EXHIBIT 10.7
[XXXXXXX XXXXXXXXXX]
October 8, 1996
X. Xxxxx Xxxxxxx
New Gold, Inc.
0000 Xxxx Xxxx, Xxxxx 000
Xxxx, XX
XXX
Via Facsimile 000-000-0000
Dear Sir:
RE: Letter of Intent - Xxxxxx Property, Nevada
I am pleased to inform you that I believe that we can come to a final agreement
with respect to the Xxxxxx Property on the following basis:
1. Non-refundable deposit of US$10,000 on signing of this Letter of Intent;
2. 45 day due diligence process & preparation of option agreement subject to
signing a confidentiality agreement;
3. Option Agreement to be signed by November 18, 1996 for a FOUR year term;
4. Newgold to have an option to purchase 100% of property at end of four years
for:
a) US$870,000;
b) 100,000 shares of Newgold;
c) Miramar to retain 2.5% NSR on all production over 200,000 oz;
d) NSR to reduce to 1.5% if trading price of Newgold shares is equal to or
greater than US$15 per share when issued to Miramar;
e) NSR to terminate if Miramar buys back in as provided in paragraph 8;
5. US$80,000 payment on November 18, 1996 and each August 1 thereafter for as
long as the option agreement is in good standing;
6. Miramar will use payments to make November 19th, 1996 US$31,250 payment to
and to cover other property holding costs in August & December in subsequent
years;
7. Newgold will conduct a minimum work program of 10,000 feet of drilling per
year on the Burner property;
8. In the event of a proven & probable reserve of more than 1 million ounces of
gold is defined:
a) Miramar will have the right to purchase back up to a 25% working
interest in a joint venture which will operate the Xxxxxx project;
b) The cost to Miramar for the buy-back will be twice 25% of Newgold's cost
incurred during the development of the property;
c) The joint venture will fund capital requirements and operations on a pro
rata basis;
d) A third party, acceptable to both Miramar and Newgold, will audit the
reserve to confirm the 1 million ounce has been established, with the
cost of the audit to be split 50/50 between Miramar and Newgold;
e) The 1 million ounce reserve level will be defined on the basis of proven
and probable reserves defined at any time prior to an irrevocable
production decision being made by Newgold;
9. Miramar to be presented with results of quarterly and a comprehensive annual
report detailing all results (factual and interpretive);
10. Newgold will return all information (factual and interpretive) if it
withdraws from Xxxxxx;
11. Newgold will assume environmental liabilities during the term of the option
agreement, including any future requirements to provide a reclamation
bond, and be responsible for reclamation of any disturbances it creates.
Should you find these terms and conditions acceptable, please sign where
indicated below and deliver the $10,000 deposit check to our Reno office. Please
also execute a copy of the Confidentiality Agreement attached and also return to
our Reno office. Please fax a copy of both documents to me in Vancouver as well.
On receipt of these documents and the deposit, you will be able to begin your
due diligence at the Reno Office. Please contact Xxx Xxxxxxxxx in Reno to make
the necessary arrangements to view the data. For legal issues related to the
option agreement, please deal with Xxxxx Xxxx, our in house counsel in
Vancouver.
We look forward to progressing with you in this venture.
Yours truly,
MIRAMAR MINING CORPORATION
/s/
Xxxxxxx X. Xxxx
Executive Vice president
The above terms and conditions of this Letter of Intent are agreed to by the
undersigned on behalf of Newgold Inc. this 11th day of October 1996:
Signed: /s/
Name: X. Xxxxx Xxxxxxx
Position: President/CEO
