MINING CONTRACT
between
MINERA SAN XAVIER, S.A. DE C.V.
And
WASHINGTON GROUP LATIN AMERICA, INC.
CERRO SAN XXXXX PROJECT
CERRO DE SAN XXXXX, MEXICO
FINAL
TABLE OF CONTENTS
PAGE
ARTICLE 1. DEFINITIONS............................................................................... 1
ARTICLE 2. INTENT OF AGREEMENT....................................................................... 4
ARTICLE 3. SCOPE OF WORK............................................................................. 4
3.1 Contractor's Facilities....................................................................... 4
3.2 Pre-Production Period and Mine Development.................................................... 5
3.3 Haul Road..................................................................................... 5
3.4 Mining........................................................................................ 6
3.4.1 Mobilization......................................................................... 6
3.4.2 Clearing and Grubbing................................................................ 6
3.4.3 Topsoil Stockpiles................................................................... 6
3.4.4 Road Construction and Maintenance.................................................... 6
3.4.5 Drilling and Blasting ............................................................... 6
3.4.6 Waste Mining......................................................................... 7
3.4.7 Ore Mining........................................................................... 7
3.4.8 Reclamation.......................................................................... 8
3.4.9 Pit dewatering....................................................................... 8
3.5 Production Schedule and Mining................................................................ 8
3.6 Other Work.................................................................................... 8
3.7 Reporting..................................................................................... 8
3.8 Meetings...................................................................................... 9
3.9 Inspection.................................................................................... 9
3.10 Concealed or Unknown Conditions............................................................... 9
ARTICLE 4. CONTRACTOR'S RESPONSIBILITIES............................................................. 10
4.1 Supervision and Direction..................................................................... 10
4.2 Use of Local Resources........................................................................ 10
4.3 Permit Conditions............................................................................. 10
4.4 Drilled and Blasted Inventory................................................................. 10
4.5 Performance of Work........................................................................... 10
4.6 Underground Voids............................................................................. 11
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TABLE OF CONTENTS
(continued)
PAGE
4.7 Security for Contractor's Property............................................................ 11
4.8 Labor, Materials and Equipment................................................................ 11
4.9 Mine Schedule................................................................................. 12
4.10 Permits; Easements and Authorizations......................................................... 12
4.11 Laws and Regulations.......................................................................... 12
4.12 Taxes and Payroll............................................................................. 13
4.13 Use of Premises............................................................................... 13
4.14 Ownership of Information, Data, Materials, Etc................................................ 13
4.15 Payment of Subcontractors and Suppliers - Liens Against Owner................................. 14
4.16 Environmental Requirements.................................................................... 14
4.17 Explosives.................................................................................... 15
4.18 Retention and Modification of Contract Documents.............................................. 15
4.19 Safety and Protection......................................................................... 15
4.20 Emergencies................................................................................... 16
4.21 Project Manager............................................................................... 17
4.22 Survey Monuments.............................................................................. 17
ARTICLE 5. OWNER'S RESPONSIBILITIES.................................................................. 17
5.1 Furnishing Data............................................................................... 17
5.2 Permits....................................................................................... 17
5.3 Explosives.................................................................................... 18
5.4 Payments...................................................................................... 18
5.5 Availability of Property...................................................................... 18
5.6 Reference Points.............................................................................. 18
5.7 Aerial Survey................................................................................. 18
5.8 Surveying and Mapping of the Work............................................................. 18
5.9 Assaying and Ore Control...................................................................... 18
5.10 Mine Planning................................................................................. 19
5.11 Utilities and Fuel............................................................................ 19
5.12 Owner's Representative........................................................................ 19
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TABLE OF CONTENTS
(continued)
PAGE
5.13 Security for the Property..................................................................... 19
ARTICLE 6. WARRANTIES................................................................................ 19
6.1 Contractor's Warranty......................................................................... 19
6.1.1 Workmanship.......................................................................... 20
6.1.2 Labor................................................................................ 20
6.1.3 Other................................................................................ 20
6.2 Notice by Owner............................................................................... 20
6.3 Access to Work................................................................................ 20
6.4 Owner May Stop the Work....................................................................... 21
6.5 Correction or Removal of Defective Work....................................................... 21
6.6 Acceptance of Defective Work.................................................................. 21
6.7 Owner May Correct Defective Work.............................................................. 21
6.8 Exclusive Remedy for Defective Work........................................................... 21
ARTICLE 7. CONTRACT TERM............................................................................. 22
ARTICLE 8. CONTRACT PRICE............................................................................ 22
8.1 Target Budget................................................................................. 22
8.2 Actual Compensation........................................................................... 22
8.2.1 Cost of Work......................................................................... 22
8.2.2 Fee.................................................................................. 23
8.3 Incentive Adjustment ......................................................................... 23
8.3.1 Underruns............................................................................ 23
8.3.2 Overruns............................................................................. 23
8.3.3 Changes.............................................................................. 23
8.4 Productivity Improvement Option............................................................... 24
8.5 Mobilization.................................................................................. 24
8.6 Haul Road Price............................................................................... 24
8.7 Change Orders................................................................................. 24
ARTICLE 9. PAYMENT................................................................................... 25
9.1 Equipment Lease Payments...................................................................... 25
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TABLE OF CONTENTS
(continued)
PAGE
9.2 Quantity Measurement for Purposes of Payment.................................................. 25
9.3 Invoices ..................................................................................... 25
9.4 Haul Road Invoices............................................................................ 26
9.5 Payment for Change Orders..................................................................... 26
9.6 Inspection Upon Completion or Termination..................................................... 26
9.7 Final Payment and Acceptance.................................................................. 26
9.8 Records and Audit............................................................................. 27
9.9 Resolution.................................................................................... 27
ARTICLE 10. CONFIDENTIALITY........................................................................... 27
ARTICLE 11. INSURANCE................................................................................. 28
11.1 Contractor's Insurance........................................................................ 28
11.1.1 Coverage............................................................................. 28
11.1.2 Contractor's Property................................................................ 29
11.1.3 Endorsements and other Provisions.................................................... 29
11.1.4 Certificates......................................................................... 29
11.1.5 Failure to Maintain.................................................................. 30
11.2 Owner's Insurance............................................................................. 30
11.2.1 Coverage............................................................................. 30
11.2.2 Endorsements and other Provisions.................................................... 31
11.2.3 Certificates......................................................................... 31
11.3 Owner's Bond.................................................................................. 31
11.4 Subcontractors................................................................................ 31
11.5 Effect of Insurance .......................................................................... 31
ARTICLE 12. SUSPENSION OF WORK AND TERMINATION........................................................ 32
12.1 Suspension of Work............................................................................ 32
12.2 Termination by Owner.......................................................................... 32
12.2.1 Termination for Convenience of Owner................................................. 32
12.2.2 Termination for Default of Contractor................................................ 33
12.3 Termination by Contractor for Default or Owner' Breach........................................ 35
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TABLE OF CONTENTS
(continued)
PAGE
12.4 Remedy Not Exclusive.......................................................................... 36
ARTICLE 13. FORCE MAJEURE............................................................................. 36
ARTICLE 14. NOTICES AND PAYMENTS...................................................................... 37
ARTICLE 15. DISPUTES AND ARBITRATION.................................................................. 38
15.1 Mediation..................................................................................... 38
15.1.1 Mediation Hierarchy.................................................................. 38
15.1.2 Procedure............................................................................ 38
15.2 Arbitration................................................................................... 38
ARTICLE 16. ASSIGNMENT AND SUBCONTRACTS............................................................... 39
16.1 Assignment - General.......................................................................... 39
16.2 Assignability by Owner........................................................................ 39
16.3 Subcontracts.................................................................................. 39
ARTICLE 17. GOVERNING LAW............................................................................. 40
ARTICLE 18. INDEMNITY................................................................................. 40
ARTICLE 19. MISCELLANEOUS............................................................................. 40
19.1 Entire Agreement; Amendment................................................................... 40
19.2 Counterparts.................................................................................. 41
19.3 Severability.................................................................................. 41
19.4 Headings...................................................................................... 41
19.5 Waivers....................................................................................... 41
19.6 Consequential Damages......................................................................... 41
19.7 Limitation of Liability....................................................................... 41
19.8 U. S. Export Regulations...................................................................... 42
19.9 Foreign Corrupt Practices Act................................................................. 42
19.10 Conflicting Language.......................................................................... 42
19.11 Survival of Obligations....................................................................... 42
19.12 Other Contractors............................................................................. 42
19.13 Rights of Various Interests................................................................... 43
19.14 Non-Payment of Remuneration to Owner's Employees.............................................. 43
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TABLE OF CONTENTS
(continued)
PAGE
19.15 Discrepancies................................................................................. 43
19.16 Independent Contractor........................................................................ 43
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EXHIBITS
EXHIBIT A CONTRACT PRICE INCLUDING MOBILIZATION AND
DEMOBILIZATION
EXHIBIT B EQUIPMENT LEASE TERMS
EXHIBIT C HOURLY LABOR AND EQUIPMENT RATES
EXHIBIT D MINE SCHEDULE
EXHIBIT E LIST OF DRAWINGS AND SPECIFICATIONS
EXHIBIT F PROPERTY DESCRIPTION
EXHIBIT G STAND-BY RATES
EXHIBIT H DEMOBILIZATION SCHEDULE
EXHIBIT I PRICE ADJUSTMENT
EXHIBIT J TERMINATION SCHEDULE
EXHIBIT K PERMIT CONDITIONS
EXHIBIT L SECURITY BOND
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MINING AGREEMENT
THIS AGREEMENT is entered into as of ________________, 2003 (the
"Effective Date") between Minera San Xavier, S.A. de C.V., a Mexican
corporation, (a subsidiary of Metallica Resources Inc., a Canadian corporation),
("Owner"), and Washington Group Latin America, Inc., a Delaware, U.S.A.
corporation (a subsidiary of Washington Group International, Inc., an Ohio
corporation) ("Contractor").
WHEREAS, Owner owns and operates the Mine;
WHEREAS, Owner desires to engage the services of an independent contractor
to drill, blast, excavate, mine and haul certain quantities of Ore and Waste
material at the Mine, and to construct access and facilities to enable the
efficient performance of the same;
WHEREAS, Contractor is engaged in the business of drilling, blasting,
excavating, mining, hauling, and performing construction-related services and
desires to perform such services at the Mine, as necessary to implement the
Work; and,
WHEREAS, Contractor agrees to (i) furnish the experience, knowledge, skill
and judgment required to cooperate with and advance the interests of Owner
through industry standard mining methods, careful supervision and efficient
administration and (ii) implement the Work expeditiously, timely and
economically consistent with the interests of Owner, all of which Contractor is
able and willing to do for the compensation and in accordance with the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for other good and valuable consideration hereinafter set forth, Owner and
Contractor agree as follows:
ARTICLE 1.
DEFINITIONS
Wherever used in this Agreement, the following terms have the meanings
indicated which are applicable to both the singular and plural thereof:
"Agreement" shall mean the understanding between Owner and Contractor
regarding the Work, as embodied in this executed document, including all
Contract Documents.
"Bank Cubic Meters" or "BCM", as used herein shall mean the volume of Ore
and Waste in place before drilling, blasting or ripping.
"Billing Period" shall mean the time period between the 15th day of one
month until the 15th day of the next month with respect to the Equipment Lease
Payment and shall mean the time
period between the end of one month and the end of the next month with respect
to payment for performance of the Work.
"Change Order" shall mean a written notice by Owner specifically
identified as such for a Variation in accordance with Section 8.7.
"Contract Documents" shall mean all Exhibits, Drawings, Specifications,
Tables, and Schedules attached to or incorporated by reference into the
Agreement and any Change Orders hereafter issued in connection with the Work.
"Contract Price" shall mean the monies payable by Owner to Contractor
denominated in U.S. Dollars pursuant to this Agreement.
"Contract Term" shall mean the term during which this Agreement shall be
effective as set forth in Article 7.
"Contract Year" shall mean each consecutive twelve (12) month period
commencing at completion of the Pre-Production Period.
"Contractor's Representative" shall mean Contractor's duly authorized
representative appointed to administer this Agreement, as described in Section
4.21.
"Day" shall mean a calendar day unless otherwise specified.
"Defective" shall mean, when describing the Work, Work that fails to
comply with this Agreement, applicable laws, rules and regulations, standard
industry practices or permit conditions.
"Development Plan" shall mean the plan dated September 2003 delivered by
Contractor to Owner describing the development of the Project
"Drawings" shall mean the drawings, prepared or approved by Owner, which
show the character and scope of the Work to be performed pursuant to this
Agreement and which are attached hereto as Exhibit E, as such drawings may be
revised, amended or supplemented from time to time during the Contract Term.
"Equipment" shall mean all machinery, apparatus, tools, appliances,
materials, articles and all other items required to be provided by Contractor to
carry out the Work.
"Equipment Lease Payment" shall have the meaning set forth in Section 9.1.
"Event of Force Majeure" shall mean any event that is not reasonably
foreseeable and is beyond the reasonable control and without the fault or
negligence of the party relying thereon,
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including, but not limited to: acts of God; declared or undeclared war;
terrorism; riots; civil commotion; natural disasters; fires; floods; epidemics;
quarantine restrictions; strikes; freight embargos; governmental injunctions;
orders or prohibitions; changes in law; unusually severe weather; delays of
Subcontractors or suppliers due to such causes; or material adverse changes in
the economics of the Project, as contemplated in the Development Plan, so as to
render the assumptions and conclusion therein inapplicable.
"Extra Work Rate Schedules" shall mean the schedules set forth in Exhibit
C as such schedules may be amended from time to time in accordance with this
Agreement.
"Ground Penetrating Radar" shall mean electronic equipment used to produce
images of conditions beneath the surface of the ground useful in detecting
subsurface voids.
"Haul Road" shall have the meaning set forth in Section 3.3.
"Labor" shall mean all labor and services of any description (supervisory,
skilled, or unskilled) necessary for the performance of the Work.
"Mine Schedule" shall mean the schedule of Mine production set forth on
Exhibit D as such schedule may be amended from time to time in accordance with
this Agreement.
"Mine" or "Cerro San Xxxxx Mine" shall mean the Ore deposit and associated
Waste and overburden located on the Property.
"Mining" shall have the meaning as set forth in Section 3.4.
"Ore" shall mean mineralized rock that has been characterized by Owner as
economic and which is to be segregated from Waste rock as quantified in Exhibit
D.
"Other Contractor" shall mean any other person, firm, or corporation
employed by Owner on the Project and any Subcontractor of any such person, firm,
or corporation otherwise than through Contractor.
"Other Work" shall mean any Work under this Agreement described in Section
3.6.
"Owner's Representative" shall mean Owner's duly authorized representative
appointed to administer this Agreement pursuant to Section 5.12.
"Pre-Production Period" shall mean the time period in which Work is being
done by Contractor at the Site to prepare the Mine to produce Ore on a
sustainable basis as further described in Section 3.2.
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"Project" shall mean the Cerro San Xxxxx Mine Project of which the Work
may be the whole or part.
"Project Manager" shall mean that person employed by Contractor to oversee
and manage the Work at the Work site as set forth in Section 4.21.
"Property" or "Site" shall mean the real property situated in Cerro San
Xxxxx, Mexico, owned or controlled by Owner as the same may change from time to
time and which, as of the Effective Date, includes those properties located on
lands more particularly described in Exhibit F.
"Specifications" shall mean those portions of this Agreement incorporated
herein that consist of written technical descriptions of materials, equipment,
construction systems, standards, and workmanship as applied to the Work and
certain administrative details applicable thereto.
"Subcontractor" shall mean an individual, firm, corporation, association,
partnership or other entity having a direct contract with Contractor or with any
other Subcontractor for the performance of any part of the Work.
"Variations" shall mean any variation, alteration, amendment, deletion or
addition to the Work as set forth in Change Orders.
"Waste" shall mean all rock material other than Ore, which, pursuant to
this Agreement, is mined as quantified in Exhibit D.
"Work" shall mean all or any portion of the Labor, services or materials
required to be performed or furnished by Contractor pursuant to this Agreement.
ARTICLE 2.
INTENT OF AGREEMENT
It is the intent of this Agreement and the Contract Documents to
completely describe the Work and the roles and responsibilities of the parties
with respect to the Work and each other.
ARTICLE 3.
SCOPE OF WORK
3.1 CONTRACTOR'S FACILITIES
Contractor shall provide maintenance facilities for the Equipment and for
the operation of the Mine. Work and facilities that are the responsibility of
Contractor consist of the following:
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- Mining area grading and Site preparation,
- Erection of Contractor's shop and office,
- Utility tie-ins,
- Construction of warehousing and storage areas,
- Construction of fueling and lubrication facilities, exclusive of diesel
fuel storage tanks, and
- Construction of a water distribution system for the Mine from Owner's
water storage tanks, exclusive of the water storage tanks.
The Equipment maintenance and lubrication facilities shall have an impermeable
surface to prevent fuels, lubricants, chemicals, and contaminated water from
entering the soil.
3.2 PRE-PRODUCTION PERIOD AND MINE DEVELOPMENT
Owner shall provide a pre-production Mining sequence to Contractor.
The Pre-Production Period shall commence with pre-stripping of Waste, and
construction of the Haul Road, as described in Section 3.3 and shall continue
for approximately nine (9) months thereafter. During the Pre-Production Period,
Contractor shall perform all pioneering Work necessary to bring Equipment to the
top of the pit wall and begin the cut required for pit development. Contractor
shall be responsible to insure that material loosened by its machinery and
blasting on the crest and slopes of the hills above the town of Cerro de San
Xxxxx will be contained so as to not roll into the town of Cerro de San Xxxxx.
3.3 HAUL ROAD
Contractor shall construct a haul road from the Mine to the xxxxx pad area
(the "Haul Road") during the Pre-Production Period to accommodate the Mine haul
trucks hauling Ore to the heap xxxxx area. Construction of the Haul Road
includes placement of Mine Waste fill, drilling, blasting, and ripping of cut
material, dozing or loading/hauling and placement of cut material, cutting of
ditches and placement of safety berms along the Haul Road, and final capping and
grading of the Haul Road. The Haul Road will be constructed following an
alignment that has been developed by Owner and Contractor at a width and grade
to allow for safe use by the Mine haul trucks. Contractor shall not be
responsible for the design and construction of the San Xxxxx River and Cerro de
San Xxxxx road crossings, which will be designed and constructed by Other
Contractors; provided, that Contractor shall provide random fill for the
construction of such crossings. Contractor shall construct the Haul Road for a
lump-sum price as described in Section 8.6.
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3.4 MINING
Contractor shall perform Mining in accordance with the terms and
conditions set forth in this Agreement. Without restricting the generality of
the foregoing, Mining, includes, but is not limited to:
3.4.1 Mobilization
Mobilization and establishment of Labor and Equipment on Site, and
the demobilization and disestablishment of same.
3.4.2 Clearing and Grubbing
Clearing and grubbing of Contractor's area, pit, stockpile, and
Waste dump areas and all other areas required for execution of the
Work; stripping of topsoil and placing in stockpiles as directed by
Owner.
3.4.3 Topsoil Stockpiles
Establishment and maintenance of topsoil stockpiles, and Waste dump
areas in accordance with Owner's requirements. Plant material shall
be stockpiled for use of the local population or for future
reclamation activities.
3.4.4 Road Construction and Maintenance
Construction, maintenance and dust suppression of access, haul and
other roads, including temporary ramps, all Work areas on the
Property and roads as directed by Owner and as reasonably
anticipated by the Development Plan and Specifications. In all
construction Work involving fill material, Contractor shall maintain
existing drainage, or provide alternate drainage paths or runoff
control for surface water from precipitation.
Contractor shall be responsible for grading and maintaining berms on
roads and waste dumps. Salts, such as magnesium chloride, or other
surface treatments shall be provided by Owner (or Contractor at
Owner's expense) and shall be used on the roads to minimize water
consumption in dust control.
3.4.5 Drilling and Blasting
Drilling and blasting of Waste and Ore material in accordance with
Exhibit D; Contractor shall maintain a size distribution in the
blasted Ore material suitable for gold extraction through the heap
xxxxx process. Contractor shall provide adequate and safe access to
Owner's personnel for purposes of sampling the drill cuttings to
determine optimal Ore / Waste boundaries.
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Due to the proximity of the Mine to the town of Cerro de San Xxxxx
and to the historic church of San Xxxxx Xxxxxxx, Contractor shall
coordinate closely with Owner to carefully monitor blasting. Crushed
stone for stemming shall be used, if required, to minimize fly-rock,
and to improve fragmentation of the Ore material.
To enhance the performance of the heap xxxxx process, the size
distribution of Ore material shall have a maximum dimension of 900
mm.
Peak particle velocity at the church shall be limited to 0.5 ft/sec,
(which is the UNITED STATES BUREAU OF MINES standard for old
construction). Monitor points, installed and monitored by Owner,
shall include the dome and corners of the foundation of the San
Xxxxx Xxxxxxx church, as well as strategic points to be determined
by Owner within the town of Cerro de San Xxxxx. This may require the
use of decking and/or smaller holes in the area close to the town.
Exact blasting parameters to be followed by Contractor will be based
on test blasting and/or initial operating experience.
3.4.6 Waste Mining
Excavating, loading, hauling and dumping Waste from the Mine, in
accordance with the Mine Schedule issued by Owner and attached
hereto as Exhibit D. Waste material shall be loaded as per the
Owner's Ore/Waste instructions. The Waste shall be transported to
the dump area designated by Owner.
Contractor shall maintain dumps in a safe manner including but not
limited to providing for:
- Safety berms,
- Adequate lighting for night operation,
- Face height and crest shape,
- Final reclamation slope requirements near dump limits,
- Encapsulation of potential acid generating material
containing sulfides as identified by Owner, and
- Surface drainage to minimize rain water entering the dump.
3.4.7 Ore Mining
Excavating, loading, hauling and xxxxx pad placement of Ore material
shall be loaded as directed by Owner's Ore/Waste selection. The Ore
shall be transported to the xxxxx pad area and stacked in accordance
with Owner's pad loading plan. Contractor shall observe traffic
patterns on the heap to limit compaction of the Ore, and shall
perform a dozing and ripping program to insure permeability of the
Ore prior to irrigating with xxxxx solution.
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3.4.8 Reclamation
Demolition and reclamation of Contractor's maintenance facilities
shall be considered part of the Contractor's demobilization cost.
Reclamation of dumps, roads and cleared areas as required by Owner
shall be negotiated separately and is not part of the scope of Work
defined in this Agreement.
3.4.9 Pit dewatering
Pit dewatering including pumping or other diversion of surface water
and rain run-off water to a location designated by Owner. Any
dewatering of underground water or construction of sediment control
structures which may be required under this Agreement shall be the
responsibility of Owner or shall be performed by Contractor as Other
Work, according to Owner's direction. Contractor shall maintain
drainage control around the pit to minimize runoff that enters the
pit and erosion of areas around the pit.
3.5 PRODUCTION SCHEDULE AND MINING
The Mine Schedule shall be determined by Owner and incorporated into this
Agreement as Exhibit D, and shall be updated as production experience and
geology indicate. Standby time shall be paid by Owner to Contractor at the
applicable rates set forth in Exhibit G as such rates may be amended from time
to time by Contractor after discussions with Owner.
At Owner's discretion, specific Work to be performed according to the
Mining Schedule may be changed for the week or month as long as the product of
the quantities multiplied by haul distances of production remains within 10% of
the monthly schedule or 5% of the quarterly schedule as set forth in Exhibit D.
3.6 OTHER WORK
From time to time during the Contract Term, Owner may have other
miscellaneous Work requirements for which it shall request the services of
Contractor. Contractor shall exercise all reasonable efforts to comply with such
requests. Such Other Work shall be conducted only at the written direction of
Owner, and shall be paid for in accordance with the hourly rate calculations
established in Exhibit C, unless agreed otherwise in a written Change Order
signed by Owner and Contractor;
3.7 REPORTING
Contractor shall provide Owner with timely production reports on a weekly,
monthly, and annual basis as agreed by Owner and Contractor. The reporting of
production shall include, but is not limited to:
- Locations of loading equipment by bench designation,
- Truck counts for all material moved by bench and destination, and truck
load factor used,
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- Number of drill holes drilled, loaded with explosive and shot,
- Quantity of explosive used and number of holes using decked charges,
- Safety violations and incident or accident investigations and the results
thereof,
- Fuel consumption and hours operated for each piece of Equipment, and
- Electric power consumption.
3.8 MEETINGS
Contractor's Representative and Owner's Representative shall meet as
reasonably required to review Contractor's progress of Work and to outline
daily, monthly, and annual activities required to implement the Work.
3.9 INSPECTION
Contractor shall inspect the Property and workings thereon and shall take
all action reasonably necessary to inform itself as to the character of all
conditions, favorable and unfavorable, to the performance of the Work prior to
commencement of performance, including complying with applicable laws,
regulations, ordinances, permits and licenses.
3.10 CONCEALED OR UNKNOWN CONDITIONS
In the event Contractor encounters conditions on the Property which are
(a) subsurface or otherwise concealed physical conditions of a nature which
differ materially from those ordinarily found to exist and generally recognized
as inherent in Mining activities of the character provided for in the Contract
Documents or (b) unknown physical conditions of an unusual nature, and not
generally recognized as inherent in Mining activities of the character provided
for in the Contract Documents, Contractor shall promptly inform Owner of such
conditions before such conditions are disturbed and in no event later than seven
(7) days after the first observance of the conditions. Owner shall promptly
investigate such conditions and, if they differ materially from those ordinarily
encountered and cause an increase or decrease in Contractor's cost of, or time
required for, performance of any part of the Work, Owner shall recommend an
equitable adjustment in the Mine Schedule, Contract Price and/or Contract Term,
as applicable. If Owner determines that the conditions at the Property are not
materially different from those indicated in the Agreement or are generally
recognized as inherent in Mining activities of the character provided for in the
Contract Documents, and that no change in the terms of the Agreement is
justified, Owner shall so notify Contractor in writing, stating the reasons.
Claims by Contractor in opposition to such determination must be made within
twenty-one (21) days after Owner has given such notice of the decision.
The existence of prior underground workings within the pit area is known,
including the area of the Gran Hundido. Maps of the workings to the extent known
to Owner are attached as Exhibit E.
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ARTICLE 4.
CONTRACTOR'S RESPONSIBILITIES
4.1 SUPERVISION AND DIRECTION
Contractor shall supervise and direct all Work and shall ensure that the
Work is conducted in accordance with the standard of care described in Section
6.1.1. Contractor shall be solely responsible for the means, methods,
techniques, sequences and procedures of the Work and for coordinating all
aspects of the Work to meet Owner's objectives, including without limitation the
objectives of Mining the Property for the production and segregation of Ore and
Waste. Contractor shall be responsible for ensuring that all Work complies fully
with the requirements of this Agreement. Notwithstanding the foregoing, Owner
shall have the right to provide overall planning, oversight and direction for
the Work to be performed pursuant to this Agreement.
4.2 USE OF LOCAL RESOURCES
Contractor shall make commercially reasonable efforts in compliance with
permit requirements to use local resources (materials and Labor) in performance
of the Work. Contractor shall maximize the number of Mexican citizens in
management and supervisory roles, and endeavor to use all national staff for the
operating, maintenance and labor force. Contractor shall use commercially
reasonable efforts to maximize the use of local materials and suppliers.
4.3 PERMIT CONDITIONS
Contractor shall comply with all licensing and permitting requirements
necessary to perform the Work as required by this Agreement. Contractor is
responsible for fully informing itself of all local and federal Mexican laws,
regulations, taxes, permit requirements, etc., applicable to the Work, including
but not limited to those conditions set forth in three letters from the
Secretaria de Medio Ambiente, Recursos Naturales (SEMARNAT) dated February 26,
1999, September 3, 2001, and April 2, 2002 respectively, attached hereto as
Exhibit K.
4.4 DRILLED AND BLASTED INVENTORY
Contractor shall, as soon as Mine development permits, maintain an in-pit
inventory of broken material, as required for flexibility to meet the Mine
Schedule production requirements. Contractor shall maintain a broken in-pit
reserve of Ore and Waste as reasonably determined by Owner to maximize the
efficiency of short term planning and to avoid production delays.
4.5 PERFORMANCE OF WORK
Contractor shall perform the Work according to the professional standard
of care and performance set forth in Section 6.1.1, using qualified Labor, and
in accordance with Owner's directions. In addition, Contractor shall conform the
Work to the Agreement and to any
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applicable orders or regulations of any lawful body having the right to require
that the Work be performed in the manner specified by such body.
Contractor shall promptly notify Owner, in writing, of any facts or
conditions which would affect the Contractor's ability to maintain the Mine
Schedule, to meet the stipulated completion dates, or to meet the required
production levels. If Contractor fails to maintain the progress necessary for
the completion of the phase or activity and/or the production levels required by
the Mine Schedule, except as limited by Article 13 (Force Majeure), Owner shall
have all rights and remedies provided by this Agreement including those set
forth in Paragraph 12.2 (Termination by Owner). In addition, Owner shall be
entitled to order Contractor to take such actions, at the Contractor's expense,
including supplying additional Labor, working additional hours or furnishing
additional Equipment as Owner deems necessary to regain and thereafter maintain
the progress required by the Mine Schedule.
4.6 UNDERGROUND VOIDS
Contractor shall use Ground Penetrating Radar, extended blast holes, or
other similar techniques to supplement the existing mapping of currently known
underground works. Safe operation, blasting practice, and production accounting
will require the best possible information on the existence of void spaces in
the rock mass.
4.7 SECURITY FOR CONTRACTOR'S PROPERTY
Notwithstanding Owner's obligation to provide perimeter and general Site
security pursuant to Section 5.13, Contractor shall be responsible for
protection within the Site of Contractor's Equipment and facilities under its
control, and the active Work areas under the Contractor's control.
4.8 LABOR, MATERIALS AND EQUIPMENT
Contractor shall furnish materials, Equipment, Labor, transportation, and
machinery, tools, appliances, lubricants, maintenance and office facilities,
compressed air and field sanitary facilities and other facilities, and
incidentals necessary for the completion of the Work. Owner shall supply water,
power, fuel, fuel tanks, water tanks, telephones and radio repeater access to
Contractor facilities, which shall be located in a location specified by Owner
and agreed to by Contractor. Contractor shall supply mine radios, bear charges
for telephone use and provide any other facilities it deems necessary to
complete its obligations under this Agreement. Contractor shall be responsible
for protection of, policing of, and quality control of Contractor's materials.
Contractor shall employ sufficient Labor to ensure that the Work is fully,
properly and timely performed in accordance with the terms and conditions of
this Agreement. Labor shall have adequate training, skill and experience to
perform the Work assigned to them. Labor engaged in special or skilled Work
shall have sufficient experience with such Work and the operation of Equipment
associated therewith.
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Contractor shall cause all persons performing Labor for Contractor to
adhere to the safety and conduct rules of Contractor and Owner at the Site and
shall immediately remove from the Site any person employed by Contractor or any
Subcontractor who Contractor determines to be incompetent, disorderly or
intemperate, who violates safety rules or who interferes in any way with the
operations of Owner or Other Contractors on the Site and all such persons shall
be denied further admission to the Site. Upon Owner's written request,
Contractor shall immediately remove from the Site, any superintendent, assistant
or xxxxxxx who for any due cause is unsatisfactory to Owner and such removal has
been discussed with Contractor. Owner shall not be liable for any costs incurred
by Contractor resulting from such removal including any indemnity or
compensation or replacement cost.
4.9 MINE SCHEDULE
Contractor shall perform the Work under this Agreement producing
quantities consistent with the Mine Schedule attached hereto as Exhibit D. If
Contractor falls behind such Mine Schedule for any reason other than a
suspension of Work as described in Article 12 or an event of Force Majeure, then
Contractor must, at no additional cost to Owner, take additional steps to
improve its progress, including bringing in additional Labor and Equipment to
recover Mine Schedule. Contractor shall be deemed to be behind Mine Schedule if,
in any month of any Contract Year, it has excavated, loaded, hauled and dumped
pro rata less than ninety percent (90%), or if in any quarter, it has excavated,
loaded, hauled and dumped pro rata less than ninety five percent (95%) of the
Ore and Waste stipulated in Exhibit D to be excavated, loaded, hauled and
dumped, unless directed to deviate from the Mine Schedule by the Owner. If
Contractor persistently fails to take additional steps to recover the Mine
Schedule, Owner may withhold monthly payments (other than Equipment Lease
Payments) until Contractor achieves recovery of the Mine Schedule or achieves
what the parties agree upon as a reasonably achievable recovery of the Mine
Schedule. Contractor shall be deemed to have persistently failed to recover the
Mine Schedule if at the end of a calendar month or quarter, as applicable, the
Mine Schedule has not been met and Contractor has failed to meet the 90% monthly
minimum stated above in this Section in any three or more of the immediately
preceding twelve months or has failed to meet the quarterly 95% minimum in any
two or more of the immediately preceding eight quarters.
4.10 PERMITS; EASEMENTS AND AUTHORIZATIONS
Contractor shall obtain those governmental permits, licenses, contracts
and authorizations necessary to perform the Work, except those which (a) have
been obtained by Owner prior to the execution of this Agreement and/or (b) Owner
is obligated by law to obtain, such as the mining permit. The parties shall
cooperate with each other to obtain permits, licenses, easements, rights of
ways, contracts and authorizations to complete the Work.
4.11 LAWS AND REGULATIONS
Contractor shall give such notices and comply with those laws, ordinances,
rules, regulations and court or governmental orders applicable to the Work.
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4.12 TAXES AND PAYROLL
Contractor shall pay salaries and wages, including fringe benefits,
subsistence and other benefits required by law or applicable collective
bargaining agreements for Work performed by its employees. Contractor shall
deduct or withhold from such wages and salaries where required and pay
contributions and taxes due under income tax laws, insurance contributions,
unemployment compensation and other similar statutes, ordinances or regulations.
Contractor shall pay personal property taxes applicable to its Work and
Equipment. Contractor shall communicate with Owner regarding general information
as to prevailing wages and salary rates for workers in the vicinity of the
Project so as to facilitate Owner's and Contractor's ability to maintain stable
work forces. Contractor is not required to disclose specific cost data regarding
its employees.
4.13 USE OF PREMISES
Contractor shall confine all Equipment, the storage of materials and
Equipment, and the activities of Labor to the Property or such other areas
permitted by law, ordinances, permits or this Agreement.
During progress of the Work, Contractor shall keep its facilities
maintained in a clean, safe and orderly condition and the Property free from
accumulations of waste materials, rubbish and other debris resulting from the
Work. Contractor shall ensure that the facilities, buildings and Work areas for
which Contractor is responsible are maintained according to standard industry
conditions. Refuse disposal areas shall be designated by Owner. Refuse left by
Contractor in other areas may be cleaned up by Owner at Contractor's cost
following forty-eight (48) hours notice given to Contractor by Owner. Toxic and
hazardous materials generated by Contractor from materials brought onto the Site
by Contractor in connection with the Work shall not be disposed of on the
Property but shall be removed by Contractor to a government authorized disposal
site.
Upon termination or expiration of this Agreement, Contractor shall remove
its waste materials, rubbish and debris from and about the Property as well as
its tools, appliances, Equipment and machinery, and surplus materials, and shall
leave the Site ready for occupancy by Owner. Contractor shall have six (6)
months to remove its Equipment and materials from the Property. Upon termination
or expiration of this Agreement, Contractor shall remove its Labor from the
Property and shall deliver possession thereof to Owner.
4.14 OWNERSHIP OF INFORMATION, DATA, MATERIALS, ETC.
All information and data obtained during the performance of the Work shall
be the sole and exclusive property of Owner, with the exception of Contractor's
cost related information. Owner shall also have exclusive ownership of all
material on the Property, including but not limited to the following: rocks,
ores or mineral specimens; materials purchased for Site construction; any and
all fixtures, improvements, buildings or facilities existing on or affixed to
the Property; and all other items of personal property and equipment other than
the Equipment, buildings, facilities and materials owned by Contractor or its
Subcontractors and brought onto
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the Property by Contractor or its Subcontractors to complete the Work. Removal
by Contractor of any such or similar property of Owner, without Owner's prior
written consent, is strictly prohibited.
4.15 PAYMENT OF SUBCONTRACTORS AND SUPPLIERS - LIENS AGAINST OWNER
Contractor shall promptly pay for Labor and materials supplied to it in
conjunction with its performance of the Work. Contractor shall keep Owner's
title to the Property and workings, equipment improvements, facilities, fixtures
and appurtenances to or on the Property free and clear of all liens and
encumbrances whatsoever that may arise by or through Contractor's or its
Subcontractors' performance of the Work. In the event that any lien or
encumbrance is filed against the Property prior to payment of all compensation
due to Contractor under this Agreement, and if such lien or encumbrance is not
paid, bonded around or discharged by Contractor, Owner may, but is not obligated
to, pay or discharge such liens and encumbrances from any funds retained by
Owner which are due to Contractor. To the extent that such retained funds are
insufficient to cover the costs associated with discharging any liens or
encumbrances Owner may, but shall not be obligated to, pay or discharge any
liens or encumbrances from its own funds and shall have a claim against
Contractor for such amounts and Contractor shall be obligated to reimburse Owner
therefor. The provisions of this paragraph shall survive any termination or
expiration of this Agreement notwithstanding any payment or settlement between
the parties unless such settlement is in writing and such writing explicitly
refers to this paragraph.
4.16 ENVIRONMENTAL REQUIREMENTS
Contractor shall comply with applicable health, safety, and environmental
protection regulations associated with the Work.
Owner acknowledges that in Owner's processing operations, Contractor has
no discretion or control under this Agreement regarding the release,
transportation, storage, remediation or disposal of any Materials of
Environmental Concern (as defined below), and that Contractor has no authority
to make decisions or implement actions or mechanisms to prevent and xxxxx damage
caused by disposal, transportation, storage, remediation and release of those
Materials of Environmental Concern. Owner shall indemnify, defend at Owner's
cost and hold Contractor and its affiliates harmless from any and all liability
associated with the release, transportation, storage, remediation or disposal of
Materials of Environmental Concern except insofar as such liability is
determined to have been caused by the negligence or intentional misconduct of
Contractor.
Owner shall remain solely responsible and indemnify Contractor for, and
Contractor shall not assume any responsibility for and shall in no event be
liable for, (a) the environmental condition of the Property on or prior to the
Effective Date of this Agreement, (b) any Materials of Environmental Concern
which have arisen on or prior to the Effective Date or hereafter arise from, or
are otherwise related to, activities or operations of whatever nature presently
or formerly conducted on or about the Property by Owner or third parties (other
than Contractor or its Subcontractors), or (c) liability arising under any
regulations, law, ordinance, rule, order or
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guidance documents now in effect or later enacted or issued and pertaining to
such activities or operations.
Contractor shall be fully responsible for unauthorized releases or
discharges or improper handling of petroleum, oil, fuel that is placed in
Contractor's control, solvents and other Materials of Environmental Concern
generated by Contractor or brought onto the Site by Contractor for use in
connection with its Equipment or in the performance of the Work, or hazardous or
toxic waste therefrom.
For purposes of this Section, "Materials of Environmental Concern" shall
mean (a) those substances included within the statutory and/or regulatory
definitions of "hazardous substance," "hazardous waste," "extremely hazardous
substance," "regulated substance," "hazardous materials," or "toxic substances,"
under any applicable federal, state or local law, rule or regulations pertaining
to the protection of the environment as such regulations are updated and amended
from time to time; (b) any material, waste or substance which is (i) petroleum,
oil or a component thereof, (ii) any chemical, chemical released from the rock,
or chemically-treated residue, (iii) explosives, (iv) radioactive materials
(including naturally occurring radioactive materials), or (v) solid wastes that
pose imminent and substantial endangerment to human health and safety or the
environment; and (c) other substances, materials or wastes that are or become
classified or regulated as hazardous or toxic under any applicable federal,
state or local law, rule or regulation.
4.17 EXPLOSIVES
Contractor shall utilize explosives in compliance with applicable permits
and other applicable laws and regulations and under the terms of an explosives
license held by Owner.
4.18 RETENTION AND MODIFICATION OF CONTRACT DOCUMENTS
Contractor shall keep one record copy of all Specifications, Drawings, and
of all addenda and modifications thereto, in good order and annotated to show
all changes made during the Contract Term. These documents shall be available to
Owner for examination and copying and shall be delivered to Owner upon
expiration or termination of this Agreement. No changes to this Agreement or to
any of the documents referenced in this Section shall be effective unless in
writing and executed by both Owner and Contractor.
4.19 SAFETY AND PROTECTION
Prior to commencement of the Work, Contractor shall prepare and submit to
Owner for its approval a written safety plan conforming with applicable
regulatory requirements, consistent with Owner's safety policies and procedures
at the Site (to be provided by Owner and reviewed by Contractor prior to
mobilization), and setting forth key performance indicators, safety procedures
and policies and reporting and administrative systems. Owner shall have the
right, at any time and from time-to-time, to reasonably change, alter, modify,
or reject Contractor's safety plan. Contractor shall comply with the written
directives of Owner concerning safety or, if
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Contractor deems compliance with such directives unreasonable or unachievable by
Contractor, Contractor shall promptly notify Owner in writing. Owner may stop
the Work at any time to address safety issues or when Owner deems that
Contractor is not in compliance with its safety plan or with state and/or
federal safety requirements. Contractor shall initiate, maintain, and supervise
the safety program at the Mine. All expenses relating to safety in connection
with the Work shall be borne by Contractor. Contractor shall be responsible for
initiating, maintaining and supervising all safety precautions and programs in
connection with the Work, including barricades, warning lights, and signs.
Contractor shall comply with applicable laws, ordinances, rules,
regulations and orders of any public body having jurisdiction over the Work and
shall establish, supervise and maintain all necessary precautionary programs for
such safety. Contractor shall train, furnish, require and assure that all Labor
follow safe work practices.
Contractor acknowledges that the Work is to be done in an existing mining
area, and that adequate precautions shall be required. Contractor shall use
Ground Penetrating Radar, extended blast holes, or other similar techniques to
supplement the existing mapping of currently known underground works. This
information shall be coordinated with Owner's survey control, and shall be
provided to Owner for use in mined quantity calculations and to provide improved
planning abilities.
Contractor, at Contractor's cost, shall provide Contractor's Labor with
any necessary special personal protection specific to the Work. Contractor shall
install and maintain all necessary guards on machines, lockouts, and any other
device(s) required by law, permit, or Owner's safety policy to help ensure
worker, environmental, and public safety.
Contractor shall designate a responsible member of its organization on the
Property whose duty shall be the prevention of accidents and compliance with all
safety requirements. This person shall be competent and experienced in such
matters and shall be the Project Manager unless otherwise designated in writing
by Contractor to Owner.
4.20 EMERGENCIES
In the event of an emergency which affects the safety or protection of
persons on the premises, or Work located on the Property or adjacent thereto, in
which Contractor has the ability to respond, Contractor shall be authorized to
act to prevent threatened damage, injury or loss, without special instruction or
authorization from Owner. Contractor shall give Owner prompt written notice of
any significant deviations in the Work from or to this Agreement caused thereby.
Contractor shall immediately notify Owner of any unsafe conditions encountered
or of which it becomes aware and shall take reasonable actions to protect its
Equipment and personnel from such conditions pending action by the Owner to
remedy the condition.
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4.21 PROJECT MANAGER
Contractor shall employ at all times during the provision of the Work and
keep at the Work Site, a competent and experienced resident Project Manager. The
Project Manager shall be approved by Owner, and shall not be replaced without
the Owner's approval. Owner may, from time to time and within reason, request in
writing that Contractor replace the Project Manager and Contractor shall attempt
to promptly comply with Owner's request. Unless otherwise designated, the
Project Manager shall be Contractor's Representative at the Site and shall have
full authority to act on behalf of Contractor regarding administration of this
Agreement. All communications given to the Project Manager by Owner shall be
deemed to have been given to Contractor.
Contractor shall also provide adequate supervisory personnel to assist the
Project Manager in the performance of the Project Manager's duties.
4.22 SURVEY MONUMENTS
Contractor shall protect and preserve the existing reference points and
shall make no changes or relocations of such reference points without the prior
written approval of Owner. Contractor shall reimburse Owner's cost for monuments
destroyed by Contractor's negligence or willful misconduct.
ARTICLE 5.
OWNER'S RESPONSIBILITIES
5.1 FURNISHING DATA
Owner shall promptly furnish the data required of Owner under the terms of
this Agreement, including but not limited to, the Mine Schedule planning maps,
topographic data, production schedules, location of existing workings and
infrastructure, and Ore/Waste delineation.
5.2 PERMITS
Unless otherwise agreed to in writing, Owner shall obtain all necessary
environmental and other permits, licenses, easements, authorizations and any
rights-of-way from the appropriate private or governmental parties for the
Project.
Owner shall use commercially reasonable efforts to obtain such permits,
licenses, easements, authorizations, rights-of-way, approvals and, in the event
of any significant delays, shall keep Contractor apprised of all material
developments during the approval process and, to the extent they can reasonably
be obtained, shall provide Contractor with the necessary temporary permits,
licenses, easements, authorization, rights-of-way and approvals for the
performance of Work.
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5.3 EXPLOSIVES
Owner shall obtain a license to procure and utilize and, as operations
warrant, store explosives, and shall permit Contractor to operate under the
terms of the license.
5.4 PAYMENTS
Owner shall make payments to Contractor pursuant to Articles 8 and 9 of
this Agreement.
5.5 AVAILABILITY OF PROPERTY
Owner shall furnish the Property upon which the Work is to be performed
and provide all easements and rights-of-way for access thereto, and to such
other lands designated for the use by Contractor.
5.6 REFERENCE POINTS
Owner shall provide all engineering surveys necessary to establish
reference points to enable Contractor to proceed with the Work.
5.7 AERIAL SURVEY
Owner shall conduct an aerial baseline topographical survey or shall
supply a reasonably current existing survey prior to Contractor commencing the
Work.
5.8 SURVEYING AND MAPPING OF THE WORK
Owner shall provide survey control of the Work including crests, toes,
xxxxx pads, and Waste dumps. The control of crests and toes shall be used to
reconcile monthly payments to the Contractor. Control of pits and dumps shall be
provided on planning maps to accurately communicate production objectives.
Annual audits by an independent licensed surveyor, approved by both Owner and
Contractor shall be performed to resolve any differences in the accounts.
Surveying of known and safely accessible underground voids shall be
provided by Owner to Contractor.
5.9 ASSAYING AND ORE CONTROL
Owner shall collect and assay samples from the blast holes to use for
creating dig limits for Ore and Waste. After commissioning of Owner's on-site
assay laboratory, the assay results shall be available within forty-eight (48)
hours of sample collection. These limits shall be provided in the weekly Mine
plan maps as well as flagged and taped in the Mine. Contractor shall follow
these limits closely to maximize the value of the Ore delivered to the xxxxx
pads.
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Payment for Ore and Waste shall be determined by the intersection of these
lines with the surveyed pit advance.
5.10 MINE PLANNING
Owner shall provide Contractor with weekly, monthly and annual plan maps
and production tables. Plans shall contain the best available information
concerning planned and realized pit advance, Ore and Waste boundaries, and
special conditions to be encountered.
5.11 UTILITIES AND FUEL
Owner shall provide water, electricity, and access to telephone services
to a location on the Site designated by Owner and agreed to by Contractor. Owner
shall provide the Contractor with diesel fuel for Contractor's Equipment.
Contractor shall provide Owner an itemized list of Equipment it intends to use
at the Site.
5.12 OWNER'S REPRESENTATIVE
Owner shall be represented at the Mine by Owner's Representative. The
duties, responsibilities and the limitations of authority of Owner's
Representative during Mining operations are set forth in this Agreement and
shall not be enlarged without the prior written consent of Owner. Absent express
written notice changing the Owner's Representative, Owner's mine manager at the
Mine shall be the Owner's Representative under this Agreement.
Owner's Representative shall have authority to reject Work that is
Defective. Owner's Representative shall not be responsible for Contractor's
means, methods, techniques, sequences, procedures, or the safety precautions and
programs incident thereto, and shall not be responsible for Contractor's failure
to perform the Work in accordance with this Agreement. Owner's Representative
shall not be responsible for the acts or omissions of Contractor, any
Subcontractors, or the agents or employees of Contractor or Subcontractor, or
any other persons at the Mine or otherwise performing any of the Work.
5.13 SECURITY FOR THE PROPERTY
Perimeter and general Site security, including necessary fencing,
monitors, communications, and guards as necessary, shall be provided by Owner.
ARTICLE 6.
WARRANTIES
6.1 CONTRACTOR'S WARRANTY
Contractor warrants as follows with respect to performance of the Work:
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6.1.1 Workmanship.
All Work shall be executed by Contractor in accordance with the
terms and provisions of this Agreement and with that degree of
efficiency, care and skill ordinarily exercised by members of the
mining profession performing the same or similar work at comparable
sites in accordance with good mining practices.
6.1.2 Labor.
Contractor's professional and hourly Labor shall have proper
qualifications for the Work assigned to them hereunder and their
services shall conform to the standard of care and performance
described in Section 6.1.1.
6.1.3 Other.
All of the Work shall be completed by Contractor in accordance with
the Specifications, Drawings and Contract Documents at the prices,
rates and markups contained herein, and in compliance with all
applicable health, safety and environmental laws, rules,
regulations, decrees and orders described herein as well as all
rules, guidelines and procedures of Owner relating thereto.
6.2 NOTICE BY OWNER
Owner shall give Contractor written notice of all Defective Work within
one working day after Owner's discovery thereof.
6.3 ACCESS TO WORK
Owner's Representative, Owner's agents, other representatives of Owner,
testing agencies and governmental agencies with jurisdictional interests in the
Mine and Property shall have access to the Work at all reasonable times for
their observation, inspection and testing. Contractor shall provide proper and
safe conditions for such access.
If the Specifications, Owner's instructions, laws, ordinances, or any
public authority require any Work to be specially tested or approved, Contractor
shall give Owner timely notice of its readiness for inspection, and if the
inspection is by an authority other than Owner, of the date fixed for such
inspection. Inspections by Owner shall be made promptly, and where practicable
at the Work Site. If Contractor conceals any part of the Work without approval
or consent of Owner and which Contractor had been notified will be tested, the
Work must, if required by Owner, be uncovered for examination and properly
restored at Contractor's expense, unless Owner has unreasonably delayed
inspection.
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6.4 OWNER MAY STOP THE WORK
If at any time Owner determines that the Work being performed is
Defective, Owner may order Contractor to stop the Work until Contractor remedies
the Defective Work or supplies sufficient skilled Labor or suitable materials or
equipment to remove or correct the Work.
6.5 CORRECTION OR REMOVAL OF DEFECTIVE WORK
If required by Owner, Contractor shall promptly and without additional
cost to Owner correct or remove any Defective Work. Defective Work that Owner
requires to be removed from the Site shall be removed by Contractor as soon as
practical after written demand from Owner's Representative, taking into
consideration the applicable Mine development and production schedules, and
shall be replaced and re-executed or repaired promptly in accordance with the
requirements of this Agreement at Contractor's expense. Such Defective Work
shall be corrected or removed promptly and diligently. Contractor shall bear the
expense of making good all work of Other Contractors destroyed or damaged by
such correction or removal.
6.6 ACCEPTANCE OF DEFECTIVE WORK
If, instead of requiring Contractor to correct or remove Defective Work,
Owner prefers to accept it, Owner may (but shall not be obligated to) accept
Defective Work by giving Contractor written notice and charging Contractor for
the amount by which the value of the Contractor's Work has been reduced.
6.7 OWNER MAY CORRECT DEFECTIVE WORK
If Contractor fails, after written notice by Owner, within a reasonable
time to proceed to correct or remove Defective Work, Owner may, after ten (10)
days' written notice to Contractor, correct and remove any such Defective Work
itself or engage another party to do so, without regard to whether the cost of
correction by or on behalf of Owner is greater or less than the cost for
Contractor to correct or replace the Defective Work. Contractor shall allow
Owner, Owner's Representatives, agents, and employees such access to the
Property as may be necessary to enable Owner to exercise its rights under this
Section. All reasonable direct costs to Owner in exercising such rights shall be
paid and reimbursed by Contractor and Owner shall have the right to set off any
such amounts against amounts that Owner might otherwise be or become obligated
to pay to Contractor.
6.8 EXCLUSIVE REMEDY FOR DEFECTIVE WORK
The warranties set forth in this Article 6 are exclusive, and in lieu of
any and all other warranties relating to the standards of performance or quality
of the Work, whether statutory, express or implied, and Contractor disclaims any
such other warranties, including but not limited to any and all warranties of
merchantability and/or fitness for a particular purpose and any and all
warranties arising from course of dealing and/or usage of trade. Any other
statements of fact or descriptions expressed in this Agreement shall not be
deemed to constitute a warranty of the nature or quality of the Work or any part
thereof. The remedies provided for in this Article 6
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shall constitute complete fulfillment of, and Owner's exclusive remedy for, all
the liabilities or responsibilities of Contractor to Owner for such Defective
Work, whether the claims of Owner are based in contract, tort (including
negligence and strict liability), delay, warranty, indemnity, error and omission
or otherwise; provided that the remedies specified in this Section shall not be
construed to establish any limitation with respect to any obligations or
liabilities of the Contractor set forth elsewhere in this Contract as to matter
other than Defective Work.
ARTICLE 7.
CONTRACT TERM
The term of this Agreement (the "Contract Term") shall commence on the
Effective Date and, subject to prior termination as hereinafter provided, shall
end as set forth in Exhibit D.
ARTICLE 8.
CONTRACT PRICE
8.1 TARGET BUDGET
Unadjusted compensation to Contractor for performance of the Work shall be
based upon the quantities of Ore and Waste excavated and the target budget,
which is attached hereto as Exhibit A (the "Target Budget"). The process
described in Section 8.4 shall be used to revise Exhibit A each year prior to
the start of the Work in the subsequent year.
8.2 ACTUAL COMPENSATION
Contractor's "Actual Compensation" shall be the actual direct cost
incurred in the performance of the Work and a Fee as further described below:
8.2.1 Cost of Work. Contractor shall be reimbursed the actual direct
cost incurred in performance of the Work, based on the following factors:
(a) Cost of Mobilizing Equipment to Project Site;
(b) Cost of labor for all on-site employees performing the
Work, consisting of wages, payroll taxes and insurances, and fringe
benefits;
(c) Cost of procured goods, consisting of materials, small
tools, supplies, consumables, on-site-offices and facilities, office
supplies and consumables, and utilities;
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(d) Cost of procured services, consisting of subcontractors
and janitorial services;
(e) Cost of capital equipment ownership or leasing expense.
(f) Corporate G&A - Contractor shall be paid $700,000 per
year ($58,333.33 per month) for area office and home office overhead and
support services and other general and administrative expenses.
8.2.2 Fee. Contractor shall be paid an annual fee (the "Fee")
equivalent to a 20% before tax return on Contractor's average invested capital
for the year, including working capital (value at month end of inventory and
accounts receivable, less accounts payable and other associated liabilities) and
fair market value of Contractor's Equipment at the Site for performance of the
Work; provided, that Contractor's Fee shall not be less than 15% or more than
the percentages shown as "Max Fee Percentage of Costs" in Exhibit A of the
actual costs per Sections 8.2.1 (a) through (e) per year, as stipulated in
Section 8.1 above; and provided further, that the Fee shall be subject to the
terms of Section 8.3.
8.3 INCENTIVE ADJUSTMENT
As an incentive to perform the Work at minimum cost, Contractor's
compensation shall be subject to annual adjustment based on its cost
performance, as follows:
8.3.1 Underruns. If the Actual Compensation, per Section 8.2, is
less than the Target Budget amount, Contractor's compensation for such Work
shall be increased in the amount of 50% of such underrun.
8.3.2 Overruns. If the Actual Compensation, per Section 8.2, is more
than the Target Budget, Contractor's compensation for such Work shall be
decreased in the amount of 50% of such overrun, to the limit of the Fee.
8.3.3 Changes. In the event that (a) changes are made to the scope
of the Work, (b) Contractor encounters unanticipated conditions at the Site
which differ from the basis used to develop the Target Budget, or (c)
performance of the Work is affected by an event of Force Majeure, the parties
shall agree on an equitable adjustment to the Target Budget amount and the Mine
Schedule.
Examples of incentive adjustments are set forth in Exhibit I.
On a monthly basis, Target Budget will be compared to Actual Compensation
to estimate year to date underrun or overrun. Final adjustments to the Fee will
be calculated at year-end and invoiced on the January invoice following
year-end.
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8.4 PRODUCTIVITY IMPROVEMENT OPTION
Owner shall provide a Mine Plan to Contractor each year by September 1,
showing a detailed annual plan for the following calendar year, and annual plans
for each year thereafter. Contractor shall develop the Target Budget for the
following years based on the updated Mine Plan by October 15 of each year. If
the revised Mine Plan and Target Budget are acceptable, both parties agree to
confirm approval on or before December 1 for implementation starting January 1
of the following year. If the revised Mine Plan and Target Budget are not
acceptable, both parties agree to continue work under the latest approved Mine
Plan and Target Budget scenario until a revised Mine Plan and Target Budget can
be agreed upon.
8.5 MOBILIZATION
After mobilization has begun Owner shall pay to Contractor the
mobilization payment specified in Exhibit A in such amounts and according to the
schedule provided in Exhibit A.
8.6 HAUL ROAD PRICE
The lump sum price of Contractor constructing the Haul Road according to
Section 3.3 is $1,100,000. This price excludes the construction of the San Xxxxx
River and Cerro de San Xxxxx road crossings, other than providing random Mine
Waste fill, and the mining and hauling of Mine Waste for the road construction.
8.7 CHANGE ORDERS
Owner may make Variations without invalidating this Agreement by issuing a
written Change Order. Variations shall not affect the Mine Schedule for
completion of the Work unless the parties agree to deviate from such dates or
quantities at the time the Variation is authorized. Compensation for any
Variation to be performed by Contractor shall be established in the written
Change Order to be agreed upon by Owner and Contractor and shall be based on the
hourly Labor and Equipment rates set forth in Exhibit C.
Mine design and production characteristics provided in the Project
Development Plan were used to estimate the costs provided in Exhibit A to this
Agreement. If Owner makes material changes in the Mine Schedule (i.e. more than
10% deviation from the Mine Schedule set forth in Exhibit D), pit design,
material destinations (i.e. changes that affect haul cycles), or other
operational parameters that affect operating costs, Contractor shall determine
the effect on the operating costs and discuss such changes with Owner to
determine whether a price change is warranted. In the event a price change is
warranted, such change shall be set forth in a Change Order.
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ARTICLE 9.
PAYMENT
9.1 EQUIPMENT LEASE PAYMENTS
Payments shall be made by Owner to Contractor in U.S. Dollars on the 15th
of each month according to Exhibit B for equipment lease costs associated with
the Project (the "Equipment Lease Payments").
9.2 QUANTITY MEASUREMENT FOR PURPOSES OF PAYMENT
Measurement of the volume of Ore and Waste excavated for purposes of
establishing Work performed by Contractor shall be by Bank Cubic Meter (BCM)
determined by field surveys completed as of the first working day of each
calendar month. Mined volume shall be determined by multiplying the average face
advance on each bench by the surveyed bench height as set forth in the Mine
Schedule. Calculated volumes shall be reduced by the best estimate of existing
voids, be it from previous mapping, from new mapping based on openings to the
surface, or on analysis by Ground Penetrating Radar. Within the total volume per
time period, the Ore and Waste quantities shall be determined by intersecting
the calculated Ore control delineations with the average face advance.
9.3 INVOICES
Owner shall pay Contractor for the monthly volume of Ore and Waste
excavated by Contractor, made or completed as of the end of each calendar month.
Contractor shall submit invoices for the material mined on a monthly
basis. The invoice shall be based on a field survey. The total amount due for
the Work accomplished in the entire month will be adjusted to reflect the amount
billed in the mid-month Equipment Lease Payment. Owner shall perform field
surveys on the first working day of each calendar month to determine the volume
excavated during the previous month. A copy of the survey results shall be
provided to Contractor.
Within five (5) days following the field survey for the monthly volume
estimation, Owner and Contractor shall agree on the volumes of Ore and Waste
excavated during the preceding month. Within ten (10) days from the first of
each month during the performance of the Work, Contractor shall submit an
invoice to Owner for that part of the Work performed during the preceding month.
The invoice shall be issued from Contractor's office located at the Site.
Owner shall pay the undisputed portions of all invoices no later than the
last day of the month in which the invoice is delivered; provided, however, that
if Owner disputes all or any portion of the invoice, Owner shall, within seven
(7) business days after receipt of the invoice, notify Contractor of the item(s)
disputed, and specify the reason therefor, and payment of the
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disputed portion of the item may be withheld until resolution of the dispute.
Owner and Contractor shall promptly attempt to resolve the dispute. Disputes as
to a portion of or specific item on an invoice shall not excuse Owner from
payment of the undisputed portion. For invoices not paid within the stipulated
time, and not under dispute, finance charges at the rate of 1% per month shall
apply. Payments shall be made by electronic transfer to an account designated in
writing by Contractor. Contractor and Owner agree to cooperate on the place of
invoice issuance and payment so as to mitigate tax consequences to either to the
extent they may lawfully do so.
9.4 HAUL ROAD INVOICES
Owner shall pay for the construction of the Haul Road on a monthly percent
complete basis. Each month, the percentage of the Haul Road that has been
completed will be estimated by the Contractor and Owner, using a mutually agreed
upon methodology, and that percentage of the total price as given in Section 8.6
will be billed to the Owner by the Contractor in its end of monthly invoice.
9.5 PAYMENT FOR CHANGE ORDERS
All Work described in a Change Order and performed by Contractor in any
given period shall be invoiced by Contractor at the hourly Labor and Equipment
rates set forth in Exhibit C. The hourly rates include the Equipment operator,
operating and maintenance supplies, and necessary maintenance labor to keep the
Equipment in operable condition, ownership costs, Contractor's overhead and
profit. Non-equipment related supplies and permanent materials, which may be
required to complete the Work described in a Change Order (culverts, for
example), shall be invoiced at cost or shall be provided by Owner. All records
for Work described in a Change Order shall be substantiated by Contractor and
countersigned by Owner's Representative.
9.6 INSPECTION UPON COMPLETION OR TERMINATION
At the conclusion of the Contract Term, upon written notice from
Contractor that the Work is complete, or upon termination of the Work as
provided in Article 12, Owner shall make a final inspection and shall notify
Contractor in writing of incomplete or Defective Work. Contractor shall take
such measures as are necessary to complete or correct the Defective Work.
9.7 FINAL PAYMENT AND ACCEPTANCE
When the final invoice and accompanying documentation are accurate as to
form and substance, and Contractor has completed demobilization by cleaning up
the Site and removing its Equipment and other property as provided for in
Section 4.13, Owner shall pay Contractor the amount invoiced, within thirty (30)
days after receipt thereof. For invoices not paid within the stipulated time,
finance charges at the rate of 1% per month shall apply. Notwithstanding any
provision hereof to the contrary, Owner shall only be obligated to pay for that
Work which it has not identified as Defective.
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9.8 RECORDS AND AUDIT
Contractor shall keep complete and accurate records fully supporting its
invoices to Owner showing, as applicable, the quantity or volume of services
and/or the actual costs to it of all items of Labor, material, Equipment,
supplies, services, and other expenditures of whatever nature for which it is
entitled to reimbursement for extra Work under this Contract (the "Relevant
Records"). The Relevant Records shall be maintained in accordance with sound
bookkeeping practices applicable to the industry and shall exclude Contractor's
costs that are reimbursed by Owner at fixed unit or percentage rates.
Owner shall have two years after the completion of this Agreement in which
to make an audit of the Relevant Records, and Contractor shall preserve the
Relevant Records for such period. Owner shall have access, during Contractor's
normal business hours to all Contractor's (including those of any affiliated or
subsidiary company involved in the Work) and all Subcontractors' Relevant
Records. Owner shall also have the right to reproduce any of the Relevant
Records.
9.9 RESOLUTION
All audit exceptions or other disagreements including, without limitation,
any concerning Defective Work, that are not agreed to and settled during the
course of the audit shall be resolved between Owner and Contractor. In no event
shall Contractor refuse to perform the Work because of an unresolved dispute;
provided that Contractor may refuse to perform the Work if Owner is in default
of any part of its payment obligation not affected by a pending dispute and
written notice of same is given to Owner.
ARTICLE 10.
CONFIDENTIALITY
During the Contract Term the parties shall treat all information acquired
under this Agreement as confidential and shall not use the name of either party
or of any officer, director, employee or affiliated entity of either party or of
the Property in any press release, announcement, advertisement or publication,
either verbal or in writing, or disclose any information whatsoever that it may
obtain under or pursuant to this Agreement to third parties or to the public
without first having obtained the written approval of the other party as to the
form and content of any such disclosure, release or publication. The parties
shall not use, sell, give, disclose or otherwise make available to third parties
or to the public at any time any knowledge or information relating to internal
proprietary techniques and methods used by either party for purposes of
geological interpretation, extraction, Mining, processing of minerals or any
other proprietary information of the other party. The obligations of
confidentiality under this Article shall apply to each of the officers,
employees, agents and Subcontractors of Contractor. The covenants and
requirements of confidentiality set forth in this Article shall survive the
termination or expiration of this Agreement and shall be fully effective and
binding for a period of three years thereafter. The above restrictions shall not
apply with respect to:
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(a) information that at the time of disclosure is generally
available to the public;
(b) information that after disclosure becomes generally
available to the public by publication or otherwise through no fault of
either party;
(c) written information that was in the party's possession
prior to disclosure hereunder and which was not acquired under an
obligation of confidentiality directly or indirectly from the disclosing
party;
(d) information received by the party after the time of
disclosure hereunder from a third party without notice to the party of any
obligation of confidentiality or other restrictions with respect to use
thereof;
(e) information that is independently developed by the
receiving party;
(f) information that is required by appropriate legal
authority to be disclosed (but only to the extent of such requirement).
At the end of the Work or the termination of this Agreement, each party
shall return to the other all documents obtained from the other party during the
Contract Term pertaining to the Work, including, but not limited to, plans,
Specifications, schedules, maps, geological data, drawings, photographs,
surveys, and other writings, as requested.
ARTICLE 11.
INSURANCE
The following are the insurance obligations for the parties as set forth
in the Agreement:
11.1 CONTRACTOR'S INSURANCE
11.1.1 Coverage. Through the life of the Agreement, Contractor shall
pay for and maintain in full force and effect the following insurance with
companies authorized to do business in the Project jurisdiction.
(a) Employers Liability insurance covering legal liability
to employees for accidents and/or illnesses arising out of or in the
course of their employment. The said insurance shall be effected for an
amount not less than one million dollars (U.S.$1,000,000) for any one
occurrence.
(b) Workers Compensation insurance covering their employees
as required by the laws of Mexico for Mexican nationals. For expatriate
employees working in Mexico Contractor shall provide at its expense
Workers' Compensation insurance as required by Mexican law and the laws
pertaining to Workers' Compensation within the respective expatriate
employee's country of hire.
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(c) Automobile Liability insurance covering owned, non-owned
and hired automobiles in conformance with the automobile liability
regulations in Mexico and an amount of not less than one million dollars
(U.S. $1,000,000.00) per accident for combined bodily injury and property
damage liability
(d) Commercial General Third Party Liability insurance with
limits of not less than $10,000,000 any one loss and annual aggregate per
location, combined single limit bodily injury and property damage
liability including products/completed operations, and contractual
liability insurance.
(e) Aircraft Liability. If performance of the Work requires
the use of aircraft and/or helicopters (unless provided by the Owner),
Contractor shall carry, or shall ensure that the owner of the aircraft
carries Comprehensive Aircraft Liability insurance, including hull and
passenger liability without any seat limitation of not less than five
million dollars (U.S.$5,000,000) combined single limit or one million
dollars (US$1,000,000) per seat which ever is greater for bodily injury
and property damage (including cargo liability if an exposure exists).
Such insurance shall contain a waiver of subrogation as to any claims
against Owner as respects physical damage (hull) coverage.
11.1.2 Contractor's Property. Contractor shall, as it deems
necessary, carry fire, theft, physical damage or other insurance on its own
tools, Equipment, reusable materials (such as form work and scaffolding),
trailers, maintenance and storage buildings and facilities and any property of
its employees. Contractor waives all rights of recovery from the Owner for
damage to or destruction of the property listed in this subsection and agrees to
waive its underwriter's rights of subrogation if insured.
11.1.3 Endorsements and other Provisions. In connection with the
coverages Contractor is required or may carry pursuant to this Section 11.1, the
following shall apply:
(a) All policies of insurance carried by Contractor pursuant
to Section 11.1.1 shall provide that coverage may not be cancelled,
terminated, materially changed or renewal refused without at least thirty
(30) days prior written notice to Owner.
(b) Any and all deductibles specified in the above insurance
policies shall be assumed by, for the account of, and at the sole risk of
Contractor.
(c) All insurance carried by Contractor pursuant to this
Section shall contain endorsements waiving the insurer's right to
subrogation against Owner, its respective subsidiaries, associated and
affiliated companies and their employees, officers and directors.
(d) The provisions of the insurance specifications as
described above shall apply to Contractor, and these specifications shall
be incorporated in any subcontract or agreement between Contractor and its
subcontractors or consultants who perform any portion of the Work under
this Agreement.
11.1.4 Certificates. Prior to beginning the Work, certificates of
insurance shall be provided to Owner for all the specific insurance coverages
required and Owner shall have the
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right to approve the same. Contractor shall deliver to Owner certificates of all
insurance to be carried pursuant to this Agreement. It shall be a condition of
approval of such certificates that the required insurance must be arranged with
insurance companies authorized to do business in Mexico. Upon request,
Contractor and its Subcontractors shall permit Owner to examine any of the
Project-specific insurance policies specified herein. Each certificate shall
include a provision that Owner shall be given at least thirty (30) days prior
written notice by certified or registered mail of any termination, cancellation
or reduction of coverage. Owner's approval or failure to disapprove the
insurance certificates furnished by Contractor does not relieve Contractor from
full responsibility for liability, damage and/or accidents as set forth herein.
11.1.5 Failure to Maintain. If at any time the required insurance
policies in Section 11.1.1 should be canceled, terminated or modified so that
the insurance is not in full force and effect as required herein, Owner may
terminate the Agreement for default or obtain insurance coverage equal to that
required herein and recover the cost thereof from Contractor.
11.2 OWNER'S INSURANCE
11.2.1 Coverage. Through the life of the Agreement, Owner shall pay
for and maintain in full force and effect the following insurance with companies
authorized to do business in the Project jurisdiction:
(a) Employers Liability insurance covering legal liability
to employees for accidents and/or illnesses arising out of or in the
course of their employment. The said insurance shall be effected for an
amount not less than one million dollars (U.S.$1,000,000) for any one
occurrence.
(b) Workers Compensation insurance covering Owner's
employees as required by the laws of Mexico for Mexican nationals. For
expatriate employees working in Mexico Owner shall provide at its expense
Workers' Compensation insurance as required by Mexican law and the laws
pertaining to Workers' Compensation within the respective expatriate
employee's country of hire.
(c) Commercial General Third Party Liability insurance with
limits of not less than $10,000,000 any one loss and annual aggregate per
location, combined single limit bodily injury and property damage
liability including products/completed operations, and contractual
liability insurance.
(d) Automobile Liability insurance covering owned, non-owned
and hired automobiles in conformance with the automobile liability
regulations in Mexico and an amount of not less than one million dollars
(U.S. $1,000,000.00) per accident for combined bodily injury and property
damage liability.
(e) Builder's Risk and/or Property insurance covering the
real and personal property of Owner including property in transit, in
storage and while being incorporated into the Project and the Project.
Such insurance shall insure the interest of Owner, Contractor and its
Subcontractors, and all Other Contractors in the Work, but shall not
insure Contractor's or its Subcontractors' own or their respective
employees' tools, Equipment, reusable materials (such as form work and
scaffolding), trailers,
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maintenance and storage buildings and other facilities and any property of
their employees.
11.2.2 Endorsements and other Provisions.
(a) Builder's Risk and/or Property insurance carried by
Owner pursuant to Section 11.2.1(e) shall be endorsed to include
Contractor as an additional insured as to the interest of Contractor
described in said Section.
(b) All policies of insurance carried by the Owner pursuant
to this Section shall contain endorsements waiving the insurer's right to
subrogation against the Contractor, its respective subsidiaries,
associated and affiliated companies and their employees, officers and
directors.
(c) All policies of insurance carried by the Owner pursuant
to Section 11.2.1 shall provide that coverage may not be cancelled,
terminated, materially changed or renewal refused without at least thirty
(30) days prior written notice to Contractor.
11.2.3 Certificates. Prior to beginning the Work, Owner shall
provide certificates of insurance to the Contractor for all the specific
insurance coverages Owner is required to carry hereunder. Each certificate shall
include a provision that Owner shall be given at least thirty (30) days prior
written notice by certified or registered mail of any termination, cancellation
or reduction of coverage. Upon request, the Owner shall permit the Contractor to
examine any of the Project-specific insurance policies specified herein.
11.3 OWNER'S BOND
As a condition of obtaining the required permits for the Project, Owner
shall obtain prior to commencement of the Work a security bond to secure Owner's
obligation to protect certain buildings and architectural features in a portion
of the town of Cerro San Xxxxx from damage resulting from the Mining activities
contemplated by this Agreement.
11.4 SUBCONTRACTORS
Contractor shall ensure that all Subcontractors engaged by it in the
performance of this Agreement shall secure and maintain similar appropriate
levels of insurance. If the amounts or coverages of insurance carried by a
Subcontractor are less than those set forth in Section 11.1.1, Contractor shall
obtain Owner's consent to allowing the Subcontractor to perform any of the Work
on the Site.
11.5 EFFECT OF INSURANCE
Except as specifically provided under this Agreement, obtaining the
insurance as set out in this Article shall not in any way limit, alter or affect
the liability and obligations of the Owner or Contractor under this Agreement.
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ARTICLE 12.
SUSPENSION OF WORK AND TERMINATION
12.1 SUSPENSION OF WORK
Contractor shall, on receiving written notice from Owner, suspend all or
any portion of the Work, as may be directed by Owner. Such suspension shall not
terminate this Agreement and the extra cost, if any, incurred by Contractor by
reason of suspension of the Work shall be borne and paid for by Owner at the
stand-by rates set forth in Exhibit G unless the suspension is:
(a) the result of Federal, state or local safety violations by
Contractor.
(b) necessary as a result of a breach of this Agreement on the
part of Contractor.
(c) resulting from order of any court of competent jurisdiction or
from a ruling of a government agency.
In the event that a suspension lasts for more than thirty (30) days, Owner
and Contractor shall mutually agree as to the course of action to be followed.
12.2 TERMINATION BY OWNER
12.2.1 Termination for Convenience of Owner
Upon thirty (30) days written notice to Contractor, Owner shall have
the right to terminate all or any part of this Agreement for
convenience in accordance with the terms of this Paragraph. Upon a
termination for convenience, final settlement of all Contractor's
claims arising out of or with respect to the termination of this
Agreement shall be made as follows:
(a) Owner shall either (i) assume and become liable for all
commercially reasonable obligations, commitments and claims which
Contractor may have theretofore in good faith undertaken or incurred
in connection with the Work and in accordance with the provisions of
this Agreement. Contractor, as a condition of receiving payment as
described in this Article 12, shall execute and deliver all such
documents and take such steps as Owner may require for the purpose
of fully vesting in Owner the rights and benefits of Contractor
under such obligations, or (ii) instruct Contractor to cancel any
such obligations and commitments and pay to Contractor such
commercially reasonable, proper and unavoidable cancellation charges
which Contractor must pay to its subcontractors and suppliers as a
result of such cancellation.
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(b) Owner shall pay Contractor for any remaining capitalized
mobilization costs and demobilization costs as set forth in Exhibit
H.
(c) If the Agreement is terminated pursuant to this Section,
Owner may, upon written notice to Contractor, enter on to the
Property where the Work is being performed during normal working
hours and, for the purpose of completing the Work, take possession
of any or all necessary documents (with the exception of
Contractor's cost related documentation). At Contractors' sole
option, Owner may be allowed to take possession of tools, machinery,
Equipment and appliances which may be owned by or be in the
possession of Contractor, and which relate to the Work and the Mine,
and Owner shall pay commercially reasonable rentals to Contractor
for such facilities, tools, machinery, Equipment and appliances.
Owner, shall, on completion of the rental, return to Contractor the
facilities, tools, machinery, Equipment and appliances in the
condition they were in prior to Owner' rental, subject to normal
wear and tear. Owner shall be responsible for any repairs or
maintenance of such facilities, tools, machinery, Equipment and
appliances during its possession and use thereof. After taking
possession of the Work, Owner shall have all rights and obligations
thereafter of Contractor as necessary or proper for the completion
of the Work, and Owner may complete or employ any other person or
persons to complete the Work.
(d) Contractor shall be paid for the Work actually completed
at the date of termination, less any payments previously made and
less any sum that may be necessary to settle any unsettled claims in
connection with this Agreement, including any claims Owner may have
against Contractor under this Agreement.
(e) Contractor shall not be entitled to any payment for loss
of anticipated profits.
(f) In the event of early termination for convenience by
Owner, the Exhibit J Termination Schedule shall apply.
12.2.2 Termination for Default of Contractor
The occurrence of any one or more of the following events shall
constitute default by Contractor hereunder:
(a) Contractor is adjudged as bankrupt or insolvent;
(b) Contractor makes a general assignment for the benefit of
creditors;
(c) a trustee or receiver is appointed for Contractor or for any
of Contractor's property;
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(d) Contractor files a petition to take advantage of any debtor's
act, or to reorganize under bankruptcy or similar laws;
(e) Contractor fails to make prompt payments for Labor, materials
or Equipment unless such payments are withheld due to a failure by
the supplier to properly perform the Labor or supply acceptable
materials or Equipment;
(f) Contractor violates, contravenes, or disregards laws,
ordinances, rules, regulations or orders of any public body having
jurisdiction, or disregards safety rules, security, regulations and
accident prevention programs of Owner at the Mine;
In the event that Contractor is in default under this Section 12.2.2
or Contractor commits a material breach of its obligations under
this Agreement and (a) Contractor fails, neglects, refuses or is
unable to remedy such breach within fifteen (15) days after receipt
by Contractor of Owner's written notice of such breach, or (b) if
the breach is not capable of remedy within fifteen (15) days,
Contractor fails to commence all necessary steps, within
Contractor's control, to remedy the breach within fifteen (15) days
after receiving written notice thereof from Owner or if Contractor
fails thereafter to continue diligently and efficiently and in good
faith to remedy such breach, then Owner may, without prejudice to
any other right or remedy available to Owner, immediately terminate
this Agreement upon giving written notice of termination to
Contractor, specifying the reasons for termination and the date on
which such termination becomes effective.
In the event of termination of this Agreement pursuant to this
Section, Owner shall have the right, but not the obligation to
continue and complete the Work. If the cost of Work following the
date of termination exceeds the payments that Contractor would have
received for such Work under the terms of this Agreement, Contractor
shall be liable for such excess costs and, upon demand by Owner,
shall pay Owner the excess payment, subject to the Limitation of
Liability clause in Section 19.7 of this Agreement. In such event
Contractor shall not be entitled to receive any further payment and
shall hold Owner harmless with respect to all losses or damages
suffered by the Owner on account of such termination.
If the Agreement is terminated pursuant to this Section, Owner may,
upon written notice to Contractor, enter within normal working hours
upon the Property where the Work is being performed and, for the
purpose of completing the Work, take possession of any or all
necessary documents (with the exception of Contractor's cost related
documents). Owner may purchase facilities, materials, tools,
machinery, Equipment and appliances that are owned by or in the
possession of Contractor, and which relate to the Work and the Mine,
at fair market value or book value, whichever is higher. Thereafter,
Owner shall have all rights and obligations of Contractor as
necessary or proper for the completion of the Work,
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and Owner may complete or employ any other person or persons to
complete the Work.
12.3 TERMINATION BY CONTRACTOR FOR DEFAULT OR OWNER' BREACH
If (a) Owner commits a material breach of its obligations under the
Agreement, including any failure to pay Contractor in accordance with Article 9,
and (i) if Owner fails, neglects or refuses or is unable to remedy such breach
within fifteen (15) days after receipt by Owner of Contractor's written notice
of such breach, or (ii) if the breach (except for non-payment) is not capable of
remedy within fifteen (15) days, Owner fails to commence all necessary steps
within the Owner's control to remedy the breach within fifteen (15) days after
receiving written notice thereof from Contractor or if Owner fails thereafter to
continue diligently and efficiently and in good faith to remedy such breach, or
(b) Owner files a petition in bankruptcy or such a petition is filed against
Owner, Owner makes a general assignment for benefit of creditors, or a receiver
is appointed on account of Owner's insolvency, and, in the event that any of the
foregoing actions is involuntary, and the consequences thereof are not cured
within (30) days, then Contractor may, without prejudice to any other right or
remedy available to Contractor, immediately terminate this Agreement upon giving
written notice of termination to Owner, specifying the reasons for termination
and the date on which such termination becomes effective.
Upon such termination date, Contractor shall promptly discontinue all Work
and the placing of orders for materials, Equipment, services and supplies in
connection with the performance of the Work, and shall, if requested by Owner,
make every reasonable effort to procure cancellation of all existing commitments
upon terms reasonably satisfactory to Owner, and shall thereafter do only such
Work as may be necessary to preserve and protect Work already in progress and to
protect material and Equipment at the Property or in transit thereto.
If this Agreement is terminated by Contractor under this Section, Owner
may, upon written notice to Contractor, enter on to the Property where the Work
is being performed during normal working hours. At Contractor's sole option,
Owner may be allowed to take possession of facilities, tools, machinery,
Equipment and appliances which may be owned by or be in the possession of
Contractor, and which relate to the Work and the Mine. Owner shall pay
commercially reasonable rentals to Contractors for such facilities, tools,
machinery, Equipment and appliances. Owner shall, on completion of the rental,
return to Contractor the facilities, tools, machinery, Equipment and appliances
in the condition they were prior to when Owner's rental commenced, subject to
normal wear and tear. Owner shall be responsible for any repairs or maintenance
of such Contractor furnished facilities, tools, machinery and Equipment during
its possession and use thereof.
Upon the termination of this Agreement by Contractor, final settlement of
all claims of Contractor arising out of this Agreement shall be subject to the
claims of Owner hereunder. Contractor shall be entitled to payment for all Work
performed up to the date of termination and any costs reasonably incurred in
discontinuing operations and demobilizing (net of all reasonably documented
claims by Owner submitted to Contractor as of such date). Payment shall be made
within thirty (30) days after such termination date. Contractor shall, within
ninety (90) days after
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termination, submit a final statement to Owner for payment for other reasonable
expenses incurred, including but not limited to demobilization and contract
cancellation costs. Any payment to be received by Contractor as settlement of a
final statement, if any, shall be net of those amounts, if any, reimbursable to
Owner for any outstanding reasonably documented claims of Owner submitted to
Contractor subsequent to the termination date and set forth in a final
statement.
12.4 REMEDY NOT EXCLUSIVE
The rights of termination set forth in Sections 12.2 and 12.3 are without
prejudice to any other right or remedy a party may have under this Agreement.
ARTICLE 13.
FORCE MAJEURE
Contractor shall be excused for delays or, failing to perform its required
obligations hereunder and Owner shall not be entitled to terminate this
Agreement nor shall Contractor be charged with damages or liability as provided
in this Agreement to the extent such delays or failure to perform are due to an
Event of Force Majeure, provided that Contractor shall, within ten (10) days
from the beginning of any such event, notify Owner in writing of the cause of
delay or failure to perform. The time for completing the Work shall be extended
and/or increased, as applicable, and shall be Contractor's sole remedy for any
claim, to the extent justified by the above-mentioned causes. The cost for the
Work shall be the same as if the Event of Force Majeure did not occur.
Owner shall be excused for delays or failing to perform its obligations
hereunder except for obligations to pay monies owed for Work already performed,
and Contractor shall not be entitled to terminate this Agreement, nor shall
Owner be charged with damages or other liability, to the extent such delays or
failure to perform are due to an Event of Force Majeure, provided that Owner
shall, within ten (10) days from the beginning of any such Event of Force
Majeure, notify Contractor in writing of the cause of delay or failure to
perform. The time period for Owner's performance of its obligations shall be
extended to the extent justified by the above mentioned causes and the time and
expense for completion of the Work by Contractor shall be extended or increased
to the extent justified by such extension of time to Owner.
The party affected by an Event of Force Majeure shall exercise reasonable
diligence to resume normal performance of this Agreement as soon as practicable
after the occurrence of such event and shall promptly notify the other party of
the termination of any such Event of Force Majeure.
If an Event of Force Majeure shall cause a complete cessation of all Work
for a continuous period of thirty (30) days, and, after the expiration of such
thirty (30) day period, further implementation of the Work is impossible or a
time when implementation may be possible cannot be reasonably foreseen, then,
except as provided below in this paragraph, either
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Owner or Contractor may terminate this Agreement upon fifteen (15) days written
notice, but without prejudice to Owner's and Contractor's rights and obligations
prior to such termination. In the event of such termination, Owner shall pay
Contractor as if the Agreement were terminated for convenience under Section
12.3.1. Notwithstanding the foregoing, if, after the 30-day period described
above, Owner agrees to pay Contractor at the standby rates set forth in Exhibit
A, Contractor shall not have the right to terminate this Agreement until one
hundred twenty (120) days after commencement of an Event of Force Majeure.
ARTICLE 14.
NOTICES AND PAYMENTS
Any notice required or permitted under this Agreement shall be served or
made personally or by certified or registered mail (postage prepaid, return
receipt requested) or by facsimile (with transmission confirmation) or by
private overnight courier on or to the parties at the following addresses:
Owner: Minera San Xavier, S.A. de C.V.
Attn: Mine Manager
Camino Cerro San Xxxxx Km. 3+870, no. 200 X.X. 00000
Xxxxx xx Xxx Xxxxx, XXX
Xxxxxx
Phone: 00(000)000-0000
Fax: 00(000)000-0000
with a copy to
Metallica Resources, Inc.
Attention: Xxxx X. Xxxxxxxx
Xx. Vice President and Chief Operating Officer
00000 X. Xxxxxxxxx Xxx., Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
X.X.X.
Phone: (303) 796-0229Fax: (000) 000-0000
Contractor: Washington Group Latin America, Inc.
Attn: Xxx Xxxx
Vice President of Operations - Mining
0000 X. Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
X.X.X.
Phone: (000) 000-0000
Fax: (000) 000-0000
-37-
Notices shall be deemed given upon delivery (in cases of notice by
personal service) registered or certified mail or courier) and receipt if sent
by facsimile. Either party may change its address under this Article 14 by
providing written notice thereof to the other party.
ARTICLE 15.
DISPUTES AND ARBITRATION
15.1 MEDIATION
15.1.1 Mediation Hierarchy
Any dispute or claim arising between Owner and Contractor relating
to interpretation of the provisions of this Agreement, to the scope
of Work, to the performance of Owner or Contractor hereunder, to
payment or any portion thereof which cannot be resolved by the
appropriate staff level personnel of the parties, shall be referred
to the following parties for resolution:
Level Owner Contractor
I Mine Manager Project Manager
II General Manager Business Unit Vice President Operations
III Vice President Business Unit President
15.1.2 Procedure
If the disputed issues are not resolved at this level within fifteen
(15) working days, a memorandum shall be prepared jointly by the
participants and signed by each of them clearly outlining the
unresolved issues, the amount of disagreement and the principal
persons responsible for activities leading to the dispute. Within
five (5) working days of delivery of this memorandum to the next
level participants, the next level participants shall attempt to
resolve the dispute issues, either through telephone conversation or
meeting, as appropriate. If the next level participants cannot
resolve the dispute within ten (10) working days of the dispute
having been referred to them, then the dispute will be settled by
arbitration in accordance with the provisions of Section 15.2.
15.2 ARBITRATION
Any dispute, controversy or claim arising out of or relating to this
Agreement or the breach thereof, which cannot amicably be settled by Owner and
Contractor, shall be settled by arbitration to be conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration Association before
a board of three arbitrators each unrelated to both parties, appointed in
accordance with said Rules. The place of arbitration shall be in Denver,
Colorado.
-38-
The arbitration shall be final, conclusive and binding upon the parties,
and each party shall honor and abide by such award. Judgment upon the award
rendered may be entered in any court having jurisdiction, or application may be
made to such court for a judicial acceptance of the award and an order of
enforcement, as the case may be.
As far as applicable, performance of this Agreement shall continue during
arbitration proceedings unless such arbitration proceedings have resulted from a
notice of termination of this Agreement delivered by either Owner or Contractor.
No payments due or payable by Owner shall be withheld on account of a pending
reference to arbitration unless Owner's liability to make such payment or
payments is in issue in such arbitration.
The cost for arbitration shall be allocated between Owner and Contractor
in accordance with the arbitration award.
ARTICLE 16.
ASSIGNMENT AND SUBCONTRACTS
16.1 ASSIGNMENT - GENERAL
Except as set forth in Section 16.2 and 16.3, neither party shall assign,
pledge or make other disposition of this Agreement without first obtaining the
prior written consent of the other, which consent shall not be unreasonably
withheld if assignment is made to wholly owned affiliates.
16.2 ASSIGNABILITY BY OWNER
This Agreement and all of the Owner's rights and obligations hereunder
shall, upon prior written notice to the Contractor, be assignable by the Owner
to any entity that acquires the Cerro San Xxxxx Project.
16.3 SUBCONTRACTS
Contractor shall not employ any Subcontractor or other person or
organization (including those who are to furnish the principal items of
materials or Equipment), whether initially or as a substitute, as to which Owner
may have reasonable objection. Should Contractor wish to subcontract any item of
the Work, Contractor shall notify Owner of such intent and obtain the written
consent of Owner prior to engaging the Subcontractor, which consent shall not be
unreasonably withheld.
Contractor shall be fully responsible for all acts and omission of its
Subcontractors and of all persons or entities directly or indirectly employed or
retained by them. All Work performed for Contractor by a Subcontractor shall be
pursuant to an appropriate agreement between Contractor and the Subcontractor,
which specifically binds the Subcontractor to the applicable
-39-
terms and conditions of this Agreement for the benefit of Owner. Nothing
contained in this Agreement shall create any contractual relation between any
Subcontractor and Owner.
ARTICLE 17.
GOVERNING LAW
This Agreement shall be governed by the laws of the State of Colorado and
shall be construed in accordance therewith. The official copy of this Agreement
shall be written in English.
ARTICLE 18.
INDEMNITY
Contractor shall indemnify, defend, and save Owner, its officers,
directors, employees and affiliates harmless from any damages, claims, causes of
action, liabilities, loss, cost or expense claimed by third parties for property
damage and/or bodily injury, including death, to the proportionate extent caused
by the negligence or willful misconduct of Contractor, its agents, employees, or
affiliates in performance of the Work.
Owner shall indemnify, defend and save Contractor, its officers,
directors, employees and affiliates harmless from any and all damages, claims,
causes of action, liabilities, loss, cost or expense claimed by third parties
for property damage and/or bodily injury, including death, to the proportionate
extent caused by the negligence or willful misconduct of Owner, its agents,
employees, or affiliates.
In no event shall Contractor be liable for claims arising out of
pre-existing hazardous conditions, except to the extent Contractor knew of such
conditions and Contractor's negligence or willful misconduct exacerbated the
condition and thereby caused the claim to arise.
ARTICLE 19.
MISCELLANEOUS
19.1 ENTIRE AGREEMENT; AMENDMENT
This Agreement is the complete, entire and final agreement between the
parties and supersedes all previous bids, proposals, specifications, agreements
or understandings, whether written or otherwise, unless incorporated herein by
express reference. No modification of this Agreement shall be effective unless
in writing and executed by the parties to this Agreement.
-40-
19.2 COUNTERPARTS
This Agreement may be executed in counterparts, all of which taken
together shall constitute a single and complete Agreement.
19.3 SEVERABILITY
Whenever possible, each provision of this Agreement shall be interpreted
in such a manner as to be effective and valid under applicable law. In the event
that any provision of this Agreement shall be or becomes illegal or
unenforceable in whole or in part for any reason, the remaining provisions of
this Agreement shall remain in full force and effect, and such term or provision
shall be deemed stricken to the extent and in the jurisdiction necessary for
compliance with applicable law.
19.4 HEADINGS
The headings in this Agreement are for convenience only, and shall not
affect the interpretation hereof.
19.5 WAIVERS
No course of dealing between Contractor and Owner, or any person acting on
behalf of Contractor or Owner, nor any delay, waiver or omission by Contractor
or Owner in exercising their respective rights hereunder shall operate as a
waiver of any of Contractor's or Owner's rights except to the extent expressly
waived in writing by such party. No waiver by either party of any breach by the
other party of any of the provisions of this Agreement shall be construed as a
waiver of any subsequent breach, whether of the same or of a different provision
of the Contract.
19.6 CONSEQUENTIAL DAMAGES
Neither party shall be liable to the other party for loss of profits, loss
of interest, loss of production or any special indirect, incidental, or
consequential damages arising from its performance under this Agreement, whether
due to or based upon delay, breach of contract, warranty, tort, negligence,
strict liability, error or omission, indemnity or any cause whatsoever. Personal
injury occurring on the Site, or physical damage to third party property
occurring on the Site, other than that which is the subject of the Work, shall
not be deemed a consequential damage to which the limitations of this provision
apply.
19.7 LIMITATION OF LIABILITY
The remedies stated in this Agreement are exclusive and in no event shall
the liability of Contractor to Owner whether based on delay, contract, warranty,
tort, negligence, strict liability, indemnity, error and omission or any other
cause whatsoever exceed $5.0 Million U.S. Dollars unless such liability is (i)
covered by proceeds from the parties' insurance required under Article 11,
subject to the policy limits in Article 11, or (ii) unless such liability arises
from any fine,
-41-
claim or penalty against Owner by any governmental entity due to violation of
law, or claim against Owner by a third party as a result of the negligence or
willful misconduct of Contractor, for the Contract Term; provided that (ii) is
limited to the total amount paid under this Agreement. Failure of either party
to obtain and maintain the insurance required by Article 11 shall cause such
party to be directly liable, in addition to the amounts within the limits set
forth in Article 11 for any loss suffered by the other party which would have
been covered by the required insurance, in an amount not exceeding the amount
required to be insured. In the event the Contract Term of this Agreement is
extended, this Limit of Liability may be adjusted as mutually agreed in writing
by Owner and Contractor.
19.8 U. S. EXPORT REGULATIONS
The parties recognize that Contractor is subject to the Export Regulations
of the United States of America regarding export of certain technical data from
the United States. Owner agrees that it will not export, either directly or
indirectly, any information or data received from Contractor or the direct
product thereof to any country in contravention of the said Export Regulations,
or which, if done by Contractor would violate the laws of the United States of
America.
19.9 FOREIGN CORRUPT PRACTICES ACT
Owner and Contractor shall comply fully with the U. S. Foreign Corrupt
Practices Act and warrant that they are, and will remain, in full compliance
with all applicable laws and regulations of any and all countries related to the
performance of services hereunder.
19.10 CONFLICTING LANGUAGE
In the event of a conflict between any language in this Agreement and any
language in any exhibit hereto, the language of this Agreement shall control
unless the exhibit expressly provides otherwise.
19.11 SURVIVAL OF OBLIGATIONS
Notwithstanding Owner's acceptance of the Work or the termination of this
Agreement, any duty or obligation which has been incurred by Contractor, and
which has not been fully observed, performed and/or discharged and any right,
unconditional, which has been created and has not been fully enjoyed, enforced
and/or satisfied (including but not limited to the duties, obligations and
rights, if any, with respect to secrecy) shall survive such acceptance or
termination until such duty or obligation has been fully observed, performed
and/or discharged and such right has been fully enjoyed, enforced and/or
satisfied.
19.12 OTHER CONTRACTORS
Owner reserves the right to let Other Contractors perform work at the Work
Site. Contractor shall afford such Other Contractors reasonable opportunity for
the introduction and storage of their materials and the performance of their
work, and shall consult with Owner's
-42-
representative, as necessary, and properly connect, correlate, and coordinate
the Work with theirs.
If the proper execution or results of any party of the Work depends upon
the work of Other Contractors, Contractor shall inspect and promptly report to
Owner, any defects in such work, which may render it unsuitable for such proper
execution and results.
19.13 RIGHTS OF VARIOUS INTERESTS
Whenever work being done by Owner's or by Other Contractor's Labor is
contiguous to the Work covered by this Agreement, the respective rights of the
various interests involved shall be established by Owner, to secure the
completion of the various portions of the Project in general harmony.
19.14 NON-PAYMENT OF REMUNERATION TO OWNER'S EMPLOYEES
Neither Contractor nor any Subcontractors shall pay any commissions or
fees or grant any rebates or other remuneration or gratuity to any employee or
officer of Owner. Neither shall Contractor nor any Subcontractor grant any
secret rebates; one to the other, and neither shall Contractor nor any
Subcontractor pay any commissions or fees to the employees or officers of the
other in connection with work performed.
19.15 DISCREPANCIES
Discrepancies between different Drawings or between Drawings and
Specifications shall be promptly brought to the attention of Owner. This Section
shall not have the effect of making Contractor a guarantor of Owner's design.
19.16 INDEPENDENT CONTRACTOR
In the performance of the Work, Contractor is an independent contractor.
This Agreement shall not be construed as creating a partnership or joint venture
or as establishing a relationship of principal and agent, or of employer and
employee, between Owner and Contractor, Contractor's agents, employees or
Subcontractors. Contractor shall have no authority to hire any person on behalf
of Owner and all persons or entities employed by it shall be deemed to be solely
the employees of Contractor. Contractor shall have no authority to enter into
agreements or to contract on behalf of Owner and all such commitments made by it
shall be binding solely upon Contractor.
-43-
IN WITNESS WHEREOF and intending to be legally bound, the parties have
executed this Agreement on this 30 day of December, 2003, to be effective as of
the Effective Date.
OWNER:
Minera San Xavier, S.A. de C.V.
By:/s/ Xxxx X. Xxxxxxxx
--------------------------------
Name: Xxxx X. Xxxxxxxx
Title: General Director
CONTRACTOR:
WASHINGTON GROUP LATIN AMERICA, INC.
By:/s/ XxXxx X. Xxxxxx
----------------------------------
Name: XxXxx X. Xxxxxx
Title: President, Mining Business Unit
Washington Group International, Inc.
Attorney-in-Fact, Washington Group
Latin America, Inc.
-44-
G:\DEdata1\KingJ\32513 Metallica Resources\MSX WGI JMK Draft 141203.doc
(u:/jms/legal/contracts/MSX Washington Group International final 12-29-03)
EXHIBIT A
CERRO SAN XXXXX
TARGET PRICING SUMMARY
$US (000)
ALL PRICES EXCLUSIVE OF FUEL
PRE-PROD PRE-PROD PRE-PROD
ACCESS PIT TOTAL YR 1 YR 2 YR 3 YR 4 YR 5
Percent of Year 0.05 0.57 0.62 1.00 1.00 1.00 1.00 1.00
PRODUCTION (BCM 000)
Ore 20 203 223 2,227 3,036 3,036 3,036 3,036
Waste 200 2,513 2,713 5,951 5,142 5,142 5,142 4,211
Total 220 2,716 2,936 8,178 8,178 8,178 8,178 7,247
UNIT COST SUMMARY (NO MOB COSTS)
Ore ($/bcm Ore) 4.210 2.240 2.417 2.013 2.040 2.242 2.274 2.236
Waste ($/bcm Waste) 3.740 1.940 2.072 1.481 1.488 1.291 1.302 1.520
Total ($/bcm Total Material) 3.783 1.962 2.099 1.625 1.693 1.644 1.663 1.820
TOTAL MINING COST ($000)
Mobilization 467(1) 309(1) 776(1) 184(2) - - - -
Ore 85 455 539 4,482 6,193 6,808 6,905 6,790
Waste 747 4,874 5,622 8,811 7,650 6,640 6,695 6,399
Total 1,299 5,638 6,937 13,477 13,843 13,448 13,600 13,189
TARGET PRICE CALCULATION
REVENUE ($000) 6,937 13,477 13,843 13,448 13,600 13,189
COST ($000)
Direct Costs 4,248 8,230 8,641 8,606 8,895 8,991
Depreciation 859 1,776 1,851 1,857 1,838 1,555
Corporate G&A 434 700 700 700 700 700
Fee 1,396 2,771 2,651 2,285 2,167 1,943
Actual Capital Employed ($000) 11,252 13,854 13,255 11,426 10,837 9,716
Calculation Capital Employed ($000) 6,981 13,854 13,255 11,426 10,837 9,716
ROCE 20.0% 20.0% 20.0% 20.0% 20.0% 20.0%
Max Fee Percentage of Costs 26% 26% 24% 21% 19% 18%
Min Fee @ 15% of Costs ($000) 831 1,606 1,679 1,674 1,715 1,687
YR 6 YR 7 YR 8 YR 9 TOTAL
Percent of Year 1.00 1.00 1.00 0.36 8.98
PRODUCTION (BCM 000)
Ore 3,036 3,036 3,036 1,020 24,724
Waste 911 324 374 80 29,989
Total 3,947 3,360 3,411 1,100 54,714
UNIT COST SUMMARY (NO MOB COSTS)
Ore ($/bcm Ore) 2.517 2.569 2.745 2.953 2.366
Waste ($/bcm Waste) 1.984 2.059 2.061 2.342 1.509
Total ($/bcm Total Material) 2.394 2.520 2.670 2.908 1.896
TOTAL MINING COST ($000)
Mobilization - - - - 960
Ore 7,643 7,800 8,334 3,011 58,505
Waste 1,807 667 772 188 45,251
Total 9,450 8,467 9,106 3,199 104,716
REVENUE ($000) 9,450 8,467 9,106 3,199 104,716
COST ($000)
Direct Costs 5,553 4,915 6,366 2,502 66,947
Depreciation 1,428 1,398 845 70 13,477
Corporate G&A 700 700 700 254 6,288
Fee 1,768 1,454 1,195 372 18,004
Actual Capital Employed ($000) 8,842 7,269 5,977 5,127
Calculation Capital Employed ($000) 8,842 7,269 5,977 1,861 90,018
ROCE 20.0% 20.0% 20.0% 20.0% 20.0%
Max Fee Percentage of Costs 23% 21% 15% 15%
Min Fee @ 15% of Costs ($000) 1,152 1,052 1,187 424
(1) $250,000 was authorized in the Limited Authorization to Proceed and will be
billed in the January 2004 end of month invoice.
$217,000 will be billed in the February 2004 end of month invoice.
$309,000 will be billed in the March 2004 end of month invoice.
(2) $138,000 will be billed in the November 2004 end of month invoice.
$46,000 will be billed in the July 2005 end of month invoice.
EXHIBIT B
CERRO SAN XXXXX
EQUIPMENT LEASE TERMS
Initial Capital Life Monthly
Equipment Description Serial Number Basis (years) Lease Rate
--------------------- ------------- --------------- ----- ----------
Driltech DK55S Blasthole Drill $ 1,000,000 7 $ 11,905
Driltech DK55S Blasthole Drill $ 500,000 7 $ 5,952
IR ECM 000 Xxxxxxxxx Xxxxx $ 185,000 5 $ 3,083
CAT 992G Loader $ 850,000 5 $ 14,167
CAT 992G Loader 7MJ059 $ 200,000 5 $ 3,333
XX 000 Xxxxxxxxx Shovel $ 1,500,000 7 $ 17,857
XX 000 Xxxxxxxxx Shovel 72767-A $ 300,000 5 $ 5,000
CAT 777B Haul Truck 4YC01454 $ 200,000 5 $ 3,333
CAT 777B Haul Truck 4YC01455 $ 225,000 5 $ 3,750
CAT 777B Haul Truck 4YC01457 $ 225,000 5 $ 3,750
CAT 777B Haul Truck 4YC1452 $ 215,000 5 $ 3,583
CAT 785 Haul Truck 8GB00460 $ 450,000 7 $ 5,357
CAT 785 Haul Truck 8GB00466 $ 450,000 7 $ 5,357
CAT 785 Haul Truck 8GB00468 $ 450,000 7 $ 5,357
CAT 785 Haul Truck 8GB00674 $ 500,000 7 $ 5,952
CAT 785 Haul Truck 8GB00392 $ 450,000 7 $ 5,357
CAT 785 Haul Truck 8GB00472 $ 450,000 7 $ 5,357
CAT D10R Track Dozer 3KR00593 $ 300,000 5 $ 5,000
CAT D10R Track Dozer $ 300,000 5 $ 5,000
CAT D8R Track Dozer 7XM01793 $ 200,000 5 $ 3,333
CAT 16H Motor Grader 6ZJ000399 $ 195,000 5 $ 3,250
CAT 16H Motor Grader $ 285,000 5 $ 4,750
CAT 834B Tire Dozer $ 350,000 5 $ 5,833
CAT 773 Water Truck $ 200,000 5 $ 3,333
CAT 773 Water Truck $ 200,000 5 $ 3,333
Lube/Fuel Truck $ 180,000 5 $ 3,000
Lube/Fuel Truck $ 177,000 5 $ 2,950
Mechanic Truck $ 107,000 5 $ 1,783
Mechanic Truck $ 107,000 5 $ 1,783
Boom/Flatbed Truck $ 169,000 5 $ 2,817
70 tonne Crane $ 150,000 5 $ 2,500
XX Xxxxx $ 185,000 5 $ 3,083
VR90 Forklift $ 55,000 5 $ 917
Manbus (2) $ 50,000 5 $ 833
Pickup Truck (6) $ 140,000 3 $ 3,889
Light Plant (10) $ 75,000 5 $ 1,250
GPS Survey System $ 60,000 5 $ 1,000
GPR System $ 75,000 5 $ 1,250
Sediment Control $ 100,000 3 $ 2,778
Maint. Inventory and Supplies $ 300,000 3 $ 8,333
Truck Shop and Office $ 820,000 7 $ 9,762
Office Eq. $ 50,000 3 $ 1,389
Equipment Depreciation $12,980,000 $191,599
Capital Fee $125,000
--------
Total Lease Rate $316,599
Notes:
1. The capital costs and lives in this Exhibit are preliminary and budgetary as
the actual equipment has not all been identified and purchased. As equipment is
purchased, or sold, this exhibit will be updated and the costs billed to the
Owner adjusted accordingly.
2. The Monthly Lease Rate is calculated by dividing the capital values by the
life in months, plus a monthly capital fee.
EXHIBIT C
CERRO SAN XXXXX
EXTRA WORK RATE SCHEDULES
CERRO SAN XXXXX US$
MINING BID - AUGUST 2003 BID RATE
EQUIPMENT RATES INCLUDING OPERATOR $/HR
FUEL COSTS NOT INCLUDING W/ OPER
--------------------------------------------------------------
Cat 777C 89.00
Cat 785B 119.00
Cat 773C 58.00
Cat 16G 53.00
Cat 992G 112.00
O&K RH120 269.00
Cat 834G 94.00
Drilltech DK 55S 160.00
Cat D-10R 110.00
CERRO SAN XXXXX US$
MINING BID - AUGUST 2003 TOTAL
LABOR RATES ($/OPER HR.)
---------------------------------------------------------------
Shovel Operator 6.00
Shovel Oiler 3.30
Plant Operator 6.00
Welder "A" 6.00
Mechanic "A" 6.00
Electrician "A" 6.00
Loader Operator 6.00
Equipment Operator 4.20
Truck Driver 4.20
Welder "B" 4.20
Mechanic "B" 4.20
Electrician "B" 4.20
Warehouse 4.20
Servicer 4.20
Laborer 2.80
EXHIBIT D
CERRO SAN XXXXX
MINE SCHEDULE
PERIOD ORE WASTE TOTAL ORE WASTE TOTAL
--------------------------------------------------------------------------------------------------------------------------
TONNES (000) TONNES (000) TONNES (000) BCM (000) BCM (000) BCM (000)
--------------------------------------------------------------------------------------------------------------------------
Yr 0 - Access 50 701 751 20 284 304
Yr 0 - PP 500 6,000 6,500 202 2,429 2,631
Yr 1 Q1 1,000 4,050 5,050 405 1,640 2,045
Yr 1 Q2 1,250 3,800 5,050 506 1,538 2,044
Yr 1 Q3 1,500 3,550 5,050 607 1,437 2,044
Yr 1 Q4 1,750 3,300 5,050 709 1,336 2,045
Yr 2 Q1 1,875 3,175 5,050 759 1,285 2,044
Yr 2 Q2 1,875 3,175 5,050 759 1,285 2,044
Yr 2 Q3 1,875 3,175 5,050 759 1,285 2,044
Yr 2 Q4 1,875 3,175 5,050 759 1,285 2,044
Yr 3 7,500 12,700 20,200 3,036 5,142 8,178
Yr 4 7,500 12,700 20,200 3,036 5,142 8,178
Yr 5 7,500 10,400 17,900 3,036 4,211 7,247
Yr 6 7,500 2,250 9,750 3,036 911 3,947
Yr 7 7,500 800 8,300 3,036 324 3,360
Yr 8 7,500 925 8,425 3,036 374 3,410
Yr 9 2,519 198 2,717 1,020 80 1,100
Total 61,069 74,074 135,143 24,721 29,988 54,709
CERRO DE SAN XXXXX
EXHIBIT E
List of Drawings and Specifications
Mine Plan Tables Mine Plan total tons by Period Prod30Jul.xls
Mine Plan by Period by Rock Type Pscd030721.xls
Mine Plan Drawings Phase 1 Limit with buffer around town B150m_2d_phs1.dwg
Phase 2 Limit with buffer around town X000x_0x_xxx0.xxx
Xxxxx 0 Xxxxx Xxx00_Xxxxx0.xxx
General Arrangement of Mine Operation 2000Mine-Simple-
- per Glamis Gold 90_Esp.dwg
Reference Drawings Area topography and existing infrastructure Pedro1-9-2000.dwg
Existing Underground Workings as Known AllTunnels.dxf
Other Specifications:
- Fuel will be provided by MSX
- Assumed powder factor is 0.15 kg/tonne material
- Operating Schedule is Mon - Sat 24 hours/day
- Base Labor Rates Provided by MSX April 2003
EXHIBIT F
CERRO SAN XXXXX
MINERAL PROPERTY SUMMARY
--------------------------------------------------------------------------------------------------
CERRO SAN XXXXX MINERAL CONCESSIONS
--------------------------------------------------------------------------------------------------
GROUP CONCESSION NAME CONCESSION TYPE TITLE NUMBER HECTARES
--------------------------------------------------------------------------------------------------
GROUP 1.
100% Minera San Xavier
--------------------------------------------------------------------------------------------------
1. Xx Xxxxxxxx Xxxxxxxxxxxx 000000 5.5916
--------------------------------------------------------------------------------------------------
2. Xx Xxxxxxxx Xxxxxxxx Xxxxxxxxxxxx 000000 0.0076
--------------------------------------------------------------------------------------------------
3. Begonia Exploitation 181179 10.0000
--------------------------------------------------------------------------------------------------
4. Xxxxx Xxx Xxxxxxxxxxxx 000000 8.0000
--------------------------------------------------------------------------------------------------
5. Xxxxx Xxx Xxx Xxxxxxxxxxxx 000000 1.5076
--------------------------------------------------------------------------------------------------
6. Xxx Xxxxxxx Xxxxxxxxxxxx 000000 9.0394
--------------------------------------------------------------------------------------------------
7. Gorgorron Exploitation 180300 9.6250
--------------------------------------------------------------------------------------------------
8. Xxx Xxxxxxx Xxxxxxxxxxxx 000000 6.9788
--------------------------------------------------------------------------------------------------
9. Xxx Xxxxxxx Xxx Xxxxxxxxxxxx 000000 1.4896
--------------------------------------------------------------------------------------------------
10. San Nicolas Suroeste Exploitation 180609 0.1923
--------------------------------------------------------------------------------------------------
11. Los Riscos Exploitation 182282 4.3474
--------------------------------------------------------------------------------------------------
12. La Xxxxxxxxxx Exploitation 182281 4.0000
--------------------------------------------------------------------------------------------------
Subtotal 60.7793
--------------------------------------------------------------------------------------------------
GROUP 2.
Optionor: Xxxxxxx Xxxxxxx Xxxxxx - Xxxxxxxx 2 Group
--------------------------------------------------------------------------------------------------
13. Xxxxxxxx 2 Exploitation 180938 0.5537
--------------------------------------------------------------------------------------------------
14. Gama Exploitation 179256 41.6391
--------------------------------------------------------------------------------------------------
15. La Canoa 3 Exploitation 184906 0.0051
--------------------------------------------------------------------------------------------------
16. Omega 2 Exploitation 180958 0.1687
--------------------------------------------------------------------------------------------------
17. La Canoa 2 Exploitation 180948 0.6649
--------------------------------------------------------------------------------------------------
18. Xxxxxxxx Exploitation 186321 93.6228
--------------------------------------------------------------------------------------------------
19. Xx Xxxxx Xxxxxxxxxxxx 000000 3.4799
--------------------------------------------------------------------------------------------------
20. Omega Exploitation 193390 2.0576
--------------------------------------------------------------------------------------------------
Subtotal 142.1918
--------------------------------------------------------------------------------------------------
GROUP 3.
100% MSX
--------------------------------------------------------------------------------------------------
21. San Salvador Exploitation 186268 12.9399
--------------------------------------------------------------------------------------------------
22. Tribilin Exploitation 187088 18.2808
--------------------------------------------------------------------------------------------------
23. Xx Xxxxxxxx Xxxxxxxxxxxx 000000 10.3797
--------------------------------------------------------------------------------------------------
24. Xxxxxxx Exploitation 211849 18.0000
--------------------------------------------------------------------------------------------------
Subtotal 59.6004
--------------------------------------------------------------------------------------------------
GROUP 4.
100% MSX
--------------------------------------------------------------------------------------------------
25. Xxxxxxx Exploitation 179603 11.2359
--------------------------------------------------------------------------------------------------
Subtotal 11.2359
--------------------------------------------------------------------------------------------------
GROUP 5.
100% MSX
--------------------------------------------------------------------------------------------------
26. Porvenir IV Fracc. A Exploration 201484 51.7965
--------------------------------------------------------------------------------------------------
27. Porvenir IV Fracc. B Exploitation 216926 1.3237
--------------------------------------------------------------------------------------------------
28. Porvenir V Exploitation 218428 11.7876
--------------------------------------------------------------------------------------------------
Subtotal 64.9078
--------------------------------------------------------------------------------------------------
GROUP 6.
Optionor: Xxxxxxx Xxxxxxx Xxxx-Porvenir Group
--------------------------------------------------------------------------------------------------
29. Porvenir Exploitation 214835 4.4241
--------------------------------------------------------------------------------------------------
30. Porvenir I Exploitation 183925 12.0000
--------------------------------------------------------------------------------------------------
31. Porvenir II Exploitation 186269 2.9981
--------------------------------------------------------------------------------------------------
32. Xx Xxxxxxxx XXX Xxxxxxxxxxxx 000000 11.9902
--------------------------------------------------------------------------------------------------
Subtotal 31.4124
--------------------------------------------------------------------------------------------------
GROUP 7.
100% MSX
--------------------------------------------------------------------------------------------------
33. Xxxx xx Xxx Xxxxxxxxxxxx 000000 99.5187
--------------------------------------------------------------------------------------------------
Subtotal 99.5187
--------------------------------------------------------------------------------------------------
GROUP 9.
100% MSX
--------------------------------------------------------------------------------------------------
34. Xxxxx Exploitation 217859 1969.5069
--------------------------------------------------------------------------------------------------
35. Xxxxx 0 Xxxxxxxxxxxx 000000 421.4346
--------------------------------------------------------------------------------------------------
Subtotal 2390.9415
--------------------------------------------------------------------------------------------------
GROUP 10.
100% MSX
--------------------------------------------------------------------------------------------------
36. La Loteria Exploitation 184377 3.8809
--------------------------------------------------------------------------------------------------
37. San Xxxxxx Exploitation 179722 1.5000
--------------------------------------------------------------------------------------------------
38. Xxxxx xxx Xxxxx Xxxxxxxxxxxx 000000 0.0049
--------------------------------------------------------------------------------------------------
39. El Campeon Exploitation 179257 0.2072
--------------------------------------------------------------------------------------------------
Subtotal 5.5930
--------------------------------------------------------------------------------------------------
GROUP 11.
100% MSX
--------------------------------------------------------------------------------------------------
40. Gitano 2004 Exploration 208096 64.0000
--------------------------------------------------------------------------------------------------
41. Xx Xxxxxx 2004 Exploration 208466 10.000
--------------------------------------------------------------------------------------------------
42. Xxxx 2005 Exploration 210667 0.0529
--------------------------------------------------------------------------------------------------
43. Xxxxxxx 2005 Exploration 210668 9.3396
--------------------------------------------------------------------------------------------------
44. Davide 2006 Exploration 211606 0.0788
--------------------------------------------------------------------------------------------------
45. Xxxxx Sofia 2007 Exploration 215378 0.2470
--------------------------------------------------------------------------------------------------
46. Xxxxx Xxxxx 2007 Exploration 215499 1.0976
--------------------------------------------------------------------------------------------------
47. Xxxxx 2007 Exploration 215896 0.6660
--------------------------------------------------------------------------------------------------
Subtotal 85.4819
--------------------------------------------------------------------------------------------------
TOTAL 2,951.6627
--------------------------------------------------------------------------------------------------
EXHIBIT G
CERRO SAN XXXXX
STAND-BY RATES
EQUIPMENT STANDBY RATES WITH OPERATOR
HOURLY COST WEEKLY COST
EQUIPMENT ($US) ($US)
----------------------------------------------------------------------------
Cat 777C $31 $3,170
Cat 785B $42 $4,290
Cat 773C $22 $2,250
Cat 16G $20 $2,040
Cat 992G $43 $4,390
O&K RH120 $71 $7,250
Cat 834G $35 $3,570
Drilltech DK 55S $49 $5,000
Cat D-10R $35 $3,570
EQUIPMENT STANDBY RATES WITHOUT OPERATOR
HOURLY COST WEEKLY COST
EQUIPMENT ($US) ($US)
-----------------------------------------------------------------------------------
Cat 777C $26 $2,660
Cat 785B $37 $3,780
Cat 773C $17 $1,740
Cat 16G $15 $1,530
Cat 992G $36 $3,680
O&K RH120 $64 $6,530
Cat 834G $30 $3,060
Drilltech DK 55S $44 $4,490
Cat D-10R $30 $3,060
EXHIBIT H
CERRO SAN XXXXX
DEMOBILIZATION
($US 000)
---------------------------------------------------------------------------------------------------------------------------
PRE-PRODUCTION YR 1 YR 2 YR 3 YR 4 YR 5 YR 6 YR 7 YR 8 YR 9
---------------------------------------------------------------------------------------------------------------------------
960 960 960 960 960 960 960 960 960 0
Note: Demobilization will be zero for the year the orebody is mined out. This
may be sooner than Year 9.
EXHIBIT I
CERRO SAN XXXXX
TARGET PRICING
$US (000)
EXAMPLE FEE CALCULATION WITH INCENTIVE ADJUSTMENT
IF COST OVERRUN
TARGET
PRODUCTION (BCM 000)
Ore 3,000
Waste 5,100
Total 8,100
UNIT COST SUMMARY (NO MOB COSTS)
Ore ($/bcm Ore) $ 2.24
Waste ($/bcm Waste) $ 1.29
Total ($/bcm Total Material) $ 1.64
TOTAL MINING PRICE
Mobilization -
Ore $ 6,721
Waste $ 6,579
Capitalized Pre-Strip
Total $ 13,300
AVERAGE CAPITAL EMPLOYED $ 11,500
Contractor Fee Calculation
Pre-tax Net Income (% ROCE) 20% $ 2,300
CONTRACTOR FEE $ 2,300
Target Price of Work $ 13,300
Actual Cost of Work $ 13,000
Contractor Fee $ 2,300
Incentive Adjustment $ (2,000)
NET COST TO MSX (50% OF INCENTIVE) $ (1,000)
EXHIBIT I
CERRO SAN XXXXX
TARGET PRICING
$US
EXAMPLE FEE CALCULATION WITH INCENTIVE ADJUSTMENT
IF COST UNDERRUN
TARGET
PRODUCTION (BCM 000)
Ore 3,000
Waste 5,100
Total 8,100
UNIT COST SUMMARY (NO MOB COSTS)
Ore ($/bcm Ore) $ 2.24
Waste ($/bcm Waste) $ 1.29
Total ($/bcm Total Material) $ 1.64
TOTAL MINING PRICE
Mobilization -
Ore $ 6,721
Waste $ 6,579
Capitalized Pre-Strip
Total $ 13,300
AVERAGE CAPITAL EMPLOYED $ 11,500
Contractor Fee Calculation
Pre-tax Net Income (% ROCE) 20% $ 2,300
CONTRACTOR FEE $ 2,300
Target Price of Work $ 13,300
Actual Cost of Work $ 9,000
Contractor Fee $ 2,300
Incentive Adjustment $ 2,000
NET SAVINGS TO MSX (50% OF INCENTIVE) $ 1,000
EXHIBIT J
CERRO SAN XXXXX
EARLY TERMINATION SCHEDULE
($US000)
Early
Period Termination Fee
------ ---------------
Pre-Production 10,600
Year 1 9,200
Year 2 6,500
Year 3 3,800
Year 4 2,000
Year 5 1,400
Year 6 1,100
Year 7 700
Year 8 400
Year 9 -
Notes: 1. These fees will be in addition to the demobilization costs as
presented in Exhibit H.
2. This schedule will be reviewed on an annual basis and adjusted as
required to reflect the estimated ore reserves mine-out date.
EXHIBIT G
MSX PERMIT CONDITIONS
(ATTACHED)
NATIONAL INSTITUTE OF ECOLOGY
GENERAL DIRECTION OF ECOLOGICAL ORDINANCE
AND ENVIRONMENTAL IMPACT
Mexico City, February 26, 1999.
MR. XXXXXXX XXXXXXXX DODGE XXXXXXX
GENERAL MANAGER AND LEGAL REPRESENTATIVE OF
MINERA SAN XAVIER, S.A. DE C.V.
XXXXXXX XXXXXXX NO. 492
FRACCIONAMIENTO TANGAMANGA
San Xxxx Potosi, S.L.P.
TEL (48) 11-8916, FAX, (48) 11-3382
After analysis and evaluation of the Environmental Impact Statement, in its
general mode, the Risk Analysis in its Detailed Risk Analysis mode, the
Justifying Technical Study for the change in land use, and additional
information, of the mining-metallurgical open cut exploitation and heap leaching
of minerals with gold and silver contents denominated "CERRO SAN XXXXX" with a
presumed location in the public land of "Cerro San Xxxxx", "Cuesta xx Xxxxx",
"Xxxxx de la Xxxx", and several properties located in the "Comunidad da La
Zapatilla", in the Cerro San Xxxxx municipality, in the state of San Xxxx
Potosi, submitted by MINERA SAN XAVIER S.A. DE C.V., that will be denominated as
the PROMOTER, and
RESULTING:
I. On August 1st, 1997, the communication No. 1960 with the same date was
received in the Federal Delegation of the Environment, Natural Resources
and Fisheries Ministry (Delegacion Federal de la Secretaria de Medio
Ambiente, Recursos Naturales y Pesca, SEMARNAP), in the state of San Xxxx
Potosi, through which the Promoter requested:
"the authorization for the change in land use (land rezoning) with an area
of 000-00-00 has in lands located in the public land of Palma de la Xxxx,
Cerro de San Xxxxx, Cuesta xx Xxxxx, and other private properties in the
Cerro de San Xxxxx municipality, which will be used to build a
mining-metallurgical gold and silver producer unit. There's no official
classification for the use of the land in the study area, even though
INEGI defines it indistinctively as of 'forestal use or cattle pasture and
collective use'. The request for change In land use is to 'others', that
specifically will consist in the development of an industrial mining
complex".
II. On September 1st, 1997 the communication dated August 29, 1997 was
received in the SEMARNAP Federal Delegation, in the state of San Xxxx
Potosi, through which the Promoter submitted the Preventative Report to
evaluate the construction of two explosive magazines in the Mining
District of Cerro de San Xxxxx, presumably located approximately at a 2
kms distance straight from the Cerro de San Xxxxx town, in the state of
San Xxxx Potosi, considering them as works associated with the "CERRO SAN
XXXXX" project.
III. On September 1st, 1997 the communication dated August 29, 1997 was
received in the SEMARNAP Federal Delegation in the state of San Xxxx
Potosi, through which the "Promoter" submitted a modification report to
the Preventative Report that was conditionally approved by the General
Direction of Ecological Ordinance and Environmental Impact with the
official document D.O.O.DGOEIA.-05605 dated November 6, 1996, with the
purpose of carrying out the new core drilling stage, in the Mining
District of Cerro de San Xxxxx, in the state of San Xxxx Potosi, for its
evaluation on the matter.
IV. On October 8, 1997 the communication dated October 8, 1997, was received
in the SEMARNAP Federal Delegation in the state of San Xxxx Potosi,
through which the "Promoter" asked for authorization for the construction
of a mining-metallurgical unit in the Mining District of "Cerro de San
Xxxxx", with a presumed location in the public land of "Cerro San Xxxxx",
"Cuesta xx Xxxxx", "Xxxxx de la Xxxx", and several properties located in
the "Comunidad de La Zapatilla", in the Cerro San Xxxxx municipality, in
the state of San Xxxx Potosi; for this purpose, it submitted the
Environmental Impact Statement, in its general mode, and the Risk
Analysis, in the Detailed Risk Analysis mode, as well as other support
documents, for its corresponding evaluation.
V. On October 10, 1997, the official document No. 1085 dated October 10, 1997
was received in the General Direction of Ecological Ordinance and
Environmental Impact, through which the SEMARNAP Federal Delegation in the
state of San Xxxx Potosi, submitted the following information for the
"CERRO SAN XXXXX" project evaluation, promoted by Minera San Xavier, S.A.
de C.V.:
1. Volumes I and II of the Environmental Impact Statement in its
general mode.
2. The Project Executive Summaries.
3. The Risk Analysis in the Detailed Risk Analysis mode.
As attachments:
4. Volumes IIIA and IIIB of the Environmental Impact Statement, in its
general mode.
5. The explosive magazines construction and access routes.
6. Volume II: Risk Analysis Technical Appendix.
And as reference to the Environmental Impact Studies:
7. The geophysical resistivity studies to determine the possible
existence of underground workings under the San Xxxxx Xxxxxx in the
Cerro San Xxxxx town, in the state of San Xxxx Potosi.
8. Blasting considerations for old buildings in the projected open cut
mine at Xxxxx xx Xxx Xxxxx, Xxx Xxxx Xxxxxx
0. The adverse effect analysis in the use of explosives for rock
fragmentation in mining operations.
10. The Seismic Tomography Study Report carried out in the surroundings
of the San Xxxxx Xxxxxx.
VI. On October 10, 1997, copy of the official document No. 000-0000-0000/97
dated August 5, 1997 was received in the General Direction of Ecological
Ordinance and Environmental Impact, through which the National Institute
of Anthropology and History, San Xxxx Potosi Center, sent to Xx. Xxxx Xxxx
Xxxxx Xxxxxxxxx, SEMARNAP's Federal Delegate in the state of San Xxxx
Potosi, with the following information:
1. Its Technical Resolution.
2. A recommendation letter.
3. The Federal Declaration of the preservation area in Cerro San Xxxxx
(maps attached), and
4. The State Declaration of the preservation area in Cerro San Xxxxx
(maps attached).
This last in order to support the Environmental Impact Evaluation of the
referred project and consider the fact that, presenting a protection
perimeter for the Cerro de San Xxxxx town is sustained in the handling of
the necessary area to minimize the impact that historical monuments could
be susceptible of suffering.
VII. On October 16, 1997, Minera San Xavier, S.A. de C.V. published an abstract
of the Environmental impact Statement in its general mode, for the mining
exploitation project
"Cerro San Xxxxx", in two newspapers of State circulation, according with
the 34 Article, Fraction 1, of the General Law of Ecological Balance and
Environment Protection.
VIII. On October 22, 1997, a communication dated October 20, 1997 was received
in the SEMARNAP Federal Delegation in the state of San Xxxx Potosi sent by
the Pro Ecological San Xxxx Group, through which it requested for public
knowledge the Environmental impact Statement of the "CERRO SAN XXXXX"
project.
IX. By the official document D.O.O.DGOEIA-06798 dated October 22, 1997, the
General Direction submitted the "Cerro de San Xxxxx" project Risk
Analysis, Detailed Risk Analysis mode to the General Direction of
Materials, Hazardous Waste and Dangerous Activities of the National
Institute of Ecology for its technical resolution.
X. On October 27, 1997 a communication without number, was received in the
SEMARNAP Federal Delegation in the state of San Xxxx Potosi, through which
the "Promoter" submitted the "ATTACHMENT TO THE ENVIRONMENTAL IMPACT
STATEMENT IN ITS GENERAL MODE, REQUESTING THE FOREST LAND USE CHANGE OF
THE CERRO SAN XXXXX MINING EXPLOITATION PROJECT CORRESPONDING TO THE
RELOCATION OF THE LA ZAPATILLA TOWN, CERRO SAN XXXXX, SAN XXXX POTOSI" for
its evaluation.
XI. From November 3, 1997, the "CERRO SAN XXXXX" project file was open to the
public for consultation at the SEMARNAP Federal Delegation installations
in the state of San Xxxx Potosi, and the Document Center of the National
Institute of Ecology, according with Article 34 of the General Law of
Ecological Balance and Environment Protection.
XlI. On November 17, 1997 a communication dated November 14, 1997, file number
2813, was received in the SEMARNAP Federal Delegation in the state of San
Xxxx Potosi, through which the Pro Ecological San Xxxx Group requested to
this Ministry that in coordination with the State authorities a Public
Meeting was convoked in relationship with the project of Minera San
Xavier, according with Article 34, Fraction III of the General Law of
Ecological Balance and Environment Protection.
XIII. On November 21, 1997, through the official document No. 1234 dated
November 13, 1997, the SEMARNAP Federal Delegation in San Xxxx Potosi,
asked to the Northeast Regional Management office of the Water National
Commission (CNA), their technical opinion related to the water use and
consumption required by the "Promoter" for the "CERRO SAN XXXXX" project
operation, and, for being of its competence area, the CNA will judge
whatever is relevant for its interest in regard to concession that might
eventually be granted.
XIV. On December 10, 1997, the official document No. 1327 dated November 28,
1997 was received in the General Direction of Ecological Ordinance and
Environmental Impact, sent by the SEMARNAP Federal Delegation in the state
of San Xxxx Potosi, in which an attachment to the Environmental Impact
Statement, in its general mode of the "CERRO SAN XXXXX" project,
corresponding to the relocation of the La Zapatilla town, since its within
the project's influence area, was submitted.
XV. Through the official document No. 1358 dated December 10, 1997, the
SEMARNAP Federal Delegation in the state of San Xxxx Potosi asked to the
Ecology and Environmental Affairs Ministry of The State Government their
opinion upon the "CERRO SAN XXXXX" project, promoted by the Minera San
Xavier S.A. de C.V. company, attaching the following documents.
1. The Environmental Impact Statement, General mode.
2. The explosives magazine construction and access route.
3. The attachment for the Environmental Impact Statement, general mode
of the "CERRO SAN XXXXX" mining exploitation project, corresponding
to the relocation of the La Zapatilla town, in the Cerro San Xxxxx
Municipality, San Xxxx Potosi.
4. The Risk Analysis, Detailed Risk Analysis mode.
5. Volume II, Technical appendix to the Risk Analysis.
6. The geophysical resistivity studies to determine the possible
existence of underground workings under the San Xxxxx Xxxxxx, Xxxxx
xx Xxx Xxxxx, Xxx Xxxx Xxxxxx.
0. Blasting considerations for old buildings in the open cut Cerro de
San Xxxxx mine project, San Xxxx Potosi.
8. The adverse effects analysis in the use of explosives for rock
fragmentation in mining operations.
9. The seismic tomography study report practiced around the San Xxxxx
Xxxxxx.
XVI. Through official document No. 1393, dated December 15, 1997, received in
the SEMARNAP General Direction on January 19, 1998, the Federal
Delegation of SEMARNAP in the state of San Xxxx Potosi, submitted the copy
of the results obtained in the Public Consultation Process, carried out
from November 3, 1997 in the SEMARNAP Federal Delegation in the state of
San Xxxx Potosi, according with article 34 of the General Law of
Ecological Balance and Environment Protection, for the Environmental
Impact Statement, general mode, of the "CERRO SAN XXXXX" project.
XVII. Through official document No. D.O.O.DGOEIA - 07865 dated December 16,
1997, received by the "Promoter" on January 21, 1998, the General
Direction requested Minera San Xavier, S.A. de C.V. the presentation of
any additional information resulting from the visit to the project
location, in order to continue with the evaluation in Environmental Impact
matters of the "CERRO SAN XXXXX" project.
XVIII.Through the official document No. 1403 dated December 23, 1997, the
SEMARNAP Federal Delegation in the state of San Xxxx Potosi, asked to the
Ecology and Environmental Affairs Ministry of the State Government of San
Xxxx Potosi a list of the instances that would participate in the document
review previously sent to such Ministry, and the probable resolution date
about the "CERRO SAN XXXXX" project.
XIX. Through the communication No. San Xxxx Potosi-98009WD dated January 29,
1998, Xx. Xxxx X. Xxxxxxxx, legal representative of Minera San Xavier S.A.
de C.V,, informed to this Ministry, that, from that date on, his legal
responsibility was transferred to Mr. Xxxxxxx Xxxxxxxx Dodge Xxxxxxx,
General Manager of the Company.
This transfer of powers, was registered on the four hundred and twenty
second book, JMMG /ASP / ENC, Public Instrument No. Twenty thousand one
hundred forty one, in Mexico City, dated April twenty seven, one thousand
nine hundred ninety eight, approved by C. Xxxx Xxxxx Xxxxxx Xxxxxxxx,
principal officer of the Notary Public Register number one hundred and
two of the Federal District (Mexico City).
XX. On March 17, 1998, the SEMARNAP Federal Delegation in the state of San
Xxxx Potosi published, in four State newspapers the edict to convoke to a
Public Information Hearing of the "CERRO SAN XXXXX" mining project, in
response to requests submitted by several organizations of civil
character, that would take place on March 20, 1998, from 15:00 to 21:00
hours in the Lomas Racquet Club at Cofre de Perote 52, Lomas 3" Seccion,
in the city of San Xxxx Potosi, in order to collect the doubts and
comments about the Environmental Impact Evaluation of the project, and
include them to the Environmental Evaluation Process.
XXI. Through the official document No. 255 dated March 16, 1998, received in
the General Direction dated March 17, 1998, the SEMARNAP Federal
Delegation in the state of San Xxxx Potosi submitted additional
information requested to Minera San Xavier, S.A. de C.V., for the "CERRO
SAN XXXXX" project, within the period established by the current
Environmental legislation, as well as a copy of the preliminary advance
report of the study "Geo-hydrologic operation of the aquifer in the Cerro
de San Xxxxx Zone, S.L.P.", carried
XXVII. On July 10, 1998, through the official document No. D.O.O.DGOEIA-03008,
the Genera Direction requested for second time, according with Article 35
Bis of the General Law of Ecological Balance and Environment Protection,
additional information for continuing with the evaluation of the "Cerro
San Xxxxx" project, due the analysis results and the considerations made
by the technical-academic Commission of the Autonomous University of San
Xxxx Potosi.
XXVIII. On August 19, 1998, the communication No. SLP98260/WCD dated August
18,1998, was received in the General Direction through which the
"Promoter" submitted the additional information requested for continuing
with the evaluation in environmental impact matters of the "CERRO SAN
XXXXX" project.
XXIX. On August 26, 1998, through the official document No. 983, the SEMARNAP
Federal Delegation submitted to the technical-academic comission of the
Autonomous University of San Xxxx Potosi the additional information
requested for concluding their opinion about the "CERRO SAN XXXXX"
project.
XXX. On November 10, 1998, through the document No. SLP98372-WCD Minera San
Xavier, S.A. de C.V. submitted to the SEMARNAP Federal Delegation in the
state of San Xxxx Potosi, a copy of the official document No. BOO.E42-2023
dated October 27 , 1998, through which the National Water Commission
authorized the drilling of an exploratory well in the La Zapatilla area,
in the Cerro San Xxxxx municipality, State of San Xxxx Potosi, as a
supplement of the geo-hydrological study carried out by the Autonomous
University of San Xxxx Potosi.
XXXI. Through the official document No. EC0. 01.0004/99 dated January 4, 1999,
received in the General Direction dated January 6, 1999, the Ecology and
Environmental Affairs of the State Government of San Xxxx Potosi,
submitted to the SEMARNAP Federal Delegation in the state, the opinion of
the State Government of San Xxxx Potosi related to the "CERRO SAN XXXXX"
project, through the document "Technical-scientific opinion about the
environmental components of the Cerro de San Xxxxx Project by Minera San
Xavier", for integrating the present authorization, indicating, besides,
the following:
"By the strong commitment of the Autonomous University of San Xxxx Potosi
with the interests of our society and state, as well as the high
professional level and ethics of every one of the Commission members that
prepared this document, the State Government takes responsibility of all
of its content as public opinion related to the Environmental Components
of the Minera San Xavier Project"
XXXII. On February 16, 1999, the communication SLP990464-WCD dated February 16,
1999, was received by fax in this General Direction, through which the
"Promoter" clarified to the SEMARNAP Federal Delegation in the state of
San Xxxx Potosi the area to be used in the CERRO SAN XXXXX project, that
once verified resulted to be 373.39 ha.
And
CONSIDERING:
I. That the project "CERRO SAN XXXXX", with presumed location in the public
land of "CERRO SAN XXXXX", "Cuesta xx Xxxxx", "Xxxxx de la Xxxx", and
several properties located in the "Comunidad La Zapatilla", in the Cerro
San Xxxxx municipality in the state of San Xxxx Potosi, promoted by Minera
San Xavier, S.A. de C.V., pretends to establish an open cut and heap
leaching of minerals containing gold and silver mining-metallurgical
exploitation unit, the change of land use in a project area of 373.39 out
of 469.9854 total has under lease.
II. That MINERA SAN XAVIER S.A. DE C.V. submitted copy of the leasing contract
of:
1. 136.1549 has of land, located at the public land of Palma de la
Xxxx, Xxxxx xx Xxx Xxxxx xxxxxxxxxxxx, Xxx Xxxx Xxxxxx.
0. 290.8465 has of land, located at the public land of Cerro de San
Xxxxx, Xxxxx xx Xxx Xxxxx xxxxxxxxxxxx, Xxx Xxxx Xxxxxx.
0. 42.9844 has of land, located at the public land of Cuesta xx Xxxxx,
Cerro de San Xxxxx municipality, San Xxxx Potosi.
III. The project Public Consultation period, established according with Article
34, Fraction IV, of the General Law of Ecological Balance and Environment
Protection was registered from November 3, 1997 during which 17
communications in total were received, from several committees, neighbors
groups, unions, and diverse civil associations from different communities:
Citizens of San Xxxx Potosi, La Morena, La Xxxxxx de la Xxxx, Xxxxxx xx
Xxxxx and Cerro de San Xxxxx, and attached to them a total of 1,696
registers of citizens (1,242 names and signatures, 444 names and 10
signatures),
IV. Minera San Xavier S.A. de C.V. submitted copy of the following Concession
Titles of Mining Exploration:
CERRO SAN XXXXX PROJECT, S.L.P.
MINING CONCESSIONS
TITLE
CONCESSION No. TYPE CONCESSIONAIRE AREA (Has)
-------------------- ----- ------------ -------------------------------------------------------- ----------
Xx Xxxxxxxx 000000 Exploitation Xxx.Xxx.Xx Victoria y Anexas en S. Pedro, S.A. de C.V. 5.5916
La Princesa Poniente 180366 - Xxx.Xxx.Xx Victoria Y Anexas en S. Pedro, S.A. de C.V. 0.0076
Xxxxxx 000000 - Xxx.Xxx.Xx Victoria y Anexas en S. Pedro, S.A. de C.V. 10.0000
Santa Xxx 180598 - Xxx.Xxx.Xx. Victoria y Anexas en S. Pedro, S.A. de C.V. 8.0000
Xxxxx Xxx Xxx 000000 - Neg. Min. La Victoria y Anexas en S. Pedro, S.A. de C.V. 1.5076
Los Blancos 181180 - Neg. Min. La Victoria y Anexas en S. Pedro. S.A. de C.V. 9.0394
Gogorron 180300 - Neg. Min. La Victoria y Anexas en S. Pedro, S.A. de C.V. 9.6250
San Nicolas 180608 - Xxx.Xxx.Xx Victoria y Anexas en S. Pedro, S.A. de C.V. 6.9788
San Nicolas Sur 180610 - Neg. Min. La Victoria y Anexas en S. Pedro, S.A. de C.V. 1.4986
San Nicolas Suroeste 180609 - Neg. Min. La Victoria y Anexas en S. Pedro, S.A. de C.V. 0.1923
Los Riscos 182282 - Neg. Min La Victoria y Anexas en S. Pedro, S.A. de C.V. 4.3474
La Conceocion 182281 - Neg. Min. La Victoria y Anexas en S. Pedro, S.A. de C.V. 4.0000
Cnstina 186231 - Xxxxx and Xxxxxxx Xxxxxxx Xxxxxx 93.6220
Cnstina 2 180938 - Xxxxx and Xxxxxxx Xxxxxxx Xxxxxx 0.5537
Gama 179256 - Xxxxx and Xxxxxxx Xxxxxxx Xxxxxx 41.6391
La Canoa 186370 - Xxxxx and Xxxxxxx Xxxxxxx Xxxxxx 3.4799
La Canoa 2 180948 - Xxxxx and Xxxxxxx Xxxxxxx Xxxxxx 0.6649
La Canoa 3 184906 - Xxxxx and Xxxxxxx Xxxxxxx Xxxxxx 0.0051
Omega 193390 - Xxxxx and Xxxxxxx Xxxxxxx Xxxxxx 2.0576
Omega 2 180958 - Xxxxx and Xxxxxxx Xxxxxxx Xxxxxx 0.1687
San Salvador 186268 - Xxxxx Xxxxxxx Xxxxxx 12.9399
El Tribilin 187088 - Xxxxx Xxxxxxx Xxxxxx 18.2808
La Victoria 185387 - Xxxxx Xxxxxxx Xxxxxx and Xxxxxxx Xxxxx Xxxxxxxxx 10.3797
Gabnel 197045 - Xxxxx Xxxxxxx Xxxxxx and Xxxxxxx Xxxxx Xxxxxxxxx 18.0000
El Xxxxxxx 179603 - Xxxxx Xxxx Brothers 11.2359
El Porvenir 199546 - Xxxxxxx Xxxxxxx Xxxx 4.4200
Porvenir 183925 - Xxxxxxx Xxxxxxx Xxxx 12.0000
And Surface Lands:
SURFACE LAND NAME LEASED AREA (Has)
------------ ---- -----------------
0 Xxxxx xx xx Xxxx Public Land 136.1549
0 Xxxxx xx Xxx Xxxxx Public Land 290.8465
3 Cuesta xx Xxxxx Public Land 42.9844
V. That during the Public Consultation period of the "CERRO SAN XXXXX"
project file, from November 1997, in the SEMARNAP Federal Delegation in
the state of San Xxxx Potosi, according with Article 34 of the General Law
of Ecological Balance and Environment Protection, the attendance of 21
persons was registered, for consulting the Environmental Impact Statement
of the project with approximately 104 consulting hours, where the proposal
for a public information hearing was requested.
VI. That during the technical inspection carried out to the project site
during the period of November 12-14, 1997, by SEMARNAP Federal Delegation
personnel, in the state of San Xxxx Potosi, the "Promoter" and the General
Direction of Ecological Ordinance and Environmental Impact, several
technical matters related to the "CERRO SAN XXXXX" project were explained,
and submitted by the "Promoter" as additional information requested by the
official document No. D.O.O.DGOEIA-07865, dated December 16, 1997 for the
project evaluation.
VII. At the Public Information Hearing of the "CERRO SAN XXXXX" mining project,
in order to gather doubts and comments about the project execution and
integrate them to the environmental evaluation process:
1. Part of the Presidium was integrated by:
a) Lie. Xxxxxxxx Xxxxx Palau, Ministry of Economic Development of
the State
b) Ing. Xxxxx Xxxxxx Xxxxxxxx, Ministry of Ecology and
Environmental Affairs of the San Xxxx Potosi State Government
c) Congressman Xxxxx Xxxxx Xxxxxx Sierra, Ecology Commission of
the State Congress
d) Ing. Xxxxx Xxxxx Xxxxxxx, Northeast Regional Sub-manager of
the National Water Commission
e) Ing. Xxxxxxx Xxxxxx Xxxxxxxxx, representative of the San Xxxx
Potosi Municipal President, Lic. Xxxxxxxxx Xxxxxx Perogordo
f) X. Xxxxxxxx Xxxxx Xxxxxx, Cerro de San Xxxxx Municipal
President
g) C. Xxxx Xxxxxx Xxxxxxxxx Xxxxxxxxx, SEMARNAP Federal Delegate
in the state, and
h) Biol, Xxxxx Xxxxxx Xxxxxxxx, Environmental Impact Director of
the National Institute of Ecology, Mexico, D.F.
1. 319 persons were registered, among which there were members of
social organizations, academies, businessmen, ecological groups,
municipal, State and federal government institutions, as well as
non-organized citizens interested in the project.
2. 15 persons were registered to express their particular opinion and 7
more gave a formal presentation. The comments and proposals
submitted by the attendants to the Public Information Meeting were
answered by the "Promoter" properly, summarizing both side opinions
in the following table:
RECLAMATION The reclamation of the area affected by the project
The company should commit The company has expressed that the execution, will be planned from the activities startup,
itself to restore the zone zone has already been damaged; without waiting to the abandonment stage, as it is
in case of pollution. nevertheless, it does accept the pointed out in the present authorization and as part
commitment of assuring the of the General Reclamation Plan of the zone requested
reclamation activities in case of By Condition No.75.
pollution.
WATER
If the company has in mind The company will carry out analysis Since there could be other options. It has been
using the water from the of the water present in the San Xxxxx requested in the Condition No.67 to the company to
San Xxxxx shaft, the shaft, for verifying its metals develop and apply an "aspersion" method of barren
metals contents should be content and determining its use solutions with Sodium Cyanide to the heaps, as one
analyzed prior to its use. availability. of the methods to save water pretending to reduce
its consumption as an alternative.
The company should submit at the proper time, If it
decides to modify the supplying source of water,
considering the one found in the shaft of old mining
operations, according to the Condition No.68
There's no There's already a geo-hydrological The geo-hydrological study was submitted to this
geo-hydrological study of the zone, which will be General Direction, where it is considered that the
studies of the zone available for consultation and aquifer of the San Xxxx Potosi Valley is different
based on field work. review. from the one in the Cerro San Xxxxx area, fact that
was considered for the project feasibility.
SOCIAL ASPECTS
The major percentage of Propose an approach between the In the competence area of this Ministry, It has
taxes should be absorbed municipal authorities and the Public been recommended to the company in Condition no.9 to
by the entity, for State Finance Ministry for analyzing the consider the social and economical benefit for the
environmental reclamation, proposal that the taxes that will be region, so that there could be an economical growth
since benefits should be paid, will return to the municipality in the zone through the personnel hiring, further
received along with the for its application In municipal recommendations are made in the Term 7 No.3 since
risks. works. they go beyond this Ministry scope.
To build another town and Currently, the negotiations for It will be responsibility of the company to maintain
other church doesn't voluntary relocation of the Cerro de under monitoring and restore any damage in the
rebuild history. There San Xxxxx inhabitants is at a 90% historical buildings in Cerro San Xxxxx town.
should be included in the advance. According to the company's opinion, a cooperation
project plans, the areas agreement with National Institute of Anthropology
for the relocation of the and History for the preservation of buildings in
towns. Cerro San Xxxxx. In Condition No. 32 it is stated
We won't allow the that the company should maintain a safety area around
demolition of the town, the town.
neither its evacuation.
Cerro San Xxxxx can go on
without necessarily being
a mining town. We are not
leaving the town.
Twice a year audits by a It is proposed a social audit as As part of the recommendations of this Ministry to
citizenship committee are surveillance and the installation of the company, are those related to the promotion of
proposed. a citizenship committee, that reviews Technical-scientific and citizenship committees, as
its operations every six months. stated in the Term 7 numbers 2 and 3.
HISTORICAL ASPECTS
Two churches will disappear The company pointed out that the Considering the last events in the Cerro San Xxxxx
with the development of physical conditions of the churches, town, where several collapses have occurred in the
this project: San Nicolas specifically San Xxxxx Xxxxxxx, surroundings of the San Xxxxx xxxxxx, it is important
Xxxxxxxxx and San Xxxxx presents an imminent fall risk, even to point out that before anything, this Ministry
Xxxxxxx. if the company didn't operate; considers a need the immediate agreement between the
nevertheless, it commits itself to company and the National Institute of Anthropology and
The authorities should protect and restore such churches History, in order to carry out the proper actions that
provide assurances that the located in the town. allow the preservation of the historical buildings in
Federal Law for Historical The company developed a detailed study Cerro San Xxxxx, according to the Resulting section
Monuments will be obeyed. of seismic tomography that shows the VI, in the Considerations section IX, and in the
conditions of the church, that would Recommendation number 5.
The church could suffer support the protection actions that
permanent damage, it is should take place. The company will
necessary that the company produce a photographic survey submitted
informs about its condition to a notary public.
continuously.
TOURIST ASPECTS
The zone has unique The company doesn't reject the Having in mind the importance of the municipality's
aesthetic characteristics tourist projects execution in the development, this Ministry has recommended to the
even though it is not zone, and therefore invited those company in the Term 7, Nos. 3 and 4, that in
mentioned in the study, and interested to have a meeting to coordination with the State and municipal
therefore is frequently analyze the project availability. governments, carries out actions that promote
visited by artists, benefits for region inhabitants, not only in the
painters, musicians, and social aspect, but also in the economical one.
photographers.
We have already submitted a
tourist-based project that
would generate 400 jobs on
the short term.
FLORA AND FAUNA
Flora and fauna can be A rescue program for flora species The vegetation and fauna preservation is extremely
relocated for their under protection status will be important and therefore included in the Conditions
preservation. designed, under the direction of No. 4, 8, 14, 21 and 24.
There are three species expert institutions.
under protection status, The installation of a botanical
and therefore a specialist garden is proposed.
should be hired for the
recollection of the cactus
before project start.
Identify zones where the
cactus will be relocated.
Permanent Rescue program.
If there are any species in
danger, the authorization
for the project should be
denied.
There should be a The company pointed out that, in The reforestation zone, will include actions that
reforestation program that order to assure the success in the will tend to compensate the surface vegetation lack,
includes: number of needed reforestation, it will carry as indicated in Condition No. 76.
participants, technical out personally a reforestation
level, etc., considering a program in the zone. Since the fertile soil layer in the zone is
specialist and a work crew. superficial, Conditions Nos. ,34 and 35 indicate to
Reclamation of the soil the company that it should recover for the
layers for botanical reclamation activities in the zone.
garden, reforestation area,
species rescue, etc.
The project would affect There's no affectation upon the The ecosystem mentioned doesn't form part of the
the oak and pine forest Sierra xx Xxxxxxx zone. area where the project pretends to be developed, and
ecosystem, part of the isn't under any risk if it's carried out, and
Sierra xx Xxxxxxx where therefore isn't considered for this authorization
several endangered animal
species live.
The project is located 20
kms from the protected
natural area of the Sierra
xx Xxxxxxx, and the impact
includes the oak area on the
top of the Xxxxx Xxxxxxx.
MATTERS REGARDING THE The company stated its commitment to Minera San Xavier, S.A. de C.V. has sated its
PROJECT DEVELOPMENT organize as many meetings as needed commitment to provide the public with all the
It is requested to carry for clearing up any doubts that could information that is required for a better
out another Public be generated. understanding of the "Cerro San Xxxxx" project.
Information Meeting, more The Public Information Hearing was carried out
public and without the need according to Article 34, Fractions III and V of the
of an executive summary. General Law of Ecological Balance and Environmental
Protection, in the place that was found available at
Organization of this forum the time, with enough capacity for all the
is given in hurried terms. attendance.
The forums can take place
anywhere.
Federal authorities should The Environmental Impact Statement, The Environmental impact Statement, in its specific
have requested an submitted in its general mode, counts mode, requested for projects with such
Environmental Impact with supplementary information that characteristics that could alter very particular
Statement, in the specific provides more information than the elements of the biotic communities components that
mode. one that could have been submitted in develop in the area where they will be carried out,
any other mode. areas where there's still a good flora and fauna
natural preservation.
This doesn't mean that it necessarily covers all the
necessary aspects for the activity evaluation, or that
automatically its resolution is positive.
The information submitted in the documents for the "Cerro San
Xxxxx" mining project, exceeded the requirements included in
the guide for developing the Environmental Impact Statement,
in its general mode, nevertheless it was requested to the
company further explanation over some topics that had to be
expanded for assuring that the zone preservation and the
prevention of some impacts that could be generated.
VIII. That the "CERRO SAN XXXXX" project, promoted by Minera San Xavier, S.A. de
C.V. is not located within any protected natural area, of federal or State
character.
IX. That the National Institute of Anthropology and History in the state of
San Xxxx Potosi informed to the "Promoter" through the official document
No.401-22-D 412 dated July 2, 1997, the conservation guidance that should
be observed during the exploitation of minerals in the surroundings of the
Cerro San Xxxxx town.
X. That the area where the "CERRO SAN XXXXX" is pretended to be developed and
promoted by Minera San Xavier, SA de C.V., it was identified the presence
of individuals of species under different protection categories, according
with the Official Mexican Norm NOM-059-ECOL-1994.
XI. That the Cerro de San Xxxxx town has great historic importance in the
foundation of the city of San Xxxx Potosi.
XII. That the land where the open cut and heap leaching of minerals containing
gold and silver a mining-metallurgical "CERRO SAN XXXXX" project pretends
to be developed is considered of forest or cattle pasture use in an arid
zone of low economical profits, and with the change in the use of land it
is pretended to obtain a benefit for most of the Cerro de San Xxxxx
community.
XIII. That Minera San Xavier, SA de C.V. has shown to be willing to obey the
conditions that the authority establishes in Environmental Impact and Risk
matters, integrating the best equipment and systems during the extraction
and leaching process of materials with gold and silver contents, in behalf
of the Cerro San Xxxxx town inhabitants health, the preservation of the
ecological balance, and the respect of the life quality of the San Xxxx
Potosi citizens.
XIV. That based on Article 35, in the next to the last paragraph of the General
Law of Ecological Balance and Environment Protection, the Ministry can
request warranties for the compliance of the conditions established in the
authorization, in those cases specifically pointed out in the regulations
of the law above, if during the development of works, serious damages
could occur to the ecosystems.
Guaranties for the CERRO SAN XXXXX project, proposed by MINERA SAN XAVIER,
S.A. de C.V., as well as bonds that will insure the compliance with the
terms and conditions of this authorization will be established and based
on financial feasibility studies developed by entities with such
capabilities and submitted to this General Direction according to the
terms and conditions of this authorization.
Based on the preceding paragraphs and on Articles; number 28, sections III and
VII, numbers 30 and 34 sections III and V, number 35 section II and 147 of the
General Law for Ecological Balance and Protection to the Environment; numbers 5
and 20 section II of it's regulations regarding environmental impact; number 32
bis of the Organic Law for Public Federal Administration and number 60 of
SEMARNAP's internal regulations, the General Direction for Ecological Balance
and Protection to the Environment considers the San Xxxxx Project to be
ACCEPTABLE ACCORDING TO LEGAL RULES and has resolved THE CONDITIONAL
AUTHORIZATION of It's development and subject to the following
TERMS
FIRST.- MINERA SAN XAVIER, S.A. DE C.V. is authorized in the matters of
Environmental Impact and Risk, the Land Rezoning of a desert forest area as well
as the preparation, development, maintenance, abandonment and reclamation of
the site over a surface of 373.39 ha out of 469.9854 ha that have been leased
for the development of the "Cerro San Xxxxx" Mining - Metallurgical project of
open pit and heap leaching operations that will treat gold - silver ore,
approximately located at the intersection of the following geographic
coordinates: 22(degree)13' North Latitude and 100(degree) 49' West Longitude, 20
kilometers northwest of the City of San Xxxx Potosi, in the Cerro San Xxxxx
Municipality, State of San Xxxx Potosi, The project can be described as follows:
1. Mining - Metallurgical project to be initiated with the open pit
exploitation of rock material at a large scale, followed by a mixed
metallurgical process that will include the preparation of mined-out
material (crushing, screening and transport), a hydro-metallurgical stage
known as heap leaching and chemical precipitation or "Xxxxxxx-Xxxxx" and
smelting in rotary furnaces to finalize with the production of metallic
concentrate known as dore. The project also includes the following;
2. Development over an area of 373.39 hectares in the municipality of Cerro
de San Xxxxx, including:
SURFACE
DESCRIPTION (Hectares
----------- ---------
Mine area (Open Dit) 67.58
Crushing station 3.53
Dumps 178.00
Xxxxx pad (Phase 1) 30.15
Xxxxx pad (Phase 2) 31.35
Xxxxx pad (Phase 3) 36.94
Four solution ponds 1.00
Recovery plant 3.50
Office building 0.04
Lab 0.03
Storehouse 0.11
Conveyor belt 0.75
Access roads 10.58
Magazines 0.68
Relocation of La Zapatilla 9.15
TOTAL 373.39
3. Approximately 117 million tonnes of fragmented waste rock in different
sizes, will be disposed of in the waste dump site, covering a surface of
approximately 16.78 ha and 30 m high.
4. Approximately 77 million tonnes will be deposited in the heap pads
reaching a final height of 65 m at the end of the mine life.
5. The conveyor belt system installed between the pit and heap pads will be 2
Km long.
6. During a period of eight years; 117 million tonnes of waste and 77 million
tonnes of ore with, an average of 0.67 grams per tonne (g/t) gold and 25
(g/t) silver will be produced.
7. The heap leaching process through ore piles with gold and silver contents,
will be made with a solution carrying 0.5 g/lt, of sodium cyanide.
8. Production will be at a 32,000 tonnes per day or 9.92 million tonnes per
annum (t/a).
9. A metallic alloy of gold and silver known as dore, will be produced at a
rate of 144,000 kg per year.
10. The project will have a maximum storage capacity of 200 tonnes of sodium
cyanide, and 250,000 liters of diesel in several tanks.
11. The project will have barren, intermediate, pregnant and barren solution
ponds with a capacity of 13,757 m(3),13,757m(3) and 8,139 m(3),
respectively.
12. There will be an additional over-board and fresh water pond with a 43,275
m(3) pond.
13. Clearing of the vegetation cover will require the rescue of all
individuals of species with some protection status, amenable to relocation
and/or it's use in the reclamation process, following the
NOM-059-ECOL-1994 official standard.
Clearing and stripping of the mine area will cover an extension of 67.58
ha while the heap pads will cover 98.43 ha. Waste material will be hauled
by trucks to the waste dump area, located to the east and northeast of the
pit over an area of 178 ha.
The open cut mine will be located in the southeastern slope of the SAN
XXXXX xxxx. The pit will be exploited in 10 m benches for both ore and
waste material, with the use of drilling equipment, hydraulic shovels and
large tonnage off-road dump trucks to haul ore and waste.
14. Mining of the gold and silver ore deposit will be made by open pit
standard methods, while the recovery process will be made through the heap
leaching method with the use of low concentration - sodium cyanide
solutions and a "Xxxxxxx Xxxxx" plant that uses zinc powder to precipitate
metals for later refining in a rotary smelting furnace. The main
exploitation activities will be:
a) BLASTING.- Bench drilling will be blasted with the use of an
ammonium nitrate and diesel mixture and an approximate consumption
of 0.170 Kg per tonne. Ignition will be made with the use of cord,
fuse and retardants to control the blast sequence and have a more
efficient breaking of the rock.
b) TRANSPORT.- Rock material will be shoveled in large tonnage off-
road dump trucks by means of two or three hydraulic 17 m(3) shovels
and a 16 m(3) front end loader.
c) CRUSHING. - Ore will be crushed 80% to less than 140 mm with a
giratory crusher, piled in a 158,000 t stock pile approximately 100
m in diameter and 47 m in height. Ore will be transported through a
conveyor belt to the secondary and tertiary crushing stations where
more than 80% will be reduced to less than 12.7 mm in size.
Depending on some of the leaching characteristics of the ore, this
might not go through the secondary and/or tertiary crushers.
d) HEAP LEACHING.- Ore material will be piled up on top of the heap pad
in 5 m benches to build a final pile approximately 65 m high. Once
in the pad, the ore will be sprayed with a Sodium Cyanide solution
with a 0.5g/lt concentration pumped from the barren solution pond
through a piping system at a 0.204 liters per min./m(2) rate.
The solution will go through the ore pile, leaching contained metals
and will collect at the bottom of the pile over an impermeable
polyethylene base. The pregnant solution will be conducted to a rich
solution pond for further treatment in the processing plant, or to
the intermediate pond where it will be recycled to the heaps to be
enriched.
e) RECOVERY AND REFINING OF MINERALS.- The metallurgical recovery
process will involve the following activities:
- Ore crushing.
- Mineral leaching with low concentration cyanide solutions.
- Recovery of solutions in solution ponds.
- Recovery of gold and silver values and smelting.
Once gold and silver have been extracted, the barren solution will
be pumped to an intermediate solution pond to be reconditioned in
it's sodium cyanide concentration and pH, before recycling to the
heap pads.
All solutions will be recycled within an impermeable, confined
environment with neither discharges nor contact with the exterior,
with the purpose of eliminating any possibility of soil pollution
and avoid loosing the metal contents of the solution.
15. SECONDARY ASSOCIATED PROJECTS.- These include the construction of office
buildings, demolition and removal of all buildings and structures, water
and electrical power line construction and access road.
a) RELOCATION OF THE LA ZAPATILLA AND CERRO DE SAN XXXXX COMMUNITIES.-
Construction of a new population center for the La Zapatilla
inhabitants and for the Cerro de San Xxxxx inhabitants in case
they decide it so, process that will be carried out once the Company
has covered all other requirements.
b) MAGAZINE AND ACCESS ROAD CONSTRUCTION.- It will follow all
specification established by the Ministry of National Defense for
this type of facilities.
c) ACCESS ROADS.- Access roads to different operation areas will be
graded with an average width of 12 m, appropriate for the
circulation of mining and hauling equipment. During construction
and operation, the roads will be continuously watered to avoid dust
Generation.
d) POWER LINE CONSTRUCTION.- Electrical power will be obtained from a
primary CFE net to a transformer in the Cerro de San Xxxxx area that
will regulate voltage and provide service to the mine. An average
annual consumption of 55 MKwh is estimated for an installed capacity
of 7,000 Kwh.
e) WATER PROVISION.- All water required for dust suppression in roads,
for heap pads and ponds, etc., will be subject to the authorization
and granting of water rights by the National Water Commission.
SECOND.- This authorization is valid for a period of twelve years. Activities
during the first eight years will include mining and processing of ore as well
as the execution of a Monitoring Program and the following four will conclude
with the monitoring program, the neutralization of ore in the heap pads and
finalize the reclamation of the site.
This time limit will begin the following day of receipt of this authorization
and can be prorogued, following the judgment of this Ministry, as long as MINERA
SAN XAVIER, S.A. DE C.V. submits its request to this General Direction of
Ecological Ordinance and Environmental Impact before thirty days of the
expiration date. A copy of the last compliance of conditions report should be
attached and validated by the Environmental Protection Federal Attorney
(PROFEPA) in the State and by the different committees that will be created for
the purpose of providing a follow-up to the project.
THIRD.- MINERA SAN XAVIER, S.A. DE C.V. is subject to comply with all conditions
included in Article 21 section II of the Regulations of the General Law of
Ecological Balance and Environment Protection, regarding environmental impact,
in the case it decides not to proceed with the development of activities
referred to in this resolution. This General Direction of Ecological Ordinance
and Environmental Impact will determine the necessary measures to be followed to
avoid any negative modifications to the environment..
FOURTH.- MINERA SAN XAVIER, S.A. DE C.V. should submit previous notification to
this General Direction, of any changes to the project as stated in the
Environmental Impact Statement (General mode), Risk Analysis (Detailed Risk
Analysis mode) and Supplementary Information submitted, including future
expansions, to determine adequate actions according to the existing
environmental legislation.
It is strictly forbidden to perform preparation and construction activities
other than those specified in this authorization.
FIFTH.- According to Article 35 of the General Law of Ecological Balance and
Environment Protection, this resolution refers to the environmental aspects of
activities and works described in Title First of the same of the CERRO SAN XXXXX
PROJECT; it is the obligation of MINERA SAN XAVIER, S.A. DE C.V., to permit and
obtain other authorizations, concessions, licenses, permits and others
considered as requisite to perform and operate ail works, among which the
required permit to Change of Use from Forestry and Preferentially Forest
Characteristics, is included.
It is of its most critical responsibility the validity of all civil, mercantile
and labor agreements that have been signed to operate within the Law, as well as
its compliance and legal consequences that will be applied by the Ministry of
Environment, Natural Resources and Fisheries and/or other federal, state or
municipal authorities.
SIXTH.- The construction, operation, maintenance, closure and abandonment of the
CERRO SAN XXXXX project, shall be subject to the description made in the
Environmental Impact Statement (General mode); Risk Analysis ( Detailed Risk
Analysis mode) and its annexes and project maps submitted by MINERA SAN XAVIER,
S.A. DE C.V. as well as all measures of this resolution according to the
following
C O N D I T I O N S
1. GENERAL
MINERA SAN XAVIER, S.A. DE C.V., shall:
1. Guarantee through a bond, insurance or other similar instruments, the
proper compliance with all conditions referred to in this resolution and
the reclamation of the project area or the attention to any contingency.
The type and amount of required guarantees will be according to
technical-economic studies that will evaluate and insure the attention to
accidents, health and environmental risks, reclamation plans and programs,
as well as the compliance with all conditions to which the project is
subject to, considering each and every one of the stages mentioned in the
Environmental Impact Statement (General mode); Risk Analysis and
supplementary information submitted. Results of this evaluation as well as
the amount and type of guarantees shall be submitted to this General
Direction in original and three copies for approval.
Within THREE MONTHS of receiving this authorization, the PROMOTER shall
submit its proposal for a first guarantee or insurance in which the
preparation stage is included, at least, with the following stages being
conditioned, to the presentation of their corresponding guarantees or
insurance; this proposal will be evaluated by this General Direction and
once accepted, will be sent to PROFEPA for it's follow-up with copies to
the corresponding SEMARNAP and PROFEPA Delegations in the State of San
Xxxx Potosi.
2. Establish a Supervision Program in which a responsible (entity or person?)
be assigned to the project, with good technical capabilities to identify
critical environmental and risk aspects, to make decisions, define
strategies or modify negative activities. It will create, furthermore, an
internal Group of Environmental Vigilance that will be responsible, at all
moments of watching the compliance with all Project's terms and conditions
It will submit the aforesaid program to PROFEPA with copies to this
General Direction and the SEMARNAP and PROFEPA Delegations in the State of
San Xxxx Potosi, within a THREE MONTH period of time after reception of
this document.
3. Promote the formation and support of a Technical-Scientific Group that
will provide follow-up to those commitments defined during the evaluation
and resolution process of the CERRO SAN XXXXX project, for this purpose,
the recommendations pointed out in Term number Seven of this
authorization, might be considered.
4. Previous to any activity in the area to be affected, carry out the rescue
and relocation of all wild flora and fauna individuals present on site,
that are considered with any state of preservation, following standards of
the Official Mexican Standard NOM-059-ECOL-1994 and, after that, consider
all other flora species, parts of them, seeds, trees or brushes that can
be used in the reclamation of the project. Other species different to
those existing in the project site, can not be used for reclamation
purposes since they would be considered exotic. This activities based on a
Protection Program that should be carried, out based on existing field
studies and new sampling in the area.
5. Relocate all plants in final or temporary locations according to the
Protection Program. At the end of the relocation, submit to this General
Direction a map where relocation sites are marked along with a listing of
species and the total number of individuals of each species relocated.
Determine the preservation areas in conjunction with Municipal and State
authorities, in a place feasible for this purpose and where the risk of
individuals being affected by other activities does not exist.
6. Determine and outline an area where a botanical garden can be established
with the purpose of collecting all representative vegetation of the CERRO
SAN XXXXX site and to promote training courses and diffusion of actual
mining activities, the importance of preserving natural systems and the
alteration of natural ecosystems due to these activities.
7. Determine and an area where future activities will not affect the
establishment of a green house and where vegetation individuals that will
be used in the reclamation process can be reproduced from seeds. This will
be initiated at the beginning of project activities, considering the long
life cycles of desert species.
8. Notify to its workers of general dispositions and sanctions defined by
laws in the matters of wild flora and fauna protection; within SIX MONTHS
of receiving this authorization, send to this General Direction, with
copies to the SEMARNAP and PROFEPA Delegations in the State, a list of
actions that will be carried out to guarantee that the workers will
respect legal ordinances with the final purpose of protecting wild flora
and fauna, including those under any protection status in the area of
influence of the project.
9. Hiring local inhabitants will be preferred with the purpose of avoiding
negative social economic impacts due to the demand of goods and services
and channel out the economic flow derived from the project to the local
population.
10. Previous to the start-up of project activities, to obtain required
permits, licenses, authorizations and concessions, among others:
Authorization of the National Water Commission to use underground water
and transmission of water rights according to existing regulations; water
will only be extracted to substitute that evaporated in the process and
only domestic waters will be allowed to be discharged. Other
authorizations are as follows:
- Authorization for the change of use of forestry land (land
rezoning).
- Use of soil license issued by a local authority.
- Environmental License.
- Residual water discharge.
- La Zapatilla town relocation permit.
- Construction License. ,
- Authorization to store and handle explosives, issued by the Ministry
of National Defense.
- Authorization for not hazardous solid waste disposal.
Copies of these authorizations, once obtained, should be sent within
THIRTY DAYS, to this General Direction, with copies to the SEMARNAP and
PROFEPA Delegations in the State.
11. Maintain construction and operation equipment in the best possible working
conditions during the different stages of the project and establish a
systematic monitoring program, in such a way that the following Official
Mexican Standards are met:
a) NOM-041-ECOL-1993, that refers to the maximum allowed levels of
polluting gases from the exhaust of automobiles driven with
gasoline.
b) NOM-045-ECOL-1993, that refers to the maximum levels of smoke
opacity allowed from the exhaust of automobiles driven with diesel
fuel oil.
c) NOM-080-ECOL-1994, that refers to the maximum levels of noise
allowed.
d) NOM-001-SEMIP-1994. That refers to installations that provide
electrical power, as published in the Official Gazette October 10,
1994.
12. Previous to the start-up of project preparation or any other activities,
to promote necessary permits to relocate the inhabitants of the Cerro San
Xxxxx and La Zapatilla communities, as well as any other that might be
affected by the project, as needed. This should be done with the
permission of all local people, Municipal, State and Federal Governments
according to applicable legislation.
13. Follow lines of action regarding the adequate disposal of different types
of wastes generated during the different stages of the Cerro San Xxxxx
project:
a) Domestic solid wastes (mostly organic matter) will be located in
capped containers strategically located in the areas of generation.
Final disposal will be periodical where local authorities decide, to
avoid its dispersion and generation of noxious fauna
b) Other solid waste, like empty bags, paper, cardboard, glass, wood,
saw dust, plastic, metal parts, etc., susceptible to recycling will
be channeled through those companies that provide recycling
services.
c) Other materials generally used for construction, installation,
equipment tests and maintenance, like: paintings, greases solvents
and spent acids, as well as their containers, tow and papers
impregnated by the former, will be considered as hazardous wastes,
according to the Official Mexican Standard NOM-052-ECOL-1993, and
have to be collected and stored following the Regulations of the
General Law of Ecological Balance and Environment
Protection-referring to hazardous wastes and later sent to
recycling, incineration and/or confinement to authorized facilities
authorized by this Ministry, after notification to this General
Direction and to PROFEPA in the corresponding official forms.
14. Establish the limitation of its environmental responsibility along with
this Ministry and the State Health Department, concerning possible future
damages based on existing environmental characteristics already
established and future data that will be gathered on site. The following
should be established:
a) Area included within the environmental and health characterizations.
b) Natural environment characteristics that will be defined taking into
account those that might be affected by mining activities and
possible contingencies.
c) Health characteristics that will be determined for those inhabitants
in the project area according to the area already defined for such
studies, taking into account those physiological factors that might
be altered by mining related activities,
d) Estimated degree of soil, water and air pollution, making reference
to current concentrations of pollutants in both surface areas and at
depth.
e) Sampling of pollutants (heavy metals in general) in flora and fauna,
considering the study area, those parameters that might be affected
by mining.
Technical personnel assigned to this task by the Company, along with
municipal, state and federal authorities will determine the scope of
this analysis and the best way of doing it. Results shall be
submitted to the Vigilance Committee.
Those Official Mexican Standards that might be applicable should be
considered, such as the Official Mexican Standard NOM-048-SSA1-1993
that establishes the normalized method to evaluate health risks as a
consequence of environmental agents, among other.
A guideline or protocol that will include the aforesaid, should be
submitted to this General Direction for evaluation, with copies so
the corresponding SEMARNAP State Delegation
as well as to the Technical - Scientific Committee in a period of time
that shall not exceed of six months from the moment this authorization is
received and, once accepted to PROFEPA for follow-up. All analysis that
the Company ought to submit to comply with all environmental aspects,
shall be carried out in certified laboratories belonging to the National
System of Testing Laboratories (SINALP).
15. Previous to the start-up of project preparation or any other activities,
submit to this General Direction detailed Engineering of proposed works
that will guarantee the compliance, without restrictions, of all
environmental conditions established in this resolution, with quality
control annex information of programs that shall establish all measures to
be taken during the construction process in the development of this
project.
16. Establish adequate restrictive and informative signals to the general
population, that will establish the works that the Company will carry out
in that site.
17. Follow all regulations established by the Ministry of Labor and Social
Prevision and comply without restriction with the Program of Health and
Safety.
18. Perform maintenance and/or repair of the equipment in a shop that will be
impermeable (floor) and equipped to collect waste greases and lubricants.
Wastes generated in this area shall be stored in properly marked cans that
should be delivered to be handled and disposed of by a properly authorized
company.
19. Establish a compromise with this General Direction to certify, with the
use of best standards, the quality of each and every one of the phases of
the project, including detailed engineering of construction, operation and
monitoring, contingency response, detoxification and reclamation as well
as those services that will be used, such as the chemical analysis
laboratories. The Company might decide to establish an Environmental
Management Voluntary Program in which a System of Environmental
Administration will be included and will comply with quality standards
such as ISO 14000, Integral Responsibility or a Total Quality Program.
It is strictly forbidden to MINERA SAN XAVIER, S.A. DE C.V.;
20. The use of chemical products and/or burning for vegetation clearing
activities.
21. Illegal capture and sale of terrestrial and/or aquatic wild flora and
fauna species with emphasis in those species approved for hunting
activities and those included in the NOM - 059-ECOL-0994. MINERA SAN
XAVIER, S.A. de C.V. will be responsible of any environmental wrong doing
by its workers and will be subject to judiciary dispositions established
by the law in this matter.
22. Opencast disposal of domestic sewage and industrial waste waters.
23. Maintenance and repair of equipment and machinery outside of those
established places conditioned for that purpose.
24. Abandonment or burial of hazardous wastes such as cloths and tows soaked
in lubricant oils or greases, containers, packaging material and others
along access roads or any other parts of the project.
25. Change the trace of existing roads without previous notification, analysis
and authorization.
26. Opencast disposal of any type of trash; this shall be hauled to those
sites indicated by municipal authorities.
27. The lighting of bonfires or explosives outside the areas designed for this
purpose.
28. The construction of permanent camps; only temporary camps will be allowed,
trying to diminish their area to a minimum and to locate them in places
that have already been altered by previous activities. .
II. SITE PREPARATION AND CONSTRUCTION
MINERA SAN XAVIER, S.A. DE C.V, SHALL:
29. Before clearing activities, carry out the rescue of those individuals of
flora and fauna on site belonging to the listing of species subject to
protection according to the NOM-059-ECOL-94 and to the general conditions
established in this document. In the case of local fauna, to rescue those
individuals living in xxxxxxx in the areas to be affected and that due to
their slow movement characteristics or physiological requirements can not
re-establish on their own.
For this effect, consider these activities within the Protection Program
referred to in the General Condition number 4, with the participation of
highly specialized technical personnel. This program should clearly
indicate a list of species included, the scope and timetable of
activities, techniques to be used in the rescue, relocation sites and
actions to be taken to insure the survival of those individuals to be
relocated.
Such a program should be submitted along with preliminary results, as
mentioned in the condition of reference, within SIX MONTHS from the date
of authorization. This program should also include all areas authorized to
install project infrastructure and later submit annual reports of advance
activities and partial results, including photographic annexes and/or
video tapes that will show the most relevant aspects of the stage
developed.
30. Install a system of floating plastic balls and nets to scare birds away
from ponds and heap pad areas, as well as any site where solutions can
attract wild fauna.
31. Provide with alternate sources of fresh water that can be used by local
wild fauna.
32. Outline and respect a safety buffer zones, one surrounding the town and
the other surrounding the pit to prevent from any disturbance to the
people as established by the National Coordination of Historic Monuments
of the National Institute of Anthropology and History. This area can be
modified by the authorities after evaluation, if causes of merit are
present, considering:
a) Construction of a protection fence in those operation areas where
most risk exists, particularly in the heap pad and pond areas.
b) A blasting safety zone.
c) A perimeter protection zone of the Cerro San Xxxxx town.
33. Perform all vegetation and soil clearing in a gradual manner to allow the
departure of local fauna inhabitants and their later resettlement in
adjacent areas.
34. Recover and store in a pre-defined site, all material derived from the
clearing of the site that may be used in the reclamation and reforestation
of the area. It should be noted, during development of these activities,
that this material does not block natural water courses.
35. Brush that will not be rescued, or that may not be of any use to locals,
will be chopped and mixed with soil to be used in later reclamation and
re-vegetation activities
36. Plant residues that may not be of any use can be disposed of in the waste
dump zone with the purpose of avoiding additional damage to the flora and
fauna of the site.
37. Office buildings, store houses, laboratory, shops and magazines will be
installed trying to preserve as much as possible of the original tree and
brush individuals of the area. Therefore, those areas where infrastructure
will be built, clearing should be selective and disturbance should be
restricted to the areas needed for buildings and access roads.
38. Drainage works should be built in such manner that the construction and
rehabilitation of access roads will not modify the existing natural
drainage pattern.
39. Within SIX MONTHS of receiving this resolution the following information
should be submitted to this General Direction:
a) Techniques and systems that will be used with the purpose of keeping
local wild fauna, including birds, away from solution ponds; this
should include the installation of a protection fence in those
operation areas where most risk exists, particularly in the heap pad
and plant areas. It should also deter domestic fauna from invading
operation areas.
b) Modification to the pregnant and barren solution ponds to be
included within the area that will be impermeable with a high
density polyethylene layer to diminish the risk of leakage and
accidents due to the fall of wild fauna or workers in the cyanide
solutions.
c) Technical design specifications and construction of the impermeable
system in heap pads and ponds, according to selected methods. Mean
life and factory guaranty of the system as well as conditions that
should be met.
d) The surface of agricultural land that will be affected according to
official records and project works, as well as compensation plans
agreed with owners.
e) Detailed design of automated transport systems, where particle
emission and dust contention systems to keep fugitive particles
down, are included.
f) Enough portable sanitary toilets should be installed and properly
maintained, to cover the needs of workers and personnel during
different project phases.
g) Drainage works should be built in such manner that under no
circumstances contaminated process waters might reach the existing
natural drainage pattern (particularly the San Xxxxx creek).
40. Design an Integral Monitoring Program that will provide attention to Risks
and Contingencies derived of cyanide and metal pollution of soils and air;
this program should be submitted for evaluation to this General Direction
before the operation stage and establish it once approved, considering:
a) Construction of a series of monitoring xxxxx to favorable depths
that will detect any horizontal flow of cyanide-rich solutions, both
in the heap pad area and its surroundings. Actions that will be
taken in case solutions are detected, should be indicated.
b) Actions that will be taken in case of leakage and/or spill of
cyanide solutions from the ponds.
c) Install cyanide gas detection alarms in those process areas where
solutions are prepared.
d) Actions that will be taken in case hydrocyanic acid gases, above
standards recommended by existing health regulations, are detected.
e) Response to medical emergencies.
f) Design of an operations manual in case of accidents, based on
existing SCT guidelines relative to the transport of hazardous
materials in the State of San Xxxx Potosi, attaching general
information of the company that will be in charge of these
activities providing assurance of valid authorizations. This manual
should consider the handling of Sodium Cyanide and its containers
within premises.
g) Location of antidote equipment against intoxication, in a the
necessary quantity to cover the possible needs of operation
personnel and general population.
h) Calendar of tactical contingency exercises, following the Prevention
of Accidents Program that will be requested later in matter of
risks.
i) Monitoring well calendar of readings and records.
41. Submit a program and calendar of activities for training courses in safety
matters and the use of equipment required for the attention, prevention
and control of leakage, fire, spills and/or explosions.
42. Build heap pads following strictly the design and characteristics
established in the Environmental Impact Statement and Risk analysis
submitted and using proposed liners or better ones.
43. Build and install infrastructure, as authorized in this resolution,
following strictly submitted detailed engineering information.
44. Build one overflow pond that will be impermeable, using the same liner
system as proposed for the heap pads.
45. Guarantee that the project will count with drainage works, built in such
manner that under no circumstances contaminated process waters might reach
the existing natural drainage pattern, considering the possible storm
effects.
46. Carry out digging, leveling, compaction and land filling necessary for the
preparation stage of the project, developing necessary engineering works
to avoid the disturbance of the natural drainage.
47. Obtain necessary construction materials from authorized sites.
48. Establish a barrier in the waste dump area with upstream and downstream
monitoring xxxxx for immediate detection of any possible acid drainage
generation.
It is strictly forbidden to MINERA SAN XAVIER, S.A. DE C.V.:
49. Clearing of vegetation outside the areas required for project development.
50. Burning and abandonment of clearing debris in the project area or adjacent
areas, water courses and/or places where wild flora and fauna might be
affected.
51. The use of chemical products and/or burning for vegetation clearing
activities; these activities should be made by mechanical and manual means
within the project site.
III. OPERATION AND MAINTENANCE STAGES
MINERA SAN XAVIER, S.A. DE C.V. shall:
52. Follow the mining plan submitted in previously mentioned documents.
53. Watch over, through A MONITORING PROGRAM during the piling up of waste
dumps, that:
a) Slope stability is guaranteed for a long period of time.
b) Slope of the waste dumps should allow soil concentration to avoid
air and water erosion and make the re-vegetation process easier.
c) Channel drainage to control rain waters, diminishing erosion effects
and dirt transport to ADJACENT AREAS, is made.
d) All proposed measures with the purpose of eliminating the generation
of acid solutions derived of existing sulfide material and later
weathering, are carried out.
e) Waste material is not transported to adjacent areas.
Submit the program to this General Direction within a period of time
not longer than six months from the moment of reception of this
document to be approved and to be followed-up by PROFEPA. This
Program should have the support of a prestigious Academic
Institution.
54. Carry out mining in the pit area according to a Pit Slope Stability
Program that should be submitted to this General Direction within a period
of time not longer than six months from the moment of reception of this
document. Furthermore, channel drainage to control rain waters diminishing
erosion effects in adjacent areas, should be included.
55. Use of explosives following the handling, transport and storage procedures
established by the Ministry of National Defense
56. Verify that explosive charges used in mining operations will not exceed,
at any moment, safety specifications that might cause health damage to
adjacent communities derived of over pressure and noise levels. Blasting
operations shall be carried out during day shifts, exclusively.
57. Verify through direct inspection and monitoring stations the presence of
dust from mine and waste dump operations in both, plant and open areas;
characterization of dust contents shall be made according to existing
standards and control measures shall be established following a
Characterization and Dispersion of Dust and Air Contaminants study tat
will provide technical specifications of the gas monitoring system, as
well as treatment of smokes and gases and will provide generation
estimates and define dispersion patterns.
A data base with chemical analysis of samples from atmosphere monitoring
readings, shall be submitted every six months and shall include
bio-availability results to define health hazards derived of dust and
gases, with the purpose of establishing protection measures.
Additional environmental controls and definition of the number and
location of monitoring stations shall be defined and technically designed,
to insure that air readings will be representative.
A detailed analysis of water-based dust suppression systems shall be
appended, where favorable and unfavorable aspects of their use are
analyzed, considering also the use of wind-breaking tree curtains and/or
local vegetation.
These measures shall be submitted to this General Direction with copies to
PROFEPA and to the corresponding SEMARNAP and PROFEPA Delegations in the
State of San Xxxx Potosi within a six month period once project operation
is initiated.
58. Develop a plan in which all potentially acid generating material will be
mixed with limestone to be neutralized.
59. isolate those rock areas in the pit that might be potentially acid
generating, using different methods like cement covering, among others.
60. Comply with existing regulations regarding the production of gas emission
from fixed sources due to the emission of gases in the smelting, retort
and lab areas, A gas monitoring system should be included with results
sent to PROFEPA and copies to this General Direction and corresponding
SEMARNAP and PROFEPA Delegations in the State of San Xxxx Potosi within a
period of time that shall not exceed of three months once project
operation is initiated.
61. Handle and dispose of recovered arsenic following existing regulations for
this effect.
62. Once pilot plant tests are finished, submit mass balance results for the
following metals: Pb, As. Hq and Mn These results should be submitted one
month after the first year of operation. ' .
63. Carry out dynamic tests to predict detoxification and determine the risk
of acid generation at the end of the rinsing process of heap pads.
64. Handle cyanide solutions independently, for each leaching phase.
65. Use of pumping systems with easy-access for operation and maintenance
purposes, considering the different leaching phases and the modification
of the pregnant pond within the leaching pad.
66. Develop and submit a barren sodium cyanide solution spraying system that
will allow water savings
67. Carry out, during the first two years of operation, kinetic tests to
evaluate the handling of leached material residues including, in addition
to acid drainage parameters (pH, conductivity, SO, Fe, Ca, Mg) the
following metals: Lead, Arsenic, Copper, Zinc, Manganese and Mercury,
submitting these results to this General Direction to be submitted in a
yearly basis.
68. Consider the possibility of decreasing the amount of fresh aquifer water
used in the process by substituting with treated water or mine water from
old shafts. It will be necessary, in the last case, to carry out chemical
analysis to verify metal contents and determine its possible use.
Such a proposal should be submitted to this General Direction within a
period no longer than three months after this document is received.
69. Install a back-up electrical system with purpose of making sure of the
continuous operation of the solution recycling pumping system during
operation.
70. Consider the adoption of measure that would allow mining operations in
parallel with normal activities of local inhabitants, namely, access and
circulation.
71 Keep background levels of contaminants within limits defined by baseline
studies before operations; in case some contamination is produced due to
normal operations or as a result of a contingency, reclamation to restore
original parameters should be carried out.
72 Comply with all preservation ordinances regarding historical monuments and
sites, established by the National Institute of Anthropology and History
in San Xxxx Potosi.
MINERA SAN XAVIER, S.A. DE C.V. will not be able to:
73. Obstruct natural water courses with any type of material.
74. Extract water from unauthorized sources.
IV. ABANDONMENT AND RECLAMATION
MINERA SAN XAVIER, S.A. DE C.V. shall:
75. Submit a General Plan of Site Reclamation to this General Direction within
a period of time not longer than TWELVE MONTHS from the moment of
reception of this document and once approved, to PROFEPA, where the
following items should be included:
a) Specific Reclamation Plans and Programs, where time frames, costs,
activities, techniques, etc., that guarantee the reclamation of the
site at short, medium and long ranges, are discussed
b) Reclamation activities considered, from the beginning of project
development.
c) Activities considered to handle leached residues and residual
solutions before rehabilitation and abandonment, with the purpose
of eliminating all compounds of the Cyanide, chemical family (free
cyanide, hydrocyanic acid, cyanide-metal complexes, thiocyanates,
cyanates, etc.) and those compounds derived of cyanide destruction
(ammonia, nitrates, nitrites, etc.) to reach concentrations allowed
by existing regulations.
d) Chronic risk, cascade effect or cumulative impacts and affectation
ratios.
e) Rescue and preservation of physical and biological resources that
can be used in reclamation activities.
f) Pit, waste dump and heap pad slope stability.
g) Heap pile neutralization studies.
h) Re-vegetation of those areas disturbed by project development.
i) Removal and final disposition of those structures that will not
serve a purpose after the project's life.
j) Restoration or, given the case, compensation of disturbed areas by
project development.
k) Projected and specific actions considered for the mine's closure of
operations.
76. To provide compensation by the loss of vegetation cover caused by the
development of the project, contact and coordination with the General
Direction for Restoration and Soil Conservation of the Under Ministry of
Natural Resources and with SEMARNAP's Federal Delegation in the State of
San Xxxx Potosi, should be made, to develop a Reforestation Program to be
submitted to this General Direction within a period no longer than six
months after this document is received.
This program should include all requirements established in both, the
Authorization for Change in Forest Land Use issued by SEMARNAP's Federal
Delegation in the State of San Xxxx Potosi and the following points
included in the Environmental Impact Statement:
a) List of native species to be used (with common and scientific
names). The introduction and use of exotic species like eucalyptus
(Eucalyptus sp.), casuarina, (Cassuarina sp.) and Tamarix sp. should
be avoided.
b) Location map with areas to be reforested.
c) Density of reforestation by unit-area.
d) Nursery techniques and/or places where plants will be obtained.
e) Maintenance and protection activities proposed, including four years
at least, after closure.
f) Places where seeds and/or small plants to be used in the
reforestation process, will be obtained,
77. Provide treatment to all piles of leached ore and to the sodium cyanide
solution considering the detoxification of metals like Pb, As, Hg, and Mn,
by establishing an adequate program where the best available techniques
and elements are used.
78. Control and restore any aquifer contamination in case this is caused by
company activities.
V. ENVIRONMENTAL MONITORING
MINERA SAN XAVIER, S.A. DE C.V, shall:
79. Identify all Manganese (Mn) mineral specimens and compounds and define
their dissolution activity during the process, closure and reclamation
of the mine site.
80. Develop a working plan that will allow a continuous environmental
evaluation of the project site and of all mining and processing
activities, to identify on time, any unforeseen direct or indirect
impacts, or to establish corrective measures for those impacts that may
not be significant.
81. Design and carry out the following environmental monitoring with an
ecological protection objective in mind:
a) erosive processes in the project site,
b) Vegetation health of plant transplant relocation sites.
c) Botanical classification of those areas selected for reclamation,
during the process and once plants are established.
d) Detailed chemical and physical analysis of soils.
e) Presence and behavior of wild fauna within the previously mentioned
relocation areas.
The monitoring process should be carried out every six months starting one
before the initiation of any activity on site and summarizing collected
data in a yearly report to be submitted to PROFEPA with copies to this
General Direction and corresponding SEMARNAP and PROFEPA Delegations in
the State of San Xxxx Potosi.
In the case that some of the controlled parameters suffers any
modification from it's previous condition, this shall be analyzed; if any
negative disturbance is defined, corrective measures must be taken to
establish values back to their original background.
The Company shall inform of any negative disturbances immediately to
PROFEPA, (with copies to this General Direction and the SEMARNAP
Delegation in the State) and will also inform of the return to normal
conditions. In case normal conditions can hot be re-established within
three months, all project activities shall be suspended and reclamation
activities initiated.
82. Carry out a water quality monitoring program. It is the responsibility of
the Company to define the number and exact location of monitoring
stations, with the sole objective of timely detecting any changes in the
physical, chemical and biologic characteristics of the water. The analysis
of these results will provide exact information of possible changes and if
these are directly related to activities in the project (with source
identification) or to any other foreign cause.
83. Develop a Water Monitoring Program which should include the following
information:
a) Criteria considered to establish the number and location of
monitoring stations.
b) Map with the exact location of monitoring stations.
c) Parameters to be controlled and frequency of sampling in the case of
physical, chemical and biological parameters.
d) Detailed description equipment and techniques to be used.
e) Assay result analysis proposal.
This Water Monitoring Program shall be submitted to this General Direction with
copies to PROFEPA and to the corresponding SEMARNAP and PROFEPA Delegations in
the State within an eight month period once this resolution has been received..
84. Establish a Company Environmental Control Program (Vigilance] and a
dedicated group that will be responsible of complying with the Terms and
Conditions to which the project has been subject.
85. Establish and carry out a Permanent Environmental Monitoring Program with
the purpose of timely detecting the presence of any polluting element
(mercury, lead, cyanide, manganese and other) that might cause an
environmental contingency in the area. It should also consider actions
that would help to stabilize lead, arsenic and manganese during the
leaching, detoxification and reclamation stages.
All monitoring Programs shall be included in a single General Monitoring Program
that shall be submitted to this General Direction for evaluation within a period
not longer than one year once this authorization has been received and once
approved, copies should be sent to PROFEPA and to the corresponding SEMARNAP and
PROFEPA Delegations in the State for follow-up.
VI ENVIRONMENTAL RISK MATTERS
MINERA SAN XAVIER, S.A, DE C.V. should:
1. Build the project facilities (leaching area, solution ponds, and metals
recovery plant) based on the measures and especifications stated in the
risk analysis submitted.
2. For compliance with Article 147 of the General Law of Ecological Balance
and Environment Protection to design an Accident Prevention Program,
that shall meet the following conditions:
a) It should be made previous to the initiation of operations and
active in a time period no longer than three months from start; for
this, the company should submit to the General Direction of
Materials, Hazardous Waste and Risky Activities of the National
Institute of Ecology, and the Federal Attorney for Environmental
Protection, within sixty natural days, from the reception of this
resolution document, the program to carry out these activities, as
well as periodic progress reports.
b) Once the program for Accident Prevention (PPA), is active it should
be upgraded permanently, having the obligation of informing annually
to the General Direction of Materials, Hazardous Waste and Risky
Activities of the National Institute of Ecology, about the
programming for carrying out such actualization,
c) The General Direction of Materials. Hazardous Waste and Risky
Activites of the National Institute of Ecology, could request the
presentation of an Accident Prevention Program, whenever it
considers it convenient, to be submitted and under consideration and
approval from the Accident Prevention Programs Analysis and
Approval Committee (COAAPPA), which is integrated by several
Ministries.
Also, as a complement from the third issue of the guide mentioned
previously, it is necessary to request the Risk Analysis results
format.
To obtain the PPA guide and the suplementary format to the third
issue of the guide, consult the INE's webpage through internet:
http//xxx.xxx.xxx.xx/xxxxxx/xx/xxx/xxxxxxx.xxx.
Such PPA, should contain a plan for the immediate attention to any
spills that could cause soil and underground pollution, according to
the sustance spilled, the response actions, as well as the
contaminated soils proper treatment. Also, it should include the
especific procedures for alert the project's neighboring population,
protect them from open cut mining operations like fly-rock, noise
emissions, and vibrations.
88. Warrant that at any time, the explosive material loads used during the
mining operations don't exceed the quantities that could affect human
settlements, by noise levels and seismic effects.
For this purpose, it should submit to the General Direction of Materiasl,
Hazardous Waste and Risky Activities of the National Institute of Ecology,
previous to the project operations startup, the information that justifies
the relocation of human settlements surrounding the project's influence
area, based on the risk analysis (Attach a map showing the location and
population density of the new settlements).
Also, a permanent monitoring of the physical properties of buildings
considered as national monuments, should be done, in order to warrant that
they will not be affected by the project's exploitation activities; if
not, it should look for another alternative or suspend activities.
[emblem] NATIONAL ECOLOGY INSTITUTE
GENERAL OFFICE OF ECOLOGICAL
MINISTRY OF THE ENVIRONMENT, CODIFICATION AND ENVIRONMENTAL
NATURAL RESOURCES AND FISHING IMPACT
D.O.O.DGOEIA.- 001130
89. Conduct blasting in mining operations exclusively during daylight
hours, based on the provisions of the Risk Study.
"Cerro San Xxxxx"
Minera San Xavier, S.A. de C.V.
Page 45 of 55
[emblem] NATIONAL ECOLOGY INSTITUTE
GENERAL OFFICE OF ECOLOGICAL
MINISTRY OF THE ENVIRONMENT, CODIFICATION AND ENVIRONMENTAL
NATURAL RESOURCES AND FISHING IMPACT
D.O.O.DGOEIA.- 001130
90. Present to the General Office of Materials, Residues and Risk
Activities of the National Ecology Institute, prior to commencing
operations, the scheduled preventive maintenance program for the
contaminant processing and control equipment, emphasizing the safety
devices and firefighting system.
The maintenance work undertaken in accordance with the indicated
program must be entered in a logbook.
91. Before commencing project operations, install alarms to detect
hydrocyanic acid in the solution preparation area, based on the
provisions of the risk study presented.
The foregoing will also be taken into account for the sodium cyanide
storage area.
Regarding the foregoing, before commencement of operations the
information demonstrating compliance must be presented to the General
Office of Materials, Residues and Risk Activities of the National
Ecology Institute; also, the criteria used to locate the sensors and a
schematic showing distribution of the system must be attached.
92. Adequately delimit the storage and processing areas of the entire
plant; similarly, it will have signs and posters referring to the
danger of the materials being handled, in visible places and forms.
The areas where dangerous liquid materials are handled (storage and
processing) must be provided with a spill capture and recovery system.
Dangerous materials in the storage site must be properly labeled and
identified, respecting chemical incompatibilities that may exist
between them.
In addition, the firefighting system equipment will be appropriately
identified and located, in order to have easy access to it in case of
emergency.
Regarding the foregoing, information demonstrating compliance with the foregoing
provisions (including a photographic annex) must be presented to the General
Office of Materials, Residues and Risk Activities of the National Ecology
Institute prior to commencing operations.
"Cerro San Xxxxx"
Minera San Xavier, S.A. de C.V.
Page 46 of 55
[emblem] NATIONAL ECOLOGY INSTITUTE
GENERAL OFFICE OF ECOLOGICAL
MINISTRY OF THE ENVIRONMENT, CODIFICATION AND ENVIRONMENTAL
NATURAL RESOURCES AND FISHING IMPACT
D.O.O.DGOEIA.- 001130
93. Install a low pH sound alarm system, located in strategic points where
sodium cyanide solution is used, for redundant prevention of the
possible formation of hydrocyanic acid.
94. Install a retaining dike for atmospheric tanks that store diesel, which
must be constructed of impermeable material, with a capacity of not
less than 1.1 times the volume of the largest tank, with a wall height
not greater than 1.5 meters and minimum separation between the wall of
the tank and the dike of one half the diameter of the tank; in
addition, it must have a recovery system for spills and the pumping
system must be located outside the retention area.
95. Have operating and safety manuals located in the various areas of the
project, which must be available at all times for consultation by the
corresponding personnel. These manuals must contain, among other
things, the information described below:
a) Safety data sheets for all hazardous materials used in the
project.
b) Explosives handling.
c) Startup of the plant.
d) Normal shutdown.
e) Emergency shutdown.
f) Startup after a shutdown of short duration.
g) Maintenance, including work permits, decontamination prior to
maintenance, etc.
h) Startup after maintenance.
i) Predictable abnormal situations, in case of failure of
auxiliary services.
j) Operating conditions during a shutdown.
96. In the handling of dangerous residues generated as a result of project
operations, as well as maintenance operations in the facilities, comply
with the corresponding provisions of the General Law of Ecological
Equilibrium and
"Cerro San Xxxxx"
Minera San Xavier, S.A. de C.V.
Page 47 of 55
[emblem] NATIONAL ECOLOGY INSTITUTE
GENERAL OFFICE OF ECOLOGICAL
MINISTRY OF THE ENVIRONMENT, CODIFICATION AND ENVIRONMENTAL
NATURAL RESOURCES AND FISHING IMPACT
D.O.O.DGOEIA.- 001130
Environmental Protection, its Regulations regarding Dangerous Residues,
as well as the applicable rules in effect regarding the matter.
97. When for any reason there are spills, leaks, discharges or flows of
dangerous materials during project operations, give immediate notice of
the events to the General Office of Materials, Residues and Risk
Activities of the National Ecology Institute, which notice must be
confirmed in writing within the three days following the day of
occurrence of the events, so that it will be in a position to order or,
if applicable, promote before the competent authorities the application
of appropriate safety measures, without prejudice to the measures
applied by other authorities.
98. Install, prior to commencing operations, monitoring xxxxx at strategic
places in the leaching area, solution ponds and processing area, in
order to detect any possible contamination of the groundwater mantels
caused by project activities; for this purpose, there must be a logbook
recording the result of monitoring at those xxxxx, as well as a
scheduled testing program. Annex the criteria used to fix their
location.
99. Prior to commencing project operations (if applicable), implement the
recommendations in the risk study presented, principally as regards the
following points:
a) Periodically undertake geological mapping of the banks to
prevent areas of structural weakness.
b) Install safety valves to stop the pumping of sodium cyanide
solution upon detecting increased flow and variations in the
control gauges.
c) Constant supervision throughout the impermeable areas.
100. Conduct safety audits, prior to startup and placement in service of the
project facilities, in order to review the conditions of the various
areas: processes, auxiliary services, storage, transportation, disposal
and treatment of residues; as well as safety systems and devices.
The aspects that must be considered are, among others:
a) Review of design and construction rules and specifications of
the equipment and facilities (passageways, access and
maneuvering routes, processing equipment, storage tanks,
pumping capacity, etc.).
"Cerro San Xxxxx"
Minera San Xavier, S.A. de C.V.
Page 48 of 55
[emblem] NATIONAL ECOLOGY INSTITUTE
GENERAL OFFICE OF ECOLOGICAL
MINISTRY OF THE ENVIRONMENT, CODIFICATION AND ENVIRONMENTAL
NATURAL RESOURCES AND FISHING IMPACT
D.O.O.DGOEIA.- 001130
b) The existence and application of procedures and programs to
guarantee the appropriate operation and maintenance of the
facilities (manuals with operating procedures for each area of
the project, shutdown, startup and emergencies, preventive
maintenance, etc.).
c) The implementation of systems for identification and
codification of equipment (identification of tubing, tanks,
transportation units, etc.).
d) The programs for verification or testing to certify the
overall quality and mechanical strength of equipment
(certification of accessories and connections, hydrostatic and
pneumatic tests, etc.).
e) Program for review of the various safety systems, as well as
the programs for calibrating instrumentation and control
components (firefighting system, safety valves, nozzles and
alarms, etc.).
f) Availability of equipment necessary for personal protection and
first aid.
g) Measures and systems for the disposal and/or treatment of waste
generated within the facilities.
h) Vulnerability of the area (irregular human settlements, housing
areas, protected natural areas, etc.).
It is appropriate to note that special emphasis must be placed on those
areas that are at greatest risk, in accordance with the results of the
study presented.
Based on the foregoing it must present, for consideration of the
General Office of Materials, Residues and Risk Activities of the
National Ecology Institute, the corresponding report and, if
applicable, information regarding performance and/or scheduling for
implementation of the recommendations arising therefrom. In addition,
the safety audits must the regularly performed once normal operations
of the project commence, considering the foregoing and presenting later
reports annually.
SEVENTH.- In order to ensure that, through the actions undertaken at the project
site, Minera San Xavier, S.A. de C.V. maintains harmony and good relationships
with society, it must take into account the following
"Cerro San Xxxxx"
Minera San Xavier, S.A. de C.V.
Page 49 of 55
[emblem] NATIONAL ECOLOGY INSTITUTE
GENERAL OFFICE OF ECOLOGICAL
MINISTRY OF THE ENVIRONMENT, CODIFICATION AND ENVIRONMENTAL
NATURAL RESOURCES AND FISHING IMPACT
D.O.O.DGOEIA.- 001130
RECOMMENDATIONS:
1. Assist in the structuring of the Scientific Technical Committee
mentioned in Condition 3, which will have the following composition and
functions:
a) The Committee will be comprised of Academics and technicians,
of broad and recognized moral reputation.
b) It will assist in the technical monitoring of the conditions,
resolutions and commitments to which this authorization is
subject.
c) It will analyze and issue its technical opinion regarding the
manner and terms in which the actions taken by the Promoter
satisfy its commitments.
d) It will have Regulations or another system governing its
operations and functioning, which will be determined by the
members themselves.
e) It will assist the Citizens Committee with the technical data
necessary for its information.
f) It will maintain objectivity and impartiality in all
situations, however complex this may be.
g) The committee will only assist in the observation of
compliance with agreements and state its position regarding
technical and environmental aspects of the project, for which
reason the financial and political options thereof are beyond
its purpose.
The rules for operations of the Committee will take into account the aspects
related to its operation, the most appropriate technical profile of the
participants, the form of participation, the working mechanisms, and the sources
of financing, as well as the use of electronic means for the exchange of
information, avoiding duplication of efforts with other departments.
It will consider having the participation of the authority and enterprise (legal
representative of the company and personnel of PROFEPA), in a manner that allows
timely suggestion and agreement on modifications, or even suspension of work, if
there is a risk to the ecological balance of the area, or in the event of
possible effect on plant specimens and animals under a protected regime.
"Cerro San Xxxxx"
Minera San Xavier, S.A. de C.V.
Page 50 of 55
[emblem] NATIONAL ECOLOGY INSTITUTE
GENERAL OFFICE OF ECOLOGICAL
MINISTRY OF THE ENVIRONMENT, CODIFICATION AND ENVIRONMENTAL
NATURAL RESOURCES AND FISHING IMPACT
D.O.O.DGOEIA.- 001130
The Committee will define its activities within the framework of applicable
legislation, in accordance with the exercise of the powers given to it and
without prejudice to those of other authorities.
Specifically, when conducting the required validation studies, it will see to it
that the enterprise undertakes the studies and validates them in advance with
one or more bodies, whether they are certified laboratories or specialists in
the matter, as the case may be.
Opinions of this Committee will be given without prejudice to the provisions of
the General Law of Ecological Equilibrium and Environmental Protection and the
legislation applicable to the matter, the propriety of their application being
determined in exercise of the powers of inspection and oversight of this
Ministry.
2. Promote, in coordination with the State Government, a Citizens
Committee to monitor agreements and commitments, which may have the
following characteristics:
a) Be comprised of Citizens of proven morality and objectivity.
b) Maintain its objectivity in all situations, however complex
that may be.
c) Be prepared to give its opinion and request opinions from any
organization or person as may be appropriate.
d) Assist in the monitoring of the agreements and commitments of
the proponent.
3. Xxxxxx and develop productive activities for, among others, the social,
economic, cultural, historical, heritage and health benefit of the
inhabitants of the community of San Xxxxx and of San Xxxx Potosi, in
coordination with the municipal, state and federal governments.
4. Conduct all activities inherent in the project with absolute
transparency and under the strictest mechanisms of quality control,
coordinating with the corresponding governmental agencies.
5. Support the activities for restoration of the historical heritage of
the municipality of Cerro San Xxxxx, in coordination with the local
authorities and the National Institute of Anthropology and History.
"Cerro San Xxxxx"
Minera San Xavier, S.A. de C.V.
Page 51 of 55
[emblem] NATIONAL ECOLOGY INSTITUTE
GENERAL OFFICE OF ECOLOGICAL
MINISTRY OF THE ENVIRONMENT, CODIFICATION AND ENVIRONMENTAL
NATURAL RESOURCES AND FISHING IMPACT
D.O.O.DGOEIA.- 001130
6. Prior to the commencing its operations, undertake a status study that
determines the current status of health prevailing in the population
and communities near the project site, considering the possibility of
monitoring it through later studies, based on a protocol establishing
the following:
a. The area covered by the environmental and health status.
b. The parameters of the natural environment the status of which
is determined, considering those that may be affected by the
mining activities and possible contingencies.
c. The health parameters the status of which is determined for
the inhabitants of the project site in accordance with the
area defined for the studies, considering those physiological
factors that may be altered by reason of the mining
activities.
d. The estimated degree of contamination of soil, water and air.
Determining the values of current concentrations of
contaminants, for both surface and underground areas.
e. A sample of contaminants (heavy metals in general) in plants
and animals. Considering the area of the study, and those
parameters that may be affected by mining activities.
Because seeing to the well being of citizens is within the scope of authority of
the Ministry of Health and Social Security, it is recommended that the company
carry out these activities.
7. Within a maximum term of one year, present to this General Office for
its consideration a proposal of the values of maximum permissible
levels of arsenic, manganese, mercury, lead and ...
"Cerro San Xxxxx"
Minera San Xavier, S.A. de C.V.
Page 52 of 55
Cyanide in the air, water and soil, as well as the emissions from
established sources, by which it should adjust its operation.
For this it should refer to the current Official Mexican Norms, or to
other international Normativity that could be applied, detailing the
criteria used for the proposal elaboration, according to the kind of
project and particular conditions of the location.
The company will comply with the Official Mexican Norms that are
published during the project's active life.
8. Submit a proposal, that will facilitate the development of a reclamation
plan, establishing a location, with an area defined by the company with
the purpose of keeping it as protection, that will give confidence to the
integration of prevention, mitigation and compensation of biotic impacts
in the Xxxxxx de San Xxxxx basin where the project is located.
9. Carry out periodical environmental audits, carried out by an authorized
company. The results of those audits should be submitted to this General
Direction for information, and to the PROFEPA for its analysis, evaluation
and corresponding follow-up, according with whatever this organization
establishes.
EIGTH.- Any modifications to statements in the reference Information both in the
operations and the safety systems, capacity, or other, should be notified to the
General Direction of Materials, Hazardous Waste and Risky Activities of the
National Institute of Ecology, so that it will provide resolutions in its
competence area.
NINTH.- MINERA SAN XAVIER, S.A. DE C.V., should comply with the Federal Law for
Monuments and Archeological, Artistic and Historical Zones, as well as the
General Law of National Goods, with the objective of preserving the historical
wealth existing in the zone, and therefore, previous to any activity will have
to have the corresponding authorization, given by the corresponding authority,
respecting at all times, the conditions established by the corresponding
resolution.
TENTH.- MINERA SAN XAVIER, S.A. DE C.V. should develop and submit to this
General Direction within a period of six month from this document reception,
copy of the preservation and monitoring program for the historical monuments
described by the environmental impact statement.
ELEVENTH.- MINERA SAN XAVIER, S A DE C.V. should develop and submit to this
General Direction, for those terms and conditions that require it and, in an
annual format, a report of compliance. The reports should be supplemented by
photographic and/or video attachments.
The reports should be submitted to this General Direction and to the Federal
Attorney for Environmental Protection, sending copies to the SEMARNAP and
PROFEPA corresponding delegations.
TWELVETH.- MINERA SAN XAVIER, S.A. DE C.V. should communicate in writting to the
Federal Attorney for Environmental Protection, sending corresponding copies to
this General Direction of Ecological Ordinance and Environmental Impact, and to
the SEMARNAP and PROFEPA delegations at the San Xxxx Potosi state, the startup
date of authorized works, within the following fifteen days from the startup. In
the same way, it will communicate the termination day of such works within the
following fifteen days this happens.
THIRTEENTH.- The authorization issued to Minera San Xavier, S.A. de C.V., is
personal. In case of pretending to transfer the rights and obligations contained
in this document, it will submit a request in writting to this authority, which
will determine its validity, end, if proper, will authorize the transference.
FOURTEENTH.- All the acts that are carried out contrary to the especifications
of this authorization will be void.
FIFTEENTH.- Minera San Xavier, S.A. de C.V., will be the only responsible of
carrying out the necessary works and permits to mitigate, restore, and control
all of the adverse environmental impacts related with to the development and
operation of the authorized works, that haven't been considered in the
Environmental impact Statement, in its general mode and the other reference
documentation.
For this reason, the Promoter will be the responsible before the Federal
Attorney of Environmental Protection in case of any wrongdoing in Environmental
Impact matters, that the company or its personnel could commit; the mentioned
above will obey strictly the terms and conditions mandatory under the present
resolution.
If the works, during its different stages, cause damages that alter the
ecological balance, it can be demanded its suspension and the installation of
the mitigation and/or compensation programs.
SIXTEENTH.- The Ministry for Environment, Natural Resources and Fisheries will
be able to evaluate one more time the Environmental Impact Statement, in its
general mode, and the reference documentation, or request additional
information, if it considers it necessary, in the terms stated by the Article 23
of the corresponding regulation, with the purpose of revalidating the
authorization given here, modify it, suspend or revoke it, if the ecological
balance were in danger or unsuspected damages to the environment happened.
SEVENTEENTH.- The Promoter will keep at the project location, the corresponding
copies of the Environmental Impact Statement, in its general mode, the Risk
Analysis in its Detailed Risk Analysis mode, the Technical Justification Study,
Additional Information and the working maps, as well as the present
authorization, with the purpose of showing them to the corresponding authority
that might request it.
For the authorization of further works within the Cerro San Xxxxx municipality,
the Promoter will have to give reference to this resolution with the purpose of
considering the "sinergy" impacts that could be created.
EIGHTEENTH.- The violation to any of the resolution terms and/or the project
modification from the conditions expressed in the documentation submitted, could
invalidate the present authorization, without affecting the application of the
penalty, as proposed by the General Law or Ecological Balance and Environmental
Protection, and other regulations that apply.
NINETEENTH.- The Environmental, Natural Resources and Fishing Ministry, through
the Federal Attorney of Environmental Protection, will surveill the compliance
of the terms established by the present instrument, as well as the proper
ordinances on Environmental Impact matters. For this it will exert, among
others, the abilities given by Article 20 of the General Law of Ecological
Balance and Environmental Protection regulation, on Environmental Impact
matters.
Hoping that all of the actions stated here in benefit of the environment, are
complied with, receive my regards.
RESPECTFULLY
"SUFRAGIO EFECTIVO, NO REELECCION"
DIRECTOR GENERAL
XXXXX XXXXXXX ICAZA LONGORIA
[emblem] SUBMINISTRY FOR MANAGEMENT OF
ENVIRONMENTAL PROTECTION
MINISTRY OF THE ENVIRONMENT, GENERAL OFFICE OF ENVIRONMENTAL
NATURAL RESOURCES AND FISHING IMPACT AND RISK
S.G.P.A.DGIRA.- 000000
Xxxxxx, D.F. on SEPTEMBER 3, 2001
ENG. XXXXXXX XXXXXXXX DODGE XXXXXXX
GENERAL MANAGER AND ATTORNEY-IN-FACT OF
MINERA SAN XAVIER, S.A. DE C.V.
XXXXXXX XXXXXXX No. 492
FRACCIONAMIENTO TANGAMANGA,
SAN XXXX POTOSI, C.P. 78280, S.L.P.
TEL. (48) 11-89-16; FAX: (48) 11-33-82
This document is issued by reference to official communication
D.O.O.DGOEIA.-01130 of February 26, 1999, by means of which the then General
Office of Ecological Classification and Environmental Impact, now the General
Office of Environmental Impact and Risk, resolved to conditionally authorize, in
terms of environmental impact and risk, the "CERRO SAN XXXXX" project, promoted
by MINERA SAN XAVIER, S.A. DE C.V., located in the Municipality of San Xxxxx,
State of San Xxxx Potosi, and
WHEREAS:
1. On April 26, 2001, the then General Office of Ecological Classification
and Environmental Impact received an unnumbered communication dated the
25th of the same month and year, through which MINERA SAN XAVIER, S.A.
DE C.V. asked to modify the "CERRO SAN XXXXX" project. The requested
modifications were:
a) A change in the mineral conveyor belt route, with an option of
using 172-ton transport trucks on the same route.
b) Relocation and modification of the leaching piles.
c) Location of maintenance shops.
d) Relocation of pulverizers.
e) Two sterile material piles instead of one.
2. On July 6, 2001, there was a technical meeting at the facilities of
this General Office, to clarify various inaccuracies regarding the
requested modifications, and the information presented by the company.
Participating in the meeting were Eng. Xxxx Xxxxxx Xxxxxx Xxxxxxx,
representing MINERA SAN XAVIER, S.A. DE C.V.
"Cerro San Xxxxx"
Minera San Xavier, S.A. de C.V.
Page 1 of 9
[emblem] SUBMINISTRY FOR MANAGEMENT OF
ENVIRONMENTAL PROTECTION
MINISTRY OF THE ENVIRONMENT, GENERAL OFFICE OF ENVIRONMENTAL
NATURAL RESOURCES AND FISHING IMPACT AND RISK
S.G.P.A.DGIRA.- 003310
and officials from the Environmental Impact Office, it being agreed
that the company would clarify in writing aspects related to:
a) The change of the conveyor belt route and the parallel road
for the transport of minerals in trucks, indicating dust
management and the areas that would be occupied.
b) Intersection of the highway and the haulage road.
c) Modification of administrative offices.
d) Proposal of a guarantee of restoration of the area occupied by
the administrative offices.
e) List of doubts delivered by the Environmental Impact Office
during the meeting.
3. On July 19, 2001, this Office received an unnumbered communication of
the 13th of the same month and year, by which MINERA SAN XAVIER, S.A.
DE C.V. presented, in writing, the clarifications discussed in the July
6, 2001, meeting.
and,
IT RESULTING:
I. That as a consequence of the proposed modifications, other changes
arise that are a part of the general adaptation, authorization for
which was requested in the unnumbered communication of July 13, 2001,
from MINERA SAN XAVIER, S.A. DE C.V., consisting of:
------------------------------------------------------------------------------------------------------------
ITEM ORIGINAL MODIFICATION
------------------------------------------------------------------------------------------------------------
Leaching areas 98.44 hectares 88.45 hectares
------------------------------------------------------------------------------------------------------------
Recovery plant 3.50 hectares 0.18 hectares
------------------------------------------------------------------------------------------------------------
Cut 67.58 hectares 63 hectares
------------------------------------------------------------------------------------------------------------
Internal roads, surface water diversion Not contemplated 29.39 hectares
channel, parking, etc.
------------------------------------------------------------------------------------------------------------
Location of administrative offices Next to the leaching areas Next to the recovery plant
------------------------------------------------------------------------------------------------------------
Membranes to make the leaching piles and LDPE (Low-density HDPE (High-density
areas impermeable polyethylene polyethylene)
------------------------------------------------------------------------------------------------------------
Breaking plant (3.53 hectares) On a site used only for Located in "xxxxxxx" 2,
the plant. optimizing land use.
------------------------------------------------------------------------------------------------------------
[handwritten after final row: no breaker]
"Cerro San Xxxxx"
Minera San Xavier, S.A. de C.V.
Page 2 of 9
[emblem] SUBMINISTRY FOR MANAGEMENT OF
ENVIRONMENTAL PROTECTION
MINISTRY OF THE ENVIRONMENT, GENERAL OFFICE OF ENVIRONMENTAL
NATURAL RESOURCES AND FISHING IMPACT AND RISK
S.G.P.A.DGIRA.- 003310
II. That the original route of the conveyor belt followed the curving
course of the old railroad tracks, currently in ruins, with a length of
2 km and an area of 0.75 hectares, also affecting a large part of the
10.58 hectares of 12 meter-wide access roads.
The alternative route consists of two consecutive straight segments,
the total length of which would be 1690 m, 40 m wide, covering a
surface of 6.76 hectares. Of the 40 m of width, 10 m would be occupied
by the conveyor belt and the rest by a road for maintenance and repair
of the belt, and for optional transport in trucks. It also would affect
9.5 hectares for cuts and maneuvers during construction, for a total of
16.26 hectares.
III. That the company justified its requests regarding modification of the
conveyor belt and the transport of mineral in trucks, on the following:
1. The original proposal makes it more difficult to establish a
parallel road to allow maintenance and repair activities on
the conveyor belt, and to leave open the option of
transporting stony material in trucks. On the contrary, the
alternative route facilitates the creation of this road.
2. The straight design of the new proposal facilitates
maintenance and operation of the conveyor belt, which would be
complicated by the original curving path. It also facilitates
the intersections with the public road and the stream.
3. The new route will not affect the ruins of the past century.
4. The current prices of gold would not make it viable to
pulverize all of the mineral, because the extra recovery of
metal that would be obtained would be less than the additional
cost of pulverization. Because the conveyor belt cannot
transfer very large rocks, it is essential to the company to
be able to transport these materials in trucks to the leaching
areas.
5. The calculations of dust emissions demonstrate that the
transfer of uncrushed material in trucks moving on moist
surfaces will produce less dust suspension than crushed
material transported by belts.
6. The channel of the San Xxxxx stream will be respected by
construction of a bridge with masonry walls and a reinforced
concrete slab.
"Cerro San Xxxxx"
Minera San Xavier, S.A. de C.V.
Page 3 of 9
[emblem] SUBMINISTRY FOR MANAGEMENT OF
ENVIRONMENTAL PROTECTION
MINISTRY OF THE ENVIRONMENT, GENERAL OFFICE OF ENVIRONMENTAL
NATURAL RESOURCES AND FISHING IMPACT AND RISK
S.G.P.A.DGIRA.- 003310
IV. That in the July 6, 2001, meeting, it was mentioned that MINERA SAN
XAVIER, S.A. DE C.V. had contemplated constructing an underpass at the
intersection of the haulage road with the Cerro San Xxxxx-San Xxxx
Potosi highway, to avoid interference with traffic on the highway.
Nevertheless, in the documentation received on June 19, 2001, the
company did not refer to this work and stated that it contemplated the
following:
1. Traffic using the Cerro de San Xxxxx road would have
preference. [handwriting: intersection]
2. Installing appropriate signals/signs.
3. Having personnel to assist the transport trucks and the
traffic on the road to Cerro de San Xxxxx.
4. The transport of minerals to the leaching areas will only
occur 6 days per week.
5. All safety measures necessary for the correct functioning of
this intersection will be taken into account.
V. That the transport of stony material in "off-road" trucks would
increase disturbances to residents of the area, especially if the
transport crossed the road that connects the town of Cerro de San Xxxxx
and the City of San Xxxx Potosi at kilometer 1.9.
VI. That the constant demonstrations of people opposing development of the
project involve concerns about affects to the quality of life of
residents.
VII. That the project originally contemplated the installation of four
leaching piles, which were to be located at a site adjacent to the
access road to the town of Cerro San Xxxxx, occupying an area of 1
hectare. In addition, the original site is at a higher altitude than
that of the leaching areas.
The proposed alternative contemplates only two piles, one for high
concentration and the other for overflow, occupying a combined area of
4.33 hectares, dispensing with the low and intermediate concentration
piles which will be replaced by a 2000 m3 tank, decreasing the area
exposed to evaporation. On the other hand, the new location of the
leaching piles is not adjacent to the access road and is at a point
lower than the natural terrain, which does not make it more susceptible
to capturing rain run-off, because the site is protected by a diversion
"Cerro San Xxxxx"
Minera San Xavier, S.A. de C.V.
Page 4 of 9
[emblem] SUBMINISTRY FOR MANAGEMENT OF
ENVIRONMENTAL PROTECTION
MINISTRY OF THE ENVIRONMENT, GENERAL OFFICE OF ENVIRONMENTAL
NATURAL RESOURCES AND FISHING IMPACT AND RISK
S.G.P.A.DGIRA.- 003310
channel for rain run-off, and the leaching perimeter is designed to
contain the worst precipitation event registered in the last 100 years.
VIII. That item b) of Condition 39 of official communication
D.O.O.DGOEIA.-01130 of February 26, 1999, provides that within a
maximum term of six months counted from the date of receipt of the
resolution, the company must present A modification of the design of
the high and low concentration piles, so that it will be possible to
include them in the area made impermeable by the high-density
polyethylene layer in the leaching area, and thereby diminish both the
risk of leaks, and the risk of accidents from the fall of wild animals
or workers into the cyanide solutions.
IX. That the company justified its request for modification of the design
and location of the piles based on the following:
1. Decreasing the number of piles facilitates protection of wild
animals and the establishment of strict safety measures, which
would bring it into compliance with item b) of condition 39.
2. High and low density membranes are appropriate for the
project, but the company is more familiar with the former.
3. The new site avoids considerable movement of materials, which
will allow it to achieve the necessary differentiation of the
levels of the leaching areas and piles.
4. Moving the piles away from the access road to the town
decreases the risk of accidents and, in general, the concerns
of the residents.
5. The decrease of the number of piles does not imply risks of
leaks or spills from overflows, because they are of greater
capacity, without implying an increase in production levels.
X. That the authorization in official communication D.O.O.DGOEIA.-01130 of
February 26, 1999, does not contemplate the installation of a
maintenance shop, but Condition 18 of the official decision provides
that the company must "Undertake maintenance and/or repair of the
machinery and equipment, within an area defined as a shop, with an
impermeable surface, equipped for the recovery of used grease and
lubricants. Residues produced in this area must be stored in properly
labeled drums, which will be delivered for handling and final
disposition to duly authorized companies".
"Cerro San Xxxxx"
Minera San Xavier, S.A. de C.V.
Page 5 of 9
[emblem] SUBMINISTRY FOR MANAGEMENT OF
ENVIRONMENTAL PROTECTION
MINISTRY OF THE ENVIRONMENT, GENERAL OFFICE OF ENVIRONMENTAL
NATURAL RESOURCES AND FISHING IMPACT AND RISK
S.G.P.A.DGIRA.- 003310
XI. That in order to comply with condition 18, MINERA SAN XAVIER, S.A. DE
C.V. intends to install a shop with an area of 0.271 hectares,
including the 0.11 hectares destined to storage, on a site located near
the recovery plant and the administrative offices. The surface area of
the shop will be impermeable and equipped for recovery of grease, fuel
and lubricants.
XII. That the creation of a single pile was originally contemplated, which
would occupy 178 hectares, and MINERA SAN XAVIER, S.A. DE C.V. stated
that the creation of two piles in place of one would facilitate
connection with the new route of the conveyor belt, would decrease the
distances for transporting sterile material, and would result in the
area affected being reduced to 143.51 hectares.
XIII. That the site originally planned for the pulverizers is within the new
route of the conveyor belt, for which reason a new site is proposed,
maintaining the original characteristics, but reducing the area
involved from 0.68 hectares to 0.56 hectares.
XIV. That MINERA SAN XAVIER, S.A. DE C.V. believes that it is of the highest
importance to it that the offices be located near the recovery plant,
to offer services such as water, electricity, drainage and security.
The offices will consist of a 200 m2 building, calculating the
restoration cost for that area at $1,724.23 dollars, which includes
restoration of the access road.
Based on the foregoing, and on Article 8 of the Political Constitution of the
Mexican United States, Article 25 fraction III of the Internal Regulations of
SEMARNAT, Article 16 fraction X of the Federal Administrative Procedure Law,
Article 30 third paragraph of the General Law of Ecological Equilibrium and
Environmental Protection, and Article 28 of the Regulations of the General Law
of Ecological Equilibrium and Environmental Protection, regarding Environmental
Impact Evaluation, this General Office within the Scope of official
communication D.O.O.DGOEIA.-01130 of February 26, 1999,
RESOLVES:
FIRST.- To acknowledge as having been attended to, the unnumbered document of
April 25, 2001, sent to the then General Office of Ecological Classification and
Environmental Impact by MINERA SAN XAVIER, S.A. DE C.V., described in Whereas
Clause I of this official communication, to have been attended to.
SECOND.- To authorize the modifications described in Whereas Clause I of this
official communication, except that the road parallel to the conveyor belt will
have a width of 11 meters, for purposes of maintenance. This General Office may
authorize expansion of
"Cerro San Xxxxx"
Minera San Xavier, S.A. de C.V.
Page 6 of 9
[emblem] SUBMINISTRY FOR MANAGEMENT OF
ENVIRONMENTAL PROTECTION
MINISTRY OF THE ENVIRONMENT, GENERAL OFFICE OF ENVIRONMENTAL
NATURAL RESOURCES AND FISHING IMPACT AND RISK
S.G.P.A.DGIRA.- 003310
this road to 40 meters, when the company provides the information to evaluate
the environmental impact that would result, it being necessary to present:
1. A description of measures for protection of components of plant life
that may be affected by development of the road, and the related
animals.
2. The design of the work proposed to ensure that the "off-road" 172-ton
capacity trucks do not affect the Cerro San Xxxxx-San Xxxx Potosi
highway, so as to prevent possible effect on the environment.
3. A copy of the approval issued by the Honorable Constitutional City
Council of Cerro San Xxxxx and of the Ministry of Communications and
Transport, regarding this work and the crossing of the road by the
aforementioned trucks.
4. The design of the bridge work by which the "off-road" trucks will cross
the San Xxxxx stream, with the preventive measures necessary to avoid
deterioration of the banks of the streambed.
THIRD.- To indicate that the authorization of the cited modifications will be
effective provided that, when implementing them, MINERA SAN XAVIER, S.A. DE C.V.
is subject to the Terms and Conditions established in official communication
D.O.O.DGOEIA.-01130 of February 26, 1999, as well as the following:
1. To apply measures so that suspended particle emissions produced by
pulverization, the operation of the conveyor belt and the transport of
stony material to the leaching areas, do not affect the environment, or
the inhabitants of Cerro San Xxxxx, through sprinkling of the materials
and transportation surfaces, using biodegradable additives that allow
greater efficiency in the use of the liquid.
2. To use specimens of Equinocactus plantyacanthus found in the area of
the new route of the conveyor belt in the recovery and relocation
operations established in Conditions 4 and 5 of official decision
number D.O.O.DGOEIA.-01130 of February 26, 1999.
3. To incorporate the modifications authorized in this official
communication in the guarantees or insurance established in Condition 1
of official communication D.O.O.DGOEIA.-01130 of February 26, 1999, in
order to guarantee proper performance of the conditions and restoration
of the project area, and to attend to contingencies.
"Cerro San Xxxxx"
Minera San Xavier, S.A. de C.V.
Page 7 of 9
[emblem] SUBMINISTRY FOR MANAGEMENT OF
ENVIRONMENTAL PROTECTION
MINISTRY OF THE ENVIRONMENT, GENERAL OFFICE OF ENVIRONMENTAL
NATURAL RESOURCES AND FISHING IMPACT AND RISK
S.G.P.A.DGIRA.- 003310
FOURTH.- To notify MINERA SAN XAVIER, S.A. DE C.V. of this Resolution by any of
the legal means contemplated in Article 35 and related and applicable provisions
of the Federal Administrative Procedure Law.
FIFTH.- Notify this to the Office of the Federal Prosecutor for Environmental
Protection.
Awaiting full performance of the actions contemplated for the project in
question, for the benefit of the environment, please accept my cordial
greetings.
SINCERELY
EFFECTIVE SUFFRAGE, NO REELECTION
THE GENERAL MANAGER
[illegible signature]
J. XXXXXXX XXXXXX XXXXXXXX
xx: BIOLOGIST XXXX X. XXXXXXX XXXXXXX.- Undersecretary of Management for
Environmental Protection, SEMARNAT.-Hand delivery.
cc: ATTORNEY XXXX XXXXXXX XXXXXXXX XXXXXX.- Federal Prosecutor for
Environmental Protection.- Periferico Sur No. 5000, 5th Floor, Col.
Xxxxxxxxxxx Xxxxxxxxx, X.X. 00000, Xxxxxx, D.F.- For his information.-
Hand delivery.
cc: ENGINEER XXXX XXXX XXXXX XXXXXXXXX.- Federal Delegate of SEMARNAT in
San Xxxx Potosi.- Xx. Xxxxxxxxxx xxx Xxx Xxxx Xxxxxxxxxx, X.X. 00000,
San Xxxx Potosi.
cc: ENGINEER XXXX XXXX XXXXXX XXXXXX.- Federal Delegate of PROFEPA in San
Xxxx Potosi.- Av. Industrias and Xxx 000 Xxxx Xxxxxxxxxx, X.X. 00000,
San Xxxx Potosi.
cc: HONORABLE OFFICE OF THE MUNICIPAL CHAIRMAN OF CERRO SAN XXXXX, SAN XXXX
POTOSI.- Known domicile.
cc: Master of Sciences XXXXXXXXX XXXX XXXXXX.- Director of Environmental
Impact.- Hand delivery.
cc: Chronological file of the General Office of Environmental Impact and
Risk.
cc: Key Files: 1165VUS2001, DIA/380/2001 and DGIRA/0101431.
cc: ATTORNEY XXXXXXX XXXXXXXXX XXXXXX.- Chairman of the National Ecology
Institute.- Hand delivery.
cc: MASTER XXXXXXX XXXXXX DE LA XXXXX.- Federal Prosecutor for
Environmental Protection.- Periferico Sur No. 5000, 5th Floor, Col.
Xxxxxxxxxxx Xxxxxxxxx, Xxxxxxxx, X.X. 00000, D.F.
cc: ENGINEER XXXXX XXXXXX XXXXXXXX.- Secretary of Ecology and Environmental
Management of the Government of the State of San Xxxx Potosi.-
Government Palace.- Known Domicile.
cc: ATTORNEY XXXXXX XXXXXXX XXXXXXX.- Assistant Prosecutor for Natural
Resources of PROFEPA.- Periferico Sur No. 5000, 5th Floor, Col.
Xxxxxxxxxxx Xxxxxxxxx, Xxxxxxxx, X.X. 00000, D.F.
cc: DOCTOR XXXXXXXX XXXXXXXX XX XXXX.- General Director of Materials,
Residues and Risk Activities.- In response to her Attentive Note SRA.-
630/96.- Hand delivery.
cc: ATTORNEY XXXX XXXX XXXXX XXXXXXXXX.- Delegate of SEMARNAP in San Xxxx
Potosi.- Perfecto [Illegible] 000, Xxxxxxxxxxxxxxx Xxxxxxxxxx, Xxx Xxxx
Xxxxxx, S.L.P.
"Cerro San Xxxxx"
Minera San Xavier, S.A. de C.V.
Page 8 of 9
[emblem] SUBMINISTRY FOR MANAGEMENT OF
ENVIRONMENTAL PROTECTION
MINISTRY OF THE ENVIRONMENT, GENERAL OFFICE OF ENVIRONMENTAL
NATURAL RESOURCES AND FISHING IMPACT AND RISK
S.G.P.A.DGIRA.- 003310
cc: ENGINEER XXXX XXXX XXXXXX XXXXXX.- Delegate of PROFEPA in San Xxxx
Potosi.- Xx. Xxxxxxxxxx 00, Xxx Xxxx Xxxxxx, X.X.X.
cc: ATTORNEY XXXXXXX XXXXXXXXX XXXXXXXXX.- Head of the Legal Affairs Unit
of the National Ecology Institute.- Hand delivery.- In response to
Memorandum D.O.O.UAJ.203.- 055/99 of February 3, 1999.
cc: BIOLOGIST XXXXX XXXXXX XXXXXXXX.- Director of Environmental Impact.-
Hand delivery.
cc: HONORABLE OFFICE OF THE MUNICIPAL CHAIRMAN OF CERRO SAN XXXXX, SAN XXXX
POTOSI.- Known domicile.
cc: Chronological file.
cc: Files: 97M0074, 00XXX0000, 99VUV0042, 99VUV0189 and 99VUV285.
cc: File for public consultation. National Ecology Institute document
center. Archive: C:\XXXXXX\SANXAVIER\RESOLSNXAV
[Illegible initials and signatures]
"Cerro San Xxxxx"
Minera San Xavier, S.A. de C.V.
Page 9 of 9
[Emblem] SUBMINISTRY FOR MANAGEMENT OF
ENVIRONMENTAL PROTECTION
MINISTRY OF THE ENVIRONMENT GENERAL OFFICE OF ENVIRONMENTAL
AND NATURAL RESOURCES IMPACT AND RISK
S.G.P.A.DGIRA.- 000000
Xxxxxx, D.F. on APRIL 2, 2002
ENG. XXXXXXX XXXXXXXX DODGE XXXXXXX
GENERAL MANAGER AND ATTORNEY-IN-FACT OF
MINERA SAN XAVIER, S.A. DE C.V.
XXXXXXX XXXXXXX Xx. 000
XXXXXXXXXXXXXXX XXXXXXXXXX,
XXX XXXX XXXXXX, X.X. 00000, S.L.P.
TEL. 00 (000) 000-00-00; FAX: 000-00-00
This document is issued by reference to official communication
D.O.O.DGOEIA.-01130 of February 26, 1999, by means of which the then General
Office of Ecological Classification and Environmental Impact, now the General
Office of Environmental Impact and Risk, resolved to conditionally authorize, in
terms of environmental impact and risk, the "Cerro San Xxxxx" project, promoted
by Minera San Xavier, S.A. de C.V., located in the Municipality of San Xxxxx,
State of San Xxxx Potosi, and
W H E R E A S :
I. On April 26, 2001, the then General Office of Ecological Classification
and Environmental Impact received an unnumbered communication dated the
25th of the same month and year, through which Minera San Xavier, S.A.
de C.V. requested authorization to modify the "Cerro San Xxxxx"
project, the modifications including a change in the route of the
mineral transport belt and the construction of a 40 meter wide road
parallel to the new route for optional transport of materials in 172
ton trucks.
II. On September 3, 2001, by means of official communication
S.G.P.A.DGIRA.-03310, this General Office of Environmental Impact and
Risk granted authorization to Minera San Xavier, S.A. de C.V. to make
the intended modifications in the "Cerro San Xxxxx" project,
restricting the width of the indicated road to 11 meters, because
information was lacking to evaluate the environmental impact that would
be caused by "off track" trucks continually crossing the Cerro San
Xxxxx-San Xxxx Potosi highway.
III. In the Second Resolution in official communication S.G.P.A.DGIRA.-03310
of September 3, 2001, this General Office indicated to Minera San
Xavier, S.A. de C.V. that it should present additional information to
evaluate the increase of the
"Cerro San Xxxxx"
Minera San Xavier, S.A. de C.V.
Page 1 of 5
[Emblem] SUBMINISTRY FOR MANAGEMENT OF
ENVIRONMENTAL PROTECTION
MINISTRY OF THE ENVIRONMENT GENERAL OFFICE OF ENVIRONMENTAL
AND NATURAL RESOURCES IMPACT AND RISK
S.G.P.A.DGIRA.- 000877
width of the road referred to in the preceding whereas clause from 11
to 40 meters.
IV. On October 25, 2001, this General Office of Environmental Impact and
Risk received the unnumbered communication of the 3rd of the same month
and year, by means of which Minera San Xavier, S.A. de C.V. requested
the increase of the width of the road parallel to the transport belt,
presenting the information required therefore.
I T R E S U L T I N G :
I. That this General Office of Environmental Impact and Risk, in response
to the requests presented, again reviewed the file corresponding to the
"Cerro San Xxxxx" project, for the purpose of resolving as appropriate,
finding that:
a) The total length of the road is 1690 meters and the width
would be 40 meters, covering an area of 6.76 hectares. In
addition, it would imply affecting 9.5 hectares for cuts and
maneuvers during construction, giving a total of 16.26
hectares.
b) The company justified and supported the request to expand the
road parallel to the transport belt based on the need to carry
uncrushed rock in trucks to the leaching areas.
c) Calculations of dust emissions, presented by the company on
July 19, 2001, by means of an unnumbered communication, showed
that the transfer of the uncrushed material in trucks
traveling over moist surfaces would generate less suspended
dust in the environment than would crushed material
transported on belts.
d) The channel of the San Xxxxx stream will be respected, by
construction of a bridge with masonry walls and a reinforced
concrete slab.
e) The intersection of the haulage road with the Cerro San
Xxxxx-San Xxxx Potosi highway will have an underpass to avoid
interference with traffic on the highway.
f) The banks of the road will be constructed of rocky material
with a slope of 1.5:1 to assure stability.
"Cerro San Xxxxx"
Minera San Xavier, S.A. de C.V.
Page 2 of 5
[Emblem] SUBMINISTRY FOR MANAGEMENT OF
ENVIRONMENTAL PROTECTION
MINISTRY OF THE ENVIRONMENT GENERAL OFFICE OF ENVIRONMENTAL
AND NATURAL RESOURCES IMPACT AND RISK
S.G.P.A.DGIRA.- 000877
g) Cuts in solid rock will have slopes of at least 0.5:1 to
ensure stability.
h) Rainwater drainage will be controlled with berms and gutters
on one side of the road, preventing erosion damage.
II. That the Honorable City Council of San Xxxxx granted the Construction
License to Minera San Xavier, S.A. de C.V. to make the underpass at the
intersection of the haulage road with the Cerro San Xxxxx - San Xxxx
Potosi highway, which indicates that the Municipality has no problem
with that work.
Based on the foregoing, and as a result of evaluation of the request, and based
on Article 8 of the Political Constitution of the Mexican United States, Article
32 bis fractions II and XI of the Organic Law of Federal Public Administration,
Articles 2 fraction XIX, 17 fraction XXIII, and 25 fractions I and III of the
Internal Regulations of the Ministry of the Environment and Natural Resources,
and Article 16 fraction X of the Federal Administrative Procedure Law, and
Article 28 of the Regulations of the General Law of Ecological Equilibrium and
Environmental Protection, regarding Environmental Impact Evaluation, this
General Office of Environmental Impact and Risk, within the scope of official
communication D.O.O.DGOEIA.-01130 of February 26, 1999.
R E S O L V E S :
FIRST.- To acknowledge as having been attended to the request in the unnumbered
writing of October 3, 2001, sent to this General Office of Environmental Impact
and Risk by Minera San Xavier, S.A. de C.V., described in Whereas Clause IV of
this official communication.
SECOND.- To authorize the expansion from 11 to 40 meters of the road parallel to
the transport belt and the transport of materials in 172 ton capacity trucks,
provided that in doing so Minera San Xavier, S.A. de C.V. is subject to the
Terms and Conditions established in official communication D.O.O.DGOEIA.-01130
of February 26, 1999, as well as the following:
1. To keep the surface of the material haulage road authorized in this
official communication moist.
"Cerro San Xxxxx"
Minera San Xavier, S.A. de C.V.
Page 3 of 5
[Emblem] SUBMINISTRY FOR MANAGEMENT OF
ENVIRONMENTAL PROTECTION
MINISTRY OF THE ENVIRONMENT GENERAL OFFICE OF ENVIRONMENTAL
AND NATURAL RESOURCES IMPACT AND RISK
S.G.P.A.DGIRA.- 000877
2. It must monitor and apply preventive maintenance to the work related to
the underpass that will be located at the intersection of the haulage
road with the Cerro San Xxxxx-San Xxxx Potosi highway and the bridge
over the San Xxxxx Stream, in order to guarantee that there is no
negative environmental impact on surrounding vegetation resulting from
landslides, collapses or accidents.
3. To perform the recovery and relocation activities established by
Conditions 4 and 5 of official decision D.O.O.DGOEIA.-01130 of February
26, 1999, as stated in its unnumbered communication of October 3, 2001,
for the area that will be occupied by the expansion of the road and the
authorized underpass work, for which reason qualified personnel of the
company must:
a) Recover all specimens of Mammiliaria candida ("viejito
xxxxxx") and Echinocactus platyacanthus ("biznaga de xxxx")
included in NOM-059-ECOL-1994, as well as those individual
plants that by reason of their size and diameter can be
recovered.
b) For the specimens to be recovered, determine the orientation
to the sun, as well as their relationship to other plants,
respecting those conditions when transplanting (principally
cactus).
c) Dig to the necessary depth, to avoid damaging the roots of the
plant to be recovered.
d) In the case of animals, recover those that have underground
xxxxxxx in the areas to be affected, and by reason of their
characteristics of slow movement or physiological requirements
cannot relocate by themselves, including individuals in
species included in NOM-059-ECOL-1994, such as Buteo
jamaicencis (red-tailed hawk), Gopherus xerobastes berlandieri
(desert tortoise), Masticophis flagellum (coachwhip snake),
Pitouphis deppei ("Mexican pine snake"), and Crotalus
scotulatus (Mojave rattlesnake).
e) Locate the xxxxxxx, visibly marking their location.
f) Supervise the removal, to be accomplished unidirectionally and
gradually, allowing the departure of the animals and their
readjustment in bordering sites.
g) At the end of the recovery and relocation, the company must
prepare a report of what plants and animals were subject to
the aforementioned
"Cerro San Xxxxx"
Minera San Xavier, S.A. de C.V.
Page 4 of 5
[Emblem] SUBMINISTRY FOR MANAGEMENT OF
ENVIRONMENTAL PROTECTION
MINISTRY OF THE ENVIRONMENT GENERAL OFFICE OF ENVIRONMENTAL
AND NATURAL RESOURCES IMPACT AND RISK
S.G.P.A.DGIRA.- 000877
activities, indicating the number of specimens of each
species, and the horizontal location of the origin and
relocation sites.
h) Monitor the survival of the removed plant specimens, and if
there is less than 80% in a period of two years, the company
must reintroduce specimens of the same species, at least 5
years old, guaranteeing their survival during the first two
years after planting, respecting the requirements of each
species regarding orientation to the sun, and relationship to
other species. The specimens necessary for the reintroduction
must be acquired from existing nurseries or, in their absence,
from production in a nursery established by the company.
THIRD.- To exhort Minera San Xavier, S.A. de C.V. to faithfully comply with the
Terms and Conditions established in official communication D.O.O.DGOEIA.-01130
of February 26, 1999, which authorized, in terms of environmental impact,
implementation of the "Cerro San Xxxxx" project, located in the municipality of
[illegible] in the state of Sonora.
FOURTH.- To notify Minera San Xavier, S.A. de C.V. of this Resolution by any of
the legal means contemplated in Article 35 and related and applicable provisions
of the Federal Administrative Procedure Law.
Awaiting full performance of the actions contemplated for the project in
question, for the benefit of the environment, please accept my cordial
greetings.
SINCERELY
EFFECTIVE SUFFRAGE, NO REELECTION
THE GENERAL MANAGER
[illegible signature]
J. XXXXXXX XXXXXX XXXXXXXX
ccs on the reverse...
"Cerro San Xxxxx"
Minera San Xavier, S.A. de C.V.
Page 5 of 5
