LETTER AGREEMENT
Agua Xxxxxx Property
San Xxxx Province, Argentina
April 4, 1996
The purpose of this letter is to outline the terms upon which Newcrest
Minera Argentina S.A. ("NEWCREST") is willing to enter into a joint venture with
Minera Andes Inc. ("MAINC") with respect to the Agua Xxxxxx area in San Xxxx
Province, Argentina. If a copy of this letter is signed by MAINC and returned to
Xxxxxxx X. Xxxxxx, at Minera Newcrest Chile Ltda., Xxxxxxx Xxxxxxxxxx 3600, Piso
00, Xxx Xxxxxx, Xxxxxxxx, Xxxxx, or Xxxxxx X. Xxxxxx, at Newcrest Resources,
Inc., 0000 Xxxx Xxxx., Xxxxxx, Xxxxxxxx, X.X.X., by 5:00 p.m. on April 15, 1996,
this letter shall constitute a valid and binding contract between NEWCREST and
MAINC (the "Letter Agreement ). If a fully executed copy of this letter is not
returned to Xxxxxxx X. Xxxxxx by the deadline mentioned above, this offer shall
expire and shall be of no further force or effect.
1. Definitions
1.1. "Agua Xxxxxx Property" means all land and mineral interests owned or
controlled by Minera Andes S.A. ("MASA") in San Xxxx Province,
Argentina, as of the Commencement Date. The Agua Xxxxxx Property is
described in detail in Exhibit A to this Letter Agreement.
1.2. "Appraised Value" means the fair market value calculated in the
following manner: the parties each shall select one independent
appraiser, and those two independent appraisers shall agree on a
third independent appraiser. Each of the three appraisers shall
calculate the fair market value on his or her own, and then the three
appraisers shall meet and attempt to agree on a consensus fair market
value, which shall constitute the Appraised Value. If all three
appraisers cannot agree on a consensus fair market value, then the
Appraised Value shall be the consensus fair market value agreed upon
by any two of the three appraisers.
1.3. "Area of Interest has the meaning ascribed to it in paragraph 4.1.
1.4. "Commencement Date" means the date that this Letter Agreement has
been executed by both parties, which also shall be the Commencement
Date for the Venture Agreement.
1.5. "Cumulative Allowable Expenditures" means the aggregate and total
amount at any given time of all costs and expenses paid or incurred
by NEWCREST for or
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in connection with exploration or development of the Venture Property
or for other operations for the benefit of the Venture Property,
beginning on February 20, 1996, and including all amounts paid or
incurred through the date of the calculation. All property payments,
option fees, and rents, fees and other statutory sums required under
the Mining Code to keep the Venture Property in good standing shall
be included in Cumulative Allowable Expenditures. Funds advanced by
NEWCREST to MASA to cover its reasonable cost of managing the Venture
Property pursuant to paragraph 5.4 shall be included in Cumulative
Allowable Expenditures.
1.6. "Decision to Mine" means a decision by the Operating Committee, based
on a positive feasibility study, to proceed with the development and
construction of a mine on the Venture Property.
1.7. "Development Costs" means all development, construction, and start-up
costs associated with the Mine through the date of commencement of
production from the Mine.
1.8. "Feasibility Study" means a study of the feasibility of developing
and operating a mine on the Venture Property, including an analysis
of economic, engineering, environmental, regulatory and other
considerations, and containing the level of detail customary in the
industry for a feasibility study presented to financial institutions
for the purpose of seeking financing for the development of a mine.
1.9. "MASA" means Minera Andes S.A., an Argentina company which is 100%
owned by MAINC.
1.10. "Manager" means the Manager of the Venture.
1.11. "Mine" means the mine to be constructed on the Venture Property
following a Decision to Mine.
1.12. "NEWCREST's Borrowing Cost" means the rate of interest paid by
NEWCREST on funds borrowed for the construction of the Mine or, if
NEWCREST does not obtain such a loan, the lowest rate of interest at
which NEWCREST could have borrowed funds for the construction of the
Mine.
1.13. "Operating Committee" means the Operating Committee of the Venture.
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1.14. "Option Completion Date" means the date that NEWCREST completes all
of the requirements contained in paragraph 5.9, if NEWCREST elects
the option described in that paragraph.
1.15. "Related Company" with respect to a party means any corporation or
other business entity which is more than 50% owned or controlled by
that party, or which is more than 50% owned or controlled by a
corporation or other business entity which also owns or controls more
than 50% of that party.
1.16. "$" means United States dollars.
1.17. "Venture" means the Venture between NEWCREST and MAINC with respect
to the Venture Property under this Letter Agreement and the Venture
Agreement.
1.18. "Venture Agreement" means the final and formal Venture Agreement
between NEWCREST and MAINC which, once it is drafted and executed,
will replace this Letter Agreement.
1.19. "Venture Property" has the meaning ascribed to it in paragraph 4.2.
1.20. "Vesting Date" has the meaning ascribed to it in paragraph 5.5.
2. Operation under Letter Agreement
2.1. The respective rights and obligations of the parties shall be
governed by this Letter Agreement until execution of the Venture
Agreement. The Venture Agreement shall be drafted in accordance with
the general understandings and agreements set forth in this Letter
Agreement. The date that this Letter Agreement has been executed by
both parties shall be the Commencement Date for both this Letter
Agreement and the Venture Agreement. MAINC and NEWCREST shall
diligently pursue negotiation of the Venture Agreement and, upon
agreement as to final form and content, shall execute the Venture
Agreement.
2.2. This Letter Agreement constitute's the entire agreement between the
parties with respect to the subject matter hereof, and terminates and
replaces all prior agreements, either written, oral or implied,
between NEWCREST and MAINC with respect to the subject matter hereof.
This Letter Agreement shall not be
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amended, modified, extended, supplemented or otherwise altered except
by written instrument executed by both parties.
3. Formation of Venture
The parties shall form a Venture for exploration and, if approved by the
Operating Committee, mining, of the Venture Property. The initial participating
interests of the parties in the Venture as of the Commencement Date shall be as
follows:
NEWCREST 51.00%
MAINC 49.00%
4. Venture Property and Area of Interest
4.1. The Area of Interest of the Venture shall be all lands and all
mineral interests, any portion of which lies within the boundaries
shown in Exhibit B to this Letter Agreement. The Area of Interest can
be increased or decreased in size only with the agreement of both
parties.
4.2. As of the Commencement Date, the Venture Property shall consist of
the Agua Xxxxxx Property. All lands and all mineral interests within
the Area of Interest which are acquired after the Commencement Date
by the Venture shall be added to the Venture Property. All lands and
all mineral interests within the Area of Interest which are acquired
after the Commencement Date by either of the parties or any of their
respective subsidiaries shall be offered to the Venture at the
acquisition price.
5. Initial Contributions to the Venture
5.1. MAINC, as its initial contribution to the Venture, shall contribute
the Agua Xxxxxx Property. MAINC represents and warrants to NEWCREST
that:
(a) MASA holds an option to purchase the Agua Xxxxxx Property, as
stated in Exhibit A, free and clear of all liens, security
interests, encumbrances, royalties, and adverse claims, except
as specified in Exhibit A;
(b) the agreements described in Exhibit A by which MASA holds an
option to purchase the Agua Xxxxxx Property are valid and
binding agreements
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which have not been amended, modified, supplemented or
terminated, in whole or in part, and are in good standing as of
the Commencement Date;
(c) through the Commencement Date, MASA has fully performed each and
every term, condition and covenant which it is required to
perform under the agreements described in Exhibit A, and MASA
has not received any notice of default or termination with
respect to such agreements;
(d) to the best of MASA's knowledge and understanding, the mining
concessions listed in Exhibit A were obtained by the proper
procedures, and any defects, if any are present, can be
corrected to provide adequate coverage of the mineralized
targets of interest;
(e) MASA knows of no other conflicting agreements with the owners of
the Agua Xxxxxx Property as described in Exhibit;
(f) all corporate action on the part of MASA necessary to authorize
MAINC to enter into this Letter Agreement has been duly taken;
and
(g) MAINC has provided to NEWCREST copies of all data and
information regarding the existence of minerals within the Agua
Xxxxxx Property and all information concerning record,
possessory, legal or equitable title to the Agua Xxxxxx Property
which is within MAINC's and MASA's knowledge, possession or
control.
5.2. NEWCREST, as its initial contribution to the Venture, shall satisfy
the following requirements:
(a) NEWCREST shall incur Cumulative Allowable Expenditures of not
less than $350,000 on or before the first anniversary of the
Commencement Date. In addition, NEWCREST shall complete not less
than 2,000 meters of total drilling on the Venture Property on
or before the first anniversary of the Commencement Date, the
cost of which shall be included in Cumulative Allowable
Expenditures.
(b) NEWCREST shall reimburse MAINC for the property payment to
maintain the Agua Xxxxxx Property in the amount of $40,000 made
by MAINC on March 2, 1996, and shall make property payments to
maintain
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the Agua Xxxxxx Property in the amount of $50,000 on June 2,
1996, and $50,000 on September 2, 1996.
(c) If NEWCREST does not withdraw from the Venture before the
six-month anniversary of the Commencement Date, then NEWCREST
shall make the property payment to maintain the Agua Xxxxxx
Property in the amount of $50,000 on December 2, 1996.
(d) If NEWCREST does not withdraw from the Venture before the second
anniversary of the Commencement Date, then NEWCREST shall incur
Cumulative Allowable Expenditures of not less than $1,000,000 on
or before the second anniversary of the Commencement Date. In
addition, if NEWCREST does not withdraw from the Venture before
the second anniversary of the Commencement Date, then NEWCREST
shall complete not less than 5,000 meters of total drilling on
the Venture Property on or before the second anniversary of the
Commencement Date, the cost of which shall be included in
Cumulative Allowable Expenditures.
(e) If NEWCREST does not withdraw from the Venture before the third
anniversary of the Commencement Date, then NEWCREST shall incur
Cumulative Allowable Expenditures of not less than $2,200,000 on
or before the third anniversary of the Commencement Date.
(f) If NEWCREST does not withdraw from the Venture before the fourth
anniversary of the Commencement Date, then NEWCREST shall incur
Cumulative Allowable Expenditures of not less than $3,800,000 on
or before the fourth anniversary of the Commencement Date.
5.3. As additional consideration to MAINC for entering into the Venture,
NEWCREST shall make the following cash payments to MAINC, which shall
not be included in Cumulative Allowable Expenditures:
(a) NEWCREST shall make a cash payment of $50,000 to MAINC on the
Commencement Date.
(b) If NEWCREST does not withdraw from the Venture before the
six-month
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anniversary of the Commencement Date, then NEWCREST shall make a
cash payment of $50,000 to MAINC on the six-month anniversary of
the Commencement Date.
(c) If NEWCREST does not withdraw from the Venture before the first
anniversary of the Commencement Date, then NEWCREST shall make a
cash payment of $250,000 to MAINC on the first anniversary of
the Commencement Date.
5.4. Until the earlier of the Vesting Date or NEWCREST's withdrawal from
the Venture (subject to paragraphs 5.2(b) and 5.2(c)), NEWCREST shall
pay all option fees and all rents, fees and other statutory sums
required under the Mining Code to keep the Venture Property in good
standing. All Venture Property shall be held and managed by MASA
until the Vesting Date. NEWCREST shall advance funds to MASA to cover
option, lease and other land costs, plus reasonable costs of MASA in
administering the Venture Property.
5.5. On the date that NEWCREST completes all of the requirements contained
in paragraphs 5.2 and 5.3 and is not in material breach of any other
obligations under the Venture Agreement (the "Vesting Date"),
NEWCREST shall be fully vested in its 51% initial participating
interest in the Venture and the Venture Property. On the Vesting
Date, NEWCREST shall be registered as the legal owner of a 51%
undivided interest in the Venture Property. Prior to becoming fully
vested, NEWCREST's initial participating interest of 51 percent is
for the purposes of management only. There is no partial vesting by
NEWCREST until the Vesting Date.
5.6. All amounts of Cumulative Allowable Expenditures paid or incurred by
NEWCREST during any of the time periods described in paragraphs
5.2(a), 5.2(d), 5.2(e), and 5.2(f) shall be fully credited towards
the required Cumulative Allowable Expenditures for later time
periods. Any shortfall in Cumulative Allowable Expenditures paid or
incurred by NEWCREST during any of the time periods described in
paragraphs 5.2(a), 5.2(d), 5.2(e), and 5.2(f) may be made up by a
cash payment from NEWCREST to MAINC so that the Cumulative Allowable
Expenditures plus such cash payment shall equal the required
Cumulative Allowable Expenditures for that time period.
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5.7. If at any time prior to the Vesting Date, NEWCREST fails to meet the
requirements contained in paragraphs 5.2, 5.3 and 5.4, MAINC shall
give written notice to NEWCREST of such default. If NEWCREST fails to
cure such default within 30 days after its receipt of the notice of
default from MAINC, then NEWCREST shall be deemed to have withdrawn
from the Venture and to have relinquished to MAINC all of NEWCREST's
right, title and interest in and to the Venture and the Venture
Property.
5.8. After the Vesting Date, except as provided in paragraph 5.9, all
costs and expenses paid or incurred by or on behalf of the Venture
shall be Venture expenses, to be borne by the parties in proportion
to their respecting participating interests in the Venture,
including, without limitation, the following:
(a) all option fees and rents, fees and other statutory sums
required under the Mining Code to keep the Venture Property in
good standing; and
(b) all consideration paid for any Venture Property, whether in the
form of cash payments, royalties, a share of production, or any
combination of these.
5.9. After the Vesting Date, NEWCREST shall have a 90 day period to give
MAINC written notice that it will exercise the option (in its sole
discretion) of earning an additional 14% participating interest (for
a total of 65%) in the Venture by completing the following
requirements:
(a) NEWCREST shall incur Cumulative Allowable Expenditures of not
less than $10,300,000 on or before the sixth anniversary of the
Commencement Date.
(b) NEWCREST shall prepare a Feasibility Study at its expense with
respect to mining of the Venture Property, the cost of which
shall be included in Cumulative Allowable Expenditures.
(c) NEWCREST shall arrange a loan from a third party to MAINC for
the purpose of funding all or a part of MAINC's required
contributions to the Development Costs of the Mine. The total
amount of the loan shall be equal to 20% of the Development
Costs of the Mine. The loan shall be advanced directly to the
Venture as needed to cover MAINC's required
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contributions to the Venture. If NEWCREST is unable to or does
not desire to obtain such a loan from a third party, then
NEWCREST itself shall make such a loan to MAINC at a rate of
interest equal to NEWCREST's Borrowing Cost. A portion of
MAINC's share of net cash flow from the Mine, equal to 80% of
the net cash flow that would be received from a 20% interest in
the Mine as a whole, shall be dedicated exclusively to repayment
of any loan under this paragraph 5.9(c). Any loan under this
paragraph 5.9(c) shall be a full recourse loan and shall be
secured by MAINC's entire participating interest in the Venture
and the Mine and all of MAINC's right, title and interest in the
Venture Property.
(d) NEWCREST shall pay all option fees and all rents, fees and other
statutory sums required under the Mining Code to keep the
Venture Property in good standing until the requirements in
paragraphs 5.9(a), 5.9(b) and 5.9(c) have been met.
(e) If NEWCREST elects the option described in this paragraph 5.9
but for any reason fails to meet the requirements set forth in
paragraphs 5.9(a), 5.9(b), 5.9(c) and 5.9(d), then from the date
that NEWCREST abandons the option forward, the parties shall
proceed as if NEWCREST had not elected the option, with NEWCREST
having a 51% participating interest and having a 49%
participating interest.
6. Withdrawal from the Venture
6.1. NEWCREST shall have the right to withdraw from the Venture at any
time after it has satisfied the requirements of paragraphs 5.2(a),
5.2(b) and 5.3(a), upon 10 days' prior written notice to MAINC. If
NEWCREST withdraws prior to the Vesting Date, NEWCREST shall have
paid all rents, fees and other required statutory sums under the
Mining Code necessary to keep the Venture Property in good standing
through the effective date of its withdrawal, and shall have
satisfied any obligations it has under paragraphs 5.2 and 5.3 through
the effective date of its withdrawal.
6.2. Notwithstanding paragraph 6.1, NEWCREST shall have the right to
withdraw from the Venture on the six-month anniversary of the
Commencement Date or thereafter upon 30 days' prior written notice to
MAINC if there are material defects in title affecting the mineral
interests in 20% or more of the land area of
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the Agua Xxxxxx Property as described in Exhibit A, or affecting the
mineral interests in any part of the Agua Xxxxxx Property as
described in Exhibit A where one of NEWCREST's primary exploration
targets is located, and if such title defects cannot be cured by
reasonable curative measures in a reasonable time period. The
determination referred to in the immediately preceding sentence shall
be made in the sole judgment of NEWCREST, but NEWCREST shall act in
good faith and shall cooperate fully with MAINC in the resolution of
such title defects. If NEWCREST withdraws from the Venture pursuant
to this paragraph 6.2, NEWCREST shall have no other obligation under
this Letter Agreement, except that NEWCREST shall have paid all
rents, fees and other required statutory sums under the Mining Code
necessary to keep the Venture Property in good standing through the
effective date of its withdrawal, and MAINC shall have the right to
retain all payments made by NEWCREST to MAINC prior to the date of
NEWCREST's withdrawal.
6.3. MAINC shall have the right to withdraw from the Venture at any time
after the Vesting Date, upon 30 days' prior written notice to
NEWCREST.
6.4. Upon withdrawal by either party, the Venture shall terminate, and the
withdrawing party shall convey to the nonwithdrawing party all of its
right, title and interest in and to the Venture Property, and shall
deliver to the nonwithdrawing party all mineral data and samples in
its possession related to the Venture Property.
7. Venture Programs and Budgets
7.1. Prior to the Vesting Date (or the Option Completion Date, if
applicable), all exploration programs and budgets shall be prepared
by NEWCREST. NEWCREST shall provide copies of such programs and
budgets to MAINC. After the Vesting Date (or the Option Completion
Date, if applicable), all exploration programs and budgets until a
Decision to Mine shall be prepared on an annual basis by the Manager
for approval by the Operating Committee.
7.2. Except as provided in paragraph 5.9, after the Vesting Date, the
parties shall contribute to all exploration programs and budgets in
proportion to their respective participating interests in the
Venture.
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8. Dilution and Future Equity Calculations
8.1. Subject to paragraph 5.9, if at any time after the Vesting Date (or
the Option Completion Date, if applicable) a party elects not to
contribute, or fails to contribute, to an approved program and
budget, the respective participating interests of the parties shall
be recalculated in accordance with tile following formula:
1a = (Da + Aa)/(Da + Aa + Db + Ab)
where
Ia is the new participating interest of party A
Da is the deemed value of the initial contribution of
party A
Aa is the actual cumulative contribution of party A from
the Vesting Date (or the Option Completion Date, if
applicable) through the date of calculation
Db is the deemed value of the initial contribution of
party B
Ab is the actual cumulative contribution of party B from
the Vesting Date (or the Option Completion Date, if
applicable) through the date of calculation
If NEWCREST does not exercise the option described in paragraph 5.9, then
for purposes of the above formula, the deemed value of NEWCREST's initial
contribution shall be the total cost incurred by NEWCREST pursuant to paragraphs
5.2, 5.3 and 5.4, and the deemed value of MAINC's initial contribution shall be
49/51 of the deemed value of NEWCREST's initial contribution. If NEWCREST does
exercise the option described in paragraph 5.9, then for purposes of the above
formula, the deemed value of NEWCREST's initial contribution shall be the total
cost incurred by NEWCREST pursuant to paragraphs 5.2, 5.3, 5.4 and 5.9, and the
deemed value of MAINC's initial contribution shall be 35/65 of the deemed value
of NEWCREST's initial contribution.
8.2. If, prior to a Decision to Mine, MAINC's participating interest is
reduced to 10.00% by operation of paragraph 8. 1, then:
(a) MAINC shall have no further obligation to make cash
contributions to the Venture until a Decision to Mine, and
MAINC's participating interest shall not be reduced below 10.00%
until the Decision to Mine.
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(b) If MAINC elects under paragraph 9.2 to contribute to the
Development Costs of the Mine, then MAINC shall use its best
efforts to obtain financing for its 10% share of the Development
Costs.
(c) If MAINC is unable to obtain financing or otherwise fund its 10%
share of the Development Costs of the Mine, then NEWCREST shall
lend the necessary funds to MAINC at a rate of interest equal to
NEWCREST's Borrowing Cost, to be advanced directly to the
Venture as needed to cover MAINC's required contributions to the
Venture. The loan shall be a full recourse loan and shall be
secured by MAINC's entire participating interest in the Venture
and the Mine and all of MAINC's right, title and interest in the
Venture Property.
(d) If NEWCREST lends money to MAINC pursuant to paragraph 8.2(c),
80% of MAINC's net cash flow from its 10.00% participating
interest in the Mine shall be dedicated exclusively to repayment
of the loan from NEWCREST.
8.3. Each party agrees to pledge its entire participating interest in the
Venture and the Mine, and its entire right, title and interest in and
to the Venture Property, if necessary or desirable in order for the
Venture to obtaining financing for the Development Costs of the Mine,
and that any such financing obtained by the Venture shall have a
first lien on such assets.
9. Decision to Mine
9.1. Either party may request the Operating Committee to direct the
Manager to undertake a feasibility study. If the Operating Committee
declines to do so, that party may undertake its own feasibility study
at its own cost. If that party's feasibility study later forms the
basis of a Decision to Mine by the Operating Committee, then the
Venture shall reimburse that party for all costs of the feasibility
study.
9.2. After a Decision to Mine, each party shall choose one of the
following two options: (1) to contribute in proportion to its
participating interest to the Development Costs of the Mine; or (2)
to decline to participate in the Mine. If a party chooses the second
option, the following shall occur:
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(a) The party choosing the second option (the "selling party") shall
be required to offer to sell its entire participating interest
in the Venture to the non-selling party, and the non-selling
party shall be required to make a good faith offer to purchase
such participating interest. The selling party shall have a
period of not less than 120 days after its receipt of the offer
from the non-selling party within which to accept such offer.
The parties then shall attempt in good faith to negotiate the
terms and conditions of a sale of the selling party's
participating interest to the non- selling party.
(b) If the terms and conditions of a sale of the selling party's
participating interest to the non-selling party cannot be agreed
upon within 60 days after the commencement of negotiations, the
selling party shall have the right to offer its participating
interest to third parties, and the non-selling party shall be
deemed to have waived its right of first refusal with respect to
such participating interest.
(c) In the event the selling party does not accept the offer of the
non-selling party and does not sell its participating interest
to a third party, the selling party's participating interest
shall be subject to dilution in accordance with paragraph 8.1.
9.3. If after a Decision to Mine either party, having elected under
paragraph 9.2 to contribute to the development costs of the mining
project, fails to contribute to an approved program and budget in
proportion to its participating interest, then the nondefaulting
party, in addition to any other remedies it might have, shall have
the right to acquire the defaulting party's entire participating
interest for 90% of its Appraised Value.
10. Management
10.1. NEWCREST shall have the right to be the Manager of the Venture from
the Commencement Date through the Vesting Date, and until such time
as it ceases to hold a majority participating interest (or if there
are more than two parties to the Venture, until such time as it
ceases to hold the single largest participating interest).
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10.2. The parties shall form an Operating Committee composed of two
representatives of each party. Voting on all issues will be by simple
majority vote (except for a Decision to Mine or the purchase, sale or
surrender of any material property, all of which shall require a
unanimous vote) with the parties' votes being weighted in proportion
to their respective participating interests. If a Feasibility Study,
duly completed and subsequently audited by a reputable outside
engineering firm, agreeable to NEWCREST and MAINC, is positive and
recommends development, a unanimous vote shall not be required for a
Decision to Mine, and a simple majority vote shall be sufficient for
a Decision to Mine.
11. Manager's Duties
11.1 The Manager shall:
(a) prepare and implement exploration programs and budgets;
(b) maintain the Venture Property in good standing by the timely
payment of all rents, fees and other sums required;
(c) provide any statutory, technical or other reports required by
any governmental authority;
(d) provide copies of all such reports to the parties;
(e) secure any approvals, consents and/or statutory authorizations
required in order to conduct exploration of the Venture
Property; and
(f) report to the parties on a quarterly basis with respect to
exploration activities, exploration results and any other
matters relating to the Venture Property.
11.2. From the Commencement Date through the Vesting Date (or the Option
Completion Date, if applicable), all costs and expenses properly
incurred by the Manager in the performance of its shall be paid by
NEWCREST and shall be included in Cumulative Allowable Expenditures.
After the Vesting Date (or the Option Completion Date, if
applicable), the Venture shall reimburse the Manager for all costs
and expenses properly incurred by the Manager in the
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performance of its duties. In lieu of general and administrative
expenses, after the Vesting Date (or the Option Completion Date, if
applicable) the Venture shall pay the Manager an overhead charge
equal to 1% of capital expenditures of $10,000 or more, plus 2% of
all other expenditures (excluding royalties, option fees, rents and
fees due under the Mining Code, royalties, and taxes). Such overhead
rates may be amended from time to time by agreement of the parties
if, in practice, such rates are found to be insufficient or
excessive.
12. Formal Venture Agreement
12.1. This Letter Agreement, once signed by both parties, shall constitute
a legally binding contract between NEWCREST and MAINC NEWCREST shall
prepare at its own cost a formal Venture Agreement to provide in more
detail for the above matters, together with such other provisions as
are normally found in this type of arrangement.
12.2. NEWCREST shall be responsible for all costs and expenses incurred in
connection with this Letter Agreement and the Venture Agreement,
including registration, notarial, stamp duty and/or property transfer
fees. However, each party shall be responsible for its own legal
costs incurred in connection with this Letter Agreement and the
Venture Agreement.
13. Assignment
Each party shall have the right to convey, assign or transfer all or part of its
participating interest to any other person or entity. However, if the
conveyance, assignment or offer is to any person or entity other than a Related
Company of the assigning party, then the nonassigning party shall have a right
of first refusal with respect to such conveyance, assignment or transfer.
14. Confidentiality
14.1. The terms of this Letter Agreement and the Venture Agreement and all
information obtained in connection with the performance of this
Letter Agreement and the Venture Agreement shall be the exclusive
property of the parties and, except as provided in paragraph 14.2,
shall not be disclosed to any person or entity or to the public
without the prior written consent of the other party, which consent
shall not be unreasonably withheld. The confidentiality
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restrictions contained in this paragraph 14.1 shall be binding during
the term of this Letter Agreement, and shall continue to be binding
upon any party who withdraws from the Venture for two years following
the date of withdrawal.
14.2. The consent required by paragraph 14.1 shall not apply to a
disclosure: (a) to a Related Company, consultant, or contractor of a
party that has a bona fide need for the information; (b) to any
person or entity which is considering purchasing of a party's
participating interest or extending financing to a party; (c) to a
government agency, stock exchange, securities commission or to the
public which a party believes in good faith is required by applicable
laws or regulations; or (d) of information that has become generally
available to the public other than as a result of any breach by such
party of its obligations hereunder. A party shall give written notice
to the other party prior to any disclosure under this paragraph
14.2(a) and 14.2(b), and in the case of disclosures under said
paragraphs, the disclosing party shall require the recipient of the
confidential information to agree in writing to protect the
information from further disclosure in accordance with paragraphs
14.1, 14.2(a) and 14.2(b). Except as required by law or regulatory
authority, neither party shall make any public announcements or
statements concerning this Letter Agreement, the Venture Agreement,
or any activities conducted thereunder without the prior written
approval of the other party, which approval shall not be unreasonably
withheld. A party shall provide to the other party advance copies of
all routine public announcements or press releases of information
made under paragraphs 14.2(c) and 14.2(d), but not necessarily
routine business filings under paragraph 14.2(c), to allow the other
party to consent on matters of fact.
15. Other Provisions
15.1. This Letter Agreement and the Venture Agreement shall be governed by
the laws of the State of Colorado in the United States.
15.2. In the event of any dispute between the parties relating to or
arising out of either the Letter Agreement or the Venture Agreement,
the parties shall first attempt to resolve the dispute by negotiating
in good faith. If the dispute is not resolved within 90 days after
the commencement of negotiations in accordance with the immediately
preceding sentence, then either party shall have the right (unless
prohibited by Argentinean law) to submit the dispute to
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binding arbitration in Denver, Colorado, administered by the American
Arbitration Association under its Commercial Arbitration Rules then
in effect. The arbitration shall be decided by a panel of three
arbitrators, who shall be selected in accordance with the following
procedure: the parties each shall select one independent arbitrator,
and those two arbitrators shall agree on the third independent
arbitrator. If either party fails to select an arbitrator, or if the
two arbitrators selected by the parties cannot agree on a third
arbitrator, then such arbitrator shall be selected by the American
Arbitration Association. The arbitrators shall be required to follow
Colorado law and precedent, and shall be required to issue detailed
findings of fact and conclusions of law. Judgment on the arbitration
award rendered by the arbitration panel may be entered in any court
having jurisdiction thereof. If the arbitration award is challenged
in a court of law, the court shall apply the same standard of review
that a Colorado appellate court applies to the review of a decision
by a trial court.
15.3. The obligations of the parties under this Letter Agreement and under
the Venture Agreement shall be suspended to the extent and for the
period that performance is prevented by any condition of force
majeure. Force majeure shall mean any cause, whether foreseeable or
unforeseeable, beyond a party's reasonable control, including,
without limitation, Acts of God; labor disputes; laws, regulations,
or orders of any governmental entity; judgments or orders of any
court; inability to obtain on reasonably acceptable terms any public
or private license, permit or authorization; acts of war or
conditions attributable to war; riot, civil strife, terrorism,
insurrection or rebellion; fire, explosion, earthquake, storm, flood,
drought, or adverse weather conditions; accidents; inability to
obtain labor, transportation, materials, equipment, or services; or
breakdown of equipment.
15.4. NEWCREST and MAINC agree to make whatever changes are required in
this Letter Agreement and to take whatever actions are required in
the drafting of the Venture Agreement to ensure that the agreement is
legal and binding under Argentinean laws and to maximize the tax
benefits to the Venture.
If the terms set forth above are acceptable to MAINC, please indicate
MAINC's agreement by signing a copy of this letter in the space provided below
on behalf of MAINC and returning the signed copy to Xxxxxxx X. Xxxxxx or Xxxxxx
X. Xxxxxx by 5:00 p.m. on April 15,1996. We look forward to working with you on
this project.
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Xxxxxxxxx,
XXXXXXXX RESOURCES, INC.
By: /s/ XXXXX X. XXXXXX
-------------------------------------------
Xxxxx X. Xxxxxx
President
(Acting on behalf of a yet to be named affiliate.)
ACCEPTED AND AGREED TO:
MINERA ANDES INC.
By: /s/ XXXXX X. XXXXXXX
-----------------------------------
Xxxxx X. Xxxxxxx
President
(Acting additionally as a representative of Minera Andes S.A.)
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