EXHIBIT 10.1
QUARTER CLAIM DEEMED
PRODUCTION AGREEMENT
HOMESTAKE MINING COMPANY
AMENDMENT made this 4th day of July, 1995 ("Effective Date") between
Homestake Canada Inc., successor in interest to International Corona Resources
Ltd. ("Homestake"), Teck Corporation ("Teck") (Homestake and Teck are
collectively referred to herein as "T/H") and Hemlo Gold Mines Inc., successor
in interest to Noranda Exploration Company Limited (N.P.L.) ("Hemlo") to that
certain Agreement between Teck Corporation , International Corona Resources
Ltd., and Noranda Exploration Company Limited (N.P.L.) made as of January 25,
1983 and amended December 1, 1983 (the "Agreement").
WHEREAS, the Agreement contained an option in favor of Hemlo to acquire
certain mineral property defined therein as the Optioned Property and Hemlo,
pursuant to exercise of the option, became the owner of the Optioned Property
(hereinafter referred to as the "Quarter Claim") on terms and conditions set out
in the Agreement, including but not limited to the obligation to pay to T/H a
50% Net Profits Royalty and the obligation to provide hoisting and milling
capacity to T/H through facilities of Hemlo; and,
WHEREAS, for the term hereof T/H and Hemlo desire to (i) modify the
manner in which the 50% Net Profits Royalty is calculated and paid such that
Hemlo will pay and T/H will receive monthly payments based on estimates of
reserves, grades, production rates and costs provided by Hemlo on the Effective
Date without respect to Hemlo's actual rate of production and sale of gold from
the Quarter Claim and (ii) make other amendments contained herein;
THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the parties do agree as follows:
1. Definitions. For the purposes of this Amendment, including the Schedules
attached hereto, the following words and expressions shall have the following
meanings with respect to the Quarter Claim. All capitalized words and terms not
defined herein shall have the same meanings as are ascribed to them in the
Agreement.
(a) "Deemed Gold Production" shall mean the number of xxxx
ounces of gold for which the Royalty shall be calculated and paid pursuant to
this Amendment. For each month while this Amendment is in effect, such number
shall be the product of (i) the Deemed Production Rate, (ii) the number of
calendar days in the same month and (iii) the Production Factor.
(b) "Deemed Production Rate" shall mean 453.59 metric tonnes
of ore per day.
(c) "Deemed Production Costs" shall mean the product of Deemed
Unit Production Costs and the Deemed Production Rate.
(d) "Deemed Unit Production Costs" shall mean C$57.40 per
metric tonne as shown in the last line of the Column on Schedule B entitled
"Total Cost per Tonne to Recover
Gold ($C/T)" as that amount may be adjusted for Escalation. Hemlo acknowledges
that such Costs include a component for all costs, charges, and fees included in
the Agreement as Operating Costs.
(e) "Deemed Revenue" shall mean that sum of money equal to
Deemed Gold Production for the month for which the Royalty is being calculated
multiplied by the average of the London final daily quotation per ounce of gold
for each trading day in the same month and converted from U. S. dollars into
Canadian dollars at a rate of exchange equal to the average of the daily Bank of
Canada noon rates of exchange between U. S. and Canadian dollars for each
business day in such month. No adjustment shall be made to Deemed Revenue on
account of silver.
(f) "Deemed Third Party Royalty" means for the period for which
it is being calculated the amount that would be payable for the same period
pursuant to the Third Party Royalty if such Third Party Royalty were calculated
on the basis of Deemed Gold Production, Deemed Revenue, and Deemed Production
Costs for the same period.
(g) "Escalation" shall mean the amount by which Deemed Unit
Production Costs may be increased or decreased annually in accordance with
Schedule A and commencing as of January 1, 1996.
(h) "Estimated Production" shall mean the 304,976 xxxx ounces
of gold estimated by Hemlo to be recovered from the Quarter Claim after January
1, 1995 as shown in the last line of the column on Schedule B entitled
"Estimated Ounces Recovered".
(i) "Production Factor" shall mean 0.27377 and was derived by
dividing the total number of ounces shown in the last line of the Column on
Schedule B entitled "Estimated Ounces Recovered" by the total number of tonnes
shown in the last line of the Column on Schedule B entitled "Estimated Mined
Tonnes".
(j) "Royalty" means the 50% Net Profits Royalty payable to T/H
as provided in the Agreement and modified in this Amendment. The Royalty is
calculated and paid as provided in Section 3 of this Amendment.
(k) "Third Party Royalty" shall mean that 3% net smelter
royalty referred to in the Agreement determined in accordance with that
agreement made the 30th day of September, 1980 between 435198 Ontario Corp. and
International Corona Resources Ltd., as amended.
(l) "Third Party Royalty Agreement" shall mean that agreement
referred to in Section 1(k).
2. Representations.
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(a) Hemlo represents to T/H that Schedule B contains Hemlo's
good faith estimates as of January 1, 1995 of reserves, grade, contained ounces,
minable tonnes, ounces to be recovered, and costs with respect to the remaining
mine life of the Quarter Claim at the time of Hemlo's execution of this
Amendment. T/H acknowledges that T/H has reviewed those estimates and entered
into this Amendment after making independent analysis based on such estimates.
Hemlo acknowledges that T/H relies upon the underlying factual information
contained in such estimates in entering into this Amendment.
(b) Hemlo represents to T/H that T/H, and T/H represents to
Hemlo that Hemlo, is not in breach of the Agreement and that the Agreement is
valid and enforceable pursuant to its terms.
3. Net Profits Royalty Calculation and Payment.
(a) Commencing as of January 1, 1995, Hemlo shall pay the
Royalty to T/H until Hemlo has paid the Royalty with respect to cumulative
Deemed Gold Production equal to 95% of Estimated Production (which number, for
greater clarity, is equal to 289,727 xxxx ounces of gold).
(b) The Royalty shall be calculated for any month by
subtracting from Deemed Revenue the sum of (i) Deemed Production Costs for such
month, (ii) Hemlo's estimate of Ontario Mining Taxes payable with respect to
such month, (iii) Deemed Third Party Royalty, and (iv) an amount equivalent to
deductions that would have been appropriate under the Agreement for Post
Production Capital Expenditures, Interest Charges, and Reserve Charges, if any,
and multiplying the remainder by .50. With respect to the calendar month in
which cumulative Deemed Gold Production equals 95% of Estimated Production, the
Royalty shall be adjusted as is appropriate to reflect the number of ounces of
Deemed Gold Production in that month required to reach such 95%.
(c) Payment of the Royalty for each month shall be made not
later than the 20th day of the following month.
(d) Hemlo shall provide T/H with each Royalty payment details
of its calculation showing monthly and cumulative Deemed Gold Production, the
applicable gold price and exchange rates, the monthly and cumulative Deemed
Third Party Royalty, and any estimated Ontario Mining Taxes deducted.
(e) T/H shall have no obligation or liability of any kind to
Hemlo, including but not limited to the refund or payment of any Royalty, in the
event that the actual number of xxxx ounces of gold actually produced from the
Quarter Claim on and after January 1, 1995 is for any reason less than 95% of
Estimated Production.
4. Actual Rates of Production; Suspension of Certain Obligations. Hemlo's
obligations
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to (i) provide hoisting and milling capacity for the benefit of the Quarter
Claim and (ii) mine and process ore from the Quarter Claim, as provided in the
Agreement, shall be suspended from January 1, 1995 until this Amendment
terminates. Until this Amendment terminates Hemlo shall have the right to mine
and mill ore from the Quarter Claim, and recover and sell gold therefrom, at
rates determined by Hemlo in its sole discretion; provided, however, that Hemlo
shall at all times carry out all mining, milling, and other operations in a good
and minerlike fashion and in accordance with applicable laws and regulations and
shall make all Third Party Royalty payments when due and shall defend, indemnify
and hold T/H harmless against any cost, loss, damage or liability arising from
Hemlo's failure to comply with the terms and provisions of the Third Party
Royalty Agreement.
5. Termination of Amendment; Subsequent Reduction of Net Profits Royalty.
This Amendment shall terminate on the day that the cumulative
number of xxxx ounces of gold actually recovered from the Quarter Claim after
January 1, 1995 is equal to 95% of Estimated Production (which number, for
greater clarity, is equal to 289,727 xxxx ounces of gold). Upon termination of
this Amendment the rights and duties of the parties shall continue to be
governed by the Agreement, including but not limited to its provisions regarding
payment of the Royalty and the obligations to provide T/H with hoisting and
milling capacities, without regard to the provisions of this Amendment except
that the Royalty payable to T/H shall be reduced in perpetuity from 50% to 40%.
For greater clarity, in the event that the actual production of precious metals
(including gold and silver) from the Quarter Claim continues after termination
of this Amendment, the rights and duties of T/H and Hemlo to each other with
respect to the royalty payable to T/H on such production shall be governed by
the Agreement and not by this Amendment except that the Royalty on all such
production shall be 40%.
6. Escalation.
(a) Not later than March 31st of each year Deemed Unit
Production costs shall be increased or decreased annually in accordance with
Schedule A. Each such increase or decrease shall be retroactively effective as
of January 1 of the same year.
(b) If either party believes that extraordinary events affecting
costs or material changes in accounting practices at the Golden Giant Mine or
the Xxxxxxxx Mine render the annual Escalation calculated pursuant to Schedule A
materially inappropriate for the purpose intended, such party shall notify the
other in writing. Within fifteen (15) days of the receipt of such notice by the
other party, both parties shall meet to try to agree on appropriate Escalation
for the relevant time period. If the parties do not so agree within thirty (30)
days following such meeting, the parties shall arbitrate such Escalation before
a single arbitrator experienced in the matter of mining and milling costs,
appointed by the President of the Canadian Institute of Mining and Metallurgy,
whose decision shall be final and binding upon the parties. Each party shall
submit a written proposal for such Escalation to the arbitrator within twenty
(20) days of the arbitrator's appointment along with a justification therefor,
including within such submittal all relevant costs
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for from the Golden Giant or Xxxxxxxx Mine as the case may be. The arbitrator
shall select either the Hemlo or the T/H proposal, whichever he deems to more
reasonably reflect changes in costs that do or should apply to production from
the Quarter Claim.
7. Records. Hemlo shall keep and maintain (i) records of actual production
from the Quarter Claim, including records of the quantities of tonnes mined and
milled and the number of ounces of gold recovered therefrom and (ii) such
accounting and financial records as are necessary to calculate Escalation. Hemlo
shall report such records of production to T/H on a regular basis not less
frequently than annually and make all such production, accounting and financial
records available for inspection and copying by T/H from time to time as T/H may
request.
8. Governing Law. This Amendment shall be governed in accordance with the
laws of the Province of Ontario.
9. Effect. This Amendment shall not be construed by implication to deprive
any party of any right to which it is expressly entitled under the Agreement.
The parties acknowledge that the Agreement is a valid and subsisting agreement
and, agree that, except as expressly amended herein, the Agreement shall remain
in full force and effect.
10. Successors. This Amendment shall extend to and bind the parties hereto
and their respective successors and permitted assigns.
11. Notices. Notices given and payments made pursuant to this Amendment
shall be given and made by personal delivery, mail, or (except for payment)
facsimile transmission as follows:
Notices:
Teck Corporation: Hemlo Gold Mines Inc.:
000 Xxxxxxx Xxxxxx Xxxxx 0000
Xxxxxxxxx, X.X. XX0 0X0 0 Xxxxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Attn: Senior Vice-President Attn: Xxxx Xxxxx
Mining
FAX: 000-000-0000 FAX: 000-000-0000
Homestake Canada Inc.
0000-000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, X.X X0X 0X0
Attn: President
FAX: 000-000-0000
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Royalty payments shall be made in accordance with reasonable
instructions to Hemlo from Teck and Homestake. Until further notice Royalty
payments shall be make to Teck for the benefit of Homestake and Teck.
IN WITNESS WHEREOF, the parties have duly executed this Amendment as of
the date first written above.
For Homestake Canada Inc. For Hemlo Gold Mines Inc.
By: _______________________ By: _______________________
Its: Its:
For Teck Corporation
By: _______________________
Its:
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