NOTICE: The text below was created automatically and may contain errors and differences from the contract's original PDF file. Learn more hereTREASURY BILL PURCHASE AGREEMENT
THE GOVERNMENT OF MONGOLIA
IVANHOE MINES MONGOLIA INC LLC
Treasury Bill Purchase Agreement between the Government of Mongolia and
Ivanhoe Mines Mongolia Inc LLC
This Treasury Bill Purchase Agreement (“this Agreement”) is made on this 6th day of October
The Government of Mongolia, acting through its authorized representative, the Minister of
Finance (hereinafter referred to as the “Government”);
Ivanhoe Mines Mongolia Inc LLC, a company duly organized in Mongolia with the state
registration certificate of incorporation # 2657457 and foreign investor’s certificate # 00-218,
possessing mining licenses 6709A, 6708A and 6710A (hereinafter referred to as the
having regard to the following:
The Investor and the Government, and others, have entered into an Investment Agreement
(the “Investment Agreement”) on or about the date of this Agreement which memorializes
and regulates a relationship between them for the development and operation of the Oyu
The Government requires the Investor to enter into this Agreement as a condition of the
Government’s entry into the Investment Agreement.
The purpose of this Agreement is to record the terms and conditions on which the Investor
has agreed to purchase from the Government three discounted Treasury Bills with an
aggregate face value of USD $287,500,000.
Capitalized terms used in this Agreement, if not defined in this Agreement, shall have
the meanings given to them in the Investment Agreement provided that “Parties” as
used in this Agreement shall mean the Government as that term is defined in this
Agreement and the Investor (and “Party” shall mean either the Government or the
Investor, individually), and provided further that:
“Taxes” for the purposes of this Agreement shall mean the taxes listed in
Article 7 of the General Taxation Law.
“Treasury Bill" means a bill issued by the Government in respect of the First
TBill, Second TBill or Third TBill, denominated in USD and substantially in the
form set out in Schedule 1, each having a term of five (5) years from the date of
issue and in all respects ranking equally with and be payable pari passu with
other priority sovereign debt of Mongolia (and in no circumstances inconsistent
with the terms of this Agreement).
A term not defined in this Agreement and which is defined in the Investment Agreement
shall have the meaning given to it in the Investment Agreement. The rules of
interpretation contained in Chapter 16 (Definitions) of the Investment Agreement shall
apply to this Agreement, and this Agreement forms part of the Investment Agreement.
This Agreement shall enter into force at such time as the Investment Agreement shall
have been signed by all the parties thereto, and such execution shall constitute a
condition precedent to this Agreement. This Agreement shall remain in effect from the
aforesaid date of signing for so long as any amount of the Outstanding Balance
remains unpaid by the Government, provided however, that Clause 7 shall survive so
long as any taxable year of the Investor or any of its Affiliates to which any Tax may
relate shall remain open for audit or adjustment by the Government.
2. PURCHASE OF TREASURY BILLS
Subject to the terms and conditions of this Clause 2 in its entirety, the Investor shall
purchase at a discount three (3) Treasury Bills to be issued by the Government having
an aggregate face value of USD $287,500,000:
Within fourteen (14) days after the Investment Agreement has been signed by
all parties thereto, the Investor will purchase a Treasury Bill in the principal
amount of USD $115,000,000 by paying the Government USD $100,000,000
Within fourteen (14) days after the Effective Date (as defined in the Investment
Agreement), the Investor will purchase a Treasury Bill in the principal amount
of USD $57,500,000 by paying the Government USD $50,000,000 (“Second
Within fourteen (14) days after drawdown, pursuant to full project financing, of
all the funds required for construction of the open pit mine and underground
mine for the Oyu Tolgoi Deposit contemplated in the Investment Agreement
and all associated infrastructure (as contemplated by the associated feasibility
studies for the open pit mine and underground mine) or no later than 30 June
2010 if such drawdown has not occurred by 30 June 2010, the Investor will
purchase a Treasury Bill in the principal amount of USD $115,000,000 by
paying the Government USD $100,000,000 (“Third TBill”).
The aggregate of the face value of the First TBill (being USD $115,000,000), the
Second TBill (being USD $57,500,000) and the Third TBill (being USD $115,000,000)
is hereinafter referred to as the “Principal Amount”.
3. OUTSTANDING BALANCE
The “Outstanding Balance”, which shall always be in USD, shall mean, at any point in
the Principal Amount outstanding at that time;
less any amounts repaid by the Government to the Investor in accordance with
Clauses 4.1, 6.1 or 6.3;
less any amounts applied by the Investor in reduction of the Tax liability of the
Investor and its Affiliates in accordance with Clause 4.1;
plus the amount of any interest under Clause 6.2.1.
4. APPLICATION OF OUTSTANDING BALANCE AGAINST TAX LIABILITY
If the entirety of the then current Outstanding Balance has not been paid on a
Repayment Date in accordance with Clause 6.1, then the Investor may, at its
discretion, notify the Government in writing through the relevant taxation authority in
Mongolia that any Tax owed by the Investor or any of its Affiliates has been satisfied in
whole or in part by being offset against the Outstanding Balance. Promptly following the
provision of such written notice, the Government shall, through the relevant taxation
authority, provide to the Investor a receipt or voucher acceptable to the Investor (acting
reasonably) as evidence of payment by the Investor (or, where applicable, its Affiliates)
of the Tax liability described in the notice. Neither the Investor (nor, where applicable,
its Affiliates) shall be liable or subject to any penalties or interest which might otherwise
have been imposed on the Investor (or, where applicable, its Affiliates) in respect of a
Tax liability satisfied by a written notice under this Clause 4.1. The Outstanding
Balance shall not be reduced by the amount of a Tax liability specified by the Investor
in a notice under this Clause 4.1 until the Investor has received all receipts and
vouchers required under this Clause 4.1.
If the Investor issues a written notice under Clause 4.1 to satisfy a VAT liability of the
Investor or its Affiliates by application of the VAT amount against the Outstanding
Balance, then the Government shall ensure that any entitlement the Investor or its
Affiliates may have to a VAT refund under the laws or regulations of Mongolia shall not
be affected by the VAT liability having been satisfied by such notice.
Except as provided in Clause 6, the Government may repay the Outstanding Balance
in whole or in part at any time.
For the purposes of calculating the VAT refund amount to be applied as a credit in
accordance with Clauses 2.1.2 or 2.1.3 and for applying a Tax liability against the
Outstanding Balance under Clause 4.1, the VAT credit or Tax liability (as applicable)
shall be converted by the Investor to USD using the average official Mongolian togrog /
USD exchange rate published by Reuters during the week immediately preceding the
payment in accordance with Clause 2.1.2 or 2.1.3 or Investor’s written notice under
Clause 4.1 (this shall be calculated as the simple arithmetic average of the last
published exchange rate for each day during that week).
For the avoidance of doubt, other than as provided in Clauses 4.1 and 6.3, nothing in
this Agreement shall affect the manner in which any Tax liability shall be calculated
and, without limiting the foregoing, nothing in this Agreement shall limit the ability of the
Investor to treat any offset of Tax liability by amounts prepaid hereunder as a
deductible expense from the taxable income of the Investor if otherwise permitted by
the Investment Agreement or any applicable treaty, law or regulation.
Any income that arises from this Agreement, or which may be derived as a result of the
issue or redemption of the Treasury Bills or in any other way whatsoever as a result of
the implementation of this Agreement shall not be subject to any form of taxation.
The Government must immediately repay to the Investor the whole of the then current
Outstanding Balance on the earliest to occur of each of the following events (the date
of each such event constituting a “Repayment Date”):
the Government or SHC fails to fulfil any material and significant
obligations under the Investment Agreement or the Shareholders’
Agreement respectively for a period of 6 (six) months;
the termination of the Investment Agreement or the Shareholders’
if the conditions precedent in Clause 15.7 of the Investment Agreement
are not satisfied or waived by the time required under the Investment
Agreement and, accordingly, the Investment Agreement does not come
into force and effect (as contemplated by the final paragraph in Clause
15.7 of the Investment Agreement); and
each date which is five (5) years after the date of purchase by the
Investor of each Treasury Bill.
If the Government does not repay the then current Outstanding Balance in accordance
with Clause 6.1, then the obligation to pay for the Treasury Bills remaining to be
purchased by the Investor shall be cancelled and:
the then current Outstanding Balance for the purposes of Clause 3 shall
bear interest at a rate of 9.9% per annum calculated daily on the basis of
a year comprising 360 days (but after allowing for the notional interest
incorporated in the discount at which each Treasury Bill is issued) and
added to the Outstanding Balance at the end of each Calendar Quarter;
the Government and SHC agree that the Investor may, without limiting
any of its other rights, apply any freely available dividends or other
amounts which may become due and payable by the Investor to SHC
towards reduction of the Outstanding Balance.
The Government must repay the Principal Amount of each Treasury Bill in accordance
with its terms.
Repayment of the Principal Amount and the Outstanding Balance must be made in
On repayment of the whole of the Principal Amount owing in respect of a Treasury Bill
the Investor shall surrender to the Government the applicable Treasury Bill.
Nothing in this Clause 6 limits the Investor’s right to commence arbitration proceedings
to recover the Outstanding Balance.
As consideration for the Investor's purchase of the First TBill, the Government shall in
good faith draw on sources of revenue other than the First TBill revenue until such time
as the conditions precedent to the Investment Agreement have been satisfied and, to
the extent possible, will not comingle Treasury Bill revenues with other sources of
7. DISPUTE RESOLUTION
Chapter 14 (Dispute Resolution) of the Investment Agreement relating to dispute
resolution shall apply to this Agreement as if set out in full in this Agreement, and as if
references in that clause to the ‘Parties’ were references to the Parties to this
The Investor shall be entitled to assign its rights and obligations under this Agreement
and the Treasury Bills. The Investor may charge, mortgage or grant other forms of
security over its rights and obligations under this Agreement and the Treasury Bills and
the Government shall provide all necessary support (including providing written consent
and signing necessary documents) to register and perfect the security in Mongolia.
The Government shall not be entitled to assign or encumber its rights and obligations
under this Agreement or the Treasury Bills.
No assignment will expand or alter the rights and obligations of either Party under this
The provisions of this Agreement contain the entire agreement between the Parties
with respect to the subject matter of this Agreement.
Notices or other communications under this Agreement between the Parties shall be
given in accordance with the notice provisions contained in clause 15.32 of the
This Agreement shall be governed by and interpreted in accordance with the laws of
Mongolia and international treaties to which Mongolia is a party.
Each Party agrees to do all things and execute all deeds, instruments, transfers or
other documents as may be necessary or desirable to give full effect to the provisions
of this Agreement and the transactions contemplated by it.
Upon mutual consent recorded in writing, the Parties may amend or modify this
The issuer of the Treasury Bills is the Government of Mongolia and the Treasury Bills
constitute sovereign debt.
Each Party warrants to each other Party that at the date of this Agreement it has full
power and lawful authority to execute and deliver this Agreement, to perform its
obligations under this Agreement and to complete the transactions contemplated by
this Agreement. The Government further warrants to the Investor that at the date of
this Agreement and at the date that each Treasury Bill is issued:
it has all requisite power and authority and has all necessary approvals,
licences, permits and authorizations to issue the Treasury Bill;
it has taken all requisite action to issue the Treasury Bill, and the Treasury Bill
concerned constitutes a valid and binding obligation of the Government,
enforceable against the Government in accordance with its terms, without
regard to the principles of sovereign immunity;
that the Treasury Bills are legally binding, valid and enforceable obligations of
and against the Government;
there are no facts or circumstances existing, except current liabilities incurred
and obligations entered into in the usual and ordinary course, none of which
(individually or in the aggregate) could have a material adverse effect on the
Government's ability to perform its obligations under this Agreement and under
the Treasury Bills.
If any provision of this Agreement is found to be unenforceable for whatever reason,
that provision will be severed from the Agreement, and the remainder of this
Agreement shall remain in force.
The Government agrees that any change to the laws or regulations of Mongolia
(including the passing of any new laws or regulations), or any other requirements that
would, but for this Clause 9.9, be required to be complied with in connection with this
Agreement that take effect after the date of this Agreement, and which discriminates
against the Investor (taking into account the principles of non-discrimination in clause
2.3 of the Investment Agreement), shall not apply in relation to this Agreement.
9.10. Expiration or earlier termination of this Agreement does not affect the monetary rights
and obligations of the Parties which have accrued prior to the date of such expiry or
termination and which remain undischarged at that date.
9.11. This Agreement will be provided and executed in the Mongolian and English languages
each in two original copies, with each Party retaining one copy in each language and
the Parties agree that the Mongolian and English versions will be treated equally
except that, in the event of any legal dispute in the interpretation between the twolanguage versions, the English version shall prevail.
Form of Treasury Bill
(the Form of Treasury Bill omitted)
IN WITNESS WHEREOF, this Agreement is executed and signed on this 6th day of October 2009
in the City of Ulaanbaatar.
For and on behalf of the Government of Mongolia:
Minister of Finance
Date: 6 October 2009
For and on behalf of Ivanhoe Mines
Mongolia Inc LLC:
Date: 6 October 2009