EXHIBIT 99.5
No securities regulatory authority has expressed an opinion about these
securities and it is an offence to claim otherwise.
These securities have not been, and will not be, registered under the United
States Securities Act of 1933, as amended (the "U.S. Securities Act") or any
state securities laws. Accordingly, the securities may not be offered or sold in
the United States or to U.S. persons unless registered under the U.S. Securities
Act and applicable state securities laws or an exemption from such registration
is available. This short form prospectus does not constitute an offer to sell or
a solicitation of an offer to buy any of the securities offered hereby within
the United States. See "Private Placement and Plan of Distribution".
INFORMATION HAS BEEN INCORPORATED BY REFERENCE IN THIS SHORT FORM PROSPECTUS
FROM DOCUMENTS FILED WITH SECURITIES REGULATORY AUTHORITIES IN CANADA. Copies of
the documents incorporated herein by reference may be obtained on request
without charge from the Secretary of Ivanhoe Mines Ltd. at Suite 654, 999 Canada
Place, Vancouver, B.C. V6C 3E1 (telephone (604) 688-5755).
Short Form Prospectus
New Issue
June 6, 2002
IVANHOE MINES LTD.
$8,287,500
2,550,000 COMMON SHARES TO BE ISSUED UPON
THE EXERCISE OF 2,550,000 SPECIAL WARRANTS
This short form prospectus qualifies for distribution 2,550,000 common shares
("Common Shares") of Ivanhoe Mines Ltd. ("Ivanhoe" or the "Corporation") to be
issued upon the exercise of 2,550,000 special warrants (the "Special Warrants")
of Ivanhoe (the "Offering"). The Special Warrants were issued on April 24, 2002
pursuant to a subscription agreement (the "Subscription Agreement") between
Ivanhoe and an institutional investor (the "Purchaser"). The price of the
Special Warrants was determined by negotiation between Ivanhoe and the
Purchaser. The Special Warrants were issued at a price of $3.25 per Special
Warrant. Ivanhoe sold the Special Warrants directly to the Purchaser without the
use of an agent or underwriter pursuant to registration and prospectus
exemptions under applicable securities legislation. See "Private Placement and
Plan of Distribution". No underwriter has been involved in the preparation of,
or has reviewed the contents of, this short form prospectus.
Subject to adjustment, each Special Warrant entitles the holder thereof to
acquire one Common Share, at no additional cost, at any time until 5:00 p.m.
(Vancouver time) on the fifth business day after the earlier of (i) the date of
issuance of a receipt for this prospectus by the British Columbia Securities
Commission; and (ii) August 24, 2002 (the "Expiry Time"). Any Special Warrants
not exercised prior to the Expiry Time will be deemed to have been exercised
immediately prior to the Expiry Time without any further action on the part of
the holder.
Other than a fee paid to obtain a waiver of a contractual commitment not to
issue additional equity securities for a period of time, Ivanhoe paid no fees or
commissions in connection with the Offering, nor will any fees or commissions be
payable by Ivanhoe in connection with the issuance of the Common Shares on the
exercise of the Special Warrants. The expenses of the Offering, including the
cost of preparation of this prospectus, will be borne by Ivanhoe. See "Private
Placement and Plan of Distribution".
The Purchaser has represented and warranted in the Subscription Agreement that
it is acquiring the Special Warrants and the underlying Common Shares to be held
for investment only and not with a view to immediate resale or distribution.
Ivanhoe has no reason to believe that the Purchaser has any different investment
intent in respect of the Special Warrants and the underlying Common Shares than
that represented by the Purchaser.
The Common Shares are traded on the Toronto Stock Exchange (the "TSX") and the
Australian Stock Exchange under the symbol "IVN". The price of the Common Shares
as reported by the TSX at the close of business on June 5, 2002 was $3.43 per
Common Share.
2
TABLE OF CONTENTS
PAGE
DOCUMENTS INCORPORATED BY REFERENCE............................................. 3
NAME AND INCORPORATION.......................................................... 4
SUMMARY DESCRIPTION OF BUSINESS................................................. 6
DESCRIPTION OF SHARE CAPITAL.................................................... 6
PRIVATE PLACEMENT AND PLAN OF DISTRIBUTION...................................... 6
USE OF PROCEEDS................................................................. 13
RISK FACTORS.................................................................... 14
AUDITORS, TRANSFER AGENT AND REGISTRAR.......................................... 14
LEGAL MATTERS................................................................... 14
PURCHASERS' STATUTORY RIGHTS.................................................... 14
CONTRACTUAL RIGHTS OF ACTION FOR RESCISSION..................................... 14
CERTIFICATE OF IVANHOE MINES LTD................................................ 15
DOCUMENTS INCORPORATED BY REFERENCE
The following documents of Ivanhoe, filed with the various securities
commissions or similar authorities in all of the provinces and territories of
Canada, are specifically incorporated by reference into, and form an integral
part of, this short form prospectus:
1. Revised Renewal Annual Information Form of Ivanhoe dated May 16, 2002
including the management's discussion and analysis of financial
condition and results of operations for the financial year ended
December 31, 2001 incorporated therein (the "AIF");
2. Comparative consolidated financial statements of Ivanhoe for the years
ended December 31, 2001 and 2000, together with the notes thereto and
the auditors' report thereon;
3. Comparative unaudited consolidated interim financial statements of
Ivanhoe for the three month periods ended March 31, 2002 and 2001,
together with management's discussion and analysis of financial
condition and results of operation for such periods;
4. Management Information Circular dated May 10, 2002 prepared in
connection with Ivanhoe's annual meeting of shareholders to be held on
June 25, 2002 (excluding the report on executive compensation, the
performance graph and the statement of corporate governance practices);
5. Material Change Report dated January 7, 2002 respecting the conversion
of loans owed by Ivanhoe's subsidiary, ABM Mining Limited, to entities
controlled by Robert M. Friedland, the Chairman of Ivanhoe, into Common
Shares of Ivanhoe;
3
6. Material Change Report dated February 12, 2002 respecting Ivanhoe's
completion of its earn-in obligations to acquire a 100% interest in the
Oyu Tolgoi exploration project in Mongolia;
7. Material Change Report dated March 21, 2002 respecting the completion
of a resource estimate at the Southwest Oyu zone of the Oyu Tolgoi
exploration project; and
8. Material Change Report dated March 22, 2002 respecting an underwritten
offering of 17,450,000 common shares of the Corporation.
Any documents of the type referred to in the preceding paragraph, interim
financial statements and any material change reports (excluding confidential
reports) filed by Ivanhoe with the British Columbia Securities Commission
subsequent to the date of this short form prospectus and prior to the
termination of the Offering shall be deemed to be incorporated by reference in
this short form prospectus.
ANY STATEMENT CONTAINED IN A DOCUMENT INCORPORATED OR DEEMED TO BE INCORPORATED
BY REFERENCE HEREIN SHALL BE DEEMED TO BE MODIFIED OR SUPERSEDED FOR PURPOSES OF
THIS SHORT FORM PROSPECTUS, TO THE EXTENT THAT A STATEMENT CONTAINED HEREIN OR
IN ANY SUBSEQUENTLY FILED DOCUMENT THAT ALSO IS OR IS DEEMED TO BE INCORPORATED
BY REFERENCE HEREIN MODIFIES OR REPLACES SUCH STATEMENT. THE MODIFYING OR
SUPERSEDING STATEMENT NEED NOT STATE THAT IT HAS MODIFIED OR SUPERSEDED A PRIOR
STATEMENT OR INCLUDE ANY OTHER INFORMATION SET FORTH IN THE DOCUMENT THAT IT
MODIFIES OR SUPERSEDES. THE MAKING OF A MODIFYING OR SUPERSEDING STATEMENT SHALL
NOT BE DEEMED AN ADMISSION FOR ANY PURPOSES THAT THE MODIFIED OR SUPERSEDED
STATEMENT WHEN MADE, CONSTITUTED A MISREPRESENTATION, AN UNTRUE STATEMENT OF A
MATERIAL FACT OR AN OMISSION TO STATE A MATERIAL FACT THAT IS REQUIRED TO BE
STATED OR THAT IS NECESSARY TO MAKE A STATEMENT NOT MISLEADING IN LIGHT OF THE
CIRCUMSTANCES IN WHICH IT WAS MADE. ANY STATEMENT SO MODIFIED OR SUPERSEDED
SHALL NOT BE DEEMED IN ITS UNMODIFIED OR SUPERSEDED FORM TO CONSTITUTE A PART OF
THIS SHORT FORM PROSPECTUS.
INFORMATION HAS BEEN INCORPORATED BY REFERENCE IN THIS SHORT FORM PROSPECTUS
FROM DOCUMENTS FILED WITH SECURITIES COMMISSIONS OR SIMILAR AUTHORITIES IN
CANADA. Copies of the documents incorporated herein by reference may be obtained
on request without charge from the Secretary of Ivanhoe, Suite 654, 999 Canada
Place, Vancouver, B.C. V6C 3E1 (telephone (604) 688-5755).
NAME AND INCORPORATION
Ivanhoe was incorporated under the Company Act (British Columbia) on January 25,
1994 under the name 463212 B.C. Ltd. In February 1994, Ivanhoe changed its name
to Indochina Goldfields Ltd. In March 1994, Ivanhoe 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, Ivanhoe was continued under the Business Corporations Act
(Yukon). In July 1997, Ivanhoe 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, Ivanhoe changed its name to Ivanhoe
Mines Ltd.
Ivanhoe's North American headquarters are located at Suite 654, 999 Canada
Place, Vancouver, B.C. V6C 3E1. Ivanhoe's Asian headquarters are located at 37 -
02 Millenia Tower, 1 Temasek Avenue, Singapore 039192. The Corporation's
registered office is located at Suite 300, 204 Black Street, Whitehorse, Yukon,
Canada, Y1A 2M9.
4
SUBSIDIARIES AND MANAGEMENT STRUCTURE
The corporate structure of Ivanhoe, its material subsidiaries, the percentage
ownership in subsidiaries which are not wholly-owned by Ivanhoe and the
jurisdiction of incorporation of such corporations as at December 31, 2001 are
set out in the following chart.
5
[IVANHOE MINES LTD.-CORPORATE STRUCTURE FLOW CHART]
Note: All subsidiaries are wholly-owned unless otherwise indicated "BVI"
means British Virgin Islands
6
SUMMARY
DESCRIPTION OF BUSINESS
GENERAL
Ivanhoe is an international mineral exploration and development company. Ivanhoe
holds interests in mineral resource properties in Mongolia, Myanmar, Australia,
Kazakhstan, Norway, South Korea and Vietnam. For the purposes of Form 44-101F3
under National Instrument 44-101, the Oyu Tolgoi gold and copper exploration
project in Mongolia, the Monywa copper project in Myanmar and the Savage River
iron ore mine in Tasmania, Australia have been identified as the mineral
resource properties material to Ivanhoe. Ivanhoe's interests in Kazakhstan,
Mongolia (other than the Oyu Tolgoi project), Myanmar (other than the Monywa
copper project), Norway, South Korea and Vietnam are not considered material for
the purposes of Form 44-101F3 under National Instrument 44-101. For a
description of the properties, see "Item 3 - General Development of the
Business" and "Item 4 - Narrative Description of Business" on pages 9 through 47
of Ivanhoe's AIF, which is incorporated by reference in this short form
prospectus.
RECENT DEVELOPMENTS
OYU TOLGOI GOLD AND COPPER EXPLORATION PROJECT
Charles Forster, P.Geo., an employee of Ivanhoe and a qualified person as
defined by National Instrument 43-101, has supervised the preparation of all of
the foregoing scientific and technical information except the Southwest Oyu
Resource Estimate. All disclosure of a scientific or technical nature in respect
of the Southwest Oyu Resource Estimate has been summarized from a June 5, 2002
addendum (the "Addendum") to a January 11, 2002 technical report (the "Technical
Report") of Roscoe Postle Associates Inc. ("RPA"), prepared by Gildar J.
Arseneau, Ph.D., P.Geo, of RPA. Mr. Arseneau is an independent qualified person
as defined by National Instrument 43-101.
Central Oyu Zone - Recent Drill Results
On May 21, 2002 the Corporation announced that a series of new holes drilled at
the Central Zone of the Oyu Tolgoi project, approximately 1,000 metres north of
the Southwest Discovery Zone, encountered intrusive and volcanic-hosted
hypogene, gold-rich, chalcopyrite mineralization similar to that in the
Southwest Discovery Zone, adjacent to and beneath a thick blanket of strong,
secondary chalcocite and covellite mineralization.
Holes OTD196, OTD202 and OTD207 are step-out holes that extend the high-grade
gold and copper mineralization previously encountered in OTD187, which
intersected 102 metres grading 1.40 g/t gold and 0.84% copper in basaltic
volcanic rocks, at a down-hole depth of between 334 to 436 metres. Closer to
surface, Hole 187 also intersected 138 metres of 0.42 g/t gold and 0.57% copper,
from a down-hole depth of 90 to 228 metres.
Of the new holes:
- - OTD202 intersected 136 metres grading 0.58 g/t gold and 0.89% copper at a
down-hole depth of between 280 metres to 416 metres, including 44 metres
grading 1.09 g/t gold and 1.22% copper in primary chalcopyrite
mineralization. The upper part of the hole contained 82 metres grading 0.05
g/t gold and 0.86% copper in secondary mineralization.
- - OTD207 encountered 68 metres grading 0.15 g/t gold and 2.15% copper at a
down-hole depth of between 44 metres and 112 metres in secondary enrichment
blanket, as well as intersecting 144 metres grading 0.66 g/t gold and 0.79%
copper in primary mineralization beginning at a down-hole depth of 238
metres.
7
- - OTD196 intersected 26 metres grading 0.25g/t gold and 2.29% copper at a
down-hole depth of 48 metres before encountering 156 metres grading 0.43
g/t gold and 0.84% copper starting at a down-hole depth of 294 metres.
The mineralized intercepts are from inclined holes; the true vertical depth from
the surface to the currently defined primary gold/copper mineralization is
shallower, ranging from approximately 125 metres to 250 metres. Potential exists
to project this style of mineralization closer to the surface based on the
current geologic interpretation.
These new holes are considered important to the overall project because they
identify a near-surface, blanket-like, enriched zone of secondary copper
mineralization potentially amenable to simple flotation concentration or heap
leaching and an underlying gold/copper system of the same style and character as
the system at the nearby Southwest Discovery Zone.
The Central Zone drilling is designed to test a target, some 800 metres by 600
metres, that was defined by the outline of the IP anomaly. Holes within the
target area will be spaced at approximately 100-metre intervals. As the current
program progresses, deeper drilling will test for an increase in the
gold-to-copper ratios, an overall increase in grade with depth, as was found at
the Southwest Discovery Zone, and evidence that the two systems could merge at
depth into a parent intrusive.
Recent drilling also indicates that the mineralization appears to have been
down-dropped on the southeastern flank of the Central Zone, where the IP survey
projects the zone below the shallow, reverse-circulation (RC) holes previously
drilled in the area -- suggesting that additional primary mineralization also
could exist at depth in this location. This concept is supported by holes OTD212
and OTD215, located approximately mid-way between the Central and Southwest
Discovery zones. Both holes have encountered primary copper mineralization
beneath a thin sequence of gravels adjacent to a projected extension of a
northeast-trending structure that has been encountered in deep drilling in the
Southwest Discovery Zone. This structural zone appears to have some influence on
the distribution of higher grade gold values encountered in that area.
Summary results from recent drilling are as follows:
FINAL DEPTH INTERVAL GOLD COPPER
HOLE (METRES) FROM TO (METRES) (G/T) (%)
- -----------------------------------------------------------------------------------------------------
OTD187 532.6 0 68 68 0.07 0.13
- -----------------------------------------------------------------------------------------------------
Az 180
Dip -60 68 90 22 0.31 0.68
- -----------------------------------------------------------------------------------------------------
90 228 138 0.42 0.57
- -----------------------------------------------------------------------------------------------------
228 268 40 0.11 0.37
- -----------------------------------------------------------------------------------------------------
334 436 102 1.40 0.84
- -----------------------------------------------------------------------------------------------------
436 448 12 0.25 0.23
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
OTD193 576 14 22 8 0.10 0.77
- -----------------------------------------------------------------------------------------------------
8
FINAL DEPTH INTERVAL GOLD COPPER
HOLE (METRES) FROM TO (METRES) (G/T) (%)
- -----------------------------------------------------------------------------------------------------
Az 180
Dip -60 46 90 44 0.09 0.73
- -----------------------------------------------------------------------------------------------------
90 208 118 0.07 1.15
- -----------------------------------------------------------------------------------------------------
124 208 84 0.07 1.43
- -----------------------------------------------------------------------------------------------------
208 342 134 0.10 0.42
- -----------------------------------------------------------------------------------------------------
342 402 60 0.05 0.17
- -----------------------------------------------------------------------------------------------------
402 576 174 0.03 0.13
- -----------------------------------------------------------------------------------------------------
OTD194 481 56 88 32 0.51 0.55
- -----------------------------------------------------------------------------------------------------
Az 180
Dip -60 228 240 12 0.28 0.35
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
OTD196 569.4 48 74 26 0.25 2.29
- -----------------------------------------------------------------------------------------------------
Az 180
Dip -60 74 142 68 0.03 0.53
- -----------------------------------------------------------------------------------------------------
142 194 52 0.16 0.86
- -----------------------------------------------------------------------------------------------------
194 258 64 0.04 0.29
- -----------------------------------------------------------------------------------------------------
258 294 36 0.06 0.07
- -----------------------------------------------------------------------------------------------------
294 412 118 0.47 0.95
- -----------------------------------------------------------------------------------------------------
424 450 26 0.47 0.70
- -----------------------------------------------------------------------------------------------------
294 450 156 0.43 0.84
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
OTD205 460.5 10 46 36 0.03 0.90
- -----------------------------------------------------------------------------------------------------
Az 360
Dip -60
- -----------------------------------------------------------------------------------------------------
9
FINAL DEPTH INTERVAL GOLD COPPER
HOLE (METRES) FROM TO (METRES) (G/T) (%)
- -----------------------------------------------------------------------------------------------------
OTD207 599.5 44 112 68 0.15 2.15
- -----------------------------------------------------------------------------------------------------
Az 180
Dip -60 112 160 48 0.04 0.43
- -----------------------------------------------------------------------------------------------------
238 382 144 0.66 0.79
- -----------------------------------------------------------------------------------------------------
478 550 72 0.23 0.13
- -----------------------------------------------------------------------------------------------------
Updated Southwest Oyu Resource Estimate
On May 31, 2002, the Corporation announced that AMEC E & C Services Ltd.
("AMEC") had completed an updated inferred resource estimate of the Southwest
Oyu zone based on six new drill holes. RPA reviewed and verified the resource
estimate in the Addendum. The Addendum replaces the disclosure respecting the
Southwest Oyu resource estimate in both the Technical Report and in RPA's March,
2002 addendum to the Technical Report.
In the Addendum, RPA reported an inferred mineral resource estimate to a depth
of 600 metres in the Southwest Oyu zone as follows:
CUTOFF GRADE
COPPER EQUIVALENT (1) (%) TONNES CU (%) AU (G/T)
0.70 148,800,000 0.66 1.10
0.60 252,400,000 0.55 0.83
0.50 392,600,000 0.48 0.66
0.40 552,800,000 0.42 0.56
0.30 684,100,000 0.38 0.50
0.20 757,300,000 0.36 0.46
Note (1) Based on US$300 per ounce gold and US$0.80 per pound copper at
100% metal recovery
RPA also reported an inferred mineral resource estimate below 600 metres in the
Southwest Oyu zone as follows:
CUTOFF GRADE
COPPER EQUIVALENT (1) (%) TONNES CU (%) AU (G/T)
2.0 4,000,000 0.80 2.60
1.8 8,000,000 0.76 2.40
1.6 13,000,000 0.72 2.20
1.4 17,000,000 0.68 2.10
1.2 21,000,000 0.65 1.90
1.0 26,000,000 0.61 1.80
Note (1) Based on US$300 per ounce gold and US$0.80 per pound copper at
100% metal recovery
10
RPA believes that additional drilling and evaluation is required before the
mineralization below 600 metres can be classified as a mineral resource at
cutoff grades of less than 1% copper equivalent.
The revised mineral resource estimate is based on the same assumptions,
parameters and methods as that disclosed in the description of the Southwest Oyu
Resource Estimate in the AIF except that the drill hole database now consists of
37 diamond drill holes totalling 21,050 metres.
Southwest Oyu Zone - Recent Drill Results
Ivanhoe has recently completed several additional drill holes at Southwest Oyu
only one of which (OTD 208) was not included in RPA's inferred mineral resource
estimate. Hole OTD200, drilled to a depth of 1,043 metres on the flank of the
Southwest Oyu discovery zone, intersected 360 metres of gold and copper
mineralization averaging 1.26 g/t gold and 0.43% copper between a depth of 642
and 1002 metres. OTD197, drilled 225 metres south of the surface projection of
the high grade intercept of OTD200, intersected 770 metres grading 0.41g/t gold
and 0.32% copper starting at 38 metres. Both OTD197 and OTD200 follow the
southwesterly trend of a deep IP chargeability anomaly. Finally, OTD195
intersected 678 metres grading 0.37 g/t gold and 0.25% copper between 42 and 720
metres.
Summary results from recent drilling at Southwest Oyu are as follows:
FINAL DEPTH INTERVAL GOLD COPPER
HOLE (METRES) FROM TO (METRES) (G/T) (%)
- -----------------------------------------------------------------------------------------------------
OTD195 786.4 42 720 678 0.37 0.25
- -----------------------------------------------------------------------------------------------------
OTD197 824 38 810 772 0.41 0.32
- -----------------------------------------------------------------------------------------------------
262 338 76 0.69 0.59
- -----------------------------------------------------------------------------------------------------
OTD200 656.2 642 1002 360 1.26 0.43
- -----------------------------------------------------------------------------------------------------
642 838 196 1.40 0.51
- -----------------------------------------------------------------------------------------------------
908 1002 94 1.46 0.46
- -----------------------------------------------------------------------------------------------------
OTD203 754.5 152 184 32 0.84 0.96
- -----------------------------------------------------------------------------------------------------
228 310 82 0.12 0.42
- -----------------------------------------------------------------------------------------------------
558 610 52 0.30 0.47
- -----------------------------------------------------------------------------------------------------
OTD204 647.8 46 568 522 0.42 0.29
- -----------------------------------------------------------------------------------------------------
226 346 120 0.46 0.45
- -----------------------------------------------------------------------------------------------------
500 568 68 0.76 0.25
- -----------------------------------------------------------------------------------------------------
OTD208 604 244 362 118 0.16 0.44
- -----------------------------------------------------------------------------------------------------
11
Based on the most recent drill results, Ivanhoe believes that gold and copper
mineralization continues to thicken at depth and plunge in a southwesterly
direction. The deep expression of the Southwest Oyu Discovery Zone has now been
extended to at least 400 metres on strike and more than 900 metres below the
surface. Ivanhoe's current drilling program is designed to test the relationship
between IP signatures from Ivanhoe's IP surveys and geological projections of
the high-grade core of the discovery zone. The next phase of drilling will
employ drill rigs with directional drilling capacity, which will enable Ivanhoe
to target down-plunge extensions of the high-grade zone below the intersections
reported in OTD185, 190 and 200. Ivanhoe has contracted with a subsidiary of
Major Drilling of Canada to supply an additional seven drill rigs at Oyu Tolgoi,
bringing the number of working rigs on the property to 14.
DESCRIPTION OF SHARE CAPITAL
The authorized share capital of Ivanhoe consists of an unlimited number of
Common Shares without par value and an unlimited number of preferred shares
without par value ("Preferred Shares"). As of the date of this prospectus, there
are 199,161,572 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 Ivanhoe's articles of continuance and in the Yukon Business
Corporations Act, and its regulations, Ivanhoe's governing statute.
The holders of Common Shares are entitled to one vote per Common Share at all
meetings of shareholders, to receive dividends as and when declared by the
directors, and to receive a pro rata share of the remaining property and assets
of the Corporation in the event of liquidation, dissolution or winding up of the
Corporation. The Common Shares have no pre-emptive, redemption, purchase or
conversion rights. There are no sinking fund provisions in relation to the
Common Shares and they are not liable to further calls or to assessment by the
Corporation. The Yukon Business Corporations Act 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.
The Preferred Shares as a class rank senior to the Common Shares as to the
payment of dividends and the distribution of property and assets on the
liquidation, dissolution or winding-up of the Corporation. Holders of Preferred
Shares are not entitled to any voting rights as a class except as may be
provided under the Yukon Business Corporations Act and except that the directors
of the Corporation are empowered to attach to any series voting rights relating
to the election of directors on a default in payment of dividends.
The Preferred Shares are issuable in one or more series, each consisting of such
number of Preferred Shares as may be fixed by the Corporation's directors. The
Corporation'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 the Corporation 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.
12
PRIVATE PLACEMENT AND PLAN OF DISTRIBUTION
The Special Warrants were issued pursuant to the Subscription Agreement on April
24, 2002 at a price of $3.25 per Special Warrant. The price of the Special
Warrants was determined by negotiation between Ivanhoe and the Purchaser.
Ivanhoe sold the Special Warrants directly to the Purchaser without use of an
agent or underwriter pursuant to registration and prospectus exemptions under
applicable securities legislation and, except as disclosed below, paid no fees
or commissions in connection therewith. No fees or commissions will be payable
by Ivanhoe in connection with the issuance of the Common Shares on the exercise
of the Special Warrants. The expenses of the Offering, including the cost of
preparation of this prospectus, will be borne by Ivanhoe.
On April 3, 2002, the Corporation issued 17,450,000 Common Shares to an
underwriting group consisting of Griffiths McBurney & Partners, HSBC Securities
(Canada) Inc. and Haywood Securities Inc. (collectively, the "Underwriters").
Under the terms of the underwriting agreement between the Corporation and the
Underwriters, the Corporation agreed not to issue any additional equity
securities, except in certain limited circumstances, until July 3, 2002 without
the prior written consent of the Underwriters. In order to obtain the
Underwriters' consent to carry out this Offering, the Corporation agreed to pay
the Underwriters a waiver fee equal to 1% of the gross proceeds of this
Offering.
Each Special Warrant allows the holder to acquire, without any additional
payment, one Common Share.
The Special Warrants may be exchanged or exercised at any time after their
issuance, subject to the terms and conditions of the special warrant indenture
dated April 23, 2002 (the "Special Warrant Indenture") between Ivanhoe and CIBC
Mellon Trust Company, and will be deemed to be exercised on the fifth business
day following the earlier of: (i) the date on which a receipt has been issued
for a final prospectus qualifying the issuance of the Common Shares issuable
upon exercise of the Special Warrants by the British Columbia Securities
Commission; and (ii) August 24, 2002.
The Purchaser has represented and warranted in the Subscription Agreement that
it is acquiring the Special Warrants and the underlying Common Shares to be held
for investment only and not with a view to immediate resale or distribution.
Ivanhoe has no reason to believe that the Purchaser has any different investment
intent in respect of the Special Warrants and the underlying Common Shares than
that represented in the Subscription Agreement.
This prospectus is being filed in British Columbia to qualify the distribution
of the Common Shares to be issued upon the exercise of the Special Warrants.
Common Shares issued to holders of the Special Warrants in any province in which
a receipt for this prospectus has not been issued may be subject to resale
restrictions under applicable securities legislation.
The TSX has approved for listing the Common Shares issuable upon the exercise of
the Special Warrants.
The Special Warrants and the Common Shares issuable upon exercise of the Special
Warrants have not been registered under the United States Securities Act of 1933
(the "U.S. Securities Act") or any state securities laws and may not be offered
or sold or otherwise transferred in the United States to any U.S. Person (as
defined in Regulation S under the U.S. Securities Act) and may not be sold in
the United States or to U.S. Persons except in transactions exempt from the
registration requirements of the U.S. Securities Act and applicable state
securities laws. Ivanhoe has no plans to register the Common Shares issuable
upon the exercise of the Special Warrants under the U.S. Securities Act.
USE OF PROCEEDS
The aggregate net proceeds received by Ivanhoe from the sale of the Special
Warrants was $8,129,625 after payment of expenses of the Offering, including
preparation of this short form prospectus, estimated to be
13
$157,875. Ivanhoe has allocated the net proceeds to working capital pending the
results of a sampling and geophysics reconnaissance program of all of the
Corporation's Mongolian properties except Oyu Tolgoi.
RISK FACTORS
Investment in securities of Ivanhoe involves a significant degree of risk and
should be considered speculative due to the nature of Ivanhoe's business and the
present stage of its development. Investors should give careful consideration to
the risk factors described in "Item 4 - Narrative Description of Business - Risk
Factors" on pages 48 through 56 of Ivanhoe's AIF, which is incorporated by
reference in this short form prospectus.
AUDITORS, TRANSFER AGENT AND REGISTRAR
The auditors of Ivanhoe are Deloitte & Touche LLP, Chartered Accountants,
Vancouver, British Columbia. The registrar and transfer agent for the Common
Shares in Canada is CIBC Mellon Trust Company at its principal offices in
Vancouver.
LEGAL MATTERS
Certain Canadian legal matters in connection with this Offering will be passed
upon by Goodmans on behalf of Ivanhoe. As at the date hereof, the partners and
associates of Goodmans, as a group, beneficially own directly or indirectly less
than one percent of the outstanding Common Shares.
PURCHASERS' STATUTORY RIGHTS
Securities legislation in British Columbia provides purchasers with the right to
withdraw from an agreement to purchase securities. This right may be exercised
within two business days after receipt or deemed receipt of a prospectus and any
amendment thereto. In British Columbia, securities legislation further provides
a purchaser with remedies for rescission or, in some jurisdictions, damages
where the prospectus and any amendment contains a misrepresentation or is not
delivered to the purchaser, provided that the remedies for rescission or damages
are exercised by the purchaser within the time limit prescribed by the
securities legislation of the purchaser's province. Purchasers should refer to
any applicable provisions of the securities legislation of the purchaser's
province for the particulars of these rights or consult with a legal adviser.
CONTRACTUAL RIGHTS OF ACTION FOR RESCISSION
In the event that a holder of a Special Warrant who acquires a Common Share upon
the exercise of the Special Warrant as provided for in this prospectus, is or
becomes entitled under applicable legislation to the remedy of rescission by
reason of this prospectus or any amendment thereto containing a
misrepresentation, the holder will be entitled to rescission not only of the
holder's exercise of their Special Warrant but also of the private placement
transaction pursuant to which the Special Warrant was initially acquired and
shall be entitled, in connection with such rescission, to a full refund of all
consideration paid on the acquisition of the Special Warrant. In the event the
holder is a permitted assignee of the interest of the original Special Warrant
subscriber, that permitted assignee shall be entitled to exercise the rights of
rescission and refund granted hereunder as if the permitted assignee was the
original subscriber. The foregoing is in addition to any other right or remedy
available to a holder of a Special Warrant under section 131 of the Securities
Act (British Columbia), or otherwise at law.
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CERTIFICATE OF IVANHOE MINES LTD.
Dated: June 6, 2002
This short form prospectus, together with the documents incorporated
herein by reference, constitutes full, true and plain disclosure of all material
facts relating to the securities being offered by this short form prospectus as
required by the securities laws of the provinces of British Columbia.
(Signed) Daniel Kunz (Signed) Pierre Masse
President Chief Financial Officer
On behalf of the Board of Directors
(Signed) R. Edward Flood (Signed) Eric V. Friedland
Director Director
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