Exhibit 10.1
PROPERTY OPTION AGREEMENT
THIS AGREEMENT made and entered into as of the 25th day of July, 2003.
BETWEEN: MinQuest Inc., a company having a mailing address at 0000 Xxxxxxx Xxx,
Xxxx, Xxxxxx, 00000, X.X.X.
(herein called the "Optionor")
OF THE FIRST PART
AND: Patriot Gold Corporation, a company having an office at 000 Xxxxxxx Xxxxxx,
Xxxxx Xxxxxxxxx, X.X., X0X 0X0
(herein called the "Optionee")
OF THE SECOND PART
WHEREAS the Optionor has represented that it is the sole recorded and beneficial
owner in and to two properties called the Xxxxxx Project and the Vernal Project
(the "Property") described in Schedule "A" attached hereto;
AND WHEREAS the Optionor, subject to the Net Smelter Royalty reserved to the
Optionor, now wishes to grant to the Optionee the exclusive right and option to
acquire an undivided 100% right, title and interest in and to the Property on
the terms and conditions hereinafter set forth;
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the premises,
the mutual covenants herein set forth and the sum of One Dollar ($1.00) of
lawful money of U.S. currency now paid by the Optionee to the Optionor (the
receipt whereof is hereby acknowledged), the Parties hereto do hereby mutually
covenant and agree as follows:
1. Definitions
The following words, phrases and expressions shall have the following
meanings:
(a) "After Acquired Properties" means any and all mineral
interests staked, located, granted or acquired by or on
behalf of either of the parties hereto during the currency
of this Agreement which are located, in whole or in part,
within two miles of the existing perimeter of the
Property;
(b) "Exchange" means OTCBB Venture Exchange;
(c) "Expenditures" includes all direct or indirect expenses
[net of government incentives and not including payments
to the Optionor pursuant to section 4, paragraphs (a),
(b)(ii), (c)(ii), (d)(ii), and (e)(ii), hereof] of or
incidental to Mining Operations. The certificate of the
Controller or other financial officer of the Optionee,
together with a statement of Expenditures in reasonable
detail shall be prima facie evidence of such Expenditures;
the parties hereto agree that Property payments and
Property expenditures are separate payments as outlined in
paragraph 4;
(d) "Facilities" means all mines and plants, including without
limitation, all pits, shafts, adits, haulageways, raises
and other underground workings, and all buildings, plants,
facilities and other structures, fixtures and
improvements, and all other property, whether fixed or
moveable, as the same may exist at any time in, or on the
Property and relating to the operator of the Property as a
mine or outside the Property if for the exclusive benefit
of the Property only;
(e) "Force Majeure" means an event beyond the reasonable
control of the Optionee that prevents or delays it from
conducting the activities contemplated by this Agreement
other than the making of payments referred to in Section 4
herein. Such events shall include but not be limited to
acts of God, war, insurrection, action of governmental
agencies reflecting an instability in government
procedures, or delay in permitting unacceptable to both
Optionor and Optionee;
(f) "Mineral Products" means the commercial end products
derived from operating the Property as a mine:
(g) "Mining Operations" includes:
(i) every kind of work done on or with respect to the Property
by or under the direction of the Optionee during the
Option Period or pursuant to an approved Work Program; and
(ii)without limiting the generality of the foregoing,
includes all work capable of receiving assessment credits
pursuant to The Mines and Minerals Act of Nevada and the
work of assessment, geophysical, geochemical and
geological surveys, studies and mapping, investigating,
drilling, designing, examining equipping, improving,
surveying, shaft sinking, raising, cross-cutting and
drifting, searching for, digging, trucking, sampling,
working and procuring minerals, ores and metals, in
surveying and bringing any mineral claims to lease or
patent, in doing all other work usually considered to be
prospecting, exploration, development, a feasibility
study, mining work, milling, concentration, beneficiation
of ores and concentrates, as well as the separation and
extraction of Mineral Products and all reclamation,
restoration and permitting activities;
(h) "Net Smelter Royalty" means that Net Smelter Royalty as
defined in Schedule "B" attached hereto ("NSR");
(i) "Option" means the option granted by the Optionor to the
Optionee to acquire, subject to the NSR reserved to the
Optionor, an undivided 100% right, title and interest in
and to the Property as more particularly set forth in
Section 4;
(j) "Option Period" means the period from the date hereof to
the date at which the Optionee has performed its
obligations to acquire its 100% interest in the Property
as set out in Section 4 hereof, which ever shall be the
lesser period;
(k) "Property" means the mineral claims described in Schedule
"A";
(l) "Work Program" means a program of work reasonably
acceptable to both parties in respect of a particular
Property, contained in a written document setting out in
reasonable detail:
(i) An outline of the Mining Operations proposed to be
undertaken and conducted on the Property, specifically
stating the period of time during which the work
contemplated by the proposed program is to be done and
performed;
(ii)The estimated cost of such Mining Operations including a
proposed budget providing for estimated monthly cash
requirements in advance and giving reasonable details; and
(iii) The identity and credentials of the person or persons
undertaking the Mining Operations so proposed if not the
Optionor,
reasonably acceptable to both parties hereto.
2. Headings
Any heading, caption or index hereto shall not be used in
any way in construing or interpreting any provision hereof.
3. Singular, Plural
Whenever the singular or masculine or neuter is used in
this Agreement, the same shall be construed as meaning plural or feminine
or body politic or corporate or vice versa, as the context so requires.
4. Option
The Optionor hereby grants to the Optionee the sole and
exclusive right and option (the "Option") to earn a 100% interest in the
Property exercisable as follows:
(a) The Optionee paying the sum of $ 12,500 U.S. to the Optionor by way of cash;
(b) On or before July 25, 2004:
(i) The Optionee incurring Expenditures of $75,000 U.S.
on the Property; and
(ii) The Optionee paying $20,000 U.S. to the Optionor;
(c) On or before July 25, 2005:
(i) The Optionee incurring Expenditures of $100,000
U.S. on the Property in addition to the
expenditures referred to in clause (b)(i); and
(ii) The Optionee paying $20,000 U.S. to the Optionor;
(d) On or before July 25, 2006:
(i) The Optionee incurring Expenditures of $100,000
U.S. on the Property in addition to the
expenditures referred to in clauses (b)(i) and
(c)(i) hereof; and
(ii) The Optionee paying $20,000 U.S. to the Optionor;
(e) On or before July 25, 2007:
(i) The Optionee incurring Expenditures of $100,000
U.S. on the Property in addition to the
expenditures referred to in clauses (b)(i), (c)(i)
and (d)(i) hereof; and
(ii) The Optionee paying $20,000 U.S. to the Optionor;
and
(f) On or before July 25, 2008:
(i) The Optionee incurring Expenditures of $125,000
U.S. on the Property in addition to the
expenditures referred to in clauses (b)(i), (c)(i),
(d)(i) and (e)(i) hereof;
Following which the Optionee shall be deemed to have exercised the Option
(the "Exercise Date") and shall be entitled to an undivided 100% right,
title and interest in and to the Property with the full right and authority
to equip the Property for production and operate the Property as a mine
subject to the rights of the Optionor to receive the NSR. The Property
comprises two projects individually known as the Xxxxxx Project, and the
Vernal Project all as more particularly described in Schedule "A". The
Optionee has the one time right exercisable for 90 days following
completion of a bankable feasibility study to buy up to two thirds (66.7%)
of the Optionor's NSR interest (i.e. an amount equal to 2% NSR interest)
for $2,000,000 U.S. for each project comprising the Property, leaving the
Optionor to retain not less than a 1% NSR interest. The right to purchase
the said NSR interest shall be exercised by the Optionee providing the
Optionor with notice of the purchase accompanied by payment in the amount
of $2,000,000 U.S. for each project on which the Optionee is purchasing the
NSR.
The Optionor and Optionee understand and confirm that all Expenditures
incurred in a particular period, including any excess in the amount of
Expenditures required to be incurred to maintain the Option during such
period, shall be carried over and included in the aggregate amount of
Expenditures for the subsequent period.
Notwithstanding paragraphs (c)(i), (d)(i), (e)(i), and (f)(i) if the
Optionee has not incurred the requisite Expenditures to maintain its option
in good standing prior to July 25 of any given year, the Optionee may pay
to the Optionor within 60 days following the expiry of such period, the
amount of the deficiency and such amount shall thereupon be deemed to have
been Expenditures incurred by the Optionee during such period.
(g) The doing of any act or the incurrence of any cash payments by
the Optionee shall not obligate the Optionee to do any further
acts or make any further payments.
(h) The Property comprises two projects individually known as the
Xxxxxx Project, and the Vernal Project all as more
particularly described in Schedule "A". The cash consideration
referred to in this Section 4 will not change if only one
project is terminated.
5. Transfer of Title
Upon Optionee's completion of all requirement to earn a
100 percent interest in the Property, the Optionor will deliver or cause to
be delivered to the Optionee's solicitors a duly executed transfer of
Property in favour of the Optionee (the "Optionee Transfer"). The Optionee
shall be entitled to record the Optionee Transfer with the appropriate
government offices to effect transfer of legal title of the Property into
its own name upon the full and complete exercise of the Option by the
Optionee. In the event the Optionee Transfer is recorded the Optionor shall
be entitled to record notice of its NSR interest.
6. Mining Operations during Option
During the Option Period, the Optionor may provide its
mineral exploration expertise on the Property, on a consultation basis for
and on behalf of the Optionee, at the election of the Optionee. However,
the Optionee has the exclusive right to determine what Expenditures and
Mining Operations it will perform, when they will be performed, and by
whom. If the Optionee elects to use the mineral expertise and consulting
services of the Optionor, then the Optionor shall invoice for time for
consulting services and related travel expenses from time to time and the
prompt payment of such invoices when due shall constitute a portion of
Expenditures by the Optionee as contemplated under Section 4 hereof.
During the currency of this Agreement, the Optionee, its
servants, agents and workmen and any persons duly authorized by the
Optionee, shall have the right of access to and from and to enter upon and
take possession of and prospect, explore and develop the Property in such
manner as the Optionee in its sole discretion may deem advisable and shall
have the right to remove and ship therefrom ores, minerals, metals, or
other products recovered in any manner therefrom.
7. Assignment
During the Option Term, both parties shall have the right
to sell, transfer, assign, mortgage, pledge its interest in this Agreement
or its right or interest in the Property. It will be a condition of any
assignment under this Agreement that such assignee shall agree in writing
to be bound by the terms of this Agreement applicable to the assignor.
8. Termination
This Agreement shall forthwith terminate in circumstances
where:
(a) The Optionee shall fail to comply with any of its
obligations hereunder, subject to Force Majeure, and within 30
days of receipt by the Optionee of written notice from the
Optionor of such default, the Optionee has not:
(i) cured such default, or commenced proceedings to
cure such default and prosecuted same to
completion without undue delay; or
(ii) given the Optionor notice that it denies that
such default has occurred.
In the event that the Optionee gives notice that it denies that a default
has occurred, the Optionee shall not be deemed to be in default until the
matter shall have been determined finally through such means of dispute
resolution as such matter has been subjected to by either party; or
(b) The Optionee gives notice of termination to the Optionor,
which it shall be at liberty to do at any time after the
execution of this Agreement. If and when the Optionee elects
to terminate this Agreement, or terminate one of the projects
comprising the Property, at such time the Property or the
specific project will be returned to the Optionor with all
claim fees paid in full for that calendar year but no later
than June 30th of that year. For clarity, any portion of the
Property that is terminated after June 30th and before
September 1st of any year must have the annual claim fees paid
in full for September 1st of that year.
Upon the termination of this Agreement under this Section 8, the Optionee
shall cease to be liable to the Optionor in debt, damages or otherwise,
other than to pay the claim fees as described in paragraph (b) of this
Section 8 and all liabilities referred to in Section 11.
Upon termination of this Agreement under this Section 8, the Optionee shall
vacate the Property within a reasonable time after such termination, but
shall have the right of access to the Property for a period of six months
thereafter for the purpose of removing its chattels, machinery, equipment
and fixtures.
9. Representations, Optionies and Covenants of the Optionor
The Optionor represents, Options and covenants to and with
the Optionee as follows:
(a) The Optionor is a company duly organized validly existing
and in good standing under the laws of Nevada;
(b) The Optionor has full power and authority to carry on its
business and to enter into this Agreement and any
agreement or instrument referred to or contemplated by
this Agreement;
(c) Neither the execution and delivery of this Agreement, nor
any of the agreements referred to herein or contemplated
hereby, nor the consummation of the transactions hereby
contemplated conflict with, result in the breach of or
accelerate the performance required by, any agreement to
which it is a party;
(d) The execution and delivery of this Agreement and the
agreements contemplated hereby will not violate or result
in the breach of the laws of any jurisdiction applicable
or pertaining thereto or of its constating documents;
(e) The Agreement constitutes a legal, valid and binding
obligation of the Optionor;
(f) The Property is accurately described in Schedule "A", is
in good standing under the laws of the jurisdiction in
which it is located and is free and clear of all liens,
charges and encumbrances;
(g) The Optionor is the sole recorded and beneficial owner of
the Property and has the exclusive right to enter into
this Agreement and all necessary authority to transfer its
interest in the Property in accordance with the terms of
this Agreement;
(h) No person, firm or corporation has any proprietary or
possessorty interest in the Property other than the
Optionor, and no person, firm or corporation is entitled
to any royalty or other payment in the nature of rent or
royalty on any minerals, ores, metals or concentrates or
any other such products removed from the Property other
than the government of the state of Nevada pursuant to
statute; notwithstanding any Federal, State or County
royalties or net proceeds tax derived from mining
operations.
(i) Upon request by the Optionee, and at the sole cost of the
Optionee, the Optionor shall deliver or cause to be
delivered to the Optionee copies of all available maps and
other documents and data in its possession respecting the
Property. Nothing will be withheld, hidden, or kept from
the Optionee, whether the data or information is held or
not by the Optionor; and
(j) Subject to performance by the Optionee of its' obligations
under Section 4, during the Option Period, the Optionor
will keep the Property in good standing, free and clear of
all liens, charges and encumbrances, will carry out all
Mining Operations on the Property in a miner-like fashion
if the Optionee elects to use the mining expertise and
consulting services of the Optionor, will obtain all
necessary licenses and permits as shall be necessary and
will file all applicable work up to the legal limits as
assessment work under The Mines and Mineral Act (Nevada).
10. Representations, Optionies and Covenants of the Optionee
The Optionee represents, Options and covenants to and with
the Optionor that:
(a) The Optionee is a company duly organized validly existing and
in good standing under the laws of the United States;
(b) The Optionee has full power and authority to carry on its
business and to enter into this Agreement and any agreement or
instrument referred to or contemplated by this Agreement;
(c) Neither the execution and delivery of this Agreement, nor any
of the agreements referred to herein or contemplated hereby,
nor the consummation of the transactions hereby contemplated
conflict with, result in the breach of or accelerate the
performance required by, any agreement to which it is a party;
(e) The execution and delivery of this Agreement and the
agreements contemplated hereby will not violate or result in
the breach of the laws of any jurisdiction applicable or
pertaining thereto or of its constating documents; and
(f) This Agreement constitutes a legal, valid and binding obligation of the
Optionee.
11. Indemnity and Survival of Representation
The representation and Optionies hereinbefore set out are
conditions on which the parties have relied in entering into this Agreement
and shall survive the acquisition of any interest in the Property by the
Optionee and each of the parties will indemnify and save the other harmless
from all loss, damage, costs, actions and suits arising out of or in
connection with any breach of any representation, Optiony, covenant,
agreement or condition made by them and contained in this Agreement.
The Optionor agrees to indemnify and save harmless the
Optionee from any liability to which it may be subject arising from any
Mining Operations carried out by the Optionor or at its direction on the
Property. The Optionee agrees to indemnify and save harmless the Optionor
from any liability to which it may be subject arising from any Mining
Operations carried out by the Optionee or at its direction on the Property.
The Optionor agrees to indemnify and save harmless the
Optionee from any liability arising from any and every kind of work done on
or with respect to the Property prior to the signing of this Agreement (the
"Prior Operations). Without limiting the generality of the foregoing, Prior
Operations includes all work capable of receiving assessment credits
pursuant to The Mines and Minerals Act of Nevada and the work of
assessment, geophysical, geochemical and geological surveys, studies and
mapping, investigating, drilling, designing, examining equipping,
improving, surveying, shaft sinking, raising, cross-cutting and drifting,
searching for, digging, trucking, sampling, working and procuring minerals,
ores and metals, in surveying and bringing any mineral claims to lease or
patent, in doing all other work usually considered to be prospecting,
exploration, development, a feasibility study, mining work, milling,
concentration, beneficiation of ores and concentrates, as well as the
separation and extraction of Mineral Products and all reclamation,
restoration and permitting activities.
12. Confidentiality
The parties hereto agree to hold in confidence all information obtained
in confidence in respect of the Property or otherwise in connection with
this Agreement other than in circumstances where a party has an obligation
to disclose such information in accordance with applicable securities
legislation, in which case such disclosure shall only be made after
consultation with the other party.
13. Notice
All notices, consents, demands and requests (in this
Section 13 called the "Communication") required or permitted to be given
under this Agreement shall be in writing and may be delivered personally
sent by telegram, by telex or telecopier or other electronic means or may
be forwarded by first class prepaid registered mail to the parties at their
addresses first above written. Any Communication delivered personally or
sent by telegram, telex or telecopier or other electronic means including
email shall be deemed to have been given and received on the second
business day next following the date of sending. Any Communication mailed
as aforesaid shall be deemed to have been given and received on the fifth
business day following the date it is posted, addressed to the parties at
their addresses first above written or to such other address or addresses
as either party may from time to time specify by notice to the other;
provided, however, that if there shall be a mail strike, slowdown or other
labour dispute which might effect delivery of the Communication by mail,
then the Communication shall be effective only if actually delivered. For
purposes of this agreement and as a definition of address the Optionor's
email shall be defined as xxxxxx@xxxxxxx.xxx. and the Optionor's telecopier
number is 000-000-0000. The Optionee's email shall be defined as
xxxx@xxxxxxxxxxxxxxx.xxx and the Optionee's telecopier number is
000-000-0000. Notice will be provided to each party should their respective
email address change.
14. Further Assurances
Each of the parties to this Agreement shall from time to
time and at all times do all such further acts and execute and deliver all
further deeds and documents as shall be reasonably required in order to
fully perform and carry out the terms of this Agreement.
15. Entire Agreement
The parties hereto acknowledge that they have expressed
herein the entire understanding and obligation of this Agreement and it is
expressly understood and agreed that no implied covenant, condition, term
or reservation, shall be read into this Agreement relating to or concerning
any matter or operation provided for herein.
16. Proper Law and Arbitration
This Agreement will be governed by and construed in
accordance with the laws of the State of Nevada and the laws of the United
States of America applicable herein. The parties hereto hereby irrevocably
attorn to the jurisdiction of the Courts of Nevada. All disputes arising
out of or in connection with this Agreement, or in respect of any defined
legal relationship associated therewith or derived therefrom, shall be
referred to and finally resolved by a sole arbitrator by arbitration under
the rules of The Arbitration Act of Nevada.
17. Enurement
This Agreement will enure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns.
18. After Acquired Properties
(i) The parties covenant and agree, each with the other, that
any and all After Acquired Properties shall be subject to
the terms and conditions of this Agreement and shall be
added to and deemed, for the purposes hereof, to be
included in the Property. Any costs incurred by the
Optionor in staking, locating, recording or otherwise
acquiring any "After Acquired Properties" will be deemed
to be Mining Operations for which the Optionor will be
entitled to reimbursements as part of the Expenditures
payable by the Optionee hereunder.
(ii)Any additional claims agreed by the Optionee to be staked
by the Optionor within 2 miles from the existing perimeter
of the Property boundaries shall form part of this
Agreement. The Optionee will reimburse the Optionor for
the costs of staking the additional claims, unless the
Optionee does not elect to have the additional claims
subject to this Agreement.
20. Default
Notwithstanding anything in this Agreement to the contrary
if any party (a "Defaulting Party") is in default of any requirement herein
set forth the party affected by such default shall give written notice to
the Defaulting Party specifying the default and the Defaulting Party shall
not lose any rights under this Agreement, unless thirty (30) days after the
giving of notice of default by the affected party the Defaulting Party has
failed to take reasonable steps to cure the default by the appropriate
performance and if the Defaulting Party fails within such period to take
reasonable steps to cure any such default, the affected party shall be
entitled to seek any remedy it may have on account of such default
including, without limiting, termination of this Agreement. Notwithstanding
the Optionee shall be responsible for claim fees to the U.S. Bureau of Land
Management no later than June 30th of each calendar year of the agreement.
Further, all county claim fees shall be paid by the Optionee no later than
June 30th of each calendar year.
21. Payment
All references to monies herein shall be in U.S. funds unless otherwise
specified. The Optionee shall make payments for the Expenditures incurred
by the Optionor no later than 15 days after the receipt of invoices
delivered by the Optionor which for the purposes of this Agreement shall
constitute prompt and due payment. All contractors will invoice the
Optionee directly and any costs arising with respect to work performed
shall be solely borne by the Optionee and not the Optionor.
22. Option Only
This is an option only and except as herein specifically provided otherwise
nothing herein contained shall be construed as obligating the Optionee to
do any acts or make any payments hereunder, and any act or payment or
payments as shall be made hereunder shall not be construed as obligating
the Optionee to do any further act or make any further payment or payments.
23. Supersedes Previous Agreements
This Agreement supersedes and replaces all previous oral or written
agreements, memoranda, correspondence or other communications between the
parties hereto relating to the subject matter hereof.
IN WITNESS WHEREOF the Parties hereto have duly executed this Agreement
effective as of the 25th day of July, 2003.
MinQuest Inc.
Per:
---------------------------
Xxxxxxx X. Xxxx, President
Patriot Gold Corp.
Per:
---------------------------
Xxxxxx Blomkamp, President
SCHEDULE "A"
XXXXXX PROPERTY
16 UNPATENTED LODE CLAIMS SITUATED IN SECTIONS 24 & 25, TOWNSHIP 14 NORTH, RANGE
37 EAST AND SECTIONS 19 & 30, TOWNSHIP 14 NORTH, RANGE 38 EAST, MDB&M, XXX
COUNTY, STATE OF NEVADA
CLAIM NAME BLM SERIAL #
Moon 1-6 NMC 849694-849699
Moon 7 XXX 000000
Moon 8 XXX 000000
Moon 9-12 NMC 842235-842238
Moon 13-16 NMC 849701-849704
VERNAL PROPERTY
12 UNPATENTED LODE CLAIMS SITUATED IN XXXXXXX 00, XXXXXXXX 00 XXXXX, XXXXX 00
XXXX XXX SECTION 3, TOWNSHIP 13 NORTH, RANGE 39 EAST, MDB&M, XXX COUNTY, STATE
OF NEVADA
CLAIM NAME BLM SERIAL #
Vernal 5-10 NMC 849705-849710
Vernal 11-14 NMC 841093-841096
Vernal 15, 16 NMC 849711-849712
SCHEDULE "B"
"Net Smelter Return" shall mean the aggregate proceeds received by the Optionee
from time to time from any smelter or other purchaser from the sale of any ores,
concentrates, metals or any other material of commercial value produced by and
from the Property after deducting from such proceeds the following charges only
to the extent that they are not deducted by the smelter or other purchaser in
computing the proceeds:
(a) The cost of transportation of the ores, concentrates or metals from the
Property to such smelter or other purchaser, including related
insurance;
(b) Smelting and refining charges including penalties; and
The Optionee shall reserve and pay to the Optionor a NSR equal to three (3%)
percent of Net Smelter Return.
Payment of NSR payable to the Optionor hereunder shall be made quarterly
within thirty (30) days after the end of each calendar quarter during which
the Optionee receives Net Smelter Returns in U.S. dollars or in kind
bullion at the discretion of the Optionor. Within sixty (60) days after the
end of each calendar quarter for which the NSR are payable to the Optionor,
the records relating to the calculation of NSR for such year shall be
audited by the Optionee and any adjustments in the payments of NSR to the
Optionor shall be made forthwith after completion of the audit. All
payments of NSR to the Optionor for a calendar year shall be deemed final
and in full satisfaction of all obligations of the Optionee in respect
thereof if such payments or the calculations thereof are not disputed by
the Optionor within sixty (60) days after receipt by the Optionor of the
same audited statement. The Optionee shall maintain accurate records
relevant to the determination of the NSR and the Optionor, or its
authorized agent, shall be permitted the right to examine such records at
all reasonable times.
