LETTER OF INTENT
----------------
PARTIES: MINERA CONSTELACION (CONSTELACION)
AND XXXXXX XXXXXXX (XXXXXXX)
OBJECT: "XXX XXXXXX" PROPERTY IN SONORA, MEXICO, COMPRISING 12 (TWELVE)
MINING CONCESSIONS (EXPLOITATION AND EXPLORATION), AS PER LIST IN ATTACHED
SCHEDULE "A". ALL CONCESSIONS SHALL BE DULY UP-TO-DATE ON ALL OBLIGATIONS
THROUGH CONTRACT DATE.
TERMS:
1. AN EXCLUSIVE 120 DAY OPTION PERIOD FOR THE DUE DILIGENCE
FOR A CONSIDERATION OF US$25,000; DURING THIS PERIOD XXXXXXX SHALL ALSO
APPROACH THE FINANCING REQUIREMENTS OF THE PROJECT. IF THE FINANCIAL
INSTITUTIONS REQUEST ADDITIONAL OR CONFIRMATION DRILLING ON THE
PROPERTY, THEN XXXXXXX SHALL REQUEST AND (CONSTELACION) SHALL GRANT AN
EXTENSION OF AN ADDITIONAL 60 DAYS FOR THIS OPTION PERIOD.
2. AT THE END OF THE DUE DILIGENCE-EXCLUSIVE OPTION PERIOD,
XXXXXXX MAY EXERCISE THE OPTION FOR A TOTAL PRICE OF US$5 MILLION
DOLLARS TO BE PAID AS FOLLOWS: XXXXXXX WILL MADE A PAYMENT OF US$50,000
AS PART OF THE PURCHASE PRICE ON THE DATE OF FORMALIZATION OF THE
PURCHASE BY A PUBLIC NOTARY.
3. THEREAFTER, A PAYMENT OF US$100,000 WILL BE MADE AS PART OF
THE PURCHASE EVERY TWELVE MONTH PERIOD UNTIL THE PROPERTY IS PLACED
INTO COMMERCIAL PRODUCTION.
4. ONCE IN PRODUCTION, XXXXXXX WILL PAY TO CONSTELACION
US$1,000,000 EVERY ANNIVERSARY FROM THE DATE OF PRODUCTION AS PART OF
THE PURCHASE PRICE. HOWEVER THE FIRST MILLION DOLLAR PAYMENT AT THE
FIRST YEAR AFTER PRODUCTION WILL BE REDUCED BY THE AMOUNTS ALREADY PAID
AS PER THE PURCHASE PRICE. BUT IT CAN NOT BE LESS THAN US$750,000. IF
DUE TO FORCE MAJEURE RELATED TO REASONABLE CAUSE SUCH AS THE
SIGNIFICANT DROP IN THE METAL PRICE, XXXXXXX SHALL REQUEST AND
CONSTELACION SHALL GRANT A NINETY DAY EXTENSION OF ANY OF THE ONE
MILLION DOLLAR PAYMENTS WITH AN INTEREST RATE AT PRIME RATE INTEREST.
5. XXXXXXX SHALL KEEP CONSTELACION INFORMED BY QUARTERLY
PROGRESS REPORTS TO BE DELIVERED NO LATER THAN 45 DAYS AFTER THE END OF
THE QUARTER. XXXXXXX SHALL WELCOME THE PRESENCE OF CONSTELACION-COMINCO
REPRESENTATIVES ON THE PROPERTY AT ANY TIME AS MUTUALLY AGREED UPON 10
DAYS IN ADVANCE.
6. XXXXXXX SHALL KEEP ALL CONCESSIONS DULY CURRENT ON ALL OF
THE LEGAL OBLIGATIONS FROM THE DATE OF THE SIGNATURE OF THE CONTRACT.
7. TRANSFER OF TITLE OF THE CONCESSIONS SHALL BE EFFECTIVE AT
THE MOMENT OF THE PAYMENT MENTIONED IN THE SECTION LABELED "TERMS 2"
FOR THE PURPOSE OF FACILITATING THE FINANCING OF THE PROJECT. HOWEVER,
XXXXXXX SHALL MAINTAIN ALL 12 CONCESSIONS UNENCUMBERED AND FREE OF ANY
LIEN AS A GUARANTEE TO CONSTELACION FOR EACH AND EVERY ONE OF THE
PAYMENTS.
8. CONSTELACION AGREES TO AN AREA OF INTEREST OF 2,500 METERS
IN RADIUS FROM THE PORTAL OF THE "XXX XXXXXX" ADIT. WITHIN THIS AREA OF
INTEREST, CONSTELACION GIVES XXXXXXX THE EXCLUSIVE RIGHT TO OBTAIN
MINING CONCESSIONS. IF XXXXXXX DOES NOT EXERCISE THE OPTION, THESE
CONCESSIONS SHALL ALSO BE RETURNED TO CONSTELACION.
9. IF XXXXXXX DOES NOT EXERCISE THE OPTION OR DOES NOT PAY ANY
OF THE PAYMENTS OF THE FULL PURCHASE PRICE, IT SHALL DELIVER ALL THE
TECHNICAL DATA TO CONSTELACION. IN THIS CASE CONSTELACION WILL
AUTOMATICALLY ACQUIRE A 90 DAY OPTION TO BUY BACK THE CONCESSIONS FOR
AN AMOUNT OF US $100.
SIGNED ON THIS GUADALAJARA, JAL. DAY OF JUN 3 OF 1997.
MINERA CONSTELACION, S.A. DE C.V. MINERA XXXXXXX X.X. DE C.V.
/S/ /S/
ING. XXXXX XXXXXXXX XXXXXXX ING. XXXXX X. XXXXXXX XXXXXX
ANEXO "A"
PROYECTO XXX XXXXXX, SONORA
LOTES MINEROS
CONCESION NUMERO HECTAREAS
--------- ------ ---------
BACANORA T-168625 238.9685
BACANORA TRES T-194437 12
XXX XXXXXX T-168566 14
BUENA VISTA T-168569 21
PIEDRAS AZULES T-178925 132.7287
CONTINUACION BUENA VISTA T-168574 30
LA NUEVA XXXX DE SAN NICOLAS T-168573 81
LA FRONTERA T-168575 15
DOS PICACHOS T-168621 31
LA BUFITA T-193491 10
LA VERDE T-168576 9
AMPLIACION XXX XXXXXX E-18087 ---
TOTAL 12 LOTES MINEROS 594.6972
PENDIENTE POR REDENUNCIAR-TERRENO ANTERIORMENTE AMPARADO POR:
BACANORA DOS E-16175
