Exhibit 4.2
HEADS OF AGREEMENT TO THE OPTION TO ACQUIRE A
60% INTEREST IN THE GRAN XXXXXXX PROPERTIES
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TUMI RESOURCES LIMITED
#0000 - 0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX X0X 0X0
Tel: (000) 000-0000 Fax: (000) 000-0000
HEADS OF AGREEMENT ("HOA")
Minera San Jorge S.A. de C.V., October 23, 2002
Aguamarina 2457, Bosques de la Victoria,
Xxxxxxxxxxx, Xxxxxxx,
Xxxxxx 00000
Attn: Mr. Xxxxxx Xxxxxxx:
Dear Sir:
Re: Right of First Refusal and Option to Earn a 60% Interest of the Gran
Xxxxxxx Previous Metal Property in Jalisco, Mexico and the Right to
Acquire the Remaining 40%
In our letter agreement dated July 15, 2002, Minera San Jorge S.A. de C.V.
("MSJ") granted Tumi Resources Limited ("Tumi") a right of first refusal to
acquire two additional projects.
This HOA sets out the terms and conditions whereby Tumi, or its Mexican
subsidiary, can acquire up to a 100% interest in MSJ's right, title and interest
in certain exploration and mining concessions in Mexico known as the Gran
Xxxxxxx Group of Claims. The concessions are listed in the attached Schedule A
and shown on the attached map. The general terms and conditions of this HOA are
as follows:
1. MSJ will represent and warrant that it is the legal and beneficial owner
or has the right to 100% of the titles to the Gran Xxxxxxx concessions
totalling approximately 3,950 ha and listed in the attached Schedule A
and shown on Schedule B, and that the concessions will be in good
standing with respect to Mexican law once past due taxes of about
US$43,000 are paid. MSJ represents that there are no underlying option
agreements with concession owners and MSJ can freely grant the option to
Tumi as contemplated by this HOA.
2. MSJ will endeavor or undertake to deliver under favorable option terms
acceptable to Tumi good title to Block "I" shown on Schedule B, attached.
MSJ will not receive any additional consideration for any concessions it
negotitates for Compania Minera Cinco Minas S.A. de C.V. in the Gran
Xxxxxxx Group of Claims (Area "C" Schedule B, attached.) However, the
option payments will remain the sole obligation of Tumi. As such, Tumi
will have final approval of any proposed options. Should Tumi refuse
final option terms, then MSJ shall be free to propose these mining or
exploration claims/concessions on similar terms to any third party of
MSJ's choosing.
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3. MSJ granted Tumi the right to earn up to a 100% interest in the Cinco
Minas claims, pursuant to a HOA dated July 6, 2002, by spending US$2.5
million over three years, making certain cash payments and issuing common
shares.
4. In order to maintain the option agreement to earn a 60% interest in the
Gran Xxxxxxx Concessions, Tumi must pay the outstanding taxes on the Gran
Xxxxxxx Concessions, fund a total of US$2.5 million in exploration
expenditures, including underlying option payments to concession holders
and government concession taxes, over a three year period, on the Grand
Xxxxxxx or Cinco Minas concessions, except that the Company agrees to
incur a minimum of US$75,000 in expenditures (including past due taxes
paid) on the Gran Xxxxxxx property in the first year, US$100,000 in the
second and US$150,000 in the third year.
5. As further consideration for this option agreement, Tumi will issue, on
TSX Venture Exchange approval of this agreement, 250,000 fully paid
common shares in Tumi, an additional 250,000 common shares on the first
anniversary and a final 250,000 common shares on the second anniversary
for a total of 750,000 fully paid common shares. MSJ acknowledges that
the shares will be subject to restrictions on resale under Canadian
securities laws and that the issuance of each tranche of shares is
dependent on TSX Venture Exchange acceptance.
6. On payment of the outstanding taxes on the Gran Xxxxxxx Concessions, MSJ
will transfer the claims to Compania Minera Cinco Minas S.A. Should Tumi
withdraw from this option agreement the Gran Xxxxxxx Concessions will be
transferred 100% back to MSJ.
7. Tumi shall be the operator of the joint venture programs and shall submit
all programs and budgets to MSJ for approval. If MSJ does not approve,
then MSJ will submit its concerns in writing and Tumi will attempt to
resolve the concerns. If it is unable to do so, Tumi will submit the
program and budget and MSJ's concerns to a reputable independent
consultant acceptable to both parties for determination of such concerns.
As the operator of the program, the final decision for implementation of
each program and budget lies with Tumi.
8. Should Tumi decide to farm out any portion of the Gran Xxxxxxx Group of
Concessions, then MSJ agrees that its 40% interest will be included in
such farmout. For greater certainty, any concessions to be farmed out
will be farmed out by Compania Minera Cinco Minas, its degignee or
assignee. Any consideration, including cash payments or shares received
on farmout or JV or outright sale will be used first, before any split
occurs on a 60/40 basis, whether the consideration is in the form or cash
or shares as follows: (1) to reimburse Tumi for any currently outstanding
mining taxes paid; (2) to reimburse or credit Tumi for any new expenses
or costs incurred by Tumi such as new option payments, exploration
expenses and administrative costs, etc.; (3) to credit or reimburse MSJ,
subject to audit US$879,614 for the Gran Xxxxxxx Concession including the
La Xxxxxxx and Ampl. La Xxxxxxx concessions; and US$67,566 for the
Xxxxxxx Concession(s) provided these can be optioned on terms acceptable
to Tumi. Any farm-out will include a retained 1% NSR (defined in standard
industry terms) split 60/40 by
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Tumi and MSJ. The NSR can be purchased for US $ 2,000,000.Tumi and MSJ
have agreed to co- operate to the fullest extent possible to come to a
mutually satisfactory joint venture agreement acceptable to the TSE
Venture Exchange as soon as possible.
9. Tumi recognizes the value of the operating experience of MSJ's personnel
and independent consultants in Mexico and will use MSJ's personnel
wherever possible including consultancy work for Xx. Xxxxxx Xxxxxxx
Xxxxxxx. MSJ acknowledges that Tumi has limited financial resources in
the initial stages of this program and that as a vendor, MSJ's personnel
will be unable to perform certain tasks attached to the initial technical
due diligence exploration program.
10. Should the property justify production and MSJ cannot fund its share of
development costs then Tumi will use its best endeavours to fund or deal
with such share according to generally accepted resource property
development agreements.
11. Tumi has the option at any time to purchase for money or the equivalent
amount in shares the remaining 40% interest that MSJ has in the Gran
Xxxxxxx Concession areas, provided that a bankable feasibility study has
been produced by Tumi Resources for the block of mines or area proposed
for development/mining. This feasibility study will establish the
reasonable commercial value of all or any part of the Xxxxxxx Group of
Concessions (Area "C" on the attached map) acquired completely by Tumi,
its value to be determined by a discounted NPV. Tumi shall have the right
of first refusal should an outside party bid for MSJ's 40% interest.
12. Tumi has the right to withdraw from this option agreement at any time
after the initial exploration program with no further obligation or
commitment to MSJ with 30 days advance notice.
Please indicate your agreement to the above terms by signing in the area below
and returning a copy of this letter to the attention of the undersigned.
Yours truly,
TUMI RESOURCES LIMITED
Per:
/s/ Xxxxx Xxxxxxxxxx 23/10/02
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Xxxxx Xxxxxxxxxx Date
President
REVIEWED, ACKNOWLEDGED AND AGREED TO THIS 23rd DAY OF October, 2002.
MINERA SAN JORGE S.A. DE C.V.
Per:
/s/ Xxxxxx Xxxxxxx
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Xxxxxx Xxxxxxx, Legal Representative, MSJ
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