1
Exhibit 3i
INVESTMENT AND PARTICIPATION AGREEMENT
THIS AGREEMENT made as of the 20th day of February, 1996
AMONG:
MINCO MINING AND METALS CORPORATION, a body corporate
incorporated under the laws of British Columbia, with an
office at 1870 - 000 Xxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, X.X.,
X0X 0X0
("Minco")
AND:
TECK CORPORATION, a body corporate incorporated under the laws
of Canada, with an office at 700 - 000 Xxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X-0
("Teck")
AND:
COMINCO LTD., a body corporate incorporated under the laws of
Canada, with an office at 000 - 000 Xxxxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxx Xxxxxxxx, X0X 0X0
("Cominco")
WHEREAS:
(A) Pacific Canada Resources Inc. ("PCR") has entered into an investment and
participation agreement dated as of February 19, 1996 (the "Teck-Cominco-PCR
Agreement") with Teck and Cominco under which PCR has granted certain rights to
Teck and Cominco in exchange for them making a private placement in a specified
company which the parties have agreed will be Minco, subject to the Closing of
this Agreement.
(B) PCR has entered into an investment and participation agreement dated as of
February 19, 1996 (the "Minco-PCR Agreement") with Minco which provides, amongst
other things, that for a period of time commencing on the date of this Agreement
and expiring on March 1, 2000, extendable upon agreement of the Parties thereto,
Minco shall have the exclusive right to acquire from PCR, at cost and in the
manner therein
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described, all right, title and interest in and to any new base or precious
metal Property which PCR identifies and in respect to which PCR has acquired an
NCI or in respect to which PCR has a reasonable expectation of acquiring an NCI.
(C) Under Chinese law a foreigner may acquire an interest in a joint venture or
other recognized Chinese vehicle which in turn holds a mineral property in
China;
(D) Minco intends to acquire indirect interests in mineral properties in China
and the right to exploit mineral properties in China;
(E) This Agreement provides for the manner in which Cominco and Teck may acquire
part of Minco's interest in any NCI or Property (both as defined herein) or any
mineral property that is acquired;
(F) At the same time Minco will require working capital, Teck and Cominco wish
to invest, and Minco has agreed to grant certain rights to Teck and Cominco in
consideration of such investments;
(G) Minco also intends to raise capital by public financing to generate the
funds necessary to advance one or more Properties to the stage of a preliminary
feasibility report;
(H) The parties have agreed that the interest to be acquired by Teck and Cominco
in Minco's interest in an NCI or a Property may be increased in through a good
faith negotiation outside the terms of this Agreement at some future time; and
(I) The parties wish to record their respective rights and obligations.
THEREFORE the Parties agree as follows:
PART 1
CONSTRUCTION
DEFINITIONS
1.1 In this Agreement, except as otherwise expressly provided or as the context
otherwise requires:
ACQUIRED PROPERTY means a Property in respect of which
(i) Minco has entered into a formal joint venture agreement
(as such term is understood in China) with a Chinese entity
pursuant to which
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Minco has the right to acquire an NCI, and the Chinese entity
has applied for approval of the appropriate Chinese
Governmental Authority pursuant to a request by Minco to
negotiate a joint venture contract with Minco; or
(ii) Minco receives a New Property Notice as contemplated in
Section 6.3 of the Minco-PCR Agreement.
AFFILIATE of a Party has the meaning ascribed to it in the Securities Act
(British Columbia).
BUSINESS DAY means a day that is not a Saturday, Sunday or a statutory holiday
in British Columbia.
CLOSING means the closing of the purchase and sale of the Purchased Securities.
CLOSING DATE means the fifth Business Day following the date upon which Minco
receives written notification from the Vancouver Stock Exchange that this
Agreement and the Minco-PCR Agreement have been accepted for filing or such
other date as the Parties may agree upon.
COMMITMENT NOTICE means a notice delivered to Minco by the Investors pursuant to
Section 6.13 or 6.17 that they intend to proceed with programs contemplated in a
Final Feasibility Report and they have commitments from lenders for the debt
portion of the project financing, as evidenced by certified copies of the
lenders' commitment letters to the Investors delivered with the notice.
COMMON SHARE means a common share, as constituted as at the date of this
Agreement, in the capital of Minco.
COSTS means cash outlays, expenses, obligations and liabilities of whatever kind
or nature, but without duplication.
DESIGNATED INVESTOR means, in the case of a base metal Property, Cominco, and in
all other cases, Teck.
DEVELOPMENT PROPERTY means an Acquired Property that the Investors determine,
pursuant to Section 6.1, should be governed by this Agreement and categorize as
a Development Property pursuant to Section 6.4.
EARN-IN PERIOD means the period of time beginning on the date hereof and ending
on the date the Earn-In Rights terminate in accordance with Section 6.6.
EARN-IN RIGHTS means those rights to earn an Interest in an NCI in respect of an
Acquired Property, more particularly set out in Section 6.8 and 6.14.
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ENCUMBRANCE means a security interest, mortgage, pledge, hypothecation, lien,
easement, right-of-way, encroachment, covenant, condition, right of re-entry,
lease, licence, assignment, option, claim or other title defect, encumbrance or
charge whatsoever, whether or not registered or registrable.
EXERCISE NOTICE means, with respect to an Acquired Property, a written notice
delivered by an Investor that it intends to proceed with the preparation of a
Final Feasibility Report under Part 6.
EXPENDITURES means all Costs spent or incurred or deemed incurred hereunder by a
Party in connection with a Property including:
(i) monies expended in maintaining the Property in good standing,
including any monies expended in doing and filing assessment work and
any required vendor's or royalty payments;
(ii) monies expended in exploring the Property, including doing
geophysical, geochemical and geological surveys, drilling, assaying and
metallurgical testing;
(iii) monies expended in acquiring assets for use on or in connection
with the Property;
(iv) monies expended in paying the fees, wages, salaries and travelling
expenses of all employees of a Party or associated entities engaged in
work with respect to and for the benefit of the Property, together with
an amount for fringe benefits usually paid by such Party;
(v) monies expended in paying for the food, lodging and other
reasonable needs of the persons referred to in clause (iv) hereof;
(vi) a charge equal to
(A) 10% before the date of a Commitment Notice, and
(B) 3% thereafter,
for unallocable overhead and head office expenses and all other
expenses relating to supervision and management of all work done with
respect to and for the benefit of the Property of all Expenditures,
other than the charge referred to in this clause (vi);
(vii) monies expended or set aside for environmental remediation and
reclamation;
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(viii) all Costs related to the preparation of programs and reporting
as to the results thereof;
(ix) all Costs related to the preparation of a Final or Preliminary
Feasibility Report and a production program;
(x) all Costs related to construction and development programs up to
commercial production; and
(xi) all Costs related to operations after the date of commencement of
commercial production.
EXPLORATION PROPERTY means an Acquired Property that the Investors determine,
pursuant to Section 6.1, should be governed by this Agreement and which has been
categorized as an Exploration Property pursuant to Section 6.4.
FINAL FEASIBILITY REPORT means a detailed report showing the feasibility of
placing a Property or part thereof into commercial production and including at
least the following information:
(i) a description of that part of the Property to be covered by the
proposed mine;
(ii) the estimated recoverable reserves of minerals and the estimated
composition and content thereof;
(iii) the proposed procedure for development, mining and production;
(iv) results of ore amenability tests (if any);
(v) the nature and extent of the facilities proposed to be acquired or
constructed and, if the size, extent and location of the ore body makes
mill facilities feasible, a preliminary design for such mill
facilities;
(vi) the total costs, including capital budget, reasonably required to
purchase, construct and install all structures, machinery and equipment
required for the proposed mine, including a schedule of timing of such
cost requirements;
(vii) environmental impact studies and costs thereof;
(viii) the period in which it is proposed the Property shall be brought
to commercial production;
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(ix) such other data and information as are reasonably necessary to
substantiate the existence of a mineral deposit of sufficient size and
grade to justify development of a mine, taking into account all
relevant business, tax and other economic considerations; and
(x) working capital requirements for the initial four months of
operation of the Property as a mine or such longer period as may be
reasonably justified in the circumstances.
FIRST RECOVERY DATE means the date on which the first of either Minco or an
Investor recovers its Prior Costs from Net Proceeds.
GOVERNMENTAL AUTHORITY means a federal, state, provincial, regional, municipal
or local government or subdivision thereof including an entity or person
exercising executive, legislative, judicial, regulatory or administrative
functions of, or pertaining to, any such government or subdivision.
INTEREST means an undivided interest in and to an NCI in respect of an Acquired
Property held by Minco or an Investor, as the case may be.
INVESTORS means Teck and Cominco and INVESTOR means any one of them.
JOINT VENTURE AGREEMENT means the agreement to be entered into among the Parties
pursuant to Section 6.22 defining the respective rights and obligations with
respect to the joint ownership (directly or indirectly) of, and operation of
activities on, an Exploration Property or Development Property, as the case may
be, once an Investor has earned an Interest.
MINIMUM PERCENTAGE means with respect to the Investors, 50% of that percentage
of the issued common shares of Minco issued to both Investors pursuant to
Section 3.1 as compared to the total issued common shares of Minco at the
Closing Date.
NCI, with respect to a Property, means a direct or indirect interest therein
that is available for a non-Chinese entity or foreigner to acquire under Chinese
law and is held by or available to Minco, including shares, or a contractual
right to acquire shares, in a Chinese company that owns or holds a direct or
indirect interest in the Property.
NET PROCEEDS means that amount which remains after the initial cash flows
available or attributable to the Parties' Interest from sales of product from
the mine have been used to pay operating, marketing and distribution costs;
taxes (other than income taxes) and royalties; any advances which a Party has
made to cover sustaining capital requirements or operating losses during the
"cost recovery" period contemplated in Section 6.23 or Section 6.24; and the
administrative charge
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contemplated in Section (vi)(B) of the Expenditures definition on costs incurred
from the date of commencement of commercial production.
PARTIES means two or more of Minco, Teck and Cominco and PARTY means any one of
them.
PERSON means an individual, corporation, partnership, joint venture,
association, trust or unincorporated organization or any trustee, executor,
administrator or other legal representative, or government official or ministry.
PRELIMINARY FEASIBILITY REPORT means an intermediate level report, prepared in
accordance with Canadian industry standards, having as its objective a
determination whether a project justifies a detailed analysis and cost of a
Final Feasibility Report, and identifying aspects of the project that are
critical to its viability and that necessitate in-depth investigations through
functional or support studies and will be expected to include evaluation of
estimated reserves, preliminary mining methods and equipment selections,
preliminary metallurgical analysis, workable flow sheet for a process plant,
support services and facilities, manpower sources and costs, project
implementation schemes, market evaluation, environmental and cultural issues,
and a preliminary financial analysis based on investment costs, production
costs, and market potential.
PRIME RATE means, at any particular time, the annual rate of interest announced
from time to time by Bank of Montreal, main branch, Vancouver, British Columbia
as a reference rate then quoted as being in effect on Canadian dollar loans made
in Canada to its most creditworthy commercial customers and as to which from
time to time a certificate of an officer of such Bank shall be conclusive.
PRIOR COSTS with respect to a Property means the Expenditures incurred by Minco
or Investor at the time incurred but before the date of commencement of
commercial production, all stated in United States dollars.
PROPERTY means a mineral property in China by whatever instrument it may be held
and any interest, contractual right or other right to acquire an interest
therein and includes an Acquired Property, an Exploration Property and a
Development Property.
PURCHASED SECURITIES means the Units, comprised of common shares and warrants,
to be issued to the Investors pursuant to Section 3.1 hereof.
REQUISITE APPROVALS means the approvals of stock exchanges and other regulatory
authorities having jurisdiction to review and grant approval of the transactions
contemplated by this Agreement.
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SECOND RECOVERY DATE means the date on which the last of Minco and the
Investors recovers its Prior Costs from Net Proceeds.
UNDERLYING AGREEMENT means any agreement in existence at the date
hereof, or that comes into existence after the date hereof, entitling
Minco to acquire an NCI in respect of an Acquired Property.
UNIT means one unissued common share of Minco together with one fifth
(1/5) of a share purchase warrant, one full warrant entitling the
holder thereof to purchase one additional common share of Minco
pursuant to the terms of the Subscription Agreement attached hereto as
Schedule I.
INTERPRETATION
1.2 For all purposes of this Agreement, except as otherwise expressly provided
or as the context otherwise requires:
(a) "THIS AGREEMENT" means this agreement as from time to time
supplemented or amended by one or more agreements entered into pursuant
to the applicable provisions of this Agreement together with all
schedules and other attachments to it;
(b) the headings are for convenience only and shall not be used to
interpret this Agreement;
(c) the word "INCLUDING", when following any general term or statement,
is not to be construed as limiting the general term or statement to the
specific items or matters set forth or to similar items or matters, but
rather as permitting the general term or statement to refer to all
other items or matters that could reasonably fall within the broadest
possible scope of the general term or statement;
(d) an accounting term not otherwise defined herein has the meaning
assigned to it, and every calculation to be made hereunder is to be
made, in accordance with generally accepted accounting principles in
Canada;
(e) except where otherwise stated, all references to currency mean
United States currency;
(f) a reference to a statute includes all regulations made thereunder,
all amendments to the statute or regulations in force from time to time
and any statute or regulation that supplements or supersedes such
statute or regulations;
(g) a reference to a Part means a Part of this Agreement and the symbol
"Section " followed by a number or some combination of numbers and
letters refers to the
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provision of this Agreement so designated and the symbol "Section"
followed by a letter within a provision refers to a clause within such
provision;
(h) a reference to a person includes a successor to that person;
(i) words importing the masculine gender include the feminine or
neuter, words in the singular include the plural, words importing a
corporate entity include individuals and vice versa;
(j) a reference to "APPROVAL", "AUTHORIZATION" or "CONSENT" means
written approval, authorization or consent; and
(k) references to payments to be made by certified cheque will be
deemed to contemplate payment by certified cheque drawn on, or bank
draft issued by, a Canadian chartered bank, payable at par in
Vancouver, British Columbia and payable to the party entitled to
receive payment or its counsel, in trust.
SCHEDULES
1.3 The following schedules are incorporated into this Agreement
by reference:
Schedule Description Reference
-------- ----------- ---------
A Capital of Minco and Rights to Acquire Securities Section 2.3(f)
B Right to Acquire Interests in NCI's or Properties of Minco Section 2.3(f)
C Minco's Financial Statements Section 2.3(n)
D List and Description of Underlying Agreements Section 2.3(m)
E Form of Consent and Waiver Section 2.4(c)(ii)
F Minco's Material Liabilities
G Terms of Joint Venture Section 6.20
H Net Smelter Return Royalty Section 6.22
I Purchased Securities Subscription Agreement Section 3.1
GOVERNING LAW
1.4 This Agreement shall be construed and governed by the laws in force in the
Province of British Columbia and the courts of said Province shall have
exclusive jurisdiction to hear and determine all disputes arising hereunder.
Each Party irrevocably attorns to the jurisdiction of said courts and consents
to the commencement of proceedings in such courts. This paragraph shall not be
construed to affect the rights of a Party to enforce a judgment or award outside
the said Province, including the right to record or enforce a judgment or award
in any jurisdiction in which the Property is situated.
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SEVERABILITY
1.5 If any provision of this Agreement is or shall become illegal, invalid or
unenforceable, in whole or in part, the remaining provisions shall nevertheless
be and remain valid and subsisting and the said remaining provisions shall be
construed as if this Agreement had been executed without the illegal, invalid or
unenforceable portion.
PART 2
REPRESENTATIONS, WARRANTIES AND COVENANTS
REPRESENTATIONS AND WARRANTIES OF TECK
2.1 Teck represents and warrants to Minco, as representations and warranties on
which Minco has relied in entering into this Agreement and which will survive
the execution hereof, that:
(a) Teck is a body corporate duly incorporated, organized and validly
subsisting under the laws of its incorporating jurisdiction and 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;
(b) 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 or thereby contemplated,
violate or result in the breach of its constating documents;
(c) this Agreement has been duly executed and delivered by, and
constitutes a legal, valid and binding obligation of Teck enforceable
against it in accordance with its terms; and
(d) Teck is acquiring the Purchased Securities as principal.
REPRESENTATIONS AND WARRANTIES OF COMINCO
2.2 Cominco represents and warrants to Minco, as representations and warranties
on which Minco has relied in entering into this Agreement and which will survive
the execution hereof, that:
(a) Cominco is a body corporate duly incorporated, organized and
validly subsisting under the laws of its incorporating jurisdiction and
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;
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(b) 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 or thereby contemplated,
violate or result in the breach of its constating documents;
(c) this Agreement has been duly executed and delivered by, and
constitutes a legal, valid and binding obligation of Cominco
enforceable against it in accordance with its terms; and
(d) Cominco is acquiring the Purchased Securities as principal.
REPRESENTATIONS AND WARRANTIES OF MINCO
2.3 Minco represents and warrants to each of Teck and Cominco, as
representations and warranties upon which Teck and Cominco have relied in
entering into this Agreement, which will be true at the Closing of the purchase
of the Purchased Securities and which will survive the execution hereof, that:
(a) it is a corporation duly organized and validly subsisting under the
laws of British Columbia and has full power and authority to carry on
its business and to enter into this Agreement and any agreement or
instrument referred to in or contemplated by, this Agreement;
(b) 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 or thereby contemplated, (i)
violate or result in the breach of its constating documents or (ii)
conflict with, result in the breach of or accelerate the performance
required by any agreement to which it is a party;
(c) no proceedings are pending for and Minco is unaware of any basis
for the institution of any proceedings leading to the dissolution or
winding-up of Minco or the placing of it into bankruptcy or subject to
any other laws governing the affairs of insolvent persons;
(d) Schedule A accurately sets out the authorized and issued capital of
Minco;
(e) this Agreement has been duly executed and delivered by, and
constitutes a legal, valid and binding obligation of Minco enforceable
against it in accordance with its terms;
(f) no person, other than the Investors or as set out in Schedules A
and B, has any right, agreement or option, present or future,
contingent or absolute or any right capable of becoming a right,
agreement or option
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(i) to require Minco to issue any further or other shares in
its capital or any security or other instrument convertible or
exchangeable into shares in its capital, or to convert or
exchange any security or other instrument into, with or for
shares in its capital,
(ii) for the issue or allotment of any of the authorized but
unissued shares in its capital,
(iii) to require Minco to create any additional shares in its
capital,
(iv) to require Minco to purchase, redeem or otherwise acquire
any of the issued and outstanding shares in its capital,
(v) to require Minco to distribute any or all of its assets,
or to declare any dividends,
(vi) for the purchase of any assets or the acquisition of any
interest in a Property or an NCI, or
(vii) to purchase or otherwise acquire any securities of
Minco;
(g) no finder's fees, commission or financial services fees of any type
whatsoever are payable by Minco in connection with the transactions
contemplated by this Agreement except as will be disclosed to and
agreed by the Investors prior to the Closing Date, such agreement not
to be unreasonably withheld, and not to exceed the regulatory maximum
permitted;
(h) the financial statements of Minco as at and for the financial year
ended December 31, 1995 attached as Schedule C present fairly, in all
material respects, the financial position of Minco as at December 31,
1995 and the results of operations and the changes in financial
position for the year then ended in accordance with Canadian generally
accepted accounting principles applied on a consistent basis and do not
omit to state any material fact that is required by generally accepted
accounting principles or by applicable law to be stated or reflected
therein or which is necessary to make the statements contained therein
not misleading and there has been no material adverse change in the
financial affairs of Minco;
(i) since the end of its most recently completed fiscal year, Minco has
carried on its business in the ordinary and normal course of the
routine daily affairs of such business. Since such date, there has been
no material change in the business, operations, affairs or conditions
of Minco, financial or otherwise, including any change arising as a
result of any legislative or regulatory change, modification,
revocation or suspension of any material license or right to do
business, fire, explosion, accident, casualty, labour trouble, flood,
drought, riot,
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xxxxx, xxxxxxxxxxxxx, xxxxxxxxxxxx, xxx of God or otherwise, except
changes occurring in the ordinary course of the routine daily affairs
of business, which changes have not materially adversely affected the
organization, business, properties, prospects or financial condition of
Minco;
(j) no order prohibiting the issue and sale or resale of securities by
Minco has been issued and no proceedings for this purpose have been
instituted, are pending, or, to the knowledge of Minco contemplated or
threatened;
(k) this Agreement and any statement furnished to Teck and Cominco by
or on behalf of Minco do not contain and will not contain any untrue
statement of material fact or omit or will omit to state a material
fact necessary to make the statements contained herein or therein not
misleading;
(l) all taxes, assessments, levies and other amounts, the non-payment
of which could affect Minco's ownership interest or title to an NCI or
Acquired Property, will have been duly paid, withheld or collected
before the Closing Date; provided, however, that none of the foregoing
need be paid while the same is being contested in good faith by
appropriate proceedings diligently conducted;
(m) Schedule D contains a complete list of all Underlying Agreements at
the date hereof;
(n) Minco owns, at the date hereof, the NCI's or has rights to acquire
an NCI in Properties as set out in the Underlying Agreements on
Schedule D and has the right to acquire NCI's in China;
(o) there are no material liabilities, contingent or otherwise, of
Minco which are not disclosed in Schedule "F" attached hereto and Minco
has not guaranteed, or agreed to guarantee, any debt, liability or
other obligation of any person, firm or corporation other than as
described in Schedule "F";
(p) no person, other than PCR, or as set out in Schedule "A", has any
right, agreement, or option, present or future, contingent or absolute,
or any right capable of becoming a right, agreement or option:
(i) to require Minco to issue any further or other shares in
its capital or any security or other instrument convertible or
exchangeable into shares in its capital, or to convert or
exchange any security or other instrument into, with or for
shares in its capital;
(ii) for the issue or allotment of any of the authorized but
unissued shares in its capital;
(iii) to require Minco to create any additional shares in its
capital;
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(iv) to require Minco to purchase, redeem, or otherwise
acquire any of the issued and outstanding shares in its
capital;
(v) to require Minco to distribute any or all of its assets,
or to declare any dividends;
(vi) for the purchase of any assets or the acquisition or any
interest in a Property, or an NCI; or
(vii) to purchase or otherwise acquire any securities or
Minco;
(q) the Purchased Securities to be issued to the Investors pursuant to
the provisions of paragraph 3, when issued, will be validly issued as
fully paid and non-assessable and will be free of all resale
restrictions other than the one-year hold period imposed by the Act;
(r) Minco is not indebted to any affiliate or director or officer of
Minco other than is set out in the financial statements attached hereto
as Schedule "C";
(s) no dividends or other distribution of any shares in the capital of
Minco have been made, declared or authorized;
(t) there is no basis for and there are no actions, suits, judgments,
investigations or proceedings outstanding or pending or to the
knowledge of Minco threatened against or affecting Minco at law or in
equity or before or by any governmental agency or authority having
jurisdiction; and
(u) the performance of this Agreement will not be in violation of the
constating documents of Minco or of any agreement to which Minco is a
party and will not give any person or company any right to terminate or
cancel any agreement or any right enjoyed by Minco and will not result
in the creation or imposition of any lien, encumbrance or restriction
of any nature whatsoever in favour of a third party upon or against the
assets of Minco.
COVENANTS OF MINCO
2.4 Minco covenants with Teck and Cominco that:
(a) until the Closing, each Investor and its counsel and other advisors
and representatives will be entitled to have full access during normal
business hours to all records relating to Minco, all Affiliates of
Minco and their businesses and Minco will furnish or cause to be
furnished to each Investor and its representatives all data and
information concerning the business, finances, operations and
properties of and all Affiliates of Minco that may reasonably be
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requested and will provide on a timely basis such written consents as
may be requested by Teck or Cominco for the purpose of due diligence
searches;
(b) all representations, warranties, covenants and agreements of Minco
set forth in this Agreement and in any written statements delivered
under this Agreement will be true and correct as at the Closing Date as
if made on that date and all representations and warranties will
survive the Closing and the transactions contemplated hereby and any
investigations made at any time with respect thereto without
limitation;
(c) during the Earn-In Period
(i) Minco will promptly provide each Investor with a copy of
each Underlying Agreement negotiated or entered into after the
date hereof,
(ii) Minco will use its best efforts to cause each optionor,
joint venturer or co-owner under an Underlying Agreement or
co-ownership agreement to which Minco is or may become party
to execute the form of consent and waiver attached hereto as
Schedule E and will keep each Investor informed of its
progress in obtaining such consents and waivers,
(iii) Minco will not, without the Designated Investor's prior
written consent (such consent not to be unreasonably
withheld), agree to amend any Underlying Agreement in a manner
that may materially adversely affect the Investors, and
(iv) Minco will use its best efforts to secure, as part of
any Underlying Agreement entered into, the right for Minco to
provide management and direction of, and to operate, programs
of work on the subject Acquired Property, and
(v) Minco will consult with the Investors with respect to work
programs for each Acquired Property and budgets for each
Acquired Property and will provide the Designated Investor
with such information concerning each Acquired Property and
the activities on or in respect thereof and the results of
such activities as the Investors may from time to time
reasonably request; and
(d) following the Earn-In Period, Minco will not, with respect to the
Properties on which the Investors have exercised their Earn-In Rights,
without the Designated Investor's prior written consent (such consent
not to be unreasonably withheld), agree to amend any Underlying
Agreement in a manner that may materially adversely affect the
Investors.
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COVENANTS OF TECK
2.5 Teck covenants with Minco that:
(a) all representations, warranties, covenants and agreements of Teck
set forth in this Agreement and in any written statement delivered by
Teck under this Agreement will be true and correct as at the Closing
Date as if made on that date and all representations and warranties
will survive the Closing and the transactions contemplated hereby and
any investigations made at any time with respect thereto without
limitation;
(b) it will at all times and from time to time cooperate with each
other Party in order to give full effect to this Agreement and in order
to assist and expedite the performance by each Party of all or any of
the provisions herein contained and, in particular, execute under its
corporate seal or otherwise and deliver all such instruments, deeds,
mortgages, assignments and other documents and cause all such corporate
acts to be duly, expeditiously and validly done as the Parties may
reasonably require in accordance with the provisions hereof;
(c) subject to Section 2.8, it will use all reasonable efforts to
ensure that the Investors do not collectively own more than 20% of the
issued and outstanding common shares of Minco; and
(d) Teck will give notice to Minco immediately following each sale of
Purchased Securities and upon becoming aware that the Investors
shareholding has fallen below the Minimum Percentage.
COVENANTS OF COMINCO
2.6 Cominco covenants with Minco that:
(a) all representations, warranties, covenants and agreements of
Cominco set forth in this Agreement and in any written statement
delivered by Cominco under this Agreement will be true and correct as
at the Closing Date as if made on that date and all representations and
warranties will survive the Closing and the transactions contemplated
hereby and any investigations made at any time with respect thereto
without limitation;
(b) it will at all times and from time to time cooperate with each
other Party in order to give full effect to this Agreement and in order
to assist and expedite the performance by each party of all or any of
the provisions herein contained and, in particular, execute under its
corporate seal or otherwise and deliver all such instruments, deeds,
mortgages, assignments and other documents and cause all such corporate
acts to be duly, expeditiously and validly done as the Parties may
reasonably require in accordance with the provisions hereof;
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(c) subject to Section 2.8, it will use all reasonable efforts to
ensure that the Investors do not collectively own more than 20% of the
issued and outstanding common shares of Minco; and
(d) Cominco will give notice to Minco immediately following each sale
of Purchased Securities and upon becoming aware that the Investors
shareholding has fallen below the Minimum Percentage.
SURVIVAL
2.7 The representations, warranties, covenants, agreements and conditions
hereinbefore set out are conditions on which the Parties have relied in entering
into this Agreement, shall survive the acquisition by an Investor of any
interest in a Property and related assets hereunder and shall be unaffected by
any due diligence undertaken by and Investor in respect of this Agreement and
each Party 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, warranty, covenant, agreement or condition made bv them and
contained in this Agreement (including lawyer's fees and disbursements).
LIMITATION
2.8 The restriction as to investment level set out in Sections 2.5(c) and 2.6(c)
ceases to apply on the earliest to occur of the following events:
(a) a significant change of control of Minco, of which Minco hereby
agrees to give the Investors immediate notice upon becoming aware of
the occurrence of the change, provided that Minco shall give the
Investors at least five clear trading days prior notice of its
intention to sell any common shares or securities convertible into
Common Shares which would or are likely to result in a change of
control of Minco, as the case may be;
(b) except where such reduction occurs as a result of dispositions by
an Investor, the combined interests of the Investors and Xxx Xxx
(whether directly or indirectly through PCR and whether by ownership,
control of or direction over) in Common Shares falling below 25%;
(c) any reconstitution of management of Minco that results in Xxx Xxx
not being part of management;
(d) a Person (by itself or together with its Affiliates) or two or more
Persons acting jointly and in concert with each other acquiring more
than 10% of the outstanding shares of Minco;
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(e) a takeover bid of which Minco is the offeree; provided that if a
takeover bid or any competing takeover bid is not successful according
to its terms, the restriction set out in Section 2.5(c) and
Section 2.6(c) shall continue to apply; and
(f) Minco offering more than 5% of any particular share offering to a
Person who is engaged in the business of mineral exploration, mining,
smelting or refining.
PART 3
INVESTMENT IN PCR AND GRANT OF RIGHTS
ISSUE OF SHARES AND GRANT OF RIGHTS
3.1 Relying upon the representations contained herein, in consideration of the
investment by the Investors, and subject to the terms and conditions hereof,
Minco hereby:
(a) agrees to issue and deliver to each Investor, upon receipt of
$500,000 Canadian from such Investor, 625,000 Units pursuant to the
terms of the Subscription Agreement attached hereto as Schedule I; and
(b) grants to each Investor, until such time, if any, as the Investors
first cease to collectively own the Minimum Percentage:
(i) the joint right to nominate one individual for election as
a director of Minco,
(ii) the Earn-in Rights and preferential purchase rights more
particularly described in Parts 6 and 7 and the rights
contemplated in Section 2.4(c), and
(iii) the right to participate in future financings of Minco,
as set forth in Part 5,
provided that, if the grant to the Investors under this Section 3.1(b)
terminates, the Investors rights under Parts 6 and 7 shall not be
affected as they relate to Properties in respect of which the Investors
have exercised their Earn-In Rights; however, the Investors' rights
under Parts 6 and 7 shall continue as to any unexercised Earn-In Rights
until March 1, 2004 regardless of whether the Acquired Properties are
held by Minco. In determining whether the Investors have ceased to hold
the Minimum Percentage, there shall be excluded from the determination
any shares issued as consideration for the acquisition of Properties
after the date on which the Investors first acquire Common Shares and
any shares issued as performance shares, the result of the exercise of
directors' stock or other
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options or any other shares which are issued in a manner in which the
Investors are unable to exercise their rights under Part 5.
3.2 Cominco and Teck each agree to execute and deliver to Minco a Subscription
Agreement for the Purchased Securities in the form attached hereto as Schedule I
concurrently with execution of this Agreement. Cominco and Teck furthermore
acknowledge that they may be required to execute and deliver such other
documents as may reasonably be requested by Minco in order to obtain necessary
regulatory approval of the transactions herein contemplated and Cominco and Teck
hereby agree to execute and deliver any and all such documents forthwith at such
request of Minco.
3.3 Subject to Section 5.1 herein, following the execution of this Agreement by
both parties, Minco will submit this Agreement to the Exchange and request the
acceptance for filing hereof. Thereafter, the parties will diligently pursue
obtaining such acceptance for filing and regulatory approval and comply with all
reasonable requests of the Exchange in connection therewith, but neither party
will, in any event, be liable for failure to obtain such acceptance or approval.
Each party will cooperate with the other as reasonably necessary to secure such
acceptance for filing and other required approvals.
3.4 Each of Cominco and Teck acknowledges that the Purchased Securities are to
be allotted and issued to it hereunder pursuant to exemptions from the
registration and prospectus requirements of the Act, and acknowledges, confirms
to and covenants with Minco that:
(a) it will comply with all requirements of applicable securities
legislation in connection with the issuance to it of the Shares and the
resale of the Shares including, without limitation, entering into the
Escrow Agreement if required; and
(b) it is not entering into this Agreement as result of any material
information about the affairs of Minco that, to its knowledge, has not
been publicly disclosed.
PART 4
CLOSING
TIME AND PLACE OF CLOSING
4.1 The Closing will take place at 11:00 a.m. (Vancouver time) on the Closing
Date at Teck's offices in Vancouver, British Columbia or such other place and
time as the Parties may agree.
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DELIVERIES BY THE INVESTORS
4.2 At the Closing each Investor will, subject to Part 8, deliver to Minco:
(a) a cheque or bank draft for $500,000 Canadian (being the purchase
price for that Investor's Purchased Securities);
(b) an opinion of counsel, acceptable to Minco, as to the matters set
out in Section 4.5;
(c) a certificate of an officer as to the truth and accuracy of the
representations, warranties and covenants of the Investor as at the
Closing; and
(d) such other instruments and documents as are required to be
delivered at Closing by the Investor to Minco pursuant to the
provisions of this Agreement or as are reasonably required to evidence
compliance with the representations, warranties and covenants of the
Investor contained herein.
DELIVERIES BY MINCO AT CLOSING
4.3 At the Closing Minco will, subject to Part 8, deliver to each Investor:
(a) a certificate representing the Purchased Securities registered in
the name of the Investor;
(b) an opinion of counsel acceptable to the Investors as to the matters
set out in Section 4.4;
(c) a certificate of an officer as to the truth and accuracy of the
representations, warranties and covenants of Minco as at the Closing;
and
(d) such other instruments and documents as are required to be
delivered at Closing by Minco pursuant to the provisions of this
Agreement or as are reasonably required to evidence compliance with the
representations, warranties and covenants of Minco contained herein.
OPINIONS
4.4 Minco shall deliver at the Closing an opinion of counsel, addressed to each
Investor and in a form reasonably satisfactory to the Investor, as to:
(a) the matters set out in Section 2.3(a), (d), and (e) and, limited as
set out in Section 4.6, Section 2.3(b) and (f);
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(b) the valid allotment and issuance of the Purchased Securities to the
Investor as fully paid and non-assessable; and
(c) such other matters as the Investor shall reasonably request.
4.5 Each Investor shall deliver at the Closing an opinion of counsel, addressed
to PCR and in a form reasonably satisfactory to Minco, as to:
(a) in the case of Teck, the matters set out in Section 2.1(a) and (b);
(b) in the case of Cominco, the matters set out in Section 2.2(a)
and (b); and
(c) such other matters as Minco shall reasonably request.
4.6 In giving the opinion regarding matters set out in Section 2.3(b)(ii) and
2.3(f) counsel may state that such counsel has no actual knowledge of any such
agreement or right.
PART 5
GRANT OF SUBSCRIPTION RIGHTS TO INVESTORS
RIGHT TO SUBSCRIBE
5.1 Minco hereby grants to each Investor the right to purchase equity securities
of Minco or securities convertible into equity securities of Minco (such equity
securities and securities convertible into equity securities being referred to
as "Securities") from time to time, in the circumstances and manner set out
below.
5.2 If Minco intends to allot any Securities (for any purpose including raising
working capital generally or to cover its share of program costs in respect of a
Property), it shall first offer to sell, free of fees, brokerage or commissions,
such number of the Securities to the Investors to ensure that the Investors'
aggregate percentage ownership of issued and outstanding Securities of Minco
will remain unchanged after giving effect to the allotment.
5.3 The offer shall be made in writing and shall specify any conditions to the
offer; the price per offered Security; and that if an Investor does not, within
the time stipulated (which shall not be less than 10 days nor more than 30
days), elect in writing to exercise the option hereunder with respect to the
offered Securities (in whole or in part), that Investor will be deemed to have
elected not to exercise the option as to the offered Securities.
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5.4 The purchase of Securities hereunder by the Investors shall be completed
contemporaneously with the purchase of Securities by all other persons. The
Investors may determine, as between themselves, to acquire all or part of the
offered Securities. Unless otherwise indicated by the Investors, if both accept
the offer they shall be deemed to be purchasing the offered Securities in equal
proportions.
5.5 After the expiry of the time stipulated in the offer, or on receipt of
written confirmation from both Investors that they elect not to exercise the
option with respect thereto, Minco may for 180 days thereafter offer the
remaining Securities to the persons and in the manner it thinks most beneficial,
but the offer to those persons shall not be at a price less than, or on terms
less favourable to Minco than the offer to the Investors.
5.6 At such time, if any, as the Investors' first cease to collectively own the
Minimum Percentage, the right to purchase securities as set out in this Part 5
will immediately terminate.
PART 6
MATTERS AFFECTING PROPERTIES
PROPERTIES TO BE GOVERNED HEREBY
6.1 If, prior to March 1, 2004, Minco identifies an Acquired Property of merit
in respect of which Minco has acquired or may acquire an NCI which it believes
may be of interest to the Investors, Minco, and all persons acting on its
behalf, shall deliver a notice to the Investors, providing reasonable details
regarding the Property, the NCI and the Underlying Agreement and requesting the
Investors to determine whether such Acquired Property is one that should be
governed by this Agreement. The Investors shall notify Minco in writing within
15 days after receipt of Minco's notice of their determination. The Investors
Earn-In Rights under this Part 6 shall not be limited as to time but may only be
exercised on those Acquired Properties which are held subject to this Agreement
on or prior to March 1, 2004.
6.2 If the Investors determine that such Acquired Property is not one that
should be governed by this Agreement, Minco will be free to deal with that
Acquired Property as it sees fit and that Acquired Property shall thereafter not
be subject to this Agreement. Failure by the Investors to notify Minco of their
determination within the time limit in Section 6.1 will be deemed to be a
determination that the Acquired Property should not be governed by this
Agreement.
6.3 If the Investors determine that the Acquired Property is to be governed by
this Agreement, they shall either sign a separate confidentiality agreement
relating to the particular Property or shall add the Property to the schedule of
properties governed by the current Confidentiality Agreements. Thereafter Minco
will make all data in its
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possession or control available to the Investors and will, if requested to do so
by the Investors and subject to limits imposed by the relevant Governmental
Authority, arrange for site visits at the earliest reasonable time and within
such time periods that will allow the Investors adequate time for evaluating the
Property. The Investors shall be responsible for their own costs in connection
with such site visits and such other costs as may have been agreed by the
Investors in advance of the site visit.
CATEGORIZATION OF EXPLORATION OR DEVELOPMENT PROPERTY
6.4 On the earlier of 15 days after receipt of Minco's notice under Section 6.1,
if the Investors have already completed a site visit, or within 30 days of
completion of a site visit as contemplated in Section 6.3, the Investors shall
deliver a notice to Minco indicating whether the Acquired Property should be
categorized as:
(a) an Exploration Property, in which case Section 6.5 to Section 6.13
will govern; or
(b) a Development Property, in which case Section 6.14 to Section 6.21
will govern.
Failure by the Investors to notify Minco of their election within the above time
limit will be deemed to be an election to categorize the Acquired Property as an
Exploration Property.
THIRD PARTY DEALINGS PRIOR TO EARN-IN
6.5 All dealings by Minco with respect to an Acquired Property before the
Investors have exercised their Earn-In Rights on two Properties shall be subject
to the Investors' Earn-In Rights and any Person who acquires an Interest in an
Acquired Property prior thereto shall hold that Interest subject to the
Investors' Earn-In Rights and, following such acquisition, this Agreement shall
apply mutatis mutandis to that Person and the Interest which it has acquired so
that the Person and Minco shall enjoy the rights and benefits flowing from the
Investors and shall be subject to the same duties and obligations to the
Investors pro rata their respective Interests.
EARN-IN RIGHTS GENERALLY
6.6 Under the Teck-Cominco-PCR Agreement, the Investors have the right to earn
an Interest in an aggregate of two NCIs held by PCR or Minco. The Investors'
right to earn an Interest (the "Earn-In Rights") regarding NCI's held by Minco
are exercisable in the manner set out either in Section 6.8 or Section 6.14.
Promptly upon the Investors exercising an earn-in right under the
Teck-Cominco-PCR Agreement, the Investors shall give notice to Minco. After the
Investors have exercised their earn-in rights under the Teck-Cominco-PCR
Agreement or their Earn-in Rights under this Agreement as to an aggregate of two
Acquired Properties, the Earn-In Rights will terminate and the provisions of
Section 6.1 through Section 6.21 will cease to apply to the Parties.
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EXPLORATION PROPERTIES GENERALLY
6.7 An Acquired Property that has been categorized by the Investors as an
Exploration Property will form part of the general assets of Minco, but will
remain subject to the terms of this Agreement, and in particular:
(a) all dealings with such Property by Minco before the production of a
Preliminary Feasibility Report relating thereto will be subject to the
Earn-in Rights of the Investors set out more particularly in
Section 6.8.
(b) Minco may, but is not obligated to, per-form additional work on the
Property;
(c) all Preliminary Feasibility Reports shall be presented and
delivered to the Investors, forthwith upon completion or receipt by
Minco, at a meeting to be held at a mutually convenient time and place
and called by Minco on at least 30 days notice to the Investors;
(d) if less than $1,000,000 in Expenditures have been incurred by
Minco in connection with the Exploration Property, Minco may elect to
abandon the Property or allow contractual rights to expire without the
consent of the Investors but will provide notice of such event to the
Investors; and
(e) if Minco has incurred Expenditures of $1,000,000 or more and wishes
to abandon the Exploration Property or allow contractual fights to
expire, it shall first give 30 days notice to the Investors of such
intent and if the Investors request Minco not to abandon the Property
or to allow the contractual rights to expire, the Investors shall,
subject to the applicable Underlying Agreement and approval of the
relevant Governmental Authority, assume the obligations of Minco with
respect to such contractual rights.
EARN-IN RIGHT ON EXPLORATION PROPERTIES
6.8 Subject to existing requirements under any applicable Underlying Agreement,
the Investors will have a right to earn a 51% Interest in respect of an
Exploration Property and will have the further joint right to become the
operator of programs on such Exploration Property, by
(a) completing, at their sole cost as between the Parties, a Final
Feasibility Report with respect to the Exploration Property, and
(b) arranging for, and giving notice as contemplated in Section 6.12
of, funding (by equity, debt or a combination thereof) of all costs
which are required to be provided by the Parties in respect of the NCI
to bring the Property into commercial production as contemplated in a
Final Feasibility Report.
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6.9 The Earn-In Rights are exercisable with respect to an Exploration Property
in respect of which the Investors give Minco an Exercise Notice prior to the
30th day after the date of the meeting contemplated in Section 6.7(c). Failing
delivery of an Exercise Notice within the 30 days aforesaid, the Investors shall
be deemed to have elected that the Exploration Property be released from their
Earn-In Rights and that Property shall thereafter not be subject to this
Agreement.
EARNING AN INTEREST - EXPLORATION PROPERTY
6.10 Where the Investors have delivered an Exercise Notice as contemplated in
Section 6.9, the Investors will thereafter have the right to design and
implement such programs of work to be conducted on the Exploration Property as,
in their sole discretion, they consider necessary to complete a Final
Feasibility Report with respect thereto and will earn the Interest in accordance
with the following provisions.
6.11 The Investors shall complete the Final Feasibility Report contemplated in
Section 6.10 without undue delay and within such time limits as are imposed by
the applicable Underlying Agreement. The Investors shall present and deliver to
Minco a copy of the Final Feasibility Report, forthwith upon completion or
receipt by the Investors, at a meeting to be held at a mutually convenient time
and place and called by the Investors on at least 30 days notice to Minco. At
the meeting or by separate notice the Investors will indicate by notice whether:
(a) they consider the Final Feasibility Report to be positive and
bankable and they intend to seek funding necessary to bring the mine
into commercial production as contemplated in the Final Feasibility
Report, in which case Section 6.12 shall apply;
(b) they consider the Final Feasibility Report to be otherwise positive
and bankable, but that it is not prudent to proceed at that time for
reasons or as a result of conditions which they shall itemize at that
time; in which case Section 6.13 shall apply; or
(c) they no longer wish to retain their Earn-In Rights with respect to
that Exploration Property, in which case that Property shall cease to
be subject to this Agreement.
Notwithstanding the foregoing, the Investors may, at any time prior to
completion of a Final Feasibility Report, give notice to Minco that they are
abandoning the completion of the Final Feasibility Report and that they no
longer wish to retain their Earn-In Rights with respect to that Exploration
Property, in which case that Property shall cease to be subject to this
Agreement. The Investors will, promptly following the abandonment, provide
Minco, on a without-warranty basis, with copies of all factual information and
data held or developed by the Investors as part of their Final Feasibility
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Report work which the Investors are not precluded from providing as a result of
confidentiality obligations to third parties.
6.12 If the Investors give notice under Section 6.11(a), the Investors shall
have 180 days from the date of delivery of the notice to Minco under Section
6.11(a) to obtain (by equity and commitments from a bank or other third party
for financing) 100% of the funds necessary for the program contemplated by the
Final Feasibility Report which are required to be provided by the Parties in
respect of the NCI. Upon the delivery of a Commitment Notice by the Investors to
Minco that the required funds are available:
(a) the Investors shall have earned an undivided 51% Interest provided
always that if the applicable Underlying Agreement provides that Minco
must complete the programs before an Interest is earned, the Investors
shall earn their Interest at the same time as Minco; and
(b) upon the Interest having been earned, the Investors shall have
exercised an Earn-In Right.
6.13 If the Investors give notice of deferral under Section 6.11(b), the
Investors may, where possible in accordance with the Underlying Agreement, defer
delivery of a Commitment Notice from time to time until, in their view, the
subject Property could be placed into commercial production and such deferral
shall not prejudice the rights of the Investors hereunder. If the Investors
elect to defer commencement of programs contemplated in the Final Feasibility
Report under such circumstances, they shall update the Final Feasibility Report
annually and deliver the results of such update to Minco together with an
indication whether they are continuing to defer a decision to commence with the
programs.
EARN-IN RIGHT ON DEVELOPMENT PROPERTIES
6.14 Subject to existing requirements under any applicable Underlying Agreement,
the Investors will have a right to earn a 70% Interest in respect of a
Development Property and will have the further joint right to become the
operator of programs on such Development Property, by
(a) completing, at their sole cost as between the Investors, such
exploration work or other activities as may be necessary after its
categorization as a Development Property under Section 6.4 and a Final
Feasibility Report with respect to the Development Property, and
(b) arranging for, and giving notice as contemplated in Section 6.17
of, funding (by equity, debt or a combination thereof) 70% of the costs
which are required to be provided by the Parties in respect of the NCI
to bring the mine into commercial production as contemplated in a Final
Feasibility Report (or 70% of such funds as are required for the
programs contemplated under the Final Feasibility Report
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where such programs relate to the expansion of an existing or currently
operating mine).
EARNING AN INTEREST - DEVELOPMENT PROPERTY
6.15 Where under Section 6.4(b) the Investors have categorized the Acquired
Property as a Development Property, the Investors will thereafter have the right
to design and implement such programs of work to be conducted on the Property
as, in their sole discretion, they consider necessary to complete a Final
Feasibility Report with respect thereto and will earn their Interest in
accordance with the following provisions.
6.16 The Investors shall complete the Final Feasibility Report contemplated in
Section 6.15 without undue delay and within such time limits as are imposed by
the applicable Underlying Agreement. The Investors shall present and deliver to
Minco a copy of the Final Feasibility Report, forthwith upon completion or
receipt by the Investors, at a meeting to be held at a mutually convenient time
and place and called by the Investors on at least 30 days notice to Minco. At
the meeting or by separate notice the Investors will indicate by notice whether:
(a) they consider the Final Feasibility Report to be positive and
bankable and they intend to seek funding necessary to bring the mine
into commercial production as contemplated in the Final Feasibility
Report, in which case Section 6.17 shall apply;
(b) they consider the Final Feasibility Report to be otherwise positive
and bankable, but that it is not prudent to proceed at that time for
reasons or as a result of conditions which they shall itemize at that
time; in which case Section 6.18 shall apply; or
(c) they no longer wish to retain their Earn-In Rights with respect to
that Property, in which case that Property shall cease to be subject to
this Agreement.
Notwithstanding the foregoing, the Investors may, at any time prior to
completion of a Final Feasibility Report, give notice to Minco that they are
abandoning the completion of the Final Feasibility Report and that they no
longer wish to retain their Earn-In Rights with respect to that Property, in
which case that Property shall cease to be subject to this Agreement. The
Investors will, promptly following the abandonment, provide Minco, on a
without-warranty basis, with copies of all factual information and data held or
developed by the Investors as part of their Final Feasibility Report work which
the Investors are not precluded from providing as a result of confidentiality
obligations to third parties.
6.17 If the Investors give notice under Section 6.16(a) or Section 6.18, the
Investors shall have 180 days from the date of delivery of the notice to Minco
under Section 6.16(a) or Section 6.18 to obtain (by equity and commitments from
a bank or other third party for financing)
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70% of the funds necessary for the program contemplated by the Final Feasibility
Report which are required to be provided by the Parties in respect of the NCI.
Upon delivery of a Commitment Notice by the Investors to Minco that the required
funds are available:
(a) the Investors shall have earned an undivided 70% Interest, provided
always that if the applicable Underlying Agreement provides that Minco
must complete the programs before an Interest is earned, the Investors
shall earn their Interest at the same time as Minco; and
(b) upon the Interest having been earned, the Investors will have
exercised an Earn-In Right.
6.18 If the Investors give notice of deferral under Section 6.16(b), the
Investors may, where possible in accordance with the Underlying Agreement, defer
delivery of a Commitment Notice from time to time until, in their view, the
subject Property could be placed into commercial production and such deferral
shall not prejudice the rights of the Investors hereunder. If the Investors
elect to defer commencement of programs contemplated in the Final Feasibility
Report under such circumstances, they shall update the Final Feasibility Report
annually and deliver the results of such update to Minco together with an
indication whether they are continuing to defer a decision to commence with the
programs. The Investors may, at any time during the deferral, give notice to
Minco that conditions upon which the deferral has been based have been overcome
and they consider the Final Feasibility Report to be positive and bankable and
they intend to seek funding necessary to bring the mine into commercial
production as contemplated in the Final Feasibility Report, in which case
Section 6.17 shall apply to the Investors and Section 6.19 to Section 6.21 will
apply to Minco.
6.19 The Investors will be entitled to include in the terms of any bank or third
party commitment for financing a condition precedent that Minco will provide the
remaining 30% of the funds necessary for the programs of work which are required
to be provided by the Parties in respect of the NCI.
6.20 If Minco is unable, during the 180-day period referred to in Section 6.17,
to deliver a Commitment Notice for its 30% of the required funds the Investors
can either:
(a) notify Minco that the production programs will be postponed; or
(b) elect to arrange for or provide such remaining funds as are
necessary for the programs contemplated by the Final Feasibility
Report, in which case Minco's Interest will be diluted in accordance
with the dilution formula set out in the Terms of Joint Venture annexed
as Schedule F hereto.
6.21 If the Investors elect under Section 6.20 to postpone the production
programs, Minco and Investor shall maintain their respective interests in the
Property. The Investors shall update the Final Feasibility Report annually and
may, at any time, elect
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to proceed with the production program contained therein. In such case, the
Investors will give notice in writing to Minco and Minco will thereafter have
180 days within which to arrange for financing of its share of funds required
for the production programs. If after the expiry of such time Minco cannot
deliver a Financing Notice for its share of funds, the Investors will be
entitled to provide the balance of such funds for the production programs and
the interest of Minco will be diluted in accordance with the dilution formula
set out in the Terms of Joint Venture annexed as Schedule F hereto.
JOINT VENTURE
6.22 As promptly as practicable after the Closing Date, the Parties shall settle
the form of Joint Venture Agreement relating to Properties, which Joint Venture
Agreement shall include at least the terms set out on Schedule G, including a
provision that if Minco's Interest is diluted to 10% its Interest will be
converted to a 1% Net Smelter Return Royalty, as defined in Schedule H, from
that share of production from a mine on the Property which is taken in kind or
attributable to the Interests held by the Parties. Notwithstanding actual
Expenditures of Minco, Minco's initial contribution for a Development Property
for the purposes of calculating dilution shall be deemed to be such amount that
is equal to 3/7 of Investors' Costs (see Schedule F) at the time of Commitment
Notice. Each Property for which the Investors have exercised an Earn-In Right
will be governed by its own separate Joint Venture Agreement.
COST RECOVERY - DEVELOPMENT PROPERTY
6.23 With respect to a Development Property, Net Proceeds shall be distributed
as follows:
(a) firstly 100% to repay any third party project financing;
(b) secondly, 100% to repay any project financing contributed by the
Parties as between the Parties in proportion to their percentage
contribution level to the project financing;
(c) thirdly, to repay any Prior Costs, excluding deemed costs, prior to
the date of the Investors' Commitment Notice; and
(d) finally, to the Parties in proportion to their respective
Interests.
COST RECOVERY - EXPLORATION PROPERTY
6.24 With respect to an Exploration Property, Net Proceeds shall be distributed
as follows:
(a) firstly 100% to repay any third party project financing;
30
- 30 -
(b) secondly, until the First Recovery Date, 75% to the Investors in
respect of their Prior Costs, excluding deemed costs (in proportion to
their respective Interests as between them) and 25% to Minco in respect
of its Prior Costs, excluding deemed costs, plus interest at Prime Rate
plus 2%, calculated in each case from the date on which the said Prior
Costs were paid;
(c) thirdly, until the Second Recovery Date, 100% to the Party that has
not yet recovered its Prior Costs, excluding deemed costs, plus
interest at the Prime Rate plus 2%, calculated from the date on which
such said Prior Costs were paid; and
(d) finally, to the Parties in proportion to their respective
Interests.
MINCO CONSULTING SERVICES
6.25 Where Minco can demonstrate that its current employees have the required
expertise and provided that the contract price is within the standard range in
the industry for arms length engagements, such Party shall be entitled to offer
its consulting services to any other Party hereto. The Investors may require
Minco to render consulting services, so long as the renumeration for such
services is within the standard range in the industry.
PART 7
ASSIGNMENTS AND PREFERENTIAL RIGHTS OF PURCHASE
ASSIGNMENTS
7.1 No Party may assign any right, benefit or interest in this Agreement or an
NCI in respect of which the Investors have exercised their rights under Part 6
without the prior written consent of the other Parties and any purported
assignment without such compliance will be void except:
(a) such assignment is permitted if it occurs in accordance with Part
6;
(b) an Investor may, at any time, assign all or any part of its
interest to an Affiliate so long as such Affiliate agrees to be bound
by the terms of this Agreement and to retransfer the interest prior to
ceasing to be an Affiliate of such Investor;
(c) Minco may assign all or any part of its interest to a wholly-owned
subsidiary of Minco so long as such entity agrees to be bound by the
terms of this Agreement and to retransfer the interest prior to ceasing
to be a wholly-owned subsidiary;
31
- 31 -
(d) Minco may assign all or any part of its Interest to the Investors
or to PCR;
(e) the Investors may freely assign Interests as between them; and
(f) such assignment is permitted if it occurs in accordance with
Section 7.2 through 7.6.
7.2 Subject to Section 7.7 and to existing requirements under any
applicable Underlying Agreement, after the Earn-In Rights contained in Section
6.6 and 6.7 have been exercised (by either or both Investors) with respect to an
aggregate of two Properties, if:
(a) Minco wishes to dispose of all or a portion of its Interest in a
Property; or
(b) Minco wishes to accept a legally binding and enforceable offer from
a third party to purchase, earn or acquire an Interest;
it shall first offer to the Investors the same opportunity in the manner
hereinafter set out.
7.3 Minco shall deliver an offer ("Minco's Offer") to the Investors
which shall include at least the following information or documents:
(a) a written notice specifying in reasonable detail the Property which
is the subject of Minco's Offer, and the NCI in relation thereto;
(b) all information in Minco's possession or control relating to the
Acquired Property;
(c) such preliminary feasibility report (if any and without obligating
Minco to produce one) relating to the Acquired Property in the
possession or control of Minco;
(d) the terms and conditions of Minco's Offer, or a copy of any third
party offer contemplated in Section 7.2(b), including the time period
for acceptance; and
(e) all other information, analysis and data in Minco's possession or
control that the Investors may reasonably request or which might
reasonably be expected to be useful to them in deciding whether to
accept Minco's Offer;
and in all cases if the Investors have not previously executed a confidentiality
agreement governing the subject Property, upon request of Minco before delivery
of the information, they shall do so.
7.4 The Investors shall have 30 days after receipt of Minco's Offer
to accept Minco's Offer. Either or both of the Investors may elect in writing to
accept such offer
32
- 32 -
and where both Investors elect to accept, they shall participate in purchasing,
earning or acquiring the Interest in equal proportions unless otherwise agreed
between them. Completion of the transaction shall occur on a date agreed among
the Parties but not earlier than 60 days after delivery of the acceptance
notice.
7.5 If neither Investor accepts Minco's Offer within the time
period provided for acceptance, the Investors shall be deemed to have declined
the offer and Minco may, for a period of 180 days thereafter, sell or dispose of
the Interest to a third party (and where Minco's Offer relates to a specific
third party offer to that third party) on the same, or financially equivalent,
terms and conditions as set out in Minco's Offer; provided that, with respect to
the Properties in which the Investors have exercised their Earn-In Rights, the
third party agrees to be bound by this Agreement. If Minco does not complete the
acquisition or transaction within the said 180 days, the preferential right of
purchase enjoyed by the Investors shall again apply to any proposed disposition.
7.6 If after making an election or earning an Interest under Part 6
an Investor wishes to transfer all of the Interest to a third party other than
an Affiliate, it must first offer the Interest to Minco in accordance with the
provisions of Section 7.2 to Section 7.5 and for these purposes "Minco" shall be
read to mean the particular Investor and "Investors" shall be read to mean
Minco.
7.7 This Part 7 shall cease to apply to Properties, other than the
two in respect of which the Investors have exercised their Earn-In Rights, on
the earlier of March 1, 2004 and the third anniversary of the date the Investors
have exercised their Earn-In Rights on two Properties.
PART 8
CONDITIONS
CONDITIONS TO THE OBLIGATIONS OF TECK AND COMINCO
8.1 Except as otherwise specifically set forth herein, all
obligations of Teck and Cominco under this Agreement are subject to the
fulfilment, before or on the Closing Date, of each of the following conditions
for the exclusive joint benefit of the Investors, each of which may be waived in
whole or in part by the Investors, on or before the Closing Date:
(a) all representations and warranties of Minco contained in this
Agreement or in any written statement delivered to Teck or Cominco
under this Agreement, are true and correct, when made and will be true
and correct at the Closing Date; and
33
- 33 -
(b) each of the covenants and agreements of, conditions imposed upon
and the deliveries set out herein to be made by Minco to be performed,
satisfied or complied with on or before the Closing Date has been duly
performed, satisfied and complied with in all respects on or before the
Closing Date.
CONDITIONS TO THE OBLIGATIONS OF MINCO
8.2 Except as otherwise specifically set forth herein, all
obligations of Minco under this Agreement are subject to the fulfilment, before
or on the Closing Date, of each of the following conditions for the exclusive
benefit of Minco and each of which may be waived in whole or in part by Minco on
or before the Closing Date:
(a) receipt of any Requisite Approvals for the transactions
contemplated in this Agreement;
(b) all representations and warranties of Teck and Cominco contained in
this Agreement, or in any written statement delivered to Minco by Teck
or Cominco under this Agreement, are true and correct, when made and
will be true and correct on the Closing Date; and
(c) each of the covenants, agreements and conditions of Teck and
Cominco to be performed, satisfied or complied with on or before the
Closing Date pursuant to the terms hereof has been duly performed,
satisfied and complied with in all respects on or before the Closing
Date.
PART 9
FORCE MAJEURE
FORCE MAJEURE
9.1 Notwithstanding any other provision of this Agreement, a
Party's rights and privileges shall not be affected and no liabilities hereunder
shall result to that Party, except for monies then due, for any delay in
performance or non-performance caused by circumstances beyond the control of the
party affected, including but not limited to acts of God, earthquake, fire,
flood or the elements, perils of the sea, including any action or threatened
action of any nation endangering transport, malicious mischief, riots, strikes,
lockouts, boycotts, picketing, labour disturbances, war, compliance with any
directive, order or regulation of any governmental authority or representatives
thereof acting under claim or colour of authority, accidents, equipment or
operational breakdown, shortage or inability to obtain fuel, electric power, raw
materials or manufactured products, equipment, containers or transportation,
unfavourable economic or political considerations beyond the control of that
Party such as, but not limited to foreign exchange controls restricting foreign
investment or the return of foreign investment, or
34
- 34 -
the currency in which it is payable and restrictions on the export of production
or due to any cause beyond that Party's reasonable control whether or not
similar to the foregoing.
NOTICE
9.2 Upon the occurrence of an event of force majeure, the affected
Party shall notify the other Parties immediately upon such occurrence and the
Parties shall exercise all reasonable efforts and due diligence to eliminate or
remedy any event of force majeure or interrupting proponents hereunder (provided
that nothing herein contained shall be construed as requiring any party to
accede to any demands of workers which it considers unreasonable or to test
constitutionality of any law).
EXTENSION OF TIME
9.3 If an event of force majeure occurs, the time periods during
which a Party must satisfy its obligations hereunder will be extended for the
same length of time as the event of force majeure continues.
PART 10
GENERAL PROVISIONS
ENTIRE AGREEMENT
10.1 This Agreement constitutes the entire agreement among the
Parties and supersedes every previous agreement, communication, expectation,
negotiation, representation or understanding, whether oral or written, express
or implied, statutory or otherwise, between the Parties with respect to the
subject matter of this Agreement other than agreements executed by each of the
Parties on or after the date of this Agreement.
NO OTHER REPRESENTATIONS
10.2 No director, officer, employee or agent of any Party has any
authority to make any representation or warranty not contained in this
Agreement, and each Party agrees that it has executed this Agreement without
reliance upon any such representation or warranty.
WAIVER AND CONSENT
10.3 No consent or waiver, express or implied, by either Party to
or of any breach or default by the other of any or all of its obligations under
this Agreement will
(a) be valid unless it is in writing and stated to be a consent or
waiver pursuant to this Section 10.3;
35
- 35 -
(b) be relied on as a consent to or waiver of any other breach or
default of the same or any other obligation;
(c) constitute a general waiver under this Agreement; or
(d) eliminate or modify the need for a specific consent or waiver
pursuant to this Section 10.3 in any other or subsequent instance.
AMENDMENTS
10.4 This Agreement may not be amended except by written document
signed by all Parties to this Agreement.
PRESS RELEASES
10.5 Each Party shall consult with the others prior to issuing any
press release or other public statement regarding a Property or the activities
of the Parties with respect thereto:
(a) during the Earn-In Period in respect of all Acquired Properties;
and
(b) thereafter in respect of Acquired Properties for which the
Investors have exercised the Earn-In Rights.
At all times each Party shall obtain prior approval from the other before
issuing any press release or public statement using the others' names or the
name of any of the others' associated companies or of any of the officers,
directors or employees of the others or their associated companies.
BINDING EFFECT
10.6 This Agreement will enure to the benefit of and be binding
upon the respective legal representatives, successors and permitted assigns of
the Parties.
TIME OF ESSENCE
10.7 Time is of the essence in the performance of each obligation
under this Agreement.
FURTHER ASSURANCES
10.8 Each Party will at all times and from time to time cooperate
with each other Party in order to give full effect to this Agreement and in
order to assist and expedite the performance by each Party of all or any of the
provisions herein contained and, in particular, do all acts and things and
execute under its corporate seal or
36
- 36 -
otherwise and deliver all such instruments, deeds, mortgages, assignments and
other documents and cause all such corporate acts to be duly, expeditiously and
validly done as the Parties may reasonably require in accordance with the
provisions hereof.
NOTICE
10.9 Every notice, request, demand or direction (each, for the
purposes of this Section 10.9, a "notice") to be given pursuant to this
Agreement by any Party to another will be in writing and will be delivered or
sent by telecopier or other similar form of instantaneous written communication
on tangible medium, in each case, addressed as applicable as follows:
If to Minco:
1870 - 000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
Fax: (000) 000-0000
Attention: Chairman
If to Teck at:
000 - 000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
Fax: (000) 000-0000
Attention: Secretary
If to Cominco at:
000 - 000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
Fax: (000) 000-0000
Attention: General Manager, Exploration, International
or to such other address as is specified by the particular Party by notice to
the other.
37
- 37 -
DEEMED RECEIPT
10.10 Any notice delivered or sent in accordance with Section 10.9
will be deemed to have been given and received:
(a) if delivered, on the first Business Day after the day of delivery;
and
(b) if sent by telecopier or other similar form of instantaneous
written communication, on the first Business Day after the day of
transmittal.
TERMINATION
10.11 This Agreement will terminate:
(a) upon mutual agreement of the Parties; and
(b) at the option of the Investors if any of the events set out in
2.8(b) occurs.
COUNTERPARTS
10.12 This Agreement may be signed by facsimile and in any number
of counterparts and all such counterparts will be taken to comprise a single
agreement.
CONDITIONS PRECEDENT
10.13 This Agreement and the obligations of the Parties are subject
to:
(a) the execution of a subscription agreement between Minco, Teck and
Cominco relating to the Teck-Cominco private placement; and
38
- 38 -
(b) acceptance for filing of this Agreement by the Vancouver Stock
Exchange on or before March 31, 1996.
IN WITNESS WHEREOF the Parties have executed this Agreement as of the day and
year first above written.
The Common Seal of )
MINCO MINING AND METALS )
CORPORATION )
was affixed in the presence of: )
) C/S
/s/illegible )
________________________________ )
Authorized Signatory )
)
/s/illegible )
________________________________ )
Authorized Signatory )
The Corporate Seal of )
TECK CORPORATION )
was affixed in the presence of: )
) C/S
/s/illegible )
________________________________ )
Authorized Signatory )
)
/s/illegible )
________________________________ )
Authorized Signatory )
The Corporate Seal of )
COMINCO LTD. )
was affixed in the presence of: )
) C/S
/s/illegible )
________________________________ )
Authorized Signatory )
)
/s/illegible )
________________________________ )
Authorized Signatory )
39
Schedule A-1
This is SCHEDULE A to the Agreement
Between MINCO MINING AND METALS CORPORATION
TECK CORPORATION and COMINCO LTD.
made the 20th day of February, 1996
ISSUED CAPITAL
As at March 25, 1996 there were 3,309,882 common shares outstanding in the
capital of the Company.
RIGHTS TO ACQUIRE SECURITIES IN MINCO
1. incentive stock options for an aggregate of 10,000 common shares
exercisable until June 2, 2000 at a price of $1.00 per share;
2. an aggregate 60,241 additional performance escrow shares to be issued
to certain principals of Minco pursuant to the policies of the
Exchange, the issuance of which remains subject to the approval of the
Exchange;
3. 200,000 finders fee shares to be issued to December Inc. pursuant to a
Finders Fee Agreement dated as of December 11, 1995 made between
December Inc. and Minco, the issuance of which remains subject to the
approval of the Exchange;
4. 100,000 finder's fee special warrants to be issued to Canaccord Capital
Corporation pursuant to a Finder's Fee Agreement dates as of February
29, 1996 made between Canaccord Capital Corporation and Minco, the
issuance of which remains subject to the approval of the Exchange; and
5. incentive stock options for an aggregate of 1,050,000 common shares
exercisable until March 5, 2001 at a price of $1.85 per share, subject
to the approval of the Exchange.
40
Schedule B - 1
This is SCHEDULE B to the Agreement
Between MINCO MINING AND METALS CORPORATION
TECK CORPORATION and COMINCO LTD.
made the 20th day of February, 1996
RIGHTS TO ACQUIRE INTERESTS
IN ACQUIRED PROPERTIES HELD BY PCR
Notes:
There is only one agreement (the "TEMCO OPTION AGREEMENT") dated March 3, 0000
xxxxxxx XXX xxx Xxxxxx Xxxx Xxxxx Ltd, under which a third party has a right to
acquire an interest in an Acquired Property for purposes of the Agreement.
A copy of the above agreement has been made available to the Parties.
41
Schedule D - 1
This is SCHEDULE D to the Agreement
Between MINCO MINING AND METALS CORPORATION
TECK CORPORATION and COMINCO LTD.
made the 20th day of February, 1996
LIST AND DESCRIPTION OF UNDERLYING AGREEMENTS
NOTES:
1. THERE IS ONLY ONE AGREEMENT (THE "EMPEROR'S DELIGHT JOINT VENTURE
CONTRACT") DATED DECEMBER 25, 1995 BETWEEN AND THE FIRST:
GEOEXPLORATION BUREAU ("FGEB") OF THE MINISTRY OF METALLURGICAL
INDUSTRY AND TRIPLE EIGHT MINERAL CORPORATION WHICH IS AN UNDERLYING
AGREEMENT FOR PURPOSES OF THE AGREEMENT.
2. There are three other agreements which are not Underlying Agreements
FOR PURPOSES OF THE AGREEMENT BUT WHICH HAVE THE POTENTIAL TO BECOME
UNDERLYING AGREEMENTS.
(a) THE FIRST SUCH AGREEMENT (THE "FGEB CO-OPERATION AGREEMENT") WAS AMONG
FGEB, PATRICIAN GOLD MINES LTD., AND PCR AND WAS DATED OCTOBER 4, 1994
(WITH OCTOBER 4, 1994 BEING THE EFFECTIVE DATE AND THE DATE ON WHICH
THE CHINESE VERSION WAS SIGNED BUT WITH NOVEMBER 17. 1994 BEING THE
DATE ON WHICH THE ENGLISH VERSION WAS SIGNED).
(b) THE SECOND SUCH AGREEMENT THE (THE "CB-LG AGREEMENT') DATED JUNE 6,
1995 AMONG TECK EXPLORATION LTD., PCR AND BAIYIN NON-FERROUS METALS
COMPANY.
(c) The third such agreement dated July 7, 1995 as amended by undated
supplementary agreement between Minco Mining & Metals Corporation and
Sichuan Bureau of Geology and Mineral Resources.
A COPY OF THE ABOVE AGREEMENTS HAS BEEN MADE AVAILABLE TO THE PARTIES.
42
Schedule C-1
This is SCHEDULE C to the Agreement
Between MINCO MINING AND METALS CORPORATION
TECK CORPORATION and COMINCO LTD.
made the 20th day of February, 1996
--------------------------------------------------------------------------------
Audited Financial Statements of Minco Mining and Metals Corporation
dated December 31, 1995
MINCO MINING AND METALS CORPORATION
Final Statements
December 31, 1995
Index
Auditors' Report
Balance Sheet
Statement of Loss and Deficit
Statement of Changes in Financial Position
Notes to Financial Statements
43
C-2
XXXXX XXXXXX
CHARTERED ACCOUNTANTS
0000 Xxxx 0xx Xxxxxx
Xxxxxxxxx, X.X., Xxxxxx X0X 0X0
Telephone: (000) 000-0000 Facsimile: (000) 000-0000
--------------------------------------------------------------------------------
AUDITORS' REPORT
To the Shareholders of
MINCO MINING AND METALS CORPORATION
We have audited the balance sheets of MINCO MINING and METALS CORPORATION as at
December 31, 1995 and 1994 and the statements of loss and deficit and changes
in financial position for the years then ended. These financial statements are
the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at December 31, 1995 and
1994 and the results of its operations and the changes in its financial
position for the years then ended in accordance with generally accepted
accounting principles.
Vancouver, Canada /s/ Xxxxx Xxxxxx
February 12, 1996 ---------------------
Chartered Accountants
--------------------------------------------------------------------------------
E A partnership of incorporated professionals
F An independently owned and operated member of Xxxxx Xxxxxxxx North America,
Inc., a member of Xxxxx Xxxxxxxx International Limited-members in
principal cities throughout the world
44
C-3
MINCO MINING AND METALS CORPORATION
Balance Sheet
December 31, 1995
================================================================================
1995 1994
--------------------------------------------------------------------------------
ASSETS
Current
Cash $ 229,304 $ 137,437
Marketable securities - 600
Refundable tax credits 2,680 1,989
--------------------------------------------------------------------------------
231,984 140,026
Resource interests (Note 2) 100 -
Capital assets (Note 3) 25,102 -
--------------------------------------------------------------------------------
$ 257,186 $ 140,026
================================================================================
LIABILITIES
Current
Accounts payable and accrued liabilities $ 27,908 $ 10,550
Management fees payable 12,000 48,000
Due to a director 60,000 -
--------------------------------------------------------------------------------
99,908 58,550
--------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital (Note 4) 3,026,474 2,526,474
Deficit (2,869,196) (2,444,998)
--------------------------------------------------------------------------------
157,278 81,476
--------------------------------------------------------------------------------
$ 257,186 $ 140,026
================================================================================
Approved by the Directors: [illegible] [illegible]
----------------------------- ------------
Director Director
45
C-4
MINCO MINING AND METALS CORPORATION
Statement of Loss and Deficit
Year Ended December 31, 1995
1995 1994
----------- -----------
Revenue
Interest income $ 8,754 $ 2,795
Gain on sale of marketable securities 535 -
----------- -----------
9,289 2,795
Expenses
Accounting and audit 21,830 11,958
Amortization 3,587 -
Bank charges 852 230
Filing fees 7,840 4,171
Investor relations 19,863 3,683
Legal 18,409 4,746
Management and consulting fees 45,684 24,000
Office 19,625 1,075
Property investigation 143,078 51,287
Rent 38,443 -
Salaries and benefits 57,621 -
Telephone 15,678 -
Transportation 11,200 -
Transfer agent 4,092 4,119
Travel and conference 25,385 -
----------- -----------
433,487 105,269
Net loss for the year (424,198) (102,474)
Deficit, beginning of year (2,444,998) (2,342,524)
----------- -----------
Deficit, end of year $(2,869,196) $(2,444,998)
=========== ===========
Loss per share $(0.17) $(0.04)
=========== ===========
46
MINCO MINING AND METALS CORPORATION C-5
Statement of Changes in Financial Position
Year Ended December 31, 1995
1995 1994
---------- ---------
Cash provided by (used for) operating activites
Net loss for the year $ (424,198) $(102,474)
Item not involving cash:
- amortization 3,587 -
---------- ---------
(420,611) (102,474)
Net change in non-cash working capital 41,267 91,705
---------- ---------
(379,344) (10,769)
---------- ---------
Cash provided by financing activities
Proceeds from issuance of shares 500,000 110,000
---------- ---------
Cash used for investing activities
Acquisition of capital assets (28,689) -
Acquisition of resource interests (100) -
---------- ---------
(28,789) -
---------- ---------
Increase in cash position 91,867 99,231
Cash position, beginning of year 137,437 38,206
---------- ---------
Cash position, end of year $ 229,304 $ 137,437
========= =========
47
C-6
MINCO MINING AND METALS CORPORATION
Notes to Financial Statements
December 31, 1995
1. Significant Accounting Policies
a) Capital Assets
Amortization is provided on a declining-balance basis as
follows:
Computer equipment 30% per annum
Office equipment and furniture 20% per annum
b) Resource Interests
The Company follows the policy of deferring all acquisition,
exploration and development costs relating to the resource
interests. These costs will be amortized against revenue from
future production or written off if the interest is abandoned
or sold. At the present time, management has determined each
project to be a cost centre.
Depletion of cost capitalized on projects put into commercial
production will be recorded using the unit-of-production method
when estimated proven reserves are determined.
The amounts shown for resource interests represent acquisition
and exploration costs incurred to date, less recoveries, and
do not necessarily reflect present or future values.
The Company does not accrue the estimated costs of maintaining
its resource interests in good standing.
c) Option Agreements
From time to time, the Company may acquire or dispose of
properties pursuant to the terms of option agreements. Due to
the fact that options are exercisable entirely at the discretion
of the optionee, the amounts payable or receivable are not
recorded. Option payments are recorded as resource property
costs or recoveries when the payments are made or received.
48
C-7
MINCO MINING AND METALS CORPORATION
Notes to Financial Statements
December 31, 1995
--------------------------------------------------------------------------------
2. RESOURCE INTEREST
The Company has entered into a joint venture agreement with the Sichuan
Bureau of Geology and Mineral Resources ("SBGMR"). SBGMR is the holder
of exploration rights to the Chapuzi Gold Deposit in Sichuan Province,
China.
Pursuant to the agreement, the Company shall have the right to earn a
51% interest by spending CDN$5 million on exploration and development.
To date the Company has incurred $135,201 in connection with the
investigation and signing of the joint venture agreement. These costs
have been expensed together with other property investigation.
The resource interest is carried at a minimal amount of $100.
3. CAPITAL ASSETS
1995 1994
--------------------------------------- --------
Accumulated Net book Net book
Cost amortization value value
--------------------------------------------------------------------------------
Computer equipment $14,358 $2,154 $12,204 $ -
Office equipment and
furniture 14,331 1,433 12,898 -
--------------------------------------------------------------------------------
$28,689 $3,587 $25,102 $ -
================================================================================
4. SHARE CAPITAL
a) Authorized: 20,000,000 common shares without par value.
b) Issued:
Shares Amount
--------------------------------------------------------------------------------
Balance, December 31, 1993 1,785,873 $2,416,474
Issued pursuant to exercise of
warrants at $0.22 per share 500,000 110,000
--------------------------------------------------------------------------------
Balance, December 31, 1994 2,285,873 2,526,474
Issued pursuant to a private placement 500,000 500,000
--------------------------------------------------------------------------------
Balance, December 31, 1995 2,785,873 $3,026,474
================================================================================
49
C-8
MINCO MINING AND METALS CORPORATION
Notes to Financial Statements
December 31, 1995
--------------------------------------------------------------------------------
4. SHARE CAPITAL (continued)
c) 125,000 of the shares are held in escrow, the release of which
is subject to the direction of the regulatory authorities.
d) The Company has granted incentive stock options to directors and
employees for 156,750 shares exercisable at $1.00 per share,
expiring June 2, 2000.
e) The Company has agreed to issue 437,000 additional escrow shares
to its directors at $0.01 per share. These shares were issued
subsequent to the year-end.
f) The Company has agreed to issue, subject to regulatory approval,
200,000 shares as finder's fees in connection with the
joint venture as described in Note 2.
5. REMUNERATION OF DIRECTORS AND SENIOR OFFICERS
During the year, the Company paid or accrued the following expenses to
its directors:
Accounting - $10,400
Management and consulting fees - $45,684
Salaries - $33,000
50
Schedule D-1
This is SCHEDULE D to the Agreement
Between MINCO MINING AND METALS CORPORATION
TECK CORPORATION and COMINCO LTD.
made the 20th day of February, 1996
--------------------------------------------------------------------------------
LIST AND DESCRIPTION OF UNDERLYING AGREEMENTS
Notes:
1. There is only one agreement (the "Emperor's Delight Joint Venture
Contract") dated December 25, 1995 between and The First Geoexploration
Bureau ("FGEB") of the Ministry of Metallurgical Industry and Triple
Eight Mineral Corporation which is an Underlying Agreement for purposes
of the Agreement.
2. There are three other agreements which are not Underlying Agreements for
purposes of the Agreement but which have the potential to become
Underlying Agreements.
(a) The first such agreement (the "FGEB Co-operation Agreement") was among
FGEB, Patrician Gold Mines Ltd., and PCR and was dated October 4, 1994
(with October 4, 1994 being the effective date and the date on which the
Chinese version was signed but with November 17, 1994 being the date on
which the English version was signed).
(b) The second such agreement the (the "CB-LG Agreement") dated June 6, 1995
among Teck Exploration Ltd., PCR and Baiyin Non-Ferrous Metals Company.
(c) The third such agreement dated July 7, 1995 as amended by undated
supplementary agreement between Minco Mining & Metals Corporation and
Sichuan Bureau of Geology and Mineral Resources.
A copy of the above agreements has been made available to the Parties.
51
Schedule E-1
This is SCHEDULE E to the Agreement
Between MINCO MINING AND METALS CORPORATION
TECK CORPORATION and COMINCO LTD.
made the 20th day of February, 1996
CONSENT AND WAIVER
TO: Teck Corporation
AND TO: Cominco Ltd.
AND TO: Minco Mining and Metals Corporation
Reference is made to that certain investment and participation agreement (the
"Agreement") dated the 20th day of February, 1996 among Teck Corporation
("Teck"), Cominco Ltd. ("Cominco") and Minco Mining and Metals Corporation.
Unless the context of this Consent and Waiver otherwise requires, capitalized
terms used but not defined herein shall have the meanings ascribed to them in
the Agreement.
The undersigned, a party to any or all of the Underlying Agreement(s),
hereby irrevocably and for valuable consideration:
(a) consents to the terms of the Agreement and the performance by the
Owner of all of its agreements and obligations thereunder; and
(b) waives any and all provisions of the Underlying Agreement(s) and of
any joint venture agreement which may be entered into pursuant to the
terms of the Underlying Agreement(s) which, in whole or in part,
conflict with or could in the future preclude the grant by the Owner to
Teck and Cominco (or either of them), or the exercise by Teck or
Cominco (or either of them) of, the rights set out in Parts 6 and 7 of
the Agreement.
DATED this _____________________ day of ________________________, 199____.
The Corporate Seal of )
)
was affixed in the presence of: )
)
) C/S
)
)
__________________________________ )
Authorized Signatory )
)
)
__________________________________ )
Authorized Signatory )
52
Schedule F-1
This is SCHEDULE F to the Agreement
Between MINCO MINING AND METALS CORPORATION
TECK CORPORATION and COMINCO LTD.
made the 20th day of February, 1996
Minco's Material Liabilities
None other than as disclosed in Minco's financial statements for the year ended
December 31, 1995 which are attached to this Agreement as Schedule "C".
53
Schedule I-1
This is SCHEDULE I to the Agreement
Between MINCO MINING AND METALS CORPORATION
TECK CORPORATION and COMINCO LTD.
made the 20th day of February, 1996
PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT is made as of the ___ day of ________________, 1996.
BETWEEN:
MINCO MINING AND METALS CORPORATION, a body corporate duly
incorporated under the laws of the Province of British
Columbia and having its head office located at Suite 0000-000
Xxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx
(the "Issuer")
OF THE FIRST PART
AND:
____________________________________, a body corporate duly
incorporated under the laws of Canada and having an office
at_______________ __________________________, Vancouver,
British Columbia, ________
(the "Purchaser")
OF THE SECOND PART
WHEREAS:
A. The Issuer's common shares are listed on the Vancouver Stock Exchange (the
"Exchange") and the Issuer is subject to the regulatory jurisdiction of the
Exchange and of the Executive Director of the British Columbia Securities
Commission (together, the "Commission").
B. The Issuer has entered into an Investment and Participation Agreement with
the Purchaser and * (" * ") (the "Investment and Participation Agreement"),
under which Minco has granted certain rights to * and the Purchaser in exchange
for them subscribing for securities of the Issuer.
1. SUBSCRIPTION
1.1 Minco hereby sells and agrees to issue to the Purchaser and the Purchaser
hereby subscribes for 625,000 units (the "Units"), at a price of $0.80 per Unit,
each Unit consisting of
54
I-2
- 2 -
one common share in the capital of the Issuer as constituted on the date hereof
(a "Common Share") and one fifth of one non-transferable share purchase warrant
(a "Warrant").
1.2 Payment for the Units shall be made in accordance with Article 3 on the
Closing Date (as hereinafter defined), failing which the Issuer shall, in
addition to any other rights it may have, have the right to rescind this
Subscription Agreement.
1.3 The Warrants forming part of the Units will be non-transferable, and one
full Warrant will entitle the Purchaser to purchase one additional Common Share
at a price of $1.20 per share at any time up to the close of business on the
first anniversary of the Closing Date and at a price of $1.38 per share at any
time thereafter up to the close of business on the second anniversary of the
Closing Date.
1.4 The terms and conditions which govern the Warrants will be referred to on
the certificates representing the Warrants and will contain, among other things,
provisions for the appropriate adjustment in the class, number and price of the
shares to be issued on the exercise of the Warrants upon the occurrence of
certain events including any subdivision, consolidation or reclassification of
the shares or amalgamation of the Issuer or the payment of stock dividends.
1.5 The issue of the Warrants will not restrict or prevent the Issuer from
obtaining any other financing, nor from issuing additional securities or rights
during the period within which the Warrants are exercisable.
2. ACKNOWLEDGEMENTS, REPRESENTATIONS AND WARRANTIES
2.1 The Purchaser acknowledges as at the date given above and as at the Closing,
that:
(a) the Purchaser is purchasing the Units under the
exemption from prospectus requirements available
under section 55(2)(4) of the Act and the Purchaser
is not a syndicate, partnership or other form of
unincorporated entity or organization created solely
to permit the purchase of the Units (or other similar
purchases) by a group of individuals whose individual
share of the aggregate acquisition cost of the Units
is less than $97,000 (Cdn.);
(b) the offer made by this subscription requires
acceptance by the Issuer and the approval of the
Exchange;
(c) no person has made to the Purchaser any written or
oral representation:
(i) that any person will resell or repurchase
any of the Securities;
(ii) that any person will refund the purchase
price of any of the Securities;
55
I-3
- 3 -
(iii) as to the future price or value of any of
the Securities; or
(iv) that any of the Securities will be listed
and posted for trading on a stock exchange
or that application has been made to list
and post any of the Securities for trading
on a stock exchange other than the Exchange;
(d) the purchase of the Units has been privately
negotiated and arranged and the Purchaser or his
agent has been invited and afforded the opportunity
to conduct a review of all of the Issuer's affairs
and records in order that the Purchaser may be
properly and fully aware of all of the facts relevant
to the Issuer's affairs;
(e) the Purchaser is duly incorporated and validly
subsisting under the laws of its jurisdiction of
incorporation and all necessary approvals by its
directors, shareholders and others have been given to
authorize execution of this Subscription Agreement on
behalf of the Purchaser;
(f) the entering into of this Subscription Agreement and
the transactions contemplated hereby will not result
in the violation of any of the terms and provisions
of any law applicable to or the constating documents
of the Purchaser or of any agreement, written or
oral, to which the Purchaser may be a party or by
which the Purchaser is or may be bound; and
(g) this Subscription Agreement has been duly executed
and delivered by the Purchaser and constitutes a
valid obligation of the Purchaser legally binding
upon the Purchaser and enforceable against the
Purchaser in accordance with its terms.
2.2 The Purchaser represents and warrants, as at the date given above and as of
the Closing Date, that:
(a) no prospectus has been delivered by the Issuer to the
Purchaser in connection with the distribution of the
Units. The Purchaser has been advised that the
issuance of the Units is exempted from the prospectus
requirements of the Securities Act (British Columbia)
(the "Act") and as a result the Purchaser may not
received information that would otherwise be required
to be provided to the Purchaser under the Act or
securities rules thereunder;
(b) the Purchaser is purchasing the Units as principal
and no other person, corporation, firm or other
organization will have a beneficial interest in the
Units;
(c) the Units were not offered to the Purchaser through
an advertisement in printed media of general and
regular paid circulation, radio or television;
56
I-4
- 4 -
(d) the Purchaser doe not beneficially own any Common
Shares of the Issuer and does not intend to act in
concert with any other person so as to render the
Purchaser a "control person" as defined in the Act.
(e) the Purchaser has no knowledge of a "material fact"
or "material change" (as those terms are defined in
the Act) in the affairs of the Issuer that has not
been generally disclosed to the public, save
knowledge of this particular transaction; and
(f) the Purchaser has sought and obtained independent
legal advice regarding the purchase and re-sale of
the Securities under the Act and the Rules.
2.3 The Issuer represents and warrants as at the date given above and as at the
Closing, that:
(a) the Issuer and its subsidiaries, if any, are valid
and subsisting corporations duly incorporated and in
good standing under the laws of the Province of
British Columbia;
(b) the Issuer will reserve or set aside sufficient
shares in the treasury of the Issuer to issue the
Securities;
(c) the Issuer is an "exchange issuer" as defined in the
Act, which is recognized as such by the Commission
and the Exchange, and is not on the List of
Defaulting Issuers maintained by the Commission;
(d) the Issuer shall use its best efforts to diligently
seek and obtain the acceptance for filing of this
Subscription Agreement and the Investment and
Participation Agreement by the Exchange and will make
all filings necessary to obtain the exemptions from
registration and prospectus requirements available
under sections 31(2) and 55(2) of the Act
respectively in respect of the transaction
contemplated hereby;
(e) the issuance and sale of the Securities by the Issuer
does not and will not conflict with and does not and
will not result in a breach of any of the terms,
conditions or provisions of its constating documents
or any agreement or instrument to which the Issuer is
a party or by which it is bound;
(f) this Subscription Agreement has been duly authorized
by all necessary corporate action on the part of the
Issuer and has been duly executed and delivered by
the Issuer and constitutes a valid obligation of the
Issuer legally binding upon it and enforceable in
accordance with its terms; and
(g) the authorized capital of the Issuer consists of
20,000,000 common shares of which 3,163,132 are
validly issued, fully-paid and non-assessable.
57
I-5
- 5 -
3. CLOSING
3.1 The closing of the transaction contemplated by this Subscription Agreement
(the "Closing") will take place on a date to be agreed between the parties (the
"Closing Date") within five business days of the receipt by the Issuer of final
acceptance for filing by the Exchange of this Subscription Agreement and the
Investment and Participation Agreement.
3.2 On the Closing Date, the Purchaser shall deliver to the Issuer a certified
cheque or banker's draft for the total purchase price of the Units.
3.3 At the Closing, the Issuer will, against payment for the Units, deliver to
the Purchaser the certificates representing the Shares and the Warrants
registered in the name of the Purchaser or the Purchaser's nominee.
3.4 At the Closing, the Issuer will deliver to the Purchaser such copies of
approvals and a legal opinion of the Issuer's counsel or other documents as the
Purchaser may reasonably request.
3.5 The acknowledgements, representations and warranties of the Purchaser and
the Issuer herein shall survive the Closing.
4. CONDITIONS TO OBLIGATIONS OF PURCHASER
4.1 The obligations of the Purchaser under this Agreement are subject to the
fulfilment, before or on the Closing, of each of the conditions contained in
Part 8 of the Investment and Participation Agreement, each of which may be
waived in whole or in part by the Purchaser on or before the Closing Date.
5. HOLD PERIOD
5.1 The Purchaser acknowledges that the Securities may not be traded in British
Columbia for a period of one year from the Closing except as permitted by the
Act and Rules. The certificates representing the Securities will contain a
legend denoting the restrictions on transfer imposed by the Act and the
Exchange. The Purchaser agrees to sell, assign or transfer the Securities only
in accordance with the requirements of the Act, the Rules and the Exchange.
6. MISCELLANEOUS
6.1 Upon acceptance of the subscription contained herein by the Issuer, this
Subscription Agreement shall constitute a valid and binding agreement between
the parties, subject only to the approval thereof by the Exchange.
6.2 The Purchaser will execute and deliver to the Issuer for filing with the
Exchange, in duplicate, the Private Placement Questionnaire and Undertaking
substantially in the form attached hereto as Appendix I, and the parties to this
Subscription Agreement will execute and deliver all such further and other
deeds, documents and assurances, and will perform all such further and other
acts as may, in the opinion of counsel for the Issuer, be necessary for the
58
I-6
- 6 -
purposes of giving effect to or perfecting the transaction contemplated by this
Subscription Agreement.
6.3 This Subscription Agreement and the Investment and Participation Agreement
constitutes the entire agreement between the parties and there are no
representations, warranties or collateral agreements, express or implied, other
than as expressly set forth herein or in the Investment and Participation
Agreement.
6.4 The parties to this Subscription Agreement may amend this Subscription
Agreement only in writing.
6.5 Time is of the essence of this Subscription Agreement and will be calculated
in accordance with the provisions of the Interpretation Act (British Columbia).
6.6 This Subscription Agreement will be governed by and construed in accordance
with the laws of British Columbia and the parties hereby irrevocably attorn to
the jurisdiction of the Courts of such Province.
6.7 A party to this Subscription Agreement will give all notices to or other
written communications with the other party to this Subscription Agreement
concerning this Subscription Agreement by hand or by registered mail addressed
to the address given above.
6.8 This Subscription Agreement shall enure to the benefit of and is binding
upon the parties to this Subscription Agreement and their successors and
permitted assigned.
DATED as of the 20th day of February, 1996.
THE CORPORATE SEAL OF * was hereunto )
affixed in the presence of: )
)
_____________________________________ )
Authorized Signatory ) C/S
)
)
_____________________________________ )
Authorized Signatory )
)
ACCEPTED BY MINCO MINING AND METALS CORPORATION this _____ day of ____________,
1996.
By: ___________________________________
Authorized Signatory
59
I-8
APPENDIX I
PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING
A. DESCRIPTION OF TRANSACTION
(i) Name of issuer of the securities:
Minco Mining and Metals Corporation
(ii) Number and description of securities to be purchased:
625,000 Units (the "Units"), each Unit consisting of one (1)
common share and one-fifth (1/5) non-transferable share
purchase warrant (the "Warrants"), one full Warrant entitling
the holder to purchase one additional common share of the
Issuer at $1.20 per share during the first year, and $1.38 per
share during the second year.
(iii) Purchase price:
(a) $0.80 per Unit.
B. DETAILS OF PURCHASER
(i) Name of Purchaser:____________________________________________
(ii) Address:______________________________________________________
(iii) If the purchaser is a corporation, state the jurisdiction of
incorporation:
______________________________________________________________
(iv) Names and addresses of persons having a greater than 10%
beneficial interest in the purchaser, if a corporation or
trust:
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
60
I-9
- 2 -
C. RELATIONSHIP TO LISTED COMPANY
(i) State if purchaser will become a control person with over 20%
of the Company's issued share capital as a result of the
purchase in section A above:
The purchaser will not become a control person as a result of
the purchase.
______________________________________________________________
(ii) Does the purchaser own any securities of the Issuer at the
date hereof? If so, give particulars. State the number of
securities of the listed company held by the purchaser not
including the purchase in section A above:
______________________________________________________________
______________________________________________________________
D. PAYMENT DATE:
(i) State the date the purchaser has advanced full payment:
______________________________________________________________
(ii) If the purchase funds are held in trust pending receipt of
final regulatory approval, identify the trustee and give
particulars of the condition(s) required for release of the
funds:
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
E. UNDERTAKING
TO: THE VANCOUVER STOCK EXCHANGE
The undersigned has subscribed for and agreed to purchase, as principal, the
securities described in section A of this Private Placement Questionnaire and
Undertaking. (The purchase funds may be deposited in trust with advancement to
the Company subject only to receipt of all necessary regulatory approvals).
61
I-10
- 3 -
The undersigned undertakes not to sell or otherwise dispose of any of the said
securities so purchased or any securities derived therefrom for a period of
twelve months from the payment day, without the prior consent of the Vancouver
Stock Exchange and any other regulatory body having jurisdiction. The
undersigned acknowledges that all certificates representing the said securities
will bear a legend to the effect that the certificates are subject to a hold
period for a period of twelve months.
The undersigned hereby certifies that the said securities are not being
purchased as a result of any material information about the Company's affairs
that has not been publicly disclosed. The undersigned acknowledges that it is
aware that the removal from the securities of any resale restriction after
twelve months that is imposed solely as a requirement of the Vancouver Stock
Exchange will not entitle it to sell the securities if such sale would
contravene any other applicable securities legislation or regulation.
F. ADDITIONAL UNDERTAKING - PORTFOLIO MANAGER
If the undersigned is a portfolio manager purchasing as agent for accounts that
are fully managed by it, the undersigned acknowledges that since it is deemed to
be purchasing securities as principal under the Securities Act (British
Columbia) (the "Act") it is bound by the provisions of the Act as though it were
the sole beneficial owner of the said securities, and the undersigned undertakes
to comply with all provisions of the act relating to ownership of, and trading
in, securities including, without limitation, the filing of insider reports and
reports pursuant to section 93 of the Act.
DATED at _________________________, ) __________________________________
) (Name of Purchaser - please print)
__________________________________, this )
)
________ day of _______________, 1996. ) __________________________________
) (Authorized Signature)
)
)
) __________________________________
) (Official Capacity - please print)
)
)
)
) __________________________________
) (Please print name of individual
) whose signature appears above, if
) different from name of purchaser
) printed above)
62
Schedule G - 1
This is SCHEDULE G to the Agreement
Between MINCO MINING AND METALS CORPORATION
TECK CORPORATION and COMINCO LTD.
made the 20th day of February, 1996
TERMS SUMMARY OF JOINT VENTURE
1. INITIAL INTERESTS
1.1 The joint venture will be formed as of the date the Investors
exercise an Earn-In Right on a Property under either
Section 6.12 or Section 6.17 of the Agreement. Each of the
Parties shall own the Property held and bear the Costs and
liabilities incurred by the joint venture in proportion to
their respective Interests. In the case of an Exploration
Property, the Interests will be: the Investors, as to 51% and
Minco as to 49%. In the case of a Development Property, the
Interest will be: the Investors as to 70% and Minco as to 30%.
2. MANAGEMENT COMMITTEE
2.1 Forthwith upon the Investors having exercised their Earn-In
Rights on a Property, a management committee will be formed.
The management committee is comprised of two representatives
and two alternate representatives of each party. Each party's
representatives are collectively entitled to a vote which is
proportionate to its party's interest. Management committee
decisions are to be made by simple majority, except for the
following matters, which shall require approval by at least
75% of the Interests voted at a duly convened meeting:
(a) any major deviations in mine construction from the
program contemplated by the Final Feasibility Report;
(b) following completion of mine construction, any
significant expansion of the milling capacity of a
mill or any mine if not provided for in an approved
operating plan;
63
Schedule G - 2
(c) any purchase or disposal of an asset which is not
contemplated in an operating plan where the Cost of
that asset is in excess of US$3,000,000;
(d) any proposed reduction in excess of 30% of the
anticipated monthly mining or milling rates from
those established in an operating plan, other than
for reasons other than an event of force majeure or
as a result of the performance of the assets or mine,
or the quality or quantity of ore reserves actually
available being less than projected or anticipated;
and
(e) any temporary suspension or any termination of mining
operations for reasons other than a permanent
termination based upon the operator's bona fide
conclusion that economic reserves at the mine have
been exhausted and the Property has insufficient
potential to add sufficient new reserves to support
Mining Operations.
3. OPERATOR
3.1 That Investor which is jointly nominated by the Investors will
be the initial Operator and, generally speaking, will remain
operator so long as it maintains at least the largest single
interest. The operator is responsible for the daily direction
of programs on the Property which it carries out on behalf of
the joint venture.
4. OBLIGATIONS OF OPERATOR
4.1 The operator shall have the exclusive right to manage all work
on the Property and to incur the costs required for that
purpose. In so doing the operator shall, unless it obtains the
approval of the management committee:
(a) comply with all instruments of title under which
mineral properties in the Property are held;
64
Schedule G - 3
(b) pay all Costs properly incurred promptly as and when
due;
(c) keep the Property and assets relating to the Property
free of all liens and encumbrances;
(d) do all such other things as may be necessary to
maintain the Property in good standing;
(e) maintain accounts in accordance with accounting
principles generally accepted in the mining industry;
(f) perform its duties and obligations in a sound and
workmanlike manner, in accordance with sound mining
and engineering practices, and in compliance with all
applicable laws and this Agreement;
(g) permit authorized representatives of each Party, at
its and their sole risk and expense and at reasonable
times, to have access to the Property and to all
technical records and other factual engineering data
relating to the Property which is in the possession
of the operator; and
(h) furnish each of the Parties with regular progress
reports during periods of active exploration and with
an annual summary of the work performed and the
results obtained.
5. CONSTRUCTION
5.1 The Operator shall forthwith proceed with the program
necessary to implement the Final Feasibility Report forthwith
after Commitment Notices have been received under the
Agreement and any Chinese entities which hold assessable
interests in the Property have elected to contribute their
share of Costs so that the Costs of implementation are fully
funded. Construction shall be substantially in accordance with
the Final Feasibility Study subject to such variations as are
approved by the Management Committee.
65
Schedule G - 4
6. OPERATING PLANS
6.1 A mine shall be operated on the basis of annual operating
plans approved by the management committee; provided that the
management committee may temporarily suspend or permanently
terminate operations pursuant to a suspension or closure plan
approved by it.
7. PAYMENT OF COSTS
7.1 As between the Parties who are contributing to the costs
necessary for the program contemplated by the Final
Feasibility Report, the operator may invoice for costs
incurred or to cash call reasonably in advance of
requirements. If a party does not pay the amount invoiced
within 30 days, the operator may demand payment. If payment is
not made within 30 days of demand the other party may elect to
advance the amount of the defaulted payment. The operator may
thereupon cause the defaulting party's Interest to be sold
privately or at public auction, apply the proceeds of sale to
the amount in default plus interest at the Prime Rate plus 2%
and the reasonable costs of sale and pay the balance to the
defaulting party.
8. DILUTION
8.1 If the Owner elected not to contribute its 30% of the funds
as contemplated in Section 6.22 and Section 6.23 of the
Agreement, its Interest will be diluted and the Investors'
Interests increased as Costs are incurred so that at all times
each Party's Interest is proportionate to its Contribution to
Costs compared to the total Costs contributed by the Parties
from the date of the Agreement. For this purpose, for
Development Properties the Owner shall be credited with deemed
Costs equal to 3/7ths of the Investors' Costs incurred prior
to the date
66
Schedule G - 5
on which the Investors' Commitment Notice was delivered under
the Agreement.
9. DISTRIBUTION OF PRODUCTION
9.1 To the extent permitted by the Underlying Agreement for that
Property, a party contributing to mine costs is entitled to
receive, in kind, its proportionate share of any minerals
produced from a mine on the property and to separately dispose
of the same.
10. ACKNOWLEDGEMENT
10.1 The Parties acknowledge Section 6.22 of the Agreement
providing for the Owner's royalty if its interest is diluted
below 1O% and to Section 6.23 and Section 6.24 which deal with
the manner in which Costs are to be recovered.
11. GENERAL
11.1 A party shall be entitled to surrender its interest to the
other parties on notice to them. A surrender of interest shall
not release a party from liabilities accrued prior to the
effective surrender date.
11.2 The rights and obligations of the parties shall be several and
the parties shall hold their interests as tenants in common.
11.3 Upon payment for costs incurred by the operator under the
joint venture a party contributing to those costs shall be
entitled to all tax benefits with respect thereto.
11.4 Nothing contained in the joint venture agreement shall be
construed as creating a partnership or imposing any fiduciary
duty on any party.
11.5 No party shall institute any proceedings to partition the
Property.
67
Schedule G - 6
11.6 A party shall be entitled to claim force majeure if it is
delayed or prevented from performing any obligation by reason
of any cause, excluding lack of finances, beyond its
reasonable control.
11.7 The joint venture shall continue so long as at least two
parties have a participating interest.
11.8 The agreement shall be governed by the laws of British
Columbia.
68
Schedule H - 1
This is SCHEDULE H to the Agreement
Between MINCO MINING AND METALS CORPORATION
TECK CORPORATION and COMINCO LTD.
made the 20th day of February, 1996
NET SMELTER RETURNS
1. DEFINITION
1.1 "Net Smelter Returns" for purposes of the Agreement means,
with respect to that portion of the ores or concentrates
produced from the Property or reprocessed on the Property from
tailings or residues of production from the Property which is
received by each Party in kind or, if not received in kind,
which is attributable to the NCI held by that Party:
(a) where all or a portion of those ores or concentrates
are taken by a Party in kind and are sold as ores or
concentrates, the Net Smelter Returns shall be the
gross amount received from the purchaser following
sale thereof after deduction, if applicable under the
sale contract, of all smelter charges, penalties and
other deductions, and after deducting all costs of
transporting and insuring the ores or concentrates
from the mine to the smelter or other place of final
delivery; or
(b) where all or a portion of those ores or concentrates
are taken by a Party in kind and are treated in a
smelter and a portion of the metals recovered
therefrom are delivered and sold, the Net Smelter
Returns shall be the gross amount received from the
purchaser following sale of the metals so delivered,
after deduction of all smelter charges, penalties and
other deductions, and after deducting all costs of
transporting and insuring the ores or concentrates
from the mine to the smelter, and, if applicable
69
Schedule H - 2
under the smelter contract, all costs of transporting
and insuring the metals from the smelter to the place
of final delivery by the purchaser; and
(c) where the ores or concentrates are not taken in kind
by the Party, but rather the Party is only entitled
to receive a distribution of profits from the Chinese
entity, the Party shall, to the greatest extent
practicable, calculate Net Smelter Returns so as to
provide the royaltyholder with the same royalty as
would be provided under Section 1.1 (a) and (b)
using the best information it has available as to
production of ores and concentrates and the costs and
charges.
Where any ores or concentrates are taken in kind and sold to,
or treated in, a smelter owned or controlled by a Party, the
pricing for that sale or treatment will be established by a
Party on an arms-length basis so as to be fairly competitive
with pricing, net of transportation, insurance, treatment
charges and other related costs, then available on world
markets for product of like quantity and quality.
2. PAYMENT OF NET SMELTER RETURNS
2.1 A Party which is obligated to pay a royalty shall maintain its
accounts in accordance with accounting principles generally
accepted in the mining industry and shall calculate the Net
Smelter Returns and the sums to be disbursed to the royalty
holder contemplated in Section 6.22 of the Agreement.
2.2 Each Party which is obligated to pay a royalty under Section
6.22 of the Agreement shall, within 60 days of the end of each
calendar quarter from the commencement of commercial
production, deliver to the royaltyholder a statement
indicating:
70
Schedule H-3
(a) the gross amounts received as contemplated in
Section 1.1 of this Schedule H;
(b) the deductions therefrom in accordance with
Section 1.1 of this Schedule H; and
(c) the amount of Net Smelter Returns remaining.
supported by such reasonable information as to the tonnage and
grade of ores or concentrates shipped as is in the possession
or control of that Party as will enable the royalty holder to
verify the gross amount payable by the smelter or other
purchaser.
2.3 To the extent which the Parties take their share of mineral
production from a Property in kind or there are monies which
have been paid or distributed to that Party by the Chinese
entity which holds the Property, each Party shall pay or cause
to be paid to the royaltyholder one percent of the Net Smelter
Returns on the share of production which it has taken or which
is attributable to its Interest. To the extent the Parties are
not entitled to take in kind but rather monies are paid or
distributed to them by Chinese entity and those distributions,
the one percent Net Smelter Returns shall accrue to the
royaltyholder and shall be paid following receipt by that
Party of the payment or distribution from the Chinese entity;
provided that the maximum payable to the royaltyholder shall
be 10 percent of any payment or distribution received by the
Party from the Chinese entity.
2.4 Payments to the royaltyholder shall be within 60 days of the
end of the calendar quarter in which either monies are
received from the smelter or distributed by the Chinese entity
as contemplated in Section 2.3 and shall be made by way of
cash, certified cheque or wire transfer. Any royalty payments
due and unpaid on the 60th day shall accrue interest from that
day at the Prime Rate plus two percent until paid.
71
Schedule H - 4
3. ADJUSTMENTS AND VERIFICATION
3.1 Payment of any Net Smelter Returns by a Party shall not
prejudice the right of that Party to adjust any statement
supporting the payment; provided, however, that all statements
presented to the royaltyholder by a Party for any quarter
shall conclusively be presumed to be true and correct upon the
expiration of 12 months following the end of the quarter to
which the statement relates, unless within that 12-month
period that Party gives notice to the royaltyholder claiming
an adjustment to the statement which will be reflected in
subsequent payment of Net Smelter Returns.
3.2 A Party shall not adjust any statement in favour of itself
after the expiration of 12 months following the end of the
quarter to which the statement relates.
3.3 The royaltyholder shall, upon 30 days' notice in advance to a
Party, have the right to request that the Party have its
independent external auditors provide their audit certificate
for the statement or adjusted statement, as it may relate to
the Agreement and the calculation of Net Smelter Returns;
provided that in the case of Section 1.1 (c), the auditors
shall confirm that they have examined the information on which
the Party calculated the Net Smelter Returns and that the
calculation is reasonable.
3.4 The cost of the audit certificate shall be solely for the
royaltyholder's account unless the audit certificate discloses
a material error in the calculation of Net Smelter Returns, in
which case the Party shall reimburse the royaltyholder the
cost of the audit certificate. Without limiting the generality
of the foregoing, a discrepancy of one percent in the
calculation of Net Smelter Returns shall be deemed to be
material.
