coal
Investment  Pte.  Ltd.  and  Southgobi  sands  LLC  is  a  direct  or  indirect
wholly-owned subsidiary of SouthGobi.




<PAGE>

                                      11



GENERAL DEVELOPMENT OF THE BUSINESS

Overview

IVN is an international  mineral exploration and development  company.  The IVN
Group's principal mineral resource property is the Oyu Tolgoi Project,  located
in  Mongolia.  The IVN Group also holds  interests  in  several  other  mineral
resource  projects,  mostly in Asia, and holds significant  equity interests in
several   publicly-listed   mineral  exploration  and  development   companies,
including  SouthGobi whose  principal  mineral  resource  property is the Ovoot
Tolgoi Project, located in Mongolia.

Three Year History

Throughout the period from 2005 to 2007 IVN focused substantial time and effort
on the further development of its Mongolian properties, including in particular
the Oyu Tolgoi Project.

     2005

In January 2005,  IVN's Common Shares  commenced  trading on the New York Stock
Exchange and were  concurrently  delisted from the NASDAQ Stock  Market.  IVN's
Common Shares were delisted from the Australian Stock Exchange in April 2005.

In February  2005,  IVN sold its 100%  interest in the Savage River  Project to
Stemcor Holdings Limited for $21.5 million in cash plus a series of contingent,
escalating-scale  annual  payments  based on iron ore pellet prices over a five
year period.  The annual  payments are based on Savage  River  iron-ore  pellet
sales of 1.8 million  tonnes per year. The amount of the payment is based on an
escalating  pellet-price  formula using the annual Nibrasco/JSM pellet price as
the pricing benchmark,  with the initial rate being $1.00 a tonne if the annual
benchmark  price exceeds $30 a tonne,  and  escalating to a maximum of $16.50 a
tonne if annual pellet prices exceed $80 a tonne. The first payment occurred in
March 2006, and the final payment is scheduled to occur in March 2010.

In April and May 2005,  updated resource  estimates were completed for the Hugo
Dummett Deposits and Southern Oyu Deposits, respectively. The reports estimated
that  the  Oyu  Tolgoi  Project  contained  aggregate  measured  and  indicated
resources  totalling 1.15 billion tonnes grading 1.30% copper and 0.47 g/t gold
at a 0.6% copper  equivalent  cut-off  grade,  with an additional  1.16 billion
tonnes of inferred  resources grading 1.02% copper and 0.23 g/t gold at a 0.60%
copper equivalent cut-off grade.

In June 2005,  IVN  completed an  underwritten  public  offering of  19,750,000
Common  Shares  at a price  of  Cdn.$8.00  per  share  for  gross  proceeds  of
Cdn.$158,000,000.

In September 2005, a resource estimate for the Ovoot Tolgoi Project in Mongolia
was completed in which it was estimated  that the project  contained 72 million
tonnes of  measured  and  indicated  coal  resources  and 26 million  tonnes of
inferred coal resources.

In  September  2005,  IVN  released  its  Integrated  Development  Plan 2005, a
preliminary  assessment report that envisions the staged development of the Oyu
Tolgoi  Project over a 15 year period as a major copper and gold project having
an ultimate mine life of in excess of 40 years. The Integrated Development Plan
contemplates  the  development  of the Southern  Oyu Deposits  through open pit
mining and the Hugo Dummett Deposits through  underground block cave mining and
establishes  engineering  and  production  parameters for mining and processing
operations.

<PAGE>

                                      12


In December  2005,  IVN  completed a  restructuring  transaction  with  Jinshan
whereby IVN received  48,552,948 new common shares of Jinshan in  consideration
for all of IVN's  participating  interest in the CSH 217 Gold Project in China,
its  interests  in all other joint  venture  arrangements  between the parties,
certain  contractual rights to participate with Jinshan in mineral  exploration
and  development  opportunities  in China  and  $3.4  million  in cash.  At the
conclusion  of the  transaction  and  including  shares  issued  pursuant  to a
concurrent private placement to other investors,  IVN held approximately 53% of
the issued and outstanding common shares of Jinshan.

     2006

In January  2006, a reserve  estimate was produced  upgrading  the measured and
indicated  resources  at the  Southern  Oyu Deposits to the proven and probable
reserve  categories.  The  estimate  listed  930  million  tonnes of proven and
probable reserves grading 0.5% copper and 0.36 g/t gold.

In February 2006, IVN's Common Shares re-commenced  trading on the NASDAQ Stock
Market.

In February  2006,  an updated  coal  resource  estimate  for the Ovoot  Tolgoi
Project was completed which reported measured and indicated  resources of 123.9
million tonnes and inferred resources of 33.7 million tonnes.

In February 2006, an updated  independent  resource  estimate on the Oyu Tolgoi
Project was completed, adding inferred resources from Hugo North and Hugo North
Extension,  and  reporting  measured  and  indicated  resources  (inclusive  of
reported  reserves) of 1.15 billion  tonnes  grading  1.27% copper and 0.48 g/t
gold at a 0.60% copper equivalent  cut-off grade and inferred resources of 1.44
billion tonnes grading 1.11% copper and 0.28 g/t gold at the same cut-off.

In April 2006, IVN completed an underwritten  public offering which,  including
the exercise of an over-allotment option, consisted of 18,400,000 Common Shares
at  a  price  of   Cdn.$10.28   per  Common  Share,   for  gross   proceeds  of
Cdn.$189,152,000.

In July 2006,  IVN entered into  definitive  agreements  with SouthGobi for the
Coal  Reorganization.  Pursuant  to the  agreements,  IVN  agreed  to  sell  to
SouthGobi all of the coal assets of IVN, including the Ovoot Tolgoi Project, in
consideration for the issuance of 82,576,383 common shares of SouthGobi,  which
would,  when  combined  with  existing  shareholdings,  give IVN  ownership  of
approximately 90% of SouthGobi's issued and outstanding shares. The transaction
was approved by the  shareholders  of SouthGobi in August 2006.  In  connection
with the transaction,  IVN also provided SouthGobi with interim funding support
of up to $10,000,000, with an option to increase such funding to $15,000,000 by
mutual agreement.

In October 2006, IVN and a wholly-owned  subsidiary of Rio Tinto  completed the
Rio Tinto Transaction,  which transaction  established a strategic  partnership
for the  development  of the Oyu  Tolgoi  Project.  Pursuant  to the Rio  Tinto
Transaction,  Rio Tinto  subscribed  for 37.1 million common shares of IVN at a
price of $8.18 per share, for gross proceeds of approximately  $303 million and
agreed to subscribe for an additional  46.3 million  shares at a price of $8.38
per  share,  for  gross  proceeds  of  approximately  $388  million,  upon  the
completion  of  certain  conditions  precedent,  including  completion  of  the
Investment   Agreement.   IVN  also  issued  to  Rio  Tinto  two   tranches  of
approximately  46 million warrants each that entitle Rio Tinto to subscribe for
common shares of IVN at prices between $8.38 and $9.02 following  completion of
the Investment  Agreement.  The relevant agreements also imposed upon Rio Tinto
limits on the  number of shares it can hold in IVN such that its  holdings  not
exceed 40% of the  outstanding  shares of IVN,  subject to certain  exceptions.
Pursuant to the transaction, the parties established the OT Technical Committee
and Rio Tinto  agreed to provide  the  technical  services of Rio Tinto for the
development of the project on a cost-recovery  basis. Rio Tinto became entitled
to board seats proportional to its share ownership of IVN.

<PAGE>


                                      13


     2007

In February  2007, as part of the Rio Tinto  Transaction,  IVN agreed to divest
its Myanmar  Assets and  transferred  all of the  Myanmar  Assets to the Monywa
Trust,  an independent  third party trust,  in  consideration  for a promissory
note.  The sole purpose of the Monywa Trust is to facilitate the future sale of
the  Myanmar  Assets to one or more  arm's  length  third  parties  that do not
constitute  Excluded  Persons.  Following  the  sale  of  the  Myanmar  Assets,
substantially  all of the proceeds will be used to repay the  promissory  note,
with  the  remainder  distributed  to  the  beneficiaries  of  the  trust.  See
"DESCRIPTION OF THE BUSINESS - Other Assets - Myanmar Trust Arrangements"

In May 2007 IVN and SouthGobi completed the Coal Reorganization,  and SouthGobi
issued  57,000,000   Common  Shares  and  25,576,383   preferred  shares  (each
convertible  into a SouthGobi  common  share) to IVN in  consideration  for the
transfer to SouthGobi of the IVN coal assets.  As a result of the  transaction,
SouthGobi became a majority-owned, publicly traded IVN subsidiary.

In June 2007, a draft  Investment  Agreement  was  completed  between IVN and a
Mongolian  government  working group and submitted to the Standing Committee on
Economics,  a  committee  of the  Mongolian  Parliament.  The  draft  agreement
provided,  among other things,  for the  Government of Mongolia to obtain a 34%
ownership  interest in the Oyu Tolgoi  Project.  It was intended that the draft
Investment  Agreement be reviewed by the Standing  Committee and then submitted
to the Parliament for approval,  but the Standing Committee  determined that it
needed further  expertise and background  prior to commenting on the draft, and
delayed its presentation to Parliament  pending a review and education process.
In the interim,  Parliament voted to replace the existing government with a new
government and a new Prime Minister,  which became effective and functioning in
December 2007.

In October 2007, IVN and Rio Tinto entered into the Rio Tinto Credit Agreement.
Pursuant to this Agreement,  Rio Tinto has provided to IVN a convertible credit
facility of up to $350 million to finance ongoing mine  development  activities
at the Oyu Tolgoi Project pending the  finalization of an Investment  Agreement
with the Government of Mongolia.  The funds are available to IVN at an interest
rate of LIBOR  plus  3.3% and the loan  matures  on  September  12,  2010.  The
principal  amount  drawn on the loan plus up to $108  million in  interest  are
automatically  convertible  into Common  Shares at maturity  (or earlier at the
option of Rio Tinto) at a deemed price of $10 per share, for an aggregate of up
to 45.8 million  Common Shares  issuable under the facility.  In addition,  IVN
issued to Rio Tinto share purchase warrants to purchase up to 35 million Common
Shares at a price of $10 per share for a period of five years. The warrants may
be exercised on a basis  proportionate  to the amount of funds drawn down under
the Credit Agreement.  As at the date of this Annual  Information Form, IVN had
drawn down $250 million from the facility. In connection with the completion of
the Rio Tinto Credit Agreement,  IVN and Rio Tinto also agreed to amend certain
terms of the Rio Tinto Transaction.  Rio Tinto now has the right to appoint the
Chairman of the Technical Committee overseeing development and operation of the
Oyu  Tolgoi  project  in  2009  rather  than in 2011  and Rio  Tinto's  maximum
permitted shareholding in IVN increased to 46.65% from 40%.

     2008

In January 2008,  SouthGobi completed three equity private placement financings
to raise a total of Cdn.$117.9 million. The first placement was for ten million
common  shares at Cdn.$8.00  per share,  while the second and third  placements
were for 3.5 million  Common Shares and 711,111  Common  Shares,  respectively,
each at Cdn.$9.00  per share.  Coincident  with the  financings,  IVN converted
25,576,383  preferred  shares of SouthGobi,  the total sum of preferred  shares
held by IVN, into common shares of SouthGobi on a one-for-one  basis.  IVN also
converted  approximately  Cdn.$30 million of debt into 14,293,998 common shares

<PAGE>

                                      14


of SouthGobi at a conversion rate of Cdn.$2.09 per share.  The conversion ratio
for preferred shares and debt was contemplated in the Coal Reorganization.

In January 2008,  IVN  announced  that it had completed an estimate of inferred
resources at the Heruga Deposit,  a newly discovered  deposit of the Oyu Tolgoi
Project  located on lands  covered by the Entree  Joint  Venture.  IVN reported
inferred resources of 760 million tonnes grading 0.48% copper, 0.55g/t gold and
142 ppm molybdenum, using a 0.60% copper equivalent cut-off grade.

In  March  2008,  IVN  notified  Entree  that it  completed  $27.5  million  in
expenditures  on the  property  covered by the Entree  Joint  Venture,  and has
thereby earned a 60% interest in that property.  IVN can increase this interest
to 80% on minerals  below 560 m and 70% on  minerals  above that  threshold  by
completing  an  aggregate  of $35  million of  exploration  and/or  development
expenditures on that property prior to November 2012.

Outlook

IVN expects that, for the foreseeable  future,  it will continue to concentrate
most  of its  business  activities  and  financial  resources  on  the  ongoing
development of the Oyu Tolgoi Project. IVN has implemented a number of measures
recently to restructure  its operations in a manner  designed to make its other
projects  largely  self-funding.   As  an  example,  SouthGobi  is  now  solely
responsible  for funding and  operational  requirements  for the Mongolian coal
division. IVN expects to continue this process for other projects in the coming
year.

IVN will continue its efforts to successfully  complete  negotiations  with the
government  of  Mongolia  for the  Investment  Agreement.  Finalization  of the
Investment Agreement has taken much longer than expected.  The draft Investment
Agreement  completed  in June 2007 is under review by the new  government  that
assumed control in December 2007. IVN and Rio Tinto have continued  discussions
regarding the Investment  Agreement with the new  government,  and have advised
all  interested  parties about the potential  adverse  impact that would result
from further delays in the approval process for an Investment Agreement. IVN is
monitoring the deliberations of the Mongolian Parliament and the actions by the
Mongolian government regarding the Investment  Agreement,  and IVN continues to
assess the implications  for the Oyu Tolgoi  development  schedule.  Without an
Investment Agreement, further progress for the project remains uncertain.

IVN is concurrently proceeding with development work on the Oyu Tolgoi Project.
This development work includes on-going engineering and mine planning,  as well
as completion of relevant  infrastructure,  including completion of No. 1 shaft
to  full  depth  and  initial  sub-surface  work on No.  2  shaft.  An  updated
Integrated  Development  Plan 2008  (IDP08)  is nearing  completion  which will
update  all known  factors  affecting  the Oyu  Tolgoi  Project.  IDP08 will be
finalized  and  released  after an  acceptable  Investment  Agreement  has been
negotiated  with the  Government  of  Mongolia  and  approved  by all parties -
including the Board of Directors of IVN.

Risk Factors

     IVN may be  unsuccessful  in completing an Investment  Agreement  with the
     Government  of Mongolia for the Oyu Tolgoi  Project or may only be able to
     complete  the  contract  on terms that  effectively  impair  the  economic
     viability of the project.

The Investment Agreement with the Government of Mongolia is expected to address
a broad range of matters relevant to the Oyu Tolgoi Project, and the nature and
scope of the Investment Agreement is of fundamental importance to the viability
of the  Oyu  Tolgoi  Project.  The  amendments  to the  Mining  Law  that  were
implemented in the Spring of 2006 establish a broad framework for an Investment
Agreement, and a substantial portion of the terms are subject to the discretion
and mutual  agreement  of the  Government  and the  applicable  mining  licence

<PAGE>

                                      15


holder. The Mongolian Government can, within the discretionary  mandate imposed
by the Mining Law,  propose to complete the Agreement  only on terms that would
severely impact the economic viability of the Oyu Tolgoi Project or effectively
prevent IVN from coming to an agreement  with the  Government on the Investment
Agreement.  In June 2007 IVN and the  Government of Mongolia  completed a draft
Investment  Agreement,  but this draft has not been  presented to the Mongolian
Parliament for approval and political  developments  since that date have meant
that  the  scope  of the  Investment  Agreement  could be  subject  to  further
amendments.  In addition,  there is the potential for additional changes to the
Mining  Law  that  could  result  in  further  amendments  to the  scope of the
Investment  Agreement.  Any such result could have a significant adverse effect
on the development of the Oyu Tolgoi Project and IVN itself.

     IVN's  ability to carry on business  in  Mongolia is subject to  political
     risk.

IVN holds its interest in the Oyu Tolgoi  Project,  the Ovoot  Tolgoi  Project,
through its interest in  SouthGobi,  and its Mongolian  exploration  properties
through  mining  licences and  exploration  licences  that enable it to conduct
operations or development and  exploration  activities.  Notwithstanding  these
arrangements,   IVN's  ability  to  conduct   operations  or  exploration   and
development  activities  is subject to changes  in  legislation  or  government
regulations or shifts in political attitudes beyond IVN's control.

Government policy may change to discourage foreign investment,  nationalization
of mining industries may occur or other government limitations, restrictions or
requirements  not  currently  foreseen  may  be  implemented.  There  can be no
assurance that IVN's assets will not be subject to nationalization, requisition
or confiscation, whether legitimate or not, by any authority or body.

There is no assurance that provisions  under Mongolian law for compensation and
reimbursement  of  losses  to  investors  under  such  circumstances  would  be
effective to restore the value of IVN's original investment.  Similarly,  IVN's
operations may be affected in varying  degrees by government  regulations  with
respect to restrictions on production,  price controls, export controls, income
taxes,  environmental  legislation,  mine  safety and annual  fees to  maintain
mineral  licences in good  standing.  There can be no assurance  that Mongolian
laws protecting  foreign  investments  will not be amended or abolished or that
existing laws will be enforced or  interpreted to provide  adequate  protection
against any or all of the risks described above.

     There  can be no  assurance  that  IVN  will be  capable  of  raising  the
     additional  funding  that  it  needs  to  carry  out its  development  and
     exploration objectives.

The  further  development  and  exploration  of the Oyu Tolgoi  Project and the
various other mineral properties in which it holds interests depends upon IVN's
ability to obtain financing  through capital markets,  sales of non-core assets
or other  means.  IVN will be able to meet  short-term  cash  requirements  for
development  of the Oyu  Tolgoi  Project  as a result of the Rio  Tinto  Credit
Agreement,  but these  funds  will not be  sufficient  to meet all  development
needs. The share purchase entitlements and obligations of Rio Tinto pursuant to
the Rio Tinto Transaction may, if consummated in their entirety,  account for a
large portion of the development  cost of the Oyu Tolgoi  Project,  but it also
will not account for the entire  development cost and, in any case, there is no
assurance  that IVN will meet the  conditions  necessary to trigger Rio Tinto's
purchase  obligations  or that Rio  Tinto  will  exercise  its  entitlement  to
subscribe for more share capital pursuant to its warrants and other rights.  In
particular,  Rio Tinto's  obligation  to complete  the second  tranche  private
placement  is  subject  to IVN  obtaining  an  Investment  Agreement  on  terms
acceptable to Rio Tinto.  Until an Investment  Agreement with the Government of
Mongolia is actually  finalized and approved,  it is not possible to predict to
what extent IVN will be  successful  in  negotiating  and  obtaining  terms and
conditions  in an  Investment  Agreement  that  is  acceptable  to  Rio  Tinto.
Meanwhile, Rio Tinto's warrants are exercisable at the discretion of Rio Tinto,
and IVN has no control over the  decision to exercise  those  warrants.  If the
second tranche private  placement is not completed  and/or the warrants are not
exercised by Rio Tinto,  there is no assurance  that IVN will be  successful in

<PAGE>

                                      16


obtaining  financing  from other sources  necessary for  development of the Oyu
Tolgoi Project, on favourable terms or at all. Even if Rio Tinto does subscribe
for the maximum amount contemplated in the Rio Tinto Transaction, IVN will need
to obtain additional  sources of capital to complete the development of the Oyu
Tolgoi  Project and to advance the  development  of other  mineral  properties.
Depressed  markets  for  precious  and base  metals  may make it  difficult  or
impossible for IVN to obtain debt financing or equity  financing.  IVN operates
in a region of the world that is prone to economic and  political  upheaval and
instability,  which may make it more difficult for IVN to obtain debt financing
from project lenders.  Failure to obtain additional financing on a timely basis
may cause IVN to postpone its development plans,  forfeit rights in some or all
of its  properties or joint  ventures or reduce or terminate some or all of its
operations.

     Lack of  infrastructure  in proximity to IVN's material  properties  could
     adversely affect mining feasibility.

The Oyu Tolgoi Project is located in an extremely  remote area, which currently
lacks  basic  infrastructure,  including  sources  of  electric  power,  water,
housing,  food and  transport,  necessary to develop and operate a major mining
project.  While IVN has  established  the limited  infrastructure  necessary to
conduct its  current  exploration  and  development  activities,  substantially
greater sources of power, water, physical plant and transport infrastructure in
the area will need to be established  before IVN can conduct mining operations.
Lack of  availability  of the means and  inputs  necessary  to  establish  such
infrastructure  may adversely  affect  mining  feasibility.  Establishing  such
infrastructure   will,   in   any   event,   require   significant   financing,
identification  of adequate sources of raw materials and supplies and necessary
approvals from national and regional governments, none of which can be assured.
The Ovoot Tolgoi Project is similarly located in a remote area.

     Mining projects are sensitive to the volatility of metal prices.

The long-term viability of IVN depends in large part on the world market prices
of copper and gold.  The market  prices for these  metals are  volatile and are
affected by numerous  factors  beyond  IVN's  control.  These  factors  include
international economic and political trends,  expectations of inflation, global
and regional demand, currency exchange fluctuations,  interest rates and global
or regional consumption patterns, speculative activities,  increased production
due to improved mining and production  methods and economic  events,  including
the performance of Asia's economies.

The  aggregate  effect of these  factors  on metals  prices  is  impossible  to
predict.  Should  prevailing  metal  prices  fall  and  remain  below  variable
production costs of IVN's current and planned mining operations for a sustained
period, losses may be sustained and, under certain circumstances,  there may be
a curtailment  or suspension  of some or all of IVN's mining,  development  and
exploration  activities.  IVN would also have to assess the economic  impact of
any sustained lower metal prices on recoverability and, therefore,  the cut-off
grade and level of IVN's  reserves and  resources.  These factors could have an
adverse  impact on IVN's future cash flows,  earnings,  results of  operations,
stated reserves and financial condition.

The following table sets forth for the periods  indicated (1) the London Metals
Exchange's high, low and average  settlement  prices for copper in U.S. dollars
per pound and (2) the high, low and average London  afternoon fixing prices for
gold.

<PAGE>

                                      17

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------
Year                    Copper                                 Gold
          ----------------------------------     -------------------------------

           High          Low        Average       High        Low       Average
          ------        -----      ---------     ------      -----     ---------
<S>       <C>          <C>         <C>           <C>         <C>       <C>

2002       $0.77        $0.65        $0.71        $349        $278       $310

2003       $1.05        $0.71        $0.81        $416        $320       $363

2004       $1.49        $1.06        $1.30        $454        $375       $409

2005       $2.11        $1.39        $1.67        $536        $411       $444

2006       $3.99        $2.06        $3.05        $725        $524       $604

2007       $3.77        $2.37        $3.23        $841        $604       $695
--------------------------------------------------------------------------------

</TABLE>

     IVN's business in Mongolia may be subject to legal risk.

The  legal  framework  in  Mongolia  is,  in many  instances,  based on  recent
political  reforms or newly  enacted  legislation,  which may not be consistent
with  long-standing  local conventions and customs.  As a result,  there may be
ambiguities,  inconsistencies  and  anomalies in the  agreements,  licences and
title  documents  upon  which IVN  holds  its  interests  in  Mongolia,  or the
underlying legislation upon which those interests are based, which are atypical
of more  developed  legal systems and which may affect the  interpretation  and
enforcement  of  IVN's  rights  and   obligations.   Local   institutions   and
bureaucracies   responsible   for   administrating   laws  may  lack  a  proper
understanding of the laws or the experience necessary to apply them in a modern
business context.  Many laws have been enacted,  but in many instances they are
neither  understood  nor  enforced  and  may  be  applied  in an  inconsistent,
arbitrary and unfair manner, while legal remedies may be uncertain,  delayed or
unavailable.  For decades Mongolians have looked to politicians and bureaucrats
as the  sources of the  "law".  This has  changed  in theory,  but often not in
practice.  With respect to most  day-to-day  activities in Mongolia  government
civil servants  interpret,  and often effectively make, the law. This situation
is gradually  changing but at a relatively  slow pace.  Accordingly,  while IVN
believes  that it has taken the legal  steps  necessary  to obtain and hold its
property and other  interests in Mongolia,  there can be no guarantee that such
steps will be sufficient to preserve those interests.

     Recent and future  amendments  to Mongolian  laws could  adversely  affect
     IVN's mining rights in the Oyu Tolgoi Project or make it more difficult or
     expensive to develop the project and carry out mining.

In 2006,  Mongolia  implemented  revisions to the Minerals Law. These revisions
continue to preserve  the  substance of the original  Minerals  Law,  which was
drafted with the assistance of Western legal experts and is widely  regarded as
progressive, internally consistent and effective legislation, but the revisions
have also increased the potential for political  interference  and weakened the
rights of mineral holders in Mongolia.  A number of the provisions will require
further  clarification  from the  Government  about  the  manner  in which  the
Government  intends to interpret and apply the relevant law, which could have a
significant  effect on IVN's  Mongolian  properties,  including  the Oyu Tolgoi
Project in  particular.  In addition,  representatives  of the newly  installed
government in Mongolia have recently stated that they are contemplating further
amendments to the Mining Law.

The  Mongolian  government  has, in the past,  expressed  its strong  desire to
foster,  and has to date protected the development of, an enabling  environment
for foreign  investment.  However,  there are political  constituencies  within
Mongolia  that  have  espoused   ideas  that  would  not  be  regarded  by  the
international  mining industry as conducive to foreign  investment if they were
to become law or official  government policy. IVN has no reason to believe that
the  government of Mongolia  intends to sponsor or that  Parliament  intends to

<PAGE>

                                      18


enact  amendments  to the  Minerals  Law or  other  legislation  that  would be
materially  adverse to the interests of  international  investors in Mongolia's
mining sector, including those of IVN. Nevertheless, the Oyu Tolgoi Project has
a high profile among the citizens of Mongolia  and, as a burgeoning  democracy,
Mongolia  has  recently   demonstrated   a  degree  of  political   volatility.
Accordingly,  until these issues are addressed and  clarified,  there can be no
assurance that the present  government or a future government will refrain from
enacting  legislation or adopting government policies that are adverse to IVN's
interests  or that impair  IVN's  ability to develop and operate the Oyu Tolgoi
Project on the basis presently contemplated.

     IVN  may experience difficulties with its joint venture partners.

A portion of the Oyu Tolgoi  Project  property is held by Entree and subject to
an earn-in by IVN,  and IVN's  interest in that  portion of the  property  will
ultimately be held through a joint  venture with Entree.  IVN is subject to the
risks normally  associated  with the conduct of joint  ventures,  which include
disagreements as to how to develop,  operate and finance a project and possible
litigation  between the participants  regarding joint venture  matters.  If any
such  risks are  realized,  it may have an adverse  effect on IVN's  ability to
obtain the full  economic  benefit of its interest in the property  that is the
subject of the joint venture,  which could affect its results of operations and
financial condition.

     IVN may be unable to enforce its legal rights in certain circumstances.

In  the  event  of a  dispute  arising  at  or in  respect  of,  IVN's  foreign
operations,  including  the  Oyu  Tolgoi  Project,  IVN may be  subject  to the
exclusive jurisdiction of foreign courts or may not be successful in subjecting
foreign persons to the jurisdiction of courts in Canada or other jurisdictions.
IVN may also be hindered or prevented from enforcing its rights with respect to
a governmental  entity or instrumentality  because of the doctrine of sovereign
immunity.

     The  Monywa  Trust  may not be able to sell the  interest  in the  Myanmar
     Assets on a timely basis or for its fair value.

Pursuant  to the  transaction  establishing  the  Monywa  Trust,  the  trust is
obligated  to sell its interest in the Myanmar  Assets to a third party.  Until
such time as that sale occurs,  IVN will not receive the consideration  that it
is  seeking  for the  project.  There are  numerous  contingencies  that  could
constrain the sale price or otherwise  prevent the sale of the Myanmar  Assets,
including operational problems on the Monywa Copper Project,  disputes with the
government-controlled joint venture partner and a severe decrease in the market
price for copper. In addition,  there are international  sanctions  directed at
the  Government  of  Myanmar by several  constituencies,  including  the United
States, European Union and Canada. While the sanctions in their current form do
not affect the Monywa Copper  Project  directly,  they  effectively  reduce the
number of potential purchasers for the Monywa Copper Project interest and have,
in  the  past,   hindered  the  orderly   conduct  of  commercial   operations.
Accordingly,  it may be difficult for the Monywa Trust to arrange a sale of the
Myanmar Assets on reasonable commercial terms or at all.

     IVN's  valuation of its  investment in ABCP may not reflect actual amounts
     recovered in the future

IVN  has  valued  its  investment  in  asset  backed   commercial  paper  using
information that is publicly available at this time.  Continuing  uncertainties
regarding the value of the assets that underlie these  investments,  the amount
and timing of cash flows and the  outcome of the  restructuring  process  could
give rise to a further  change in their fair value.  There can be no  assurance
that IVN's investment will be recoverable in whole, in part or at all.

     Changes in, or more aggressive  enforcement of, laws and regulations could
     adversely impact IVN's business.


<PAGE>

                                      19


Mining operations and exploration  activities are subject to extensive laws and
regulations.  These relate to production,  development,  exploration,  exports,
imports,  taxes and royalties,  labour standards,  occupational  health,  waste
disposal,  protection and remediation of the environment,  mine decommissioning
and  reclamation,  mine safety,  toxic  substances,  transportation  safety and
emergency response and other matters.

Compliance  with these laws and  regulations  increases the costs of exploring,
drilling,  developing,  constructing,  operating  and  closing  mines and other
facilities.  It is possible that the costs, delays and other effects associated
with these laws and  regulations  may impact  IVN's  decision  as to whether to
continue to operate in a  particular  jurisdiction  or whether to proceed  with
exploration  or  development of  properties.  Since legal  requirements  change
frequently,  are  subject  to  interpretation  and may be  enforced  to varying
degrees in practice,  IVN is unable to predict the ultimate  cost of compliance
with these requirements or their effect on operations.  Furthermore, changes in
governments,  regulations  and  policies  and  practices  could have an adverse
impact  on IVN's  future  cash  flows,  earnings,  results  of  operations  and
financial condition.

     IVN  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
     IVN.

All phases of IVN's operations are subject to environmental  regulations in the
various jurisdictions in which it operates. For example, the Oyu Tolgoi Project
is subject to a requirement to develop an environmental  impact assessment,  as
well as other environmental protection obligations.  Environmental  legislation
is  evolving in a manner  which will  likely  require  stricter  standards  and
enforcement,  increased fines and penalties for non-compliance,  more stringent
environmental  assessments  of proposed  projects  and a  heightened  degree of
responsibility for companies and their officers, directors and employees. There
is no assurance that future changes in environmental  regulation,  if any, will
not adversely affect IVN's operations.  Environmental  hazards may exist on the
properties in which IVN holds interests which are presently  unknown to IVN and
which have been caused by previous or existing  third party owners or operators
of the properties.

Government  approvals  and permits are sometimes  required in  connection  with
IVN's  operations.  To the extent such approvals are required and not obtained,
IVN may be delayed or prohibited from  proceeding  with planned  exploration or
development of its mineral properties.

Failure to comply with applicable laws, regulations and permitting requirements
may  result in  enforcement  actions  thereunder,  including  orders  issued by
regulatory or judicial authorities causing operations to cease or be curtailed,
and  may  include   corrective   measures   requiring   capital   expenditures,
installation of additional equipment,  or remedial actions.  Parties engaged in
mining  operations may be required to compensate those suffering loss or damage
by reason of the  mining  activities  and may have civil or  criminal  fines or
penalties imposed for violations of applicable laws or regulations.

Amendments to current laws,  regulations and permits  governing  operations and
activities of mining companies, or more stringent implementation thereof, could
have  a  material  adverse  impact  on  IVN  and  cause  increases  in  capital
expenditures  or  production  costs or  reductions  in levels of  production at
producing  properties or require  abandonment  or delays in  development of new
mining properties.

     Previous mining operations may have caused environmental damage at current
     and former IVN mining  projects,  and if IVN cannot prove that such damage
     was caused by such prior  operators,  its  indemnities and exemptions from
     liability may not be effective.

IVN  has  received   exemptions  from  liability  from  relevant   governmental
authorities  for  environmental  damage  caused by previous  mining  operations
current and former mining  projects,  including at the Monywa Copper Project in
Myanmar,  the Bakyrchik gold project in Kazakhstan and the Cloncurry Project in

<PAGE>

                                      20


Australia.  There  is a  risk,  however,  that,  if an  environmental  accident
occurred at those sites, it may be difficult or impossible to assess the extent
to which environmental  damage was caused by IVN's activities or the activities
of  other  operators.   In  that  event,  the  liability  exemptions  could  be
ineffective and possibly worthless.

     The  actual  cost  of  developing   the  Oyu  Tolgoi  Project  may  differ
     significantly  from IVN's  estimates  and involve  unexpected  problems or
     delays.

The estimates regarding the development and operation of the Oyu Tolgoi Project
are  based  on the  IDP05.  This  study  establishes  estimates  of  resources,
construction  and  development  costs,  operating  costs and projects  economic
returns.  These estimates are based, in part, on assumptions about future metal
prices and future cost inputs,  and variances in these inputs, as well as other
inputs  that  form  the  basis  of  IDP05,   may  result  in  operating  costs,
construction and development costs, production and economic returns that differ
significantly  from  those  anticipated  by the  IDP05 and  future  development
reports.  In the case of operating  costs,  IDP05 derives  estimates of average
cash operating costs based upon, among other things:

     o    anticipated tonnage, grades and metallurgical  characteristics of ore
          to be mined and processed;

     o    anticipated recovery rates of copper and gold from the ore;

     o    cash operating costs of comparable facilities and equipment; and

     o    anticipated climatic conditions.

There  are also a number  of  uncertainties  inherent  in the  development  and
construction  of  any  new  mine,  including  the  Oyu  Tolgoi  Project.  These
uncertainties include:

     o    the timing and cost, which can be  considerable,  of the construction
          of mining and processing facilities;

     o    the  availability  and  cost of  skilled  labour,  power,  water  and
          transportation;

     o    the  availability  and  cost of  appropriate  smelting  and  refining
          arrangements;

     o    the need to  obtain  necessary  environmental  and  other  government
          permits, and the timing of those permits; and

     o    the  availability  of funds to finance  construction  and development
          activities.

The cost,  timing and  complexities  of mine  construction  and development are
increased by the remote  location of a property such as the Oyu Tolgoi Project.
It is common in new mining  operations  to experience  unexpected  problems and
delays during development,  construction and mine start-up. In addition, delays
in the commencement of mineral production often occur. Accordingly, there is no
assurance that future  development  activities will result in profitable mining
operations.

<PAGE>

                                      21


     IVN's  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.

IVN  conducts  its  operations  through  subsidiaries.  Its  ability  to obtain
dividends  or other  distributions  from its  subsidiaries  may be  subject  to
restrictions on dividends or repatriation  of earnings under  applicable  local
law, monetary transfer  restrictions and foreign currency exchange  regulations
in the  jurisdictions  in which the  subsidiaries  operate.  The  subsidiaries'
ability to pay dividends or make other  distributions to IVN is also subject to
their having  sufficient  funds to do so. If the subsidiaries are unable to pay
dividends or make other distributions,  IVN's growth may be inhibited unless it
is able to obtain  additional  equity or debt financing on acceptable terms. In
the event of a subsidiary's  liquidation,  IVN may lose all or a portion of its
investment in that subsidiary.

     There  can  be  no  assurance  that  the  interest  held  by  IVN  in  its
     exploration,  development  and mining  properties  is free from defects or
     that material  contractual  arrangements between IVN and entities owned or
     controlled  by foreign  governments  will not be  unilaterally  altered or
     revoked.

IVN has investigated  its rights to explore and exploit its various  properties
and, to the best of its  knowledge,  those  rights are in good  standing but no
assurance can be given that such rights will not be revoked,  or  significantly
altered,  to the  detriment of IVN.  There can also be no assurance  that IVN's
rights  will not be  challenged  or  impugned  by third  parties.  IVN has also
applied for rights to explore,  develop and mine various properties,  but there
is no certainty that such rights, or any additional rights applied for, will be
granted on terms satisfactory to IVN or at all.

     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.

The  remaining  portion  of the  proceeds  payable  to IVN from the sale of the
Savage  River  Project  are  deferred,  and the  amount  of such  payments  are
dependent on prevailing prices for iron ore (as represented by the Nibrasco/JSM
pellet price) in the year that the  compensation  is paid and the total tonnage
of iron ore  pellets  sold from the Savage  River  Project  in that year.  Such
prices are very  volatile  and in the past  prices  have  suffered  significant
declines.  Lower prices means lower corresponding payments to IVN. In addition,
while  current  reserve and resource  estimates  indicate that the mine will be
capable of producing sufficient ore to meet the 1,800,000 tpy threshold for the
term of deferred  payments,  there is no assurance  that these  estimates  will
actually  bear  themselves  out. If  insufficient  ore is  actually  present to
produce the maximum threshold amount of ore, then the corresponding payments to
IVN will be lower.

     Competition  for  new  mining  properties  by  larger,   more  established
     companies  may  prevent  IVN  from   acquiring   interests  in  additional
     properties or mining operations.

Significant  and  increasing   competition   exists  for  mineral   acquisition
opportunities  throughout the world. As a result of this  competition,  some of
which is with large,  better  established  mining  companies  with  substantial
capabilities and greater financial and technical  resources,  IVN may be unable
to acquire rights to exploit  additional  attractive mining properties on terms
it considers acceptable.  Accordingly,  there can be no assurance that IVN will
acquire any  interest in  additional  operations  that would yield  reserves or
result in commercial mining operations.

     There is no assurance that IVN will be capable of  consistently  producing
     positive cash flows.

IVN has paid no dividends on its Common Shares since incorporation and does not
anticipate doing so in the foreseeable  future. IVN has not, to date,  produced
positive  cash  flows from  operations,  and there can be no  assurance  of its

<PAGE>

                                      22


ability  to  operate  its  projects  profitably.  While  IVN may in the  future
generate additional working capital through the operation, development, sale or
possible syndication of its properties,  there is no assurance that IVN will be
capable of producing  positive cash flow on a consistent basis or that any such
funds will be available for exploration and development programs.

     A  substantial   portion  of  IVN's  operations  involve  exploration  and
     development  and there is no guarantee  that any such activity will result
     in commercial production of mineral deposits.

Development   of  IVN's  mineral   properties  is  contingent   upon  obtaining
satisfactory  exploration results. Mineral exploration and development involves
substantial  expenses and a high degree of risk,  which even a  combination  of
experience,  knowledge  and careful  evaluation  may not be able to  adequately
mitigate.  There is no assurance that additional  commercial  quantities of ore
will be discovered  on any of IVN's  exploration  properties.  There is also no
assurance that, even if commercial quantities of ore are discovered,  a mineral
property will be brought into commercial  production.  The discovery of mineral
deposits is dependent  upon a number of factors,  not the least of which is the
technical skill of the exploration personnel involved. The commercial viability
of a mineral  deposit,  once  discovered,  is also  dependent  upon a number of
factors,  some of which are the particular  attributes of the deposit,  such as
size,  grade and  proximity  to  infrastructure,  metal  prices and  government
regulations, including regulations relating to royalties, allowable production,
importing and exporting of minerals, and environmental protection. In addition,
assuming  discovery of a commercial  ore body,  depending on the type of mining
operation involved, several years can elapse from the initial phase of drilling
until commercial operations are commenced. Most of the above factors are beyond
the control of IVN.

     IVN cannot insure against all of the risks associated with mining.

Exploration,  development  and  production  operations  on  mineral  properties
involve numerous risks and hazards, including:

     o    rock   bursts,   slides,   fires,   earthquakes   or  other   adverse
          environmental occurrences;

     o    industrial accidents;

     o    labour disputes;

     o    political and social instability;

     o    technical  difficulties  due  to  unusual  or  unexpected  geological
          formations;

     o    failures of pit walls; and

     o    flooding  and  periodic  interruptions  due to inclement or hazardous
          weather condition.

These risks can result in, among other things:

     o    damage to, and  destruction  of,  mineral  properties  or  production
          facilities;

     o    personal injury;

     o    environmental damage;

     o    delays in mining;

     o    monetary losses; and

     o    legal liability.


<PAGE>

                                      23


It is not always  possible to obtain  insurance  against all such risks and IVN
may decide not to insure against  certain risks as a result of high premiums or
other reasons. The incurrence of an event that is not fully covered, or covered
at all, by insurance,  could have a material  adverse effect on IVN's financial
conditions, results of operations and cash flows and could lead to a decline in
the value of the  securities  of IVN. IVN does not maintain  insurance  against
political or environmental risks.

     As a result of the  rights  to  acquire  common  shares  and other  rights
     granted to Rio Tinto  pursuant  to the Rio Tinto  Transaction  and the Rio
     Tinto  Credit  Agreement,  Rio  Tinto  has the  ability  to  significantly
     influence the business and affairs of IVN.

Rio  Tinto's  original  subscription  for  Common  Shares,  together  with  the
additional  rights  granted to Rio Tinto to obtain  additional  Common  Shares,
pursuant to a second tranche private placement and the exercise of the warrants
from the Rio Tinto  Transaction  and pursuant to  conversion  rights on amounts
owing under the Rio Tinto Credit Agreement and the exercise of warrants granted
in connection  with the creation of the Rio Tinto Credit  Agreement,  will give
Rio Tinto the voting power to  significantly  influence the policies,  business
and affairs of IVN and the outcome of any significant  corporate transaction or
other matter,  including a merger,  business  combination  or a sale of all, or
substantially all, of IVN's assets. Subject to certain limited exceptions,  Rio
Tinto  also  has a  right  of  first  refusal  with  respect  to  any  proposed
disposition by IVN of an interest in the Oyu Tolgoi Project.  Rio Tinto's share
position in IVN and its right of first  refusal  with respect to the Oyu Tolgoi
Project may have the effect of delaying,  deterring or preventing a transaction
involving a change of control of IVN in favour of a third party that  otherwise
could  result in a premium  in the  market  price of the  Common  Shares in the
future.

Rio  Tinto  will  also be  able  to  significantly  influence  the  management,
development and operation of the Oyu Tolgoi Project through its representatives
on the OT Technical  Committee,  established to manage the Oyu Tolgoi  Project.
Provided  Rio Tinto  maintains  a minimum  level of  shareholding  in IVN,  Rio
Tinto's appointees to the OT Technical  Committee will have a veto over certain
specified  material  decisions during the five year period following closing of
the first tranche private placement and, thereafter,  Rio Tinto appointees will
represent  a majority  of the members of the OT  Technical  Committee  and will
thereby be  entitled to control the  ongoing  decisions  made by the  Technical
Committee. In addition, pursuant to the Credit Agreement, Rio Tinto now has the
right to appoint the Chairman of the Technical Committee overseeing development
and  operation  of the Oyu Tolgoi  project in 2009  rather than in 2011 and Rio
Tinto's maximum permitted shareholding in IVN increased to 46.65% from 40%.

     IVN is exposed to risks of changing  political  stability  and  government
     regulation in the countries in which it operates.

IVN holds  mineral  interests  in  countries,  which may be affected in varying
degrees by political stability,  government  regulations relating to the mining
industry and foreign investment  therein,  and the policies of other nations in
respect of these  countries.  Any changes in regulations or shifts in political
conditions are beyond the control of IVN and may adversely affect its business.
IVN's operations may be affected in varying degrees by government  regulations,
including  those with respect to  restrictions  on production,  price controls,
export controls, income taxes, expropriation of property, employment, land use,
water use, environmental legislation and mine safety. IVN's operations may also
be affected in varying degrees by political and economic instability,  economic
or other sanctions imposed by other nations,  terrorism,  military  repression,
crime, extreme fluctuations in currency exchange rates and high inflation.

In certain areas where IVN is active, the regulatory  environment is in a state
of  continuing  change,  and new  laws,  regulations  and  requirements  may be
retroactive  in  their  effect  and  implementation.  The  laws  of many of the
countries   in  which   IVN   operates   also   contain   inconsistencies   and
contradictions. Many of them are structured to bestow on government bureaucrats


<PAGE>

                                      24


substantial administrative discretion in their application and enforcement with
the result that the laws are subject to changing and different interpretations.
As such,  even  IVN's best  efforts  to comply  with the laws may not result in
effective compliance in the determination of government bureaucrats.

     IVN's prospects depend on its ability to attract and retain key personnel.

Recruiting and retaining qualified personnel is critical to IVN's success.  The
number of persons  skilled in the  acquisition,  exploration and development of
mining  properties is limited and competition for such persons is intense.  IVN
believes that it has been successful in recruiting  excellent personnel to meet
its corporate objectives but, as IVN's business activity grows, it will require
additional  key  financial,   administrative,   mining,  marketing  and  public
relations  personnel  as well  as  additional  staff  on the  operations  side.
Although IVN believes that it will be  successful  in attracting  and retaining
qualified personnel, there can be no assurance of such success.

     Certain directors of IVN 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
     IVN.

Certain  of the  directors  of IVN  are  directors  or  officers  of,  or  have
significant  shareholdings  in, other mineral  resource  companies  and, to the
extent that such other  companies may  participate in ventures in which IVN may
participate,  the  directors  of  IVN  may  have  a  conflict  of  interest  in
negotiating and concluding terms  respecting the extent of such  participation.
This  includes  the  nominees  of Rio  Tinto,  which is  entitled  to  nominate
directors  to the board of directors  of IVN in  proportion  to its holdings of
IVN's issued and outstanding  common shares from time to time. Certain of these
nominees  are  or  may  be  directors  or  officers  of,  or  have  significant
shareholdings in, Rio Tinto companies or other mineral resource  companies and,
to the extent that such  companies  may engage in business  relationships  with
IVN, the directors of IVN appointed by Rio Tinto may have conflicts of interest
in negotiating and concluding terms of such  relationships.  In all cases where
directors and officers have an interest in another resource company, such other
companies  may also compete with IVN for the  acquisition  of mineral  property
rights.  In the event that any such conflict of interest arises, a director who
has such a conflict will disclose the conflict to a meeting of the directors of
IVN and  will  abstain  from  voting  for or  against  the  approval  of such a
participation or such terms. In appropriate cases, IVN will establish a special
committee  of  independent  directors  to  review  a matter  in  which  several
directors,  or  management,  may have a  conflict.  From time to time,  several
companies may  participate in the  acquisition,  exploration and development of
natural  resource  properties  thereby  allowing their  participation in larger
programs,  permitting  involvement in a greater number of programs and reducing
financial  exposure  in  respect of any one  program.  It may also occur that a
particular company will assign all or a portion of its interest in a particular
program to another of these  companies  due to the  financial  position  of the
company  making  the  assignment.  In  accordance  with the  laws of the  Yukon
Business  Corporations  Act, the directors of IVN are required to act honestly,
in good faith and in the best interests of IVN. In  determining  whether or not
IVN will  participate  in a particular  program and the interest  therein to be
acquired by it, the directors will primarily consider the potential benefits to
IVN, the degree of risk to which IVN may be exposed and its financial  position
at that time.


<PAGE>

                                      25


DESCRIPTION OF THE BUSINESS

Overview

The Oyu Tolgoi Project and the Ovoot Tolgoi Project have been identified as the
mineral properties that are material to IVN.

Qualified Persons

Disclosure of a scientific or technical nature in this Annual  Information Form
in respect  of each of the  material  mineral  resource  properties  of IVN was
prepared by or under the  supervision of the "qualified  persons" (as that term
is defined in NI 43-101) listed below:

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------
Property                                        Qualified Person              Relationship to Corporation
----------------------------------------  -------------------------------  ------------------------------
<S>                                       <C>                                <C>

Oyu Tolgoi Project                         Bernard Peters, GRD Minproc          Independent Consultant

Ovoot Tolgoi Project (open pit)            Richard D. Tifft III, Norwest        Independent Consultant

Ovoot Tolgoi Project (underground)         Patrick P. Riley, TAG                Independent Consultant
----------------------------------------  -------------------------------  ------------------------------
</TABLE>

Oyu Tolgoi Copper and Gold Project, Mongolia

The information in this Section is based on the Oyu Tolgoi Technical Report, in
accordance with the  requirements of NI 43-101.  The Qualified  Persons for the
Oyu Tolgoi Technical Report are Bernard Peters, B. Eng. (Mining), Aus.I.M.M. of
GRD Minproc,  who was responsible for overall  preparation of the report and in
particular  the open pit design and  mineral  reserve  estimate  of the report;
Stephen Torr, B.Sc.  (Hons) MSc, PGeo (APEGBC),  of Ivanhoe Mines Ltd., who was
responsible  for  preparation  of the  sections  on the Oyu  Tolgoi  and Shivee
Geology and Mineral Resources; Scott Jackson, B.Sc. (Hons), CFSG, M.Aus.I.M.M.,
of Quantitative Geoscience Pty Ltd., who was responsible for preparation of the
sections  Heruga Geology and Mineral  Resources;  John Vann,  B.App.Sc.,  B.Sc.
(Hons), M.Sc., F.Aus.I.M.M.,  M.A.I.G, M.S.E.G., of Quantitative Geoscience Pty
Ltd., who was responsible for preparation of the sections on Heruga Geology and
Mineral  Resources;  Jeffrey  Price PhD,  M.Aus.I.M.M.,  MIE (Aus)  F.G.S.,  of
Steffen Robertson  Kirsten  (Australasia) Pty Ltd., who was responsible for the
subsection on Open Pit Mine  Geotechnical  in the Oyu Tolgoi  Technical  Report
March 2007; and Dean David, B. AppSc (Metallurgy),  Aus.I.M.M., of GRD Minproc,
who was responsible for preparation of the processing section.

Project Description and Location

The Oyu  Tolgoi  Project  is  located  in the  Aimag  (province)  of  Omnogovi,
approximately  550 km south of the capital city of Ulaanbaatar  and 80 km north
of the border with China.  Mineralization  on the property  consists of copper,
gold and  molybdenum  contained in a porphyry  system  structural  trend with a
strike length that extends over 20 km. Mineral  resources have been  identified
in a series of deposits  throughout  this trend,  including  the  Southern  Oyu
Deposit group,  which hosts the Southwest Oyu, Central Oyu, South Oyu and Wedge
deposits,  the Hugo Dummett  Deposits group,  which hosts the Hugo South,  Hugo
North  and Hugo  North  Extension  deposits,  and the newly  discovered  Heruga
deposit.


<PAGE>

                                      26


IVN operates the Oyu Tolgoi Project through its wholly-owned subsidiary,  IMMI.
IMMI,  in turn,  holds its  rights to the Oyu  Tolgoi  Project  through  mining
licence 6709A (the "OT Licence"),  comprising  approximately  8,496 hectares of
property. The Mongolian government granted the OT Licence to IMMI in 2003 along
with  mining  licences  for  three  adjacent  properties  identified  as mining
licences 6708A,  6710A and 6711A. The OT Licence includes the right to explore,
develop mining  infrastructure  and facilities and conduct mining operations on
the Oyu Tolgoi Project.  When originally granted,  the OT Licence had a term of
60 years,  with an option to extend the licence for an additional term of up to
40 years. In 2006 the Mongolian  parliament passed new mining  legislation that
changes the term of mining licences to 30 years with two 20 year extensions. It
is unclear if this law will be applied retroactively to current licences.

IVN holds an  interest  in  approximately  20,000  hectares  of MEL 3148X  (the
"Shivee Tolgoi  Licence") and  approximately  20,000 hectares of MEL 3150X (the
"Javkhlant  Licence")  owned by Entree.  IVN holds its  rights to the  property
through an Entree Earn-in Agreement.  Pursuant to the earn-in,  IVN is entitled
to earn up to an 80%  interest  in minerals  below 560 m and a 70%  interest in
minerals  above  that  point.  To date,  IVN has  completed  in excess of $27.5
million of earn-in expenditures, which entitles IVN to a 60% interest. In order
for IVN to earn its full  interest in the  property,  the IVN Group must expend
$35 million in exploration  and  development  over an eight year period,  which
expires in November  2012. The expenses of holding the MEL must be paid by IVN.
The Shivee  Tolgoi and  Javkhlant  Licences  were  renewed in June 2007 and the
current  terms are now due to expire in 2010.  Thereafter,  the  Licences  will
expire if the  holder  does not  convert  the MELs into a mining  licence.  The
Shivee Tolgoi Licence is adjacent to the north of the OT Licence,  and the Hugo
North deposit crosses the property boundary onto the Shivee Tolgoi Licence. The
Javkhlant Licence hosts the newly discovered Heruga deposit.

IMMI must pay a yearly per hectare fee to the Mongolian  government in order to
maintain the OT Licence in good standing.  The licence fees are $15 per hectare
per year on the mining  licence.  The lands covered by the Entree Joint Venture
are  subject  to an annual  licence  fee of $1.50 per  hectare.  The OT Licence
property was surveyed by an  independent  consultant in 2002 and by a qualified
Mongolian  Land  Surveyor in 2004 to establish  the legal  boundaries of the OT
Licence concession.

Pursuant to the Minerals Law, the Mongolian government assesses a royalty of 5%
on the sale  value of all  minerals  mined in the  country.  IVN holds a 2% net
smelter returns royalty over the property covered by the OT Licence (which does
not  cover  the  Entree  Joint  Venture  lands)  that  was  purchased  from BHP
Exploration in 2003.

Environment

Holders  of a  mining  licence  in  Mongolia  must  comply  with  environmental
protection  obligations  established  in the  Environmental  Protection  Law of
Mongolia,  Law of Environmental  Impact  Assessment and the Minerals Law. These
obligations include  preparation of an environmental  impact assessment ("EIA")
for mining  proposals,  submitting  an annual  environmental  protection  plan,
posting an annual bond against completion of the protection plan and submitting
an annual environmental report.

IMMI has posted  environmental  bonds to the Mongolian  Ministry for Nature and
Environment  (MNE)  in  accordance  with  the  Minerals  Law  of  Mongolia  for
restoration and environmental  management work required for exploration and the
limited development work undertaken at the site. IMMI pays to the Khanbogd Soum
annual fees for water and road  usage,  while sand and gravel use fees are paid
to the Aimag government in Dalanzadgad.

IMMI has, through qualified  independent  consultants,  prepared an EIA for Oyu
Tolgoi  consisting of three parts: (i) road, (ii) water supply,  and (iii) mine
and processing  facilities.  The first EIA document, for the transport corridor
south of the Oyu Tolgoi property to the Chinese border,  was submitted in April


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                                      27


2004 and approved in May 2004.  An amendment to the approved EIA was  submitted
in December 2006 to allow for an alternative  road route to the Chinese border.
The  second  volume  of the EIA,  covering  the  supply  of water  from  nearby
aquifers,  was submitted in June 2005 and approved in September 2005. The third
document,  incorporating  the results of the 2005 IDP,  was first  submitted in
January 2006 and, after review by the Mongolian government,  the submission was
amended  in May 2006.  An expert  committee  review of the mine and  processing
facilities  volume of the EIA was  completed  in  September  2006,  and further
information  was submitted in November 2006 to address the issues  raised.  The
third volume of the EIA was approved by the MNE in December 2007.

IMMI has received  approval for  supplementary  environmental  assessments  and
management  plans  covering  current   development  work  associated  with  the
underground  shafts,  temporary  site  accommodation  facilities,  waste  water
treatment,  diesel power supply and the excavation of construction materials. A
further EIA report is being prepared for a 3x150MW coal fired steam power plant
located on the mining licence at the Oyu Tolgoi Project.

IMMI has retained the  Institute of  Archaeology  at the  Mongolian  Academy of
Science to  complete  archaeological  studies of the Oyu  Tolgoi  Project.  The
studies have resulted in the  excavation and removal of sites of historical and
cultural significance within the Oyu Tolgoi Project area in accordance with the
relevant Mongolian Laws and custom.

Accessibility, Climate, Local Resources and Physiography

The Oyu  Tolgoi  Project  is  located  in the South  Gobi  region of  Mongolia,
approximately 570 km south of the capital city, Ulaanbaatar. The most prominent
nearby  community is Dalanzadgad,  with a population of  approximately  15,000,
which is located  approximately  220 km northwest  of the Oyu Tolgoi  property.
Facilities  at  Dalanzadgad  include a regional  hospital,  tertiary  technical
colleges,  domestic airport and a 6 megawatt capacity coal-fired power station.
The closest  community to the property is Khanbogd,  the centre of the Khanbogd
Soum.  Khanbogd has a population of approximately 2,500 and is located 35 km to
the east of the property.

Road access to the property  follows a  well-defined  track directly south from
Ulaanbaatar requiring  approximately 12 hours travel time in a four-wheel drive
vehicle.  IMMI has also developed a 2,000 m dirt airstrip within the Oyu Tolgoi
property that allows the property to be serviced by a 50 passenger,  turbo prop
aircraft.  Mongolian  rail service and a large  electric  power line lie 350 km
east of the property at the main rail line between  Ulaanbaatar and China.  The
China-Mongolia  border is located  approximately 80 km south of Oyu Tolgoi. The
Chinese  government has upgraded a highway to the Mongolian  border,  which now
provides a direct link between the border  south of Oyu Tolgoi  property to the
trans-China railway system.

The south Gobi region has a continental,  semi-desert climate with cool springs
and autumns, hot summers, and cold winters. The average annual precipitation is
approximately  80 millimetres,  90% of which falls in the form of rain with the
remainder as snow.  Temperatures  range from an extreme  maximum of about 36(0)
Celsius to an extreme  minimum of about -31(0) Celsius.  The area  occasionally
receives very high winds  accompanied by sand storms that often severely reduce
visibility for several hours at a time.  IMMI conducts  exploration  activities
year-round and believes that mining  operations can also be run on a year-round
basis.

The property  ranges in elevation from 1,140 m to 1,215 m above sea level.  The
region is  covered  by sparse  semi-desert  vegetation  and is used by  nomadic
herders who tend camels,  goats and sheep.  The topography  largely consists of
gravel-covered  plains,  with low hills along the northern and western borders.
Scattered,  small rock outcrops and colluvial  talus are widespread  within the
northern,  western and southern parts of the property.  IMMI believes that this
topography will be amenable to the construction of the necessary infrastructure
for mining operations, including tailings storage sites, heap leach pads, waste


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                                      28


disposal,  and  processing  plant  sites.  Seismicity  studies  related  to the
property have been conducted and IMMI has determined that the seismicity of the
project area is generally low.

The Mongolian  Minerals Law and Mongolian Land Law govern IMMI's surface rights
on the Oyu Tolgoi Project. Water rights are governed by the Mongolian Water Law
and the Mongolian  Minerals Law. These laws permit  licence  holders to use the
land and water in connection with exploration and mining operations, subject to
the  discretionary  authority of Mongolian  national,  provincial  and regional
governmental  authorities.  IVN expects that it will have to negotiate with all
three  levels of  government  to ensure  access to  appropriate  land and water
rights prior to the commencement of any mining operations.

Power sources are currently sufficient for exploration activities.  The nearest
power line is 350 km away, so IMMI operates a number of diesel  generators  for
camp  electrical  needs. A small power station  consisting of six one MW diesel
generators  has been  installed  to  provide  power for  sinking a shaft on the
property.  Additional  power  sources  will need to be  developed  prior to the
commencement of mine development and mining  operations.  IMMI is exploring the
possibility  of utilizing  currently  undeveloped  coal deposits as a source of
power supply.

Water is widely available from shallow wells, and is sufficient for exploration
purposes.  A more substantial  source of water will be required for development
and  mining  operations.   Groundwater  supply  investigations  by  independent
consultants for the Oyu Tolgoi Project have been ongoing since April 2002. IMMI
has identified three deep sedimentary  groundwater systems within 100 km of the
Oyu Tolgoi Project. Investigative drilling of two of these systems and computer
modeling  of the  systems  has now  been  completed  and  indicates that  these
groundwater systems will be able to meet the water demand for a production rate
of up to 40 million tpy. The Gunii Hooloi aquifer system has been identified as
the most suitable  supply,  with use of water from the systems being subject to
finalization of the EIA for the project and the issue of extraction licences by
the Mongolian government.  There were discussions with the Mongolian Government
during 2006 on points related to the issue of extraction licences. In 2007 IMMI
conducted additional drilling and testing to acquire additional data in support
of licence  applications.  A total of eight  exploration bores totaling 2,868 m
with an outside  diameter of 250 mm were  drilled to better  define the aquifer
continuity,  its boundaries and spatial  variability in aquifer  transmissivity
and to explore to greater  depths to determine  if  additional  aquifers  exist
below the previously  defined zones. In addition,  four trial production bores,
totaling  2,541 m, with outside  diameters of 444 mm were drilled to field test
the  preliminary  bore  design  and their  capability  to produce at the design
capacity.

The results of the 2007 drill program  indicates that the aquifer is capable of
supplying an estimated maximum output of 1,325 litres per second ("L/s") for 40
years  assuming the water  drawdown is  restricted to the base of the confining
layer  which is the top of the main  aquifer.  If draw down is  allowed  to the
midpoint of the main aquifer,  (i.e.  50% of the main aquifer is dewatered) the
yield could be  increased to 2,650 L/s. It is believed  that current  Mongolian
guidelines  will  restrict the aquifer  draw down to the top of aquifer,  hence
1,325 L/s will be the acceptable supply from the proposed bore field.

History

Old diggings and small  amounts of slag found in the area indicate that the Oyu
Tolgoi  area was  subject to small  scale  mining  activity  in ancient  times.
However,  modern mineral exploration did not begin in earnest in the area until
1996, when the Magma Copper Company Ltd. began a  reconnaissance  program which
examined more than 60 copper occurrences in various parts of Mongolia. In 1996,
after BHP  Exploration  acquired  Magma Copper  Company Ltd.,  BHP  Exploration
continued the reconnaissance program in western and southern Mongolia.


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                                      29


BHP Exploration  first visited the Oyu Tolgoi Project in September 1996 as part
of  its  regional   reconnaissance  program  of  the  south  Gobi  region.  BHP
Exploration   subsequently   applied  for,  and  was  granted,  an  exploration
concession  covering 1,350 km(2).  After  geological  mapping,  stream and soil
sediment  surveys and magnetic and IP surveys,  BHP  Exploration  completed six
diamond  core  holes  totalling  1,102 m during  the 1997  field  season.  With
encouraging  results  from two of the holes,  a second  phase of  drilling  was
undertaken  in 1998,  consisting  of an  additional 17 widely spaced core holes
totalling 2,800 m. These holes failed to return significant mineralization, and
BHP  Exploration  suspended  the  project  pending  economic  review.  In 1999,
following  a  review  of  past  results,   additional  drilling  and  continued
exploration on the property was planned but never carried out. BHP  Exploration
then offered the properties for joint venture.

IMMI  originally  acquired its interest in the property from BHP Exploration in
May 2000 pursuant to an earn-in agreement. Shortly thereafter, IMMI carried out
a RC drill program to delineate a chalcocite blanket  intersected by one of BHP
Exploration's  diamond  drill  holes.  This  program  consisted of 109 RC holes
totalling  8,828 m. In 2001,  IMMI continued the RC drilling  program to expand
the chalcocite  blanket and locate additional  supergene  resources.  IMMI also
completed  three  diamond  drill  holes to test deep  hypogene  copper and gold
potential.  One of these holes, OTD 150, intersected 508 m of chalcopyrite-rich
mineralization  grading 0.81% copper and 1.17 g/t gold, while another hole, OTD
159,  intersected a 49 m thick chalcocite blanket grading 1.17% copper and 0.21
g/t gold and 252 m of hypogene  covellite  mineralization  grading 0.61% copper
and 0.11 g/t gold.

The diamond  drill holes were  sufficiently  encouraging  for IMMI to conduct a
major  follow-up  drill program that resulted in the discovery of the Southwest
Oyu deposit. In late 2002, drilling in the far northern section of the property
intersected 638 m of  bornite-chalcopyrite  rich  mineralization  grading 1.61%
copper  and  0.07 g/t  gold  starting  at a depth  of 222 m.  This  marked  the
discovery of the Hugo Dummett Deposits.

IMMI completed the earn-in  requirements  under the Earn-in  Agreement with BHP
Exploration by the first quarter of 2002.  After certain back-in rights held by
BHP  Exploration  expired,  BHP Exploration  transferred  title to the relevant
mineral  exploration  licences  to IMMI in the summer of 2002.  Pursuant to the
Earn-in Agreement, BHP Exploration retained a 2% net smelter returns royalty on
production  from the Oyu Tolgoi  Project.  IVN  acquired  this royalty from BHP
Exploration  in  November  2003  in  consideration   for  the  payment  to  BHP
Exploration of $37,000,000.

In February  2004,  a scoping  study was prepared  for  development  of the Oyu
Tolgoi Project.  The report considered mine development  options ranging from a
20-year mine life to a 40-year mine life,  with all deposits  except Hugo North
being mined by open pit and Hugo North being mined by block caving.

In 2005 the  Integrated  Development  Plan 2005 was  completed.  The  IDP05,  a
preliminary  assessment  report,  was  summarized  in a Technical  Report dated
October 1, 2005, which was filed with applicable Canadian securities regulatory
authorities and is available for review at  www.sedar.com.  The report assesses
development  alternatives  open to IVN and  charts an  implementation  path for
developing the Oyu Tolgoi Project.

Geology and Mineralization

The Oyu Tolgoi  Project lies near the boundary of the South  Mongolian  and the
South Gobi tectonic  units,  in the Kazakh Mongol Belt.  The project area falls
within the Gurvansayhan Terrane, which consists of highly deformed accretionary
complexes and oceanic island arc assemblages.  The area is dominated by a broad
corridor of major strike-slip  faults,  contractional  fault and fold belts and
fault-controlled Mesozoic sedimentary basins.


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                                      30


The Oyu  Tolgoi  Project  area  lies  within an east to west  trending  belt of
volcanic and sedimentary rocks of continental margin and island arc affinities.
The two major  stratigraphic  sequences  recognised  in the project  area are a
sequence of tuffs, basaltic rocks and sedimentary strata of probable island arc
affinity,  assigned to the Upper Devonian Alagbayan Formation and a sequence of
overlying succession containing conglomerates, fossiliferous marine siltstones,
sandstones,  waterlain tuffs and basaltic to andesitic flows and volcaniclastic
rocks, assigned to the Carboniferous  Sainshandhudag Formation. There is also a
thin covering of  stratified  clays and  clay-rich  gravels of  Cretaceous  age
overlying  the  two  main   sequences,   infilling   paleochannels   and  small
fault-controlled basins.

The Alagbayan  Formation sequence includes four major  lithological  divisions.
The  lowest  division   consists  of  mafic  volcanic  flows  and  volcanogenic
sedimentary  rocks,  often forming a sequence  several hundred m thick.  Within
this division are subunits  consisting of volcanogenic  siltstone,  porphyritic
basalt and lapilli tuff to volcaniclastic conglomerate/breccia. These rocks are
commonly  strongly  altered and host much of the contained  copper found on the
property.  The  other  three  divisions  include a layer of  volcanic  rocks of
dacitic  composition up to 200 m thick, a sequence of clastic sedimentary rocks
that overlies the dacitic  composition that is up to 100 m thick and a sequence
of basaltic flows and volcaniclastic  rocks overlain and  interstratified  with
thinly bedded siltstone and massive sandstone averaging up to 600 m thick.

The Sainshandhudag  Formation lies above the Alagbayan Formation sequence,  and
consists of a lower tuffaceous sequence, an intermediate clastic package and an
uppermost volcanic  sequence.  The lowest sequence consists mainly of andesitic
lapilli tuff and measures up to 200 m in thickness.  The intermediate  sequence
typically  shows a  progression  from a lower  conglomerate-sandstone-siltstone
dominant  unit to an  overlying  siltstone-waterlain  tuff  unit up to 200 m in
thickness.  The  uppermost  sequence  consists of a thick layer of andesitic to
basaltic flows and volcaniclastic rocks comprising several subunits that can be
up to 800 m thick.

Interspersed   within  the  principal   stratigraphic   sequences  are  several
formations of intrusive rocks and several faults. The granitic intrusions range
from large batholithic  intrusions to narrow discontinuous dykes and sills, and
consist of at least seven different classes of rock, including mafic dykes with
basalt or dolerite,  rhyolite dykes and sills, horneblende biotite andesite and
dacite dykes and large biotite granodiorite intrusions that forms a dyke system
along  the  western  side of the Hugo  Dummett  Deposits.  The most  voluminous
intrusions are a series of QMD intrusions. The porphyry style mineralization at
the Oyu Tolgoi property is genetically linked to these QMD intrusions.

There is a complex network of faults,  folds and shear zones that cross-cut and
underlie the project.  The southern end of the mineralized  deposits is bounded
by  the  Solongo  fault.   Up  until  2007,   all  of  the  known   significant
mineralization  discovered  on the property  was on the northern  block of this
fault.  Other  significant  faults  include the West Bat fault and the East Bat
fault,  which  respectively  bound  the  west  and  east  side  of the  zone of
mineralization  constituting  the Hugo Dummett  Deposits.  In 2007,  the Heruga
copper, gold, molybdenum deposit was discovered approximately three km south of
the Solongo fault on the Entree Gold Javkhlant exploration tenement,  which IVN
has now earned a 60% interest in.

Southern Oyu Deposits

The Southern Oyu  deposits  consist of a series of deposits  known as Southwest
Oyu, South Oyu, Central Oyu and Wedge.  These deposits form contiguous zones of
mineralization  representing  multiple mineralizing centres, each with distinct
styles of mineralization,  alteration and host lithology. The boundaries of the
individual deposits coincide with major fault zones.

The geology and mineralization of the Southwest Oyu deposit is characterized by
a gold-rich porphyry system, with a high-grade core about 250 m in diameter and
extending over 700 m vertically (the  "Southwest  Gold Zone").  Over 80% of the


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                                      31


deposit is hosted by porphyritic  basalt of the Alagbayan  Formation,  with the
remainder hosted by QMD intrusions. The high-grade core is enclosed by a large,
low-grade ore shell  approximately  600 m by 2,000 m in area. The system is low
sulphide, and the copper and gold mineralization is related to chalcopyrite.

Mineralization  at  Southwest  Oyu  consists  mainly  of  finely   disseminated
pyrite-chalcopyrite   with  minor  bornite  and  massive   chalcopyrite   veins
cross-cutting and impregnating earlier deformed quartz vein stock works and the
basalt  and QMD host  rocks.  The  mineralization  is  related  to a late stage
sericite  and   sericite-biotite-albite   overprint,   which  affects  the  QMD
intrusions and basaltic wall rocks. The high grade core is centred on a 10 m to
30 m wide,  vein-rich  QMD dyke and  extends  for over 100 m into the  adjacent
porphyritic augite basalt.  Gold to copper ratios (g/t Au to % Cu) vary between
0.5 to one and one to one in the outer margin of the  deposits,  increasing  to
approximately two to one into the high grade gold core, with the highest ratios
consisting  of up to three to one in the deeper parts of the  deposit.  Outside
the Southwest Gold Zone, the augite  basalts  contain  anomalous gold contents,
with the gold to copper ratios increasing southward.

South  Oyu is a copper  porphyry  deposit  developed  mainly  in the  Alagbayan
Formation strata consisting of basalt and dacite tuff units. The deposit is cut
by numerous barren dykes, including one major east-west rhyolite dyke that cuts
east to west  through  the middle of the  deposit  that is up to tens of metres
wide.  Unlike  Southwest  Oyu,  the South Oyu system is not gold  rich.  Copper
mineralization  at South Oyu is associated  with  stockworks of thin quartz and
sulphide veins,  and consists of finely  disseminated  pyrite-chalcopyrite  and
bornite.

The Central Oyu deposit is hosted in a swarm of feldspar-phyric QMD intrusions,
emplaced  into  porphyritic  augite  basalt  and dacite  tuff of the  Alagbayan
Formation.  The basalt  flows and  dacite  tuffs are  preserved  as a series of
isolated,  irregular  bodies  within the QMD dyke swarm,  which are up to 200 m
thick and extend  several  hundred  metres  down dip to the limit of  drilling.
Mineralization is high-sulphidation style with copper mineralization consisting
of  covellite,  chalcocite,  and  minor  enargite,  a body of  copper  and gold
porphyry  mineralization  consisting  primarily of  chalcopyrite  and a shallow
chalcocite  enrichment blanket.  The  high-sulphidation  mineralization and its
associated  advanced argillic alteration and mineralization are telescoped onto
an underlying and peripheral porphyry system. The chalcocite blanket appears to
overlie  the  covellite-rich   quartz-veined  zones  in  pyrite-rich  QMD.  The
quartz-veined  zones  are  also  strongly  covellite   mineralized.   Supergene
mineralization  underlies a leached cap extending 20 to 80 m below the surface,
containing an enrichment  blanket with an upper  chalcocite and lower covellite
zone.   The  style  of   mineralization   with  the   largest   volume  is  the
high-sulphidation system with finely disseminated  pyrite-covellite-chalcocite.
The  covellite  mineralization  generally  averages  about  0.7%  copper and is
characterized by high pyrite content and minor enargite.

The Wedge deposit occurs as a sequence of Alagbayan Formation strata similar to
the South Oyu deposit,  except the dacite tuff unit is significantly thicker at
up to 180 m. The Wedge deposit is structurally and stratigraphically similar to
Central  Oyu,  with  numerous   stratigraphic   contacts  that  are  relatively
continuous,  leading IMMI to believe that the two deposits are one structurally
intact block that has been  displaced  downward  relative to the other Southern
Oyu deposits.  Mineralized  rocks are cut by numerous  barren dykes,  including
biotite,   granodiorite,   horneblende,   biotite   andesites   and   rhyolite.
Mineralization  is found  mostly in the dacitic  tuff,  grading  downward  into
chalcopyrite in basalt and QMD rocks. There is little gold mineralization.

Hugo Dummett Deposits

The Hugo Dummett Deposits consist of Hugo South,  Hugo North and the Hugo North
Extension. These deposits represent a continuous zone of mineralization that is
elongated in a north-north-easterly  direction over a strike length of at least
three km.  While  mineralization  of the Hugo  Dummett  Deposits  is  virtually


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                                      32


continuous, IMMI has divided the mineralized zone into two deposits (Hugo South
and a  combined  Hugo  North and Hugo  North  Extension)  for the  purposes  of
resource estimation,  development and mine planning.  Hugo South and Hugo North
are separated by a 110(0) striking sub-vertical fault that displaces Hugo North
vertically  down a modest  distance  from  Hugo  South.  Hugo  North  Extension
represents  the  extension  of the Hugo North  deposit  into the Shivee  Tolgoi
Licence.

The Hugo Dummett Deposits occur in a northerly striking,  moderately to steeply
east  dipping  monocline  that is  bounded  and  intruded  by  several  faults,
including a near  vertical  fault that controls the western edge of the deposit
known as the West Bat Fault and a near vertical fault that controls the eastern
edge of the deposit known as the East Bat Fault.  The host rocks to the deposit
are basalt and minor  volcaniclastic  strata of the Alagbayan Formation and QMD
intrusive  rocks.  These rocks are overlain by dacite  tuffs and breccias  that
form a sequence  approximately 100 m to 200 m thick. Overlying the dacite tuffs
are  sedimentary  and  volcanic  rocks of the  upper  Alagbayan  Formation  and
Sainshandhudag  Formation  that is up to 600 m thick in places.  Intrusive into
main  rock  formations  are a series  of QMD  intrusions  that host most of the
mineralization.

The width of the  mineralized  zone on the Hugo Dummett  Deposits  varies along
strike from 200 m to in excess of 500 m.  Mineralization  dips generally to the
east  from as low as 40(0) to up to 80(0),  but is  generally  above  60(0) and
increases to sub-vertical at the northern end of Hugo North.

Hugo South consists of a higher copper to gold ratio than Hugo North, averaging
10 to one copper to gold in most of the  deposit.  It is closer to the  surface
than Hugo North,  with the lowest  portion of the deposit  approximately  700 m
below  surface   compared  to  1,500  m  below  the  surface  for  Hugo  North.
Mineralization  is centred on a high-grade zone typically  grading in excess of
2% copper within a series of intense quartz stockwork veining which, in much of
the deposit,  is localized  within narrow QMD  intrusions  and extends into the
enclosing  basalt and dacite  tuff.  The  sulphide  mineralization  consists of
chalcopyrite,  bornite,  chalcocite and pyrite.  The sulphides are zoned,  with
bornite,  chalcocite and tennantite  comprising  the highest  grades,  often in
excess of 2.5% copper,  then grading  outwards to chalcopyrite at between 1% to
2% copper and then  pyrite-chalcopyrite and other minerals grading at less than
1% copper. The gold-rich QMD does not occur in Hugo South, with the result that
the gold  grades  are  typically  less  than 0.1 g/t  while  the  late,  weakly
mineralized QMD forms the base of the deposit.

Hugo North contains the same high-grade  copper zone as Hugo South,  consisting
of a  zone  of  intense  stockwork  to  sheeted  quartz  veins  centred  on QMD
intrusions and extending into the adjacent Alagbayan  Formation basalt.  Unlike
Hugo  South,  the  Hugo  North  quartz  veining  also  hosts  significant  gold
mineralization.  The  copper  mineralization  in the  high-grade  zone  is also
greater,  at up to 3% to 5%  copper,  and the  main  zone is  accompanied  by a
moderate to high-grade  copper and gold values in nearby QMD  intrusions  below
and to the west of the intense  vein zone.  In other  respects,  Hugo North and
Hugo South have similar mineralogy and zonation  patterns.  Bornite is dominant
in the  highest  grade  part of the  deposit,  at 3% to 5% copper  and is zoned
outward to  chalcopyrite  at  approximately  2% copper.  Copper  also occurs at
grades of less than 1% in pyrite-chalcopyrite with other minerals and contained
mostly in the dacitic tuff sequence.

All of the deposits display alteration zones,  including  K-silicate,  advanced
argillic,  muscovite/sericite  and intermediate  argillic styles. The copper in
the deposits also correlates with elevated  abundances of silver,  selenium and
tellurium.  Small amounts of zinc, arsenic, lead and mercury also occur with or
near the high-grade zone.

On the Hugo North Extension,  mineralization is similar to that  characterizing
the northern part of the Hugo North deposit.  High copper grades are associated
with equally elevated gold values, with copper and gold ratios typically around
two to four to one. The most significant geological difference between the Hugo
North  Extension  and the main  deposit to the south is the greater  structural
complexity present in the former. This structural complexity is manifested in a
more  variable  strike  and  steeper  dip to the  mineralized  zone,  a  higher


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                                      33


prevalence  of  faults,   and   structurally-induced   discontinuities  in  the
high-grade zone. These features are the result of post-mineral deformation.

Both  the  mineralized  zone  and  lithologic  contacts  in the  enclosing  and
overlying rocks display an abrupt right-hand stepover of around 200 m, starting
at the border of the deposit with the main Hugo North deposit. Drilling in this
zone during 2006 confirmed  that this stepover is a flexure/fold  with a short,
east-west  striking  limb,  rather than a fault  offset.  North of the flexure,
grade  continuity is more  difficult to predict,  and the western margin of the
deposit consists of a zone of complex  faulting.  These faults typically result
in a sliver  of  weakly-  to  moderately-  mineralized  QMD lying  between  the
subvertical   high-grade  deposit  core,  and   non-mineralized   Devonian  and
Carboniferous rocks to the west of the fault system.

Heruga Deposit

The Heruga  porphyry is likely  formed  within a relatively  intact  structural
block,  with most faulting and disruption of contacts  related to  post-mineral
deformation.  The  mineralization  style  most  closely  accords  with  that at
Southwest Oyu, but the system has lower quartz vein content.

The  alteration at Heruga is typical of porphyry style  deposits,  with notably
stronger potassic alteration at deeper levels. Locally intense  quartz-sericite
alteration with  disseminated and vein pyrite is  characteristic of mineralized
quartz  monzodiorite.  Molybdenite  mineralization seems to spatially correlate
with stronger quartz-sericite  alteration and also note anhydrite alteration at
Heruga (with poorly understood distribution) and widespread minor tourmaline.

Copper sulphides occur at Heruga in both  disseminations  and  veins/fractures.
Mineralized  veins  have a much  lower  density  at  Heruga  than  in the  more
northerly Southern Oyu and Hugo Dummett Deposits. Some quartz veins show a weak
preferred orientation,  but in general most occur as stockworks with no visible
preferred orientation.

High grade copper and gold intersections show a strong spatial association with
contacts of the  mineralized  quartz  monzodiorite  porphyry  intrusion  in the
southern  part of the deposit,  occurring  both within the outer portion of the
intrusion and in adjacent enclosing basaltic country rock.

Modelling of  mineralization  zones for resource  estimation  purposes revealed
that  there is an upper  copper-driven  zone and a deeper  gold-driven  zone of
copper-gold  mineralization  at  Heruga.  In  addition,  there  is  significant
(100-1000 ppm) Mo mineralization in the form of molybdenite.  Locally high gold
grades  (exceeding 50 g/t) appear to be associated with base metal with varying
degrees of molybdenite in late stage veins.

There is no oxide  zone at  Heruga,  nor is there any  high-sulphidation  style
mineralization known to date.

Exploration

IMMI's  exploration  at Oyu Tolgoi has consisted  mainly of remote  sensing and
geophysical methods, including satellite image interpretation,  detailed ground
magnetics, Bouger gravity and gradient array IP, as well as extensive drilling.
These  activities  have  enabled  IMMI to construct  detailed  geophysical  and
geological  mapping  of the  entire  property,  as  well as the  nearby  mining
licences owned by IMMI, and have supplemented the understanding of the property
derived from drilling.  Outcropping prospects,  including Southwest,  South and
Central Oyu, have been mapped at 1:1,000  scale,  while the central part of the
exploration block was mapped at 1:5,000 scale. The entire remaining exploration
block has been mapped at 1:10,000 scale. In 2004,  extensive  surface trenching
by  excavators  and shallow  overburden  RC drilling  was  conducted to provide
bedrock  geology over the  extensive  areas devoid of outcrop.  As a result the
geology is well defined over the entire 10 km by 8 km concession block.


<PAGE>

                                      34


Gradient array IP has been conducted on north to south, and  subsequently  east
to west  lines at 200 m line  spacing,  with  electrode  spacing up to 11 km. A
further IP survey covered the deposit areas with a more detailed  program using
multiple  electrode spacing.  An airborne  magnetometer was flown by BHP in the
late 1990s at a height of 100 m on 300 m spaced,  east to west oriented  lines.
IMMI  conducted  magnetometer  surveys on the property,  with the northern half
using east to west oriented lines on 50 m intervals  with 25 m spaced  readings
and Southern Oyu deposits using a north to south  orientation for 5 m intervals
on 25 m spaced lines.

A gravity  survey was  conducted,  controlled  by GPS, with readings on deposit
areas taken on 50 m centres and on the extremities at 100 m centres. The Bouger
map was reduced to residual  gravity for contouring.  Telluric  electromagnetic
surveying  was  conducted  over the eastern half of the  concession to identify
smaller  drainage basins that could have channelled  copper-rich  waters during
the Cretaceous Period.

In late 2004 IMMI began to extend its  exploration  program to the outlying Oyu
Tolgoi Project  concessions,  including the mining  licences  6708A,  6710A and
6711A and  exploration  licence  3677X that  adjoins and  extends the  southern
limits of the mining  concessions.  A number of  chargeability  anomalies  with
similarities  to the Oyu Tolgoi  Project  anomaly were  discovered on the other
concessions and IMMI has conducted  diamond  drilling with negative  results to
date.  Additional  evaluation work will continue to be carried out to determine
the  extent to which  other  chargeability  anomalies  might  contain  sulphide
mineralization or precious metals.

IMMI initiated  exploration  work on the Shivee Tolgoi Licence in November 2004
following the signing of the earn-in agreement with Entree. Prior to that time,
Entree had undertaken  geochemical remote sensing,  geophysics testing, such as
ground magnetics,  Bouger gravity and pole-dipole  geophysical  surveying,  and
geological mapping.  Starting at the northern boundary of the OT Licence, an IP
survey was run on 100 m spaced lines  oriented  east-west to trace the northern
projection  of the Hugo North  Deposit.  This  initial IP survey used  gradient
array with 11,000 m AB  electrode  spacing,  covered an area  extending  5.6 km
north of the  boundary  and 10 km in  width.  Subsequent  IP  surveys  covering
smaller areas within the larger area were carried out with gradient arrays. The
IP surveys resulted in the delineation of a significant  chargeability  feature
being  traced for  approximately  four km north along  strike of the Hugo North
deposit. Additional IP chargeability targets were also revealed 2.5 km to three
km west of the Hugo North trend and are referred to as the Eagle anomalies.

In 2005 and 2006 IMMI conducted IP surveying on 100 m spaced,  east-west  lines
across  the  Javkhlant  Licence.  This  resulted  in  the  discovery  of  three
significant  chargeability  IP anomalies  subsequently  named the Sparrow South
(Heruga deposit),  Castle Rock and SW Magnetic anomalies.  Diamond drilling was
initiated to test these IP  anomalies  in early 2007.  Drilling is ongoing into
2008  with a total of 30 holes now  completed  with  four  additional  holes in
progress on the Heruga Deposit.  Two holes were also drilled on the Castle Rock
anomaly and one hole on the SW Magnetic anomaly.

Drilling

Diamond drill holes are the most  significant  source of  geological  and grade
data for the Oyu Tolgoi  Project.  From the start of IMMI's  diamond core drill
program in 2001 to February 1, 2008, IMMI has drilled  approximately  770,000 m
of core in over 1,700 drill holes.  IMMI currently has six drill rigs operating
on the property.

IMMI has relied on wireline methods for all drilling,  utilizing HQ and NQ size
core and some PQ size core for metallurgical  testing. At Hugo North, virtually
all holes are  initiated in PQ size core to a depth of at least 450 m to 550 m.
The rest of the drill hole is then continued  using HQ or NQ sized core. On two
occasions PQ coring was extended to depth of 1,450 m,  allowing IMMI to collect
large  diameter core from the deep Hugo North deposit.  Upon  completion of all


<PAGE>

                                      35


holes, the collar and anchor rods on drill holes are removed, and a PVC pipe is
inserted in the hole.  Each hole collar is marked by a cement  block  inscribed
with the hole  number.  The holes are not grouted or back filled with cement so
as to allow re-entry of individual holes for surveying checks or to permit IMMI
to drill new daughter  holes.  In future,  some holes may have to be grouted or
cemented  to keep  near  surface  water  from  entering  the  underground  mine
workings.

Drill hole collars are located  respective  to a property grid by either global
positioning system or theodolite and electronic distance measuring instruments.
Holes are  drilled  at an  inclination  of between  45(0) and  90(0),  with the
majority between 60(0) and 70(0). The drill  contractors take down-hole surveys
about every 50 m. Where  magnetite is present that will affect the deviation of
the compass  readings in the survey  instruments,  gyro compasses are used that
are not affected by magnetism in the rock.

IMMI uses standard logging and sampling conventions to capture information from
the drill core. The core is logged in detail onto paper logging sheets, and the
data are then entered into the project database. The core is photographed prior
to being  sampled,  and the  digital  photographs  are linked to the drill logs
enabling the geologist to quickly  access  specific  photographs  for any given
metre.  Drill core is then stacked on pallets in an organized "core farm". Core
recovery in the mineralized units has been usually between 95% and 100%.

IMMI's current drill program is now focused on testing the extent of the Heruga
deposit  mineralization on the Javkhlant Licence. Drill holes are spaced on 200
m intervals along east-west section lines spaced 300 m apart drilling grid west
at  -70(0).  Some  holes have had  daughter  holes cut from them where  reduced
spacing has been required to better define higher grade intersections.  However
most holes are single holes of 1400 m to 1800 m in length and drilled in PQ and
HQ core sizes. The mineralized intervals are cut and sampled on two m intervals
similar to the Oyu Tolgoi Project drilling described below.

Sampling, Analysis and Security

IMMI's  sampling  procedure  includes the  collection  of core samples taken on
continuous  two m intervals down each drill hole,  excluding  dykes that extend
more  than 10 m along  the  core  length.  One-half  of each NQ and HQ core and
one-quarter of each PQ core is taken in the sampling.

The core is split with a rock saw,  flushed  continually  with fresh water.  To
prevent sampling bias, the core is marked with a continuous linear cutting line
before  being  split.  Samples  are placed in cloth bags and sent to an on-site
preparation  facility owned and managed by SGS Mongolia LLC ("SGS Mongolia") of
Australia for processing.

Core  samples  are  initially  assembled  into  groups  of 15 or 16,  and  then
interspersed  with four or five quality  control  samples to make up a batch of
20. The quality  control  samples  comprise one duplicate split core sample and
one uncrushed field blank,  which are inserted prior to sample  preparation,  a
reject  or  pulp  preparation  duplicate,   which  is  inserted  during  sample
preparation,  and one or two standard  reference  material  samples,  which are
inserted after sample preparation.

The prepared samples are placed in wooden shipping boxes,  locked,  sealed with
tamper-proof,   numbered  tags  and  shipped  under  the  custody  of  IMMI  to
Ulaanbaatar, where they are assayed at a facility operated by SGS Mongolia.

Split core samples are crushed to 90% minus two to three mm. A one kg subsample
is then riffle split from the crushed  sample and then  pulverized to 90% minus
200 mesh pulp. A 150 gram  sub-sample  is split off by taking  multiple  scoops
from the  pulverized  200 mesh  pulp,  which is then  placed in a sealed  kraft
envelope.


<PAGE>

                                      36


All samples are routinely  assayed for gold,  copper,  arsenic and  molybdenum.
Samples are digested with nitric,  hydrochloric,  hydrofluoric  and  perchloric
acids to dryness  before  being  leached  with  hydrochloric  acid to  dissolve
soluble salts and made to volume with distilled water. Gold is determined using
fire assay fusion,  while copper and  molybdenum  are  determined  using atomic
absorption spectroscopy.

Upon receipt of assay results,  values for reference material samples and filed
blanks are tabulated and compared to an established round robin program.  Assay
results that deviate from round robin program results beyond pre-set parameters
are rejected and subject to re-assay.  Until January 2006,  IMMI also performed
check assays at the rate of one per batch of 20 samples.

The sampling procedure used by IMMI was developed by an independent  consultant
hired to implement a formal quality  assessment and quality  control  ("QA/QC")
program.  IMMI adopted the program in April 2002.  The original  samples  taken
from diamond drilling at Southwest Oyu were assayed prior to  implementation of
the QA/QC program  described  above. A re-assay  program of these early samples
indicated a positive  bias in the  original  gold and copper  assays of certain
samples.  Accordingly,  resource  estimates  covering  Southwest  Oyu include a
proportional adjustment of the grades of a number of pre-OTD231 gold assays and
copper assays to account for this bias.  Since the  implementation  of the full
QA/QC program,  IMMI has not been required to conduct re-assay programs or make
adjustments for bias to its assay results for subsequent resource estimations.

In preparation for feasibility level metallurgical testing IMMI has conducted a
trace element  analytical  program to map the distribution of potential penalty
elements within the deposits.  Pursuant to this program,  IMMI has prepared one
in five sample  composites from reject -200 mesh pulps  representing  all drill
core  intersections  in the deposits.  These samples are sent to an independent
laboratory in Canada for 42 element ICP analysis plus sulphur, mercury, uranium
and fluorine.  Arsenic and fluorine are currently  being  modelled to provide a
global  distribution of the potential  penalty elements to facilitate  blending
strategies  if  required  to  reduce  the  effects  of  these  elements  in the
concentrates.

Mineral Resources

The  estimates  of mineral  reserves and  resources  on the Oyu Tolgoi  Project
identified  below are  contained  in the Oyu Tolgoi  Technical  Report and were
classified using logic consistent with the CIM Standards.  The current estimate
of mineral resources for the Oyu Tolgoi Project,  excluding those on the Heruga
Deposit, was prepared under the supervision of Stephen Torr, a qualified person
for the  purposes  of NI 43-101 and an employee  of IVN.  The mineral  resource
estimate for the Heruga Deposit was prepared under the supervision of John Vann
and Scott  Jackson  of  Quantitative  Geoscience,  each of whom is a  qualified
person for the purposes of NI 43-101.  The estimate of mineral  reserves on the
Southern Oyu Deposits  was  prepared by Bernard  Peters of GRD Minproc,  who is
also a qualified person under NI 43-101.


<PAGE>

                                      37


Resources

In the Oyu Tolgoi Technical  Report, a consolidated  resource  estimate for the
Oyu Tolgoi Property is reported as follows:

<TABLE>
<CAPTION>

                                 Total Oyu Tolgoi Project Mineral Resources March 2008(1)(2)
                                         (based on a 0.60% copper equivalent cut-off)

----------------------------------------------------------------------------------------------------------------------------
Resource Category         Tonnes          Cu        Au         Mo      CuEq(3)                Contained Metal(4)
                                          (%)      (g/t)     (ppm)       (%)     -------------------------------------------
                                                                                      Cu             Au          CuEq(3)
                                                                                  ('000 lbs)      (ounces)      ('000 lbs)
------------------- ------------------- -------- --------- --------- ----------- -------------- -------------- -------------
<S>                <C>                 <C>      <C>       <C>       <C>         <C>            <C>            <C>
     Measured            101,590,000      0.64      1.10       -         1.34       1,430,000      3,590,000      3,000,000

    Indicated          1,285,840,000      1.38      0.42       -         1.65      39,120,000     17,360,000     46,770,000

    Measured +         1,387,430,000      1.33      0.47       -         1.63      40,680,000     20,970,000     49,860,000
    Indicated

     Inferred          2,157,130,000      0.81      0.34      50         1.05      38,390,000     23,860,000     50,140,000
------------------- ------------------- -------- --------- --------- ----------- -------------- -------------- -------------
</TABLE>

Notes:

     (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 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 Entree but  subject to the Entree  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
          855,500,000  tonnes  grading  0.53%  copper  and  0.52 g/t gold and a
          142ppm  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.


The estimates were based on 3D block models utilizing  commercial mine planning
software   (MineSite(R)).   Industry-accepted   methods  were  used  to  create
interpolation  domains,  these  domains  were  based  upon  mineralization  and
geology.  Grade  estimation  was  performed  by  ordinary  kriging.  A separate
resource   model  was  prepared  for  each  of  the  deposits.   Only  hypogene
mineralization  was  estimated,  with  the  exception  of a zone  of  supergene
mineralization at Central Oyu. The estimation plans, or sets of parameters used
for estimating  blocks,  were designed  using a philosophy of  restricting  the
number of  samples  for local  estimation,  as it was found to be an  effective
method of reducing  smoothing and producing  estimates  that match the Discrete
Gaussian   change-of-support   model  and  ultimately   the  actual   recovered
grade-tonnage distributions.

Modelling  consisted of grade  interpolation by ordinary  kriging.  Only capped
grades were  interpolated in the Southern Oyu and Hugo South Deposits.  Nearest
neighbour grades were interpolated for validation purposes. For both copper and


<PAGE>

                                      38


gold, on all deposits  except Hugo South,  an outlier  restriction  was used to
control the effect of  high-grade  composites.  In the Southern  Oyu  Deposits,
resource  grades were also adjusted to reflect  likely  occurrences of internal
and  contact  dilution  from  unmineralized   post-mineral  dykes.   Validation
procedures  included Discrete Gaussian  change-of-support  method,  comparisons
using a nearest neighbour model and visual checks.

The base case CuEq cut-off grade  assumptions  for each deposit were determined
using  cut-off  grades  applicable  to  mining  operations  exploiting  similar
deposits.

Southern Oyu Resources

The mineral  resource  grade model on the Southern  Oyu Deposits was  tabulated
above a 0.30% copper equivalent cut-off grade within a pit shell  approximating
a copper price of $1.15/lb copper and $450/oz gold.  These parameters were used
as they approximate the effective copper equivalent cut-off grade and pit shell
in the reserve  estimate on the Southern Oyu Deposits.  The grade and tonnages,
at a range of copper equivalent cutoff grades are reported below.


<TABLE>
<CAPTION>

                                            Southern Oyu Deposits(1)(2)

------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Contained Metals(4)
                                                                                      ----------------------------------------
                              CuEq          Tonnage      Cu       Au         CuEq         Cu             Au          CuEq(3)
Southern Oyu Deposits        Cutoff           (t)        (%)     (g/t)      (%)(3)     ('000 lb)        (oz)        ('000 lb)
------------------------  ------------  --------------  ------  --------  ----------  ------------  ------------  ------------
<S>                      <C>           <C>             <C>     <C>       <C>         <C>           <C>           <C>
Measured                      1.0          59,550,000    0.77     1.55        1.76      1,011,000     2,970,000     2,311,000
                              0.7          84,140,000    0.69     1.25        1.49      1,280,000     3,380,000     2,764,000
                              0.6         101,590,000    0.65     1.09        1.34      1,456,000     3,560,000     3,001,000
                              0.5         115,180,000    0.61     1.00        1.25      1,549,000     3,700,000     3,174,000
                              0.4         123,440,000    0.59     0.95        1.20      1,606,000     3,770,000     3,266,000
                              0.3         126,690,000    0.58     0.93        1.17      1,620,000     3,790,000     3,268,000
                              0.25        127,550,000    0.58     0.92        1.17      1,631,000     3,770,000     3,290,000
                              0.2         127,800,000    0.58     0.92        1.17      1,634,000     3,780,000     3,296,000
------------------------  ------------  --------------  ------  --------  ----------  ------------ ------------  ------------
Indicated                     1.0         102,330,000    0.85     0.82        1.38      1,918,000     2,700,000     3,113,000
                              0.7         279,850,000    0.71     0.50        1.02      4,380,000     4,500,000     6,293,000
                              0.6         430,830,000    0.63     0.40        0.89      5,984,000     5,540,000     8,453,000
                              0.5         617,530,000    0.57     0.35        0.79      7,760,000     6,950,000    10,755,000
                              0.4         827,050,000    0.51     0.30        0.70      9,299,000     7,980,000    12,763,000
                              0.3         992,400,000    0.47     0.27        0.64     10,283,000     8,610,000    14,002,000
                              0.25      1,067,830,000    0.45     0.26        0.61     10,594,000     8,930,000    14,360,000
                              0.2       1,143,710,000    0.43     0.25        0.59     10,842,000     9,190,000    14,877,000
------------------------  ------------  --------------  ------  --------  ----------  ------------ ------------  ------------
Measured+Indicated            1.0         161,880,000    0.82     1.09        1.52      2,926,000     5,670,000     5,425,000
                              0.7         363,990,000    0.70     0.67        1.13      5,617,000     7,840,000     9,068,000
                              0.6         532,420,000    0.64     0.54        0.98      7,512,000     9,240,000    11,503,000
                              0.5         732,710,000    0.57     0.45        0.86      9,207,000    10,600,000    13,892,000
                              0.4         950,490,000    0.52     0.38        0.76     10,896,000    11,610,000    15,926,000
                              0.3       1,119,100,000    0.48     0.35        0.70     11,843,000    12,590,000    17,270,000
                              0.25      1,195,370,000    0.46     0.33        0.67     12,123,000    12,680,000    17,657,000
                              0.2       1,271,510,000    0.45     0.32        0.65     12,614,000    13,080,000    18,221,000
------------------------  ------------  --------------  ------  --------  ----------  ------------ ------------  ------------
Inferred                      1.0           3,750,000    0.91     0.48        1.22         75,000        60,000       101,000
                              0.7          19,420,000    0.62     0.39        0.87        265,000       240,000       372,000
                              0.6          47,390,000    0.51     0.35        0.74        533,000       530,000       773,000
                              0.5         103,190,000    0.43     0.31        0.63        978,000     1,030,000     1,433,000
                              0.4         181,700,000    0.38     0.26        0.55      1,522,000     1,520,000     2,203,000
                              0.3         266,820,000    0.34     0.23        0.48      2,000,000     1,970,000     2,824,000
                              0.25        318,380,000    0.32     0.21        0.45      2,246,000     2,150,000     3,159,000
                              0.2         394,850,000    0.29     0.19        0.40      2,524,000     2,410,000     3,482,000
------------------------  ------------  --------------  ------  --------  ----------  ------------  ------------  ------------
</TABLE>

Notes:


<PAGE>

                                      39


     (1)  Mineral   resources  are  not  mineral   reserves   until  they  have
          demonstrated  economic  viability  based  on a  feasibility  study or
          pre-feasibility  study.  Mineral resources are reported  inclusive of
          mineral reserves.

     (2)  The resources shown above at a 0.3% CuEq Cut-off are inclusive of the
          resources  tabulated  at the  0.6  CuEq  cutoff  in the  consolidated
          resource statement.

     (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.


In the Southwest Gold Zone at Southwest Oyu,  drilling is approximately on a 50
m sample  spacing.  Inspection  of the model  and drill  hole data on plans and
sections in the Southwest  Gold Zone area,  combined  with spatial  statistical
work and  investigation of confidence  limits in predicting  planned  quarterly
production showed good geologic and grade continuity.  When taken together with
all observed  factors,  it was determined  that the blocks covered by this data
spacing in the Southwest Gold Zone area may be classified as a measured mineral
resource.  A  three-hole  rule was used where  blocks  containing  an  estimate
resulting from three or more samples from different  holes (all within 55 m and
at least one within 30 m) were classified as measured mineral resource.

The bulk of the  remainder of the Southern  Oyu Deposits  were  estimated at an
indicated resource level. The drill spacing is at a nominal 70 m on and between
sections.  Geologic and grade  continuity is  demonstrated by inspection of the
model  and  drill  hole  data in plans and  sections  over the  various  zones,
combined with spatial  statistical work and  investigation of confidence limits
in predicting planned annual production.  A two-hole rule was used where blocks
containing an estimate resulting from two or more samples from different holes.
For the  Southwest  Oyu Deposit the two holes needed to be within 75 m, with at
least one hole within 55 m. For the remaining deposits, both holes needed to be
within 65 m, with at least one hole within 45 m to be  classified  as indicated
mineral resources.  All interpolated  blocks that did not meet the criteria for
either  measured  or  indicated  mineral  resources  were  assigned as inferred
mineral resources if they fell within 150 m of a drill hole composite.

Hugo Dummett Mineral Resources

A drill spacing of between 135 to 150 m along strike and 75 m to 100 m down dip
was  adopted  for the  classification  of  indicated  resource  blocks  at Hugo
Dummett.  Blocks that do not meet these criteria but that are within 150 m of a
drill-hole composite are classified as inferred resource. Blocks outside of 150
m from a borehole composite are not classified.

For  the  Hugo  North  resource   estimate,   IMMI  created   three-dimensional
mineralized  shells or envelopes  based on copper grades of 0.6%,  and a quartz
vein percentage of 15%. For gold  interpolation  IMMI created two sets of grade
shells, one at 0.3 g/t gold threshold and one at 1.0 g/t gold thresh-hold.  The
shapes were checked for interpretational consistency in section and plan. These
shells were then used as interpolation domains. Copper grades for blocks within
the copper  domains in each deposit or zone were estimated with a hard boundary
between the shells.  Gold grades for blocks  within the gold zone in Hugo North
were also estimated with a hard boundary. The background estimation domain used
all composites outside of the grade shells.

In Hugo South, a 0.6% copper shell and a 2% copper shell were used to constrain
ordinary  kriging.  All blocks that fell within 150 m of a drill composite were
assigned to an inferred  mineral resource  category.  All other blocks were not
included in the resource estimate.

The  resources of the Hugo North  Deposit were updated at an effective  date of
February 20,  2007.  This update  included  drilling  that was  completed up to
November 1, 2006.


<PAGE>

                                      40


<TABLE>
<CAPTION>

                      Hugo Dummett Deposits - Mineral Resources at 0.6% copper equivalent cut-off(1)

------------------------------------------------------------------------------------------------------------------------------
                                                                                                  Contained Metal(3)
                                                                                      ----------------------------------------
             Deposit                        Tonnage       Cu      Au        CuEq(2)       Cu             Au          CuEq(2)
                                              (t)         (%)    (g/t)        (%)      ('000 lb)        (oz)        ('000 lb)
--------------------------------------  --------------  ------  --------  ----------  ------------  ------------  ------------
<S>                                    <C>             <C>     <C>       <C>         <C>           <C>           <C>
Indicated (Hugo North)                     703,200,000   1.82     0.39       2.07      28,215,000     8,820,000    32,091,000

Indicated (Hugo North Extension)(4)        117,000,000   1.80     0.61       2.19       4,643,000     2,290,000     5,649,000

Inferred (Hugo North)                      722,800,000   0.97     0.30       1.17      15,457,000     6,970,000    18,644,000

Inferred (Hugo North Extension)(4)          95,500,000   1.15     0.31       1.35       2,421,000       950,000     2,842,000

Inferred (Hugo South)                      490,330,000   1.05     0.09       1.11      11,350,000     1,420,000    12,000,000

--------------------------------------  --------------  ------  --------  ----------  ------------  ------------  ------------
Total
--------------------------------------  --------------  ------  --------  ----------  ------------  ------------  ------------
Indicated (Hugo North and Hugo             820,200,000   1.82     0.42       2.08      32,910,000    11,080,000    37,611,000
North Extension(4))

Inferred (Hugo North, Hugo South         1,308,630,000   1.02     0.22       1.16      29,430,000     9,260,000    33,470,000
and Hugo North Extension(4))
--------------------------------------  --------------  ------  --------  ----------  ------------  ------------  ------------

</TABLE>

Notes:

     (1)  Mineral   resources  are  not  mineral   reserves   until  they  have
          demonstrated  economic  viability  based  on a  feasibility  study or
          pre-feasibility  study.  IVN reports mineral  resources  inclusive of
          mineral reserves.

     (2)  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%.

     (3)  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.

     (4)  The Hugo North  Extension is located on the Shivee  Tolgoi  Property,
          which  property is owned by Entree but  subject to earn-in  rights in
          favour of IVN.

A further  breakdown  of the mineral  resource  inventory of the Hugo North and
Hugo North Extension Deposits is set forth below.


<PAGE>

                                      41


<TABLE>
<CAPTION>

                                     Hugo North Mineral Resource Inventory(1)
                                                     Indicated

-------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Contained Metal(3)
                                                                                       ----------------------------------------
          Class               CuEq          Tonnage        Cu      Au        CuEq(2)       Cu             Au          CuEq(2)
    Hugo North Deposit       Cutoff           (t)          (%)    (g/t)        (%)      ('000 lb)        (oz)        ('000 lb)
------------------------  ------------  ---------------  ------  --------  ----------  ------------  ------------  ------------
<S>                      <C>           <C>              <C>     <C>       <C>         <C>           <C>           <C>

Indicated (Hugo North)        3.5         125,300,000     3.74     0.93       4.34      10,331,000     3,750,000    11,989,000
                              3           175,400,000     3.49     0.84       4.03      13,496,000     4,740,000    15,584,000
                              2           276,900,000     3.03     0.69       3.47      18,497,000     6,140,000    21,183,000
                              1           541,600,000     2.15     0.46       2.44      25,672,000     8,010,000    29,134,000
                              0.6         703,200,000     1.82     0.39       2.07      28,215,000     8,820,000    32,091,000
                              0.3         798,200,000     1.65     0.35       1.87      29,036,000     8,980,000    32,907,000
------------------------  ------------  ---------------  ------  --------  ----------  ------------  ------------  ------------
Indicated (Hugo North         3.5          22,300,000     3.68     1.43       4.59       1,809,000     1,030,000     2,257,000
Extension)(4)                 3            32,000,000     3.36     1.29       4.18       2,370,000     1,330,000     2,949,000
                              2            52,300,000     2.84     1.09       3.53       3,275,000     1,830,000     4,070,000
                              1            84,800,000     2.22     0.80       2.73       4,150,000     2,180,000     5,104,000
------------------------  ------------  ---------------  ------  --------  ----------  ------------  ------------  ------------
                              0.6         117,000,000     1.80     0.61       2.19       4,643,000     2,290,000     5,649,000
                              0.3         137,900,000     1.59     0.52       1.92       4,834,000     2,310,000     5,837,000
------------------------  ------------  ---------------  ------  --------  ----------  ------------  ------------  ------------
Total Indicated               3.5         147,600,000     3.73     1.01       4.38      12,138,000     4,790,000    14,253,000
(Hugo North and               3           207,400,000     3.47     0.91       4.05      15,866,000     6,070,000    18,518,000
Hugo North Extension(4))      2           329,200,000     3.00     0.76       3.48      21,773,000     8,040,000    25,257,000
                              1           626,400,000     2.16     0.51       2.48      29,829,000    10,270,000    34,248,000
                              0.6         820,200,000     1.82     0.42       2.08      32,910,000    11,080,000    37,611,000
                              0.3         936,200,000     1.64     0.38       1.88      33,849,000    11,440,000    38,803,000
------------------------  ------------  ---------------  ------  --------  ----------  ------------  ------------  ------------
</TABLE>

<TABLE>
<CAPTION>
                                                     Inferred

-------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Contained Metal(3)
                                                                                       ----------------------------------------
          Class               CuEq          Tonnage        Cu      Au        CuEq(2)       Cu             Au          CuEq(2)
    Hugo North Deposit       Cutoff           (t)          (%)    (g/t)        (%)      ('000 lb)        (oz)        ('000 lb)
------------------------  ------------  ---------------  ------  --------  ----------  ------------  ------------  ------------
<S>                      <C>           <C>              <C>     <C>       <C>         <C>           <C>           <C>

Inferred (Hugo North)       >= 3.5           3,600,000    3.06     1.41       3.96         243,000       160,000       314,000
                            >= 3            12,900,000    2.80     0.98       3.43         796,000       410,000       975,000
                            >= 2            54,700,000    2.08     0.91       2.66       2,508,000     1,600,000     3,208,000
                            >= 1           385,500,000    1.25     0.41       1.51      10,624,000     5,080,000    12,833,000
                            >= 0.6         722,800,000    0.97     0.30       1.17      15,457,000     6,970,000    18,644,000
                            >= 0.3       1,108,200,000    0.76     0.24       0.92      18,568,000     8,550,000    22,477,000
------------------------  ------------  ---------------  ------  --------  ----------  ------------  ------------  ------------
Inferred (Hugo North        >= 3.5           1,400,000    3.32     1.03       3.98         102,000        50,000       123,000
Extension)(4)               >= 3             3,600,000    2.97     0.88       3.53         236,000       100,000       280,000
                            >= 2            11,000,000    2.20     0.86       2.75         534,000       300,000       667,000
                            >= 1            62,200,000    1.39     0.39       1.64       1,906,000       780,000     2,249,000
                            >= 0.6          95,500,000    1.15     0.31       1.35       2,421,000       950,000     2,842,000
                            >= 0.3         152,400,000    0.85     0.23       1.00       2,856,000     1,130,000     3,360,000
------------------------  ------------  ---------------  ------  --------  ----------  ------------  ------------  ------------
Total Inferred              >= 3.5           5,000,000    3.13     1.30       3.96         345,000       210,000       437,000
(Hugo North and             >= 3            16,500,000    2.84     0.96       3.45       1,033,000       510,000     1,255,000
Hugo North Extension(4))    >= 2            65,700,000    2.10     0.90       2.68       3,042,000     1,900,000     3,882,000
                            >= 1           447,700,000    1.27     0.41       1.53      12,535,000     5,900,000    15,101,000
                            >= 0.6         818,300,000    1.00     0.30       1.19      18,040,000     7,890,000    21,468,000
                            >= 0.3       1,260,500,000    0.77     0.24       0.93      21,398,000     9,730,000    25,844,000
------------------------  ------------  ---------------  ------  --------  ----------  ------------  ------------  ------------
</TABLE>

Notes:

     (1)  Mineral   resources  are  not  mineral   reserves   until  they  have
          demonstrated  economic  viability  based  on a  feasibility  study or
          pre-feasibility study.

     (2)  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.


<PAGE>

                                      42


     (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 Hugo North  Extension is located on the Shivee  Tolgoi  Property,
          which  property is owned by Entree but  subject to earn-in  rights in
          favour of IVN.


A further breakdown of the mineral resource inventory of the Hugo South Deposit
is set forth below.


<TABLE>
<CAPTION>


                                     Hugo South Mineral Resource Inventory(1)

-------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Contained Metal(3)
                                                                                       ----------------------------------------
                              CuEq          Tonnage        Cu      Au        CuEq(2)       Cu             Au          CuEq(2)
Hugo South Deposit           Cutoff           (t)          (%)    (g/t)        (%)      ('000 lb)        (oz)        ('000 lb)
------------------------  ------------  ---------------  ------  --------  ----------  ------------  ------------  ------------
<S>                      <C>           <C>              <C>     <C>       <C>         <C>           <C>           <C>

Inferred                    >= 3.5           5,440,000    3.71     0.25       3.87         440,000        40,000       460,000
                            >= 3            11,950,000    3.38     0.21       3.51         890,000        80,000       920,000
                            >= 2            38,900,000    2.67     0.15       2.77       2,290,000       190,000     2,380,000
                            >= 1           203,590,000    1.53     0.09       1.59       6,870,000       590,000     7,140,000
                            >= 0.6         490,330,000    1.05     0.09       1.11      11,350,000     1,420,000    12,000,000
                            >= 0.3       1,105,600,000    0.67     0.07       0.72      16,330,000     2,490,000    17,550,000
------------------------  ------------  ---------------  ------  --------  ----------  ------------  ------------  ------------
</TABLE>

Notes:

     (1)  Mineral   resources  are  not  mineral   reserves   until  they  have
          demonstrated  economic  viability  based  on a  feasibility  study or
          pre-feasibility study.

     (2)  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%.

     (3)  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.

Heruga Mineral Resources

For Inferred resources at Heruga a three dimensional  wireframe was constructed
inside of which the nominal drill  spacing was less than 150m.  The shape aimed
to remove isolated blocks around drill holes where continuity of mineralization
could not be  confirmed.  Within  the 150m shape  there were a small  number of
blocks  that were  greater  than 150m from a drill  hole.  These were  included
because  it was  considered  that  geological  and  grade  continuity  could be
reasonably  inferred within the main part of the mineralized  zone. The average
distance of all the Inferred  blocks in the resource  model is displayed in the
plot below. Of the total tonnes  classified as inferred  approximately  95% are
within 150m of a drill hole while the average  distance of the inferred  blocks
is approximately 100m.

At Heruga IMMI created three-dimensional  mineralized shells or envelopes based
on copper grades of 0.3%,  gold grades of 0.3g/t and 0.7 g/t and  Molybdenum of
100ppm. In addition IMMI created 3 dimensional shapes of the major lithological
and  structural   features  of  the  deposit.   The  shapes  were  checked  for
interpretational consistency in section and plan and were used as interpolation
domains during kriging.

The resources of the Heruga Deposit were reported at an effective date of March
12, 2008. This update  included  drilling that was completed up to February 15,
2008.


<PAGE>

                                      43


<TABLE>
<CAPTION>

                                     Heruga Mineral Resource Inventory(1) - March 2008

------------------------------------------------------------------------------------------------------------------------------------
    Cut-off               Tonnage           Cu         Au        Mo        CuEq(2)                    Contained Metal (3)
------------------  -------------------  --------  ---------  -------  ------------  -----------------------------------------------
     CuEq %                 (t)              %        g/t       ppm          %         Cu ('000 lb)       Au (oz)     CuEq ('000 lb)
------------------  -------------------  --------  ---------  -------  ------------  ----------------  ------------  ---------------
<S>                <C>                  <C>       <C>        <C>      <C>           <C>               <C>               <C>

     >1.50              30,000,000         0.63       1.80      126        1.85           390,000        1,600,000        1,220,000
     >1.25              80,000,000         0.59       1.39      124        1.54           970,000        3,400,000        2,710,000
     >1.00             210,000,000         0.57       0.97      145        1.26         2,570,000        6,400,000        5,840,000
     >0.90             300,000,000         0.55       0.84      150        1.16         3,600,000        8,000,000        7,700,000
     >0.80             430,000,000         0.53       0.72      152        1.07         5,000,000        9,900,000       10,120,000
     >0.70             590,000,000         0.51       0.62      148        0.98         6,590,000       11,700,000       12,750,000
     >0.60             760,000,000         0.48       0.55      142        0.91         8,030,000       13,400,000       15,190,000
     >0.50             930,000,000         0.45       0.50      135        0.84         9,220,000       14,900,000       17,270,000
     >0.40           1,160,000,000         0.41       0.45      123        0.76        10,500,000       16,700,000       19,530,000
     >0.30           1,420,000,000         0.37       0.40      111        0.69        11,670,000       18,200,000       21,530,000
------------------  -------------------  --------  ---------  -------  ------------  ----------------  ------------  ---------------
</TABLE>


Notes:

     (1)  Mineral   resources  are  not  mineral   reserves   until  they  have
          demonstrated  economic  viability  based  on a  feasibility  study or
          pre-feasibility study.

     (2)  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%.

     (3)  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.

Mineral Reserves

To date,  IVN has  declared  reserves  on the Oyu Tolgoi  Project  for only the
Southern Oyu Deposits,  based on a reserve estimate  prepared by GRD Minproc in
January 2006. IVN anticipates that it will be in a position to declare reserves
on the Hugo Dummett Deposits in connection with the completion of IDP08.

In the January 2006 study by GRD Minproc,  a reserve was declared  based on the
open pit mine plan.  This  represents the initial step in the overall mine plan
for  the  Oyu  Tolgoi  mineral  resources.  The  open  pit is  planned  to be a
conventional  truck and shovel open pit mining  operation  on the  Southern Oyu
Deposit.  Ore is to be  treated in a  conventional  concentrator.  The  mineral
reserve is not  intended  to replace  the IDP 05 but to  identify  the open pit
mineral  reserve that is in the Southern Oyu and available for inclusion in the
finalised life of mine plan.

<TABLE>
<CAPTION>

                  Southern Oyu Mineral Reserves - January 2006

-------------------------------------------------------------------------------
  Class   Ore (tonnes)  NSR     Copper    Gold    CuEq    Recovered   Recovered
                        $/t      (%)     (g/t )   Grade    Copper       Gold
                                                   (%)   ('000 lbs)   (ounces)
--------- -----------  -----    ------   ------   -----  ----------  ----------
<S>      <C>          <C>      <C>      <C>      <C>    <C>         <C>
 Proven   127,000,000  15.91     0.58     0.93    1.18    1,451,000   2,833,000
Probable  803,000,000   7.96     0.48     0.27    0.66    7,431,000   4,768,000
 Total    930,000,000   9.05     0.50     0.36    0.73    8,882,000   7,601,000
--------- -----------  -----    ------   ------   -----  ----------  ----------
</TABLE>


The key  parameters in determining  the Mineral  Reserves are (i) assumed metal
prices of $400/oz  gold and $1.00 /lb copper;  and (ii) block value net smelter
return  ("NSR")  cut-off  grades of $3.54 per tonne for Southwest Oyu and $3.39


<PAGE>

                                      44


per tonne for Central Oyu. There was no change in the mineral reserve  compared
to the previously stated mineral reserves.

In order to estimate the  reserves,  GRD Minproc  relied on the resource  model
from its prior  resource  estimates  on the  Southern  Oyu  deposits,  and then
applied proposed mining parameters for mining and processing. This includes pit
designs  using  industry  standard  mining  software,  assumed  metal prices as
described  above and  smelter  terms as set forth in the Oyu  Tolgoi  Technical
Report. The estimate was prepared on a simplified project analysis on a pre-tax
basis.  Key  outstanding  variables noted by GRD Minproc include the Investment
Agreement, marketing matters, water supply and management and power supply.

Only measured  resources were used to report proven reserves and only indicated
resources were used to report probable  reserves.  The mineral reserve estimate
is primarily based on the IDP05 and relies only on the resources and facilities
necessary to support an open pit mine at Oyu Tolgoi.  The report only considers
mineral  resources in the measured and indicated  categories,  and  engineering
that has been  carried  out to a  pre-feasibility  level or better to state the
open pit mineral reserve.

Comparison of the reserve to the total tonnes in the resource  model  indicates
that at the reserve cut-off grades 100% of measured  resource  tonnage has been
converted to proven  mineral  reserve.  The  probable to indicated  ratios are:
tonnage 75%,  recovered  copper metal 79% and recovered  gold metal 70%. Of the
total reserve and total resource within the block model,  the reserve  resource
ratios are:  tonnage 55%,  recovered  copper metal 64% and recovered gold metal
70%.

Mine Planning

The fundamental  parameters of the mine plan at Oyu Tolgoi were  established in
the IDP05,  which was produced in September  2005.  The IDP05 is a  preliminary
assessment  report under the NI 43-101 guidelines and includes inferred mineral
resources  that are considered too  speculative  geologically  to have economic
considerations  applied to them that  would  allow  them to be  categorised  as
mineral  reserves,  and there is no certainty that the  preliminary  assessment
will be realised.  Mineral  resources that are not mineral reserves do not have
demonstrated economic viability.

Since the  release of the IDP,  the  resources  reported  on the  Southern  Oyu
Deposits have been upgraded to mineral reserves and updated resource  estimates
have increased the confidence levels of a substantial  portion of the resources
from inferred to indicated and increased the overall amount of resources on the
Hugo Dummett Deposits.

IMMI has continued to advance mine planning,  engineering and  pre-construction
work,  and is preparing  the IDP08 which is near  completion.  The updated mine
plan will include numerous  changes in assumptions and development  planning to
that  reported in the IDP.  Updating of the overall  mine plan shown in the IDP
will be done as a sensitivity analysis to the mineral reserve case.

2005 IDP Mine Plan

The IDP05 envisions the staged  development of the Oyu Tolgoi  Project,  over a
15-year  period,  as a major copper and gold mining  complex having an ultimate
mine  life that is  expected  to exceed  40  years.  The IDP 05  consists  of a
feasibility-level  evaluation of an initial,  large  open-pit mine developed on
the near-surface Southern Oyu deposits and a pre-feasibility-and  scoping-level
evaluation of the associated infrastructure, such as power supply, and at least
two very large underground block cave mines at the Hugo Dummett Deposits.

It is  contemplated  that the open pit mine be developed  in nine  stages.  The
first three  stages  cover  Southwest  Oyu and the Wedge  deposit,  while later
stages would expand to Southern Oyu and Central Oyu. Accordingly,  the ore feed


<PAGE>

                                      45


will focus on the gold-rich  areas of the Southern Oyu deposits for the initial
stages. Starting in stage 4 when production moves to South Oyu and Central Oyu,
gold grades will drop  significantly.  The IDP05 only addresses  development of
the first four stages of the open pit, with the remaining five stages available
to expand the project life beyond the current schedule.

On the Hugo Dummett  Deposits,  block cave mining is contemplated.  This method
will require the  development of deep  production  shafts to provide access for
personnel,  equipment  and supplies  and for  hoisting ore and waste.  IMMI has
developed  an  approximately  1,200 m shaft to  access  Hugo  North.  The IDP05
contemplates a total of four shafts for Hugo North over the 15-year  build-out.
At appropriate  depths, IMMI would commence lateral development to extract ore.
On  Hugo  North,  IMMI  would  extract  the ore  through  two  rows of  lateral
development (lifts). Mining would target the 2% plus copper shell identified in
Hugo North. The Hugo South Deposit would also be developed  through  block-cave
mining, but only under an expanded production mining scenario.

It is  proposed  in the IDP that ore be  treated  in a  conventional  flotation
concentrator,  using conventional technology.  An ore-processing flow sheet was
proposed  based  upon  a  large  flotation   concentrator   using  conventional
40-foot-diameter  semi-autogenous ("SAG") mills, ball mills and flotation.  The
current  estimates  for capacity are 20 million tpy (70,000 tpd) for the plant,
with a second  facility  being built under the expanded  case to  accommodate a
production increase to 40 million tpy (140,000 tpd). The concentrate would then
be sold to smelters.  During the initial  three years of  operation,  mill feed
would be primarily  sourced from the  Southwest  Oyu open pit while the initial
underground block cave mine at the copper-rich, higher-grade Hugo North Deposit
was being developed. After year 3, production from the Hugo North Deposit would
commence.  By year 5, Hugo North would be the  predominant  source of mill feed
for the  concentrator.  By year 6, open-pit  production  would be curtailed and
only stages 1 and 2 of the ultimate  nine-stage  open-pit  mine plan would have
been mined. In this Base Case scenario,  Hugo North would provide the mill feed
to beyond year 40.

Phase 2 of the IDP05,  the Expanded Case, would be initiated with a decision in
year 3 to develop a block-cave  mine at the Hugo South Deposit and proceed with
the  stripping  of  stages 3 & 4 of the  open-pit  mine.  The  capacity  of the
concentrator  would be doubled  through  the  addition  of a second SAG milling
circuit and related infrastructure increases, to increase Oyu Tolgoi's combined
open-pit and  underground  production  to at least  140,000 tpd by year 7. Hugo
North mill feed, combined initially with feed from stages 3 & 4 of the open-pit
mine, would ensure that the 140,000 tpd production rate was maintained. By year
12, when  production  from Hugo South would  commence,  underground  production
alone is expected to reach 140,000 tpd.

The IDP05  indicates  that Oyu Tolgoi could  produce  approximately  35 billion
pounds of copper  and 11  million  ounces of gold over the  projected,  initial
35-year life of the mine,  based on resources  delineated as at the date of the
IDP05, with average annual production at approximately one billion lb of copper
and 9,000,000 oz of gold under the Expanded Case.

Following the  reporting of the mineral  reserve for the Southern Oyu Deposits,
the IDP05  remains  relevant in the context of a  sensitivity  showing  overall
development  of Oyu Tolgoi  mineral  resources.  The IDP financial  models were
constructed  using a base  copper  price of  $1.00/lb  and a base gold price of
$400/oz,  and are based on  interpretation  of tax,  mining and other  relevant
Mongolian  laws in effect at the time.  The estimated net present value ("NPV")
of the Oyu Tolgoi  Project,  assuming the Expanded Case production is developed
as scheduled to 140,000 tpd at an 8% discount rate, is $3.44 billion before tax
and $2.71 billion after tax. At a 10% discount  rate,  the NPV is $2.40 billion
before tax and $1.85  billion after tax. At an 8% discount  rate,  the internal
rate of return  ("IRR")  of the  Expanded  Case is 19.75%  after  tax,  and the
payback period is 6.5 years. The IDP05 is a preliminary assessment report under
the NI 43-101  guidelines  and includes  inferred  mineral  resources  that are
considered too  speculative  geologically  to have the economic  considerations
applied to them that would allow them to be  categorised  as mineral  reserves,


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                                      46


and there is no certainty  that the  preliminary  assessment  will be realised.
Mineral  resources  that are not  mineral  reserves  do not  have  demonstrated
economic viability.

The  engineering  assessment of initial  capital  required to fund the open-pit
mine and the associated milling complex,  capable of processing 70,000 tpd, was
estimated at $1.15 billion. In addition,  $232 million would be expended during
the same period to advance the development of the underground  Hugo North Mine.
This initial  expenditure  would carry the project through a six-month  ramp-up
period to reach full production of 70,000 tpd.

The IDP's sensitivity  analysis shows that the project's rate of return is most
sensitive  to changes in the copper  price,  followed  by changes in  operating
costs, capital costs and copper recovery.  The project is far less sensitive to
changes in gold price or power costs.

The  IDP was  prepared  in  September  2005,  prior  to the  implementation  of
amendments to the Minerals Law in the Spring of 2006 and without reference to a
completed  Investment  Agreement.  The  Corporation  expects  that the  updated
development  plan will include several  adjustments to the financial inputs and
conclusions set forth in the IDP based on changes to mine planning and changing
assumptions regarding price and costs to reflect current realities.

Updated  Integrated  Development  Plan

An updated  Integrated  Development Plan (IDP08) is nearing  completion,  which
will update all known factors affecting the project.  The updated IDP08 will be
finalized  and  released  after an  acceptable  Investment  Agreement  has been
negotiated  with the  Government  of  Mongolia  and  approved  by all parties -
including  the Board of  Directors of IVN. The  unprecedented  global  minerals
boom, with its attendant  record-high  market prices,  has produced  escalating
capital-cost  pressures on planned mining projects around the world.  The IDP08
will  take  these   developments   into  account  and  introduce   compensating
initiatives,  that would lead to higher overall life-of-mine  production at Oyu
Tolgoi,  with more metal  being  produced  earlier in the mine's  life than was
envisioned in the IDP05.  The IDP08 also will advance the level of the accuracy
of  related  studies  to a  bankable  stage.  The main  changes  from IDP05 are
expected to be:

     o    Increasing mill throughput to a nominal 100,000 tpd from the original
          85,000 tpd outlined in the IDP05.

     o    The  construction  of 3-x-150 MW coal fired power station in Mongolia
          for the project.  The IDP05  envisioned  that power could be imported
          from  China's  Inner  Mongolian  power grid at an  expected  price of
          $0.0426  cents per kilowatt hour  ("c/kWh").  The current plan sees a
          power plant  constructed at the site delivering  power at a long term
          average of $0.0233 c/kWh.

     o    Optimisation  of  underground  production to prioritize  higher-grade
          material.

     o    Updating of all major  capital  and  operating  estimates  to reflect
          scope changes and escalation.

     o    A review of all economic drivers, including metal prices, recoveries,
          selling assumptions, etc.

     o    The impact of changes in Mongolian laws.

     o    The  conclusion  of an  Investment  Agreement  similar  to the  draft
          agreement that was  negotiated  with a  government-appointed  working
          group in 2007.

The draft IDP08 also  assumes  that full scale  construction  will  commence in
Summer  2008;  this  construction  date  may  not be met due to the  status  of
Investment Agreement negotiations.

Work has been  prepared  assuming  that IVN will  continue to retain  equipment
previously  purchased and that IVN will purchase other long lead-time equipment
as noted in the  development  plan.  This  assumption  depends  on a  tentative


<PAGE>

                                      47


commitment  with Rio Tinto regarding  funding of equipment  purchases while IVN
and Rio Tinto  continue to engage the  Government of Mongolia in discussions on
an Investment Agreement.

In the event that an agreement  is not reached with Rio Tinto,  IVN will assess
whether it is able to acquire and maintain existing equipment purchases without
Rio Tinto's support.

Should  IVN be unable to, or decide not to,  acquire or  continue  to hold long
lead-time  equipment  that has been  purchased or committed to, the draft IDP08
will need to be modified to reflect the corresponding  changes to the mine plan
and  the  impact  on the  Oyu  Tolgoi  project  economics.

Current Status of Engineering and Construction

The engineering teams made significant  advancements in engineering  design and
procurement  for the Oyu Tolgoi  project in 2007.  Design work was conducted in
Shanghai, China, Vancouver, Canada, and North Bay, Canada. Fluor Canada Ltd. is
conducting concentrator design, while Fluor China is conducting  infrastructure
design.  Engineering  work for  underground  development is being  conducted by
McIntosh Engineering Limited.  Central  administrative and programme management
functions  are based in  Shanghai.  The  procurement  team in Shanghai  secured
critical  long-lead items identified by the design teams.  Additionally,  Fluor
China  managed  the Oyu  Tolgoi  Project  site  and  oversaw  the  construction
activities associated with site development.

Concentrator

In February 2007, a design  analysis was conducted at the conclusion of the 30%
engineering phase. The principal outcome of this exercise was a modification to
the flowsheet.  The major change resulted in the  simplification  of the pebble
crushing  circuit to allow active  by-passing  of the crusher feed during metal
detects  events.  New flotation  testwork data required  changes to the cleaner
flotation  circuit via the addition of an additional  flotation row and changes
to pipe,  launder,  and pump  sizes  for  improved  concentrate  handling.  The
grinding circuit will consist of two parallel lines, each comprising a SAG mill
and two Ball mills. The plant will process a nominal throughput rate of 100,000
tpd. Currently the design work is 80% complete.

Procurement

In 2007 IVN secured commitments for several items of long lead major equipment.
In specific project execution areas,  where the long lead equipment is schedule
critical, IVN has instructed the suppliers to commence manufacturing. For other
major  equipment with shorter  delivery  times,  IVN has agreed to procure with
agreed  escalation  factors,  but has not  instructed  the supplier to commence
manufacture.

Numerous  pieces of long lead  equipment  that are  under  manufacture  will be
placed in storage pending completion of related  development.  Examples include
the No. 2 shaft main friction hoist,  concentrator  grinding mills with drives,
ball mills with drives,  overland  conveyor  systems,  flotation  equipment and
diesel power generation  equipment.

In  summary,  the mining  process  equipment  industry,  which in recent  years
consolidated due to the cyclic nature of the business,  has a historically high
level of active  projects  and limited  resources to address the demands of the
various global projects under execution.  As a result,  the industry in general
and the project specifically are experiencing  unprecedented  increases in cost
and extended delivery schedules.


<PAGE>

                                      48


Site / Infrastructure

Site construction effort in 2007 was comprised of three activities: No 1 and No
2  Shaft  construction,   concentrator  excavation,   and  camp  infrastructure
expansion.  Concentrator  excavation  reached 20% completion  with the building
outline excavated,  and the primary crusher and tailings thickeners  remaining.
IMMI continued to build out the camp facilities at Oyu Tolgoi  throughout 2007.
The principal intent was the ability to support the construction workforce upon
full  project  release.  The camp  infrastructure  and bed count both have been
greatly  increased  throughout the year. The main camp is fully integrated to a
centralized power, communication, water, and sewage system. Long term generator
power,  multiple water wells, and a sewage treatment plant create a viable camp
suited to the Gobi's harsh conditions.  Additional  underground  utilities have
been  installed  to  support  future  expansion  of the  camp to  support  full
construction.  The total installed  capacity of the three camps stands at 2,500
beds.

The Infrastructure  Engineering team, led by Fluor China, in Shanghai worked on
twenty-seven different packages ranging from a diesel power station, operations
water  supply,  to a road  to the  Chinese  border  south  of Oyu  Tolgoi.  The
principal activities included engineering and procurement efforts on the diesel
power  station,  which will  provide  construction  power to the  project;  and
engineering  on the Gunii  Hooloi bore  field,  which will serve as a permanent
water source for the mine.  The scope for 2008 is to continue  working  through
the design basis of the packages, and analyze implementation options.

Underground Construction

IMMI  continued  to  construct  No. 1 Shaft and reached full depth of 1,380m in
February  2008.  Shaft No. 1 has a diameter of 7.3 m and is concrete lined to a
finished  diameter of 6.7 m. The No. 1 Shaft  facilities  include a  headframe,
hoisting facilities,  power station, air compressors and ventilation equipment.
The design  allows for  future  conversion  to permit the shaft to be used as a
permanent  hoisting  facility.   Following  completion  of  the  shaft  loadout
facilities in March 2008,  two lateral drives will be developed at the proposed
Lift 1  elevation  of the Hugo North  block cave mine.  The drives  will enable
further resource drilling and will provide geotechnical  information to support
completion of the mine design and become part of pre-production program for the
development of the initial block cave.

Construction  of No. 2 Shaft  started in 2007 with the  excavation of the shaft
collar.  In June the shaft was excavated to a depth of 42 m. By December  2007,
concrete  work had been  completed  back up to a point 13 m below the  surface.
Shaft No. 2 will be a combined  production/service  shaft and is being designed
to accommodate  two 54 tonne capacity skips and a cage with a payload  capacity
of 44  tonnes.  The cage  will be  dimensioned  to  accept  underground  mobile
equipment and rail equipment.  This shaft will have a finished diameter of 10 m
and will be sunk to an initial  depth of 1,466 m. IMMI  contemplates  extending
the Shaft by a further 300 m in depth at a later stage to provide  service cage
access to Lift 2 of the proposed Hugo North block cave mine.

Current Exploration Activities

In 2007 IVN  completed  approximately  64,000 m of  drilling  on the Oyu Tolgoi
project  with 37,500 m on Heruga to the end of  December  2007.  An  additional
6,500 m has been competed on Heruga in 2008.

The Heruga Deposit now has 34 drill holes,  including  three holes in progress,
spaced on 200- to 300-m centres,  that have defined an 1,800 m strike length of
continuous copper,  gold and molybdenum  mineralization  from 200 m to 400 m in
width and from 600 m to 1,000 m in vertical extent. The shallowest  portions of
the deposit lie within 600 m of surface and extend to a maximum  known depth of
1,600 m below surface.


<PAGE>

                                      49


On the  southeast  side of Heruga,  hole  EJD0026 was drilled 400 m east of the
defined mineral resource to test for a possible Hugo North-like zone that might
have existed  along the eastern  margin of the deposit.  While the hole did not
intersect  high-grade  mineralization,  it did encounter 300 m grading 0.51 g/t
gold, 0.33% copper and 102 ppm molybdenum,  starting at 1,484 m down hole. This
included  104 m at the top of the  intersection  grading  0.55 g/t gold,  0.56%
copper and 233 ppm  molybdenum,  followed by 26 m of dyke and 18 m grading 1.24
g/t gold, 0.56% copper and 112 ppm molybdenum.  The overall zone lies down dip,
beyond  the  projection  of the  resource  block  model and,  as a  stand-alone
intersection,  was not included in this  resource  estimate.  Infill  drilling,
which confirms grade continuity between the intersection and the resource block
model, may significantly expand the inferred resource base in this area.

The  deposit  is open at both  ends and,  in part,  on the  southeastern  side.
EJD0028,  which  is  drilling  on  the  northern-most  section,  4759500N,  has
intersected  24 m starting at 1,118 m down hole,  grading 0.42 g/t gold,  0.71%
copper and 306 ppm molybdenum.  The remaining  assays for the hole are pending;
however,  similar  moderate-to-strong  copper mineralization is reported in the
hole to a depth  of  1,550 m.  The  hole is 200 m east of  EJD0025,  which  was
included in the resource estimate, and had an intersection of 144 m starting at
996 m that  averaged  0.20  g/t  gold,  0.58%  copper  and 130 ppm  molybdenum,
followed by 20 m of barren dyke and 54 m of 0.15 g/t gold, 0.56% copper and 232
ppm molybdenum.  The West Bor Tolgoi fault,  which defines the western limit of
the  currently  defined  deposit,  was  intersected  at  the  base  of the 52 m
interval.  The East Bor Tolgoi  fault,  which  defines the eastern limit of the
deposit on its northern end, is projected  approximately  300 m further east of
the top of the EJD0028 interval reported above.

Extending Heruga northward,  the Induced  Polarization  data, which have been a
good  indicator  for the  mineralization,  suggest that the  mineralized  block
between the two Bor Tolgoi  faults could extend an  additional  500 m northeast
onto the 100%  Ivanhoe  Mines  owned Oyu Tolgoi  mining  licence.  Of even more
interest,  there are three  northeast-trending,  post mineral fault  structures
that cut across the northern end of the  deposit.  Ultimately,  the deposit may
extend  approximately  four kilometres further north to the southern end of the
Southwest and South Oyu deposits,  which abutted onto a similar aged, east-west
fault referred to as the Solongo Fault.  The IP shows a broad zone of increased
chargeability along the four-kilometre trend.

Ovoot Tolgoi Coal Property, Mongolia

The Ovoot Tolgoi  property is owned by SouthGobi.  As SouthGobi is a subsidiary
of IVN, the project  constitutes  a material  property of IVN. The property has
been divided into an open pit section, which covers the near-surface portion of
the  coal  deposit,  and  an  underground  section,  which  covers  the  deeper
occurrences of coal on the property.

Ovoot Tolgoi Project (open pit)

The bulk of the  information  in this  section is derived from the Ovoot Tolgoi
Open Pit  Technical  Report.  Richard  D.  Tifft and  Patrick  P.  Riley,  both
qualified  persons  within the meaning of NI 43-101,  prepared the Ovoot Tolgoi
Open Pit Technical Report on behalf of Norwest. A copy of the Ovoot Tolgoi Open
Pit Technical Report is available for review on SEDAR at www.sedar.com.

Project Description and Location

The Ovoot  Tolgoi  coal  deposit  is  located  in the  southwest  corner of the
Omnogovi  Aimag (South Gobi  Province)  of Mongolia.  The project is within the
administrative  unit of Gurvantes  Soum,  320 km  southwest  of the  provincial
capital of Dalanzadgad and 950 km south of Ulaanbaatar.


<PAGE>

                                      50


Resource  areas  detailed in this document are adjacent to the existing  Nariin
Sukhait  Mine,  owned and operated by the MAK-Qin Hua  Mongolian/Chinese  Joint
Venture ("MAK").  The MAK operation currently consists of two open-pit mines on
its 2,876 ha mining licence (the "Mak-Quin Hua Mine").

The Ovoot Tolgoi resource is contained  within three SouthGobi  controlled MELs
that cover an area of  approximately  118,989 ha.  These  exploration  licences
expire in  December  2010,  September  2008 and May 2009.  The  current  mining
licence that was granted to SouthGobi on September  20, 2007 (which  expires on
September 20, 2037) covers an additional  9,308 ha to provide a combined  total
area of 128,297 ha. Many of these licences have been split with the result that
corner  coordinates  and lease size have changed  since the licences were first
granted.  The Mak - Quin Hua Mine  southern  limit of its  lease  boundary,  as
established in the field,  is assumed to be coincident with  SouthGobi's  lease
boundary.  However, Norwest has not verified the ownership and precise location
of the Mak - Quin Hua mining lease.

The holder of MELs has various rights to access the licence area through public
or private  property (with  approvals),  to conduct  exploration  and construct
temporary  structures  and to  obtain  a  mining  licence  for any  part of the
exploration  licence  area.  Exploration  licence  fees of $1/ha are payable on
SouthGobi's  MELs.  In  addition,   SouthGobi  must  incur  reconnaissance  and
exploration expenses of no less that $1/ha on each exploration licence.

MELs are granted by the Mongolian  government  for a period of three years with
the right to extend the period twice for three additional years each. Following
a successful  exploration  program, the holder of an MEL can apply for a mining
licence  covering  any  portion of the MEL. A mining  licence is granted  for a
period of 30 years, with the right to extend the period twice for 20 additional
years with each  extension.  Any coal  extracted  and sold  within  Mongolia is
subject to a royalty  rate of 2.5% of the sales value,  while sales  outside of
Mongolia attract a royalty rate of 5% of the sales value.

Prior to commencing  mining  operations on the Ovoot Tolgoi Project,  SouthGobi
must  obtain  a Permit  to  Mine.  SouthGobi  acknowledges  that the  Mongolian
authorities  have approved all  documentation  supporting its application for a
Permit to Mine.

MEL holders are also subject to various environmental  protection  obligations.
Within 30 days of receiving  an MEL,  the holder must prepare an  environmental
protection  plan. Once approved,  the holder of an MEL must deposit funds equal
to 50% of its  environmental  protection  budget for that  particular year in a
bank  account  established  by the  governing  authority of that  district.  No
environmental  liabilities are known to which the Ovoot Tolgoi Project would be
subject arising from the exploration leases.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

The Ovoot Tolgoi Project is located in south-central Mongolia, approximately 40
km north of the border with China, and within the  physiographic  region of the
Gobi Desert.  The area  currently  supports a traditional  subsistence  economy
focused on raising sheep,  goats, and camels.  The number of persons skilled in
the exploration and development of mining properties in Mongolia is limited. To
date, SouthGobi has been successful in recruiting key personnel, however as the
project progresses, it will require some additional personnel.

The surface expression of the deposit ranges from flat,  gravel-covered  desert
plains to moderately hilly terrain.  Surface elevation ranges from 1515 to l555
m above sea level.  Vegetation is sparse,  consisting primarily of small shrubs
and grasses. The region experiences a continental desert climate.  Temperatures
typically  range from 0(0)C to -30(0)C in the winter,  increasing  to 30(0)C to
35(0)C  in  the  summer  months.  High  winds  occur  frequently   particularly
throughout  the  spring.  Average  rainfall is  approximately  530 mm with most
precipitation occurring during the summer months. The weather is acceptable for


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                                      51


exploration  activities from April through October.  Exploration activities are
not recommended during the harsh winters;  however,  the climate is expected to
allow year-round mining operations.

An on-site airport was permitted in September 2006, and Ovoot Tolgoi can now be
reached via chartered  aircraft from  Ulaanbaatar.  Regular air service is also
available  from  Ulaanbaatar  to  Dalanzadgad.  Travel from  Dalanzadgad to the
property takes  approximately  seven hours over unpaved roads. All parts of the
property can be reached with four-wheel-drive vehicles.

A new  Chinese  rail line was  completed  to the  Mongolian  border  and became
operational during 2006,  connecting the Ovoot Tolgoi area with the interior of
China. The railroad terminus is approximately 45 km south of the resource areas
at Ovoot Tolgoi. Coal trucks travel overland from the neighbouring MAK-Quin Hua
Mine to the  railroad  terminus  located  on the  Chinese  side of the  border.
Electrical power is available from a powerline distributing power from China to
the MAK-Quin Hua Mine.  There is  currently no surface  water  available in the
immediate  area of the Ovoot Tolgoi  deposit;  however  water supply wells have
been drilled as part of an on-going hydrological investigation.

History

The first geological  investigations  at Ovoot Tolgoi occurred between 1951 and
1952 and included mapping at a scale of 1:500,000. Coal was first identified at
Ovoot  Tolgoi in 1971.  The first  comprehensive  study of the  Nariin  Sukhait
deposit was undertaken in 1991.  This study included field mapping,  trenching,
the drilling of 34 boreholes,  analysis of coal quality, and the calculation of
resources for the two most promising resource areas, now controlled by MAK-Quin
Hua.

The Ovoot Tolgoi  Project is adjacent to and  surrounds  the MAK-Quin Hua Mine,
which  commenced  operating  in  2003.  The  MAK-Quin  Hua  Mine  is  currently
extracting coal from two open pits in the 5 Seam. Annual production in 2006 was
estimated to be approximately 2,000,000 tonnes of both thermal and coking blend
coal. The mine operates with a mixed Chinese and Mongolian  workforce estimated
at approximately 100 miners.  Coal and overburden are removed by excavators and
front loaders.  Road-hauling  tractor-trailer trucks are loaded directly in the
mine.

Geology

The coal-bearing  rocks at Ovoot Tolgoi are believed to be of late Permian age.
Coal was deposited along the margins of tectonically active continental basins.
The  region  has  subsequently  undergone  Basin  and Range  style  extensional
tectonics followed by a period of compressional folding and faulting.

     Regional Setting

The South  Gobi  region of  Mongolia  reflects  a complex  geologic  history of
continental  accretion and Basin and Range style crustal extension.  The region
is dominated by elongated,  east-west  trending mountain ranges and intervening
basins. The intervening basins comprise sediments of Late Cretaceous to Permian
age,  overlain by a  relatively  thin  Quaternary  gravel layer or thin Aeolian
deposit.  The mountain  ranges  separating  these  sedimentary  basins comprise
mostly  crystalline  basement  rocks  dominated by  intermediate  to high angle
faults that show evidence for both compressional and extensional movement.

     Coal Occurrences

The most prominent  feature relating to the coal deposit at Ovoot Tolgoi is the
arcuate  east-west  trending  Ovoot Tolgoi  fault.  The coal  bearing  section,
interpreted  to be late  Permian  in age,  is  exposed  primarily  in a  window
adjacent to the Ovoot Tolgoi  fault.  The only place where the fault is exposed


<PAGE>

                                      52


is in the  MAK-Quin  Hua  Mine,  where  it  appears  as an  intermediate  angle
structure  (40-50  degrees) in their West pit.  The  Corporation's  holdings at
Ovoot  Tolgoi  contain two distinct  resource  areas within the window of upper
Permian rocks the South-East Field and the West Field.

Initial  work at Ovoot  Tolgoi  identified  the  existence of 10 coal seams and
estimated  the  overall  thickness  of the  coal  bearing  section  at 1,370 m.
Cumulative  thickness of the coal was given as a range of 68 to 250 m, with the
bulk of the resources found within the 5 Seam.  Additional  resources have also
been identified in the "upper seams" located above the 5 Seam.  Based on recent
exploration  work,  the  Corporation  has confirmed that  formations  that were
originally identified as a single seam often contains a number of discrete coal
seams  separated by rock partings of highly variable  thickness and extent.  As
such,  modeling  efforts have required the  organization of these coal packages
into a number of coal zones. The thick seam originally identified as the 5 Seam
in outcrop has retained that designation, but the discovery of splits above and
below  this  has  required  a number  of  additional  correlatable  seams to be
designated as a series of seams within what is now the 5 Zone.

The remainder of the resources are found in the 8, 9, and 10 zones,  which each
contain a number of discreet coal seams.  The 4 Seam and 7 Seam are  recognized
in a number of drill  holes,  but do not appear to  represent  any  significant
resources.  Coal Seams 1 through 3 described  in the early work at Ovoot Tolgoi
have not been identified on the property.

Interburden  both  within and between  coal series is highly  variable at Ovoot
Tolgoi. Interburden between the series is generally dominated by sandstones and
conglomerates,  while the partings within the coals are most commonly mudstones
and carbonaceous mudstones.

     Structural Geology

The South-East  Field is located on  SouthGobi-controlled  land surrounding the
Southeast corner of the MAK mining licence. The 5 Seam is currently being mined
by MAK in this area along the axis of a poorly defined antiform. This structure
trends to the  southwest  from the East Pit of the  MAK-Quin Hua Mine and forms
the basis for the Ovoot Tolgoi  resources  here.  The coal  bearing  section is
found primarily as a southeast dipping  homocline.  Coal resources  modelled in
the South-East Field are almost entirely of the 5 Zone.

The West Field is located near the southwest  corner of the MAK mining licence.
Coal  resources  are  found  along  a  southwest   striking   trend.   Previous
interpretation  of structure in the West Field  suggested a southwest  plunging
antiform.  New data,  however,  has led to the interpretation of a thrust fault
system  controlling the distribution of coal in this area. This  interpretation
requires the field to be divided into several  distinct  resource  blocks.  The
majority  of  resources  are  once  again  found  in the 5 Zone  coal  within a
southeast dipping coal-bearing sequence. Additionally, a considerable amount of
resources are also found in Series 8, 9 and 10.

The  geologic  structure  of the  southwest  part of the West Field is the most
complicated  part of the  field.  Current  interpretation  shows  this  area to
contain a repeat of the upper series coal seams due to the presence of a thrust
fault.  The more steeply  dipping  rocks of the south limb have been moved over
the  section to the  north,  where the units  flatten  out and show a number of
small folds. This scenario can be followed to the northeast.

Deposit Types

The Ovoot Tolgoi  deposit has been  subjected  to a  relatively  high degree of
tectonic  deformation.  Coal seams  explored  to date sit in the  hanging  wall
(upper plate) of an east-west trending, regional thrust fault. The hanging wall
stratum has been  further  modified by  secondary  folding,  normal and reverse
faulting.  Coal seams within the two fields are typically inclined in excess of
35 degrees.  Fold segments and fault-bounded  blocks however,  generally retain


<PAGE>

                                      53


normal  stratigraphic  thicknesses  and  continuity.  The Geology  Type for the
South-East  and West Fields has been  determined to be  "Complex".  The Deposit
Type at Ovoot Tolgoi is considered to be a "Surface" mineable deposit.

Mineralization

Mineralized  zones on the Ovoot Tolgoi  Property are found  primarily  within a
zone of upper-Permian sediments exposed in the hanging wall of the Ovoot Tolgoi
fault.  Reported  mineralization is restricted to the South-East Field and West
Field resource areas. Set forth below is a table that identifies each series of
seams based on the 10 seam designation originally allocated to the fault system
which contains coal  mineralization.  The most  significant  mineralization  is
found in the 5 Zone  seams,  which are  located in the middle of the  sequence.
Thicknesses  reported  are based on drill  intercepts  and  represent  apparent
thickness.

                Ovoot Tolgoi Property Coal Seam Characteristics

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
                                South-East Field
-------------------------------------------------------------------------------
Zone         Seam       Count      Thickness Range (m)     Mean Thickness (m)
--------  ----------  ---------  -----------------------  ---------------------
<S>      <C>          <C>       <C>                      <C>
5            592U         1           21.9 - 21.9                 21.9
             590U        14              1 - 23.4                  8.8
             580U        15           0.96 - 8.6                   4.5
             570U        17            0.6 - 11.7                  4.5
              5U         38           1.04 - 74.1                 24.2
              5UB        28            0.9 - 53.1                  6.0
              580        26           1.06 - 16.6                  3.6
              570        48            1.2 - 30.7                  8.1
               5         97            0.9 - 156.7                53.4
              5B         44            0.6 - 100.1                15.5
--------  ----------  ---------  -----------------------  ---------------------
4              4         19              1 - 30.3                 7.67
--------  ----------  ---------  -----------------------  ---------------------
</TABLE>



<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
                                   West Field
-------------------------------------------------------------------------------
Zone         Seam       Count      Thickness Range (m)     Mean Thickness (m)
--------  ----------  ---------  -----------------------  ---------------------
<S>      <C>          <C>       <C>                      <C>
10           1050        23           0.34 - 16                   2.7
             1040        33           0.36 - 14                   3.4
             1030        39            0.5 - 4.7                  2.2
             1020        49           0.78 - 10.28                3.4
             1010        45            0.6 - 6.08                 2.9
              10         57            1.9 - 19.76                9.4
--------  ----------  ---------  -----------------------  ---------------------
9             998        19           0.48 - 4.16                 1.8
              996        15           0.44 - 5.5                  3.0
              990        56           0.46 - 5.1                  1.6
              980        77              1 - 27.9                 8.5
</TABLE>


<PAGE>

                                      54


<TABLE>
<S>      <C>          <C>       <C>                      <C>
              970        68            0.6 - 9.18                 3.2
              960        65            0.6 - 6.8                  2.2
              950        67           0.46 - 11.7                 1.7
              942        43           0.28 - 5.16                 1.5
              940        88            2.1 - 31                  13.0
               9         75            0.7 - 7                    2.3
--------  ----------  ---------  -----------------------  ---------------------
8             811        25            0.5 - 4.4                  1.9
              810        84           0.16 - 17.6                 4.6
               8         44           0.34 - 12                   2.2
--------  ----------  ---------  -----------------------  ---------------------
5              5         47           1.38 - 134.24              51.5
              SB         12           1.26 - 14.7                 6.4
              SL         15           3.56 - 141.24              43.1
--------  ----------  ---------  -----------------------  ---------------------
</TABLE>


Exploration

A  multi-faceted  approach in  exploration  has been used to identify  drilling
targets for coal resource  delineation.  Exploration  tools and techniques that
have been applied at Ovoot Tolgoi  include field  mapping,  surface-resistivity
geophysical surveying, satellite imagery, trenching and drilling.

Field  reconnaissance  mapping was initiated in early 2005 and continued during
2006.  Mapping and  examination of images were used to define the trend of coal
outcrops that led to the  definition of coal  resources in the  South-East  and
West  Fields and to locate coal  occurrences  in the  hangingwall  of the Ovoot
Tolgoi fault along the entire length of this structure.  Additionally,  3-D and
2-D surface  resistivity  surveys  were used to help locate  mineralization  in
areas of thin surficial  cover.  Potential  targets  identified  with the above
mentioned  techniques were then tested with trenches cut  perpendicular  to the
apparent  strike,  to expose coal seams close to  surface.  Trenching  has been
useful in identifying the near-surface  expression of coal seams, which in turn
has allowed the  Corporation  and the  predecessor  owners to site  exploratory
drill holes.  However,  coal seam  thickness  and  structure as observed in the
trenches  are  greatly  affected  by  near-surface  erosion,   alteration,  and
deformation. Accordingly, trenching intercepts have been found to be unreliable
sources of seam  characteristics  and  structure,  and are not used in resource
estimation.

Reconnaissance  exploration work was contracted  primarily to Sapphire Geo Ltd.
and supervised by the Corporation. Norwest provided assistance in the review of
activities and interpretation of results.

Drilling

Drilling to date on Ovoot Tolgoi holdings from 2004 to 2006 includes a total of
502  exploration  holes completed and 87,978 m drilled.  Limited  drilling took
place under the Soviet-Mongolian  government sponsored  exploration programs. A
new drilling  program began on the Ovoot Tolgoi Project in June 2007 though not
under Norwest's guidance or supervision.

All holes  have been  geophysically  logged  except  where  holes  have  caved.
Depending  on the  equipment  used,  logs were  either  examined  visually,  or
interpreted using the Elogger software developed by Norwest.  Drill hole depths
were then  incorporated  into the geologic model. A drilling  summary by method
and area is presented in the table below.

Drill  hole core and drill  cuttings  descriptions,  geophysical  logs and coal
analyses data were used to characterize  and interpret the  stratigraphy of the
South-East,  and West  Fields,  particularly  with  respect to the coal  seams.


<PAGE>

                                      55


Intercept  depths  and  seam  thickness  reported  are  based  on the  apparent
thickness of the beds as seen in the drill hole data.

     Sampling Method and Approach

The majority of  exploration  holes have been  drilled  with rotary  techniques
which offer the opportunity only to sample drill cuttings. All quality analyses
used for modeling have been  restricted to core samples,  and, for the 2005 and
2006 drill programs, this has been restricted to triple-tube coring equipment.

RC drilling has provided cuttings samples of relatively good integrity. Samples
were  collected at one m intervals,  and the cuttings  were laid out in rows on
the ground.  The site  geologist  would then examine the cuttings and produce a
geologic  log.  Intervals  with coal were sampled and sealed in plastic bags. A
portion of the RC samples  collected were used for basic  proximate and thermal
analysis as a comparison to the core samples. The remainder have been stored in
Ulaanbaatar.  A number of  additional  holes were drilled  with a  conventional
air-rotary  system.  Cuttings were generally logged in a similar fashion as for
reverse circulation drilling.

Core  drilling  has  been  used  where  it is  desirable  to  collect  complete
representative  samples of the coal seams,  observe structural details,  and to
more accurately measure the depths of lithologic contacts.

Some of the initial core holes at Ovoot  Tolgoi were  drilled with  single-tube
Russian made core equipment.  The bulk of the core drilling at Ovoot Tolgoi has
been done with wireline drilling systems and modern,  triple-tube core barrels.
All of the  triple-tube  coring  during  the 2005 and 2006 drill  programs  was
performed  under  Norwest  supervision.  Core  logging and sample  handling was
performed by Sapphire Geo Ltd. under Norwest supervision.

Core was retrieved,  logged and sealed according to Norwest  conventions.  Each
core run was measured for core cut and recovered. Photographs were taken at 0.5
m intervals. Coal showing distinct lithologic variation was sampled separately,
as were  partings  over  0.05  m.  Otherwise,  coal  intervals  with a  uniform
appearance  were bagged in 0.6 m sample  increments  as per the capacity of the
core box length.  When zones of core loss greater than 0.1 m were  encountered,
separate samples were collected both above and below the zone.

Sample Preparation, Analysis and Security

Samples  have been  collected  from drill core and RC cuttings  and recorded by
field  geologists  employed  by  Sapphire  Geo Ltd.  under the  supervision  of
Norwest.  Collected  samples were submitted for analysis using methods that are
standard for the coal  industry.  The specific  process used by Norwest for the
Ovoot Tolgoi drilling program is described below.

     Core drill Samples

Recovered  core is measured  to  determine  an overall  recovery  (reported  in
percent)  by  comparing  the  recovered  core length with the coring run length
recorded by the  driller.  Recovered  core is measured and compared to the coal
interval thickness determined from the geophysical log suite.

Recovered  coal  intervals  are sampled  following a standard  procedure.  Coal
samples are broken out based on  lithologic  changes.  In zones of uniform coal
appearance,  samples  were bagged about every 0.60 m.  In-seam  partings,  to a
maximum thickness of 0.10 m, are included in a coal sample, where the thickness
of the  adjacent  coal beds above and below the  parting  are both a minimum of


<PAGE>

                                      56


twice the parting  thickness.  A parting will be sampled  separately  if it is:
greater  than  0.05  m  thick;   Carbonaceous   shale,   bone  or   interbedded
coal/mudstone; or deemed to be greater than 50 percent coal.

Collected   samples  are  cleaned  of  any  mud  contamination  and  placed  in
individual,  core-sleeve  style,  plastic  bags.  The bags are  labelled on the
outside with both the core hole and sample  number and sealed with plastic tape
to prevent  excessive  moisture loss.  Samples are then placed in sequence into
waxed-cardboard  core boxes.  Core boxes are sealed with tape.  Core boxes from
the 2005  exploration  program were  transported to IMMI in  Ulaanbaatar,  then
shipped to SGS Mineral Labs in Denver, Colorado. Core from the 2006 exploration
program was similarly  transported to the Corporation's offices in Ulaanbaatar,
and then shipped to SGS Laboratories in Tianjin, China.

At the time of shipment,  scanned  geologic and  geophysical  logs,  laboratory
instructions  and shipment  manifest are forwarded to Norwest's  Salt Lake City
office.  Laboratory instructions and the shipment manifest are forwarded to the
Corporation in Ulaanbaatar. All records are compared with contents upon arrival
to SGS Mineral Labs.  To date,  there has been no loss or compromise of samples
during  shipment.  Core samples  undergo a full suite of coal  quality  testing
including  short  proximate,  full  proximate,  thermal  tests,  ash  analysis,
washability testing, and metallurgical testing.

     Reverse Circulation Samples

Samples are collected at 1.0m intervals into plastic bags. The bags are labeled
on the  outside  with both the drill  hole and sample  number  and sealed  with
plastic tape to prevent  excessive  moisture loss.  Samples are then grouped by
hole into larger bags,  packaged and transported to  Ulaanbaatar.  A portion of
these samples have been sent to the Mining Institute  Laboratory in Ulaanbaatar
for  proximate  and thermal  analysis.  The  remainder of the samples have been
stored at Corporation facilities.

In coal work,  additional special security methods for the shipping and storage
of samples are not commonly  employed,  as coal is a relatively  low-value bulk
commodity.

Data Verification

Norwest has directly managed the exploration  program from conceptual  planning
of exploration targets, through data collection, to interpretation and analysis
and has  provided  on-site  management  throughout  the great  majority  of the
exploration project.

Data  collection is performed under a defined set of protocols in which Norwest
site  geologists are responsible  for the training and  administration  of data
collection procedures and for reviewing all data.

Upon completion of a drill hole, the geologic and geophysical logs are reviewed
by a Norwest geologist. All geologic, geophysical, and sampling data is entered
into and  maintained  in an  electronic  database.  All mapping was entered and
maintained in electronic  format on a CAD-based  system.  The geologic data was
entered into an electronic  system  on-site.  The data was then  forwarded on a
routine  basis to  Norwest's  office in Salt Lake City.  Results  from the coal
quality testing were then added.

Information  collected prior to Norwest's involvement in 2005 has been supplied
to  Norwest  by IMMI  and the  Corporation  and was not  directly  verified  by
Norwest.  Exploration  drilling was also conducted in 2007 and was not reviewed
by Norwest.


<PAGE>

                                      57


Mineral Processing and Metallurgical Testing

Mineral processing and metallurgical  testing has included testing to determine
sulphur, thermal value, coking characteristics,  grindability and trace element
analysis.  Testing has also  included  proximate  analysis for  moisture,  ash,
volatile matter and fixed carbon.

The sample  analyses  show that the coal at Ovoot Tolgoi  includes both thermal
and  metallurgical  grades.  Regionally,  the coal generally has an ash content
that is less than 20% (dry  basis) and sulphur at about 1%. Free Swell Index is
variable and ranges up to 4 or more. Inherent moisture in the coal is less than
2%.

Coking characteristic tests include the Gieseler  Plastometer,  Audibert - Arnu
Dilatometer,  Reactive Maceral Analysis  (petrographics),  Phosphorous content,
Free Swelling Index and Trace Element Analyses. A Hardgrove  Grindability index
(test)  has  also  been  conducted  in  order to  describe  the  coal  handling
characteristics.

Coal qualities are observed to be generally  similar in the South-East and West
Field resource areas. Coal is of high volatile  bituminous rank with relatively
low sulphur values.  The 5 Zone is observed to have the highest coal quality at
Ovoot Tolgoi,  as well as comprising the bulk of the  resources.  Free Swelling
Index is variable and ranges up to 4 or more.

Mineral Resource Estimates

     Approach

Norwest  used CIM  Standards  and  referenced  the GSC Paper  88-21  during the
classification, estimation and reporting of coal resources for the Ovoot Tolgoi
Project. The resources were reported in the Ovoot Tolgoi Technical Report.

Under these  guidelines,  the term  "resource"  is  utilized  to quantify  coal
contained in seams  occurring  within  specified  limits of thickness and depth
from surface.  The resource  estimations  contained within are based on in-situ
tonnage and are not adjusted for mining  losses or recovery.  However,  minimum
mineable seam thickness and maximum removable parting thickness are considered,
with coal intervals not meeting these criteria not included in the resources.

Resources are  classified as to the  assurance of their  existence  into one of
three  categories:  measured,  indicated or  inferred.  The category to which a
resource  is  assigned  depends on the level of  confidence  in the  geological
information  available.  GSC Paper 88-21  provides  guidance  for  categorizing
various types of coal deposits by levels of assurance. These were considered by
Norwest during the classification of the resources.

Resources  and  reserves  are further  classified  in GSC Paper 88-21 as to the
assurance of their  existence into one of four  categories,  using the criteria
for coals found in Geology  Type  "Complex"  conditions,  as shown in the table
below.


<PAGE>

                                      58


<TABLE>
<CAPTION>
Criteria Used to Define Assurance of Existence for Coals in Complex Geology Type

--------------------------------------------------------------------------------
              Criteria                      Assurance of Existence Category
                                      ------------------------------------------
                                         Measured      Indicated      Inferred
------------------------------------  -------------  -------------  ------------
<S>                                   <C>           <C>            <C>
Cross-section spacing (m)                   150           300            600
Minimum # data points per section             3             3              3
Mean data point spacing (m)                 100           200            400
Maximum data point spacing (m)              200           400            800
------------------------------------  -------------  -------------  ------------
</TABLE>


Coal  Resources as of December 31, 2006 at Ovoot Tolgoi are  summarized  in the
table below:

<TABLE>
<CAPTION>
              Classification of Resources Geology Type: Complex(1)

--------------------------------------------------------------------------------
                                              Resources at Ovoot Tolgoi
                                      ------------------------------------------
    Resource Area        ASTM Coal       Measured      Indicated      Inferred
                            Rank         (tonnes)      (tonnes)       (tonnes)
----------------------  ------------  -------------  -------------  ------------
<S>                    <C>            <C>           <C>            <C>
South-East Field         hvB to hvA     49,752,000     15,987,000     6,502,000
West Field               hvB to hvA     55,144,000     28,698,000    22,601,000
----------------------  ------------  ----------------------------  ------------
Total                                        149,580,000             29,103,000
----------------------  ------------  ----------------------------  ------------
</TABLE>


Notes:

     (1)  Mineral   resources  are  not  mineral   reserves   until  they  have
          demonstrated   economic   viability   based  on  a   feasibility   or
          pre-feasibility study.

Mine Planning

Norwest   commenced  mine  planning  in  2006,  with  an  internally   prepared
preliminary  mine plan completed in August 2006.  SouthGobi  expects an updated
mine  plan,  an  estimate  of coal  reserves  and an  analysis  of the  project
economics are expected to be part of the upcoming pre-feasibility study.

Ovoot Tolgoi Project (Underground)

The bulk of the  information  in this  section is derived from the Ovoot Tolgoi
Underground  Technical Report.  Patrick P. Riley, a qualified person within the
meaning of NI 43-101, prepared the Ovoot Tolgoi Underground Technical Report on
behalf  of TAG.  A copy of the Ovoot  Tolgoi  Underground  Technical  Report is
available for review on SEDAR at www.sedar.com.

Norwest has not  participated  in the preparation or review of the Ovoot Tolgoi
Underground  Technical  Report,  nor was Norwest  involved in the 2007 drilling
program.

Property Description and Location

The Ovoot Tolgoi  potential  underground mine area is contained within one mine
licence that covers an area of 9,308  hectares at intercept  depths between 250
m. and 650 m. The Corporation's  mine licence was granted on September 20, 2007
for the  development  of an open-pit coal mine,  expires in 2037 and allows for
both surface and underground mining methodology, however SouthGobi will have to
file  additional  information  on an  underground  mine  once the date  becomes
available.  The  Corporation  holds all  necessary  permits to conduct the 2008
underground exploration program.

For a description of the Mongolian  Licence and royalty regime see "DESCRIPTION
OF  BUSINESS  - Coal  Division  - Ovoot  Tolgoi  Project  (open pit) - Property
Description and Location".


<PAGE>

                                      59


Currently TAG is unaware of any known environmental,  permitting, legal, title,
taxation,  socioeconomic,  marketing,  political, or other relevant issues that
may  materially  affect the  potential  mining of coal  occurrences  within the
confines of the Corporation's mine licence area.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

For  a   description   of  the   Accessibility,   Climate,   Local   Resources,
Infrastructure and Physiography of the Ovoot Tolgoi Project see "DESCRIPTION OF
BUSINESS - Coal  Division - Ovoot Tolgoi  Project  (open pit) -  Accessibility,
Climate, Local Resources, Infrastructure and Physiography".

History

For a description of the history of the Ovoot Tolgoi Project,  see "DESCRIPTION
F BUSINESS - Coal Division - Ovoot Tolgoi Report (open pit) - History.

Geological Setting

The  coal-bearing  rocks in the West Field are late  Permian  in age.  Coal was
deposited along the margins of tectonically  active  continental basins and has
subsequently   undergone   extensional   tectonics  followed  by  a  period  of
compressional folding and faulting.

The most  prominent  feature  relating to the Ovoot  Tolgoi coal deposit is the
arcuate,  east-west  trending Nariin Sukhait fault. The  coal-bearing  section,
interpreted  to be late  Permian  in age,  is  exposed  primarily  in a  window
adjacent to this fault. The West Field is approximately 2km south of the Nariin
Sukhait fault.

     Coal Occurrences

Studies of the Ovoot Tolgoi  deposit  undertaken by  Exploration  Unit No.15 of
Ulaanbaatar  Geological Research Group in 1991 and a publicly available summary
report produced by the Mongolian State  Geological  Centre resulted in adoption
of seam  nomenclature  with the very  thick  coal  called the No.5 Seam and the
naming the upper seams in ascending order.

The No. 5 Seam in the West Field surface mine area dips at 30 to 60 degrees and
is 20 to 50 m in true  thickness,  averaging  57 m in apparent  thickness.  The
immediate  roof  strata  over  the No.  5 Seam  consist  of  sandstones  and/or
conglomerates.   The  projected  depth  of  overburden   reaches  650m  in  the
underground No. 5 Seam resource block.

Additional  resource  potential  exists in a coal seam located  below the No. 5
Seam.  This seam is the 5L Seam.  The 5L Seam is  present  within  the  planned
surface  pit area.  Current  data  indicates  the 5L Seam can  occur  from 0.0m
(coalescing) to 157m below the No. 5 Seam, with 79m as the average  interburden
between  the seams.  The average  apparent  seam  thickness  for the 5L Seam is
approximately  53m.  At  present,  no data  exists  for the 5L seam  within the
underground mine area.

     Structural Geology

Coal occurrences in the West Field are found along a southwest  striking trend.
Current data indicates a thrust fault system controls the  distribution of coal
in this area.  This  interpretation  divides  the West Field into two  distinct
resource  blocks:  south and north. The more steeply dipping rocks of the south
resource block have been moved over the north resource block.  The thrust fault
interpretation  indicates  the north  resource  block  contains a repeat of the


<PAGE>

                                      60


upper series  (10-8) coal seams.  The coal seams in the north block flatten out
(30 - 40 degree dip) and indicate a number of small folds and faults.

Current data for the south resource block within the potential underground mine
area does not indicate the presence of any major structural  geologic features.
However, only four widely spaced boreholes have been drilled for the No. 5 Seam
below 250m depth within the potential underground mining area. Therefore, there
is the  possible  presence of smaller or unknown  tectonic  features  affecting
changes in seam thickness and dip.

Exploration

Exploration  began in late 2004 with the  completion  of five  boreholes in the
Ovoot Tolgoi deposit area that is now within the mine licence controlled by the
Corporation.  Exploration  continued  in 2005 and in 2006 with the  emphasis on
delineating surface resource potential.  Exploration activities included: field
reconnaissance  mapping;  satellite  imagery;  surface-resistivity  geophysical
surveying; trenching; and drilling.

Exploration geology fieldwork,  including  reconnaissance  mapping,  trenching,
geologist  descriptions of drilling returns,  geotechnical data field logs, and
database development,  was contracted primarily to Sapphire Geo Ltd. (Sapphire)
and supervised by the Corporation. Norwest provided assistance in the review of
activities and interpretation of results in 2005 and 2006.

Four cored holes are currently located within the potential  underground mining
area. The table below is a summary of the corehole drilling results.

<TABLE>
<CAPTION>
         Corehole Drilling Results in Potential Underground Mining Area

-------------------------------------------------------------------------------
                                                 No. 5 Seam
                Depth      ----------------------------------------------------
   Corehole   Drilled (m)  From Depth (m)  To Depth (m)  Apparent Thickness (m)
-----------   -----------  --------------  ------------  ----------------------
<S>          <C>          <C>             <C>            <C>
NSW06-24C       378.5         297.52         366.98             69.46
NSW06-60C       550.0         350.24         464.84            114.60
NSW07-82R/c     550.0         438.60         534.10             95.50
NSW07-92R/c     397.4         332.80         383.70             50.90
-----------   -----------  --------------  ------------  ----------------------
</TABLE>

Due to the  sparse  amount  of data,  the  previously  cited  preliminary-level
studies noted gaps in geologic information.

TAG  believes  that core  recovery  and  geologic  services  were  adequate and
reliable.

Mineralization

Geological  Survey of Canada (GSC) Paper 88-21 is a reference for coal deposits
as specified in NI 43-101. Coal "Geology Type" is a definition of the amount of
geological  complexity.  The  classification  of a coal deposit by Geology Type
determines  the  approach  to  be  used  for  the  resource/reserve  estimation
procedures and defines the confidence  that can be placed in the  extrapolation
of data values away from a particular  point of reference such as a drill hole.
The Geology Type for the Ovoot  Tolgoi West Field  potential  underground  mine
area has been determined to be "Complex".

Mineralized  zones on the Ovoot Tolgoi West Field mining licence area are found
primarily within a zone of upper-Permian  sediments exposed in the hanging wall
of the Nariin Sukhait Fault. Early work adopted the seam nomenclature,  thereby
calling the very thick coal in the middle of the sequence  the No. 5 Seam,  and
naming the upper seams in ascending order.


<PAGE>

                                      61


As Norwest  exploration work progressed,  numerous  additional seams and splits
were  discovered.  Norwest  summarized  the Ovoot  Tolgoi  West Field coal seam
characteristics in Technical Report,  Coal Geology and Resources,  Ovoot Tolgoi
Property,  Omnogovi Aimag, Mongolia,  June 21, 2007. The table below summarizes
the Norwest  findings as of December  2006  inclusive of all drill holes in the
surface as well as underground areas.  Thicknesses  reported are based on drill
intercepts and represent apparent thickness.

<TABLE>
<CAPTION>
               Ovoot Tolgoi West Field Coal Seam Characteristics
-------------------------------------------------------------------------------
   Series      Seam     Count      Thickness Range (m)*    Mean Thickness (m)*
------------  ------   -------   ----------------------  ---------------------
<S>          <C>      <C>       <C>                     <C>
10-Series      1050       23           0.34 - 16.00                2.7
               1040       33           0.36 - 14.00                3.4
               1030       39           0.50 - 4.70                 2.2
               1020       49           0.78 - 10.28                3.4
               1010       45           0.60 - 6.08                 2.9
                10        57           1.90 - 19.76                9.4
------------  ------   -------    ----------------------  ---------------------
 9-Series       998       19           0.48 - 4.16                 1.8
                996       15           0.44 - 5.50                 3.0
                990       56           0.46 - 5.10                 1.6
                980       77           1.00 - 27.90                8.5
                970       68           0.60 - 9.18                 3.2
                960       65           0.60 - 6.80                 2.2
                950       67           0.46 - 11.70                1.7
                942       43           0.28 - 5.16                 1.5
                940       88           2.10 - 31.00               13.0
                 9        75           0.70 - 7.00                 2.3
------------  ------   -------    ----------------------  ---------------------
 8-Series       811       25           0.50 - 4.40                 1.9
                810       84           0.16 - 17.60                4.6
                 8        44           0.34 - 12.00                2.2
------------  ------   -------    ----------------------  ---------------------
 5-Series        5        47           1.38 - 134.24              51.5
                5B        12           1.26 - 14.70                6.4
                5L        15           3.56 - 141.24              43.1
------------  ------   -------    ----------------------  ---------------------
</TABLE>

*Based on apparent thickness from drill intercepts


Coal seam characteristics from the surface resources  exploration programs have
been  used  to  characterize,  interpret,  and  project  the  stratigraphy  and
structure of the Ovoot Tolgoi West Field potential  underground  mine area. The
Ovoot Tolgoi Underground  Technical Report focuses on the mineralization of the
No. 5 Seam in West Field within the potential underground coal mining area. The
potential  underground  mine areas are  down-dip  and  adjacent to the proposed
surface mine for the No. 5 Seam in the Southeast and West fields where drilling
information was prevalent.


Drilling

Drilling to date on SouthGobi's Ovoot Tolgoi Southeast and West Fields includes
a total of 394 exploration holes completed and 76,803m drilled. Exploration has
expanded  considerably in 2004,  2005, and 2006, with limited drilling in 2007,
as summarized in the table below.


<PAGE>

                                      62


<TABLE>
<CAPTION>
                                               Drilling History at Ovoot Tolgoi
-----------------------------------------------------------------------------------------------------------------------------------
                                 Reverse
                               Circulation                 Rotary                     Core                    Combination
                         -----------------------  ------------------------  ------------------------  -----------------------------
                            No.         Meters       No.         Meters        No.         Meters        No.            Meters
   Field         Year       Holes       Drilled      Holes       Drilled       Holes       Cored         Holes      Drilled/ Cored
-------------  --------  -----------  ----------  -----------  -----------  -----------  -----------  -----------  ----------------
<S>           <C>       <C>          <C>          <C>         <C>          <C>          <C>          <C>          <C>
West             2005        70         12,861         17        2,223          13         2,034          -               -
                 2006        48         10,203          -          -            25         5,737          -               -
                 2007        27         4,536           -          -             4         1,467          4             1,731
-------------  --------  -----------  ----------  -----------  -----------  -----------  -----------  -----------  ----------------
Southeast        2004         -           -             -          -             5          750           -               -
                 2005        76         14,425         18        2,807          34         5,524          -               -
                 2006        11         1,778          12        3,156           5         1,085          7             2,694
                 2007        17         3,542           -          -             1          250           -               -
-------------  --------  -----------  ----------  -----------  -----------  -----------  -----------  -----------  ----------------
</TABLE>

Combination  holes were drilled  with RC and/or PDC rotary  and/or core method.
Combination  meters  drilled/cored  are  recorded in total  meters  drilled per
borehole.  RC versus core drilling per borehole for  Combination  drilling type
has not been recorded  separately as it has no adverse affect on representative
sample gathering.  Cored portions were targeted for coal quality acquisition. A
section  line  spacing of  approximately  150m to 200m is  generally  employed.
Borehole spacing on the section lines approximates 50m.

Coal occurrences in the West Field are found along a southwest  striking trend.
Most of existing  drilling  followed  this trend in order to delineate  surface
operations resources.

Drill hole core and cutting  descriptions,  geophysical logs, and coal analyses
data  from  the  surface  resources  exploration  programs  have  been  used to
characterize,  interpret,  and project the  stratigraphy  and  structure of the
Ovoot Tolgoi West Field potential underground mine area.

Four cored holes are currently located within the potential  underground mining
area.  Two  coreholes  were drilled in 2006,  and two in 2007.  Major  Drilling
Mongolia  provided  drilling  for  SouthGobi  that  included  both RC and  core
methodologies  (combination type). Drilling depths in the potential underground
mining  area  ranged  from  approximately  378 to 550m,  and  totalled  1875.9m
drilled. Sapphire provided geologic data acquisition services.

Sample Preparation, Analysis and Security

Core drilling was used to collect complete  representative  samples of the coal
seams, observe structural details, and to more accurately measure the depths of
lithologic contacts.  All quality analyses used for modeling were restricted to
core samples.  46 core holes have been drilled at Ovoot Tolgoi West Field. This
represents approximately 22% of the total number of boreholes drilled.

Core drilling at Ovoot Tolgoi West Field has primarily  been done with wireline
drilling systems and modern,  triple-tube core barrels.  All of the triple-tube
coring  completed  during the 2005 and 2006 drill programs was performed  under
Norwest supervision.

Core was  retrieved,  logged,  and  sealed  according  to  Norwest  conventions
established in 2005.  Each core run was measured for total core cut versus core
recovered.  Photographs  were taken at 0.5m  intervals.  Coal showing  distinct
lithologic  variation  was sampled  separately,  as were  partings  over 0.05m.
Otherwise,  coal intervals with a uniform appearance were bagged in 0.6m sample


<PAGE>

                                      63


increments  as per the core box length.  When zones of core loss  greater  than
0.1m were encountered, separate samples were collected both above and below the
zone.

Reverse  circulation  drilling  provided  cuttings  samples of good  integrity.
Samples were collected at 1m intervals,  and the cuttings were laid out in rows
on the ground for  examination  and logging by the Sapphire site  geologist.  A
number of additional holes were drilled with a conventional  air-rotary system.
Cuttings were generally logged in a similar fashion as for reverse  circulation
drilling.  A section line spacing of  approximately  150m to 200m was generally
employed for the 2005 through 2007  drilling.  Borehole  spacing on the section
lines approximates 50m.

Core  logging and sample  handling  was  performed  by Sapphire  under  Norwest
supervision  during the 2005 and 2006  drilling  programs  and under  SouthGobi
supervision  for  the  2007  drilling  program.  Laboratory  instructions  were
provided by Norwest.  Laboratories  employed  were SGS Mineral  Labs in Denver,
Colorado in 2005-  (ISO-9000  certified,  accredited  by the  National  Quality
Assurance  in the United  States of America) and SGS  Laboratories  in Tianjin,
China in 2006-(currently holds ISO-17025 certification, accredited by the China
National Accreditation Service for Conformity Assessment).

     Core Drilling Samples

Core recovery  (reported in percent) is recorded after  comparing the recovered
core length with the core run length recorded by the driller. Additionally, the
geophysical log suite thickness is compared to the recovered core measurement.

Recovered coal  intervals are sampled using the following  criteria and quality
control measures:  coal samples are broken out based on lithologic  changes; in
zones of uniform coal  appearance,  samples are bagged about every 0.60m as per
the capacity of the core boxes;  in-seam  partings,  to a maximum  thickness of
0.60m, are included in a coal sample,  where the thickness of the adjacent coal
beds  above and  below the  parting  are both a  minimum  of twice the  parting
thickness; a parting is sampled separately if it is determined by the geologist
to be a non-coal  lithology type >0.60m  thickness;  samples are cleaned of any
contaminants;  core is placed in individual,  core-sleeve  style,  plastic bags
which are labelled on the outside with both the core hole and sample number and
sealed with plastic tape to prevent excessive  moisture loss;  samples are then
placed in sequence into  waxed-cardboard  core boxed which are sealed with tape
and transported to SouthGobi in  Ulaanbaatar;  core is shipped for coal quality
or rock strength analyses to a certified and accredited laboratory; at the time
of shipment, scanned geologic and geophysical logs, laboratory instructions and
shipment manifest are forwarded to TAG's Lakewood,  Colorado office; laboratory
instructions  and the  shipment  manifest are  forwarded to SouthGobi  sands in
Ulaanbaatar;  and all records are compared  with  contents  upon arrival at the
accredited laboratory.

TAG believes that the sample  preparation,  security and analytical  procedures
implemented in 2005 are adequate.

     Data Verification

All data  collection  is done under a defined set of protocols  established  in
2005 by the qualified persons from Norwest. Project management and verification
protocol includes: all field geology data is electronically  forwarded to TAG's
Lakewood FTP site on a daily basis where they are reviewed by a TAG  geologist;
TAG   exploration   management   comments  and  procedural   instructions   are
electronically  forwarded on a daily basis;  data entry of all geologic data is
managed by  Sapphire  at the  project  site;  all  geologic,  geophysical,  and
sampling data forwarded by Sapphire is reviewed and verified by a TAG geologist
and then  entered  and  maintained  in an  electronic  database  and a  geology
modeling software;  periodic  cross-section and digital modeling development is


<PAGE>

                                      64


employed for  in-progress  analyses;  results from the coal quality testing are
added into the  database  in the TAG  offices;  and all  mapping is entered and
maintained in CAD system formats.

TAG  believes  the sample  preparation,  security,  and  analytical  procedures
implemented  in 2005 are adequate and is unaware of any  drilling,  sampling or
recovery factors that could materially impact the reliability of the results.

Mineral Resource Estimate

     Approach

The  classification,  estimation  and reporting of coal resources for the Ovoot
Tolgoi West Field  potential  underground  area is in accordance  with National
Instrument  43-101.  TAG has used the CIM Standards and the GSC Paper 88-21 for
the resource estimates summarized in this technical report.

Composite  quality analyses  previously  performed on the  Corporation's  Ovoot
Tolgoi  mining  licence area  indicate the coal rank to be high volatile B to A
bituminous, based on the ASTM D388 standard.

     Coal Resource Estimation

The potential  underground mine area for the West Field No. 5 Seam is currently
located down-dip and adjacent to the planned surface mining operation where the
prevalent  amount  of  drilling  information  exists.  The term  "resource"  is
utilized to quantify coal contained in seams occurring  within specified limits
of thickness and depth from surface.  The underground coal resources identified
for the  purpose of this study are from 250m depth to a depth of  approximately
650m below the surface.

The resource  estimations  contained  within are on a clean  basis,  i.e. as an
in-situ  tonnage  and not  adjusted  for mining  losses or  recovery.  However,
minimum mineable seam thickness and maximum  removable  parting  thickness were
considered;  coal  intervals not meeting these criteria are not included in the
resources.

Resources are  classified as to the  assurance of their  existence  into one of
three  categories,  Measured,  Indicated or  Inferred.  The category to which a
resource  is  assigned  depends on the level of  confidence  in the  geological
information  available.  GSC Paper 88-21  provides  guidance  for  categorizing
various types of coal deposits by levels of assurance  which were considered by
the author during the classification of the resources.

Additionally,  resources are  classified in GSC Paper 88-21 as to the assurance
of their  existence into one of four  categories,  using the criteria for coals
found in Geology Type "Complex" conditions, as shown in the table below.


<PAGE>

                                      65


<TABLE>
<CAPTION>
Criteria Used to Define Assurance of Existence for Coals in Complex Geology Type
--------------------------------------------------------------------------------
                                            Assurance of Existence Category
                                      ------------------------------------------
              Criteria                   Measured      Indicated      Inferred
------------------------------------  -------------  -------------  ------------
<S>                                  <C>            <C>            <C>
Cross-section spacing (m)                 150             300            600
Minimum # data points per section          3               3              3
Mean data point spacing (m)               100             200            400
Maximum data point spacing (m)            200             400            800
------------------------------------  -------------  -------------  ------------
</TABLE>

TAG completed resource estimations effective as of March 13, 2008 for the No. 5
Seam in the potential  underground  mining area in the Ovoot Tolgoi West Field.
The  resources  estimates  are  based  on  data  acquired  by  the  Corporation
exploration  through  December  2006.  Holes  drilled  in the 2007  exploration
program were not included in the resource estimation.

Coal  resources  as of  March  13,  2008  for the No.  5 Seam in the  potential
underground area are estimated as follows:

<TABLE>
<CAPTION>
            Deep Coal Resources Summary for Ovoot Tolgoi West Field
--------------------------------------------------------------------------------
 Underground          ASTM Group              In-Place Resources (Tonnes)
    Area
---------------  ------------------  -------------------------------------------
                                        Measured      Indicated       Inferred
                                     -------------  --------------  ------------
<S>             <C>                  <C>            <C>            <C>
  West Field          mhB to hvA       3,867,000     12,590,000      36,735,000
-----------------------------------  -----------------------------  ------------
    TOTAL                                      16,457,000            36,735,000
-----------------------------------  -----------------------------  ------------
</TABLE>

The Ovoot Tolgoi West Field underground  mining potential is at the exploration
stage of investigation,  thus with a scoping level of accuracy,  preliminary in
nature,  and includes  inferred  resources  in the  estimation  of  underground
resources available.

A high  percentage  of measured  category  resource  confidence is essential to
obtain an  underground  mine  licence  from  regulatory  agencies  and ensure a
properly planned mine.

Currently there are no known environmental, permitting, legal, title, taxation,
socioeconomic,   marketing,  political,  or  other  relevant  issues  that  may
materially affect the potential mining of coal occurrences  within the confines
of the Corporation's mine licence area.

Exploration and Development

In order for the Corporation to advance the development of detailed underground
mine planning  potential,  it plans on executing a 2008 exploration  program to
obtain geological,  geotechnical,  gas/methane,  coal quality data, and updated
No.5 Seam resource estimates within the potential underground area of the Ovoot
Tolgoi West Field.

TAG has designed a 2008  exploration  program for the  underground  area of the
Ovoot Tolgoi West Field  consisting  of 36  boreholes.  The 36  boreholes  will
obtain  data  for  coal  seam  structure,   geotechnical  information,  in-situ
gas/methane  content,  coal quality,  and coal thickness for updating  resource
estimates.

Other Projects

Mongolia


<PAGE>

                                      66


In  addition  to the Oyu  Tolgoi  Project,  the IVN  Group  operates  a mineral
exploration  program in Mongolia.  The field  program is conducted by IMMI from
base camps at Manlai and Kharmagtai in the Gobi desert.

IMMI's Mongolian exploration program commenced in 2001. Initial  reconnaissance
consisted of satellite imaging and helicopter reconnaissance surveys on most of
its MELs. IMMI has developed a detailed and extensive countrywide database that
incorporates the information  gathered from  reconnaissance  and other sources.
Using this database, IMMI has conducted more comprehensive field reconnaissance
at numerous prospective sites, including rock chip samples,  mapping and ground
magnetic surveys.  First-pass visits have been made to all mineral  occurrences
and  targets  known  within the  licences.  On  advanced  properties,  IMMI has
conducted  gradient-array IP, ground magnetic surveys, RC and diamond drilling.
Starting  in 2005 IMMI began to reduce its  exploration  activity  in  Mongolia
outside  of Oyu  Tolgoi,  as it  focuses  more  time  and  effort  on its  core
properties.

During  2007 a total  of 8,500 m of  diamond-drilling  was  completed  on three
projects.  This included 5,150 m on the Kharmagtai project, 2,250 m on Chandman
Uul, and 1,100 m on Oyut Ulaan.  Additionally  a 4,156 m trenching  program was
completed on Chandman Uul.

An extensive program of Induced  Polarization (IP) using a dipole-dipole system
was also conducted in 2007 on five of the exploration tenements. A total of 235
kilometres of IP was surveyed,  which included 170 kilometres on the Kharmagtai
project. Magnetic surveys were conducted on four tenements totalling 2,086 line
kilometres.

The Kharmagtai property is the most advanced of the exploration properties.  It
is located  approximately 120 km northwest of Oyu Tolgoi, and comprises a group
of three MELs of which QGX Ltd. is entitled to a 10%  interest in one and a 20%
interest in the other two. Work to date includes  extensive IP, ground magnetic
surveys, excavator trenching, reverse circulation drilling (208 holes totalling
27,959 m) and diamond  drilling (172 holes totalling 54,190 m) at nine separate
copper and gold porphyry targets.  At one of these targets (Gold Hill) IMMI has
identified  porphyry copper and gold  mineralization in two pipe-like stockwork
zones 100 m apart. The  mineralization  extends from surface to depths over 700
m, is gold-rich  and open on strike and at depth.  It occurs  predominantly  in
stockwork and sheeted  veins as well as in the matrix of  tourmaline  breccias.
Mineralization in the southern stockwork zone is approximately 550 m long, 70 m
wide and 600 m deep, whilst  mineralization  in the northern  stockwork zone is
approximately  250 m  long,  150 m wide  and  350 m  deep.  This  zone  will be
evaluated  further  in 2008 for its open pit,  heap  leach  potential  and a NI
43-101  complaint  resource  estimate.  Historical data from the previous seven
years of drilling on  Kharmagtai  is now being  compiled and validated for a NI
43-101 resource estimate on previously defined deposits.

BHP Exploration Joint Venture

Pursuant to a 2005  earn-in  agreement  between BHP  Exploration  and IVN,  BHP
Exploration  spent $8 million in  exploration  costs in the "BHP Joint  Venture
Area",  thereby  earning  a  50%  interest.  This  area  consists  of  non-core
exploration licences of IMMI in southern Mongolia.  The BHPB Joint Venture Area
excludes  all  coal  potential,  as well as  IMMI's  advanced  exploration  and
development-stage projects (the Oyu Tolgoi Project, the Kharmagtai,  Bronze Fox
and Oyut Ulaan  prospects).  On August 9, 2007, BHP Exploration and IVN entered
into a Letter Agreement whereby the parties agreed to enter into an amended and
restated  option  agreement  which  separated  the BHPB Joint Venture Area into
three Joint Ventures  covering a total area of  approximately  1,664,896(2) ha.
Each party must  contribute to the joint venture  expenditures in proportion to
its  interest or be subject to  dilution.  IVN and BHP  Exploration  are in the
process of finalizing the terms of the amended and restated option agreement.

Kazakhstan


<PAGE>

                                      67


IVN's  subsidiary  Central  Asian  Mining  Limited  ("CAML")  holds a  majority
interest in the  Bakyrchik  Mining  Venture  ("BMV") that owns and operates the
Bakyrchik  gold  project  in  north-eastern  Kazakhstan.   BMV  was  originally
established as a joint venture with the  government of Kazakhstan,  but in 2006
the  Government  privatized  its interest via tender,  and sold it to an entity
named JSC Altynalmas of Almaty, Kazakhstan.

The  Bakyrchik  property is located in the  village of Auezov in  north-eastern
Kazakhstan,  approximately 1,100 km north-east of Almaty, the country's largest
city and about 100 km from Ust  Kamenogorsk  which is considered the industrial
centre of East  Kazakhstan.  The property hosts the Bakyrchik gold mine,  which
originally  commenced production in 1956 to provide gold bearing flux to copper
smelters in  Ust-Kamenogorsk  and later to smelting  facilities in Russia.  The
mine  consists of a number of mine shafts and  associated  facilities,  process
plant, workshops,  warehouses,  administration buildings and accommodations.  A
total of five shafts were sunk on the Bakyrchik  deposit,  and the  underground
has been explored and developed for mining from a series of development  drifts
driven at 40 m vertical intervals.

CAML  acquired  its  interest in BMV in 1996  pursuant  to a Sale and  Purchase
Agreement  with the  government  of  Kazakhstan.  BMV holds  its  rights in the
Bakyrchik  property  through a Sub-soil Use  Contract  with the  government  of
Kazakhstan and through a combined Mining and Exploration  licence. The Sub-soil
Use Contract  entitles BMV to extract ore, use the Bakyrchik  mine  facilities,
export  concentrate  for sale and  establishes a framework for the taxation and
regulation  of BMV's  operations  in  Kazakhstan.  The  mining  portion  of the
combined Mining and Exploration  Licence  entitles BMV to mine for a term of 25
years, with extension rights. It covers the area surrounding the Bakyrchik gold
mine and the resources identified from previous exploration.

The  exploration  portion of the  licence  surrounds  the mining  portion.  The
original term of the exploration portion expired in 2001. It was renewed at the
time for 2 years and renewed a second time in 2003.  Each  renewal has resulted
in a loss of 50% of land size, and the property is now  approximately  21 km(2)
in size. The exploration  portion of the Licence expired in April 2005 but CAML
has  negotiated  an  agreement  with  the  government  to  further  extend  the
exploration rights until 2010. CAML successfully negotiated with the government
for a similar extension to the term of CAML's investment program under the Sale
and Purchase Agreement.

The gold  deposits at Bakyrchik  consist of a series of  mineralized  lenses or
lodes  lying  within  a large  shear  zone,  which is 11.5 km in  length.  Gold
mineralization  is hosted within  sheared  carbonaceous  sediments of the fault
zones, and is principally contained within sulphide mineralization occurring in
association with quartz stockworks, which crosscuts and parallels the foliation
of the sediments.  Mineralogical studies indicate that the majority of the gold
is  encapsulated  by  arsenopyrite  and,  to a lesser  extent,  pyrite.  As the
associated  sediments  contain  up to 4%  carbon,  the  deposit  is  said to be
"double-refractory" in nature, which makes processing very difficult.

Engineering studies  commissioned by the IVN Group in 1996 and 1997 recommended
development  of a mining  operation  capable of producing  between  500,000 and
1,000,000  tpy at a capital cost  ranging  from $100  million to $222  million.
However,  a  precipitous  decline  in the  price  of  gold  at the  end of 1997
dramatically  changed the  economic  assumptions  upon which these  engineering
studies were based and the IVN Group's development plans for the Bakyrchik gold
project were indefinitely  postponed. In January 1998, the IVN Group placed the
Bakyrchik  gold project on care and  maintenance  status.  Since 2001,  BMV has
processed limited  quantities of existing  stockpiles of ore on an intermittent
basis. Recoveries have generally been below expectations.

During this time of low gold price BMV  completed a number of studies to find a
lower  capital  way  to  process  the  double-refractory  sulphide  ore  on the
property. BMV has successfully completed metallurgical testwork that determined
that roasting  Bakyrchik sulphide ore using rotary kilns and production of dore


<PAGE>

                                      68


alloy is  achievable.  The  calcine  from the  rotary  kiln will be ground  and
leached using carbon in leach ("CIL") technology.  BMV commissioned independent
consultants  to produce a  development  proposal for the project  based on this
process.  The report  recommends  construction  and  operation  of a 150,000 to
200,000 tpy commercial demonstration roasting plant at the Bakyrchik mine using
the rotary kiln roasting technology.

During 2004, BMV operated a pilot-sized  rotary kiln roaster,  which  confirmed
that the  technology  can be  applied to roast  whole  ores,  concentrates  and
technogenics (man-made materials) in an environmentally safe manner. Recoveries
approximated  85% by CIL.  Following the completion of additional  confirmatory
testing,   BMV  determined  that  it  could  proceed  with   commercial   scale
development.

Construction of a large-scale rotary kiln technology  demonstration plant began
in 2007 and is scheduled for  completion  early in third  quarter of 2008.  The
commercial-scale  demonstration  plant is capable of processing  100,000 tonnes
per annum.  Bakyrchik has a stockpile of  approximately  100,000  tonnes of ore
grading 8.17 g/t of gold that will be run through the 40-metre-long rotary kiln
demonstration plant to confirm metallurgical parameters.

Construction  of the plant currently  involves seven major on-site  contractors
and ten off-site equipment fabricators.  Construction activities have commenced
on all major  areas and  infrastructure.  Most  purchase  orders  for the major
mechanical  equipment  have been  placed.  It is  currently  expected  that the
scheduled  completion date for the  demonstration  plant will be the end of the
second quarter of 2008 with commissioning commencing in the third quarter. This
is due  largely  to the  competition  for  contracting  resources  in far  east
Kazakhstan,  which  reflects  economic  growth and high levels of  construction
activity being experienced throughout Kazakhstan. The work plan was revised and
submitted  to the  Ministry of Energy and  Mineral  Resources  in December  for
approval  requesting an additional year to achieve the goal of a 900,000 tonnes
per annum industrial plant.

Discussions  have been initiated with an outside  underground  specialty mining
contractor.  It is anticipated that those  discussions will continue to analyze
the most cost effective and efficient way to commence mining activities.

Australia

In September 2003, the IVN Group acquired the "Cloncurry Property", a series of
mining and  exploration  tenements in  Australia,  from the receivers of Selwyn
Mines Limited for Aus$6  million.  The tenements are held through an Australian
wholly owned  subsidiary,  Ivanhoe  Australia  Pty Ltd.  ("IAL") and consist of
mineral leases ("MLs") and Exploration Permits for Minerals ("EPMs") located in
north-western Queensland,  Australia. The tenements cover an area of 2144/km(2)
in 16 EPMs and 4529.37/ha in 20 MLs. In addition, applications have been lodged
with the Queensland  Department of Natural  Resources Mines and Water for three
new MLs totalling 241.24 hectares.  IAL has a 100% interest in these properties
and has the exclusive  right to explore for all precious and base metals within
the  boundaries  of their  tenements,  with the exception of five sub blocks in
EPM10783 in which  Barrick has an  interest.  Styles of  mineralisation  on the
Cloncurry Property include iron-oxide-copper-gold  ("IOCG") at Mount Elliott as
well as IOCG mineralisation with associated uranium at Amethyst Castle;  whilst
copper at Mt Dore is hosted in shales and siltstones.

The Mt. Dore Project

Mt Dore is the most advanced  project on the property.  Secondary copper within
this system is hosted within  east-dipping  shales and  siltstones  overlain by
granites. The sediments are locally brecciated. Copper is mostly in the form of
chalcocite  and   chrysocolla;   as  well  as  native   copper.   The  zone  of
mineralisation  (defined  using a 0.25% Cu cut-off)  has a strike  length of at
least 600 m and dips to the east at  approximately  40(0).  The central part of
the mineralised zone is thicker, wider and defined for at least 400 m down-dip.


<PAGE>

                                      69


The mineralised  zone at surface in the central part is generally from 25 to 50
m thick,  thickening to over 100 m at depth.  Mineralisation remains open along
strike and at depth.

Significant  non NI 43-101  compliant  mineral  resources have been  previously
declared  by prior  owners at the  prospect  and  vertical  infill  drilling to
re-establish  a valid NI  43-101  compliant  resource  commenced  in the  third
quarter of 2007. This drilling  programme was initially  planned to comprise 19
holes but has been  increased to 27 holes  totaling 9,750 m. A total of 4,290 m
(11 holes) were complete by end of 2007. Two drill rigs are currently  drilling
vertical infill holes,  generally from 200 to 400 m deep. The infill  programme
is expected to be complete in Spring of 2008.

The Mount Elliott Project

The  Mount  Elliot   project  hosts  three   principal   zones  of  copper-gold
mineralisation, Mount Elliot, Swan and Swell zones. Mineralization is primarily
hosted  in  banded  and  brecciated   calc-silicates  and  is  associated  with
albite-pyroxene-magnetite-chalcopyrite-pyrite alteration.

A total of 67 diamond drill-holes totaling 59,029 m were completed on the Mount
Elliott IOCG project in 2007.

Extensive  modeling  of the Mount  Elliott  drill data was  carried  out in the
fourth quarter of 2007. This work indicates that the Swell zone is a relatively
planar  northwest-striking  zone  that dips  steeply  to the  northeast.  It is
sub-parallel  to and located  immediately  southwest of the Mount Elliott zone.
The Swan zone, west of Swell and about 750 m west of the Mount Elliott zone, is
flat-lying   at  surface   and  dips   steeply  to  the  north.   The   deeper,
steeply-dipping  section of Swan is northwest of and along the projected strike
of the Swell zone.  Recent drilling in the gap between the Swan and Swell zones
has extended the Swell zone to the  northwest and the gap between them narrowed
to 150 m. It is  expected  that this gap will be closed  in early  2008.  Swell
remains open to the southeast whilst the  steep-dipping  Swan zone remains open
to the northwest.  Both zones are open at depth. Drilling at Swan has indicated
that the system  extends to at least 1,200 m below  surface.  The Mount Elliott
system has a strike of at least 1.3 km and covers an area of over 1 km(2).

In October 2007, IVN announced the discovery of a significant high-grade (above
2% eCu) zone of copper and gold  mineralization  on the  western  margin of the
Swan zone.  More recent  drilling and  modelling  indicates the swan high grade
zone ("SHGZ") to be an L-shaped  feature  comprising an eastern upper  vertical
zone connected to a larger,  lower flat part. The flat part of the SHGZ is over
300 m long (from west to east),  40 m high in the  central  part and up to 70 m
across  (north to  south).  The top of the flat part is  located at about 550 m
below surface.

The tenor and thickness of the high-grade  mineralization at Swan appears to be
superior  to that  previously  mined  at the Mt.  Elliott  Mine  and  there  is
potential  for  further  large,  high-grade  zones in and around the Mt Elliott
system.  IVN is  conducting  an  aggressive  drilling  campaign  to explore the
immediate area around the SHGZ to expand the size and to better  understand the
structural  controls  of the  mineralization.  A  pattern  of  infill  vertical
drilling  to achieve a mineral  resource on this zone is underway as a priority
undertaking and will be completed in early 2008.

Amethyst Castle

Copper,  gold and  uranium  are  hosted in a  widespread,  large-scale  classic
breccia body in the Amethyst  Castle area.  IVN has  identified the presence of
uranium  and   IOCG-style   mineralization   and  has  carried  out   magnetic,
conductivity,  IP and gravity surveys.  Work in 2006 included 14 RC drill holes
and six diamond  drill holes.  In January  2007, a further  three diamond drill
holes  (totaling 1,550 m) tested  intersections  discovered in Holes 6 and 3 in


<PAGE>

                                      70


2006. The drill results indicate a large breccia  structure  containing pods of
high-grade gold, copper and uranium that requires further investigation.

Uranium Prospects

IVN's  Cloncurry  Project  hosts a  significant  number of uranium  exploration
prospects, including Robert Heg, Elizabeth Anne, Great Wall and Dairy Bore. The
airborne  survey  completed in November  2006 defined  additional  targets that
require follow-up field-work, however, only limited work was done in 2007. More
detailed work, including reconnaissance mapping, is planned for 2008.

Exco Resources Shareholding and Joint Venture Agreement

In May  2007,  IAL  entered  into a  private  placement  investment  in,  and a
joint-venture  agreement with, Exco Resources NL (Exco).  Exco is an Australian
mineral exploration company listed on the Australian Stock Exchange. Exco holds
extensive  exploration  tenements  in the  Cloncurry  copper,  uranium and gold
region  in  northwest  Queensland  and the  White  Dam  gold  project  in South
Australia.  Ivanhoe  Australia's  involvement with Exco  significantly  expands
Ivanhoe Mines' exploration presence in the highly prospective  Cloncurry region
in the Mt. Isa District.

China

IVN has conducted  active  exploration  programs in Inner Mongolia and Northern
China since 2003. The programs have been  principally  conducted  through joint
ventures with Chinese  governing  bodies.  The original joint venture  projects
have  now  been  terminated  or  suspended.  In March  2007,  IVN  re-commenced
reconnaissance  field  exploration,  focusing  on the  western  Gobi  region of
China's Inner Mongolia Autonomous Region and surrounding provinces. The program
consisted  of  field   geological   assessment  of  more  than  fifty  licenced
intrusive-related  and  breccia-hosted  gold-silver  and copper  deposits,  and
involved  detailed data reviews,  field  traverses and systematic rock chip and
channel sampling of all properties. The aim of the program has been to identify
high-quality,  semi-advanced  projects for  acquisition  through  joint venture
formation with, or direct purchase from the existing licence holders.

Other Business Matters

Myanmar Trust Arrangements

As part of the Rio Tinto Transaction,  IVN agreed to divest the Myanmar Assets,
and in February 2007,  established the Monywa Trust, an independent third party
trust,  and transferred  ownership of the Myanmar Assets to the trust. The sole
purpose of the Monywa  Trust is to  facilitate  the future  sale of the Myanmar
Assets to one or more arm's length third parties who do not constitute Excluded
Persons.

In consideration for the purchase of the Myanmar Assets, a company wholly-owned
by the Monywa Trust ("Trust Holdco") issued to a subsidiary of IVN a promissory
note. The principal  amount of the promissory note entitles IVN to receive cash
proceeds  realized  upon the future sale of the Myanmar  Assets plus 50% of any
cash generated by the Monywa Copper Project that is available for  distribution
to the project  participants but remains  undistributed at the time of any such
sale, less certain contractually  specified deductions,  including any fees and
expenses  incurred in carrying out the sale. IVN retains no ownership  interest
in the Myanmar  Assets,  directly or indirectly,  except as a creditor of Trust
Holdco pursuant to the promissory note.

Trust Holdco's mandate is to engage one or more qualified third parties who are
not  Excluded  Persons  (each,  a "Sale  Service  Provider").  The Sale Service
Provider will be responsible for identifying  potential third party  purchasers
who are also not Excluded Persons, soliciting expressions of interest from such
potential  purchasers,  negotiating sale terms and facilitating the sale of the
Myanmar  Assets  on  behalf  of  Trust  Holdco.  A Sale  Service  Provider  who


<PAGE>

                                      71


successfully  facilitates  the sale of the Myanmar Assets to a purchaser who is
not an Excluded  Person will be entitled to a fee equal to a percentage  of the
proceeds realized by Trust Holdco on the sale of the Myanmar Assets.

Following a sale of the Myanmar  Assets,  Trust Holdco will use the proceeds to
pay the Sale  Service  Provider's  fee and any other  expenses  or  liabilities
incurred in carrying  out the sale.  Trust  Holdco will then use the  remaining
proceeds  of sale,  less  contractually  specified  deductions,  to  repay  the
promissory  note held by IVN's  subsidiary.  Upon having retired the promissory
note,  the Monywa Trust will wind up Trust Holdco and  distribute the remaining
assets of the  Trust,  which are  expected  to consist  solely of cash,  to the
designated beneficiaries of the Trust. The designated beneficiaries will be one
or more recognized charitable organizations selected by the trustee.  Following
that distribution the Monywa Trust will terminate.

The Monywa Copper Project was originally  established as a joint venture of IVN
and Mining  Enterprise  No. 1  ("ME1"),  an agency of the  Myanmar  government,
through a Myanmar holding company ("Monywa  JVCo"),  producing copper from open
pit mining  operations  on three  adjacent  deposits  commencing  in 1999.  The
project  also  includes a fourth,  larger  deposit  called  Letpadaung  that is
located  seven km away and is  slated  for  development  under  mine  expansion
scenarios.  The mine was  originally  designed to produce 25,000 tpy of cathode
copper using heap-leach,  solvent extraction electrowinning technology. Through
an  internally  financed  expansion  process  Monywa  JVCo  managed to increase
production capacity to approximately  39,000 tpy prior to IVN's transfer of the
Myanmar Assets.

At December 31, 2007, IVN reviewed the carrying value of the Myanmar Assets and
determined that it was prudent to record a $134.3 million  write-down,  thereby
reducing the value in its financial  statements to nil. Although IVN is hopeful
that a sale may occur at some point in the future, it was determined that IVN's
non-involvement   in  the  Monywa  Copper  Project   operations  since  it  was
transferred to the Monywa Trust, the lack of knowledge of the project's current
activities  and the fact that no sale had been  achieved in almost a year since
the asset was  transferred  to the Monywa  Trust,  indicated  that the carrying
value of the investment is impaired.

Equity Holdings

IVN holds  equity  investments  in a number of other  mineral  exploration  and
development companies.  These holdings include, in particular, an approximately
81% interest in SouthGobi and an approximately 41.9% interest in Jinshan, as at
the date of this Annual  Information  Form.  A  description  of the business of
Jinshan and SouthGobi can be found through their continuous  disclosure filings
on SEDAR at  www.sedar.com.  Other equity  investments  include Intec  Limited,
Entree, Exco Resources NL, and Asia Now Resources Corp., which are all publicly
listed companies.

The following table outlines the publicly listed equity investments held by the
IVN Group and their quoted market value as at December 31, 2007:


<PAGE>

                                      72


<TABLE>
<CAPTION>

-------------------------------------------------------------------------------
Company                               Number of Shares               Value
                                                                     (US$)
--------------------------------    --------------------        ---------------
<S>                                <C>                         <C>
SouthGobi Energy Resources Ltd.         90,066,584(1)            $805,583,529
Jinshan Gold Mines Inc.                 67,250,060               $184,560,461
Entree Gold Inc.                        13,799,333                $33,309,688
Intec Limited                           34,312,366                 $2,642,354
Asia Now Resources Corp.                   969,036                   $446,471
Exco Resources NL                       26,400,000                 $7,623,871
--------------------------------    --------------------        ---------------
</TABLE>

(1)  This number is based on 64,490,201 common shares and 25,576,383  preferred
     shares  (convertible into common shares on a one-for-one basis) held as at
     December 31, 2007. The preferred shares were converted to common shares of
     SouthGobi in January  2008.  In January 2008 IVN also  converted to common
     shares of SouthGobi  convertible  debt which is not reflected in the above
     chart.

IVN also holds shares in certain non-public junior resource-related companies.

Employees

As at December 31, 2007, IVN had approximately 941 employees working at various
locations.

DIVIDENDS

IVN has not paid any  dividends  on its  outstanding  Common  Shares  since its
incorporation  and does not  anticipate  that it will do so in the  foreseeable
future.  The  declaration  of  dividends  on the Common  Shares is,  subject to
certain statutory  restrictions  described below,  within the discretion of the
Board of Directors  based on their  assessment of, among other  factors,  IVN's
earnings or lack thereof,  its capital and operating  expenditure  requirements
and its overall financial condition. Under the Yukon Business Corporations Act,
the Board of Directors  has no  discretion  to declare or pay a dividend on the
Common Shares if they have  reasonable  grounds for  believing  that IVN is, or
after payment of the dividend  would be, unable to pay its  liabilities as they
become due or that the realizable value of its assets would, as a result of the
dividend,  be less than the  aggregate  sum of its  liabilities  and the stated
capital of the Common Shares.

DESCRIPTION OF CAPITAL STRUCTURE

The authorized  share capital of IVN consists of an unlimited  number of Common
Shares  without par value and an unlimited  number of Preferred  Shares.  As at
March 27, 2008 there were  375,118,741  Common  Shares and no preferred  Shares
issued and outstanding. Rights and restrictions in respect of the Common Shares
and the Preferred  Shares are set out in IVN's articles of  continuance,  IVN's
by-laws and in the Business Corporations Act (Yukon), and its regulations.

Common Shares

The holders of Common  Shares are  entitled to one vote per Common Share at all
meetings  of  shareholders  except  meetings  at which only  holders of another
specified class or series of shares of IVN are entitled to vote separately as a
class or  series.  Subject  to the prior  rights of the  holders  of  Preferred
Shares,  the holders of Common Shares are entitled to receive  dividends as and
when  declared  by the  directors,  and to  receive  a pro  rata  share  of the
remaining  property and assets of IVN in the event of liquidation,  dissolution
or  winding up of IVN.  The  Common  Shares  have no  pre-emptive,  redemption,
purchase or conversion  rights.  Neither the Business  Corporations Act (Yukon)
nor the  constating  documents  of IVN impose  restrictions  on the transfer of
Common  Shares  on  the  register  of  IVN,  provided  that  IVN  receives  the


<PAGE>

                                      73


certificate  representing  the Common Shares to be transferred  together with a
duly  endorsed  instrument  of transfer and payment of any fees and taxes which
may be  prescribed  by the Board of Directors  from time to time.  There are no
sinking  fund  provisions  in  relation  to the Common  Shares and they are not
liable to further calls or to assessment by IVN. The Business  Corporations Act
(Yukon) provides that the rights and provisions attached to any class of shares
may  not  be  modified,  amended  or  varied  unless  consented  to by  special
resolution  passed by a majority of not less than  two-thirds of the votes cast
in person or by proxy by holders of shares of that class.

Preferred Shares

The  Preferred  Shares are issuable in one or more series,  each  consisting of
such  number  of  Preferred  Shares as may be fixed by IVN's  directors.  IVN's
directors may from time to time,  by resolution  passed before the issue of any
Preferred Shares of any particular  series,  alter the constating  documents of
IVN to determine the designation of the Preferred  Shares of that series and to
fix the number of Preferred  Shares therein and alter the constating  documents
to create,  define and attach special rights and  restrictions to the shares of
that series, including, without limitation, the following: (i) the nature, rate
or amount of dividends and the dates, places and currencies of payment thereof;
(ii) the  consideration  for, and the terms and  conditions of, any purchase of
the  Preferred  Shares for  cancellation  or  redemption;  (iii)  conversion or
exchange  rights;  (iv) the terms and  conditions of any share purchase plan or
sinking fund; and (v) voting rights and restrictions.

Registered holders of both the Preferred Shares and Common Shares are entitled,
at their option, to a certificate representing their shares of IVN.

MARKET FOR SECURITIES

The  Common  Shares of IVN are  traded in Canada on the TSX,  and in the United
States on the New York Stock  Exchange  and Nasdaq  Stock  Market.  The closing
price of IVN's Common Shares on the TSX on March 27, 2008 was Cdn.$11.04.

The  following  sets forth the high and low market prices and the volume of the
Common Shares traded on the TSX during the periods indicated:

                          (stated in Canadian dollars)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
PERIOD                       HIGH                LOW               VOLUME
------------------     ----------------    ---------------  --------------------
<S>                   <C>                 <C>              <C>
January 2007                11.95               10.49            10,737,481
February 2007               12.12               11.25            18,486,720
March 2007                  14.41               11.50            23,680,830
April 2007                  16.09               13.03            22,525,482
May 2007                    15.50               13.00            26,510,463
June 2007                   16.06               14.00            28,971,681
July 2007                   18.00               14.39            20,629,736
August 2007                 15.48                9.18            32,058,583
September 2007              13.25                9.86            22,286,128
October 2007                15.45               12.13            15,867,301
------------------     ----------------    ---------------  --------------------
</TABLE>


<PAGE>

                                      74


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
PERIOD                       HIGH                LOW               VOLUME
------------------     ----------------    ---------------  --------------------
<S>                   <C>                 <C>              <C>
November 2007               15.50               10.50            28,395,143
December 2007               11.85                9.61            18,065,989
------------------     ----------------    ---------------  --------------------
</TABLE>

DIRECTORS AND OFFICERS

The name,  province or state, and country of residence and position with IVN of
each  director  and  executive  officer of IVN, and the  principal  business or
occupation in which each director or executive  officer has been engaged during
the immediately preceding five years is as follows:

<TABLE>
<CAPTION>
Name and Municipality of Residence      Position with Corporation                              Principal Occupation
                                                                                              During Past Five Years
<S>                                    <C>                                     <C>
ROBERT M. FRIEDLAND                     Chairman and Director                   Chairman  of IVN (March  1994 to  present);  Chief
Singapore                               (Director since March 1994)             Executive  Officer  of  IVN  (March  1994  to  May
                                                                                2006);  Chairman and  President,  Ivanhoe  Capital
                                                                                Corporation (a venture  capital  company) (1988 to
                                                                                present);  Deputy  Chairman,  Capital  Markets for
                                                                                Ivanhoe Energy Inc. (June 1999 to present).

PETER G. MEREDITH                       Deputy Chairman and Director            Deputy  Chairman  of IVN  (May  2006 to  present);
B.C., Canada                            (Director since March 2005)             Chief  Financial  Officer  of IVN (May 2004 to May
                                                                                2006);  Chief Financial Officer of Ivanhoe Capital
                                                                                Corporation (a venture  capital  company) (1996 to
                                                                                present);   Chief  Executive  Officer,   SouthGobi
                                                                                Energy Resources (June 2007 to present).

JOHN MACKEN                             Director, President and Chief           Chief  Executive  Officer  of  IVN  (May  2006  to
Massachusetts, USA                      Executive Officer                       present);   President  of  IVN  (January  2004  to
                                        (Director since January 2004)           present);  Chairman of South Gobi Energy Resources
                                                                                (June  2007  to  present);   Consultant  (2000  to
                                                                                January  2004);   and  Senior  Vice  President  of
                                                                                Freeport  McMoran Copper & Gold (a mining company)
                                                                                (1996 to 2000).

DAVID HUBERMAN                          Director (lead director) (Director      President,   Coda   Consulting   Corp.   (business
B.C., Canada                            since September 2003)                   consulting firm) (1993 to present).

R. EDWARD FLOOD                         Director                                Managing  Director,  Investment  Banking,  Haywood
Idaho, USA                              (Director since March 1994)             Securities   (UK)  Limited   (investment   dealer)
                                                                                (March 2007 to  present);  Deputy  Chairman of IVN
                                                                                (December  2001 to February  2007);  Senior Mining
</TABLE>


<PAGE>

                                      75


<TABLE>
<CAPTION>
Name and Municipality of Residence      Position with Corporation                              Principal Occupation
                                                                                              During Past Five Years
<S>                                    <C>                                     <C>
                                                                                Analyst,   Haywood  Securities  Inc.   (investment
                                                                                dealer) (May 1999 to November 2001).

JOHN WEATHERALL                         Director                                President of Scarthingmoor  Assets Management Inc.
Ontario, Canada                         (Director since June 1996)              (an  asset  management  company)  (April  1996  to
                                                                                present).

KJELD THYGESEN                          Director                                Managing  Director,   Lion  Resources   Management
England                                 (Director since February 2001)          (investment  firm and fund  manager)  (May 1989 to
                                                                                present)

HON. ROBERT  HANSON                     Director                                Chairman,  Hanson Capital Limited  (investment and
England                                 (Director since February 2001)          finance  company)   (February  1998  to  present);
                                                                                Chairman,  Hanson  Transport  Group  (May  1990 to
                                                                                present);   Hanson   Westhouse   (City  of  London
                                                                                merchant bank) (2006 to present).

DR. MARKUS FABER                        Director                                Managing Director,  Marc Faber Limited (investment
Hong Kong, China                        (Director since February 2002)          advisory  firm and  fund  manager)  (June  1990 to
                                                                                present).

HOWARD BALLOCH                          Director                                President,   The  Balloch  Group  (investment  and
Beijing, China                          (Director since March 2005)             consulting   company)   (July  2001  to  present);
                                                                                Vice-Chairman,   China-Canada   Business   Council
                                                                                (July 2001 to  present);  Canadian  Ambassador  to
                                                                                China,  Mongolia and Democratic  Republic of Korea
                                                                                (April 1996 to July 2001).

DAVID KORBIN                            Director                                Independent  Management  and Financial  Consultant
B.C., Canada                            (Director since May 2006)               (May 1998 to present).

BRET CLAYTON                            Director                                Chief  Executive,  Rio Tinto  Copper (July 2006 to
England                                 (Director since May 2007)               present);  President  and CEO of Rio Tinto America
                                                                                (October 2002 to July 2006).

TONY GIARDINI                           Chief Financial Officer                 Chief  Financial  Officer  of  IVN  (May  2006  to
B.C., Canada                                                                    present);  Vice-President  and  Treasurer,  Placer
                                                                                Dome Inc.  (a mining  company)  (December  2003 to
                                                                                April   2006);   Treasurer,   Placer   Dome   Inc.
                                                                                (November  2002  to  December   2003);   Director,
                                                                                Treasury  and  Operations,  Placer Dome Inc.  (May
                                                                                2000 to October 2002).

DOUGLAS KIRWIN                          Executive Vice-President,               Executive   Vice-President,   Exploration  of  IVN
Queensland, Australia                   Exploration                             (September 1995 to present).
</TABLE>


<PAGE>

                                      76


<TABLE>
<CAPTION>
Name and Municipality of Residence      Position with Corporation                              Principal Occupation
                                                                                              During Past Five Years
<S>                                    <C>                                     <C>
STEVEN GARCIA                           Executive Vice President                Executive  Vice  President of IVN (October 2005 to
North Carolina, USA                                                             present);  Project  Director  of IVN (May  2005 to
                                                                                present);  CEO  Chamoa  Farm,  Inc.  (a  wholesale
                                                                                landscaping   and   nursery   company)   (2001  to
                                                                                present).

JAY GOW                                 Vice President, Marketing               Vice  President,  Marketing  of IVN  (May  2004 to
B.C., Canada                                                                    present);  Marketing Manager, Copper & Molybdenum,
                                                                                Compania  Minera  Antamina S.A. (a mining company)
                                                                                (January 2001 to December 2003).

PIERRE MASSE                            Vice President, Finance                 Vice  President,  Finance  of  IVN  (May  2007  to
B.C., Canada                                                                    present);  Vice  President  and  Treasurer  of IVN
                                                                                (May 2004 to May 2007);  Chief  Financial  Officer
                                                                                of IVN (November 2001 to May 2004);  Controller of
                                                                                IVN (October 1998 to November 2001).

BEVERLY A. BARTLETT                     Vice President and Corporate            Vice  President  of IVN,  SouthGobi,  Jinshan  and
B.C., Canada                            Secretary                               Ivanhoe   Energy  Inc.   (May  2006  to  present);
                                                                                Corporate   Secretary   of  IVN   (June   2001  to
                                                                                present);  Corporate Secretary,  SouthGobi (August
                                                                                2003 to  present);  Corporate  Secretary,  Jinshan
                                                                                Gold Mines Inc.  (May 2003 to present);  Corporate
                                                                                Secretary,   Ivanhoe  Energy  Inc.  (oil  and  gas
                                                                                company) (June 2001 to present).

DAVID WOODALL                           President, Gold Division                President,  Gold  Division of IVN (August  2006 to
Western Australia, Australia                                                    present);   Operations   Manager   of  Robe  River
                                                                                Associates  (a  mining  company)  (March  2005  to
                                                                                August 2006); General Manager,  Operations of Sino
                                                                                Gold  Limited (a mining  company)  (April  2004 to
                                                                                January  2005);  Mine  General  Manager  of Placer
                                                                                Dome Inc. (a mining company) (July 2001 to 2004).
</TABLE>


Each  director's  term of office expires at the next annual general  meeting of
IVN.

Shareholdings of Directors and Senior Officers

As at March  27,  2008,  the  directors  and  executive  officers,  as a group,
beneficially owned,  directly or indirectly,  or exercised control or direction
over,  101,601,885  Common Shares of IVN representing  approximately 27% of the
outstanding Common Shares of IVN.


<PAGE>

                                      77


Committees of the Board

The committees of the Board of Directors of IVN consist of an Audit  Committee,
a Compensation and Benefits  Committee,  a Corporate  Governance and Nominating
Committee,  an  Executive  Committee  and a Currency  Advisory  Committee.  The
members  of the  Audit  Committee  are David  Korbin,  John  Weatherall,  Kjeld
Thygesen  and Markus  Faber.  The  members  of the  Compensation  and  Benefits
Committee are David Huberman,  Kjeld Thygesen,  Robert Hanson, David Korbin and
Howard  Balloch.  The  members  of  the  Corporate  Governance  and  Nominating
Committee are David Huberman, John Weatherall,  Kjeld Thygesen,  Robert Hanson,
Markus  Faber,  David Korbin and Howard  Balloch.  The members of the Executive
Committee are Robert Friedland, John Macken, Peter Meredith and David Huberman.
The  members of the  Currency  Advisory  Committee  are John  Weatherall,  Tony
Giardini, Peter Meredith and Markus Faber.

Conflicts of Interest

Certain  directors  of IVN and  its  subsidiaries  are  associated  with  other
reporting  issuers or other  corporations  which may give rise to  conflicts of
interest. In accordance with the Yukon Business Corporations Act, directors and
officers  of IVN are  required  to disclose to IVN the nature and extent of any
interest that they have in a material contract or material transaction, whether
made or  proposed,  with IVN, if the director or officer is: (a) a party to the
contract or  transaction;  (b) is a director or an  officer,  or an  individual
acting in a similar capacity, of a party to the contract or transaction; or (c)
has a material interest in a party to the contract or transaction.

IVN has adopted a Code of Business  Conduct  and Ethics (the  "Ethics  Policy")
that  applies  to  all  directors,  officers  and  employees  of  IVN  and  its
subsidiaries.  As required by the Ethics Policy,  individuals  representing IVN
must not enter into outside  activities,  including business interests or other
employment,  that might  interfere with or be perceived to interfere with their
performance at IVN.

Audit Committee Information

Information  concerning the Audit Committee of IVN, as required by Multilateral
Instrument 52-110, is provided in Schedule A to this Annual Information Form.

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

Other than as disclosed below or elsewhere in this Annual  Information Form, no
insider,  director  nominee or  associate  or  affiliate of any such insider or
director  nominee,  has any  material  interest,  direct  or  indirect,  in any
material  transaction since the commencement of IVN's last financial year or in
any proposed  transaction,  which,  in either case, has materially  affected or
would materially affect IVN.

At the end of 2007,  subsidiaries  of IVN holding the Savage River Project owed
approximately  $5.1 million to Mr. Robert M. Friedland,  Chairman of IVN, which
indebtedness  originated as a result of the December 2000 acquisition by IVN of
the Savage River Project.  Following the sale of the Savage River operations in
February  2005,  repayment of this  balance is  contingent  upon IVN  receiving
proceeds in excess of  approximately  $111  million from the sale of the Savage
River Project.  To date, $70.0 million has been received from the sale, with an
additional $28.2 million expected to be received on March 31, 2008.

The  Corporation is a party to cost sharing  agreements with other companies in
which Mr.  Friedland  has a material  direct or indirect  beneficial  interest.
Through these agreements,  the Corporation  shares,  on a cost-recovery  basis,
office  space,   furnishings,   equipment  and  communications   facilities  in
Vancouver, Singapore, Beijing and London, and an aircraft. The Corporation also
shares  the costs of  employing  administrative  and  non-executive  management
personnel  in these  offices.  During the year ended  December  31,  2007,  the


<PAGE>

                                      78


Corporation's  share of these costs was U.S.$13.4  million.  The companies with
which  the  Corporation  is a party to the  cost  sharing  agreements,  and Mr.
Friedland's ownership interest in each of them, as at December 31, 2007, are as
follows:

<TABLE>
<CAPTION>
                                                              Robert Friedland
Corporation Name                                             Ownership Interest
--------------------------------                             ------------------
<S>                                                         <C>
Ivanhoe Energy Inc.                                                19.93%
Ivanhoe Capital Corporation                                         100%
Ivanhoe Nickel & Platinum Ltd.                                     38.33%
Jinshan Gold Mines Inc.                                             (1)
SouthGobi Energy Resources Ltd.                                     (1)
Govi High Power Exploration Inc.                                    Nil
</TABLE>


(1)  As at December 31, 2007, Mr. Friedland owed 26.09% of the Common Shares of
     the  Corporation,  which owned 42.9% of the common  shares of Jinshan Gold
     Mines Inc. and 86.06% of the common shares of SouthGobi.

TRANSFER AGENTS AND REGISTRARS

The registrar and transfer agent for the Common Shares in Canada is CIBC Mellon
Trust Company at its principal offices in Vancouver and Toronto.

MATERIAL CONTRACTS

Reference is made to the material  contracts  that IVN has filed with  Canadian
securities  regulatory  authorities,  coincident with the filing of this Annual
Information Form, on the SEDAR website at www.sedar.com.

Below is a list of the contracts,  including particulars,  that are material to
IVN and were  entered  into  between  January  2007 and  December  2007 or were
entered into before that date but are still in effect, other than those entered
into in the ordinary  course of business.  No disclosure is made  regarding any
contract that was entered into prior to January 1, 2002.

1.   Equity  Participation and Earn-in Agreement dated October 15, 2004 between
     IVN and Entree,  as amended  November 9, 2004 setting  forth the terms and
     conditions of the Entree Joint Venture. See "DESCRIPTION OF THE BUSINESS -
     Oyu Tolgoi Copper and Gold  Project,  Mongolia - Project  Description  and
     Location" for further details.

2.   Head  Agreement  dated  February  4, 2005 among IVN,  Stemcor  Pellets AG,
     Stemcor  Holdings Ltd. and Dominant  Holdings AG,  setting forth the terms
     and conditions of the sale of the Savage River Project.

3.   Private  Placement  Agreement  dated  October 18,  2006,  as amended as of
     November 16, 2006 between IVN and Rio Tinto International Holdings Limited
     and as further  amended by an Amending  and  Additional  Rights  Agreement
     between the parties dated October 24, 2007.  See "GENERAL  DEVELOPMENT  OF
     THE BUSINESS - Three Year History - 2006 and 2007" for further details.

4.   Credit  Agreement  dated  October  24,  2007  between  IVN and  Rio  Tinto
     International  Holdings  Limited  setting forth the terms of the Rio Tinto
     Credit  Agreement.  See "GENERAL  DEVELOPMENT OF THE BUSINESS - Three Year
     History - 2007" for further details.

INTERESTS OF EXPERTS

Deloitte & Touche LLP is the independent auditor of IVN.


<PAGE>

                                      79


IVN has  relied on the work of the  following  experts in  connection  with the
verification of IVN's mineral reserve and resource  estimates and certain other
scientific  and  technical  information  in  respect  of its  material  mineral
properties, as referenced in the Annual Information Form:

     o    GRD Minproc for the Oyu Tolgoi Technical Report;

     o    Norwest for the Ovoot Tolgoi Open Pit Technical Report; and

     o    TAG for the Ovoot Tolgoi Underground Technical Report.

The Technical Reports are available for review on SEDAR at www.sedar.com.

To the  knowledge  of IVN,  none  of the  experts  referred  to  above  nor the
qualified  persons  employed by the companies  responsible  for  preparation of
those reports or other qualified  persons who contributed to the reports,  hold
any outstanding Common Shares.

ADDITIONAL INFORMATION

Additional  information,  including  directors' and officers'  remuneration and
indebtedness,  principal holders of IVN's securities, options to purchase IVN's
Common Shares and interests of insiders in material  transactions  is contained
in the management  proxy  circular for the annual general  meeting of IVN to be
held on May 9, 2008,  which will be made available on SEDAR concurrent with the
delivery  of  the  document  to  IVN's   shareholders.   Additional   financial
information is contained in IVN's comparative  financial statements and MD&A as
at and for the years  ended  December  31,  2007 and 2006.  Copies of the proxy
circular  (when filed),  financial  statements and MD&A are available on SEDAR,
and may also be  obtained  upon  request  from IVN at 654 - 999  Canada  Place,
Vancouver, British Columbia, V6C 3E1.

Additional information relating to IVN may be found on SEDAR at www.sedar.com.


<PAGE>


                                      80


                                   SCHEDULE A

                          Audit Committee Information

Composition of Audit Committee

IVN's Audit Committee consists of Messrs.  David Korbin, Kjeld Thygesen and Dr.
Markus Faber,  as well as John  Weatherall,  who is retiring at the next annual
meeting of IVN on May 9, 2008.  Mr. Korbin  assumed the role of Chairman of the
Audit  Committee on May 11, 2007 following the  resignation of Mr.  Weatherall.
The Board of Directors has determined  that all members of the Audit  Committee
are  "independent"  and  "financially  literate"  as  defined  in  Multilateral
Instrument  52-110.  In addition,  in accordance  with New York Stock  Exchange
corporate  governance listing standards,  the Board of Directors has determined
that David Korbin and John Weatherall are audit committee financial experts.

Relevant Education and Experience

David Korbin

Mr. Korbin holds a Chartered Accountant designation.  For 16 of his 25 years in
the  accounting  profession,  he was  managing  partner  of a  number  of firms
including  the  Vancouver  office of  Deloitte  Haskins & Sells and  Deloitte &
Touche LLP. He is currently  working as a management  and financial  consultant
and has been a  director  of  E-Comm  Emergency  Communications  for  Southwest
British  Columbia  Incorporated  since  2001  serving  as Chair of the board of
directors since 2004 and Chair of the audit committee from 2002 to 2003.  Prior
thereto,  Mr. Korbin  served on the board of directors  for  Vancouver  General
Hospital and the Vancouver Hospital and Health Sciences Centre.

John Weatherall

Mr. Weatherall holds a Chartered Financial Analyst designation. He is currently
the President of  Scarthingmoor  Asset  Management  Inc. Prior thereto,  he was
Chairman  of  Toronto  Dominion  Asset  Management,  the  investment  unit of a
Canadian  Chartered Bank and head of Institutional  Equity with  responsibility
for investment research at Wood Gundy Inc. and Greenshields Inc. Mr. Weatherall
has previously served on the audit committee of five publicly traded companies.

Markus Faber

Dr. Faber holds a PhD in economics from the  University of Zurich.  He has over
35 years experience in the finance industry,  including acting as manager of an
investment bank in the United States in which he routinely  performed financial
analysis of a range of different companies. His current occupation is principal
of Marc Faber Limited,  an investment  advisory firm and fund manager.  He also
acts as a director and advisor to a number of investment funds.

Kjeld Thygesen

Mr.  Thygesen  holds  a  bachelor  of  commerce,   majoring  in  economics  and
accounting. He has been a resource investment analyst and fund manager for over
30 years. He has been the Managing Director of Lion Resources  Management since
1989, and prior thereto was the Director, Natural Resources Department and fund
manager for Rothschild Asset Management.


<PAGE>

                                      81


                                   Audit Fees

Deloitte & Touche LLP has served as IVN's  auditing  firm since  January  1995.
Fees billed by Deloitte & Touche LLP and its affiliates  during fiscal 2007 and
fiscal 2006 were  approximately  Canadian  $1,836,000 and Canadian  $2,534,000,
respectively.  The  aggregate  fees  billed by the  auditors in fiscal 2007 and
fiscal 2006 are detailed below.

<TABLE>
<CAPTION>
(Canadian $ in 000's)                            2007             2006
                                            --------------   --------------
<S>                                         <C>              <C>
Audit Fees (a)                                  $1,070           $1,588
Audit Related Fees (b)                            $355             $246
Tax Fees (c)                                      $411             $700
All Other Fees (d)                                   -                -
                                            --------------   --------------
Total                                           $1,836           $2,534
                                            ==============   ==============
</TABLE>

(a)  Fees for audit services billed or expected to be billed relating to fiscal
     2007 and 2006 consisted of:

     o    audit of the Company's annual statutory financial statements;

     o    reviews of the Company's quarterly financial statements; and

     o    comfort  letters,  consents,  and other  services  related to SEC and
          Canadian securities regulatory authorities' matters.

     In addition,  in 2007 fees were paid for services  provided in  connection
     with review  pursuant to Section 404 of the Sarbanes Oxley Act of 2002 and
     the required attestations relating to internal controls.

(b)  Fees for  audit-related  services  provided  during  fiscal  2007 and 2006
     consisted of financial accounting and reporting consultations and audit of
     annual statutory financial statements of the Company's  subsidiaries.

(c)  Fees for tax services  provided  during fiscal 2007 and 2006  consisted of
     income  tax   compliance,   and  tax  planning  and  advice   relating  to
     transactions   and   proposed   transactions   of  the   Company  and  its
     subsidiaries.

(d)  IVN did not incur fees for products and services provided by its principal
     accountant  during fiscal 2007 and 2006 not disclosed in subsections  (a),
     (b) or (c) above.


Pre-Approval Policies and Procedures

All services to be performed by IVN's  independent  auditor must be approved in
advance by the Audit  Committee or a designated  member of the Audit  Committee
("Designated Member"). The Designated Member is a member of the Audit Committee
who has been given the authority to grant  pre-approvals of permitted audit and
non-audit services.


<PAGE>

                                      82


The Audit Committee has considered whether the provision of services other than
audit services is compatible with  maintaining the auditors'  independence  and
has adopted a policy  governing  the provision of these  services.  This policy
requires the  pre-approval by the Audit  Committee or the Designated  Member of
all audit and non-audit  services provided by the external auditor,  other than
any de minimis non-audit services allowed by applicable law or regulation.  The
decisions of the Designated Member to pre-approve  permitted  services needs to
be reported to the Audit Committee at its regularly scheduled meetings.

Pre-approval  from the Audit  Committee or Designated  Member can be sought for
planned engagements based on budgeted or committed fees. No further approval is
required to pay pre-approved fees. Additional  pre-approval is required for any
increase in scope or in final fees.

Pursuant to these  procedures,  100% of each of the services  provided by IVN's
external auditor relating to the fees reported as audit, audit-related, tax and
other fees were pre-approved by the Audit Committee or the Designated Member.


<PAGE>

                                      83


                               IVANHOE MINES LTD.
                            AUDIT COMMITTEE CHARTER

I.   Purpose

The primary objective of the Audit Committee (the "Committee") of Ivanhoe Mines
Ltd. (the "Company") is to act as a liaison between the Board and the Company's
independent auditors (the "Auditors") and to assist the Board in fulfilling its
oversight  responsibilities  with respect to (a) the  financial  statements and
other financial  information  provided by the Company to its shareholders,  the
public and  others,  (b) the  Company's  compliance  with legal and  regulatory
requirements,  (c)  the  qualification,  independence  and  performance  of the
Auditors and (d) the  Company's  risk  management  and internal  financial  and
accounting controls, and management information systems.

Although the  Committee has the powers and  responsibilities  set forth in this
Charter,  the role of the Committee is oversight.  The members of the Committee
are not full-time employees of the Company and may or may not be accountants or
auditors by  profession or experts in the fields of accounting or auditing and,
in any event, do not serve in such capacity.  Consequently,  it is not the duty
of the Committee to conduct audits or to determine that the Company's financial
statements and disclosures are complete and accurate and are in accordance with
generally accepted accounting  principles and applicable rules and regulations.
These are the responsibilities of management and the Auditors.

The  responsibilities  of a member of the  Committee  are in  addition  to such
member's duties as a member of the Board.

II.  Organization

The Committee  shall  consist of three or more  directors and shall satisfy the
laws governing the Company and the independence,  financial literacy, expertise
and experience requirements under applicable securities law, stock exchange and
any other regulatory requirements applicable to the Company.

The members of the Committee and the Chair of the Committee  shall be appointed
by the Board on the recommendation of the Nominating & Governance Committee.  A
majority of the members of the Committee shall  constitute a quorum. A majority
of the  members of the  Committee  shall be  empowered  to act on behalf of the
Committee. Matters decided by the Committee shall be decided by majority votes.
The chair of the Committee shall have an ordinary vote.

Any member of the Committee may be removed or replaced at any time by the Board
and shall cease to be a member of the  Committee as soon as such member  ceases
to be a director.

The  Committee  may  form  and  delegate   authority  to   subcommittees   when
appropriate.

III. Meetings

The Committee shall meet as frequently as circumstances  require,  but not less
frequently  than  four  times  per  year.  The  Committee  shall  meet at least
quarterly with management,  the Company's  financial and accounting  officer(s)


<PAGE>

                                      84


and the Auditors in separate executive sessions to discuss any matters that the
Committee or each of these groups believe should be discussed privately.

The Chair of the Committee  shall be an  independent  chair who is not Chair of
the  Board.  In the  absence of the  appointed  Chair of the  Committee  at any
meeting,  the  members  shall  elect a chair  from those in  attendance  at the
meeting.  The Chair, in  consultation  with the other members of the Committee,
shall set the  frequency  and length of each meeting and the agenda of items to
be addressed at each upcoming meeting.

The  Committee  will appoint a Secretary who will keep minutes of all meetings.
The Secretary may be the Company's  Corporate  Secretary or another  person who
does not need to be a member of the Committee.  The Secretary for the Committee
can be changed by simple notice from the Chair.

The Chair  shall  ensure  that the  agenda  for each  upcoming  meeting  of the
Committee is  circulated  to each member of the  Committee as well as the other
directors in advance of the meeting.

The Committee may invite,  from time to time, such persons as it may see fit to
attend its meetings and to take part in  discussion  and  consideration  of the
affairs of the Committee. The Company's accounting and financial officer(s) and
the Auditors  shall attend any meeting when  requested to do so by the Chair of
the Committee.

IV.  Authority and Responsibilities

The Board, after  consideration of the  recommendation of the Committee,  shall
nominate the Auditors for  appointment  by the  shareholders  of the Company in
accordance  with  applicable  law.  The Auditors  report  directly to the Audit
Committee.  The Auditors are  ultimately  accountable  to the Committee and the
Board as representatives of the shareholders.

The Committee shall have the following responsibilities:

(a)  Auditors

1.   Recommend  to the Board  the  independent  auditors  to be  nominated  for
     appointment as Auditors of the Company at the Company's annual meeting and
     the remuneration to be paid to the Auditors for services  performed during
     the preceding  year;  approve all auditing  services to be provided by the
     Auditors;  be  responsible  for the oversight of the work of the Auditors,
     including  the  resolution of  disagreements  between  management  and the
     Auditors regarding financial reporting; and recommend to the Board and the
     shareholders  the termination of the  appointment of the Auditors,  if and
     when advisable.

2.   When there is to be a change of the Auditor,  review all issues related to
     the change,  including any notices  required under  applicable  securities
     law,  stock  exchange or other  regulatory  requirements,  and the planned
     steps for an orderly transition.

3.   Review the Auditor's audit plan and discuss the Auditor's scope, staffing,
     materiality, and general audit approach.

4.   Review on an annual basis the  performance of the Auditors,  including the
     lead audit partner.


<PAGE>

                                      85


5.   Take reasonable steps to confirm the  independence of the Auditors,  which
     include:

     (a)  Ensuring  receipt from the Auditors of a formal written  statement in
          accordance with applicable  regulatory  requirements  delineating all
          relationships between the Auditors and the Company;

     (b)  Considering   and   discussing   with  the  Auditors  any   disclosed
          relationships or services,  including  non-audit  services,  that may
          impact the objectivity and independence of the Auditors;

     (c)  Approving in advance any non-audit  related services  provided by the
          Auditor to the Company,  and the fees for such services,  with a view
          to  ensure  independence  of  the  Auditor,  and in  accordance  with
          applicable regulatory standards,  including applicable stock exchange
          requirements  with respect to approval of non-audit  related services
          performed by the Auditors; and

     (d)  As necessary,  taking or recommending that the Board take appropriate
          action to oversee the independence of the Auditors.

6.   Review and  approve  any  disclosures  required to be included in periodic
     reports  under  applicable   securities  law,  stock  exchange  and  other
     regulatory requirements with respect to non-audit services.

7.   Confirm with the Auditors and receive  written  confirmation at least once
     per year (i)  indicating  that the Auditors are a member in good  standing
     with the Canadian Public Accountability Board (CPAB) and comparable bodies
     in the United States,  Australia and elsewhere to the extent  required and
     disclosing  any  sanctions  or  restrictions  imposed by the CPAB and such
     other  comparable  bodies;  and (ii)  responding  to any other  reasonable
     request of the Audit Committee for confirmation as to their qualifications
     to act as the Company's Auditors.

8.   Consider the tenure of the lead audit  partner on the  engagement in light
     of applicable  securities  law,  stock  exchange or applicable  regulatory
     requirements.

9.   Review  all  reports  required  to be  submitted  by the  Auditors  to the
     Committee  under  applicable  securities  laws,  stock  exchange  or other
     regulatory requirements.

10.  Receive all  recommendations  and  explanations  which the Auditors  place
     before the Committee.

(b)  Financial Statements and Financial Information

11.  Review  and  discuss  with   management,   the  financial  and  accounting
     officer(s)  and the  Auditors,  the  Company's  annual  audited  financial
     statements,  including  disclosures  made in  management's  discussion and
     analysis, prior to filing or distribution of such statements and recommend
     to the  Board,  if  appropriate,  that  the  Company's  audited  financial
     statements be included in the Company's  annual  reports  distributed  and
     filed under applicable laws and regulatory requirements.


<PAGE>

                                      86


12.  Review  and  discuss  with   management,   the  financial  and  accounting
     officer(s) and the Auditors,  the Company's interim financial  statements,
     including  management's  discussion and analysis, and the Auditor's review
     of interim financial  statements,  prior to filing or distribution of such
     statements.

13.  Review any  earnings  press  releases  of the  Company  before the Company
     publicly discloses this information.

14.  Be satisfied  that adequate  procedures are in place for the review of the
     Company's  disclosure  of financial  information  and extracted or derived
     from the  Company's  financial  statements  and  periodically  assess  the
     adequacy of these procedures.

15.  Discuss  with  the  Auditor  the  matters  required  to  be  discussed  by
     applicable auditing standards  requirements relating to the conduct of the
     audit including:

     (a)  the adoption of, or changes to, the  Company's  significant  auditing
          and accounting principles and practices;

     (b)  the  management  letter  provided by the  Auditor  and the  Company's
          response to that letter; and

     (c)  any  difficulties  encountered  in  the  course  of the  audit  work,
          including  any  restrictions  on the scope of activities or access to
          requested information, or personnel and any significant disagreements
          with management.

16.  Discuss with management and the Auditors major issues regarding accounting
     principles used in the preparation of the Company's financial  statements,
     including  any   significant   changes  in  the  Company's   selection  or
     application of accounting principles. Review and discuss analyses prepared
     by  management  and/or the Auditors  setting forth  significant  financial
     reporting  issues and judgments made in connection with the preparation of
     the financial statements, including analyses of the effects of alternative
     approaches under generally accepted accounting principles.

17.  Prepare any report under  applicable  securities  law,  stock  exchange or
     other  regulatory  requirements,  including  any  reports  required  to be
     included in statutory  filings,  including in the  Company's  annual proxy
     statement.

(c)  Ongoing Reviews and Discussions with Management and Others

18.  Obtain  and  review an  annual  report  from  management  relating  to the
     accounting  principles used in the preparation of the Company's  financial
     statements,  including those policies for which  management is required to
     exercise discretion or judgments regarding the implementation thereof.

19.  Periodically review separately with each of management,  the financial and
     accounting officer(s) and the Auditors;  (a) any significant  disagreement
     between  management and the Auditors in connection with the preparation of
     the financial  statements,  (b) any  difficulties  encountered  during the
     course of the audit,  including any  restrictions  on the scope of work or
     access to required information and (c) management's response to each.


<PAGE>

                                      87


20.  Periodically discuss with the Auditors,  without management being present,
     (a) their judgments about the quality and appropriateness of the Company's
     accounting principles and financial disclosure practices as applied in its
     financial reporting and (b) the completeness and accuracy of the Company's
     financial statements.

21.  Consider and approve, if appropriate, significant changes to the Company's
     accounting  principles and financial  disclosure practices as suggested by
     the Auditors or management and the resulting  financial  statement impact.
     Review with the Auditors or management  the extent to which any changes or
     improvements  in  accounting  or financial  practices,  as approved by the
     Committee, have been implemented.

22.  Review  and  discuss  with  management,  the  Auditors  and the  Company's
     independent counsel, as appropriate,  any legal,  regulatory or compliance
     matters that could have a significant  impact on the  Company's  financial
     statements, including applicable changes in accounting standards or rules,
     or compliance  with applicable laws and  regulations,  inquiries  received
     from   regulators  or  government   agencies  and  any  pending   material
     litigation.

23.  Enquire of the  Company's  financial  and  accounting  officer(s)  and the
     Auditors on any matters  which  should be brought to the  attention of the
     Committee  concerning  accounting,  financial and operating  practices and
     controls and accounting practices of the Company.

24.  Review the  principal  control  risks to the business of the Company,  its
     subsidiaries and joint ventures; and verify that effective control systems
     are in place to manage and mitigate these risks.

25.  Review and discuss with management any earnings press releases,  including
     the use of "pro forma" or "adjusted" non-GAAP information,  as well as any
     financial  information  and  earnings  guidance  provided to analysts  and
     rating agencies.  Such discussions may be done generally (i.e.  discussion
     of the types of information to be disclosed and the types of presentations
     made).

26.  Review  and  discuss  with  management  any  material   off-balance  sheet
     transactions, arrangements, obligations (including contingent obligations)
     and other  relationships  of the Company with  unconsolidated  entities or
     other  persons,  that may have a  material  current  or  future  effect on
     financial   condition,   changes  in  financial   condition,   results  of
     operations,  liquidity, capital resources, capital reserves or significant
     components of revenues or expenses. Obtain explanations from management of
     all significant variances between comparative reporting periods.

27.  Review and discuss with  management the Company's major risk exposures and
     the steps  management  has  taken to  monitor,  control  and  manage  such
     exposures,  including the Company's risk  assessment  and risk  management
     guidelines and policies.


<PAGE>

                                      88


(d)  Risk Management and Internal Controls

28.  Review, based upon the recommendation of the Auditors and management,  the
     scope  and  plan of the  work to be done by the  Company's  financial  and
     accounting  group and the  responsibilities,  budget and staffing needs of
     such group.

29.  Ensure that management has designed and implemented  effective  systems of
     risk management and internal  controls and, at least annually,  review and
     assess the effectiveness of such systems

30.  Approve and recommend to the Board for adoption policies and procedures on
     risk  oversight  and  management  to  establish  an  effective  system for
     identifying, assessing, monitoring and managing risk.

31.  In consultation  with the Auditors and management,  review the adequacy of
     the Company's internal control structure and procedures designed to insure
     compliance with laws and  regulations,  and discuss the  responsibilities,
     budget and staffing needs of the Company's financial and accounting group.

32.  Establish  procedures  for (a) the  receipt,  retention  and  treatment of
     complaints  received  by  the  Company  regarding   accounting,   internal
     accounting   controls  or  auditing  matters  and  (b)  the  confidential,
     anonymous  submission  by employees  of the Company of concerns  regarding
     questionable accounting or auditing matters.

33.  Review the internal  control  reports  prepared by  management,  including
     management's  assessment of the  effectiveness  of the Company's  internal
     control  structure and  procedures  for  financial  reporting and (ii) the
     Auditors' attestation, and report, on the assessment made by management.

34.  Review  the  appointment  of the  chief  financial  officer  and  any  key
     financial  executives  involved  in the  financial  reporting  process and
     recommend to the Board any changes in such appointment.

(f)  Other Responsibilities

35.  Create an agenda for the  ensuing  year and  confirm a  timetable  for the
     Audit Committee for the ensuing year.

36.  Review and approve related-party transactions if required under applicable
     securities law, stock exchange or other regulatory requirements.

37.  Review  and  approve  (a) any  change or waiver in the  Company's  code of
     ethics  applicable to senior  financial  officers and (b) any  disclosures
     made under  applicable  securities law, stock exchange or other regulatory
     requirements regarding such change or waiver.

38.  Establish,  review and approve  policies  for the hiring of  employees  or
     former employees of the Company's Auditors.


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39.  Review  and  reassess  the  duties  and  responsibilities  set out in this
     Charter annually and recommend to the Nominating and Corporate  Governance
     Committee  and  to  the  Board  any  changes  deemed  appropriate  by  the
     Committee.

40.  Review its own performance annually, seeking input from management and the
     Board.

41.  Perform any other activities  consistent with this Charter,  the Company's
     articles  and by-laws and  governing  law, as the  Committee  or the Board
     deems necessary or appropriate.

V.   Reporting

The Committee shall report  regularly to the Board and shall submit the minutes
of all  meetings  of the Audit  Committee  to the Board  (which  minutes  shall
ordinarily  be included in the papers for the next full board meeting after the
relevant  meeting of the  Committee).  The  Committee  shall also report to the
Board on the proceedings and  deliberations  of the Committee at such times and
in such manner as the Board may require.  The  Committee  shall review with the
full Board any issues that have arisen with  respect to quality or integrity of
the Company's  financial  statements,  the Company's  compliance  with legal or
regulatory requirements, the performance or independence of the Auditors or the
performance of the Company's financial and accounting group.

VI.  Resources and Access to Information

The Committee shall have the authority to retain independent legal,  accounting
and other consultants to advise the Committee.

The  Committee has the authority to conduct any  investigation  appropriate  to
fulfilling its  responsibilities.  The Committee has direct access to anyone in
the  organization and may request any officer or employee of the Company or the
Company's  outside counsel or the Auditors to attend a meeting of the Committee
or to meet with any  members  of, or  consultants  to,  the  Committee  with or
without the presence of management. In the performance of any of its duties and
responsibilities,  the  Committee  shall  have  access to any and all books and
records  of  the  Company  necessary  for  the  execution  of  the  Committee's
obligations.

The  Committee  shall  consider the extent of funding  necessary for payment of
compensation to the Auditors for the purpose of rendering or issuing the annual
audit report and recommend  such  compensation  to the Board for approval.  The
Audit  Committee   shall  determine  the  funding   necessary  for  payment  of
compensation  to  any  independent  legal,  accounting  and  other  consultants
retained to advise the Committee.