OPTION AND JOINT VENTURE AGREEMENT Made as of February 20, 2002 Between FALCONBRIDGE LIMITED and DONNER MINERALS LTD.
Made as of February 20, 2002
Between
FALCONBRIDGE LIMITED
and
XXXXXX MINERALS LTD.
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This Agreement is made as of February 20, 2002 between
FALCONBRIDGE LIMITED, a corporation existing under the laws of Ontario ("Falconbridge"),
and
XXXXXX MINERALS LTD., a corporation existing under the laws of British Columbia ("Xxxxxx").
RECITALS
A. Falconbridge owns three Special Exploration Permits, SP02-01, SP01-03 and SP01-07, and two Exploration Permits, EP-218 and EP-232, centred around Gillam and 200 kilometers east of Xxxxxxxx, The Pas Mining Division, Manitoba, described in Schedule A (the "Property"). In November 2002, an additional four Mineral Exploration Licenses, XXX-53, 54, 55 and 56, were acquired and added to the Property. As per an agreement dated February 21, 2003 (attached in Schedule E), Exploration Permit 222 and Mineral Exploration Licence 49 were optioned from 4378831 Manitoba Limited and added to the Property. For illustrative purposes and as a matter of convenience only and without in any way affecting the meaning of "Property", Schedule B sets out in an approximate manner the location of the Property.
B. Falconbridge has agreed to grant to Xxxxxx an option to acquire a 50% undivided interest in the Property in which event a Joint Venture shall automatically be formed between the Parties, in accordance with the terms of this Agreement.
For valuable consideration, the Parties agree as follows.
SECTION 1. - INTERPRETATION.
1.1 Definitions. In this Agreement, the following terms have the meanings set out below.
(a) Act means the Mines and Minerals Act (Manitoba) and the regulations thereunder.
(b) Affiliate has the meaning given to that term in the Securities Act (Ontario).
(c) Agreement means this Agreement, including the recitals and the Schedules, all as amended, from time to time.
(d) Assessment Work means work performed with respect to the Property as prescribed in the Act.
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(e) Bankable Feasibility Study means a report prepared to analyze whether a commercially viable orebody exists, in a form and of a scope that is generally acceptable to reputable financial institutions that provide financing to the mining industry. If the Study is carried out by Falconbridge, the form and scope shall be no less comprehensive than that which would be required by an independent internationally recognized consulting group.
(f) Commercial Production means, and is deemed to have been achieved, when the concentrator processing ores, for other than testing purposes, has operated for a period of 30 consecutive production days at an average rate of not less than 60% of design capacity or, if a concentrator is not erected on the Property, when ores have been produced for a period of 30 consecutive production days at the rate of not less than 60% of the mining rate specified in a feasibility study recommending placing the Property in commercial production.
(g) Direct Project Costs means all direct charges, costs or expenditures (other than the indirect charge for general administrative services and overhead expenses referred to in paragraph 1.1(h) hereof) and all capital charges, expenditures or costs incurred on or in connection with Mining Operations and shall, without limiting the generality of the foregoing, include the cost of all work actually carried out in connection with Mining Operations hereunder (including pre-production work, surface and underground exploration and development work, driving adits, raises and drifting and shaft sinking) as well as the cost of metallurgical and/or engineering work required to ensure adequate recoveries of metals contained in the minerals, ores and concentrates produced or derived from the Property. In addition, Direct Project Costs shall include the costs of all of the Operator's technical personnel who may, from time to time, provide services with respect to the Property. Such costs shall be charged out at rates normal to the industry and on the basis of the time actually spent by such personnel on projects related to Mining Operations.
(h) Expenditures means all direct and indirect charges, expenses and costs of, or incidental to, Mining Operations, including the indirect charges for the provision of general administrative services and overhead expenses in the amounts set out in this section 1.1(h):
(1) at any time before the formation of the Joint Venture, for carrying out Mining Operations, 10% of the Direct Project Costs involved in the Mining Operations;
(2) at any time after the formation of the Joint Venture,
i) for carrying out Mining Operations (but excluding third party contract work and contracts with respect to capital expenditures), 15% of Direct Project Costs involved in the Mining Operations;
ii) for third party contract work, 5% of the Direct Project Costs involved in the contracted work; and
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iii) for contracts with respect to capital expenditures, 3% of the Direct Project Costs involved in such capital expenses.
(i) Joint Venture means the exploration joint venture which is formed pursuant to section 8.
(j) Joint Venture Assets means, after the formation of the Joint Venture, the Property and all other assets of the Joint Venture.
(k) Joint Venture Interest means the percentage undivided interest of each of Xxxxxx and Falconbridge in the Joint Venture, which interest shall, at all times, correspond with and represent their respective percentage undivided interest in the Property and vice versa.
(l) Lien means any lien, security interest, mortgage, charge, encumbrance, hypothec or other claim of a third party, whether registered or unregistered, and whether arising by agreement, statute or otherwise.
(m) Management Committee means the committee established by the Parties on the formation of the Joint Venture as described in section 3 of Schedule C.
(n) Mining Operations means every kind of work done on or in respect of the Property by the Operator. Mining Operations include:
(1) carrying out, or causing to be carried out, line cutting, geophysical, geochemical and geological surveys, library research, report preparation, studies, mapping, assaying and metallurgical testing, investigating, drilling, examining, equipping, improving, surveying, trenching, shaft-sinking, raising, crosscutting and drifting the Property, searching for, digging, trucking, sampling, working and procuring ores, bringing mining lands to lease or patent Note: optional for use in USA) and keeping the same in good standing, obtaining mineral properties or exploration, development, mining or other licenses, permits or mining claims and maintaining same in good standing, and in doing all other exploration, development, pre-production, mining or reclamation work;
(2) paying wages, salaries and benefits of individuals engaged in such work and in supplying food, lodging, transportation and other reasonable needs of such individuals;
(3) paying insurance premiums and assessments or premiums for workers' compensation insurance, contributions for unemployment insurance or other pay allowances or benefits customarily paid in the district to such individuals;
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(4) making payments in respect of exploration permits, leases, licenses, mining claims, taxes, rates, assessments or other governmental charges and option payments in connection with the Property;
(5) purchasing, leasing or renting plant, buildings, machinery, tools, appliances, equipment or supplies or incurring other capital expenses, and in installing, erecting, detaching or removing any such assets on or from the Property; and
(6) managing or supervising any work which is done in respect of the Property or in any other respects necessary or desirable, in the opinion of Xxxxxx, or after the formation of the Joint Venture, in the opinion of the Operator.
(o) Net Smelter Returns is defined in Schedule D.
(p) Operator means the Party responsible for carrying out, or causing to be carried out, all Mining Operations and other work in respect of the Property during the Option Period as per section 3.3 and during the Joint Venture as per Schedule C, section 4.1.
(q) Option means the option granted to Xxxxxx by Falconbridge in accordance with section 3.1.
(r) Option Period means the duration of the Option as set out in section 3.1.
(s) Party and Parties means the parties to this Agreement.
(t) Program means a written description, prepared by the Operator, outlining all Mining Operations which the Operator contemplates carrying out.
(u) Property means the property described in the first recital and on Schedule A, as amended from time to time.
(v) Property Owner is defined in section 10.1.
(w) Regulatory Requirements means with respect to the Shares hereinafter defined in the Securities Act (Ontario) and the rules, regulations and forms made or promulgated under said statute and the written policies of the regulatory authorities administering the statute, the by-laws, rules, regulations and policies of the Toronto Stock Exchange and any other regulatory authorities having or assuming jurisdiction with respect thereto and, with respect to the Property, means the provisions of the Act and all applicable statutes, regulations and government policies and other governmental requirements.
(x) Representative means the individual appointed from time to time by a Party to act as such Party's representative on the Management Committee.
(y) Royalty means the royalty given to a Party as provided in section 10.1.
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(z) Royalty Holder is defined in section 10.1.
(aa) Shares means fully paid common shares without par value in the capital of Xxxxxx which are freely tradeable except for hold periods imposed by regulatory authorities.
(bb) Working Right is defined in section 3.1.
1.2 Extended Meanings. Unless otherwise specified, words importing the singular include the plural and vice versa. The term "including" means "including, without limitation."
1.3 Headings. The division of this Agreement into sections and the insertion of headings are for convenience of reference only and are not to affect the construction or interpretation of this Agreement.
1.4 Severability. If any term of this Agreement is or becomes illegal, invalid or unenforceable, that term shall not affect the legality, validity or enforceability of the remaining terms of this Agreement.
1.5 Entire Agreement. This Agreement constitutes the entire agreement between the Parties with respect to the subject matter herein and supersedes all prior agreements, negotiations, discussions, undertakings, representations, warranties and understandings, whether written or verbal.
1.6 Time. For every provision in this Agreement, time is of the essence.
1.7 Governing Law. This Agreement shall be governed by and shall be construed and interpreted in accordance with the laws of Ontario and the laws of Canada applicable in Ontario.
1.8 Statutory References. Each reference to a statute in this Agreement includes the regulations made under that statute, as amended or re-enacted from time to time.
1.9 Schedules. The following Schedules are attached to and form part of this Agreement:
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Schedule |
Description |
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Schedule A |
Description of the Property |
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Schedule B |
Map showing Property and Area of Interest |
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Schedule C |
Joint Venture Terms |
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Schedule D |
Royalty Terms |
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Schedule E |
Letter Agreement between Falconbridge and 437831 Manitoba Ltd. |
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SECTION 2. - REPRESENTATIONS AND WARRANTIES.
2.1 Representations and Warranties of Falconbridge. Falconbridge represents and warrants to Xxxxxx as at the date of this Agreement as follows.
(a) Subsisting Corporation. Falconbridge is a corporation duly incorporated and organized and validly existing under the Business Corporations Act (Ontario).
(b) Corporate Power. Falconbridge has full corporate power, authority and capacity to enter into this Agreement and to carry out its obligations under this Agreement. Falconbridge is qualified to carry on business in Manitoba.
(c) Due Authorization. Falconbridge has been duly authorized to enter into, and to carry out its obligations under, this Agreement. No obligation of Falconbridge in this Agreement conflicts with or will result in the breach of any term in:
(1) the articles or by-laws of Falconbridge; or
(2) any other agreement or binding commitment of Falconbridge.
(d) Due Execution. Falconbridge has duly executed and delivered this Agreement, which binds Falconbridge in accordance with its terms.
(e) Properly Staked. The Property has been validly located, staked, tagged and recorded in accordance in with the Act and all other applicable legislation and regulations. There are no unstaked portions of open ground within the Property. The Property is properly and accurately described in Schedule A.
(f) Ownership of Property. Falconbridge is the sole recorded and beneficial owner of the Property.
(g) Good Standing of Property. The Property is in good standing under the laws of Manitoba and shall remain in good standing until at least February 14, 2003. All assessment work and other requirements to be filed or satisfied to keep the Property in good standing until at least February 14, 2003 have been filed or satisfied to the satisfaction of the applicable governmental authority.
(h) No Encumbrances. The Property, and Falconbridge's interest in the Property, are free and clear of all Liens.
(i) No Third Party Rights. There are no outstanding agreements or options to acquire or purchase the Property or any part thereof or interest therein. No individual, corporation or other entity has any royalty or other interest whatsoever in production or profits from the Property or any part thereof.
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(j) Payments Current. All exploration permits, leases, licenses and mining claims payments, rentals, taxes, rates, assessments, renewal fees and other governmental charges, owing in respect of the Property, or any part of the Property, have been paid in full up to February 14, 2003.
(k) Residency. Falconbridge is not a non-resident for the purposes of section 116 of the Income Tax Act (Canada).
(l) Claims. A portion of the Property lies within the Community Interest Zone of the Fox Lake First Nation, as shown in Schedule B. It is not aware of any other adverse claim against, or challenge to, the ownership of, or title to, the Property or Falconbridge’s interest in the Property.
(m) Compliance with Laws. Falconbridge has conducted all activities on or in respect of the Property in compliance and the Property itself complies with all applicable statutes, regulations, by-laws, laws, orders and judgments and all directives, rules, consents, permits, orders, guidelines, approvals and policies of all applicable governmental authorities.
(n) Data Falconbridge has made available to Xxxxxx all material, technical information and data in respect of the Property.
2.2 Representations and Warranties of Xxxxxx. Xxxxxx represents and warrants to Falconbridge as at the date of this Agreement as follows.
(a) Subsisting Corporation. Xxxxxx is a corporation duly incorporated and organized and validly existing under the Business Corporations Act (British Columbia).
(b) Corporate Power. Xxxxxx has full corporate power, authority and capacity to enter into this Agreement and to carry out its obligations under this Agreement. Xxxxxx is qualified to carry on business in Manitoba, and has extra provincial registration in Manitoba.
(c) Due Authorization. Xxxxxx has been duly authorized to enter into, and to carry out its obligations under, this Agreement. No obligation of Xxxxxx in this Agreement conflicts with or will result in the breach of any term in:
(1) the articles or by-laws of Xxxxxx; or
(2) any other agreement or binding commitment of Xxxxxx.
(d) Due Execution. Xxxxxx has duly executed and delivered this Agreement, which binds Xxxxxx in accordance with its terms.
(e) Reservation of Shares. Xxxxxx will reserve and set aside sufficient shares in its treasury to issue the Shares to Falconbridge. The Shares, when issued, will be validly issued and outstanding as fully paid and non-assessable, free and clear of all claims, liens, charges, equities, or encumbrances whatsoever, subject to compliance with the Regulatory Requirements.
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(f) Reporting Issuer. It is a reporting issuer in good standing and not in default under the Securities Act (British Columbia), and has been a reporting issuer under such statute for at least two (2) years prior to the date hereof.
(g) Corporate Proceedings. Xxxxxx will carry out all corporate proceedings and do all things that are necessary in order to allot and issue the Shares to Falconbridge.
2.3 Indemnity. Each Party's representations and warranties set out in section 2.1 and 2.2 have been relied on by the other Party in entering into this Agreement and shall survive the execution and delivery of this Agreement. Each Party shall indemnify and hold harmless the other Party from any loss, cost, expense, claim or damage, including legal fees and disbursements, suffered or incurred by the other Party at any time as a result of any misrepresentation or breach of warranty arising under this Agreement.
SECTION 3. - OPTION.
3.1 Grant of Option. Falconbridge hereby grants to Xxxxxx the irrevocable option during the period from the date of this Agreement up to and including December 31, 2006, to become the owner of a 50% undivided interest in all or such part of the Property as Xxxxxx may elect (the "Option").
3.2 Expenditures. In order to maintain the Option in good standing, Xxxxxx shall:
(a) fund Expenditures,
1)in the amount of at least One Million Dollars ($1,000,000) on or before December 31, 2002; which is a firm commitment ("Commitment") failing which it shall pay any outstanding amount to Falconbridge in cash.
2)in the aggregate amount of at least Two Million Dollars ($2,000,000) on or before December 31, 2003;
3)in the aggregate amount of at least Three Million Dollars ($3,000,000) on or before December 31, 2004;
4)in the aggregate amount of at least Four Million Dollars ($4,000,000) on or before December 31, 2005;
5)in the aggregate amount of at least Five Million Dollars ($5,000,000) on or before December 31, 2006.
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(b) Unless otherwise agreed to by the Management Committee, the above required Expenditures shall be incurred exclusively in exploration for Ni-Cu-Co-PGM deposits; expenditures for other commodities shall not count towards the above required Expenditures unless they have a direct benefit for Ni-Cu-Co-PGM targets, as approved by the Management Committee.
These Expenditures may be accelerated and applied to future years’ Expenditures, and accordingly at Xxxxxx’x election the Option may be exercised sooner. If, in a given period in section 3.2(a), Xxxxxx fails to fund sufficient Expenditures, Xxxxxx will nevertheless be deemed to have satisfied section 3.2(a), if Xxxxxx pays Falconbridge an amount which is equal to the difference between Xxxxxx'x actual Expenditures and the amount set out in the applicable section relating to such given period in section 3.2(a).
3.3 Operator. Falconbridge shall be Operator during the Option Period.
3.4 Cash Calls. Falconbridge shall submit an invoice to Xxxxxx up to 60 days prior to each quarter in which Expenditures are to be incurred, setting out the estimated Expenditures for the immediately following 3 month period. Falconbridge may also submit other invoices relating to reconciliations, bills, accounts or other requests for payment in respect of any Expenditures made by Falconbridge in accordance with this Agreement. Within 30 days of receipt of such invoice, Xxxxxx shall pay Falconbridge the invoice amount. For greater certainty, in the event Xxxxxx fails to make full payment to Falconbridge pursuant to this section 3.4, the Option shall terminate in accordance with section 3.5. Falconbridge shall not be obligated to expend any funds not provided by Xxxxxx.
3.5 Lapse, Termination or Abandonment.
(a) Xxxxxx may, after the Commitment has been met and provided all commitments pursuant to section 4.3 have been satisfied,
(i) allow the Option to lapse at any time in respect of the entire Property by failing to fund Expenditures in accordance with section 3.2;
(ii) terminate the Option in respect to all or part of the Property at any time by delivering a written notice to Falconbridge terminating the Option in respect of all of the Property;
(b) If Xxxxxx makes an election pursuant to section 3.5(a)(i) or to terminate with respect to all of the Property pursuant to section 5(a)(ii) then the Agreement will terminate:
(i) effective the date following the due date for making such Expenditure; or
(ii) on the date of the notice of termination.
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(c) If Xxxxxx makes an election pursuant to section 3.5(a)(i) or (ii) then Xxxxxx must:
(i) surrender the Property by returning any transfers held in trust or, if the Property is recorded in Xxxxxx’x name, deliver a transfer of the Property, or the applicable part thereof, to Falconbridge and Falconbridge shall promptly register such transfer;
(ii) ensure the Property, or the applicable part thereof, is:
(1) in good standing for a period of at least 180 days after the date of termination referred to in 3.5(b) above; notwithstanding the 180 day good standing obligation, in the event that the Property or any portion thereof has a work obligation under the Act, the said work will need to be completed in order to meet the good standing obligation under this section and any penalties which would result from non-compliance to the Act would be for Xxxxxx’x account; and
(2) in material compliance with all laws and regulations then in force which affect the state or condition that the Property, or the applicable part thereof is required to be maintained in; and
(3) free of all Liens arising directly from an action or failure to act of Xxxxxx.
Thereupon Xxxxxx shall have no further liability or obligation to Falconbridge in respect of the Property, or the applicable part(s) thereof.
3.6 Earning of Interest in the Property. If, on or before December 31, 2006, Xxxxxx has funded the Expenditures referred to in section 3.2(a) hereof aggregating at least Five Million Dollars ($5,000,000), Xxxxxx shall have the option, exercisable by giving reasonable written notice to Falconbridge, to become the owner of a 50% undivided interest in the Property.
SECTION 4. - PRIVATE PLACEMENTS IN XXXXXX.
4.1 While the Option is in good standing, Falconbridge will subscribe for the following private placements in Xxxxxx (“Private Placements”);
a)in the amount of Two Hundred and Fifty Thousand Dollars ($250,000) as soon as practicable upon receipt of Seven Hundred and Fifty Thousand Dollars ($750,000) from Xxxxxx out of the first One Million Dollars ($1,000,000) as outlined in section 3.2(a)1, which the Parties acknowledge has been completed;.
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b)in the amount of Three Hundred Thousand Dollars ($300,000) as soon as practicable upon receipt of the second One Million Dollars ($1,000,000) in Cash Call payments from Xxxxxx as outlined in section 3.2(a)2.
c)in the amount of Three Hundred and Fifty Thousand Dollars ($350,000) as soon as practicable upon receipt of the third One Million Dollars ($1,000,000) in Cash Call payments from Xxxxxx as outlined in section 3.2(a)3.
d)in the amount of Four Hundred Thousand Dollars ($400,000) as soon as practicable upon receipt of the fourth One Million Dollars ($1,000,000) in Cash Call payments from Xxxxxx as outlined in section 3.2(a)4.
e)in the amount of Four Hundred and Fifty Thousand Dollars ($450,000) as soon as practicable upon receipt of the fifth One Million Dollars ($1,000,000) in Cash Call payments from Xxxxxx as outlined in section 3.2(a)5.
4.2 The above Private Placements are intended to be used to finance a portion of Expenditures on the Property in a given year of the Option. Once the Management Committee has approved an exploration program, and Xxxxxx has paid the Cash Calls as per 3.4 above, as soon as practicable Falconbridge will subscribe to a Private Placement by way of purchasing Units in Xxxxxx. Each Unit will comprise one Share of Xxxxxx and a share purchase warrant entitling Falconbridge to purchase an additional Share for a two year period from the date of issuance at the same price as the issued Shares (collectively a “Unit”). The price of the Shares shall be established by Xxxxxx in accordance with the Canadian Venture Exchange, but such Share price shall be no higher than market price, and no higher than any other private placement in Xxxxxx by an institutional investor within the previous 30 days. If there is no other comparable private placement, such price shall be as low as possible as may be approved by the Canadian Venture Exchange. Falconbridge acknowledges that the Shares will be priced and subject to resale restrictions and hold periods in accordance with Regulatory Requirements.
4.3 Notwithstanding paragraph 4.1, if the Management Commitment only approves a program of Expenditures less than $1,000,000, Falconbridge’s Private Placement shall be reduced pro-rata for that program. Once a Private Placement is received by Xxxxxx from Falconbridge, such Expenditures as approved by the Management Committee for the ensuing exploration program will be deemed to be a firm commitment.
For clarity and by way of example, if the Management Committee approves an exploration program of $500,000 out of Xxxxxx’x $1,000,000 expenditure requirement during the fourth year as per section 3.2(a)4, Falconbridge would only be required to take a $200,000 Private Placement in Xxxxxx.
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SECTION 5. - COVENANTS OF FALCONBRIDGE.
5.1 Delivery of Documents. Concurrent with the execution of this Agreement, Falconbridge shall deliver, or cause to be delivered, to Xxxxxx:
(a) transfers in proper registrable form in favour of Xxxxxx of 100% of the recorded interest of Falconbridge in and to the Property, duly executed by Falconbridge to be held in escrow by Xxxxxx, some or all of which may be registered or recorded by Xxxxxx, at Xxxxxx'x election, on or after the execution of this Agreement, in which event the Property shall then be held in trust by Xxxxxx;
(b) a short memorandum of agreement with respect to this Agreement, in form and substance acceptable to Xxxxxx, for registration or recording by Xxxxxx against title to some or all of the Property, as Xxxxxx so desires.
5.2 No Liens. Falconbridge shall not, without obtaining the prior written consent of Xxxxxx, create, or permit to remain, any Liens upon the Property or Falconbridge's interest in this Agreement where such Lien results from an action or failure to act of Falconbridge.
5.3 Maintenance of Property. During the Option Period, Falconbridge shall pay all applicable taxes, rates, assessments and other similar governmental charges lawfully levied or assessed against the Property on behalf of Xxxxxx. Falconbridge is not obliged, however, to make any such payment as long as such payment is being contested in good faith and the non-payment thereof does not adversely affect the Property.
5.4 Reports. The Operator shall provide the non-operator with brief monthly summary technical reports while active programs are carried out on the Property, and copies of all assessment reports submitted to the Manitoba government and an annual non-interpretive summary report regarding the Operator’s Mining Operations and a statement of Expenditures. Such report shall include all material exploration results. The Operator shall also notify the non-operator immediately of all significant results. Notwithstanding the foregoing, if Xxxxxx is in default under this Agreement, Falconbridge shall not be required to provide any such information or reports to Xxxxxx until such default is remedied.
5.5 Access. Xxxxxx shall have access to the Property, at Xxxxxx’x sole risk and expense, during normal working hours for the purpose of examining the Mining Operations so long as such access shall not materially interfere with or impair Falconbridge's Mining Operations.
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SECTION 6. - COVENANTS OF XXXXXX.
6.1. Environmental Obligations.
It is understood and agreed that the Property is being optioned to Xxxxxx "as is". Xxxxxx acknowledges that it has not relied on any representations by Falconbridge concerning the environmental condition of the Property.
SECTION 7. – MANAGEMENT COMMITTEE.
7.1 The provisions of the Joint Venture terms relating to the formation and operation of a Management Committee, set
out in Schedule C, shall apply during the Option Period.
SECTION 8. - THE JOINT VENTURE.
8.1 Formation of Joint Venture. If Xxxxxx exercises the Option as set out in section 3.6, then the Joint Venture will be automatically formed between Xxxxxx and Falconbridge with respect to the Property in accordance with the terms set out in Schedule C. The Property shall automatically become a Joint Venture Asset.
SECTION 9. - DEVELOPMENT AND OPERATING AGREEMENT.
9.1 If the results of Mining Operations conducted on the Property indicate that further mine development work and exploration are warranted, the Parties hereto contemplate that they may enter into a Development and Operating Agreement on terms and conditions to be mutually agreed upon for the purpose of developing and exploiting the Property or any part(s) thereof and bringing same into production.
SECTION 10. - THE ROYALTY.
10.1 Grant of Net Smelter Returns Royalty. After the Option is exercised, if Xxxxxx or Falconbridge becomes the owner of a 100% interest in the Property under this Agreement (the "Property Owner"), the Property Owner shall grant and pay annually to the other Party (the "Royalty Holder"), if and when the Property or any part thereof is put into Commercial Production by the Property Owner, a 1% Net Smelter Returns royalty derived from Mining Operations conducted by the Property Owner (the "Royalty"). The Royalty shall be calculated and paid in accordance with this section 10.1 and Schedule D.
10.2 Buy-Out of Royalty Interest. At any time, the Property Owner may purchase all of the Royalty Holder's rights to all future Royalty payments for an immediate payment of $1,000,000, paid in a lump sum.
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SECTION 11. - CONFIDENTIALITY.
11.1 All matters concerning the contents of this Agreement, the Joint Venture, and the Property shall be treated as and kept confidential by the Parties hereto and there shall be no public release of any information concerning Mining Operations by either Party without the prior written consent of the other Party, such consent not to be unreasonably withheld; provided, however, that, if in the opinion of counsel for any Party, such Party must disclose any matter concerning the content of this Agreement, the Joint Venture or the Property by reason of any requirement of securities laws or other applicable laws or regulations, the other Party shall be given reasonable advance notice and an opportunity to comment on the content thereof. Falconbridge shall be entitled to review and comment on Xxxxxx’x press releases for a period of at least one full business day prior to their issuance.
Notwithstanding the foregoing the Parties are entitled to disclose confidential information to prospective investors or lenders, who shall be required to keep all such confidential information confidential.
SECTION 12 - ARBITRATION.
12.1 Scope. Subject to the terms of this section 12, all disputes between the Parties in respect of this Agreement, whether arising before or after the expiration of any term of this Agreement (including any dispute as to whether an issue is arbitrable) shall be referred to arbitration under the Arbitration Act, 1991 (Ontario).
12.2 Notice of Arbitration. A Party desiring arbitration under this Agreement shall give a notice of arbitration to the other Party containing a concise description of the matter submitted for arbitration.
12.3 Arbitrators.
(a) Number. There shall be one arbitrator.
(b) Qualifications. The arbitrator shall be a suitably qualified person who is experienced in the Canadian mining industry and who is knowledgeable about mining exploration and development in Canada.
(c) Appointment. Within 10 days after a Party gives a notice of arbitration referred to in section 12.2, the Parties shall jointly appoint an arbitrator. If the Parties fail to appoint an arbitrator within that time, the arbitrator shall be designated by a judge of the Ontario Court (General Division).
12.4 Powers of Arbitrator. The arbitrator may determine all questions of law and jurisdiction (including questions as to whether a dispute is arbitrable) and all matters of procedure relating to the arbitration. The arbitrator shall have the right to grant legal and equitable relief (including injunctive relief) and to award costs (including legal fees and the costs of the arbitration) and interest.
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12.5 Arbitration Procedure. The arbitration shall take place in the Municipality of Metropolitan Toronto at such place and time as the arbitrator may fix. No later than 20 business days after hearing the representations and evidence of the Parties, the arbitrator shall make his or her determination in writing and deliver one copy to each of the Parties.
12.6 Law Applicable to the Arbitration. The law applicable to the arbitration shall be the law of Manitoba and the laws of Canada applicable in Ontario.
12.7 Language of Arbitration. The arbitration proceedings shall be conducted in the English language.
12.8 Awards and Appeal. The written decision of the arbitrator shall be final and binding upon the Parties in respect of all matters relating to the arbitration, the procedure, the conduct of the Parties during the proceedings and the final determination of the issues in the arbitration. There shall be no appeal from the determination of the arbitrator to any court under the Arbitration Act, 1991 (Ontario). Judgment upon any award rendered by the arbitrator may be entered in any court having jurisdiction.
12.9 Costs of Arbitration. The costs of any arbitration shall be borne by the Parties in the manner specified by the arbitrator in his or her determination.
12.10 Rules. Insofar as they do not conflict with the terms of this section 12.10, the rules for the conduct of arbitration of the Arbitrators' Institute of Canada Inc. in effect at the date of commencement of any arbitration held shall be applicable to the arbitration, and the arbitrator shall have jurisdiction to take such action and make such orders as are contemplated in such rules.
12.11 Condition Precedent. Submission to arbitration under this section 12 shall be a condition precedent to bringing any action with respect to this Agreement.
SECTION 13. - AREA OF INTEREST.
13.1 Area of Interest. If either Party acquires, directly or indirectly, any interest in any property which is all or partly within the Area of Interest, as described in coordinates and shown on a map attached hereto as Schedule B as it was on the date of this Agreement, the acquiring Party must disclose this acquisition (including all costs) promptly to the other Party. The other Party will then have 30 days to elect to make that portion of the property which is within such Area of Interest part of the Property. During the Option Period, if the other Party elects to include such portion as part of the Property, the acquisition costs shall be included as Expenditures funded by Xxxxxx and credited to Xxxxxx’x earn-in pursuant to section 3.2. During the Joint Venture, each Party shall pay acquisition costs in proportion to its Joint Venture Interest if the Parties elect to include such new property as part of the Property. If the other Party fails to make such election or payment within such 30 day period, such property shall not form part of the Property.
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SECTION 14. - GENERAL.
14.1 No Obligations. No term of this Agreement and no act or omission of Xxxxxx shall oblige Xxxxxx:
(a) to fund any Expenditure referred to in section 3.2 other than the Commitment and any commitments arising under section 4.3;
(b) to exercise the Option;
(c) to bring the Property, or any part thereof, into Commercial Production; or
(d) to take any action, other than those actions expressly required by this Agreement.
14.2 Right of First Refusal. During the Option Period, Falconbridge, and once the Joint Venture is exercised and provided Xxxxxx has at least a 50% Joint Venture Interest, Xxxxxx as well, has the right of first refusal to purchase all or any part of the other Party's interest in the Property or under this Agreement, including a Party's Joint Venture Interest or Royalty interest. If Xxxxxx or Falconbridge (the "Offeror") wishes to sell, or receives any good faith offer which the Offeror is prepared to accept to purchase, all or any part of such interest (the "Offered Interest"), the Offeror shall give written notice to the other Party (the "Offeree") of all the material terms of such proposed sale (the "Sale Terms"). The Sale Terms must contain a sale price stated in cash. The Offeree shall then have 30 days, calculated from the date of receipt of the notice by the Offeror, within which to elect to purchase the Offered Interest on terms not less favourable to the Offeree than the terms contained in the Sale Terms. If the Offeree does not make an election within such 30 day period, the Offeree shall be deemed to have elected not to purchase the Offered Interest. If the Offeree does not elect to purchase the Offered Interest, then the Offeror may sell the Offered Interest to any good faith third party on terms no more favourable to such third party than the terms contained in the Sale Terms within the 45 day period immediately following the Offeree's 30 day election period. If the Offeror does not complete the sale of the Offered Interest within such 45 day sale period, then the Offeree shall once again have the right of first refusal to purchase all or any part of the Offered Interest not sold by the Offeror. Notwithstanding any term in this section 14.2, no Party with a Royalty interest has any rights under this section 14.2, including the right to be the Offeree.
14.3 Assignment and Benefit of Agreement. Notwithstanding section 14.2, Xxxxxx may not assign this Agreement or any rights hereunder or in the Property without the prior written consent of Falconbridge, such consent not to be unreasonably withheld, except that Xxxxxx may assign this Agreement to an affiliate (as that term is defined in the Business Corporations Act (Ontario)) by delivering notice to that effect to Falconbridge. Any assignee must agree in writing to be bound by the terms of this Agreement. Any such assignment to such an affiliate shall not release the assigning Party from any liability under this Agreement. This Agreement enures to the benefit of and binds the Parties and their respective successors and permitted assigns.
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14.4 Notwithstanding any other term in this Agreement, during the Option Period Falconbridge may assign, without the consent of Xxxxxx, this Agreement (including all of Falconbridge's rights and obligations) if the purchaser delivers to Xxxxxx a written undertaking of the purchasing party to be bound by the terms of the Agreement relating to Falconbridge. Upon such an assignment, Falconbridge shall be relieved of all its obligations under this Agreement. Once Xxxxxx has exercised the Option and has at least a 50% Joint Venture Interest, section 14.3 shall apply to Falconbridge as well, notwithstanding this section.
14.5 Independent Legal Advice. Xxxxxx acknowledges that Falconbridge advised Xxxxxx to seek independent legal advice in respect of this Agreement. Xxxxxx has either obtained such advice or waived its right to obtain such advice. Xxxxxx acknowledges that Xxxxxx has received no legal advice from Falconbridge's legal counsel.
14.6 Government Assistance. Any grant or other form of governmental financial assistance received by a Party with respect to Mining Operations shall be shared by the Parties, in the proportion of their respective Expenditures at the time that such grant or financial assistance applies. During the Option Period, for purposes of this section 14.6, Falconbridge’s Expenditures shall be deemed equal to the amount of its Private Placement in Xxxxxx, and Xxxxxx’x Expenditures shall be their actual Expenditures minus the amount of Falconbridge’s Private Placement. For clarity, such financial assistance shall be shared 75% Xxxxxx and 25% Falconbridge during the first year Expenditure requirement, 70% Donner and 30% Falconbridge during the second year requirement, 65% Xxxxxx and 35% Falconbridge during the third year requirement, 60% Xxxxxx and 40% Falconbridge during the fourth year requirement, and 55% Xxxxxx and 45% Falconbridge during the fifth year requirement.
14.7 Further Assurances. Each Party shall from time to time promptly execute and deliver all further documents and take all further action reasonably necessary or desirable to give effect to the terms and intent of this Agreement.
14.8 Waivers. No waiver of any term of this Agreement by a Party is binding unless such waiver is in writing and signed by the Party entitled to grant such waiver. No failure to exercise, and no delay in exercising, any right or remedy under this Agreement shall be deemed to be a waiver of that right or remedy. No waiver of any breach of any term of this Agreement shall be deemed to be a waiver of any subsequent breach of that term.
14.9 Amendments. No amendment, supplement or restatement of any term of this Agreement is binding unless it is in writing and signed by each Party.
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14.10 Force Majeure. Notwithstanding any term in this Agreement, if a Party is at any time delayed from carrying out any action under this Agreement due to circumstances beyond the reasonable control of such Party (aside from circumstances arising from the financial difficulty of such Party), acting diligently, the period of any such delay shall be excluded in computing, and shall extend, the time within which such Party may exercise its rights and/or perform its obligations under this Agreement.
14.11 Notice. Any notice or other communication required or permitted to be given under this Agreement must be in writing and shall be effectively given if delivered personally or by overnight courier or if sent by fax, addressed in the case of notice to Xxxxxx or Falconbridge, as the case may be, as follows:
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FALCONBRIDGE LIMITED
Suite 1200
00 Xxxxxxxxxx Xx. Xxxx
Xxxxxxx XX X0X 0X0
Attention: Secretary
Fax No.: 000-000-0000 |
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XXXXXX MINERALS LTD.
Xxxxx 0000, 000 Xxxxxx Xxxxxx
Xxxxxxxxx XX X0X 0X0
Attention: Xx. Xxxxxx Xxxxx, President
Tel.: 000-000-0000
Fax: 000-000-0000 |
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with a copy to: |
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FALCONBRIDGE LIMITED (Exploration)
0000, Xxxxxx Xxxxxxx-Xxxxxx
Xxxxx, Xxxxxx X0X 0X0
Attention: Director of Exploration, North America
Fax Number: 000-000-0000 |
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Any notice or other communication so given is deemed conclusively to have been given and received on the day of delivery when so personally delivered, on the day following the sending thereof by overnight courier, and on the same date when faxed (unless the notice is sent after 4:00 p.m. (Toronto time) or on a day which is not a business day, in which case the fax will be deemed to have been given and received on the business day after transmission. Either Party may change any particulars of its name, address, contact individual or fax number for notice by notice to the other Party in the manner set out in this section 14.11. Neither Party shall prevent, hinder or delay or attempt to prevent, hinder or delay the service on that Party of a notice or other communication relating to this Agreement.
14.12 Payments. Any payment made under this Agreement from one Party to the other may be made by cheque, electronic funds transfer, wire transfer or by personal delivery or overnight courier to the appropriate address set out in section 14.11.
14.13 GST. At the request of the Operator, the Parties shall promptly execute all documents and take all other actions required to make (and file, if necessary) the election referred to in section 273 of the Excise Tax Act (Canada), with a view to authorizing the Operator to pay, from time to time, on behalf of the other Party, all taxes which relate to the Joint Venture and which may become due and payable under part IX of the Excise Tax Act (Canada). This section 14.13 shall apply, with such changes as are required in the circumstances, in respect of any similar applicable provincial legislation.
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14.14 The Parties recognize that the Property may have the potential to host diamonds. The Parties agree that Xxxxxx and Falconbridge, on mutual consent, may invite one or more Parties to fund exploration for diamonds on the Property, and accordingly the Parties would enter into a separate option/joint venture agreement with the third party on the exploration for diamonds on the Property on terms to be mutually agreed by Xxxxxx and Falconbridge.
The Parties have duly executed this Agreement.
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FALCONBRIDGE LIMITED
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By: |
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Authorized Signing Representative
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By: |
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Authorized Signing Representative
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XXXXXX MINERALS LTD.
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By: |
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Authorized Signing Representative
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By: |
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Authorized Signing Representative
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SCHEDULE A - DESCRIPTION OF THE PROPERTY
THE “PROPERTY”
The following Special Exploration Permits and Regular Exploration Permit comprise the Property in the Xxxxxxxx Lake Belt, located within The Pas Mining Division, Manitoba:
|
Permit |
Name |
Hectares |
Date Acquired |
Term |
Renewal Date |
|
|
|
|
|
|
|
|
SP01-03 |
Xxxxxxxx Lake |
63,132 |
Feb 15, 2001 |
5 years |
Feb 15, 2006 |
|
SP01-07 |
Long Spruce |
79,358 |
Feb 27, 2001 |
5 years |
Feb 27, 2006 |
|
P218 |
Xxxxx River |
47,313 |
Feb 15, 2001 |
3 years |
Feb 15, 2004 |
|
P232 |
Pennycutaway |
27,568 |
Feb 21, 2002 |
3 years |
Feb 21, 2005 |
|
SP02-01 |
Angling River |
40,683 |
Feb 21, 2002 |
5 years |
Feb 21, 0000 |
|
XXX-00 |
|
19,652 |
Nov 13, 2002 |
5 years |
Nov 13, 0000 |
|
XXX-00 |
|
18,042 |
Nov 13, 2002 |
5 years |
Nov 13, 0000 |
|
XXX-00 |
|
64,663 |
Nov 13, 2002 |
5 years |
Nov 13, 0000 |
|
XXX-00 |
|
53,696 |
Nov 13, 2002 |
5 years |
Nov 13, 2007 |
FL Property Total: 414,107hectares
As per an agreement dated February 21, 2003 (attached in Schedule E), Exploration Permit 222 and Mineral Exploration Licence 49 were optioned from 4378831 Manitoba Limited and are added to the Property:
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Claim Name |
Size |
Recording Date |
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Exploration Permit #222 |
18,082 ha |
April 18, 2001 |
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Mineral Exploration License #49 |
8,977 ha |
November 02, 2002 |
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SCHEDULE B - MAP
Location of the Property (outlined in blue) and the Area of Interest (outlined in black, A to J) are outlined on the following page.
Area of Interest:
Coordinates (UTM zone 15, NAD27 datum)
Point Easting Northing
A 335600 6284600
B 396000 6267700
C 469300 6249800
D 469300 6237300
E 500700 6232500
F 500700 6213200
G 493400 6213200
H 494500 6204900
I 468500 6204900
J 468500 6218800
K 378700 6218800
L 373400 6234000
M 335600 6252000
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[Graphic]
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INDEX : SCHEDULE C |
JOINT VENTURE TERMS | |
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SECTION 1 - RELATIONSHIP OF PARTIES |
1 | |
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SECTION 2 - CALCULATION OF JOINT VENTURE INTERESTS |
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2.1Initial Calculation …………………………………………………………. |
1 | |
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2.2Non-Participation …………………………………………………………. |
1 | |
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2.3Calculation on Ongoing Basis …………………………………………….. |
1 | |
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2.4Extinguishing Joint Venture Interest ……………………………………… |
2 | |
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SECTION 3 - MANAGEMENT COMMITTEE |
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3.1Establishment …………………………………………………………….. |
2 | |
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3.2Powers and Obligations …………………………………………………… |
2 | |
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3.3Calling of Meetings ……………………………………………………….. |
2 | |
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3.4Attendance at Meeting by Phone ………………………………………….. |
2 | |
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3.5Quorum at Meetings ………………………………………………………. |
3 | |
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3.6Secretary of Meetings …………………………………………………….. |
3 | |
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3.7Making Decisions …………………………………………………………. |
3 | |
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3.8Consent of Management Committee Required ……………………………. |
3 | |
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SECTION 4 - THE OPERATOR, ITS POWERS AND OBLIGATIONS |
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4.1Initial Operator ……………………………………………………………. |
4 | |
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4.2Resignation and Replacement ……………………………………………… |
4 | |
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4.3Powers and Obligations …………………………………………………… |
5 | |
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4.4Accuracy of Information ………………………………………………….. |
6 | |
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4.5Emergencies ……………………………………………………………… |
7 | |
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4.6Contingency Fund ………………………………………………………… |
7 | |
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SECTION 5 - PROGRAMS |
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5.1Contents of Program ………………………………………………………. |
7 | |
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5.2Election by non-Operator …………………………………………………. |
7 | |
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5.3Expenditures Made Proportionately ………………………………………. |
8 | |
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5.4Payments to Operator …………………………………………………….. |
8 | |
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5.5Failure to Participate ……………………………………………………… |
8 | |
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5.6Failure to Make Payment by non-Operator ……………………………….. |
8 | |
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5.7Failure to Spend at Least 80% of Budget …………………………………. |
9 | |
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5.8Expenditures More Than 20% Above Budget ……………………………. |
9 | |
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5.9Return of Surplus Monies ………………………………………………… |
9 | |
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5.10Failure to Submit Program to Management Committee …………………… |
9 | |
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SECTION 6 -FALCONBRIDGE'S BUMP-UP RIGHT |
10 | |
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SECTION 7 - DEALING WITH AFFILIATES |
10 | |
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SECTION 8 - USE OF SURPLUS JOINT VENTURE ASSETS |
10 | |
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SECTION 9 - DISPOSITION OF SURPLUS JOINT VENTURE ASSETS |
10 | |
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SECTION 10 - INSURANCE PROCEEDS |
10 | |
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SECTION 11 - SETTLEMENT PAYMENTS |
10 | |
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SECTION 12 - LIABILITY OF OPERATOR |
11 | |
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SECTION 13 - NO PARTITION |
11 | |
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SECTION 14 - NO RESTRICTION ON OTHER ACTIVITIES |
11 | |
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XXXXXXX 00 - XXXXXXXXXXX |
00 | |
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XXXXXXX 00 - XXXXXXXXXX FROM JOINT VENTURE |
12 | |
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16.1 Right of Withdrawal and Mechanics ………………………………………. |
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16.2 Right of Remaining Party to Withdraw …………………………………… |
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SECTION 17 - TREATMENT FACILITIES ………………………………………….. |
13 | |
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SCHEDULE C - JOINT VENTURE TERMS
SECTION 1. - RELATIONSHIP OF PARTIES.
The relationship of the Parties in the Joint Venture shall not be, and shall not be construed to be, a partnership relationship, an agency or legal representative relationship or a fiduciary relationship. Except as otherwise expressly provided in this Agreement, the rights, privileges, powers, duties, liabilities and obligations of the Parties shall be as joint venturers and shall be several and not joint or joint and several.
SECTION 2. - CALCULATION OF JOINT VENTURE INTERESTS.
2.1 Initial Calculation. On the date that the Joint Venture is formed, Xxxxxx and Falconbridge are deemed to have made the following initial Expenditures:
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Falconbridge |
Xxxxxx |
Total |
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Deemed Expenditures: |
$ 5,000,000 |
$ 5,000,000 |
$ 10,000,000 |
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Joint Venture Interest |
50% |
50% |
100% |
2.2 Non-Participation. If the non-Operator elects not to participate in any Program or fails to notify the Operator of its election within the said sixty (60) day period referred to in paragraph 5.2 hereof (in which event the non-Operator shall be deemed to have elected not to participate in and contribute its proportionate share of Expenditures), its undivided Joint Venture Interest shall xxxxx in favour of the Operator in the ratio that its actual and deemed Expenditures in the Joint Venture is of the total actual and deemed Expenditures of both Parties.
2.3 Calculation on Ongoing Basis. Xxxxxx'x and Falconbridge's, as the case may be, Joint Venture Interest, calculated at any time and from time to time, shall be determined in accordance with the formula:
A = B x 100%, where
C
(a) A is Xxxxxx'x or Falconbridge's, as the case may be, Joint Venture Interest;
(b) B is an amount equal to Xxxxxx'x or Falconbridge's, as the case may be, deemed Expenditures under section 2.1 of this Schedule C, plus all of Xxxxxx'x or Falconbridge's, as the case may be, Expenditures made after the formation of the Joint Venture; and
(c) C is an amount equal to the Parties' total deemed Expenditures under section 2.1 of this Schedule C plus all of the Parties' Expenditures made after the formation of the Joint Venture.
2.4 Extinguishing Joint Venture Interest. If Xxxxxx'x or Falconbridge's Joint Venture Interest is reduced to 10% or less, then Xxxxxx'x or Falconbridge's, as the case may be, Joint Venture Interest shall be automatically extinguished and converted to a the Royalty, if the Property is brought into Commercial Production by Xxxxxx or Falconbridge, as the case may be. The Joint Venture is automatically terminated upon such conversion, and the surviving Party shall become the sole owner of a 100% interest in the Property.
SECTION 3. - MANAGEMENT COMMITTEE.
3.1 Establishment. Promptly upon the formation of the Joint Venture, the Parties shall establish the Management Committee. One Representative and one alternate shall be appointed in writing by each Party and re-appointed from time to time.
3.2 Powers and Obligations. Except as expressly provided otherwise in this Agreement, the Management Committee is empowered to make all strategic and planning decisions regarding the Joint Venture. Accordingly, the Management Committee is responsible for revising, as deemed appropriate, Programs submitted by the Operator, for approving all Programs and for evaluating the results of all Programs.
3.3 Calling of Meetings. Meetings of the Management Committee shall be held at such time, date and place as may be determined by the Operator on at least 20 days notice or as may be determined by the non-Operator on at least 30 days notice. The Representatives may waive the notice period required for any meeting. Any notice must include the time, date, place and agenda of each meeting. On receipt of any such notice, the receiving Party may add any item to the agenda, if the receiving Party notifies the other Party of the addition at least 10 days before the meeting. No item which is not on the agenda may be discussed without the consent of the Representatives. Individuals other than the Representatives may attend meetings of the Management Committee with the consent of the Representatives.
3.4 Attendance at Meeting by Phone. Any Representative may attend a meeting of the Management Committee by telephone or video conference call and such Representative is deemed to be present at such meeting.
3.5 Quorum at Meetings. The quorum for any meeting of the Management Committee is the one Representative from each of the Parties. If a quorum is not present at the time and place set for a meeting, then the meeting shall be adjourned to the same place and time on the next week. At the continuation of the adjourned meeting the Management Committee may conduct business, if a notice regarding the continuation of the adjourned meeting was sent to the Party whose Representative did not attend the first portion of the meeting. In no other circumstance may business be transacted at a meeting of the Management Committee without a quorum being present.
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3.6 Secretary of Meetings. The Representatives shall appoint a secretary to act as a secretary of the Management Committee at the beginning of each meeting of the Management Committee. Such secretary shall carry out the duties of the secretary of the Management Committee until such secretary's replacement is appointed. The secretary shall prepare and maintain minutes of each meeting of the Management Committee. The secretary shall distribute to the Representatives such minutes, as soon as practicable following each meeting. The secretary shall also maintain, and distribute to the Representatives, copies of all correspondence and instruments received, sent or signed by the Management Committee or the Representatives (when acting in the capacity of a Representative).
3.7 Making Decisions. All decisions of the Management Committee shall be by majority vote by the two voting Representatives, who shall each have the number of votes equal to such Representative's respective Party's Joint Venture Interest from time to time. In the event of an equality of votes, the Operator's Representative shall have an additional and casting vote. Alternatively, the Management Committee may transact any business by a written instrument signed by a Representative of each Party. Each decision of the Management Committee shall be final and binding on the Parties.
3.8 Consent of Management Committee Required. Notwithstanding any term in this Agreement, the Operator shall not take any of the following actions without obtaining the prior written unanimous consent of the Management Committee:
(a) create, or permit to remain, any Liens, upon any Joint Venture Asset, except for any Liens which are customary in the circumstances of a mining exploration joint venture;
(b) abandon, sell or otherwise dispose of the Property, or any part thereof; or
(c) settle any suit, claim or demand with respect to the Joint Venture involving an amount in excess of $50,000.
Notwithstanding section 3.8(b), the Operator may unilaterally dispose of any part of the Property by giving the non-Operator 60 days written notice of the proposed disposal. On receipt of such notice, the non-Operator may elect to acquire all of that part of the Property subject to the proposed disposal by delivering a notice to the Operator to this effect at least 15 days before the expiry of such 60 day notice period. On receipt of the notice from the non-Operator, the Operator shall promptly transfer the part of the Property subject to the proposed disposal to the non-Operator. The non-Operator shall pay for all transfer costs. Upon completion of the transfer of the part of the Property subject to the proposed disposal to the non-Operator, the part of the Property subject to the proposed disposal will no longer be subject to this Agreement, except that the non-Operator shall indemnify and save harmless the Operator on its own behalf and as trustee for its shareholders, directors, officers, employees, agents, contractors and representatives from and against all suits and other proceedings, claims, demands, damages, liabilities, losses, costs and expenses (including lawyers' fees and disbursements) which the Operator may suffer or incur in respect of the part of the Property subject to the proposed disposal.
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SECTION 4. - THE OPERATOR, ITS POWERS AND OBLIGATIONS.
4.1 Initial Operator. Upon the formation of the Joint Venture, Falconbridge shall automatically become the first Operator.
4.2 Resignation and Replacement. The Operator may resign as Operator upon notifying the non-Operator in writing of its resignation at any time after a Program has been approved by the Management Committee but before the commencement of the implementation of such Program, or at any time if no Program is being carried out at that time. The Management Committee shall have the right to appoint a new Operator if:
(a) the Operator defaults in its obligations as operator hereunder and fails to commence and diligently prosecute measures to remedy such default within thirty (30) days after the non-Operator shall have given written notice to the Operator of such default specifying in such notice the nature of the default;
(b) the Joint Venture Interest of the Operator becomes less than fifty percent (50%); or
(c) pursuant to section 5.1 of this Schedule C, the Operator fails to submit a Program requiring minimum Expenditures of at least Fifty Thousand Dollars ($50,000) to the Management Committee within six (6) months of the completion of the previous Program.
Provided however that in the event of the occurrence of (c) above, the non-Operator shall have the right within a period of ninety (90) days of the occurrence of such event to prepare and deliver to the Operator and the Management Committee a copy of a Program requiring minimum Expenditures of at least Fifty Thousand Dollars ($50,000) and to carry out and complete such a Program within a period of one (1) year. Upon fulfillment of the foregoing, the provisions of this section 4.2 and section 5 shall for all purposes of this Agreement apply mutatis mutandis as if for such Program the Operator was the non-Operator and the non-Operator was the Operator. Provided further that notwithstanding the foregoing, Xxxxxx so long as it retains at least a fifty percent (50%) interest in the Joint Venture, shall continue to have the right to retain its position as Operator in accordance with this paragraph 4.2 following completion of a Program by the non-Operator.
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On any change or replacement of the Operator, the retiring Operator shall transfer all data, documents, reports, records, accounts, samples and assays in its possession or control, and relating to the Mining Operations or the Property, to the incoming Operator.
4.3 Powers and Obligations. Subject to the approval of each Program by the Management Committee, the powers and obligations of the Operator shall be as follows:
(a) to manage the Joint Venture and conduct, or cause to be conducted, all Mining Operations performed under a Program in a good and workmanlike manner in accordance with good engineering and mining practice and in accordance with the terms of this Agreement;
(b) to submit each Program to the Management Committee for approval by delivering the Program to the Representatives at least 30 days in advance of the meeting of the Management Committee at which such Program is to be considered;
(c) subject to section 3.8 of this Schedule C, to keep the Property in good standing and to pay all applicable payments, fees and taxes, and other similar governmental charges lawfully levied or assessed in respect of the Property, except that the Operator shall not be obliged, however, to make any such payment as long as such payment is being contested in good faith and the non-payment thereof does not adversely affect the Property;
(d) subject to sections 7,8 and 9 of this Schedule C, to provide, purchase, lease or rent all plant, buildings, machinery, equipment, tools, appliances, materials, supplies and services required for a Program and to dispose of the same when no longer required or useful for the purposes of the Property and the Joint Venture;
(e) to maintain and keep the Joint Venture Assets, or to cause the Joint Venture Assets to be maintained and kept, in good operating condition and repair in accordance with good mining practice;
(f) to comply with all applicable statutes, regulations, by-laws, laws, orders and judgments and all directives, rules, consents, permits, orders, guidelines, approvals and policies of any applicable governmental authority affecting the Joint Venture;
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(g) to obtain and maintain such types and levels of property and liability insurance with respect to the Joint Venture as the Operator shall consider necessary from time to time, such coverage to include the non-Operator as a named insured to the extent of the non-Operator's undivided interest in the Joint Venture from time to time;
(h) to require the Operator's contractors and subcontractors to take out and maintain such types and levels of property and liability insurance as the Operator shall consider necessary or advisable from time to time and to comply with the requirements of all applicable unemployment insurance and workers' compensation legislation with respect to work or services to be provided by such contractors or subcontractors;
(i) to advise the non-Operator of any accident or occurrence resulting in any material damage to or destruction of any Joint Venture Assets or material harm or injury to any individual;
(j) to keep adequate data, information and records of the Operator's management of the Joint Venture and to keep suitable accounts which reflect all financial aspects of the Joint Venture and once per year to make such available to the non-Operator, at the place designated by the Operator, within 10 days of receipt of a written request for disclosure by the non-Operator;
(k) to provide the non-Operator with annual non-interpretive summary reports on the Operator's management of the Joint Venture while active, including an accounting of all Expenditures made by the Operator on such Program;
(l) to permit the non-Operator, at the non-Operator's sole risk and expense, access to the Property during normal working hours for the purpose of examining the Mining Operations up to four times per year, within 10 days of receipt of a written request for access by the non-Operator, so long as such access shall not materially interfere with or impair the Operator's Mining Operations; and
(m) to have all powers necessary to carry out, or cause to be carried out, all of the Operator's obligations set out in this Agreement and to otherwise carry out, or cause to be carried out, all Programs approved by the Management Committee.
4.4 Accuracy of information. The Operator, however, makes no representation or warranty whatsoever concerning the accuracy of information supplied pursuant to this Agreement, including in the reports referred to in section 4.3(k). In addition, the Operator makes no representation or warranty whatsoever concerning the location or presence of ores or other valuable materials on or near the Property or the feasibility of any Mining Operations or Commercial Production. The Operator shall have no liability to the non-Operator with respect to the above.
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4.5 Emergencies. In an emergency, the Operator, without the consent of the non-Operator, may take such immediate actions and make such immediate Expenditures as the Operator deems necessary to keep the Property in good standing or for the protection of individuals and/or property. The Operator shall promptly report such emergency actions and Expenditures to the non-Operator by delivering an invoice to the non-Operator. The non-Operator shall pay its share of the Expenditures to the Operator in accordance with section 5.4 of this Schedule C.
4.6 Contingency Fund. The Operator may establish and administer a contingency fund to be applied by the Operator to satisfy any legal obligations of the Parties respecting a mine maintenance plan or mine closure plan, including obligations for severance pay, pensions, rehabilitation and reclamation work. Each Party shall contribute its proportionate share of such fund based on such Party's Joint Venture Interest at the time of the establishment of the fund (or at the time of the contribution, in respect of subsequent contributions). The Operator shall invest any unused portion of such fund and all income thereon shall accrue in such fund. If the Operator determines that such fund, or any portion thereof, is no longer necessary, the Operator shall make payments to the Parties in proportion to their Joint Venture Interests on the date of such payments.
SECTION 5. - PROGRAMS.
5.1 Contents of Program. The Operator shall prepare a Program and submit such Program budget to the Management Committee for approval by at least September 30 each year. The Management Committee must approve each Program prior to implementation. Each Program shall cover a period of up to 12 months or such other period as the Parties may agree. Each Program must contain:
(1) a reasonably detailed outline of all Mining Operations which the Operator contemplates carrying out on the Property and detailing the areas on the Property to be subject to such Mining Operations and the time frame for each of the major elements of the Mining Operations;
(2) a reasonably itemized budget, broken down by month, of the projected Expenditures under the Program; and
(3) the estimated amount and date of each payment that the non-Operator would have to make to the Operator.
5.2 Election by non-Operator. The non-Operator may elect, on delivering notice in writing to the Operator within 60 days of the approval of each Program by the Management Committee, to participate in the Program to the extent of the non-Operator's then Joint Venture Interest (but not to any lesser extent).
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5.3 Expenditures Made Proportionately. The Operator shall carry out each Program approved by the Management Committee. The Operator will contribute its proportionate share towards the Expenditures to be made under each Program as set out in section 5.4 of this Schedule C. Each payment by the Operator in respect of an Expenditure will be deemed to be made in proportion to the Parties' Joint Venture Interests, so long as each of the Parties has provided its proportionate share of the funding in respect of the Program.
5.4 Payments to Operator. If the non-Operator elects to participate in a Program, the Operator may submit an invoice to the non-Operator 60 days preceding a quarter in which Expenditures are to be made under a Program. The invoice must set out the estimated Expenditures under the Program for the immediately following quarter, multiplied by the non-Operator's Joint Venture Interest. Within 30 days of receipt of such invoice, the non-Operator shall pay the Operator the invoice amount. The Operator may also submit other invoices relating to reconciliations, bills, accounts or other requests for payment in respect of any Expenditures made by the Operator under a Program or otherwise in accordance with this Agreement. Such invoice must set out the total amount involved, multiplied by the non-Operator's Joint Venture Interest. Within 30 days of receipt of such invoice, the non-Operator shall pay the Operator the invoice amount. If the non-Operator fails to make any payment to the Operator under this section 5.4 of this Schedule C within any applicable 30 day payment period, the non-Operator shall make such payment together with an interest payment, calculated at the rate equal to the annual rate of interest announced from time to time by the Canadian Imperial Bank of Commerce as its reference rate then in effect for determining interest rates on Canadian dollar commercial loans in Canada (commonly known as its prime rate), plus 10%, for the period commencing on the expiry of such 30 day payment period and terminating on the date that full payment is made. If the non-Operator fails to make full payment, including in respect of interest, to the Operator within 60 days of the expiry of the applicable 30 day payment period, section 5.6 of this Schedule C applies.
5.5 Failure to Participate. If either Party does not elect to participate in a Program, its interest shall be diluted in accordance with section 2.2 of this Schedule C.
5.6 Failure to Make Payment by non-Operator. If the non-Operator fails to make a required payment within the 60 day period referred to in section 5.4 of this Schedule C, the non-Operator's Joint Venture Interest shall be automatically extinguished and converted to a 1% Royalty if the Property is brought into Commercial Production by the Operator. The Joint Venture is automatically terminated upon such conversion.
5.7 Failure to Spend at Least 80% of Budget. If the non-Operator does not elect to participate in a Program and the Operator does not make Expenditures under the Program at least equal to 80% of budgeted Expenditures, the non-Operator shall not have its Joint Venture Interest reduced in accordance with section 2.2 of this Schedule C if the non-Operator promptly pays the Operator, following the completion of such Program, an amount equal to the total Expenditures made under such Program, multiplied by the non-Operator's Joint Venture Interest, determined at the commencement of such Program.
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5.8 Expenditures More Than 10% Above Budget. Expenditures made by the Operator exceeding the Expenditures contemplated by the Program by less than 10% will be funded by the Parties in proportion to their Joint Venture Interests. Expenditures made by the Operator exceeding the Expenditures contemplated by the Program by more than 10% will be funded solely by the Operator, unless otherwise agreed by the Parties in writing. Unless otherwise agreed by the Parties in writing, any such payments exceeding the Expenditures contemplated by the Program by more than 10% which are made by either the Operator or the non-Operator will not form part of the calculations used to determine the Joint Venture Interests of the Parties in accordance with section 2.2 of this Schedule C.
5.9 Return of Surplus Monies. If, after completion of any Program, the Operator is in possession of any moneys contributed by the non-Operator and which, in the Operator's opinion, are not required for the discharge of obligations relating to such Program, the Operator shall repay such moneys to the non-Operator.
5.10 Failure to Submit Program to Management Committee. If the Operator does not submit a Program for Mining Operations involving Expenditures of at least $50,000 to the Management Committee for approval within a period of at least 12 months from the date of completion of the last Program, then the non-Operator may propose a Program for Mining Operations to the Management Committee for an amount not less than $50,000. If the non-Operator makes such a proposal and the Program is approved by the Management Committee, the Operator shall carry out such Program and fund its proportionate share. If the Management Committee does not approve such Program, the non-Operator may, notwithstanding section 4.2 of this Schedule C, become the Operator and carry out the Program. Following the completion of such Program section 4.2 of this Schedule C shall apply once again.
SECTION 6. - FALCONBRIDGE’S BUMP-UP RIGHT ON A SPECIFIC PROJECT.
Provided Falconbridge has at least a 30% interest in the Joint Venture, it shall be entitled to designate all or any part of the Property as a Specific Project, and shall have the right to earn an additional 20% interest in the Specific Project by carrying out a Bankable Feasibility Study, and become Operator on the Specific Project. Falconbridge shall have the right to earn an additional 5% by arranging debt financing and bank guarantees for both Parties for the development of the Specific Project through to Commercial Production, in which case Falconbridge shall be entitled to first recover all construction, financing and other development costs incurred from net cash flow after taxes from the mine before such net cash flow is distributed pro-rata between the Parties.
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SECTION 7. - DEALINGS WITH AFFILIATES.
Any Joint Venture Assets that the Operator may purchase, lease or rent from an Affiliate shall be purchased, leased or rented at fair market value. The cost of all work which the Operator may contract to an Affiliate shall be equal to the fair market value of such work. Any Joint Venture Assets that the Operator may sell or otherwise dispose of to an Affiliate shall be sold or otherwise disposed of at fair market value. The Operator shall pay the net proceeds received in respect of such Joint Venture Assets, if any, to the Parties in proportion to their respective Joint Venture Interests. The Operator shall give the non-Operator written notice of any significant transaction with an Affiliate and the non-Operator may, at any time within 12 months after it has received such notice, dispute whether such transaction was at fair market value.
SECTION 8. - USE OF SURPLUS JOINT VENTURE ASSETS.
The Operator may use any Joint Venture Assets which are no longer required for the Joint Venture for such other purposes and on such terms as the Operator may from time to time determine. The Operator shall pay the net proceeds received in respect of such Joint Venture Assets, if any, to the Parties in proportion to their respective Joint Venture Interests. If such surplus Joint Venture Assets are used by the Operator, outside the scope of the Joint Venture, or are used by an Affiliate of the Operator, outside the scope of the Joint Venture, then the net proceeds in respect of such use shall be deemed to be an amount equal to what could be obtained from an arms-length third party.
SECTION 9. - DISPOSITION OF SURPLUS JOINT VENTURE ASSETS.
Subject to section 14.2, the Operator may from time to time sell or otherwise dispose of such part of the Joint Venture Assets as are no longer required for Joint Venture operations. The Operator shall pay the net proceeds received in respect of such Joint Venture Assets, if any, to the Parties in proportion to their respective Joint Venture Interests.
SECTION 10. - INSURANCE PROCEEDS.
The Operator shall apply, to the extent determined by the Operator, any insurance proceeds received by the Operator in respect of any loss or damage to Joint Venture Assets towards the repair or replacement of the lost or damaged Joint Venture Assets. The Operator shall pay the remaining proceeds received in respect of such Joint Venture Assets, if any, to the Parties in proportion to their respective Joint Venture Interests.
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SECTION 11. - SETTLEMENT PAYMENTS.
All losses, costs, expenses, claims or damages, including legal fees and disbursements, net of any insurance proceeds, incurred and paid by the Operator in settlement of any loss, cost, expense, claim, damage, judgment or similar matter (including a payment made, or an action taken, by the Operator as a result of an action of a governmental agency) shall constitute an Expenditure made by the Operator under the applicable Program. In addition, the non-Operator, in proportion to its Joint Venture Interest calculated on the date that the initial liability was incurred which gives rise to this indemnification obligation, shall indemnify and hold harmless the Operator for any loss, cost, expense, claim or damage, including legal fees and disbursements, suffered or incurred by the Operator in respect of a third party claim (including an action of a governmental agency which results in a payment made, or an action taken, by the Operator), except to the extent that such claim arose from the gross negligence or willful misconduct of the Operator.
SECTION 12. - LIABILITY OF OPERATOR.
The Operator shall not be liable to the non-Operator for any loss, cost, expense, claim or damage, including legal fees and disbursements, (including a payment made, or an action taken, by the Operator as a result of an action of a governmental agency) except to the extent that such loss, cost, expense, claim or damage is attributable to the gross negligence or willful misconduct of the Operator. In no event (including fundamental breach) shall the Operator be liable to the non-Operator for any indirect, special or consequential damages (including for loss of goodwill, loss of actual or anticipated profits or other economic loss), even if the Operator has been advised of the potential for such damages.
SECTION 13. - NO PARTITION.
No Party may seek or obtain partition of any of the Joint Venture Assets, including the Property, or any interest therein whether by way of physical partition, sale or otherwise. No statute, regulation or law providing for partition, or partition and sale, shall apply to any of the Joint Venture Assets.
SECTION 14. - NO RESTRICTION ON OTHER ACTIVITIES.
Each Party has the unrestricted right to engage in, and receive the full benefit of, any activity outside the scope of the Joint Venture, without consulting with, or accounting to, the other Party, or permitting the other Party to participate in such activity.
SECTION 15. - TERMINATION.
If the Parties agree to terminate the Joint Venture, the Operator may take any actions necessary or desirable to wind up the Joint Venture. All costs, charges and expenses of winding up the Joint Venture (including in respect of any reclamation) shall be for the account of the Joint Venture and the Parties shall divide the Joint Venture Assets in proportion to their Joint Venture Interests, although any loans advanced to the Joint Venture by a Party shall be satisfied before any other distribution of assets is made to the Parties. Once the said costs, charges and expenses have been paid in full, the Operator may sell the Joint Venture Assets (with the prior approval of the non-Operator, where Joint Venture Assets are sold for a total amount of in excess of $100,000) or distribute the Joint Venture Assets to the Parties in kind.
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SECTION 16 - WITHDRAWAL FROM JOINT VENTURE.
16.1 Right of Withdrawal and Mechanics. Either Party may, at any time during the Joint Venture, voluntarily withdraw from the Joint Venture (the "Withdrawing Party") and forfeit its interest in and to the Property and its rights under this Agreement by giving written notice of such withdrawal to the other Party (the "Remaining Party"). The notice must indicate an effective date for such withdrawal which may not be earlier than 90 days after receipt of such notice. The effects of the delivery of such notice are set out below.
(a) The Withdrawing Party shall:
(1) remain liable for its share, based on its Joint Venture Interest, of all costs, expenses and obligations arising out of operations conducted before the effective date of the withdrawal;
(2) secure by way of a letter of credit, or otherwise to the satisfaction of the Remaining Party, its share, based on its Joint Venture Interest, of the costs of reclaiming the Property, as estimated at the effective date of the withdrawal considering all applicable statutes, regulations, by-laws, laws, orders and judgments and with all directives, rules, consents, permits, orders, guidelines, approvals and policies of any governmental authority;
(3) continue, for a period of three years after the effective date of the withdrawal, to be bound by section 11;
(4) execute and deliver such documents as may be necessary to transfer the Property to the Remaining Party;
(5) remove, within 12 months of the effective date of the withdrawal, all buildings, machinery, equipment and supplies brought upon the Property by the Withdrawing Party that are not Joint Venture Assets; and
(6) not be entitled to any royalty under this Agreement.
(b) The Remaining Party shall become the owner of a 100% of the Withdrawing Party's interest in and to the Property as of the effective date of the withdrawal.
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(c) The Joint Venture shall be terminated and the Management Committee shall be terminated, as of the effective date of the withdrawal.
16.2 Right of Remaining Party to Withdraw. Upon receipt by the Remaining Party of a notice of withdrawal, the Remaining Party may give notice to the Withdrawing Party prior to the effective date of the withdrawal electing to join in the withdrawal ("Joint Withdrawal"). In such case, the Joint Venture shall be terminated in accordance with section 15 of Schedule C.
SECTION 17 - TREATMENT FACILITIES
As long as Falconbridge has at least a thirty percent (30%) interest in the Property, it shall have the right to designate the facilities at which all ore produced from the Property shall be concentrated, smelted and refined, at market rates, and shall have the right to purchase and market such products.
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SCHEDULE D - ROYALTY TERMS
NET SMELTER RETURN ROYALTY
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For the purposes of this Agreement the term "Net Smelter Returns" shall mean the actual proceeds received from any independent custom smelter, mill, mint or other purchaser for the sale of all minerals, metals or concentrates extracted and derived from the ore mined from the Property after deducting therefrom all charges and penalties for smelting and refining and the cost of transportation (to the mill or smelter and thereafter to the mint), insurance premiums, sampling and assaying charges incurred after the minerals, metals or concentrates have left the Property and all appropriate mint charges.
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Within ninety (90) days following the end of each calendar quarter, commencing with the quarter in which the Property is brought into Commercial Production, the Operator shall deliver to the non-operator a statement of the Net Smelter Returns for the said calendar year, duly certified by an independent Chartered Accountant appointed by the Operator for such purposes, together with payment of the royalty, if any, determined as aforesaid. If the amount of Net Smelter Return is not ascertainable for a calendar quarter, it shall be estimated as nearly as possible at the time for payment and an adjustment shall be made at the end of each calendar year. The non-operator shall have the right within a period of three (3) months from receipt of the audited statements to conduct an independent audit at its own cost and expense, the right to review the Operator's books and records relating thereto and an opportunity to discover issues raised with the Operator's auditors.
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If any portion of the minerals, metals or concentrates extracted and derived from the ore mined from the Property are sold to a purchaser owned or controlled by the Operator or treated by a smelter owned or controlled by the Operator, the actual proceeds received shall be deemed to be an amount equal to what could be obtained from a purchaser or a smelter not so owned or controlled in respect of minerals, metals or concentrates, as applicable, of like quality and quantity, after deducting therefrom a charge equal to the transportation cost which would have been incurred had the material been transported to such third party purchaser or smelter.
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SCHEDULE E –
Letter Agreement between Falconbridge Limited and
000000 Xxxxxxxx Ltd. dated February 21, 2003
