EXHIBIT 99.4
AMENDMENT TO EARN-IN AGREEMENT
(OYU TOLGOI PROJECT, MONGOLIA)
THIS AMENDING AGREEMENT is made and effective the 13th day of March, 2002, by
and between:
IVANHOE MINES LTD., a corporation incorporated under the laws of the
Yukon Territory, Canada ("IVANHOE CANADA"),
IVANHOE MINES MONGOLIA INC. LTD., ("XXK"), a company incorporated under
the laws of Mongolia ("IVANHOE MONGOLIA")
(collectively referred to as "IVANHOE")
and
BHP MINERALS INTERNATIONAL EXPLORATION INC., a company incorporated
under the laws of the state of Delaware, USA ("BHP")
INTRODUCTION
A. BHP and Ivanhoe Canada are parties to an Earn-in Agreement made
effective as of the 5th day of May, 2000 (the "Earn-in Agreement"); and
B. BHP and Ivanhoe wish to amend the Earn-in Agreement on the terms set
forth in this amending agreement (the "Amendment") including making
Ivanhoe Mongolia a party hereto.
NOW THEREFORE, in consideration of the covenants and agreements set forth
herein, the parties agree to amend the Earn-In Agreement as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 Unless otherwise defined in this Amendment, all terms denoted with
initial capital letters in this Amendment have the meanings ascribed to
them in the Earn-in Agreement.
1.2 In this Amendment, the following terms will have the meanings ascribed
thereto:
"Central Oyu Chalcocite Resource Area" means, for purposes of
determining the Outside Areas referred to in sections 3.1 and 3.5 and
the Central Oyu mineralized portion of the Licensed Area referred to in
section 4.2, that portion of the Licensed Area described in Exhibit
"D".
"Ivanhoe License" means mineral exploration license 3677X issued on
September 10, 2001 to Ivanhoe Mongolia pursuant to the applicable
mining laws of Mongolia, a copy of which is attached as Exhibit "A".
-2-
"Original License" means mineral exploration license number 210 issued
on February 17, 1997 to a Mongolian branch of BHP and re-registered to
a Mongolian branch of BHP as mineral exploration license number 66X on
August 8, 1997, all pursuant to the applicable mining laws of Mongolia,
a copy of which is attached as Exhibit "A".
"Supplemental Licenses" means mineral exploration license numbers
66X-1, 66X-2 and 66X-3 issued on September 18, 2000 to a Mongolian
branch of BHP, all pursuant to the applicable mining laws of Mongolia,
a copy of which is attached as Exhibit "A".
1.3 The definition of "Licensed Area" in Section 1.1 of the Earn-in
Agreement is hereby deleted in its entirety and replaced by the
following:
" "Licensed Area" means, at any particular time, the geographical areas
then subject to,
(i) the Original License and the Supplemental Licenses,
(ii) the Ivanhoe License but only to the extent that such areas
were subject to the Original License on the Effective Date,
and
(iii) any successor mineral tenure in respect of the area subject to
the Original License on the Effective Date, including but not
limited to the Supplemental Licenses and, subject to the
geographical limitation in subparagraph (ii) above, the
Ivanhoe License issued pursuant to the applicable mining laws
of Mongolia."
BHP and Ivanhoe hereby acknowledge and agree that, as of the date of
this Amendment, the Licensed Area is described by the coordinates set
forth in Exhibit "C".
1.4 The definition of "Outside Areas" in Section 1.1 of the Earn-in
Agreement is hereby deleted in its entirety and replaced by the
following:
" "Outside Areas" means the Licensed Area excluding the Central Oyu
Chalcocite Resource Area."
1.5 Section 1.3 of the Earn-in Agreement is hereby deleted in its entirety
and replaced by the following:
"EXHIBITS
1.3 Attached to and forming part of this Agreement are the following
exhibits:
Exhibit "A" - Copies of Original License, Supplemental Licenses and
Ivanhoe License.
Exhibit "B" - List of Vehicles and Field Equipment.
Exhibit "C' - Description of Coordinates of Licensed Area on the
effective date of the Amendment.
Exhibit "D" - Description of Coordinates of Central Oyu Chalcocite
Resource Area.
Exhibit "E" - Terms and Conditions of BHP Royalty.
-3-
Exhibit "F" - Location Map of the Oyu Tolgoi Project Areas"
2. EARN-IN RIGHTS AND OBLIGATIONS
2.1 BHP and Ivanhoe hereby acknowledge and agree that Ivanhoe has fully
performed the Earn-in Obligations within the Earn-in Period and has
earned a one hundred percent (100%) participating interest in the
Original License and the Supplemental Licenses.
2.2 BHP and Ivanhoe hereby acknowledge and agree that, as of December 31,
2001, Ivanhoe has incurred Expenditures in respect of the Second Phase
Exploration Program in the aggregate amount of US$1,323,086 (the
"Second Phase Expenditure Credit") and that the Second Phase
Expenditure Credit is not subject to audit under Section 3.9 of the
Earn-in Agreement.
2.3 BHP hereby agrees that Ivanhoe may reduce the amount secured by the
letter of credit described in Section 3.4(b) of the Earn-in Agreement
by an amount equal to the Second Phase Expenditure Credit BHP hereby
covenants to cooperate with Ivanhoe in effecting such reduction in an
expeditious and efficient manner.
3. BHP ROYALTY
3.1 BHP and Ivanhoe hereby acknowledge and agree that the terms and
conditions governing the calculation and payment of the BHP Royalty are
as set out in Exhibit "E".
4. SECOND PHASE EXPLORATION PROGRAM
4.1 Ivanhoe and BHP hereby acknowledge and agree that, notwithstanding
anything to the contrary in the Earn-in Agreement, the Second Phase
Exploration Program will be deemed to have been completed on the later
of the following dates:
(a) the sixtieth (60th) day following the date (the "Completion
Date") upon which Ivanhoe certifies in writing to BHP that
Ivanhoe has incurred Expenditures in respect of the Second
Phase Exploration Program equal to or greater than the
difference between US$3,000,000 and the Second Phase
Expenditure Credit; or
(b) the sixtieth (60th) day following the date upon which Ivanhoe
certifies in writing to BHP that Ivanhoe has delivered to BHP
copies of all geological reports, evaluations, information and
other technical and geological data (the "Data") obtained
pursuant to all Expenditures made on or before the Completion
Date in respect of the Second Phase Exploration Program. The
Data shall be delivered to BHP in both a paper format and one
of the following digital formats; (i) MicroSoft Word, (ii)
MicroSoft Excel, (iii) MicroSoft Access or (iv) CorelDraw.
4.2 Subject to its audit rights under Section 3.9 of the Earn-In Agreement,
BHP will, as soon as practicable following the completion of the Second
Phase Exploration Program, return to, or to the direction of, Ivanhoe
the letter of credit referred to in Section 3.4(b) of the Earn-in
Agreement.
-4-
5. ADDITION OF IVANHOE MONGOLIA AS A PARTY
5.1 At the request of Ivanhoe Canada, BHP agrees to assign the Original and
Supplemental Licenses to Ivanhoe Mongolia, and Ivanhoe Mongolia hereby
agrees to be jointly and severally liable with Ivanhoe Canada for all
obligations of Ivanhoe Canada pursuant to the Earn-In Agreement, as
herein amended, and such assignment.
6. RATIFICATION
6.1 Except as specifically amended and modified by this Amendment, the
Earn-in Agreement remains in full force and effect.
IN WITNESS WHEREOF the parties have executed this Amendment effective as of the
date first above written.
IVANHOE MINES LTD.
Per: "Daniel Kunz"
____________________________
Name
President
Title
IVANHOE MINES MONGOLIA INC., LTD.
Per: "Daniel Kunz"
____________________________
Name
Director
Title
BHP MINERALS INTERNATIONAL EXPLORATION INC.
Per: "Earl K. Moore"
_____________________________
Name
Vice President
Title
EXHIBIT "A"
ORIGINAL LICENSE
SUPPLEMENTAL LICENSES
IVANHOE LICENSE
EXHIBIT "B"
VEHICLES AND FIELD EQUIPMENT
EXHIBIT "C"
DESCRIPTION OF COORDINATES OF LICENSED AREA ON THE EFFECTIVE
DATE OF THE AMENDMENT
PAGE 1
BOUNDARIES OF THE 66X TENEMENT OYU TOLGOI
- ---------------------------------------------------
Longitude Latitude
- ---------------------------------------------------
106 degrees 47' 30" 42 degrees 58' 30"
- ---------------------------------------------------
106 degrees 55' 00" 43 degrees 03' 00"
- ---------------------------------------------------
106 degrees 47' 30" 43 degrees 03' 00"
- ---------------------------------------------------
106 degrees 55' 00" 42 degrees 58' 30"
- ---------------------------------------------------
BOUNDARIES OF THE 66-1X TENEMENT MANAKHT
- ---------------------------------------------------
Longitude Latitude
- ---------------------------------------------------
106 degrees 38' 00" 42 degrees 54' 00"
- ---------------------------------------------------
106 degrees 44' 00" 42 degrees 57' 00"
- ---------------------------------------------------
106 degrees 38' 00" 42 degrees 57' 00"
- ---------------------------------------------------
106 degrees 44' 00" 42 degrees 54' 00"
- ---------------------------------------------------
BOUNDARIES OF THE 66-2X TENEMENT HOH HAD
- ---------------------------------------------------
Longitude Latitude
- ---------------------------------------------------
106 degrees 51' 30" 42 degrees 55' 30"
- ---------------------------------------------------
106 degrees 55' 00" 42 degrees 57' 30"
- ---------------------------------------------------
106 degrees 51' 30" 42 degrees 57' 30"
- ---------------------------------------------------
106 degrees 55' 00" 42 degrees 55' 30"
- ---------------------------------------------------
BOUNDARIES OF THE 66-3X TENEMENT ULAAN UUL
- -------------------------------------------------
Longitude Latitude
- -------------------------------------------------
106 degrees 30' 00" 42 degrees 54' 00"
- -------------------------------------------------
106 degrees 30' 00" 43 degrees 00' 00"
- -------------------------------------------------
106 degrees 36' 00" 43 degrees 00' 00"
- -------------------------------------------------
106 degrees 36' 00" 42 degrees 54' 00"
- -------------------------------------------------
-8-
EXHIBIT "C"
PAGE 2
BOUNDARIES OF THE 3677X TENEMENT LYING WITHIN THE ORIGINAL TENEMENT 66X
(ORIGINAL OYU TOLGOI LICENSED AREA)
- -----------------------------------------------
LONGITUDE LATITUDE
- -----------------------------------------------
106 degrees 30' 00" 42 degrees 54' 00"
- -----------------------------------------------
106 degrees 36' 00" 42 degrees 54' 00"
106 degrees 36' 00" 42 degrees 55' 30"
- -----------------------------------------------
106 degrees 38' 00" 42 degrees 55' 30"
- -----------------------------------------------
106 degrees 38' 00" 42 degrees 54' 00"
- -----------------------------------------------
106 degrees 44' 00" 42 degrees 54' 00"
- -----------------------------------------------
106 degrees 44' 00" 42 degrees 55' 30"
- -----------------------------------------------
107 degrees 00' 00" 42 degrees 55' 30"
- -----------------------------------------------
107 degrees 00' 00" 42 degrees 47' 00"
- -----------------------------------------------
106 degrees 30' 00" 42 degrees 47' 00"
- -----------------------------------------------
106 degrees 30' 00" 42 degrees 54' 00"
- -----------------------------------------------
NOTE - Latitudes and longitudes quoted above are based on the "Krasovsky 1942"
ellipsoid, and reflect the values on Mongolian mineral tenement
licenses.
EXHIBIT "D"
COORDINATES OF CENTRAL
OYU CHALCOCITE RESOURCE AREA
- ------------------------------
UTM ZONE 48 UTM ZONE 48
- ------------------------------
650526E 4763595N
- ------------------------------
651626E 4763595N
- ------------------------------
651626E 4764395N
- ------------------------------
650526E 4764395N
- ------------------------------
EXHIBIT "E'
TERMS AND CONDITIONS OF
BHP ROYALTY
All terms denoted with initial capital letters used but not defined herein shall
have the meanings ascribed to them in the Earn-in Agreement made effective as of
the 5th day of May, 2000, as amended effective the 13th day of March, 2002.
1. INTERPRETATION
1.1 In this Exhibit:
(a) "ANNUAL REPORT" means a report certified by Ivanhoe's chief
accounting or financial officer showing, in respect of the
Operating Year to which the report relates, all Revenues,
Costs, BHP Royalty payments, year-end adjustments affecting
the BHP Royalty paid or to be paid and all other matters taken
into account in the calculation of the BHP Royalty;
(b) "COSTS" means all smelting, refining, marketing and
transportation costs incurred in respect of Products
including, without duplication,
(i) smelting costs, treatment charges and penalties
including, without limitation, metal losses,
penalties for impurities and charges for refining,
selling and transportation from smelter to refinery
and from refinery to market,
(ii) costs of transporting Products from the Property to a
concentrator or other place of treatment,
(iii) costs of transporting Products from the concentrator
to a smelter or other place of treatment.
(c) "NET SMELTER RETURNS" means the amount by which Revenues
exceed Costs;
(d) "OPERATING QUARTER" means a fiscal quarter of an Operating
Year;
(e) "OPERATING YEAR" means a fiscal year of Ivanhoe commencing on
January 1 and ending on December 31;
(f) "PRODUCTS" means all ores, minerals, mineral concentrates,
metals, chemical by-products and refinements or partial
refinements thereof produced from the Property;
(g) "PROPERTY" means the location or locations within the Licensed
Area from which Products are extracted;
(h) "REVENUES" means the gross amount of money received from the
sale of Products (which for greater certainty shall include
any insurance proceeds received related to Products that are
lost).
1.2 All calculations and computations relating to the BHP Royalty shall be
carried out in accordance with Canadian generally accepted accounting
principles to the extent that such principles are not inconsistent with
the provisions of this Exhibit.
1.3 All Costs shall be at competitive commercial rates and if the Products
are treated at a smelter, refinery, mint or other form of processing
facility owned, operated or controlled by Ivanhoe or an affiliate of
Ivanhoe, all Costs shall be equivalent to the prevailing competitive
commercial rates charged by similar smelters, refineries, mints or
other processing facilities, as the case may be, in arm's length
transactions for the treatment of like quantities and quality of
Products.
1.4 The determination of Net Smelter Returns hereunder will take into
account all Products and is based on the premise that such Products
will be developed solely on the Property. No Products shall be mixed,
blended or commingled with ores, minerals, mineral concentrates,
metals, chemical by-products, refinements or partial refinements from
other mining properties ("Other Products") until such time as BHP and
Ivanhoe have agreed in writing, in accordance with recognized industry
standards, to the specific procedures and controls, including but not
limited to assaying and umpiring methods, to be used to calculate the
contents of the Products and the Other Products prior to any mixing,
blending or commingling of the Products with Other Products.
2. BHP ROYALTY
2.1 Ivanhoe shall pay to BHP the BHP Royalty, calculated and payable in
accordance with this Exhibit.
3. CALCULATION AND PAYMENT OF BHP ROYALTY
3.1 Within 30 days after the end of each Operating Quarter, Ivanhoe will:
(a) calculate Net Smelter Returns in respect of the Operating
Quarter;
(b) calculate the amount payable to BHP on account of the BHP
Royalty based upon Net Smelter Returns for the Operating
Quarter; and
(c) pay to BHP the amount payable on account of the BHP Royalty
for that Operating Quarter.
Each payment will be accompanied by a statement showing, in reasonable
detail, the calculation of Net Smelter Returns and will be subject to
adjustment based upon any documented changes to the amounts used in
calculating the BHP Royalty in the statement for the previous Operating
Quarter and in the Annual Report for the Operating Year.
3.2 Within 90 days after the end of each Operating Year Ivanhoe will
calculate cumulative Net Smelter Returns in respect of the entire
Operating Year and will deliver to BHP an Annual Report in respect of
the Operating Year. Any adjustments to the amounts paid or payable to
BHP on account of the BHP Royalty in respect of the Operating Year then
ended will be credited to or deducted from the amount payable in
respect of the first Operating Quarter of the following Operating Year.
3.3 BHP will have 90 days from the date it receives the Annual Report to
question the accuracy thereof by notice in writing to Ivanhoe, failing
which the Annual Report will be deemed to be final and correct.
4. AUDITS
4.1 If any quarterly statement or the Annual Report is questioned by BHP,
and if such questions cannot be resolved between BHP and Ivanhoe, BHP
will have 9 months from the date it receives the quarterly statement or
Annual Report in question to have that statement or Annual Report
audited.
4.2 The audit will be final and determinative of the calculation of the BHP
Royalty for the period covered by such audit and will be binding on BHP
and Ivanhoe. Any overpayment of the BHP Royalty will be deducted from
future payments and any underpayment will be paid to BHP forthwith.
4.3 The costs of the audit will be borne by BHP if the quarterly statement
or Annual Report overstated the BHP Royalty payable or understated the
BHP Royalty payable by not more than 2% and will be borne by Ivanhoe if
the quarterly statement or Annual Report understated the BHP Royalty
payable by greater than 2%.
4.4 BHP will be entitled to examine, on reasonable notice and during normal
business hours, such books and records as are reasonably necessary to
verify the payment to BHP of the BHP Royalty from time to time,
provided however that such examination shall not unreasonably interfere
with or hinder Ivanhoe's operations.
5. DISPUTES
5.1 Any matter in dispute under this Exhibit will be determined by a single
arbitrator to be appointed by mutual agreement of Ivanhoe and BHP,
either of whom may refer any matter in dispute under this Exhibit to
arbitration by written notice to the other party and, within 30 days
after receipt of such notice, the parties will agree on the appointment
of an arbitrator, who shall be capable of commencing the arbitration
within 21 days of his appointment. No person will be appointed as an
arbitrator hereunder unless such person agrees in writing to act. If
the parties cannot agree on a single arbitrator, either party may
request the Supreme Court of British Columbia to appoint a single
arbitrator in accordance with the Commercial Arbitration Act of the
Province of British Columbia (the "Act").
5.2 Except as otherwise hereafter specifically provided, any arbitration
hereunder will be conducted in accordance with the Act. The arbitrator
will fix a time and place in Vancouver, British Columbia for the
purpose of hearing the evidence and representations of the parties, all
of which will be in camera, and he will preside over the arbitration
and determine all questions of procedure not provided for under the Act
or this Exhibit. After hearing any evidence and representations that
the parties may submit, the arbitrator will make an award and reduce
the same to writing and deliver one copy hereof to each of the parties.
The award will be kept confidential by the parties except as disclosure
is required by applicable securities laws. The decision of the
arbitrator will be made within 45 days after his appointment, subject
to any reasonable delay due to unforeseen circumstances. The expense of
the arbitration will be paid as specified in the award. The parties
agree that the award of the single arbitrator shall be final and
finding upon each of them and will not be subject to appeal.
EXHIBIT "F"
LOCATION MAP OF THE
OYU TOLGOI PROJECT AREAS
[OYU TOLGOI PROJECT MAP]