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EXHIBIT 10.20
MINCO MINING AND METALS CORPORATION
Xxxxx 0000
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, X.X.
X0X 0X0
May 13, 1997
MAGKO and SOUTH KYRGYZ GEOLOGICAL EXPEDITION
x/x Xxxxxx Xxxxxxxx - Xxxxxxx 00
Xxxxxx, Xxxxxx
Dear Sirs:
RE: License for Mineral Wealth Usage Rights dated April 11, 1997 (the
"License") issued by the Kyrgyz Republic to Magko ("Magko"), an
international joint stock company, and Minco Mining and Metals Corporation
("Minco") pertaining to certain lands located in the Savovardinskii
high-gold potential area in Karakuldzinskii Region, Osh Oblast, Kyrgyz
Republic (the "Property")
This Letter of Intent will confirm our understanding as to an establishment of a
joint venture between Minco, Magko and South Kyrgyz Geological Expedition
("SKGE") for the geological exploration of the Property, with subsequent
development of economic deposits found within the confines of the Property (the
"Work"), on the following terms and conditions:
1. Magko and SKGE represent and warrant that the License, a copy of which is
attached hereto as Schedule "A", is free and clear of all liens, charges and
encumbrances, and has been validly issued in accordance with the laws of the
Kyrgyz Republic.
2. Each of the parties represents and warrants it has the absolute right to
enter into this Letter of Intent without first obtaining the consent of any
other person or body corporate and no other person or body corporate has any
agreement, option, right or privilege capable of becoming an agreement for
acquiring an interest in the License.
3. Each of the parties has completed all necessary and proper corporate acts and
procedures to enter into this Letter of Intent and carry out its terms to the
full extent.
4. The parties agree to associate on a joint venture basis for the conduct of
the Work each party to contribute such resources, skills, capital, geological
information and technology as specified herein (the "Joint Venture"). The Joint
Venture business shall be conducted through a joint venture corporation to be
incorporated pursuant to Kyrgyz laws and registered in Osh, Republic of Kyrgyz
("the JV Corporation"). The parties agree that Minco will be the controlling
shareholder of the JV Corporation beneficially holding 80% of the registered
capital with each of Magko, and SKGE beneficially holding 10% of the registered
capital.
5. The parties agree to transfer all their right, title and interest in and to
the License and any other interest relating to the Property to the JV
Corporation forthwith following the incorporation of the JV Corporation. No
modifications to the total investment in the JV Corporation or to the registered
capital of the JV Corporation shall be made subsequent to the creation of the JV
Corporation without the written consent of the parties.
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6. Upon incorporation of the JV corporation, the parties shall vote their shares
in the JV Corporation so that the board of directors of the JV Corporation shall
be comprised of five (5) directors, three (3) of which shall be nominees of
Minco, one (1) of which shall be a nominee of Magko, and one (1) of which shall
be a nominee of SKEG. Thereafter, during the term of the Joint Venture and
irrespective of the Parties equity interests in the JV Corporation, the parties
agree to at all times vote their shares in the JV Corporation so that the board
of directors of the JV Corporation remains constituted as aforesaid.
7. Save for the provisions of paragraph 12 herein and except when precluded or
otherwise prohibited by the terms of any debt financing and to the extent
permitted by law, the net profits of the JV Corporation available for
distribution, after making such provisions and transfers to reserves as shall be
required by the board of directors of the JV Corporation to meet expenses or
anticipated expenses, shall be distributed annually (or at such other times as
may be determined by the board of directors), firstly by way of repayment of any
loans, on a pro rata basis, made to the JV Corporation by any of the parties and
secondly by way of dividend or any other allocation or distribution based upon
the equity shares held in the JV Corporation by the parties.
8. In the event that the parties hereinafter agree to enter into further joint
ventures with respect to conducting Work on other high potential mineral
properties which Magko or SKGE hold interests in, such joint ventures shall be
conducted through the JV Corporation on the same terms and conditions as are
herein applicable to the Property, except as otherwise agreed to by the parties.
In this regard, the parties further agree that it shall not be a requirement
that the relative interests in the Joint Venture as described in paragraph 4
herein be modified as result of an agreement to add a new mineral property to
the JV Corporation for purposes of conducting Work on such properties.
9. As its contribution to the Joint Venture and subject to paragraph 12 hereof,
Minco agrees to the following:
(a) to serve as operator of the programs for Work to be undertaken by
the JV Corporation on the Property and, as such, to provide
management and consulting services to the JV Corporation including
but not limited to investigating, prospecting, exploring,
developing, property maintenance, preparing reports, estimates and
studies, designing, equipping, improving, surveying, construction
and mining, milling, concentrating, rehabilitation, reclamation, and
environmental protection, provided that Minco shall be entitled to
charge to the JV Corporation a reasonable amount for overheads equal
to 10% of all costs and expenses incurred by Minco as operator, such
charges to be accrued as shareholders loans in accordance with
paragraph 12; and
(b) to arrange and obtain all financing necessary to fund programs of
Work on the Property, including but not limited to all costs in
connection with the employment of technicians and other personnel,
the lease or purchase of exploration and mining equipment and
payments to contractors and consultants.
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10. As its contribution to the Joint Venture, Magko agrees to undertake the
following:
(a) make applications for and obtain all necessary regulatory and
governmental approvals from the government of the Kyrgyz Republic in
respect of the Joint Venture, including but not limited to the
incorporation of the JV Corporation and the issuance to the JV
Corporation of such additional exploration and development permits
and licenses in respect of the Property as may be required in order
to advance the business of the Joint Venture,
(b) provide to the JV Corporation and to Minco all necessary geological
information in respect to the Property and the regions surrounding
the Property;
(c) serve as manager of programs of Work on the Property, reporting at
all times to Minco, and arrange and make available to the JV
Corporation the services of all local technicians and other
personnel as may reasonably be required by the JV Corporation and
Minco to carry out such programs of Work, such technicians and
personnel to be employed by the JV Corporation at fair and
reasonable wage rates having regard to prevailing local labour
market conditions at the time of the engagement of such technicians
or personnel; and
(d) make available to the JV Corporation such exploration and mining
equipment owned or under the control of Magko as may reasonably be
required by the JV Corporation to carry out programs of Work on the
Property, such equipment to be rented or sold by Magko to the JV
Corporation at fair and reasonable rates having regard to prevailing
local market conditions at the time of rental or sale.
11. As its contribution to the Joint Venture, SKGE agrees to undertake the
following:
(a) serve as independent contractor to carry out programs of Work on
the Property as may be implemented, reporting at all times to Minco,
and arrange and make available to the JV Corporation the services of
all local technicians and other personnel as may reasonably be
required by the JV Corporation and Minco to carry out such programs
of Work, such technicians and personnel to be employed by the JV
Corporation at fair and reasonable wage rates having regard to
prevailing local labour market conditions at the time of the
engagement of such technicians or personnel.
12. The parties agree that all cash advanced by Minco to the JV Corporation to
fund its obligations pursuant to the terms of this Letter of Intent and all
amounts payable to Minco for overhead charges calculated in accordance with
subparagraph 9(a) shall be accrued as a noninterest bearing shareholder loan to
the JV Corporation, with no fixed terms of repayment. The shareholders loan
shall be repaid to Minco from profits of the JV Corporation prior to any
dividends or other allocations or distributions of profit being made to the
parties as shareholders of the JV Corporation.
13. At all times during the subsistence of the Joint Venture a party or its duly
authorized representative shall, at its sole risk and expense and at reasonable
intervals and times,
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have access to the Property and to all technical records and other factual
engineering data and information relating to the Property which is in the
possession of the other party.
14. All information and data concerning or derived from the operations of the
Joint Venture shall be kept confidential by the parties and, except to the
extent required by law or by regulation of any Securities Commission, Stock
Exchange or other regulatory body having jurisdiction, shall not be disclosed by
a party to any person without the prior consent of the other party, which
consent shall not unreasonably be withheld.
15. No party shall transfer, convey, assign, mortgage or grant an option in
respect of or grant a right to purchase or in any manner transfer or alienate
all or any portion of its interest in the License, Property or in the JV
Corporation or in its rights under this Letter of Intent without the written
consent of the other party, which consent shall not be unreasonably withheld.
16. In the event either Magko or SKGE wish to sell or otherwise dispose of all
or any of their portion of their interest in and to the Joint Venture or the JV
Corporation, Minco shall have a right of first refusal respecting any such sale
or disposition thereof.
17. The parties hereto agree to do or cause to be done all acts or things
necessary to implement and carry into effect the provisions and intent of this
Letter of Intent, and without limiting the generality of the foregoing, the
parties agree to use their best efforts to execute a formal shareholders
agreement forthwith following the incorporation of the JV Corporation.
18. This Letter of Intent will be governed and construed in accordance with the
laws of the Province of British Columbia.
19. This Letter to Intent is intended to create binding legal relations among
the parties and will enure to the benefit of and be binding upon the parties
hereto and their respective successors and assigns as the case may be, until
replaced by the JV Agreement. Until the execution and delivery of a formal
shareholders agreement in respect to the JV Corporation, this Letter of Intent
will remain binding and in effect.
20. In the event that any provision of this Letter of Intent is held
unenforceable or invalid by court of law having jurisdiction, this Letter of
Intent will be read as if such unenforceable or invalid provision were removed.
21. The rights and obligations of the parties created by this Letter of Intent
are not assignable by any party without the prior written consent of the other
parties, not to be unreasonably withheld, except for any transfer or assignment
to a wholly owned subsidiary of the party or pursuant to an amalgamation,
merger, or corporate reorganization or arrangement of the party.
22. This Letter of Intent shall be written in duplicate in both English and
Russian, and both versions shall have equal weight and authority,
23. This Letter of Intent is subject to the prior acceptance for filing of the
Vancouver Stock Exchange on behalf of Minco. Minco will use its best efforts to
obtain such acceptance within sixty (60) days of the execution of this Letter of
Intent.
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If the foregoing terms and conditions, and the attached schedules which form a
part of this Letter of Intent, accurately set out our mutual understandings,
please indicate your acceptance by signing this letter where indicated below and
returning to us the enclosed copy duly signed.
Yours very truly,
MINCO MINING AND METALS CORPORATION
Per: c/s
Xxxxx Xxxxxxxx, Chairman of the Board
Terms and conditions agreed to this ___day of May, 1997.
Magko
Per: c/s
[SIG]
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Authorized Signatory
South Kyrgyz Geological Expedition
Per: c/s
[SIG]
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Authorized Signatory
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This is Schedule "A" to the Letter of Intent
dated May 13, 1997 made between Minco Mining and Metals Corporation,
Magko and South Kyrgyz Geological Expedition
[ADD COPY OF LICENSE DATED APRIL 11, 1997]
