1
EXHIBIT 3(j)
MINERAL AGREEMENT
GOBI REGION
(Amended and Restated)
This Agreement is entered into on the 15th day of January 1994, among
Energy Fuels Exploration Company (herein called "Energy Fuels"), a Colorado,
U.S.A. Corporation, the Ministry of Geology and Mineral Resources of Mongolia
(herein called the "Ministry") and the state-owned Russian geological concern
Geologorazvedka (herein called "Geologorazvedka").
Energy Fuels, Geologorazvedka and the Ministry (herein jointly called
the "Parties") desire to establish a joint business venture to conduct
prospecting and exploration for uranium and associated minerals (herein
collectively called "uranium") in the Gobi region of Mongolia, to develop any
significant uranium discoveries, and, if economically feasible, to produce
uranium therefrom for the benefit of the Parties. This Agreement sets out the
terms and conditions appropriate to the conduct of this venture by the Parties.
1. Interests. The Parties' interests in the venture shall be:
Energy Fuels 70%
The Ministry 15%
Geologorazvedka 15%
2. Conduct of Venture Business. The Parties shall conduct the business of the
venture as a Company with limited liability under the laws of Mongolia (a
Xxxxx Xxxx Hariutslagatai Kompany of "BBHK"). The Parties shall appoint a
management committee to oversee the conduct of business. Each Party shall
appoint two members to the management committee, one of whom shall be the
voting member and the other shall be an alternate. Each Party shall be
allowed one vote for each share owned by such Party. All matters brought
before the management committee shall be decided by majority vote of the
members.
The Parties agree to appoint Energy Fuels as the General Director.
Energy Fuels shall not be subject to removal as General Director and shall serve
as manager until it resigns or this Agreement is terminated. Energy Fuels shall
be deemed to have resigned as General Director if it fails to perform its
expenditure obligations under paragraph 4 below. The General Director shall have
the right to carry out its responsibilities through agents, affiliates or
independent contractors. The venture shall conduct its business in accordance
with the laws of Mongolia, including applicable environmental laws. The Founding
Agreement and Charter for the BBHK are attached hereto as Appendix B.
2
3. Exploration Areas and Mineral Title. The exploration areas subject to this
Agreement are known to the Parties as the Choir, Gurvan-Saihan, Hairhan,
Undurshilin and Ulziit depressions in the Gobi Region. These exploration
areas are outlined on the map attached as "Appendix A." The first project
of the venture shall be the Harat property located in the Choir depression.
The Parties acknowledge that some or all of the exploration areas have
not yet been surveyed and that the exploration areas are described with
reference to Appendix A. The Parties agree that the description of the areas
covered by this Agreement may be changed from time to time as necessary to
reflect surveys or other more exact descriptions of the area in the future, and
that any such change shall always be consistent with the intent of the parties
as expressed in this Agreement and Appendix A, and Appendix A shall be revised
and amended as necessary.
This Agreement shall serve as a grant by the Ministry to the venture,
of exclusive mineral title and an exclusive license and permit necessary to
conduct exploration activities in the exploration area for the duration
contemplated by this Agreement. After enactment of the Mineral Law of Mongolia
and applicable regulations (herein called the "mineral law"), the Ministry shall
grant to the venture, all necessary exclusive mineral titles and exclusive
exploration licenses and permits necessary or required by law. All such mineral
titles and exploration licenses and permits shall contain terms and conditions
consistent with this Agreement and shall not impose fees, work and expenditure
requirements, royalties or taxes in excess of those set out in this Agreement.
The venture, shall have the exclusive right to explore for all uranium
within the exploration area and to drill, trench, pit, make excavations, build
roads, build air strips, build power lines, erect camps, construct temporary
buildings, install machinery and conduct pilot plant operations. The Ministry
acknowledges that it will be necessary to produce uranium through a pilot plant
as part of the exploration program before a feasibility study may be produced.
The Parties acknowledge that it is not necessary to obtain a mining license,
mining title or other production licenses for products recovered during pilot
plant or technological testing of ore processing technologies
No area subject to a license or mineral title issued pursuant to this
Agreement may later be designated by the Ministry or the Government of Mongolia
as closed, restricted or opened to competitive bidding as long as this Agreement
is in effect, unless such area has been returned to the government.
After the initial four year exploration period, the venture may, as
part of its annual budgeting process, identify certain lands and areas of land
which no longer hold interest for the venture because of unsuccessful
exploration or otherwise. The venture will agree to release its rights under
this Agreement to such lands from time to time, if any. Additionally, the
venture and the Government of Mongolia will negotiate in good faith to
establish, after the initial four (4) year exploration period, a reasonable
procedure and schedule for restitution of property covered by
2
3
this Agreement, provided that such restitution procedure may not require the
venture to give up its rights to known minerals. 4. Funding Venture Obligations.
Energy Fuels will fund one hundred percent (100%) of the initial exploration
operations of the venture as follows:
1994 US$ 500,000
1995 US$ 1,000,000
1996 US$ 1,000,000
1997 US$ 1,500,000
--------------
TOTAL: US$ 4,000,000
No Party may recover or be repaid money spent on exploration except
from its share of production and profits from the venture.
Any amount expended by Energy Fuels in excess of the sum required for a
given year shall be carried over to succeeding years and applied to the
expenditures then required. For purposes of determining the amount expended by
Energy Fuels, the following shall be included: all cash, expenses, obligations
and liabilities reasonably spent or incurred in connection with venture
activities including geophysical, geochemical, geological surveys, drilling,
assaying and metallurgical testing, acquiring and transporting equipment and
facilities; fees, wages, salaries and expenses of venture personnel; food,
lodging and other reasonable expenses of personnel conducting venture
activities; all costs and expenses related to pilot plants and the preparation
of feasibility studies; and a charge equal to 10% of all of the above to cover
unallocated overhead costs.
Upon completion by Energy Fuels of its funding obligations set forth
above, the Parties shall fund all venture obligations in proportion to their
interest in the venture. The manager of the venture shall prepare and submit
annual programs and budgets to the management committee for approval. Any Party
failing to meet its funding requirements for an approved budget shall be
suspended from participating in the business or management of the venture, and
shall relinquish its rights to production or profit, until such time as the
Party providing funding on behalf of any non-funding Party has recovered from
net profits of the venture 150% of its contribution on behalf of the non-funding
Party. At such time, the non-funding Party will again become a full
participating Party in the venture.
Energy Fuels' funding obligation for any particular area shall also
cease upon completion by Energy Fuels of a feasibility study for such area
(herein called a "Feasibility Area"). Upon completion of a feasibility study by
Energy Fuels, the Parties shall fund all venture obligations respecting a
Feasibility Area in proportion to their interest in the venture, notwithstanding
that Energy Fuels may not have completed all of its funding obligations for
exploration outside a Feasibility Area. Any Party failing to meet its funding
obligations respecting a Feasibility Area shall be suspended from participation
in the Feasibility Area until the funding Party has recovered 150% of its
funding in the same manner as set forth above.
3
4
5. Data and Mineral Rights. The Ministry and Geologorazvedka shall each
contribute to the venture all data, records, reports, drill hole logs,
calculations, maps, charts, documents and other information it may have now
or in the future respecting the area covered b this Agreement.
Geologorazvedka shall also contribute to the venture for the duration of
this Agreement any rights it may have to uranium or to conduct exploration
or mining activities now or in the future respecting the area covered by
this Agreement.
6. Right to Include Additional Areas. The Ministry and Geologorazvedka hereby
grant Energy Fuels for 1 and 1/2 years from the date of this Agreement, the
exclusive right to investigate data from and conduct expert evaluation and
prospecting upon the following areas:
East-Gobi
Zun-Bayan
Oshinur (Ongiingol)
These areas are more particularly described in the map attached hereto as
"Appendix A."
Energy Fuels may at any time prior to the expiration of 1 and 1/2 years
designate any of such areas to be included in the venture established by this
Agreement and become Properties as the term is used in the Founding Agreement.
This Agreement shall serve as an exclusive exploration license and mineral title
for such areas until enactment of the mineral law and regulations, after which
the Ministry shall issue to Energy Fuels exploration licenses for such areas
consistent with this Agreement.
7. Taxes. Neither the venture nor any Party to this Agreement shall pay taxes
to the State or any local government body on profits or production of
uranium from a mining operation until five (5) years after the beginning of
commercial production on each such mining operation. After such five (5)
year period, for the next five (5) years taxes shall be imposed on each
mining operation at a rate equal to 50% of the tax rate otherwise
applicable absent this Agreement. After ten (10) years the venture will pay
normally applicable taxes, provided that in no event shall the applicable
tax rate exceed 40% of the net profits realized by the venture. If the law
changes to allow tax rates more favorable to the Parties or the venture
than those set forth herein, the more favorable tax rates will apply to the
venture.
8. Assignment. Unless otherwise agreed in writing, no Party may assign its
interest hereunder to a third party without the prior written consent of
the Parties, except that the Ministry may assign its interest to another
Mongolian ministry, government agency, instrumentality or state owned
company, and Energy Fuels and Geologorazvedka may assign their interest to
an affiliate without prior written consent of the Parties. For purposes of
this Agreement, "affiliate" means any person, firm or corporation directly
or indirectly controlling or controlled by or under control of a Party and
for the purposes of this definition "control" (including,
4
5
"controlling," "controlled by" and "under control of") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, firm or corporation,
whether through the ownership of voting securities or by contract or
otherwise.
No assignment otherwise allowed hereunder shall be valid unless the
party to which the interest is being assigned agrees to respect and fulfill the
obligations of this Agreement and all exploration and mining licenses and
mineral titles. The execution of this Agreement by the Ministry constitutes its
prior approval to any assignment allowed hereunder and no further approval of
the Ministry or the government shall be required respecting such assignment and
no such assignment may be voided by law for failure to receive any additional
prior approval.
9. Subsequent Agreements. It is the intent of the Parties to prepare and
execute the Founding Agreement and Charter encompassing the terms and
conditions stated herein, subsequent to the execution of this Agreement.
This Agreement shall be binding on the Parties and shall govern their
conduct and in the event of a conflict between the provisions of the
Founding Agreement and Charter, this Agreement shall control.
The Parties intend to finance all or a portion of their obligations
hereunder by loans, contributions or participation by international financing
agencies, and the Parties hereby agree to amend, restructure or change the terms
of this Agreement, the Founding Agreement and Charter as may be reasonably
necessary to obtain such financing.
10. Import, Marketing and Export. The Ministry and the Government of Mongolia
shall issue to the venture all exploration licenses and mineral titles
created by this Agreement, and all exploration and mining licenses and
mineral titles issued pursuant to this Agreement and after enactment of the
mineral law, shall grant the venture and the General Director all rights
and permits necessary to store, transport, market, process and export
uranium, and import and export all necessary equipment and materials
without the need for additional or subsequent authorization, licenses or
permits, or duties, taxes or levies. All such activities shall be conducted
consistent with Mongolian law.
11. Waiver of Equity Rights and Royalty. The Ministry, on behalf of the
government of Mongolia, acknowledges that its equity interest in this
venture (15%) is its entire interest in the mineral titles covered by this
venture and is in lieu of any other equity or royalty interest to which the
government of Mongolia may otherwise be entitled, except the four percent
(4%) royalty which the venture agrees to pay to Mongolia (herein called the
"Royalty"). Therefore, in return for the 15% interest granted herein and
the Royalty, the Ministry, on behalf of the government of Mongolia, waives
any rights it may have now or under future law to take a greater equity
interest than that granted by this Agreement or to impose a greater royalty
on production from the mineral titles granted under this Agreement.
5
6
12. Confidentiality. All Parties shall have access to and copies of all data
and information produced by the venture activities. The Parties agree that
they will keep confidential all information obtained in connection with the
performance of this Agreement and such information shall not be disclosed
to any outside party or to the public without the prior written consent of
the other Parties. All submissions by the venture or any Party to the
Ministry necessary to obtain licenses or mineral titles, including any
feasibility studies and environmental impact statements, shall be kept
confidential and shall not be made public or become part of the public
record. Furthermore, the form and substance of disclosure of the existence
and terms of this Agreement shall be reviewed and approved by all Parties
prior to disclosure.
13. Arbitration and Resolution of Disputes. This Agreement will be governed by
and construed in accordance with Mongolian laws; provided, that if any
dispute between the parties is submitted to arbitration and the arbitrators
determine that there exists no provision of any Mongolian law applicable to
the issue under dispute, such issue shall be governed by and construed in
accordance with Australian law, without regard to conflicts of law
principles.
If Mongolia shall hereafter adopt any law, decree, regulation or policy
more favorable than the laws, decrees, regulations or policies previously
applicable to the venture, then the venture shall be entitled to apply to the
appropriate Mongolian agency to receive the benefit of such law, decree,
regulation or policy and to take such actions as are necessary to qualify for
such benefit.
Disputes between the Parties arising out of, or in connection with, any
provision of this Agreement or the interpretation thereof shall be settled in
the first instance by good faith negotiation. If amicable settlement cannot be
reached within ninety (90) days of notice by the Party claiming the existence of
a dispute, the matter under dispute will be referred to binding arbitration in
accordance with UNCITRAL arbitration rules, before a board of Arbitration
consisting of three arbitrators, one selected by each Party. The arbitration
will be conducted in the English language and take place under the auspices of
the Australian Chamber of Commerce in Sydney, Australia. The Board of
Arbitration will decide by majority vote on points of substance, law and
otherwise. All decisions of the Board of Arbitration shall be final and binding
on the Parties and may be entered against them in a court of competent
jurisdiction. The Board of Arbitration will determine the costs of arbitration
in its award and such costs shall be borne by the Parties as determined by the
Board of Arbitration.
14. Term, Termination and Withdrawal. This Agreement and the exploration and
mineral rights granted hereunder will be effective for fifteen (15) years
from the date of signing, and for so long thereafter as the venture is
conducting exploration, development or production activities on any
specific property. The venture's rights under this agreement may not
terminate at the end of fifteen (15) years for any area of land in which
the venture is conducting active exploration, development or production
activities. Properties on which the venture is conducting exploration
activities after fifteen (15) years must be put into development for the
purpose of production within two (2) years after cessation of exploration
activities, or the agreement will terminate as to any such exploration
property.
6
7
The agreement will continue in effect after fifteen (15) years as to
any property in development or production so long as development or production
activities continue. If the venture ceases or suspends production on any
property at any time due to economic, political or other reasons, with intent to
start production again in the future when conditions warrant, the agreement will
not terminate as to such property. Once a property is in production, the
venture's rights under the agreement may terminate only when the venture ceases
production with the intent to abandon the property and conduct no further
production thereon.
If Energy Fuels fails to perform its funding obligations and
exploration activities as specified in paragraph 4 above, then the other Parties
may give written notice to Energy Fuels of its failure and if Energy Fuels does
not dispute such failure or take steps to correct it within thirty (30) days of
receipt of such notice, this Agreement shall terminate. Any Party may withdraw
from this Agreement and the venture by giving sixty (60) days written notice to
the other Parties. Upon such withdrawal, the interest of the withdrawing Party
shall be deemed assigned to the other Parties in proportion to their interest in
the venture. No withdrawal will relieve a Party of its funding or expenditure
obligations necessary to comply with environmental or reclamation laws. No
withdrawal by the Ministry will affect any mineral title or exploration or
mining license or permit issued under this Agreement. Any party may at any
management committee meeting suggest the termination of the venture, which the
Parties will consider.
15. Force Majeure. Any obligation of a party under this Agreement shall be
suspended to the extent that the performance thereof is hindered or
prevented, in whole or in part, by fire, flood, earthquake, volcanic
eruption or other natural disaster, strikes, labor disputes, war, riot,
insurrection, direct act of any government or subdivision thereof, or any
weather conditions which either render it impossible to conduct operations
or which increase the risk of injury to person or property beyond the risk
normally present in a remote environment in Mongolia. In the event of the
existence of a condition of force majeure, a Party's time to perform duties
or obligations hindered or prevented thereby shall be extended for a period
of time equal to the period of time during which the condition of force
majeure exists, but in no event shall performance of this Agreement be
suspended for more than thirty-six (36) months as a result of force
majeure. Any party shall give the other parties prompt notice of the
existence of any condition of force majeure, and to fulfill any obligation
which is hindered but not totally prevented thereby.
16. Government Approval. This Agreement is contingent on approval by the
Government of Mongolia, which approval shall be indicated by the authorized
signature in the space provided at the bottom of this Agreement.
7
8
This Agreement shall be in the English, Russian and Mongolian
languages, and, in the event of a conflict among any of the versions, the
English version shall control.
ENERGY FUELS EXPLORATION
COMPANY, a Colorado,
U.S.A. corporation
By:
------------------------------
Xxxxxxx X. Xxxx
President
MINISTRY OF GEOLOGY AND
MINERAL RESOURCES OF MONGOLIA
By:
------------------------------
G. Jamsrandorj
General Director of the
Department of Geology
GEOLOGORAZVEDKA,
A state owned Russian geological concern
By:
------------------------------
X.X. Xxxxxx
Chairman
APPROVED this ____ day of _______________, 1994, by the Minister of Geology
and Mineral Resources on behalf of the Government of Mongolia, D. Tsogbaatar
--------------------------------------------------------------------------------
8
