TRANSLATION / TRADUCCION
Document / Documento: "Contrato de Exploracion y Prospeccion con Opcion de
Compra, fecha 28/2/97 con Sr. Giustozzi"
CONTRACT OF EXPLORATION AND PROSPECTING WITH OPTION TO BUY. In the city of
Xxxxxxx Province on February 28, 1997, it is agreed between MINERA ANDES S.A.,
represented herein by its Director President, Xx. XXXXX XXXXXXX XXXXXX,
(document No.) C.I. 219206, guaranteeing this by means of submitting the
Corporate Statutes; also appearing as representative, is Xx. XXXXX XXXXX,
(Passport C969194D), both taking up residence in Xxxxxxx Xxxxxx 000, Xxxxxxx, on
one hand; and on the other, Xx. XXXXXX XXXXXXX XXXXXXXXX, L.E. (document) No.
6865305, a married Geologist, taking up residence in Xxxxx Xxxx 0000, Xxxxx
Xxxxx, Xxxxxxxxxx, Xxxxxxx; also appearing is Xxx. XXXXX XXXXX XX XXXXXXXXX,
X.X. (document) 4115161, married, having the same address as the latter, and
giving conjugal approval as required by Art. 1277 from the Civil Code; the said
parties agree to the current Contract of Exploration and Prospecting with Option
to buy, according to the following conditions:
FIRST: Xx. Xxxxxx Xxxxxxx Xxxxxxxxx as holder of the claim arising from the
cateo's allowances in process under files (expedientes): 495-G-94 and
Manifestaciones de Descubrimiento No. 382-G-96; 409-G-96 and 410-G-96, which
comprise the area called "Los Reyunos" in San Xxxxxx, Mendoza; states that his
rights and claims are completely valid and in force according to the Mining
Code; that there are no legal or conventional inhibitions, seizures or burdens
affecting them and that they are all completely available. A Certificate issued
by
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Notary of Mines from the Provincial Mining Direction of Mendoza, showing the
good standing of the titles, is enclosed. Xx. Xxxxxx Xxxxxxx Xxxxxxxxx also
states that included under the terms of this contract, is any other mining claim
that by any mean he has or gets in the declared cateos, or that are obtained by
third parties, such as declared mines; stating clearly that at present they
already have declared mines in process, that are comprised in this contract; and
agreeing with Minera Andes S.A. that he gives the "Right to exploration and
prospecting with irrevocable option to buy", in order to explore and/or buy
those cateos and mining claims, in a total or partial manner, at any stage of
this contract. An approximate sketch showing the location of the area is
incorporated. It is stated that there are no studies, nor enhancements prepared
for exploitation; nor certainty of economically exploitable mineralization, in
these areas. This contract makes reference to the Exploration and Option to Buy,
related to metallic minerals and not to the non metallic minerals.
SECOND: The option to buy could be exercised by Minera Andes S.A. at any moment
within the three year term, starting January 1, 1997 and ending on January 1,
2000. In the event that the Option is exercised, Xx. Xxxxxx Xxxxxxx Xxxxxxxxx,
and Xxx. Xxxxx Xxxxx xx Xxxxxxxxx, agree to carry on all the necessary
procedures to formally transfer the ownership of the mining properties hereby
detailed under clause number one to Minera Andes S.A., or to whom Minera Andes
S.A. may designate. In order to make this procedure easier, Xx. Xxxxxx Xxxxxxx
Xxxxxxxxx and Xxx. Xxxxx xx Xxxxxxxxx, give irrevocable power in favor of Minera
Andes S.A. and/or the person designated by the company, in order to drive the
process related to any of the files hereabove mentioned, declare minerals that
could be discovered and require directly from
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the Provincial Mining Direction, the titles for the corresponding properties and
arising rights, during the term of this contract. The management of the
procedures and requirements related to the Direccion de Mineria will be
conducted by Minera Andes S.A., with Xx. Xxxxxxxxx'x cooperation when requested.
To the extent that Minera Andes S.A. will give its official address in order to
receive notices related to the claims mentioned in this contract. Once this
contract is registered, Minera Andes S.A. will be responsible for maintaining
all of the claims that form part of this contract current and in force. In the
event that modifications to the mining claims and/or termination of the contract
is necessary, such acts will be done agreed to by both parties. As a consequence
of Xx. Xxxxxxxxx having given Minera Andes the exclusive right to follow-up and
maintain the mining claims, Xx. Xxxxxxxxx will not be responsible for any loss
of rights that Minera Andes S.A. is responsible for. It has been agreed that Xx.
Xxxxxxxxx has the right to examine the files related to the claims herein held
by Minera Andes. During the term of this contract, the parties agree not to
apply for or register as devoid the areas comprising the contract such as,
cateos, manifestaciones de descubrimiento (discovery declaration), minas (mines)
or estacas minas, or any other claim that could spoil the soul of this
agreement. If there had been other manifestaciones and/or any manifestacion was
made, creating rights in the areas hereby comprised, these rights would be
considered under the conditions of the current contract. Any damage to assets
suffered by any of the parties as a consequence of the conduct of the
contractors, will be indemnified.
THIRD: During the term of this contract, Xx. Xxxxxx Xxxxxxx Xxxxxxxxx and his
wife give Minera Andes S.A. the holding of the cateos and claims hereby
mentioned in Clause No. 1, but
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the latter cannot exploit the ore deposits, that could be discovered; having the
ability, to only carry on exploration and investigation tasks and the following
works: geologic studies, topographic surveys, drilling, take samples of the
surface and underground, mineralogy and metallurgic surveys, build test plants
for the sake of study and any other tasks that could be useful for accomplishing
the goal, which is the discovery and cubic measuring of ore that could be
considered economically exploitable.
FOURTH: In the event that Minera Andes S.A. exercised its option to buy under
clause number one herein, the sales price for the claims mentioned in clause 1,
include all the manifestaciones creating mining claims that could be
incorporated, and is fixed in two million dollars (US$ 2,000,000) to be paid in
U.S. dollars or in pesos at the corresponding exchange rate for the U.S. dollar
at sales price in Banco de la Nacion Argentina, the day before payment date.
Payment schedule is established in the following way:
1st) As counterpart and execution start of the contract with option to buy, as a
whole or in part, stated under clause number one, Minera Andes S.A. will pay Xx.
Xxxxxx Xxxxxxx Xxxxxxxxx, the amounts herebelow mentioned:
First year:
1) Upon signing: US$l0,000;
2) Second quarter (April 1, 1997): US$15,000;
3) Third quarter (July 1, 1997): US$17,500;
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4) Fourth quarter (October 1, 1997): US$17,500;
Second year:
1) First quarter (January 1, 1998): US$25,000;
2) Second quarter (April 1, 1998): US$25,000;
3) Third quarter (July 1, 1998): US$25,000;
4) Fourth quarter (October 1, 1998): US$25,000;
Third year:
1) First quarter (January 1, 1999): US$35,000;
2) Second quarter (April 1, 1999): US$35,000;
3) Third quarter (July 1, 1999): US$35,000;
4) Fourth quarter (October 1, 1999): US$35,000;
TOTAL US$300,000
These amounts will be paid by Minera Andes S.A. during the first five days of
each quarter, starting upon signature of this contract then subsequently in the
way hereby indicated. The address for payments will be at Xxxxxxx Xxxxxx 000,
Xxxxxxx city; or by depositing in a bank account established by the parties.
2nd) The remaining balance which is US$ 1,700,000 in the event of exercising the
option to buy when the option term expires; or if this option was taken before
the end of the three year term,
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in order to complete the total option price which is US$2,000,000; is payable in
two equal semiannual payments; canceling the first payment together with the
deed transferring the ownership, and the second payment, six months after it; at
that point, the appropriate way to give a payment guarantee, in favor of the
seller will be agreed. The term for giving this transferring deed, is agreed in
sixty straight days from receiving notice of exercising the option to buy in a
total or partial manner, by Minera Andes S.A., in the event of a delay in the
deed proceeding, a fine is stated consisting of a monthly 3% over the price
balance, which should be paid by the party responsible for the delay; eventually
Minera Andes S.A. can withhold this amount, over the price balance. The receipt
submitted or signed by Xx. Xxxxxx Xxxxxxx Xxxxxxxxx and/or Xxx. Xxxxx xx
Xxxxxxxxx, is considered sufficient as payment receipt. The delay in the payment
of any of these amounts, will proceed automatically; and if Minera Andes S.A.
after being summoned does not fulfill the payment in the term of five working
days, this contract would be considered as terminated without obligation to
indemnify.
3rd) In the event Minera Andes S.A. exercised the option to buy; a 1.5% royalty
from the ore price received from the "Net Smelter Return" during the production
period of the deposit also makes up the price. This royalty will be paid in US$
dollars. The payment term for this royalty will be in force when the eventual
commercial exploitation starts and will be paid semiannually. A delay regarding
the royalty payments will automatically produce interests equivalent to the
"Tasa Libor" in favor of Xx. Xxxxxxxxx. Xx. Xxxxxxxxx has the faculty to audit
the production and sales price of the minerals without obstructing the
administrative tasks of Minera Andes S.A.
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FIFTH: Minera Andes S.A. can terminate the contract at any moment, in a partial
or total manner without having any obligation to indemnify, through appropriate
notice sent to Xx. Xxxxxx Xxxxxxx Xxxxxxxxx at the address hereby stated. After
the first six months this prior notice should be sent fifteen days in advance.
Xx. Xxxxxx Xxxxxxx Xxxxxxxxx and Xxx. Xxxxx xx Xxxxxxxxx, do not have the
faculties to terminate the contract on their own, except for the events
mentioned under clause number eleven. The contract will be terminated at the
specific date mentioned in the termination notice that Minera Andes S.A. can
send. At the moment of terminating the contract Minera Andes will transfer the
holding of the mining claims to Xx. Xxxxxx Xxxxxxx Xxxxxxxxx as they are, with
all the concession charges up to date and without equipment or obligation to
transfer the enhancements incorporated, except for the event where it was not
possible to detach them. In the event that Minera Andes S.A. did not decide to
purchase the deposits or the area, the amounts paid up to that moment will
remain in favor of Xx. Xxxxxx Xxxxxxx Xxxxxxxxx, as compensation for not being
able to use his rights during the exploration term.
SIXTH: As warranty for the option to buy mentioned under clause number one
herein, Xx. Xxxxxx Xxxxxxx Xxxxxxxxx and Xxx. Xxxxx Xxxxx agree to register with
the mining authority of Xxxxxxx province, a voluntary inhibition to transfer,
sell, rent or burden the mining claims identified under clause number one. The
said inhibition will be determined for a period equivalent to the term of this
contract, and a copy of it will be submitted as reference and will be recorded
as a quote to each area and mines' registry; as well as in each file
(expediente).
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SEVENTH: Xx. Xxxxxx Xxxxxxx Xxxxxxxxx, will transfer the mining claims, cateos
and minas with all the canons paid up to January 1, 1997. During the term of
this contract Minera Andes S.A. should:
a) Pay all the expenses related to the legal standing of the claims mentioned
under clause number one, meaning the payment of: the canons for the cateos and
pertenencias, the surveys of cateos and minas, estacas minas and manifestaciones
de descubrimiento, repaying of borders and any other expense including
Provincial or Municipality expenses that could affect the mining claims
hereabove mentioned, as well as all the taxes and national and Provincial
burdens that could affect this contract; not being possible to deduct this from
the payments to Xx. Xxxxxx Xxxxxxx Xxxxxxxxx, except in the event that he had
accepted these obligations;
b) Xx. Xxxxxx Xxxxxxx Xxxxxxxxx will not be responsible for tools, machinery,
equipments, facilities or enhancements located within the mining property;
c) Take on all the responsibility for corporal injuries or death of any person
or damage to assets resulting from negligence of its employees or agents,
resulting from exploration activities or any other work related Minera Andes
S.A.'s activities;
d) Pay for all labor and materials in connection with this contract and/or
related issues in all its aspects.
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e) Assume the responsibility for indemnity corresponding to surface owners or
third parties, including government and environmental damage, provided that it
arose from Minera Andes S.A.'s activities.
EIGHTH: Minera Andes S.A., during the term of this contract, can install and
take any tool, machinery, equipment or supplies owned by the company. It is
agreed and established that in the event of total or partial termination of this
contract due to any reason, Minera Andes S.A. can take away all its belongings,
tools, machinery, equipment or supplies and the cost of that transportation will
be paid by Minera Andes S.A., within the term of a ninety days (90) from
terminating the contract; Minera Andes S.A. cannot take away any underground
beam or any other support installed and cannot alter or restore excavations or
any other works on the surface, unless that it is required by law; rules or
administrative requirements to be applied. Minera Andes S.A. can have security
during this term.
NINTH: After the total or partial termination of this contract due to any reason
but the payment of the purchase price to Xx. Xxxxxx Xxxxxxx Xxxxxxxxx and Xxx.
Xxxxx xx Xxxxxxxxx, in the manner and in the amounts scheduled under clause
number four, and provided that Xx. Xxxxxx Xxxxxxx Xxxxxxxxx and his wife have
fulfilled all the conditions. Minera Andes S.A. will provide them at no charge a
copy of all the feasibility studies detailed under clause number three, and any
other material useful for the investigation, within the term of ninety days
after terminating the contract. Xx. Xxxxxx Xxxxxxx Xxxxxxxxx and Xxx. Xxxxx xx
Xxxxxxxxx prior 10 days notice to Minera Andes S.A., have the right to inspect
all the claims at any adequate
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moment, without obstructing the work conducted by Minera Andes S.A.
TENTH: Xx. Xxxxxx Xxxxxxx Xxxxxxxxx and Xxx. Xxxxx xx Xxxxxxxxx, declare and
guarantee that they are the only holders of the mining claims or cateo
applications included under clause number one; and that their ownership is in
good standing with all the corresponding rights, and that they have not
transferred or burdened them, that they are free and exempt of any claim by
third parties. Without limiting or restricting in any way Minera Andes S.A.'s
rights over Xx. Xxxxxx Xxxxxxx Xxxxxxxxx and Xxx. Xxxxx xx Xxxxxxxxx, it is
agreed that if during the term of this contract Minera Andes S.A., the mining
authority, or third parties discovered or declared any kind of corruption or
limitation in the title of any of the claims or applications for cateos, or
mines mentioned under clause number one, Xx. Xxxxxx Xxxxxxx Xxxxxxxxx and Xxx.
Xxxxx xx Xxxxxxxxx would amend them. If Xx. Xxxxxx Xxxxxxx Xxxxxxxxx, did not
accomplish so within the term of thirty straight days from the date he is
summoned by Minera Andes S.A., except in the event of force majeur; vices such
as obstructions or restrictions could be amended by Minera Andes S.A., thus
Minera Andes S.A. or whoever may be designated by the company, is given
irrevocable broad power to amend such vices. In the event that Minera Andes S.A.
paid the total purchase price according to the schedule under clause number four
herein, acquiring the right already transferred, the title for the mining claims
and turning those claims into its true and material ownership, Xx. Xxxxxx
Xxxxxxx Xxxxxxxxx and his wife will furnish in the term of sixty days all of the
official documents and carry out all the proceedings necessary to improve the
ownership transfer of the concessions in favor of Minera Andes S.A.; or whoever
may be designated by Minera Andes S.A. The expenses and fees resulting from the
issuing and
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registering of official documents, will be paid by Minera Andes S.A. It is also
restated that Xx. Xxxxxx Xxxxxxx Xxxxxxxxx and Xxx. Xxxxx xx Xxxxxxxxx, give
irrevocable power to Minera Andes S.A. or to whoever may be designated by the
company, to carry on all the necessary proceedings and issue the official
documents expressing the ownership transfer for the mines and cateos'
applications included in this contract.
ELEVENTH: The only reason in favor of Xx. Xxxxxx Xxxxxxx Xxxxxxxxx and his wife
allowing them to terminate the contract, would be the lack of payment according
to what was agreed under clause number four and the unfulfillment of Minera
Andes S.A.'s commitments under clause number 7a). The faculty to terminate the
contract due to lack of payment will proceed after thirty days of delay for the
scheduled dates. The delay will proceed by legal right without any need for
legal requirements, through summoning resulting from the expiration of the
payment date. During the delay period, the amount will earn an interest
equivalent to the rate charged by Banco de la Nacion Argentina for the discount
of letters or promissory notes; which will be paid together with the amount
owed. Once the thirty day delay term is over, Xx. Xxxxxx Xxxxxxx Xxxxxxxxx and
his wife, will be able to terminate the contract by means of appropriate notice
Minera Andes S.A.'s address, keeping all the payments collected up to that
moment in their favor; except for the event in which the option to buy was
exercised and one third of the price had already been paid, in this event, Xx.
Xxxxxxxxx, should demand the total payment of the price balance and guaranties.
TWELFTH: All Minera Andes S.A.'s rights resulting herein could be transferred,
prior notice
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to Xx. Xxxxxx Xxxxxxx Xxxxxxxxx and Xxx. Xxxxx xx Xxxxxxxxx. At this time, the
transferees should ratify their acceptance to Xx. Xxxxxx Xxxxxxx Xxxxxxxxx and
offer an adequate reliability warranty or the possibility to accomplish these
contract obligations; from this moment on, all the rights and obligations
originally corresponding to Minera Andes S.A. are automatically substituted. Xx.
Xxxxxx Xxxxxxx Xxxxxxxxx'x and Xxx. Xxxxx xx Xxxxxxxxx'x rights, according to
this contract, can only be transferred with prior acceptance by Minera Andes
S.A.; not being possible for this acceptance to be denied without reason.
THIRTEENTH: This contract will oblige the parties herein and their corresponding
inheritors, executors, administrators, successors and related third parties. All
of the knowledge and information that Xx. Xxxxxx Xxxxxxx Xxxxxxxxx acquires,
related to the work mentioned under clause number three, will be kept with
discretion and considered as confidential, except for the event that Minera
Andes S.A. releases the holders from this obligation, in writing. This
confidentiality condition, will be in force during the whole term of this
contract and up to ninety days after the termination date of this contract or
the purchase of the property and mining claims. Minera Andes S.A. also agrees to
keep confidentiality for ninety days after the contract has been terminated even
in the event that Minera Andes S.A. excludes an area. Except for the event that
Minera Andes S.A. is negotiating the transfer or joint venture in this contract
with third parties concerned.
FOURTEENTH: All the notices to Minera Andes S.A. and to Xx. Xxxxxx Xxxxxxx
Xxxxxxxxx and Xxx. Xxxxx xx Xxxxxxxxx will be done in written and in a reliable
way mailed to the
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addresses hereby stated. The parties can change their address prior notice. It
is agreed that for the sake of this contract, Xxx. Xxxxx Xxxxx xx Xxxxxxxxx,
give her conjugal approval, authorizes and gives power to Xx. Xxxxxx Xxxxxxx
Xxxxxxxxx in order to represent her with Minera Andes S.A. and/or Mining
Authority, in any required circumstance. This contract is to be registered with
the Notary Public and Mining Authority; expenses will be paid by Minera Andes
S.A.
FIFTEENTH: The parties agree, that in event of dispute they accept the
jurisdiction of the common courts of the province of Xxxxxxx, excluding any
other code or jurisdiction. It is stated that this contract is exempt from seals
due to an amendment to article 240 inc. 31, Fiscal Law N(degree) 6104. Approving
this document, six copies are signed by the parties, in order to be registered
with the Mining Authority of Xxxxxxx Province; one to be recorded with a local
Notary Public; and another to be translated to English. Upon signing the
contract, Minera Andes S.A. pays the amount of US$ 10,000 (ten thousand dollars)
to its co-contractor, according to payment schedule under clause number four.
After receiving this amount, the co-contractor will furnish adequate receipt and
a broad and total payment document.
INTERPRETATIVE CLAUSE: Regarding NET SMELTER RETURN: In the event that the
royalties had to be paid, the "net smelter return" concept comprehends all of
the metallic minerals, concentrates, or their products containing ore produced
and sold by the Holder. When the ore containing minerals with commercial value,
are sold by the Holder, its "net smelter return" will be considered as the
actual amount received by the said Holder, minus the deduction of any expense
related to transport (including freight, insurance, shipping and delivery costs)
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from the exploitation to the facilities of the purchaser and/or any other
unloading location. When the concentrates or products containing minerals with
commercial value are sold by the holder, their net smelter return should be
considered as the actual amount received by the holder for the sale, minus
deduction for any and all the expenses related to smelting, refining, weighing,
sampling, assays, handling, transport (including freight, insurance, handling
and mailing expenditures), penalties for impurities and other charges deduced by
a purchaser, provided that the Holder does not deduct any charge for initial
processing. Initial processing is the initial grinding or concentration or other
ore treatment during which one or more mineral products are recovered from the
sold ore and a subsequent processing, and during which the first tails and
mineral waste are discarded or deposited. Such deductions will be limited to
commercially reasonable amounts from the point of view of mineral industrial
practices and levels, currently accepted as good, such as smelting or other
similar operations for the treatment of metals. The "net smelter return" for the
ore, concentrates or products treated in smeltery and other similar metal
operations, owned, operated or controlled by the Holder, or dealt with based on
a toll paid by the Holder, will be computed as already mentioned, with the
deductions previously established. For the ore, concentrates or products sold to
associate companies or sold by the Holder, but in some way used by him, the
gross price for the sale will be determined in a similar way; provided that the
total deductions done by the Holder according to this paragraph, do not exceed
the total deductions that could have been made by other smeltery operators or
treatment facilities for similar materials in the case that those materials were
smelted or treated in those facilities based on a reasonable commercial
agreement. There is an illegible signature and the explanatory legend says:
Xxxxx Xxxxx on behalf of Minera Andes S.A. There is an
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illegible signature and the explanatory legend says: Xxxxx X. Xxxxxx on behalf
of Minera Andes S.A. There is an illegible signature and the explanatory legend
says: Xxxxxx Xxxxxxx Xxxxxxxxx, L.E. (document) 6865305. There is an illegible
signature and a legend saying Xxxxx Xxxxx de Xxxxxxxxx X.X. (document) 4115161.
There is a certification in Notary Public proceeding number 080738, that says:
"As Notary Public, Holder of Registry number thirty-seven from Capital, I
CERTIFY: that the signatures at the bottom of each of the FIVE pages of the
Contract of Exploration and Prospecting with Option to buy herein, which also
have my signature, Professional seal and formal statement for the certification
that is done in the current sheet for the Notary Public proceeding; belong to
Xx. XXXXX XXXXX, Passport issued by the United Kingdom of Great Britain and
Northern Ireland number C969194D, to Xx. XXXXX XXXXXXX XXXXXX, C.I. (document)
number 219206 issued by the Xxxxxxx Police, and Xx. XXXXXX XXXXXXX XXXXXXXXX,
L.E. (document) number 6865305 and to Xxx. XXXXX XXXXX XX XXXXXXXXX, X.X.
(document) 4115161; all of which have been done in my presence; as well as Xx.
Xxxxx Xxxxxxx Xxxxxx is acting as President of the Board of Directors of MINERA
ANDES S.A., guaranteed by Incorporation Deed dated September 9th, 1994, issued
by Notary Public lnes Xxxxx Cumaodo, Fs. 322, from the records at Registro
Notarial number 72, and registered in the Public Registry for Limited Liability
Companies (Registro Publico de Sociedades Anonimas) from this province under
file number 2892, Fs. 1; Xx. Xxxxx Xxxxx is acting as general manager for
"Minera Andes S.A.", guaranteeing this with General Administration Power of
Attorney, registered in the Public Registry for General Powers (Registro Publico
de Mandatos Generales) from this province, under number 30432, Fs. 27, book 290
"L". The corresponding requirement has been formalized at pages 132 and 133
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respectively from Book Number "Two" of requirements of the legalized, witnessed.
Mendoza, February 28th, 1997". In each of the five pages containing the Contract
of Exploration and Prospecting with option to buy that has been textually
transcribed, there are four illegible signatures, with a seal saying:
Certification at Notary Public Proceeding sheet N(degree) 080738 with
Certification Stamps N(0) 778915/18. Mendoza, February 28th, 1997. There is an
illegible signature and a seal saying Xxxxxxxx Xxxxxx Lago, Notary Public, Reg.
N(degree) 37. Mendoza. IN ACCORDANCE WITH; what has been transcribed from the
Contract that I see, which bears the statement that it is exempt from fiscal
repaying, enclosed hereby, with the corresponding notary public's quote. ON
RECORD. READ this deed by the appearing parties, with their corresponding
functions, accepting the whole of this, ratifying its content and the signature.
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REPRESENTATION OF ACCURACY
The foregoing is a fair and accurate English translation of the document
from which it is made.
Dated this 19th day of June, 1997.
/s/ XXXXX XXXXX
----------------------------------------
Xxxxx Xxxxx
Vice President
