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OPTION TO JOINT VENTURE
This agreement is dated this 19th day of April, 1996, by and
between Royal Silver Mines, Inc., a Utah corporation (Royal) and
Placer Mining Corporation, a Nevada Corporation (Placer) for the
purpose of granting Royal an option to enter into a joint venture
with Placer for the development of the Bunker Hill Mine in
Shoshone County, Idaho.
CONSIDERATION
Upon signing of this agreement, Royal will pay to Placer the sum
of $50,000 and issue to Placer a total of 100,000 shares of
restricted common stock of Royal. This payment and issuance of
shares will be non-refundable in the event that, upon completion
of the due diligence period, Royal does not proceed with the
Joint Venture.
OPTION PERIOD, DUE DILIGENCE
This option period will commence with the signing of this
agreement and continue until Monday, July 22, 1996. During this
period, Royal will, at its sole expense, undertake the necessary
due diligence with respect to title of mining claims, analysis of
geological and engineering data, and environmental review of the
project. On or before June 5, 1996, Royal agrees to place
$1,000,000 cash and 1,000,000 shares of Royal restricted common
stock into a trust account to be released to Placer upon
execution of a Joint Venture Agreement satisfactory to both
parties on or before July 22, 1996.
JOINT VENTURE AGREEMENT
The parties hereby agree that upon satisfactory completion of the
due diligence period, they will enter into a Joint Venture
Agreement, with the following specific provisions.
Initial Contributions:
Placer as its initial contribution shall contribute its mining
rights to the Bunker Hill Mine property.
Royal as its initial contribution will pay the aforementioned
$1,000,000 and issue 1,000,000 Royal common shares to Placer.
Royal agrees that it will prepare and file a registration
statement on form S-3 or other available form to remove the
restriction from the 1,000,000 shares plus the 100,000 option
shares at the earliest practical date. This payment to Placer
will give Royal a 7 1/2 percent interest in the Joint Venture.
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Subsequent Contributions:
On or before July 22, 1997, Royal will contribute $6,000,000 in
cash to the Joint Venture Account, to be spent for the benefit of
the property in accordance with the management committee
recommendations. With this contribution, Royal's interest in the
Joint Venture shall increase to 12 1/2 percent. It is Royal's full
intent to accelerate partial payment of these funds to the Joint
Venture, and it is agreed that a pro-rata vesting of Joint
Venture percentage interest will be granted for partial payments
to the Joint Venture Account.
On or before July 22, 1998, Royal will contribute an additional
$8,000,000 in cash to the Joint Venture Account, as above. With
this contribution, Royal's interest in the Joint Venture shall
increase to 25 percent.
On or before July 22, 1999, Royal will contribute an additional
$11,000,000 in cash to the Joint Venture Account, and with this
contribution Royal's interest in the Joint Venture shall increase
to 51 percent.
On or before July 22, 2000, Royal will contribute an additional
$15,000,000 in cash to the Joint Venture Account to increase its
interest to 80 percent.
Royal may, at its option, make its contributions ahead of
schedule to accelerate its vesting in the Joint Venture, subject
to the approval of Placer for two years.
Management Committee:
It is agreed by the parties that the Joint Venture Agreement will
form a management committee of 3 members to oversee the
expenditure of funds and the development of the mine for the
benefit of the Joint Venture. Until such time as Royal has
contributed $40,000,000 in cash to the Joint Venture Account,
Placer shall have two members on the committee and Royal one.
Once $40,000,000 or more has been contributed by Royal to the
Joint Venture Account, then Royal shall have two members and
Placer one.
EXCEPTIONS
It is agreed by the parties that production of specimen crystals
for sale to the collector market will be excluded from the Joint
Venture and will remain the exclusive property of Placer for a
period of 5 years. Thereafter, the split will be 80-20.
It is further agreed that revenues from the sale of Colloidal
Silver will remain the exclusive property of Placer for a period
of three years. Thereafter, the split will be subject to
negotiation between the parties.
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FORMAL AGREEMENT CONTEMPLATED
It is understood and agreed by the parties that this OPTION TO
JOINT VENTURE AGREEMENT is preliminary and will be superseded by
a formal Joint Venture Agreement which will incorporate the terms
outlined here.
IN WITNESS HEREOF, each of the parties has executed this
Agreement as of the day and year first above written.
Royal Silver Mines, Inc. Placer Mining Corporation
________________________________ _____________________________
Its President Its _________________________
