LETTERHEAD OF ST. ELIAS MINES LTD.]
Exhibit
10.6
[LETTERHEAD
OF ST. XXXXX XXXXX LTD.]
February
12, 2007
#
11 -
0000 Xxxxxxxxxx Xxxx
Mississauga,
Ontario
Canada
L4X 2E9
Attention:
Xx. Xxxxxxxxx X. Xxxxxx, President
Dear
Xx.
Xxxxxx:
| Re: |
Letter
Agreement between Hi Ho Silver Resources Inc. and St. Xxxxx Xxxxx
Ltd.
- on the South Rim
Project,
British Columbia
|
This
letter sets forth the general terms pursuant to which it is proposed that
Hi Ho
Silver Resources Inc. (“Hi Ho Silver”) acquire from St. Xxxxx Xxxxx Ltd. (“St.
Xxxxx”) an option to earn an interest in the South Rim Project (as more
particularly described below and referred to herein as the “Property”) in the
Houston area of British Columbia. The parties hereto intend to enter into
a
formal agreement (the “Formal Agreement”), incorporating the terms herein and
such further terms as the parties may agree upon. The terms of this Letter
Agreement and the Formal Agreement may be subject to regulatory
approval.
PART
I - THE PROPERTY
The
Property is comprised of various 12 mineral claims covering approximately
5,352.572ha. located in the Omineca Mining Division of British Columbia and
is
more particularly described and set out in the attached Schedule
“A”.
PART
II - REPRESENTATIONS AND WARRANTIES OF ST. XXXXX
St.
Xxxxx
represents and warrants to Hi Ho Silver that the Property is validly located,
duly recorded, in good standing and legally and beneficially owned by St.
Xxxxx,
free and clear of any charges, liens, or encumbrances, surface rights
restrictions or environmental hazards and that there are no underlying
agreements in effect with respect to the Property.
St.
Xxxxx
represents and warrants to Hi Ho Silver that there are no claims against
title
to the Property, nor to the knowledge of St. Xxxxx is there any basis therefore,
St. Xxxxx also represents and warrants to Hi Ho Silver that St. Xxxxx has
full
right and authority to enter into this letter agreement and to carry out
the
transactions contemplated herein and all approvals required to be obtained
in
order for St. Xxxxx to do so have been obtained.
PART
III - OPTION
3.1 St.
Xxxxx, in consideration of the sum of $10, the receipt and sufficiency of
which
is hereby acknowledged, hereby grants to Hi Ho Silver the sole and exclusive
right and option to acquire an undivided 51% interest in and to the Property
(the “Option”). Hi Xx Xxxxxx can earn a 51% undivided interest in and to the
Property by paying to St. Xxxxx the aggregate sum of $40,000 in cash, issuing
to
St. Xxxxx an aggregate of 200,000 common shares in the capital stock of Hi
Ho
Silver and by incurring $500,000 in Exploration Expenditures, to be paid
and
issued to St. Xxxxx and to be incurred by Hi Ho Silver as follows:
| (a) |
the
sum of $40,000 to be paid to St. Xxxxx on or before the dates indicated
below;
|
|
(i)
|
$10,000
within five business days from the signing of this Letter
Agreement;
|
| (ii) |
$10,000
on or before February 12, 2008; and
|
| (iii) |
$20,000
on or before February 12, 2009;
|
-
Page 2 -
|
(b)
|
cumulative
Exploration Expenditures of not less than $500,000, to be incurred
on or
before the dates indicated below:
|
|
(i)
|
Exploration
expenditures totaling $75,000 to be incurred on or before February
12,
2008;
|
|
(ii)
|
Exploration
expenditures totaling $200,000 to be incurred on or before February
12,
2009; and
|
|
(iii)
|
Exploration
expenditures totaling $225,000 to be incurred on or before February
12,
2010;
|
|
(c)
|
the
issuance of 200,000 common shares in the capital of Hi Ho Silver
to St.
Xxxxx on or before the dates indicated
below:
|
|
(i)
|
100,000
common shares within ten (10) business days of regulatory approval
of the
Formal Agreement;
|
|
(ii)
|
100,000
common shares on or before February 12,
2008;
|
3.2 Exploration
expenditures incurred by any date in excess of the amount of exploration
expenditures required to be incurred by such date pursuant to paragraph 3.1(b)
shall be carried forward to the succeeding period or periods and qualify
as
exploration expenditures for such succeeding period or periods. If exploration
expenditures are less than the amount of exploration expenditures required
to be
incurred by any date, Hi Ho Silver may pay the deficiency to St. Xxxxx in
cash
by the required date in order to maintain the Option. Such payments in cash
in
lieu of exploration expenditures shall be deemed to be exploration expenditures
for the purposes of paragraph 3.1(b). If Hi Ho Silver fails to complete
exploration expenditures before the required dates referred to in 3.1(b)
and
fails to pay the deficiency in cash as referred to herein the option shall
cease
and become null and void without further notice and Hi Ho Silver will have
no
further claim or rights to the Property.
Hi
Ho
Silver shall have exercised the Option and shall have fully earned a 51%
interest in and to the Property, by making all of the cash payments, share
issuances and incurring all of the exploration expenditures pursuant to section
3.1 and upon such occurrence, St. Xxxxx will immediately take all reasonable
and
necessary steps to transfer an undivided 51% interest in and to the Property
to
Hi Ho Silver.
PART
IV - OPERATOR AND ACCESS
4.1 Hi
Ho
Silver shall have the exclusive right to manage and operate the exploration
programs as operator (the “Operator”) during the period of the Option. An
Operators fee of 8% of total exploration expenditures incurred shall be charged
by Hi Ho Silver and will qualify as an Exploration expenditure pursuant to
paragraphs 3.1(b).
4.2 A
fully
executed bill of sale transfering 51% intetrest in the Property to Hi Ho
Silver
will be provided by St. Xxxxx at the time of signing of the Formal Agreement.
This bill of sale shall be held in trust and released to Hi Ho Silver upon
the
completion by Hi Ho Silver of all the terms set out in paragraph 3.1
herein.
PART
V - JOINT VENTURE
5.1 At
any
time after Hi Xx Xxxxxx has earned either the 51% interest in the Property,
Hi
Ho Silver and St. Xxxxx shall be entered into a joint venture agreement.
Terms
of the joint venture agreement will be based upon recognized industry standards
with each party responsible for contributing their respective percentages
of
exploration and development costs. The majority owner of the property will
be
the operator of the Joint Venture. Straight line dilution will occur to either
party not contributing their respective share of costs. Should either party
have
their interest reduced to 10% or less then their interest shall automatically
be
converted to a 0.5% Net Smelter Return.
PART
VI - MAINTENANCE OF CLAIMS
6.1 During
the Option period, Hi Ho Silver will be responsible for maintaining all mineral
claims that comprise the Property in good standing with respect to Ministry
of
Energy Mines and Petroleum Resources annual assessment requirements. The
costs
associated with this will qualify as an exploration expenditure pursuant
to
paragraph 3.1(b).
PART
VII -TERMINATION FOR DEFAULT.
-
Page 3 -
7.1 Prior
to
exercise of the Option as provided for herein, and except as provided for
in
paragraph 3.2 if Hi Xx is in default of any of its obligations hereunder
the St.
Xxxxx may immediately give written notice to Hi Ho of such default, and Hi
Ho
shall than have a period of 30 days to remedy such default. If Hi Ho does
not
remedy the default with the 30 days aforesaid, the Formal Agreement and the
Option shall, at St. Xxxxx option and upon written notice to Hi Ho, terminate
forthwith.
PART
VIII - GENERAL
Unless
otherwise expressly indicated to the contrary, all references to dollar amounts
contained in this Letter Agreement are references to Canadian
dollars.
It
would
be appreciated if you could review this proposal. If the terms as presented
are
acceptable to you, please sign the attached duplicate of this Letter Agreement
and return the same to my attention at your earliest convenience. This Letter
Agreement will then form a binding agreement in principle and the basis for
a
detailed Formal Option Agreement between Hi Ho Silver and St.
Xxxxx.
Sincerely,
|
AGREED
TO and ACCEPTED
|
|
|
ST.
XXXXX XXXXX LTD.
|
this
12th
day of February, 2007
|
|
s/s
Xxxx
XxXxxxxxxx
|
|
|
Xxxx
XxXxxxxxxx
|
|
|
President
|
/s/
Xxxxxxxxx
Xxxxxx
|
|
Xxxxxxxxx
X. Xxxxxx
|
|
|
President
|
This
is
page 3 of the Letter Agreement dated February12, 2007 to Hi Ho Silver Resources
Inc. (“Hi Ho Silver”) from St. Xxxxx Xxxxx Ltd. (“St. Xxxxx”).
-
Page 4 -
SCHEDULE
"A"
To
that
Letter Agreement to HI
HO SILVER RESOURCES INC.
from
ST.
XXXXX XXXXX LTD.,
dated
the 12th
day of
February, 2007.
All
mineral claims that comprise the Property are located in the Omineca Mining
Division of British Columbia
|
TENURE
NUMBER
|
CLAIM
NAME
|
ANNIVERSARY
DATE
|
SIZE
(Ha)
|
|
541334
|
Coles
Lake South
|
Sept.
15, 2007
|
231.078
|
|
545733
|
West
Lake Gossan
|
Nov.
22, 2007
|
481.104
|
|
545736
|
West
Side
|
Nov.
22, 2007
|
481.199
|
|
545737
|
South
Rim
|
Nov.
22, 2007
|
461.953
|
|
545738
|
Camp
Zone
|
Nov.
22, 2007
|
481.341
|
|
545739
|
Augie
|
Nov.
22, 2007
|
462.221
|
|
545740
|
Center
View
|
Nov.
22, 2007
|
481.472
|
|
545741
|
Mo
|
Nov.
22, 2007
|
481.369
|
|
545742
|
Amethyst
|
Nov.
22, 2007
|
462.361
|
|
545744
|
South
Zone
|
Nov.
22, 2007
|
481.635
|
|
545745
|
East
Lake
|
Nov.
22, 2007
|
481.219
|
|
545764
|
Coles
Lake South
|
Nov.
22, 2007
|
365.62
|
|
Total
size (Ha)
|
5352.572
|
