exv10w7



 



Exhibit 10.7




AMENDED AND RESTATED

COAL RIGHTS RETENTION AGREEMENT



THIS AGREEMENT dated for reference the 31st day of July, 2003 and amended and restated
as of the 31st day of January, 2005




BETWEEN:





ASIA GOLD CORP. (formerly MX CAPITAL CORP.), a corporation continued under the laws
of Canada




(“AGC”)



AND:





IVANHOE MINES LTD, a corporation continued under the laws of the Yukon Territory




(“Ivanhoe”)



WHEREAS:





	A.  	AGC and Ivanhoe are parties to a Coal Rights Retention Agreement dated for reference the
31st day of July, 2003 (the “Original Agreement”);
	 
	B.  	through a series of transactions having effect as of the date of the Original Agreement, AGC
became the indirect beneficial owner of the Mongolian mineral exploration licenses more
particularly described in Schedule “A1” hereto (each an “IVN License” and, collectively, the
“IVN Licenses”);
	 
	C.  	Ivanhoe was the former indirect beneficial owner of the IVN Licenses and, as a
condition of causing them to be indirectly transferred to AGC, retained the rights over all
types of coal, coal-related products and coal-bed methane gas (“Coal Products”) situated in,
on or under the geographical areas covered by each IVN License (each an “IVN Property” and,
collectively, the “IVN Properties”);
	 
	D.  	pursuant to the Original Agreement, in addition to retaining the rights to Coal
Products in respect of each of the IVN Properties, Ivanhoe received from AGC the rights to
Coal Products situated in, on or under the geographical areas (each an “AGC Property” and,
collectively, the “AGC Properties”) covered by each of the mineral exploration licenses (each
an “AGC License” and, collectively, the “AGC Licenses”) already owned by AGC and listed in
Schedule “A2” hereto (the AGC Licenses and the IVN Licenses, including any successor mineral
exploration licenses or mining licenses in respect thereof, being hereinafter referred to,
individually, as a “License” and, collectively, as the “Licenses”);




 









 





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	E.  	the Original Agreement was intended to reflect the grant by AGC to Ivanhoe of all
rights (the “Coal Rights”) to Coal Products located in, on or under each of the AGC Properties
and each of the IVN Properties (each, a “Property” and, collectively, the “Properties”) and
AGC’s obligations to Ivanhoe in respect thereof as the indirect beneficial owner of the
Licenses; and
	 
	F.  	Ivanhoe and AGC wish to amend certain terms of the Original Agreement and have agreed
to enter into this amended and restated agreement (the “Restated Agreement”) to replace the
Original Agreement.




NOW THEREFORE in consideration of the premises and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by each of the parties, the parties agree
as follows:





	1.  	Retention of Coal Rights. The parties hereby acknowledge and agree that, in effecting the
transactions whereby AGC acquired its indirect beneficial interest in the IVN Licenses, it was
always their mutual intention that Ivanhoe would retain the Coal Rights notwithstanding AGC’s
acquisition of all other rights and obligations associated with, or incidental to, the IVN
Licenses. AGC hereby confirms that it holds no interest in the Coal Rights and no interest in
any Coal Products either in situ or following their extraction from any Property. Nothing in
this Restated Agreement will be construed as giving Ivanhoe any rights, directly or
indirectly, in any minerals situated in, on or under any of the Properties, other than Coal
Products. The parties hereby acknowledge and agree that under no circumstances will any oil
shales situated in, on or under any of the Properties be construed as Coal Products for
purposes of this Restated Agreement. As used in this Section 1, “oil shales” means
kerogen-bearing, finely laminated brown or black sedimentary material that, upon distillation,
yields liquid or gaseous hydrocarbons.
	 
	2.  	Mongolian Subsidiary Involvement. The parties hereby acknowledge and agree that, in order to
fully and effectually enjoy their respective rights, and perform their respective obligations,
under this Restated Agreement, it may be necessary or desirable, from time to time, for a
party to cause a company incorporated under the laws of Mongolia and controlled by such party
(a “Mongolian Subsidiary”) to do, or refrain from doing, certain acts and things in Mongolia
in furtherance of the covenants and agreements of such party in this Restated Agreement. Each
party hereby covenants and agrees with the other party that, whenever the performance by that
party of an obligation under this Restated Agreement requires any involvement by a Mongolian
Subsidiary of that party, such party will cause its Mongolian Subsidiary to promptly execute
all such instruments and do all such acts and things as may be necessary or desirable in order
for such party’s obligations hereunder to be fully and effectually performed on a timely
basis. Wherever in this Restated Agreement an obligation is ascribed to a party and such
obligation can only be legally and effectually performed by such party’s Mongolian Subsidiary,
such party will be deemed to have obliged itself, as principal, and its Mongolian Subsidiary,
as the Mongolian Subsidiary’s authorized agent, to perform such obligation.




 









 





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	3.  	Bare Trustee of Coal Rights. AGC hereby covenants and agrees, subject to the terms and
conditions of this Restated Agreement, to hold all right, title and interest in and to the
Coal Rights that may now or at any time in the future be held by AGC, whether legally or
beneficially and directly or indirectly, in respect of the Properties including without
limitation, all Coal Rights derived from any successor mineral exploration licenses covering
any of the Properties, and any mining licenses covering any of the Properties, as a bare
trustee, and for the sole and exclusive benefit of Ivanhoe for the duration of the Term (as
hereinafter defined). Ivanhoe hereby agrees, in respect of each Property for which AGC holds
Coal Rights as Ivanhoe’s bare trustee, to indemnify and hold harmless AGC from any and all
claims or demands, including legal costs incurred in defending same, for loss of or damage to
property or for injury or death to any person caused by the negligence or willful misconduct
of Ivanhoe or any of its employees or agents on such Property during the Term.
	 
	4.  	Term. This Restated Agreement will remain in effect, in respect of each License, for a term
(the “Term”) commencing on the date of the Original Agreement (the “Effective Date”) and
ending on the earliest of:






	 	(a)  	the fiftieth (50th) anniversary of the Effective Date;
	 
	 	(b)  	the date upon which Ivanhoe’s Coal Rights in respect of the License expire
pursuant to Section 7;
	 
	 	(c)  	the date upon which Ivanhoe obtains Independent Ownership Rights in respect of
any Property previously subject to the License, but only to the extent provided in
Section 6; or
	 
	 	(d)  	the date upon which AGC ceases to hold any interest in the License.






	5.  	Access. During the Term of this Restated Agreement, as it applies to each License, Ivanhoe
will have the non-exclusive right to free and unrestricted access to the Property covered by
such License, and shall have the right to carry out all such activities as may be necessary or
desirable in order to explore for, and otherwise establish the feasibility of developing and
extracting, Coal Products from the Property. If Ivanhoe makes an election pursuant to Section
6, Ivanhoe’s rights of access under this Section 5 will, until such time as AGC fulfils its
obligations under Section 6, include rights (“Enhanced Access Rights”): (i) to develop and
mine Coal Products on the Property, and to extract, remove and sell or otherwise dispose of
for its own account any and all Coal Products therefrom; (ii) to remove Coal Products, air,
water, waste and materials from the Property by means of underground or surface operations on
or in the Property; (iii) to deposit Coal Products, including coal ores, water, waste,
tailings and other materials on the Property, and to use any part of the Property for waste
dumps and tailings disposal areas; (iv) to conduct on or in the Property general mining
treatment, processing and related operations respecting the Property, and to use any part of
the Property for any purposes incident to such operations; (v) to construct, use and maintain
on the Property such buildings, roads, improvements, structures,




 









 





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	   	equipment, personal property and fixtures as may be necessary or convenient for the conduct
of Ivanhoe’s operations on the Property; and (vi) to do all such other acts and things
incidental to the extraction, removal and sale of Coal Products as Ivanhoe, acting
reasonably, considers necessary or desirable under the circumstances.
	 
	6.  	Subdivision or Sublease. If, at any time, Ivanhoe identifies an occurrence of Coal Products
on a particular Property of a quantity that Ivanhoe, in its sole discretion, believes may be
economically feasible to exploit, Ivanhoe may elect, by notice in writing to AGC, to require
AGC to:






	 	(a)  	apply to the relevant governmental authorities in Mongolia to (i) subdivide
from the License covering the Property an area of the Property comprising the
occurrence of the Coal Products and such additional areas designated by Ivanhoe as may
be necessary to efficiently extract and process the Coal Products (the “Coal Resource
Area”) and (ii) issue a new mineral exploration license or mining license in respect of
the Coal Resource Area in the name of Ivanhoe;
	 
	 	(b)  	undertake such other legal procedures under the laws of Mongolia as may be
necessary to vest in Ivanhoe legal rights in the Coal Resource Area equivalent to those
that a holder of a mineral exploration license or mining license in respect of the Coal
Resource Area would enjoy; or
	 
	 	(c)  	grant to Ivanhoe a lease of the Coal Resource Area on such terms as Ivanhoe,
acting reasonably, may stipulate but in any event having the effect of giving Ivanhoe,
through AGC, legal rights in the Coal Resource Area equivalent to those that a holder
of a mineral exploration license or mining license in respect of the Coal Resource Area
would enjoy






	   	and upon Ivanhoe having obtained independent legal rights to the Coal Resource Area either
as a license holder, a lease holder or on some other basis satisfactory to Ivanhoe, acting
reasonably, pursuant to subparagraphs (a), (b) or (c) above (“Independent Ownership
Rights”), this Restated Agreement (including the Enhanced Access Rights contemplated in
Section 5) will cease to apply to the area of the Property comprising the Coal Resource Area
and the Term of this Restated Agreement will be deemed to have ended in respect thereof.
Notwithstanding the foregoing, this Restated Agreement will continue to apply to the
remainder of the Property and all other Properties lying beyond the perimeter of the Coal
Resource Area for as long as the Property remains subject to the License. All costs and
expenses incurred by AGC in fulfilling its obligations under this Section 6 will be for the
account of Ivanhoe.
	 
	7.  	Option to Acquire License. If, at any time during the Term, AGC determines in good
faith that a Property (a “Condemnation Property”) does not warrant further exploration for
minerals other than Coal Products, AGC may notify Ivanhoe in writing of such determination
(such notification to be accompanied by any and all material information with respect to the
Condemnation Property not previously disclosed to Ivanhoe) whereupon




 









 





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	   	Ivanhoe shall have the right, exercisable by written notice to AGC within thirty (30) days
of receiving AGC’s notice (the “Option Period”), to acquire all of AGC’s right, title and
interest in and to any License to which the Condemnation Property is subject (the “Option
License”) by assuming all of AGC’s obligations, if any, in respect of the Option License.
If Ivanhoe elects to exercise its right to acquire the Option License, Ivanhoe and AGC will,
at Ivanhoe’s expense, forthwith execute all such documents and do all such things as may be
necessary to transfer the Option License to, or to the direction of, Ivanhoe in accordance
with the laws of Mongolia. Pending the completion of such transfer, AGC will hold the Option
License as a bare trustee for the sole benefit, and at the sole expense, of Ivanhoe. If
Ivanhoe fails to exercise its right to acquire the Option License prior to the expiry of the
Option Period, Ivanhoe shall forfeit all of its right, title and interest in and to the
Option License (including the Coal Rights) to AGC and the Term of this Restated Agreement in
respect of the Option License will be deemed to have expired as of the date of expiry of the
Option Period.
	 
	8.  	Mutual Use. The parties acknowledge that they are both entitled to access and use of
the Properties and the parties agree to cooperate with each other to the extent reasonably
practicable to facilitate each party’s use of each Property without detriment to the rights of
the other party. Subject always to Section 9, if the use of a Property by one party prevents
or hinders the efficient use of such Property by the other for the purposes of exploring for,
developing, extracting and processing minerals, the party whose use of the Property is being
prevented or hindered may notify the other party in writing to that effect, whereupon the
parties will use good faith efforts to reach a compromise. If, within sixty (60) days of such
notice having been given, the parties fail to resolve the incompatibility of their respective
uses of the Property, either party may initiate a commercial arbitration to resolve such
incompatibility of use.
	 
	9.  	Priority of Mining Rights. If, at any time during the Term, AGC gives notice in
writing to Ivanhoe, accompanied by an Independent Technical Report, that a particular Property
(an “Excluded Property”) has Geological Merit, then for as long as the Property remains an
Excluded Property, AGC will be excused from its obligations to furnish Ivanhoe with Enhanced
Access Rights or Independent Ownership Rights in respect of such Property. A Property’s status
as an Excluded Property will expire on the first anniversary of the date of AGC’s notice
designating it as such subject to AGC’s right to renew such status for further successive one
(1) year terms by delivering to Ivanhoe a new Independent Technical Report re-confirming the
Excluded Property’s Geological Merit. Any Excluded Property that becomes the subject of a
mining license will retain Excluded Property status for the life of the mining license. For
the purposes of this Section 9:






	 	(a)  	“Geological Merit” means that, based on all available exploration results,
there is sufficient evidence of the potential presence of mineralization, other than
Coal Products, in respect of a Property or portion of a Property to warrant additional
exploration expenditures;




 









 





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	 	(b)  	“Independent Technical Report” means a technical report prepared in accordance
with the requirements of NI 43-101 by a qualified person who, based on NI 43-101
criteria, is independent of AGC;
	 
	 	(c)  	“NI 43-101” means National Instrument 43-101 of the Canadian Securities
Administrators; and
	 
	 	(d)  	“qualified person” has the meaning assigned to it in NI 43-101.






	10.  	Good Standing. AGC hereby covenants and agrees with Ivanhoe that:






	 	(a)  	AGC will do all such acts and things, in its capacity as the holder of the
Licenses, reasonably necessary in furtherance of the objectives of this Restated
Agreement;
	 
	 	(b)  	AGC will use reasonable commercial efforts to keep the Licenses in good
standing; and
	 
	 	(c)  	AGC will not relinquish a License or any portion of a Property covered by
a License for any reason without first giving Ivanhoe the right to acquire the License
pursuant to Section 7.






	11.  	No Transfer or Encumbrance of Licenses. AGC will not transfer, assign, encumber, pledge
or otherwise dispose of any interest in a License unless the transfer, assignment, encumbrance
or pledge:






	 	(a)  	is to a corporation that is, for the purposes of the Canada Business
Corporations Act, an “affiliated body corporate” of AGC that has agreed in writing to
assume and be bound by all of AGC’s obligations under this Restated Agreement;
	 
	 	(b)  	is to an arm’s length third party that has agreed in writing to assume and be
bound by all of AGC’s obligations under this Restated Agreement, provided that Ivanhoe
has had the prior opportunity, and has failed, to exercise its right of first refusal
under Section 13;
	 
	 	(c)  	is to Ivanhoe or a corporation that is, for the purposes of the Canada Business
Corporations Act, an “affiliated body corporate” of Ivanhoe; or
	 
	 	(d)  	has otherwise been approved in writing by Ivanhoe.






	12.  	No Rent or Royalties. AGC acknowledges and agrees that the transfer of the Licenses to
AGC constitutes good and valuable consideration for the covenants and agreements of AGC
hereunder and that AGC will not be entitled to receive any remuneration from Ivanhoe’s use of
any Property pursuant to this Restated Agreement.




 









 





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	13.  	Right of First Refusal. If AGC intends to convey any License or interest in a License (a
“License Interest”) to a bona fide arm’s length third party (a “Third Party”) at any time
during the Term, AGC will give written notice (the “Transfer Notice”) to Ivanhoe, offering the
License Interest to Ivanhoe on substantially the same terms upon which AGC proposes to convey
the License Interest to the Third Party. Ivanhoe may exercise its right to purchase all, but
not less than all, of the License Interest for the consideration stipulated in the Transfer
Notice (provided that if all or any part of the consideration offered by the Third Party is
non-monetary, the equivalent consideration payable by Ivanhoe will be an amount of lawful
money of Canada equal to the fair market value of the non-monetary consideration offered by
the Third Party) by providing written notice (the “Exercise Notice”) within fifteen (15) days
of receipt by Ivanhoe of the Transfer Notice (the “Exercise Period”). If Ivanhoe does not
exercise its right to purchase the License Interest prior to the expiry of the Exercise
Period, AGC will have the right for a period of thirty (30) days following the Exercise Period
(the “Closing Period”) to convey the License Interest to the Third Party for consideration
having a value equal to or higher than the value of the consideration for which AGC offered
the License Interest to Ivanhoe. If AGC does not convey the License Interest to the Third
Party by the expiry of the Closing Period, such License Interest will again become subject to
Ivanhoe’s right of first refusal in this Section 13.
	 
	14.  	Government Permits and Filings. To the extent that any filings are required to be made
or permits obtained in order for Ivanhoe to conduct its operations on the Properties, Ivanhoe
will prepare such filings or permit applications and AGC will use reasonable commercial
efforts, at Ivanhoe’s cost, to assist Ivanhoe in such filing and facilitate the approval of
such permits by the appropriate government authorities in Mongolia.
	 
	15.  	Taxes and Remediation. AGC will pay all taxes and fees levied against the Properties
and the Licenses (other than an Option License acquired by Ivanhoe, in which case Ivanhoe will
be responsible for paying such taxes and fees commencing on the date Ivanhoe elects to acquire
the Option License), but will not be responsible for any taxes arising from the sale of Coal
Products produced on any Property. If the amount of taxes or fees payable by AGC with respect
to a particular License increases as a result of improvements made to a Property by Ivanhoe,
Ivanhoe will reimburse AGC the amount of such increase. All fees, taxes and levies with
respect to the Licenses (other than an Option License acquired by Ivanhoe, in which case
Ivanhoe will be responsible for paying such taxes and fees commencing on the date Ivanhoe
elects to acquire the Option License) will be paid by AGC when due. Ivanhoe will perform all
remediation and other obligations arising at law from the conduct of operations by Ivanhoe on
each Property.
	 
	16.  	Assignment. Neither AGC nor Ivanhoe may assign this Restated Agreement without the written
consent of the other party, such consent not to be unreasonably withheld.
	 
	17.  	Notices. Notices, demands or other communications required or permitted to be given or
made hereunder shall be in writing and delivered personally or sent by prepaid first class




 









 





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	   	post with recorded delivery, or by legible telefax addressed to the intended recipient as
follows:
	 
	   	in the case of Ivanhoe addressed to:





654, 999 Canada Place

Vancouver, British Columbia

V6C 3E1



Fax No: (604) 682-2060

Attention: Corporate Secretary




	   	in the case of AGC addressed to:





654, 999 Canada Place

Vancouver, British Columbia

V6C 3E1



Fax No: (604) 688-8391

Attention: President




	  	or such other address or telefax number as any party may from time to time duly notify to
the other party. Any such notice, demand or communication shall, unless the contrary is
proved, be deemed to have been duly served (if given or made by telefax on the next
following business day in the place of receipt or (if given or made by first class letter)
48 hours after posting and, in proving the same, it shall be sufficient to show, in the case
of a letter, that the envelope containing the same was duly addressed, correctly stamped and
posted and, in the case of a telefax, that such telefax was duly dispatched to a current
telefax number of the addressee.
	 
	18.  	Successors and Assigns. Except as otherwise provided herein, all of the rights and
obligations of a party enure to the benefit of and are binding upon the successors and assigns
of that party.
	 
	19.  	Further Assurances. Each party agrees to execute such further assurances as may be
reasonably required from time to time by any other party to more fully effect the true intent
of this Restated Agreement.
	 
	20.  	Entire Agreement. This Restated Agreement is intended to amend, restate and supersede the
Original Agreement. The parties agree that there are no representations, covenants,
agreements, warranties, or conditions in any way relating to the subject matter of this
Restated Agreement or the occupation or use of the Properties, whether express or implied or
otherwise, except as set forth in this Restated Agreement.




 









 





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	21.  	Governing Law. This Restated Agreement is and will be deemed to have been made in British
Columbia and for all purposes will be governed exclusively by and construed and enforced in
accordance with the laws prevailing in British Columbia and the rights and remedies of the
parties will be determined in accordance with those laws provided that, insofar as
legally possible, the parties will refer any disputes between them respecting the subject
matter of this Restated Agreement to binding arbitration under the Commercial Arbitration Act
of British Columbia and any such arbitration will be conducted by a single arbitrator whose
final decision will be limited to choosing between written settlement proposals furnished by
each of the parties within ten (10) days of the appointment of the arbitrator.
	 
	22.  	Counterparts. This Restated Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but both of which together shall constitute one and
the same instrument.




IN WITNESS WHEREOF the parties have duly executed this Restated Agreement as of the date set out
above.




	 	 	 	 	 	 	 
	ASIA GOLD CORP.
	 
	 	 
	Per:

	 	“David C. Owens”
	

	 	 
	

	 	Authorized Signatory
	 
	 	 
	IVANHOE MINES LTD.
	 
	 	 
	Per:

	 	“Pierre Masse”
	

	 	 
	

	 	Authorized Signatory






 









 






SCHEDULE OF LICENSES




Schedule A1




IVN Licenses




	 	 	 	 	 	 
	 
	 	License Number	 	 	Name	 
	 	 	 	 	 	 
	 	3629X

	 	 	Oyut Ovoo	 
	 	4071X

	 	 	Narabulag	 
	 	4073X

	 	 	Khukh Uul	 
	 	4253X

	 	 	Bayangiin Govi	 
	 	4256X

	 	 	Ulaan Tolgoi	 
	 	5254X

	 	 	Ikh Uul	 
	 	5255X

	 	 	Baga Nomgon	 
	 	5256X

	 	 	Khan Uul	 
	 	5257X

	 	 	Khan Uul-1	 
	 	5258X

	 	 	Tulga	 
	 	5259X

	 	 	Tulga-1	 
	 	5260X

	 	 	Khongil Uul	 
	 	5261X

	 	 	Khairkhan Tolgoi	 
	 	5262X

	 	 	Khuvguun	 
	 	5263X

	 	 	Ovoot Shar Uul	 
	 	5264X

	 	 	Ovoljoot Uul	 
	 	5265X

	 	 	Zangat Uul	 
	 	5266X

	 	 	Tooroit Uul	 
	 	5267X

	 	 	Tavan Uul	 
	 	5271X

	 	 	GaliinOvoo	 
	 	5272X

	 	 	Zurkh Uul	 
	 	5273X

	 	 	Bajuunii Tolgoi	 
	 	5274X

	 	 	Sevrei	 
	 	5686X

	 	 	Ulaan Khuree Uul	 
	 	5687X

	 	 	Shavan Uul	 
	 





 









 





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	 	License Number	 	 	Name	 
	 	 	 	 	 	 
	 	5688X

	 	 	Shavagtai	 
	 	5819X

	 	 	Khalbas Uul	 
	 	5820X

	 	 	GashuuTolgoi	 
	 	5822X

	 	 	Tukhem Els	 
	 





Schedule A2 




AGC Licenses




	 	 	 	 	 	 
	 
	 	License Number	 	 	Name	 
	 	 	 	 	 	 
	 	4465X

	 	 	Noyun Uul	 
	 	4518X

	 	 	Ulziit	 
	 	4519X

	 	 	Zurumtai	 
	 	4520X

	 	 	Baruun Nuyun Uul	 
	 	4521X

	 	 	Baga Argalant	 
	 	4522X

	 	 	Nomgon	 
	 	4523X

	 	 	Zogt Hudag	 
	 	4539X

	 	 	Delen Khyar	 
	 	4540X

	 	 	Erdene Nuruu	 
	 	4541X

	 	 	Sharga Murt	 
	 	4542X

	 	 	Banzat Khairkhan