ASSIGNMENT AGREEMENT
Exhibit
10.1
THIS
AGREEMENT dated for reference the 1st day of December, 2009
BETWEEN:
Ironwood
Gold Corp., 0000 X. Xxxxxxxx Xxxxxxx, #000 Xxxxxxxxxx, XX
00000
(the
"Assignee")
AND:
Kingsmere
Mining Ltd., 00000 Xxxxxx Xxxxxx Xxxxx Xxxxx Xxxx Xxxxxx Cal.
92260
("Kingsmere"
or the "Assignor")
WHEREAS:
A. Teck
Co, LLC ("Teck") and Kingsmere entered into an option agreement dated October
26, 2009, attached hereto as Exhibit "A" (the "Option Agreement") wherein
Kingsmere has an exclusive option to acquire from Teck an undivided 100% right,
title and interest in and to certain mineral claims known as the Haystack
Property, located in Nevada as set out in Schedule "A" of the Option Agreement
(the "Property"); and
B. Kingsmere
wishes to assign to the Assignee all of Kingsmere's right, title and interest in
and to the Option Agreement and the Property in accordance with the terms of
this Agreement (the "Assignment").
NOW
THEREFORE, in consideration of the sum of $10.00 now paid by the Assignee to the
Assignor (the receipt and sufficiency of which are hereby acknowledged by the
Assignor), the Assignor covenant and agree as follows:
THE ASSIGNMENT AND
ACCEPTANCE
1. Kingsmere
hereby unconditionally forever assigns and transfers to the Assignee all of
Kingsmere's right, title and interest in and to the Option Agreement and the
Property and all benefits and advantages to be derived therefrom (the
"Assignment").
2. In
consideration for the Assignment, the Assignee hereby agrees to issue 10,000,000
restricted shares of common stock of the Assignee (the "Consideration Shares"),
to be issued as to 8,500,000 Consideration Shares to the Assignor or as directed
by the Assignor, and 1,500,000 Consideration Shares to Teck Resources Limited
(pursuant to section 11.1 of the Option Agreement and the letter of instruction
from Teck Co. Lie to Ironwood
dated, 2009),
to be issued within 30 days of the date of execution of this Agreement upon the
delivery of the necessary documentation from each of Teck and the Assignor to
allow for the issuance of the Consideration Shares pursuant to exemptions from
the registration requirements of the United States Securities Act of
1933, as amended (the "1933 Act").
3.
In consideration for the Assignment, the Assignee hereby agrees to pay
US$300,000 (the "Cash Consideration"), to be paid as to $255,000 to the
Assignor, and $45,000 to Teck (pursuant to section 11.1 of the Option
Agreement), to be paid upon execution of this Agreement.
4.
The Assignee hereby covenants and agrees with the
Assignor that the Assignee will fully and faithfully abide by all terms and
conditions of the Option Agreement and fully and faithfully perform all
responsibilities and obligations of the Assignor under the Option Agreement.
This includes agreeing to make all monetary and royalty payments to Teck and all
required payments and property expenditures as set out in the Option Agreement
and to recognize Teck's earn-in rights to the Property as provided for in
Sections 12 and 13 of the Option Agreement.
5.
The Assignor hereby covenants and agrees with the Assignee that the
Assignor shall be responsible for the shortfall of any required payments and
property expenditures as set out in the Option Agreement that the Assignee has
not paid.
6.
The Assignor represents and warrants to the Assignee, with the knowledge
that the Assignee relies upon same in entering into this Agreement,
that:
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(a)
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the
mineral claims comprising the Property (as defined therein), the Option
Agreement and the mineral agreements in respect thereof have been, to the
best of the Assignors' knowledge and belief after due inquiry, duly and
validly located, granted, entered into and recorded, as the case may be,
pursuant to the laws of the jurisdiction in which the Property is situate
and are in each case in good standing with respect to all filings, fees,
rentals, taxes, assessments, work commitments and other obligations and
conditions on the date hereof and until the dates set opposite the
respective names;
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(b)
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the
Assignor has all requisite power and capacity, and has duly obtained all
requisite authorizations and performed all requisite acts, to enter into
and perform their obligations hereunder, they has duly executed and
delivered this Agreement and such constitutes a legal, valid and binding
obligation of them enforceable against them in accordance with the
Agreement's terms, and the entering into of this Agreement and the
performance of their obligations hereunder does not and will not result in
a breach of, default under or conflict with any of the terms and
provisions of any of their constituting documents, any resolutions of
their partners, any indenture, agreement or other instrument to which they
are a party or by which they are bound or the Property may be subject, or
any statute, order, judgment or other law or ruling of any competent
authority;
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(c)
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there
are neither any adverse claims or challenges against, or to the ownership
or title to, any of the mineral claims comprising the Property or to the
validity or enforceability of any of the mineral agreements in respect
thereof, nor to the knowledge of the Assignors after due inquiry is there
any basis therefor, and there are no outstanding agreements, options or
other rights and interests to acquire or purchase the Property or any
portion thereof or any interest therein, and no person has any royalty or
other interest whatsoever in the production from any of the mineral claims
comprising the Property or
otherwise;
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-2-
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(d)
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the
Option Agreement is in good standing as at the date hereof and no default
has occurred therein;
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(e)
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the
Assignor is an "accredited investor" as the term is defined in section
501(a) of Regulation I) under the 1933 Act, by virtue of its respective
equity owners each being accredited
investors;
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(f)
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the
Assignor has the legal capacity and competence to enter into and execute
this Agreement and to take all actions required pursuant hereto and they
are duly incorporated and validly subsisting under the laws of its
jurisdiction of incorporation and all necessary approvals by their
directors, shareholders and others have been obtained to authorize
execution and performance of this Agreement on behalf of the
Assignors;
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(g)
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the
Assignor (i) has adequate net worth and means of providing for their
current financial needs and possible personal contingencies, (ii) has no
need for liquidity in this investment, and (iii) is able to bear the
economic risks of an investment in the Consideration Shares for an
indefinite period of time, and can afford the complete loss of such
investment;
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(h)
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the
Assignor is aware that an investment in the Assignee is speculative and
involves certain risks, including the possible loss of the
investment;
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(i)
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the
Assignor is receiving the Consideration Shares for their own account for
investment purposes only and not for the account of any other person and
not for distribution, assignment or resale to others, and no other person
has a direct or indirect beneficial interest in such Consideration Shares,
and the Assignor has not subdivided its respective interest in the
Consideration Shares with any other
person;
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(j)
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the
Assignor is not an underwriter of, or dealer in, the common shares of the
Assignee, nor is the Assignor participating, pursuant to a contractual
agreement or otherwise, in the distribution of the Consideration
Shares;
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(k)
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the
Assignor is not aware of any advertisement of any of the Consideration
Shares and are not acquiring the Consideration Shares as a result of any
form of general solicitation or general advertising including
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar media or broadcast over radio or
television, or any seminar or meeting whose attendees have been invited by
general solicitation or general advertising;
and
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(I) no
person has made to the Assignor any written or oral
representations:
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(i)
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that
any person will resell or repurchase any of the Consideration
Shares;
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-3-
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(ii)
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that
any person will refund the purchase price of any of the Consideration
Shares;
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(iii)
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as
to the future price or value of any of the Consideration Shares;
or
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(iv)
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that
any of the Consideration Shares will be listed and posted for trading on
any stock exchange or automated dealer quotation system or that
application has been made to list and post any of the securities of the
Assignee on any stock exchange or automated dealer quotation
system.
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7.
The Assignor acknowledges and agrees that:
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(a)
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the
Consideration Shares have not been registered under the United States
Securities Act of 1933, as amended (the "1933 Act"), or under any state
securities or "blue sky" laws of any state of the United States, and are
being offered only in a transaction not involving any public offering
within the meaning of the 1933 Act, and, unless so registered, may not be
offered or sold in the United States or to U.S. Persons (as defined in
Regulation S promulgated under the 1933 Act), except pursuant to an
effective registration statement under the 1933 Act, or pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the 1933 Act, and in each case only in accordance with
applicable state securities laws;
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(b)
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the
Assignee will refuse to register any transfer of the Consideration Shares
not made in accordance with the provisions of Regulation S, pursuant to an
effective registration statement under the 1933 Act or pursuant to an
available exemption from, or in a transaction not subject to, the
registration requirements of the 1933
Act;
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(c)
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the
Assignee has not undertaken, and will have no obligation, to register any
of the Consideration Shares under the 1933
Act;
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(d)
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the
decision to execute this Agreement and accept the Consideration Shares has
not been based upon any oral or written representation as to fact or
otherwise made by or on behalf of the Assignee and such decision is based
entirely upon a review of information (the "Assignee Information") which
has been provided by the Assignee to the Assignor. If the Assignee has
presented a business plan or any other type of corporate profile to the
Assignors, the Assignors acknowledge that the business plan, the corporate
profile and any projections or predictions contained in any such documents
may not be achieved or be
achievable;
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(e)
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the
Assignor and their advisor(s) have had a reasonable opportunity to ask
questions of and receive answers from the Assignee regarding the
Consideration Shares, and to obtain additional information, to the extent
possessed or obtainable without unreasonable effort or expense, necessary
to verify the accuracy of the information contained in the Assignee
Information, or any business plan, corporate profile or any other document
provided to the Assignors;
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(f)
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the
books and records of the Assignee were available upon reasonable notice
for inspection, subject to certain confidentiality restrictions, by the
Assignors during reasonable business hours at its principal place of
business and that all documents, records and books pertaining to the
Consideration Shares have been made available for inspection by the
Assignors, the Assignors' attorney(ies) and/or
advisor(s);
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-4-
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(g)
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the
Assignee is entitled to rely on the representations and warranties and the
statements and answers of the Assignors contained in this Agreement, and
the Assignors will hold harmless the Assignee from any loss or damage it
may suffer as a result of the Assignors' failure to correctly complete
this Agreement;
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(h)
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the
Assignor will indemnify and hold harmless the Assignee and, where
applicable, its respective directors, officers, employees, agents,
advisors and shareholders from and against any and all loss, liability,
claim, damage and expense whatsoever (including, but not limited to, any
and all fees, costs and expenses whatsoever reasonably incurred in
investigating, preparing or defending against any claim, lawsuit,
administrative proceeding or investigation whether commenced or
threatened) arising out of or based upon any representation or warranty of
the Assignor contained herein, or in any other document furnished by the
Assignor to the Assignee in connection herewith, being untrue in any
material respect or any breach or failure by the Assignor to comply with
any covenant or agreement made by the Assignor to the Assignee in
connection therewith;
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(0
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the
Assignor has been advised to consult its own legal, tax and other advisors
with respect to the merits and risks of an investment in the Consideration
Shares and with respect to applicable resale restrictions and it is solely
responsible (and the Assignee is in any way responsible) for compliance
with applicable resale
restrictions;
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(j)
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the
Consideration Shares are not listed on any stock exchange or automated
dealer quotation system and no representation has been made to the
Assignors that any of the Consideration Shares will become listed on any
stock exchange or automated dealer quotation
system;
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(k)
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neither
the SEC nor any other securities commission or similar regulatory
authority has reviewed or passed on the merits of the Consideration
Shares;
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(1)
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no
documents in connection with this Agreement have been reviewed by the SEC
or any state
securities administrators;
and
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(m)
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there is no
government or other insurance covering any of the Consideration
Shares.
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8. The
Assignor will at all times hereafter execute and deliver, at the request of the
Assignee, all such further documents, deeds and instruments, and will do and
perform all such acts as may be necessary or desirable to give full effect to
the intent and meaning of this Agreement. Without limiting the generality of the
foregoing, the Assignor will execute such financing statements, financing change
statements, notices or directions as may be necessary or advisable to cause all
pertinent offices of public record to amend their records to show the interests
of the Assignee in the Option Agreement.
9. Each of the parties to this Agreement
acknowledges that such party has read this document and fully understands the
terms of this Agreement, and acknowledges that this Agreement has been
executed voluntarily after either receiving independent legal advice, or having
been advised to obtain independent legal advice and having elected not to do
so
-5-
10. This
..Agreement will enure to the benefit of the Assignee and' its successors and
assigns, and. will be binding upon the Assignors and their successors and
assigns.
This
Agreement will be governed by and construed in accordance with the laws in force
in the State of Nevada and the parties submit to the non-exclusive jurisdiction
of the courts of State of Nevada in any proceedings' pertaining to the
Assignment or this Agreement.
12.
This Agreement may be executed in any number of counterparts with the same
effect as if all parties hereto had all signed the same document, Ali
counterparts will be construed together and will constitute one and the same
agreement.
IN
WITNESS WHEREOF the parties hereto have executed this Agreement as of the day
and year first above written.
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Per:
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 |
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Authorized
Signatory
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Kingsmere
Mining Ltd.
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Per:
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Authorized
Signatory
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-6-
Agreement
has been executed voluntarily after either receiving independent legal advice,
or having been advised to obtain independent legal advice and having elected not
to do so
10. This
Agreement will enure to the benefit of the Assignee and its successors and
assigns, and will be binding upon the Assignors and their successors and
assigns.
11. This
Agreement will be governed by and construed in accordance with the laws in force
in the State of Nevada and the parties submit to the non-exclusive jurisdiction
of the courts of State of Nevada in any proceedings pertaining to the Assignment
or this Agreement.
12. This
Agreement may be executed in any number of counterparts with the same effect as
if all parties hereto had all signed the same document. All counterparts will be
construed together and will constitute one and the same agreement.
IN
WITNESS WHEREOF the parties hereto have executed this Agreement as of the day
and year first above written.
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Per:
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Authorized
Signatory
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Kingsmere
Mining Ltd.
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Per:
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 |
-7-
Exhibit
A
Option
Agreement
-8-
TECK
CO, LLC
October
26, 2009
Kingsmere
Mining Ltd.
00000
Xxxxxx Xxxxxx Xxxxx X., Xxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxx XxxXxxxxx,
President
Dear
Sirs:
Re:
Haystack Property, Nevada
Further
to our recent conversations on the above subject, this agreement (the “Agreement”) sets out the
agreement between Teck CO, LLC (“Teck”) and Kingsmere Mining
Ltd. (“Kingsmere”)
whereby Kingsmere is granted an option to acquire an interest in Teck’s
Haystack Property located in the State of Nevada (the “Property”, more fully
described in Schedule “A” attached hereto), subject only to certain options for
Teck to earn back various interests and a royalty reserved to Teck with respect
to the Property. The terms and conditions of this transaction are as
follows:
Unless
otherwise noted, all amounts are in United States dollars.
1. Representations
and Warranties
1.1 Teck
warrants and represents to Kingsmere that:
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(a)
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it
is duly organized and validly existing under the laws of
Colorado;
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(b)
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subject
to the superior rights of the United States of America, it is the sole
legal and beneficial owner of a 100% interest in the
Property;
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(c)
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the
Property is accurately described in Schedule “A” attached
hereto;
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(d)
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it
has not granted or created any mortgages, liens, charges, pledges,
security interests or other financial encumbrances against the Property,
and it has not granted any person the right to use the Property, or to any
royalty or other interest whatsoever in production
therefrom;
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(e)
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the
Property is free and clear of all liens, charges and encumbrances arising
from operations on or related to the Property by Teck (except for taxes
not yet due, other inchoate liens and liens contested in good faith by
Teck) and Teck has not done any work or entered into any commitments
whereby the Property has been or may become
encumbered;
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(f)
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it
has the exclusive right and necessary lawful authority to explore for
minerals on the Property;
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(g)
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the
mining claims and other rights that comprise the Property are in good
standing with respect to Teck paying
taxes;
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(h)
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it
is not a party to any underlying agreements, other than certain
confidentiality agreements with third parties who received data from Teck
in order to evaluate the Property, with respect to the Property including
surface owner agreements, water use agreements or other rights or
interests to the lands covered by the
Property;
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(i)
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Teck
has not received notice of any suits, actions, prosecutions,
investigations or proceedings, actual, pending or threatened, against or
affecting Teck or that relates to or may have an adverse effect on the
Property or Teck’s ownership or rights to explore and develop the
Property; and
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(j)
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it
has the right, power and authority to enter into this Agreement and to
dispose of the Property free of any consent rights, preferential purchase
rights or other restrictions held by other parties, and it has obtained
all necessary third party and internal corporate approvals, consents and
authorizations to enter into this Agreement and complete the transactions
contemplated in this Agreement.
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1.2 Kingsmere
warrants and represents to Teck that:
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(a)
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it
is duly organized and validly existing under the laws of Nevada;
and
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(b)
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it
has the right, power and authority to enter into this Agreement, and it
has obtained all necessary internal corporate approvals, consents and
authorizations to enter into this Agreement and complete the transactions
contemplated in this Agreement.
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2. Covenants
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2.1
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Until
the transfer of the Property to Kingsmere Teck covenants, subject to
Kingsmere providing Teck documentation and funds, to file assessment work
and make all necessary payments as requested by
Kingsmere.
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2.2
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If
the Property is transferred to Kingsmere, during the term of the T-1
Option and any T−2 Option, Kingsmere covenants, subject to Teck providing
Kingsmere documentation and funds, to file assessment work and make all
necessary payments as requested by
Teck.
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TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 509 747-6111 facsimile:
000 000-0000
3. Indemnification
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3.1
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Subject
to §3.4, Teck will indemnify, hold harmless and release Kingsmere, its
officers, directors and employees from and against any and all claims,
causes of action, liabilities, obligations, losses, damages, penalties,
fines, settlements, costs or expenses of any nature whatsoever, including
without limitation reasonable attorneys’ fees and disbursements arising
from:
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(a)
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any
of Teck’s representations or warranties set forth in § 1.1 of this
Agreement being incorrect or untrue when made or any state of facts
contrary to any such representation or warranty;
and
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(b)
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any
breach of Teck’s covenants, duties, obligations or agreements contained in
this Agreement.
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3.2
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Subject
to §3.4, Kingsmere will indemnify and hold harmless and release Teck, its
officers, directors and employees from and against any and all claims,
causes of action, liabilities, obligations, losses, damages, penalties,
fines, settlements, costs or expenses of any nature whatsoever, including
without limitation reasonable attorneys’ fees and disbursements, arising
from:
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(i)
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any
of Kingsmere’s representations or warranties set forth in §1.2 of this
Agreement being incorrect or untrue when made or any state of facts
contrary to any such representation or warranty;
and
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(ii)
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any
breach of Kingsmere’s covenants, duties, obligations or agreements
contained in this Agreement.
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3.3
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Subject
to §3.4, Kingsmere and Teck will indemnify and save harmless the other and
its respective directors, officers and employees from and against any
liability whatsoever for any loss, damage, claim, demand, lien, action or
suit, charge or expense, including legal fees, on account of injury to or
the death of any person, damage to or loss of any property, or
infringement or interference of patent (collectively the “Liabilities”), as
follows:
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(a)
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Kingsmere
will indemnify Teck as aforesaid for Liabilities which arise directly or
indirectly from any work done by or for Kingsmere on or in respect of the
Property during the term of the K-1 Option (as defined in §4.1);
and
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(b)
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Teck
will indemnify Kingsmere as aforesaid for Liabilities which arise directly
or indirectly from any work done by or for Teck on or in respect of the
Property during the term of any T-1 Option or T-2 Option (as defined in §
12. 1, and § 13.1 respectively).
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3.4
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No
party hereto shall be liable to another party hereto in contract, tort or
otherwise for special, incidental, punitive or consequential damages,
including, without limiting the generality of the foregoing, loss of
profits or revenues.
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TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 509 747-6111 facsimile:
000 000-0000
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3.5
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Except
for the provisions of this Agreement providing for elections to contribute
and contributions to programs, Mandatory Programs (as defined in §20.1),
production programs and operating plans, with which the parties must
strictly comply, and except as otherwise provided in this Agreement, if
any party (a “Defaulting
Party”) is in breach or default of any requirement herein set
forth, the other party may give Notice to the Defaulting Party specifying
the breach or default. The Defaulting Party shall not lose any rights
under this Agreement unless promptly and in any event within 30 days after
the giving of Notice (as defined in §31.1) of default given by the other
party, the Defaulting Party has failed promptly to take reasonable steps
to cure the breach or default by the appropriate performance. Upon any
such failure the other party shall be entitled to seek any remedy it may
have on account of such default.
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Option
Terms
4. The
K-1 Option
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4.1
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Subject
as hereinafter provided, Teck hereby grants to Kingsmere the sole,
exclusive and irrevocable right and option to earn, subject to the T-1
Option, T-2 Option and the NSR, an undivided 100% interest in and to
Teck’s interest in the Property (the “K-1
Option”)
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4.2
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If
Kingsmere exercises the K-1 Option, Teck shall, in addition to the T-1
Option and T-2 Option, retain a 2.5% net smelter returns royalty (the
“NSR”) on the
Property which net smelter returns royalty is defined and to be calculated
and paid as set out in Schedule “B” and Kingsmere will register the NSR
against its interest in title.
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4.3
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In
order for Kingsmere to exercise the K-1 Option, Kingsmere must incur,
subject to §4.7 and to events of force majeure, an
aggregate $2,000,000 in Expenditures (as defined in §5) on or before
September 30, 2012 as follows:
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On or Before
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Cumulative Expenditures
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September
30, 2010
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$ | 300,000 | ||
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September
30, 2011
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$ | 700,000 | ||
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September
30, 2012
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$ | 2,000,000 | ||
The first
$100,000 of the Expenditures are a commitment, whereas the balance of the
Expenditures are optional.
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4.4
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Kingsmere
shall, forthwith upon having incurred an aggregate of $2,000,000 in
Expenditures under §4.3, provide Teck Notice, which shall include a
statement in reasonable detail evidencing such Expenditures and a
technical report on the results obtained from such Expenditures (the “K-1 Expenditure
Notice”).
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TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 509 747-6111 facsimile:
000 000-0000
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4.5
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The
“Kingsmere Earn-in Date”
shall be the date, after Kingsmere incurs the Expenditures under
§4.3, that Kingsmere delivers the K-1 Expenditure Notice. On the Kingsmere
Earn-in Date, Kingsmere will have exercised the K-1 Option and earned a
100% interest in the Property subject to the T-1 Option, T-2 Option and
the NSR.
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4.6
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If
Kingsmere fails to incur Expenditures of $100,000 on or before September
30, 2010, Kingsmere will pay Teck, by October 31, 2010, an amount
equivalent to the shortfall of those Expenditures actually incurred by
Kingsmere, in cash together with interest from September 30, 2010 at a
rate, for the period of calculation, as stated by the Bank of America, as
being the prime rate charged by it on US Dollar demand loans to its most
creditworthy domestic commercial customers (the “Prime Rate”) plus 4%,
calculated monthly, until paid; provided that if payment is made by
October 31, 2010, the interest will be
forgiven.
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4.7
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If
Kingsmere fails to incur requisite aggregate Expenditures to exercise the
K-1 Option or to maintain the K-1 Option in good standing Kingsmere may
pay to Teck within 30 days following the Expenditure due date, the amount
of the deficiency and the amount of such deficiency shall thereupon be
deemed to have been Expenditures duly and timely incurred by
Kingsmere.
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5.
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Expenditures
Defined
|
5.1 The
term “Expenditures”
means:
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(a)
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all
costs, expenses, charges and outlays, direct and indirect, incurred from
the date of this Agreement
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(i) by
Kingsmere under the K-1 Option; and
(ii) by
Teck under any T-1 Option and any T-2 Option;
on or in
respect of a Property, without limiting generality, all on-site costs, costs for
prospecting, claim staking, the Property tenure payments, any payments to
holders of surface rights, taxes (excluding taxes which are recoverable such as
GST), mapping, surveying, permitting, geochemical surveys, geophysical surveys,
sampling, assaying, trenching, drilling, geochemical analyses, road building,
drill site preparation, compilation, data analysis, drafting, report writing,
metallurgical testing; metallurgical and economic studies; feasibility studies;
reclamation, and all other project expenditures; and
|
|
(b)
|
a
charge of 10% of all Expenditures incurred under §5.1(a) in lieu of any
fees for administrative services, head office overhead, use of the
corporate infrastructure, and other general services provided by Kingsmere
during the K-1 Option period or Teck during the term of any T-1 Option and
any T-2 Option, including but not limited to costs for officers and their
expenses, secretarial work, legal, accounting, human resources, taxes,
payroll, data processing, employee benefit administration, office rents,
office supplies, and other expenditures made for the benefit of the
exploration work, which shall not be charged directly in §5.1(a)
above.
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 509 747-6111 facsimile:
000 000-0000
|
5.2
|
For
clarity but without limiting the definitions of those terms, there is
distinction between Expenditures, which are costs, expenses, charges and
outlays incurred during the periods in which the K-1 Option, T-1 Option
and T-2 Option are being exercised, and Costs (as defined in § 18. 1),
which are costs, expenses, charges and outlays incurred during the term
the Joint Venture (as defined in § 15.1) is
active.
|
6. Termination
Prior to Exercise of K-1 Option
|
6.1
|
Provided
it has completed the $100,000 in aggregate committed Expenditures under
§4.3 or made payment to Teck pursuant to §4.6, Kingsmere may, on Notice to
Teck at any time prior to exercising the K-1 Option, terminate this
Agreement so long as it is not in default of any of its obligations under
this Agreement. Further, this Agreement shall terminate if Kingsmere fails
to make the requisite Expenditures as set forth in §4.3 within the time
periods for incurring those Expenditures, unless Kingsmere pays the amount
of any deficiency under §4.7. On termination aforesaid, this Agreement
shall, subject as provided below, be of no further force or effect and
Kingsmere shall have no interest in the Property; provided, however, that
Kingsmere shall satisfy any liabilities which are due or accruing due on
the date of termination arising from its operations on or in respect of
the Property and Kingsmere shall:
|
|
|
(a)
|
leave
the Property in good standing with respect to work commitments, the filing
of assessment work and paying of rental fees and taxes for a period of 60
days from the date of termination, free and clear of all liens, charges
and encumbrances arising from operations hereunder (except for taxes not
yet due, other inchoate liens and liens contested in good faith by
Kingsmere) and in good standing with respect to all applicable
environmental, safety and other statutory rules, regulations and orders
arising from or applicable to work done on the Property by
Kingsmere;
|
|
|
(b)
|
complete
all reclamation sufficient to release any reclamation bonds held by state
or federal agencies for exploration and development activities within 180
days of the date of termination;
and
|
|
|
(c)
|
deliver
to Teck, within 90 days of termination, a comprehensive report on all work
carried out by Kingsmere on the Property (limited to factual matters
only), together with all drill cores, assay samples, copies of all maps,
drill logs, assay results and other factual technical data compiled by
Kingsmere with respect to the Property which were not previously delivered
to Teck.
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 509 747-6111 facsimile:
000 000-0000
7. Technical
Committee
|
7.1
|
The
parties shall, as soon as practicable, establish a committee (the “Technical Committee”) to serve as
a forum through which all parties can be actually engaged in the design
and implementation of work plans and budgets (“Programs”) for the
Property and to review Program results from time to time. The Technical
Committee shall remain constituted until the earlier of the formation of a
Joint Venture or the termination of the T-1 Option unexercised. The
Technical Committee’s role is advisory only and is not intended to impede
or obstruct Program approval or exploration activities. Final approval of
Programs shall rest with Kingsmere during the K-1 Option period and with
Teck during the term of any T-1 Option and any T-2 Option period. A party
shall be entitled to representation on the Technical Committee and may be
represented by such individuals as that party considers appropriate for
the subject matter of discussion at the meetings and the nature of the
Program to be considered. Without limiting generality, the Technical
Committee shall:
|
(a) evaluate
the results of Program work;
(b) evaluate
and comment upon:
|
|
(i)
|
the
scope, budget and timing of proposed Programs including all alternative
suggestions or proposals of Technical Committee members;
and
|
|
|
(ii)
|
any
proposed acquisitions and proposed terms of
acquisition.
|
|
7.2
|
Meetings
shall be held on not less than seven days’ Notice from Kingsmere or Teck
and shall be held not less frequently than annually unless otherwise
agreed by all parties. If both parties are in attendance in person or by
conference telephone call, their members may waive in writing the giving
of Notice for any meeting, or the addition of business items that may not
have been included in the itemized agenda either before or after the
meeting.
|
Holding
of Property
|
8.1
|
At
some point following execution of this Agreement, and no later than 30
days after Kingsmere delivers the K-1 Expenditure Notice, Teck shall
transfer its right, title and interest in and to the Property to
Kingsmere. Upon such transfer Kingsmere shall hold title to the Property
in trust for the parties, against which Teck may record a memorandum of
its interest under this Agreement, until the earlier of the termination of
the T-1 Option unexercised or the formation of the Joint Venture, at which
time Kingsmere shall then transfer all right, title and interest in and to
the Property to the Operator and the Operator shall hold the Property
subject to this Agreement.
|
8. Kingsmere’s
Rights and Obligations
|
9.1
|
During
the currency of the K-1 Option and thereafter until the earlier of the
delivery of the T-1 Notice or delivery of the Final Expenditure Notice,
Kingsmere for itself and its employees, agents, contractors,
representatives and affiliates shall have the right and option, as between
Kingsmere and Teck, to:
|
|
|
(a)
|
enter
upon the Property;
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 509 747-6111 facsimile:
000 000-0000
(b) have
exclusive and quiet possession thereof;
|
|
(c)
|
have
the exclusive right to do such prospecting, exploration, development or
other mining work thereon and thereunder as Kingsmere in its sole
discretion may consider advisable and including, without limitations, the
removal of ores, minerals and metals from the Property but only for the
purpose of testing; and
|
|
|
(d)
|
have
the exclusive right to bring upon and erect upon the Property such
facilities and workings (whether fixed or moveable) as Kingsmere may
consider advisable.
|
|
9.2
|
During
the currency of the K-1 Option and thereafter until the earlier of the
delivery of the T-1 Notice or delivery of the Final Expenditure Notice,
Kingsmere shall, prior to November 15th
of each year beginning in 2010, deliver to Teck a statement showing in
reasonable detail the Expenditures incurred by Kingsmere during the
previous 12 month period ending September 30th
and the aggregate Expenditures incurred to the end of such period. Teck
shall have 60 days from the time of receipt of such statement to request
that Kingsmere’s independent external auditors review the accounts and
provide their audit opinion as to the correctness of the statement, and
the audit opinion shall be final and determinative of the amount of
Expenditures incurred for the audited period; provided that, if such audit
opinion discloses a deficiency in the amount of Expenditures required to
be incurred to maintain the K-1 Option in good standing, Kingsmere may,
unless Teck, in its sole discretion, waives the deficiency or permits
Kingsmere to cure the same on the next Program, pay to Teck the amount of
such deficiency within 15 days following receipt of Notice of such audited
results, whereupon such amount shall be deemed to have been Expenditures
incurred during the audited period. Kingsmere will bear the cost of the
audit opinion if Kingsmere’s statement overstated Expenditures by greater
than 5% or if Kingsmere does not pay the amount of the deficiency as
contemplated above, else the cost of the audit opinion shall be borne by
Teck. If Teck does not, within the above 60 day period, request that
Kingsmere’s independent external auditors provide their audit opinion then
such statement shall be deemed to be correct and unimpeachable
thereafter.
|
|
9.3
|
During
the currency of the K-1 Option and thereafter until the earlier of
delivery of the T−1 Notice by Teck and the expiry of the time for Teck to
deliver the T-1 Notice, Kingsmere shall assume all obligations and
liabilities associated with the Property, and in connection therewith
Kingsmere shall:
|
|
|
(a)
|
keep
the Property free and clear of all liens, charges and encumbrances arising
from its operations hereunder (except liens for taxes not yet due, other
inchoate liens and liens contested in good faith by Kingsmere) and shall
proceed with all diligence to contest and discharge any such lien that is
filed and shall keep the Property in good standing by doing all necessary
exploration work and all other acts and things which may be necessary in
that regard and, while Teck holds title to the Property, providing Teck
documentation and funds in advance of any due dates in order for Teck to
file such work and make all necessary payments to maintain tenure to the
Property in good standing;
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 509 747-6111 facsimile:
000 000-0000
|
|
(b)
|
permit
Teck, or its representatives duly authorized by it in writing, at its own
risk and expense, access to the Property at all reasonable times and
access to all factual records in the possession of Kingsmere, its
representatives and agents in connection with work done on or with respect
to the Property;
|
|
|
(c)
|
furnish
Teck with annual reports by November 15th
of each year during the conduct of the work carried out by Kingsmere on or
with respect to the Property and results obtained, together with regular
(no less than quarterly) technical progress updates on the status of
exploration in both printed and digital formats; provided that it will
report any material results immediately and provided further that it will
promptly provide Teck with more frequent reports upon Teck’s
request;
|
|
|
(d)
|
conduct
all work on or with respect to the Property in a manner consistent with
good exploration, engineering and mining practices and in compliance with
all applicable laws, rules, permits, orders and
regulations;
|
|
|
(e)
|
provide
worker's compensation coverage for its
personnel;
|
|
|
(f)
|
arrange
and pay for with an insurer and in a form acceptable to Teck, acting
reasonably:
|
|
|
(i)
|
comprehensive
general insurance with coverage of at least $5.0 million
dollars;
|
|
|
(ii)
|
automobile
liability insurance, having a limit of not less than $2.0 million
inclusive for any one occurrence, and insuring against claims for bodily
injury, including death, and for Property damage arising out of the use of
Kingsmere's owned, leased and non-owned vehicles for the performance of
any activities under this
Agreement;
|
|
|
(iii)
|
if
helicopter or fixed wing aircraft are used in performance of the work
contemplated by this Agreement, policies pertaining to aircraft liability
(having a limit of not less than $1.0 million per seat inclusive for any
one accident or occurrence; and insuring against claims for personal
injury including death) and hull coverage should be included;- 9
-
|
(iv) the
policy of insurance under §9.3(f)(i) shall include clauses that:
|
|
A.
|
define
“additional insureds” as Teck and its affiliates and their directors,
officers, employees and agents with respect to the activities of
Kingsmere, their agents, contractors, licensees and invitees on or in
respect of the Property;
|
|
|
B.
|
contain
a waiver of subrogation in favour of as Teck and its affiliates and their
directors, employees, agents, contractors, licensees and invitees;
and
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 509 747-6111 facsimile:
000 000-0000
|
|
C.
|
confirm
that the insurer shall provide Teck with at least 30 days Notice of
variation, cancellation or termination of the
coverage;
|
|
|
(v)
|
promptly
furnish a Certificate of Insurance, to Teck, c/o Teck Resources Limited’s
Vice President, Risk & Security at the address as stated in §31.1, as
proof of insurance in accordance with §9.3(f)(i);
and
|
|
|
(vi)
|
pay
the full deductible amounts if there is a claim against any policy of
insurance to be provided by Kingsmere under
§9.3(f);
|
|
(g)
|
not
bring contaminants onto the Property except as required by standard
industry practice in connection with the work being done on the Property
and then to handle any such contaminants in a safe and proper
manner;
|
|
(h)
|
at
all times retain any and all liabilities arising from the handling,
treatment, storage, transportation or disposal of environmental or similar
contaminants on or near the Property by Kingsmere or by any of Kingsmere’s
contractors or agents;
|
|
(i)
|
at
its sole cost and expense, remove or take remedial action with regard to
any materials released by Kingsmere or its contractors and agents, into
the environment at, on or near the Property for which any removal or
remedial action is required pursuant to any law, regulation, order or
governmental action, whether enacted, made or declared in force before or
after the date hereof, provided
that:
|
|
|
(i)
|
no
such removal or remedial action shall be taken except after reasonable
advance Notice has been given to Teck;
and
|
|
|
(ii)
|
any
such removal or remedial action shall be undertaken in a manner so as to
minimize any impact to the
Property;
|
so that
at the time this Agreement terminates or Teck elects to exercise its T-1 Option,
the Property and Kingsmere’s work on the Property are compliant with all laws,
including without limitation, environmental laws;
|
(j)
|
not
abandon any portion of the Property, except as required by law, without
the approval of Teck, and if the size of the Property must be reduced in
accordance with mining laws, to consult with Teck prior to the
reduction;
|
|
(k)
|
not,
without the written consent of Teck, not to be unreasonably withheld,
commence a work program for the preparation of a Feasibility Study (as
defined in §21.2) on the Property;
and
|
|
|
(l)
|
not,
without the written consent of Teck, place the Property into commercial
production or commence development of the Property as a
mine.
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 509 747-6111 facsimile:
000 000-0000
10. Continued
Funding by Kingsmere and Final Expenditure Notice
|
10.1
|
After
the Kingsmere Earn-in Date, Kingsmere may continue to incur Expenditures
on the Property and upon Kingsmere expending a minimum aggregate of
$4,000,000 in Expenditures on the Property, Kingsmere shall forthwith
provide Teck Notice (the “Final Expenditure Notice”) of
such Expenditures which shall include a report setting out the nature of
such Expenditures, a complete summary of the results of its work on the
Property and a copy of all technical data not previously delivered to
Teck.
|
11. Forward
Sale of Property
|
11.1
|
In
addition to Teck’s rights under § 12 and § 13, if at any time prior to the
delivery of the Final Expenditure Notice, should Kingsmere transfer, sell,
assign or option its interest or rights under this Agreement or the
Property to a third party, Kingsmere shall contemporaneous to the closing
of such transaction pay Teck 15% of the proceeds (including, but not
limited to, cash, securities, or other assets but excluding the value of
any work commitment) from such
transaction.
|
12. The
T-1 Option
|
12.1
|
Teck
reserves from the K-1 Option unto itself the right and option (the “T-1 Option”) to earn
back from Kingsmere a 51% interest in the Property under the terms set out
in this §12.
|
|
12.2
|
Teck
may elect, at any time from the date of this Agreement and up to the
60th
day
after the Final Expenditure Notice, to invoke the T-1 Option, as
contemplated in §12.1, by delivering Notice to Kingsmere (the “T-1 Notice”) that it is
invoking its T-1 Option.
|
|
12.3
|
If
Teck delivers the T-1 Notice prior to the receipt of the K-1 Expenditure
Notice, Kingsmere shall be deemed to have exercised the K-1 Option and
earned a 100% interest in the Property subject only to the T-1 Option, T-2
Option and NSR.
|
|
12.4
|
Teck
may exercise the T-1 Option by incurring and sole funding aggregate
optional Expenditures equal to 1.5 times the Expenditures incurred by
Kingsmere prior to the T-1 Notice (the “T-1 Requirement”) to a
maximum Expenditure of $6,000,000 (being 1.5 times the $4,000,000 required
for Kingsmere to deliver the Final Expenditure Notice), which Expenditures
must be incurred by Teck, subject to events of force majeure, within a
time period equal to the period of time in months from the date of this
Agreement to the delivery of the T-1 Notice, rounded up to the next
closest month (the “T-1
Term”).
|
|
12.5
|
Subject
to earlier termination hereunder, Teck shall have exercised the T-1 Option
on the date (the “T-1
Exercise Date”) that it has completed the T-1 Requirement in
accordance with §12.4 or §12.6 and delivered Notice thereof to Kingsmere,
which Notice shall include a statement in reasonable detail evidencing its
Expenditures and a technical report on the results obtained from those
Expenditures. On the T-1 Exercise Date, the Property shall be owned by
Teck as to a 51 % interest and Kingsmere as to a 49% interest and, if Teck
hasn’t concurrently delivered the T-2 Notice, a Joint Venture shall be
deemed to be formed under § 15.1(a). On the T-1 Exercise Date the NSR
retained by Teck under §4.2 shall be
extinguished.
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 509 747-6111 facsimile:
000 000-0000
|
12.6
|
If
Teck fails to incur the requisite aggregate Expenditures to maintain the
T-1 Option as contemplated in §12.4, and wishes to exercise the T-1
Option, Teck may pay in cash to Kingsmere, within 30 days after the
Expenditures’ due date, the amount of the deficiency and any amount so
paid shall be deemed to have been Expenditures duly and timely incurred by
Teck.
|
|
12.7
|
The
T-1 Option will expire if Teck does not deliver the T-1 Notice within the
time permitted in § 12.2 and will terminate
if:
|
|
|
(a)
|
Teck
fails to incur the requisite Expenditures as contemplated in § 12.4 and
fails to make a cash payment in lieu of the deficiency pursuant to § 12.6;
or
|
|
|
(b)
|
Teck
elects to terminate the T-1 Option which it may do at any time by giving
Notice to Kingsmere;
|
whereupon
Kingsmere will hold the Property as to 100% subject only to the NSR.
13. The T-2 Option
|
13.1
|
Should
Teck exercise the T-1 Option, Teck will have the right and option (the
“T-2 Option”) to earn back to
an additional 14% interest in the Property (to hold a 65%
interest).
|
|
13.2
|
Teck
may elect, concurrently with delivering Notice under § 12.5 that it has
exercised the T-1 Option, to invoke the T-2 Option by delivering Notice
(the “T-2 Notice”)
to Kingsmere that it is invoking the T-2
Option.
|
|
13.3
|
Teck
may earn back the additional 14% interest in the Property (to hold a 65%
interest) by incurring and sole funding an additional amount equal to the
T-1 Requirement in optional Expenditures (the “T-2 Requirement”),
which Expenditures must be incurred by Teck, subject to events of
force majeure,
within a period of time in months (rounded up to the nearest
month), from the date of the T-2 Notice, equal to 50% of the T-1
Term.
|
|
13.4
|
If
Teck has not incurred the T-2 Requirement within the time period specified
in § 13.3, Teck may pay in cash to Kingsmere, within 30 days of the due
date listed for the Expenditures, the amount of the deficiency and any
amount so paid shall thereupon be deemed to have been Expenditures duly
and timely made or incurred by
Teck.
|
|
13.5
|
Subject
to earlier termination hereunder, Teck shall have exercised its T-2 Option
on the date (“T-2
Exercise Date”) that it has completed the T-2 Requirement in
accordance with § 13.3 or § 13.4 and delivered Notice thereof to Kingsmere
which Notice shall include a statement in reasonable detail evidencing
such Expenditures and a technical report on the results obtained from such
Expenditures. On the T-2 Exercise Date, the Property shall be owned by
Teck as to a 65% interest and Kingsmere as to a 35% interest and a Joint
Venture shall be deemed to be formed under §
15.1(b).
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 509 747-6111 facsimile:
000 000-0000
|
13.6
|
The
T-2 Option will expire if Teck does not deliver the T-2 Notice within the
time permitted in § 13.2 and will terminate
if:
|
|
|
(a)
|
Teck
fails to incur the requisite Expenditures as contemplated in § 13.3 and
fails to make a cash payment in lieu of the deficiency pursuant to § 13.4;
or
|
|
|
(b)
|
Teck
elects to terminate the T-2 Option which it may do at any time by giving
Notice to Kingsmere;
|
whereupon
the Property will be held 51% by Teck and 49% by Kingsmere and a Joint Venture
shall be deemed to be formed under § 15.1(a).
14. Rights
and Obligations during T-1 Option and T-2 Option
|
14.1
|
During
the term of any T-1 Option and any T-2 Option Teck shall have the
exclusive right and option, as between Kingsmere and Teck,
to:
|
|
|
(a)
|
enter
upon the Property;
|
(b) have
exclusive and quiet possession thereof;
|
|
(c)
|
do
such prospecting, exploration, development or other mining work thereon
and thereunder as Teck in its sole discretion may consider advisable
including, without limitation, the removal of ores, minerals and metals
from the Property but only for the purpose of testing;
and
|
|
|
(d)
|
bring
and erect upon, and remove from, the Property such facilities and workings
(whether fixed or moveable) as Teck may consider
advisable.
|
and Teck
shall:
|
|
(e)
|
assume
all obligations and liabilities associated with any leases, licenses and
authorizations in relation to the Property, and in connection therewith
Teck shall have the same rights and obligations as Kingsmere had under
§9.3 during the K-1 Option term;
|
|
|
(f)
|
by
March 1st in
each year, deliver to Kingsmere a statement showing in reasonable detail
the Expenditures incurred by Teck on the Property for the 12 month period
ending December 31st
and the aggregate Expenditures incurred to the end of such period.
Kingsmere shall have the same audit rights with respect to such statement
as did Teck under §9.2 during the K-1 Option
period.
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 509 747-6111 facsimile:
000 000-0000
Joint Venture
Terms
15. Formation,
Funding and Dilution of the Joint Venture
|
15.1
|
A
joint venture (the “Joint
Venture”) shall be deemed to be formed on the later of the T-1
Exercise Date and T-2 Exercise Date or the date that the T-2 Option
terminates or expires unexercised (the “Participation Date”),
to further explore and, if warranted, develop the subject Property,
with the parties’ Joint Venture interests
being:
|
|
|
(a)
|
51%
Teck and 49% Kingsmere if the Joint Venture is formed as a result of §12.5
or § 13.6; or
|
|
|
(b)
|
65%
Teck and 35% Kingsmere if the Joint Venture is formed as a result of
§13.5.
|
|
15.2
|
From
the formation of the Joint Venture, each party shall be liable for its
pro-rata share of Costs and liabilities in accordance with its interest in
the Joint Venture.
|
|
|
15.3
On the Participation Date, the total initial deemed Costs (“TDC”) for the purposes
of the Joint Venture shall be equal to the sum of 100% of all Expenditures
incurred by Teck to the Participation Date plus 100% of all Expenditures
incurred by Kingsmere to the Participation Date. Teck’s initial deemed
Costs shall be an amount equal to Teck’s initial interest in the Joint
Venture on the Participation Date (being 51% or 65% as the case may be)
multiplied by the TDC and Kingsmere’s initial deemed Costs shall be an
amount equal to Kingsmere’s initial interest in the Joint Venture on the
Participation Date (being 49% or 35% as the case may be) multiplied by the
TDC.
|
|
15.4
|
Subsequent
to the Participation Date, the respective interests of the parties shall
be determined from time to time as being equal to the product obtained
by:
|
|
|
(a)
|
multiplying
100% by;
|
|
|
(b)
|
the
respective parties initial deemed Costs on the Participation Date under
§15.3 plus the amount of the respective parties’ contributions to Costs
subsequent to the Participation
Date;
|
|
|
(c)
|
divided
by the TDC plus the amount of all contributions to Costs made subsequent
to the Participation Date by all
parties.
|
|
15.5
|
Prior
to a Production Decision, if a party elects not to contribute its pro-rata
share of Costs of a work program or Feasibility Study, the other parties
may contribute such shortfall pro-rata to their interests and if another
party contributes to the shortfall thereby created the interests of the
parties shall be adjusted according to § 15.4 so that each party holds an
interest in the Joint Venture proportionate to its deemed and actual
contributions. However, if any program is completed with less than 80% of
the budgeted Costs having been incurred, the non-contributing party may
contribute, within 30 days of completion of the program, its proportionate
share of the actual Costs incurred and thereby maintain its
interest.
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
|
15.6
|
If
any party dilutes its interest to less than 10% in the Joint Venture, its
interest shall then be converted to a 5% net profit interest royalty on
the Property (the “NPI”),
as further defined in Schedule
“C”.
|
|
15.7
|
A
party shall be entitled to surrender its interest to the other parties on
Notice to them. A surrender of interest shall not release a party from
liabilities accrued prior to the effective surrender date. Should the
other parties not consent to receive the interest offered for surrender
under this § 15.7 then the Joint Venture shall be terminated and the
assets shall be liquidated or sold and the assets or proceeds from the
sale thereof distributed to the parties, net of liabilities hereunder or
related thereto, in accordance with their interests in the Joint Venture.
Each party shall be responsible for its cost share of all costs and
expenses related to such termination and
liquidation.
|
|
15.8
|
Upon
payment for Costs incurred by the Operator under the Joint Venture, a
partycontributing to those Costs shall be entitled to all tax benefits
with respect thereto.
|
16. Management
Committee
|
16.1
|
Upon
the formation of the Joint Venture, a management committee (the “Management Committee”)
shall be formed to manage all exploration, development and
operating programs on the Property with Kingsmere and Teck each having two
representatives. Decisions will be made by simple majority vote based on
the parties’ interests and each party’s representatives shall have a
collective vote equal to the interest held by the party they
represent.
|
17. Operator
|
17.1
|
Except
as otherwise specifically provided for herein to the contrary, Teck shall
be the initial operator (the “Operator”) of all
programs on the Property, and shall remain as Operator so long as Teck
holds the single largest interest in the Joint Venture. The Operator will
be responsible for the daily direction of exploration, development and
mining activities which it carries out on behalf of the Joint Venture and,
in connection therewith, will have the same rights and obligations as set
out in §9.1, §9.2 and §9.3(a) through
§9.3(f).
|
18. Costs
Defined
18.1 "Costs" means:
|
|
(a)
|
all
costs, expenses, charges and outlays, direct and indirect, made or
incurred by the Operator on or in respect of the Property after the
formation of the Joint Venture; and
|
|
|
(b)
|
an
Operator's fee as follows:
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
|
|
(i)
|
an
operator's fee of 10% of all costs, expenses, changes and outlays under §
18.1(a) incurred during the Joint Venture exploration period (prior to a
Production Decision); and
|
|
|
(ii)
|
an
operator's fee of 3% of costs incurred after a Production Decision is made
for the Property.
|
This fee
is intended as a reimbursement of the costs of the time incurred by head office
management and support functions in respect of approval programs on the
Property, which is not billed as cost under § 18.1(a). The fee has been
established on the basis that the party acting as Operator shall not profit nor
suffer loss by virtue of providing these services. This fee shall not be subject
to audit but may be reviewed by the parties from time to time.
19. Exploration
Programs
|
19.1
|
Prior
to a Production Decision, the Operator shall propose draft work programs,
by February 28th
of
each year, for Management Committee approval and carry out approved
programs. Any Feasibility Study (as defined in §21.2) shall be prepared
under a separate program and budget and shall be for such term as the
Operator feels is appropriate for the completion of such Feasibility
Study.
|
|
19.2
|
Each
party may, within 30 days of Management Committee approval, elect to
contribute its proportionate share of the Costs required to conduct each
program. If a party (a “Non-Contributor”) elects or
is deemed to have elected not to contribute its proportionate share of a
program, the other party (a “Contributor”) that has
elected to contribute its proportionate share of the program may give
Notice to the Operator and the Non-Contributor stating that it will
contribute, in addition to its own proportionate share, the proportionate
share of the Non-Contributor.
|
|
19.3
|
Notwithstanding
§20.1, the Operator will not proceed with any program which is not fully
subscribed. If the parties fully subscribe to a program, the Operator will
proceed with such program.
|
|
19.4
|
The
Operator may invoice for exploration Costs incurred or to cash call
reasonably in advance of requirements. If a party has elected to
contribute to a program and does not pay the amount invoiced for said
program within 30 days, the Operator may demand payment. If payment is not
made within 30 days of demand, and subject to §20.1, the Operator may, in
its sole discretion, elect to
either:
|
|
|
(a)
|
advance
all of the unpaid Cost share of the defaulting party. The party or parties
making the advance will be entitled to recover the amount so paid,
together with interest thereon from the date so paid at the Prime Rate
plus 2% calculated monthly. The party or parties making the advance shall
have a lien against the defaulting party’s interest, which it may enforce
by selling the defaulting party’s interest;
or
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
|
|
(b)
|
pay
the amount of the defaulted payment, in which case the defaulting party
shall be deemed to have incurred dilution at a rate equal to twice the
standard dilution rate. Thereupon the interests of the defaulting party
and each party that made payment shall be adjusted and the deemed total
Costs of those parties shall be adjusted to reflect the interest held
(i.e.: the defaulting parties deemed Costs shall be reduced by an amount
which is equal to the defaulted payment (in this § 19.4 the “reduced amount”) and
the total deemed Costs of the parties who made payment on behalf of the
defaulting party shall be increased by the payment made plus an equal
share of the reduced amount); provided that if a party's interest is
reduced to less than 10% it shall be deemed to have assigned and conveyed
its interest to the other party, or parties as the case may be, and in
consideration therefore the defaulting party will be entitled to receive a
NPI capped at such party’s actual contributions to Costs hereunder. The
remaining parties shall apportion the assigning party’s deemed Costs
amongst them pro rata to their interests and adjust their interests
according to § 15.4. If a written demand is made as aforesaid, it shall
contain a reminder to the party upon which demand is being made that its
interests under this Agreement will be converted to a NPI interest if
payment of its proportionate share is not made as
demanded.
|
20. Mandatory
Program
|
20.1
|
If,
in any year prior to a Production Decision, there is no approved program
and circumstances are such that the Operator must incur Costs in order to
maintain tenure to the Property, to satisfy contractual obligations or
obligations imposed by law or to prevent waste or protect life and
property, the Operator shall be entitled to propose a program (the "Mandatory Program") of
Costs to maintain tenure to the Property, to satisfy contractual
obligations that have been entered into as the result of a previously
approved program and to satisfy obligations imposed by law or to prevent
waste or protect life and property. The Mandatory Program shall be deemed
to be approved and each of the parties shall be obligated to contribute
its proportionate share of Costs. If payment is not made within 30 days of
written demand, the other party may elect to advance the amount of the
defaulted payment and the defaulting party shall be deemed to have
assigned and conveyed its interest to the other party, or parties as the
case may be, and in consideration therefore the defaulting party will be
entitled to receive a NPI capped at such party’s actual contributions to
Costs hereunder. The remaining parties shall apportion the assigning
party’s deemed Costs amongst them pro rata to their interests and adjust
their interests according to §15.4. If a written demand is made as
aforesaid, it shall contain a reminder to the party upon which demand is
being made that its interests under this Agreement will be converted to a
NPI interest if payment of its proportionate share is not made as
demanded.
|
21. Feasibility
Study
|
21.1
|
The
Management Committee may direct the Operator to prepare a Feasibility
Study, as herein defined, as a separate program. The Feasibility Study is
to be in a form which the Operator, acting reasonably and in good faith,
considers suitable for each of the parties to present to a lender in an
application for production financing for their respective shares of mine
construction Costs if the Feasibility Study was assumed to be positive and
a production decision was assumed to be
made.
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
|
21.2
|
“Feasibility Study”
means a study prepared pursuant to this Agreement that shows the
feasibility of placing the Property or part thereof into commercial
production. Any Feasibility Study prepared pursuant to this Agreement
shall contain the geological, engineering, operating, economic and other
factors which the Operator considers relevant, in sufficient detail to
provide a comprehensive analysis of the economic and technical viability
of constructing and operating a mine on the Property. The Feasibility
Study shall examine the following matters: ore reserves; mining methods;
metallurgy and processing (including metal recovery); environment,
tailings and waste disposal; capital and operating cost estimates;
manpower, social and community affairs; transportation methods and costs;
marketing; project financing alternatives; a sensitivity analysis; such
other matters as the Operator considers appropriate. The Feasibility Study
shall include at least the following
information:
|
|
|
(a)
|
a
description of that part of the Property to be covered by the proposed
mine;
|
|
|
(b)
|
the
estimated recoverable reserves of minerals and the estimated composition
and content thereof;
|
|
|
(c)
|
the
proposed procedure for development, mining and
production;
|
|
|
(d)
|
results
of ore amenability tests;
|
|
|
(e)
|
the
nature and extent of the facilities proposed to be acquired which may
include mill facilities, if the size, extent and location of the ore body
makes such mill facilities feasible, in which event the study shall also
include a preliminary design for such
mill;
|
|
|
(f)
|
the
total costs, including capital budget, which are reasonably required to
purchase, construct and install all structures, machinery and equipment
required for the proposed mine, including a schedule of timing of such
requirements;
|
|
|
(f)
|
all
environmental impact studies and
costs;
|
|
|
(g)
|
the
period in which it is proposed the Property shall be brought to commercial
production;
|
|
|
(h)
|
such
other data and information as are reasonably necessary to substantiate the
existence of an ore deposit of sufficient size and grade to justify
development of a mine, taking into account relevant business, tax and
other economic considerations; and
|
|
|
(i)
|
working
capital requirements for the initial four months of operation of the
Property as a mine or such longer period as may be reasonably justified in
the circumstances.
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
22. Production
Decision and Funding
|
22.1
|
The
Management Committee shall not meet to consider a Feasibility Study any
sooner than 60 days after it was delivered to each party, unless the
parties agree to an earlier meeting. Any decision to place the Property
into production is to be based on a production plan approved by the
Management Committee and based on an approved Feasibility Study with such
modifications, if any, as the Management Committee considers necessary or
desirable.
|
|
22.2
|
The
Management Committee may approve a production plan (including a mine
construction Cost estimate, with reasonable allowance for contingencies,
which the Management Committee considers necessary to implement the
production plan, together with a schedule of advances which the parties
shall be required to make in respect of Costs required to construct and to
operate the mine) and the giving of a Notice to each of the parties that a
decision has been made to construct a mine on the Property (a “Production
Decision”).
|
|
22.3
|
Each
party may, by Notice within 60 days of receipt of Notice of a Production
Decision, elect to participate in placing the Property into production by
committing to contribute its proportionate share of the Costs required to
construct and to operate the mine in proportion to its interest, or some
lesser share but at least 10%. If a party so elects to contribute, it
shall be deemed to hold an interest equivalent to that percentage which it
elected to contribute. If a party elects not to contribute at least a 10%
share, it shall be deemed to have assigned and conveyed its interest to
the other party, or parties as the case may be, and in consideration
therefore the party will be entitled to receive a NPI. If a party elects
to fund some lesser share than its entire interest percentage, but at
least 10%, the interest that was forgone in the election shall be deemed
to have been assigned to the other party, for no consideration, if such
other party elects to increase its contribution thereby. If elections have
not been made to fully fund the mine construction Costs then the
production plan shall be deemed
withdrawn.
|
|
22.4
|
A
party that elected to contribute to mine construction Costs as
contemplated in §22.3 shall separately provide its share of mine
construction Costs. Solely in order to secure loans to meet its
contributions toward mine construction Costs, a party may pledge,
mortgage, charge or otherwise encumber its interest provided that pledgee,
mortgagee, holder of the charge or encumbrance undertakes in writing with
all of the parties that:
|
|
|
(a)
|
its
security shall be held subject to this
Agreement;
|
|
|
(b)
|
its
remedies under that security shall be limited to the sale of the whole
(but only the whole) of the encumbering party’s secured interest;
and
|
|
|
(c)
|
its
security and right of payment shall be subordinate to the terms of this
Agreement.
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
23. Mine
Construction and Operations
|
23.1
|
A
mine shall be constructed substantially in conformity with the production
plan approved under §22.2, but subject to the right of the Management
Committee to approve such reasonable variations in construction as it may
deem advisable. Upon mine construction commencing the Operator shall
provide monthly progress reports to the
non-Operator.
|
|
23.2
|
Commencing
with the completion date of mine construction, all mining operations shall
be planned and conducted and all estimates, reports and statements shall
be prepared and made on the basis of annual operating plans approved by
the Management Committee. Operating plans will be decided by the
Management Committee on a calendar year basis taking into reasonable
account the views of the parties in respect of the operating plans with
the intent that operating plans will be designed so that the mine is
operated at production rates contemplated in the Feasibility Study but
subject to the right of the Management Committee to approve such
reasonable variations in production rates as it may deem advisable. If the
Management Committee is deadlocked over the first or any subsequent
operating plan, the operating plan proposed by the Operator will prevail
provided the budget does not exceed the budget forecast for that year in
the Feasibility Study, or a forecast subsequently unanimously approved by
the Management Committee, plus 10%.
|
|
23.3
|
The
Operator may invoice for mine construction Costs or mine operating Costs
incurred or to cash call reasonably in advance of requirements. If a party
does not pay the amount invoiced within 30 days, the Operator may demand
payment. If payment is not made within 30 days of demand the other party
may elect to pay all or a portion of the unpaid cost share of the
defaulting party. If the other party advances such unpaid share, then it
shall be entitled to recover the amount so paid, together with interest
thereon from the date so paid at a per annum rate equal to Prime Rate plus
2%, calculated monthly. The party making the advance shall have a lien
against the defaulting party’s interest and shall
have:
|
|
|
(a)
|
the
right to take possession of all or a portion of the defaulting party’s
interest in the Property and to sell, or purchase, such interest to
recover the amount of such default;
|
provided
that
|
|
(b)
|
if
the Property is in production the party making the advance will, in the
interim of proceeding under §23.3(a) above, have a prior and a first right
to receive, sell and retain the profits from the share of mineral products
of the defaulting party until such party has received proceeds of a value
equal to (after the costs of sale of the mineral products and costs of
enforcement of the lien) the amount advanced, together with interest
thereon at the rate specified.
|
|
23.4
|
The
Management Committee may temporarily suspend or permanently terminate
operations pursuant to a suspension or closure plan approved by the
Management Committee. The definitive agreement contemplated under §33.2
shall provide for suspension of operations during sustained periods of
sustained negative operating cash flow and a process for resumption of
suspended operations.
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
24. Abandonment
of Property
|
24.1
|
If
the Management Committee elects to abandon any mineral claim comprising
the Property and any party (the “Contesting Party”) has
voted against such abandonment, then each party shall be notified promptly
of such abandonment at least 60 days prior to the anniversary of the
recording date for the claim to be abandoned. If the Contesting Party,
within 30 days of receiving a Notice of abandonment, notifies the
Management Committee that the Contesting Party wishes to acquire the
abandoned claim, then the parties shall cause a transfer of the claim to
be abandoned to the Contesting Party as soon as practicable
thereafter.
|
25. Indemnification
During Joint Venture
|
25.1
|
Subject
to §25.2 and §25.5, following the formation of the Joint Venture, each
party shall indemnify and save the Operator harmless from and against any
loss, liability, claim, demand, damage, expense, injury and death,
including legal fees, resulting from any act or omission of the Operator
or its officers, employees or
agents.
|
|
25.2
|
Notwithstanding
§25.1, the Operator shall not be indemnified nor held harmless by any of
the parties for any loss, liability, claim, demand, damage, expense,
injury or death (including, without limiting the generality of the
foregoing, legal fees) resulting from the negligence or willful misconduct
of the Operator or its officers, employees or
agents.
|
|
25.3
|
An
act or omission of the Operator or its officers, employees or agents done
or omitted to be done:
|
|
|
(a)
|
at
the direction, or within the scope of the direction, of the Management
Committee; or
|
|
|
(b)
|
with
the concurrence of the Management Committee;
or
|
unilaterally
and in good faith by the Operator to protect life or property; shall be deemed
not to be negligence or willful misconduct provided that the Operator has
otherwise performed its duties and obligations as contemplated in §
17.1.
|
25.4
|
The
obligation of the other Parties to indemnify and save the Operator
harmless pursuant to §25.1 shall be in proportion to their respective
interest in the Joint Venture as at the date that the loss, liability,
claim, demand, damage, expense, injury or death occurred or
arose.
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
|
25.5
|
The
Operator shall not be liable to any other party nor shall any party be
liable to the Operator in contract, tort or otherwise for any special or
consequential damages, including, without limiting the generality, loss of
revenues or profits.
|
26. Marketing
Rights
|
26.1
|
A
party contributing to mine construction Costs and mine operating Costs
shall take, in kind, its proportionate share of any minerals produced and
to separately dispose of the same. Kingsmere shall appoint Teck as their
sole marketing agent to sell and dispose of their share of all base metals
or base metal concentrates produced from the Property. Kingsmere and Teck
shall negotiate in good faith as to the commercially competitive terms
under which Teck shall market Kingsmere’s share of such
products.
|
Terms Applicable to the
Entire Agreement
The
following terms apply to the K-1 Option, T-1 Option, T-2 Option and Joint
Venture phases:
27. Restrictions
On Alienation
|
27.1
|
Except
in accordance with this Agreement no party shall transfer, sell, dispose
or encumber its interest in the Property or rights under this
Agreement.
|
27.2 No
party shall institute any proceedings to partition the Property.
|
27.3
|
Subject
to §27.4 and §27.5, each party shall have the right to transfer, sell or
assign its interest or rights under this Agreement to a third party. For
greater certainty, a party wishing to dispose of its interest or rights
under this Agreement does not have to offer to sell all or any such
interest or rights under this Agreement to the other
party.
|
|
27.4
|
Prior
to Kingsmere Earn-in Date, should Kingsmere transfer, sell or assign its
interest or rights under this Agreement to a third party such transfer,
sale or assignment shall be subject to Kingsmere unconditionally
guaranteeing to Teck the due and punctual payment by such assignee of any
shortfall in the Expenditures and any interest as contemplated in §4.6 of
this Agreement.
|
|
27.5
|
Any
allowable transfers under this §27 are subject to: (a) the transferee
delivering, in a form acceptable to the other party, a document whereby it
agrees to be bound by, and comply with, the terms of this Agreement; and
(b) such assignment does not result in any one party holding less than a
10% interest in the Property and if a party assigns, transfers, sells or
disposes of an interest in this Agreement or the Property to an affiliate,
it shall, so long as such party remains an affiliate covenant to cause
such affiliate to perform all of the obligations on its part to be
performed under this Agreement so long as such party remains an
affiliate.
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
28. Area
of Interest
|
28.1
|
During
the term of this Agreement and any Joint Venture formed hereunder, there
shall be an area of interest around the Property which will comprise any
lands within the area of interest, inclusive of the Property, as the area
of interest is described on the attached Schedule “A1”. If either party
stakes or acquires any surface or water rights or mineral Property within
the area of interest, it will offer to have those rights or Property
included in this Agreement; it being agreed that the parties shall consult
each other prior to making any acquisitions of lands held by third parties
within the area of interest. The other party shall have 30 days to elect
whether to accept that offer and, where appropriate, pay its share of the
costs of acquisition; failing which election and payment, the acquiring
party may retain the rights or Property so acquired free of the terms of
this Agreement. This Agreement shall not restrict the rights of either
party to acquire mineral rights or other Property outside the area of
interest.
|
|
28.2
|
If
the K-1 Option terminates the area of interest provision shall remain in
effect as follows:
|
|
|
(a)
|
in
the case of Kingsmere’s obligations to Teck, for 120 days after Kingsmere
has delivered a comprehensive report under §6.1(c) to Teck in respect of
Kingsmere’s work on the Property;
and
|
(b) shall
terminate immediately with respect to Teck’s obligations to Kingsmere. 29.Force Majeure
|
29.1
|
A
party may claim force
majeure if such party is prevented from or delayed in performing
any obligation under this Agreement by any cause beyond its reasonable
control, excluding only lack of finances, but including, without
limitation, acts of God, strikes, lockouts, or other industrial disputes,
laws, rules and regulations or orders of any duly constituted court or
governmental authority, acts of terrorism, acts of the public enemy, war,
insurrection, riots, fire, storm, flood, unusually harsh weather causing
delay, explosion, government restriction, failure to obtain any approvals
required from regulatory authorities or unavailability of equipment,
materials or transportation (provided the approvals were properly applied
for and pursued in good faith and on a timely basis or the equipment,
materials or transportation were sought in a timely way), any delay by a
regulatory authority in renewing a tenure to the Property or, where a
party is entitled thereto, to a higher form of tenure being issued
(provided applications therefor were made reasonably in advance of the
tenure due date and pursued in good faith), interference by third party
interests groups (including environmental lobbyists and First Nations or
indigenous peoples’ groups) or other causes whether of the kind enumerated
above or otherwise, then the time for the performance of that obligation
shall be extended for a period equivalent to the total period the cause of
the prevention or delay persists regardless of the length of such total
period. A party may also claim force majeure, if such
party, acting reasonably, believes that social or political unrest in the
region of the Property or the threat of that unrest will endanger the
safety of its employees or the employees of its contractors if the party
were to continue with the work program unless such social or political
unrest is caused by action or inaction by that party. The party that
claims force majeure
shall promptly notify the other party and shall take all reasonable
steps to remove or remedy the cause of the prevention or delay insofar as
it is reasonably able to do so and as soon as possible. The party claiming
force majeure
will provide the other party with a regular a written report
summarizing events that have occurred and prospects for
resolution.
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
30. Confidentiality
and Disclosure
|
30.1
|
During
the term of this Agreement, all information and data concerning the
Property shall generally be kept confidential and, except to the extent
required by law or in connection with the customary reporting
requirements, investor relations activity or financing activities of a
party or its affiliates, shall not be disclosed to any person other than
an affiliate without the prior consent of the other party, which consent
shall not unreasonably be withheld, conditioned or
delayed.
|
30.2 A
party (or its affiliates) proposing:
|
|
(a)
|
a
press release; or
|
|
|
(b)
|
other
written public disclosure, to the extent that such public disclosure
contains material information not previously publicly
disclosed;
|
relating
to the Property, or the terms of this Agreement, work thereon, or the activities
of the parties or their affiliates with respect thereto, shall provide a copy to
the other party for its information and comments using its commercially
reasonable efforts to ensure it is provided at least 3 business days (being a
business day in Vancouver, B.C. and Reno, Nevada, a “Business Day”), prior to
release. Any comments that the receiving party may make shall not be considered
certification by the other party of the accuracy of the information in such
release, or a confirmation by it that the content of such release complies with
the rules, policies, by-laws and disclosure standards of the applicable
regulatory authorities or stock exchanges. If the receiving party fails to
provide comments within said time period the providing party may, subject to
§30.3 make the proposed release.
|
30.3
|
Each
party shall obtain prior approval of the other party before issuing any
press release, other public disclosure or public statement using the other
party’s name, the name of any of the officers, directors or employees of
the other party, or the name of any of its affiliates. The foregoing
prohibition shall not apply if disclosure of the other party’s name is
required, in the opinion of counsel to a party, by applicable public
disclosure requirements however in such a case the party wishing to make
the disclosure must provide a copy to the other party for its information
and comments using its best efforts to ensure it is provided at least 3
Business Days prior to release. However, such approval shall not be
considered certification by the other party of the accuracy of the
information in such release, or a confirmation by it that the content of
such release complies with the rules, policies, by-laws and disclosure
standards of the applicable regulatory authorities or stock
exchanges.
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
|
30.4
|
For
greater certainty and notwithstanding the foregoing, the parties
acknowledge and agree that the provisions of §30.1 and §30.2 shall not
operate so as to prevent either party from complying with its timely
disclosure obligations under applicable law and
regulations.
|
31. Notices
|
31.1
|
Any
notice (“Notice”),
direction or other instrument given hereunder shall be in writing
and will, if delivered, be deemed to have been given and received on the
Business Day following the day it was delivered and, if sent by facsimile
prior to 5:00 p.m. local time of the place of receipt), be deemed to have
been given or received on the Business Day following the day it was so
sent, or in the case of facsimile sent outside normal business hours, on
the next following Business Day. Any Notice to be given under this
Agreement will be addressed as
follows:
|
If to
Teck:
Teck CO,
LLC,
Suite
300, 000 Xxxxx Xxxxxxxxxx Xxxx.
Xxxxxxx,
XX 00000 XXX
Attention:
President
Fax (000)
000-0000
With a
copy to Teck Resources
Limited:
Teck
Resources Limited
0000 -
000 Xxxxxxx Xxxxxx
Xxxxxxxxx,
XX
Xxxxxx
X0X
0X0
Attention:
Corporate Secretary
Fax:
(000) 000-0000
If to
Kingsmere
at:
Kingsmere
Mining Ltd.
00000
Xxxxxx Xxxxxx Xxxxx X.,
Xxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention:
President
Fax:
(000) 000-0000
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
Any party
may at any time give to the other Notice of any change of address of the party
giving such Notice and from and after the giving of such Notice, the address or
addresses therein specified will be deemed to be the address of such party for
the purposes of giving Notice hereunder.
32. Termination
32.1 This
Agreement shall terminate upon the occurrence of the earliest of:
|
|
(a)
|
a
termination of the K-1 Option pursuant to
§6;
|
(b) except
with respect to Teck’s NSR royalty, the expiry of T-1 Option
unexercised;
|
|
(c)
|
except
with respect to a NPI royalty received by a party under § 15.6, § 19.4(b),
§20.1 or §22.3, one party acquiring 100% interest in the Property after
formation of the Joint Venture; or
|
|
|
(d)
|
sale
or other disposition of the Property and other assets following the
written agreement by the parties to wind down and terminate the Joint
Venture.
|
33. Definitive
Agreement
|
33.1
|
This
Agreement shall be a binding agreement between the parties, until such
time, if any, as a more definitive is executed, that shall govern joint
operations on or in respect of the
Property.
|
|
33.2
|
After
the execution of this Agreement, and prior to Teck delivering the T-1
Exercise Notice, Teck’s solicitors shall prepare a definitive agreement,
which the parties shall endeavour to settle in a timely
fashion.
|
34. Governing
Law
|
34.1
|
This
Agreement shall be governed by the laws of the State of Nevada and the
parties agree to attorn to the jurisdiction of the courts of the State of
Nevada on any legal proceedings related to this
Agreement.
|
35. General
|
35.1
|
This
is the entire agreement between the parties relating to the Property and
supersedes all previous negotiations and communications related to the
terms set out in this letter.
|
|
35.2
|
A
Memorandum of this Agreement substantially in the form of Schedule “D”
shall be recorded with the Pershing County, Nevada recording office after
execution of this Agreement.
|
|
35.3
|
Each
of the parties shall do all such further acts and execute and deliver such
further deeds and documents as shall be reasonably required in order fully
to perform the terms of this
Agreement.
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
|
35.4
|
No
modification of this Agreement shall be valid unless made in writing and
duly executed by the parties.
|
|
35.5
|
The
rights and obligations of the parties shall be
several.
|
|
35.6
|
Nothing
contained in this Agreement shall be construed as creating a partnership
or in imposing any fiduciary duty on any
party.
|
|
35.7
|
The
failure of a party to insist on the strict performance of any provision of
this Agreement or to exercise any right, power or remedy upon a breach
hereof shall not constitute a waiver of any provision of this Agreement or
limit the party’s right thereafter to enforce any provision or exercise
any right.
|
|
35.8
|
Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall be ineffective in such jurisdiction only to the extent
of such prohibition or unenforceability without affecting the remaining
provisions of this Agreement.
|
|
35.9
|
This
Agreement may be executed in counterparts and by facsimile, each of which
when so executed shall be deemed an original, and such counterparts shall
together constitute but one and the same
instrument.
|
|
35.10
|
This
Agreement shall be read with such changes in gender or number as the
context shall require.
|
|
35.11
|
The
captions in this Agreement have been provided for ease of reference and
shall be disregarded in interpreting this
Agreement.
|
|
35.12
|
Unless
otherwise stated, a reference to an Article means an Article of this
Agreement and the symbol “§” followed by a number or some combination of
numbers and letters refers to the provision of this Agreement so
designated and the symbol “§” followed by a letter within a provision
refers to a clause within such provision. A reference to “this Agreement”,
“hereof”, “hereunder”, “herein” or words of similar meaning, means this
agreement including the schedules hereto, together with any amendments
thereof.
|
|
35.13
|
Time
is of the essence in this Agreement and the performance by the parties of
their respective duties and obligations
hereunder.
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
If the
terms set out above are satisfactory please sign all copies of this Agreement
and return three copies to Teck. Upon receipt of the signed copy this Agreement
shall become a binding and enforceable agreement which will continue in effect
until such time, if any, as it is replaced by a more formal and comprehensive
agreement.
Yours
truly,
TECK
CO, LLC
|
By:
|
||
|
C.
Xxxxx XxXxxxx
|
||
|
President
|
||
|
Agreed
this 26th
day of October 2009
|
||
|
KINGSMERE
MINING LTD.
|
||
|
By:
|
||
|
[Title:
|
]
|
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
Page
B-1
This is
SCHEDULE “B” to the
Haystack Agreement between
Teck CO, LLC and Kingsmere Mining
Ltd.
dated
October 26, 2009
|
NET
SMELTER RETURNS ROYALTY
|
1 THE ROYALTY
1.01 An
NSR royalty has been reserved pursuant to the Agreement. The royalty shall be
2.5% of Net Smelter Returns.
2 DEFINITION
2.01 "Net Smelter Returns" for
purposes of the Agreement are defined as follows:
(a) where
all or a portion of the ores or concentrates derived from the Property are sold
as ores or concentrates, the Net Smelter Returns shall be the gross amount
received from the purchaser following sale thereof after deduction
of:
(i) if
applicable under the sale contract, of all smelter charges, penalties and other
deductions;
(ii) all
costs of transporting and insuring the ores or concentrates from the mine to the
smelter or other place of final delivery; and
(iii) sales,
use, severance, excise, net proceeds of mine, and ad valorem taxes and any tax
on or measured by mineral production, but excluding income taxes of the
Royaltypayor; and
(b) where
all or a portion of the said ores or concentrates derived from the Property are
treated in a smelter and a portion of the metals recovered therefrom are
delivered to, and sold by Royaltypayor, the Net Smelter Returns shall be the
gross amount received from the purchaser following sale of the metals so
delivered, after deduction of:
(i) all
smelter charges, penalties and other deductions;
(ii) all
costs of transporting and insuring the ores or concentrates from the mine to the
smelter; and
(iii) if
applicable under the smelter contract, all costs of transporting and insuring
the metals from the smelter to the place of final delivery by the purchaser;
and
(iv) sales,
use, severance, excise, net proceeds of mine, and ad valorem taxes and any tax
on or measured by mineral production, but excluding income taxes of the
Royaltypayor.
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
Where any
ores or concentrates are sold to, or treated in, a smelter owned or controlled
by Royaltypayor, the pricing for that sale or treatment will be established by
Royaltypayor on an arms-length basis so as to be fairly competitive with
pricing, net of transportation, insurance, treatment charges and other related
costs, then available on world markets for product of like quantity and
quality.
3 PAYMENT OF NET SMELTER
RETURNS
3.01 If
a party becomes entitled to a Net Smelter Returns royalty pursuant to the
Agreement, the party paying the Net Smelter Returns (the “Royaltypayor”) shall
calculate the Net Smelter Returns and the sums to be disbursed to the party
receiving the Net Smelter Returns (the “Royaltyholder”) as at the end
of each calendar quarter.
3.02 The
Royaltypayor shall, within 60 days of the end of each calendar quarter, as and
when any Net Smelter Returns are available for distribution:
(a) pay
or cause to be paid to the Royaltyholder that percentage of the Net Smelter
Returns to which the Royaltyholder are entitled under the
Agreement;
(b) deliver
to the Royaltyholder a statement indicating:
(i) the
gross amounts received from the purchaser contemplated in §2.01 of this Schedule
“B”;
(ii) the
deductions therefrom in accordance with §2.01 of this Schedule “B”;
(iii) the
amount of Net Smelter Returns remaining; and
(iv) the
amount of those Net Smelter Returns to which the Royaltyholder are
entitled;
supported
by such reasonable information as to the tonnage and grade of ores or
concentrates shipped as will enable the Royaltyholder to verify the gross amount
payable by the smelter or other purchaser.
4 ADJUSTMENTS AND
VERIFICATION
4.01 Payment
of any Net Smelter Returns by Royaltypayor shall not prejudice the right of
Royaltypayor to adjust any statement supporting the payment; provided, however,
that all statements presented to the Royaltyholder by Royaltypayor for any
quarter shall conclusively be presumed to be true and correct upon the
expiration of 12 months following the end of the quarter to which the statement
relates, unless within that 12-month period Royaltypayor gives Notice to the
Royaltyholder claiming an adjustment to the statement which will be reflected in
subsequent payment of Net Smelter Returns.
4.02 Royaltypayor
shall not adjust any statement in favour of itself more than 12 months following
the end of the quarter to which the statement relates.
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
4.03 The
Royaltyholder shall, upon 30 days' Notice in advance to Royaltypayor, have the
right to request that Royaltypayor have its independent external auditors
provide their audit certificate for the statement or adjusted statement, as it
may relate to the Agreement and the calculation of Net Smelter
Returns.
4.04 The
cost of the audit certificate shall be solely for the Royaltyholder's account
unless the audit certificate discloses material error in the calculation of Net
Smelter Returns, in which case Royaltypayor shall reimburse the Royaltyholder
the cost of the audit certificate. Without limiting the generality of the
foregoing, a discrepancy of one percent in the calculation of Net Smelter
Returns shall be deemed to be material.
5 ROYALTYPAYOR TO DETERMINE
OPERATIONS
5.01 The
Royaltypayor will have complete discretion concerning the nature, timing and
extent of all exploration, development, mining and other operations conducted on
or for the benefit of the Property and may suspend operations and production on
the Property at any time it considers prudent or appropriate to do so. The
Royaltypayor will owe the Royaltyholder no duty to explore, develop or mine the
Property, or to do so at any rate or in any manner other than that which the
Royaltypayor may determine in its sole and unfettered discretion. The
Royaltypayor may, but will not be obligated to treat, mill, heap xxxxx, sort,
concentrate, refine, smelt, or otherwise process, beneficiate or upgrade the
ores, concentrates, and other products at sites located on or off the Property,
prior to sale, transfer, or conveyance to a purchaser, user, or consumer. The
Royaltypayor will not be liable for mineral values lost in processing under
sound practices and procedures, and no royalty will be due on any such lost
mineral values.
6 COMMINGLING
6.01 Ores,
concentrates and derivatives mined or retrieved from the Property may be
commingled with ores, concentrates or derivatives mined or retrieved from other
Property. All determinations required for calculation of Net Smelter Returns,
including without limitation the amount of the metals contained in or recovered
from ores, solutions, concentrates or derivatives mined or retrieved from the
Property, the amount of the metals contained in or recovered from commingled
ores, solutions, concentrates or derivatives shall be made in accordance with
prudent engineering, metallurgical and cost accounting practices.
7 TRADING
ACTIVITIES
7.01 The
Royaltypayor may, but need not, engage in forward sales, futures trading or
commodity options trading, and other price hedging, price protection, and
speculative arrangements (“Trading Activities”) which
may involve the possible delivery of base or precious metals produced from the
Property. The parties acknowledge and agree that the Royaltyholder shall not be
entitled to participate in the proceeds or be obligated to share in any losses
generated by the Trading Activities.
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
Page
C-1
This is
SCHEDULE “C” to the
Haystack Agreement between
Teck CO, LLC and Kingsmere Mining
Ltd.
dated
October 26, 2009
|
NPI ROYALTY
|
1 THE
ROYALTY
|
1.01
|
An
NPI Royalty has been reserved pursuant to the Agreement. The royalty shall
be 5% of Net Profits.
|
2 OBLIGATION
|
2.01
|
If
a party (the “Royaltyholder”) becomes
entitled to an NPI Royalty pursuant to the Agreement, Holdco (hereinafter
the “Royaltypayor”)
shall calculate, as at the end of each calendar quarter subsequent
to the Completion Date, the Net Profits in accordance with generally
accepted accounting principles consistently applied as applied in the
Canada.
|
|
2.02
|
Subsequent
to the Completion Date, the Royaltypayor shall within 60 days of the end
of each calendar quarter:
|
(a) deliver
to the Royaltyholder a statement indicating:
|
|
(i)
|
the
Gross Receipts during the calendar
quarter;
|
(ii) the
deductions therefrom made in the order itemized in §3.01 of this Schedule
C;
(iii) the
amount of Net Profits remaining, if any; and
|
|
(iv)
|
the
amount of those Net Profits, if any, to which the Royaltyholder is
entitled; and
|
|
|
(b)
|
pay
or cause to be paid to the Royaltyholder that percentage of the Net
Profits, if any, to which the Royaltyholder is entitled under the
Agreement.
|
|
2.03
|
Nothing
contained in the Agreement or this Schedule C shall be construed as
conferring on the Royaltyholder any right to or interest in any Property
or assets except the right to receive royalty payments from the
Royaltypayor as and when due.
|
3 NET
PROFITS DEFINED
|
3.01
|
"Net Profits" means the
Gross Receipts minus deductions therefrom, to the extent of but not
exceeding the amount of those Gross Receipts, of the then net unrecovered
amounts of the following classes of Costs, as further defined in §4.01(c),
made in the following itemized
order:
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
(a) Marketing
Costs;
(b) Distribution
Costs;
(c) Operating
Costs;
(d) Taxes
and Royalties;
(e) Interest
Costs;
(f) Capital
Costs; and
(g) Exploration
Costs.
|
3.02
|
For
greater certainty, in calculating Net Profits at any time, each of the
classes of Costs shall constitute a separate pool from which all Costs
deducted on any previous quarterly calculation shall be removed and to
which Costs of those classes recorded since the date of the Agreement (in
the case of the first quarterly calculation) or since the date of the last
quarterly calculation (in the case of any calculation subsequent to the
first quarterly calculation) shall be
added.
|
|
3.03
|
If
the application of credits to a pool of Costs results in a negative
balance in that pool of Costs, the amount of any negative balance from a
Cost pool shall be applied to reduce the balances then remaining in pools
itemized in §3.01 of this Schedule C in the order
itemized.
|
4 DEFINITIONS
|
4.01
|
In
addition to the definitions provided in the Agreement and without limiting
the generality thereof:
|
|
|
(a)
|
"Commercial Production"
shall mean the operation of the Property or any part thereof as a
mine but does not include milling for the purpose of testing or milling by
a pilot plant. Commercial Production shall be deemed to have commenced on
the first day of the month following the first 15 consecutive days during
which Products have been produced from the
Property
|
|
|
(b)
|
Completion Date" means
the date on which the Royaltypayor determines that the project of
preparing and equipping a Mine for Commercial Production is
complete;
|
|
|
(c)
|
“Costs" means all items
of outlay and expense whatsoever, both direct and indirect, with respect
to the Property, the Products or any Mine recorded by the Royaltypayor in
accordance with industry standard accounting practices applicable from
time to time and, without limiting generality, more
particularly:
|
(i) "Capital Costs"
means
|
|
(A)
|
all
Costs of preparing and equipping a Mine for Commercial Production which
are recorded by the Royaltypayor from and including the Production
Decision Date to and including the Completion Date, and all Costs of
obtaining financing and providing security;
and
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
|
|
(B)
|
a
charge of three percent of the Capital Costs referred to in §(A) in return
for its overhead functions which are not charged
directly;
|
(ii) "Distribution Costs" means all
Costs of
|
|
(A)
|
transporting
Products from a Mine or a concentrating plant to a smelter, refinery or
other place of delivery designated by the purchaser and, in the case of
concentrates tolled, of transporting the metal from a smelter to the place
of delivery designated by the
purchaser;
|
|
|
(B)
|
handling,
warehousing and insuring the Products;
and
|
|
|
(C)
|
in
the case of concentrates tolled, of smelting and refining, including any
penalties thereon or in connection
therewith;
|
(iii) "Exploration Costs"
means:
|
|
(A)
|
all
Costs of Mining Operations recorded by the Royaltypayor prior to the
Production Decision Date; and
|
|
|
(B)
|
a
charge which shall not aggregate more than 10 percent of the Exploration
Costs referred to in §(A), reduced to five percent on amounts in excess of
$100,000 on any single third party contract, in return for its overhead
functions which are not charged
directly;
|
|
|
(iv)
|
"Interest Costs" means
interest computed quarterly and not in advance and being the aggregate of
the interest determined for each month in the quarter as
follows:
|
|
|
(A)
|
the
average of the opening and closing monthly outstanding balances for each
month of the net unrecovered amounts of all Costs in the classes
enumerated in §3.01 of this Schedule
C;
|
|
|
(B)
|
multiplied
by,
|
|
|
(C)
|
the
Prime Rate plus two percent;
|
|
|
(D)
|
multiplied
by,
|
|
|
(E)
|
the
number of days in the month;
|
|
|
(F)
|
divided
by,
|
|
|
(G)
|
the
number of days in the year.
|
These
Interest Costs are in lieu of an inclusion in Costs for the interest charged by
third party project lenders of Capital Costs and Operating Costs;
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
|
|
(v)
|
"Marketing Costs" means
such reasonable charge for marketing of ores and concentrates sold or of
concentrates tolled as is consistent with generally accepted industry
marketing practices;
|
(vi) "Operating Costs"
means:
|
|
(A)
|
all
Costs of Mining Operations recorded by the Royaltypayor subsequent to the
Completion Date, including, without limiting generality, an amount to be
established by the Royaltypayor in good faith as representing the cost of
rehabilitation which will have to be spent after Commercial Production has
terminated, it being agreed that the Royaltypayor may charge a portion of
that cost to the royalty account over a reasonable period of time prior to
the anticipated termination of Commercial Production;
and
|
|
|
(B)
|
a
charge of three percent of the Operating Costs referred to in §(A) in
return for its overhead functions which are not charged
directly;
|
|
|
(vii)
|
"Taxes and Royalties"
means all taxes (other than income taxes), royalties or other
charges or imposts provided for pursuant to any law or legal obligation
imposed by any government if paid by the Royaltypayor, except where such
Taxes and Royalties or equivalent taxes or royalties are assessed against
and paid by the Royaltyholder.
|
|
(d)
|
"Gross Receipts" means
the aggregate of all receipts, recoveries or amounts received by or
credited to the Royaltypayor in connection with this Agreement including,
without limiting the generality of the
foregoing:
|
|
|
(i)
|
the
receipts from the sale of the Royaltypayor's proportionate share of
Products produced from the Mine together with interest on those receipts
calculated as follows:
|
(A) the
aggregate of the cumulative daily receipts for each day of the
quarter;
(B) divided
by,
(C) the
number of days in the quarter;
(C) multiplied
by,
(D) the
Prime Rate;
(E) multiplied
by,
(F) the
number of days in the quarter;
(G) divided
by,
(H) the
number of days in the year;
|
|
(ii)
|
all
proceeds received from the sale of the Property or assets subsequent to
the Operative Date;
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
|
|
(iii)
|
all
insurance recoveries (including amounts received to settle claims) in
respect of loss of, or damage to any portion of the Property or assets
subsequent to the Operative Date;
|
|
|
(iv)
|
all
amounts received as compensation for the expropriation or forcible taking
of any portion of the Property or assets subsequent to the Operative
Date;
|
|
|
(v)
|
the
fair market value, at the Property, of those assets, if any, that are
transferred from the Property for use by the Royaltypayor elsewhere
subsequent to the Completion Date;
and
|
|
|
(vi)
|
the
amount of any negative balance remaining after the reallocation of
negative balances pursuant to §3.03 of this Schedule C; to the extent that
those receipts, recoveries or amounts have not been applied by the
Royaltypayor as a recovery of any of the classes of Costs itemized in
§3.01 of this Schedule C;
|
provided
that where any Products are sold to, or treated in, a smelter or refinery owned
or controlled by Royaltypayor, the pricing for that sale or treatment will be
established by Royaltypayor on an arms-length basis so as to be fairly
competitive with pricing, net of transportation, insurance, treatment charges
and other related costs, then available on world markets for product of like
quantity and quality.
|
(e)
|
"Mine" means the
workings established and assets acquired in order to bring the Property or
a portion thereof into Commercial Production, including, without limiting
generality, development headings, plant and concentrator installations and
all infrastructure, plant, housing, airport, roads and other
facilities.
|
|
(f)
|
"Mining Operations"
means every kind of work done by the Royaltypayor on or in respect
of the Property in contemplation or as a consequence of the Agreement
including, without limiting generality, investigating, prospecting,
exploring, developing, property maintenance, preparing reports, estimates
and studies, designing, equipping, improving, surveying, construction and
mining, milling, concentrating, and
reclamation.
|
|
(g)
|
“Operative Date” means
the date of the Agreement.
|
|
(h)
|
"Prime Rate" means the
weighted average of the rates of interest for the period of calculation as
stated by the Bank of Montreal, Main Office, Vancouver, British Columbia,
as being charged by it on Canadian Dollar demand loans to its most
creditworthy domestic commercial
customers.
|
|
(i)
|
“Production Decision Date"
means the date on which a decision is made by the Royaltypayor to
establish and operate a Mine on the
Property.
|
|
(j)
|
“Products” shall mean
ores, concentrates and minerals mined from the Property, or solutions,
concentrates or cathodes retrieved through leaching or solution mining or
solution extraction/electrowinning or other processing of mineralized
material mined from the Property.
|
|
|
(j)
|
“Trading Activities”
shall have the meaning set out in §7 of this Schedule
C.
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
5 ROYALTYPAYOR
TO DETERMINE OPERATIONS
|
5.01
|
The
Royaltypayor will have complete discretion concerning the nature, timing
and extent of all exploration, development, mining and other operations
conducted on or for the benefit of the Property and may suspend operations
and production on the Property at any time it considers prudent or
appropriate to do so. The Royaltypayor will owe the Royaltyholder no duty
to explore, develop or mine the Property, or to do so at any rate or in
any manner other than that which the Royaltypayor may determine in its
sole and unfettered discretion. The Royaltypayor may, but will not be
obligated to treat, mill, heap xxxxx, sort, concentrate, refine, smelt, or
otherwise process, beneficiate or upgrade the ores, concentrates, and
other products at sites located on or off the Property, prior to sale,
transfer, or conveyance to a purchaser, user, or consumer. The
Royaltypayor will not be liable for mineral values lost in processing
under sound practices and procedures, and no royalty will be due on any
such lost mineral values.
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6 COMMINGLING
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6.01
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Ores,
concentrates and derivatives mined or retrieved from the Property may be
commingled with ores, concentrates or derivatives mined or retrieved from
other properties. All determinations required for calculation of Net
Profits, including without limitation the amount of the metals contained
in or recovered from ores, solutions, concentrates or derivatives mined or
retrieved from the Property, the amount of the metals contained in or
recovered from commingled ores, solutions, concentrates or derivatives,
gross revenues from the sale of Products, and costs and expenses allocated
to the Property or Products shall be made in accordance with prudent
engineering, metallurgical and cost accounting
practices.
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7 TRADING
ACTIVITIES
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7.01
|
The
Royaltypayor may, but need not, engage in forward sales, futures trading
or commodity options trading, and other price hedging, price protection,
and speculative arrangements (“Trading Activities”)
which may involve the possible delivery of base or precious metals
produced from the Property. The parties acknowledge and agree that the
Royaltyholder shall not be entitled to participate in the proceeds or be
obligated to share in any losses generated by the Trading
Activities.
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8 ADJUSTMENTS
AND VERIFICATION
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8.01
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Payment
of any Net Profits by the Royaltypayor shall not prejudice the right of
the Royaltypayor to protest the correctness of the statement supporting
the payment; provided, however, that all statements presented to the
Royaltyholder by the Royaltypayor for any quarter shall conclusively be
presumed to be true and correct upon the expiration of 12 months following
the end of the quarter to which the statement relates, unless within that
12 month period that the Royaltypayor gives Notice to the Royaltyholder
making claim on the Royaltyholder for an adjustment to the statement which
will be reflected in subsequent payment of Net
Profits.
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
|
8.02
|
The
Royaltypayor shall not adjust any statement in favour of itself after the
expiration of 12 months following the end of the quarter to which the
statement relates.
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|
8.03
|
The
Royaltyholder may from time to time request reasonable supporting
documentation for statements that are within the period contemplated in
§8.01 and the Royaltypayor, acting in good faith, shall provide the same
promptly to the Royaltyholde
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|
8.04
|
If
the supporting documentation and any discussion with the Royaltypayor do
not resolve the Royaltyholder’s concerns, the Royaltyholder shall be
entitled upon Notice to the Royaltypayor to request from the Royaltypayor
that mutually accepted auditors be requested to provide the Royaltyholder
with their opinion that any statement delivered pursuant to §2.02 of this
Schedule C in respect of any quarterly period falling with the 12 month
period immediately preceding the date of the Royaltyholder's Notice has
been prepared in accordance with this Agreement. When giving any Notice
aforesaid, the Royaltyholder will articulate the matter or matters of
concern to it.
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|
8.05
|
The
time required for giving the audit opinion contemplated in §8.04 of this
Schedule C shall not extend the time for the taking of exception to and
making claim on the Royaltyholder for adjustment as provided in §8.01 of
this Schedule C.
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|
8.06
|
The
cost of the auditors opinion referred to in §8.04 of this Schedule C shall
be shared by the Royaltypayor and Royaltyholder unless the audit opinion
reveals a material error adverse to the Royaltyholder, in which case the
cost shall be solely for the account of the
Royaltypayor.
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|
8.07
|
If
the audit opinion delivered under §8.04 does not adequately address the
concerns raised by the Royaltyholder, the Royaltyholder, acting
reasonably, will have the right to have an independent accounting firm,
that is one of the three largest international accounting firms that does
not act for either the Royaltypayor or Royaltyholder, audit the
Royaltypayor’s accounts related to the calculation of Net Profits. In
order to exercise this right, the Royaltyholder will provide the
Royaltypayor with Notice, within 30 days of receipt of the audit opinion
under §8.04, of its intention to do so. Thereupon, the Royaltyholder shall
cause the accounting firm to proceed promptly and complete the audit
efficiently, undertaking to minimize disruption to the Royaltypayor. The
cost of this audit shall be solely for the account of the
Royaltyholder.
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|
8.08
|
The
provisions of §8.04 and 8.07 are intended to provide an effective
mechanism for the Royaltyholder to resolve its unresolved concerns
regarding Net Profits accounting and not to effect a regular audit of the
Net Profits calculation
|
TECK
CO, LLC
000 X.
Xxxxxxxxxx Xxxx. Xxxxx 000, Xxxxxxx, XX 00000 telephone: 000
000-0000 facsimile: 000 000-0000
