OPTION TO PURCHASE AGREEMENT
THIS
OPTION TO PURCHASE AGREEMENT is made effective this 13th
Day of
October, 2004.
CUMO
MOLYBDENUM MINING INC.
A
Nevada
Corporation with an office at 000 Xxxxx Xxxxxx, X.X. Xxx 000, Xxxx, Xxxxxx
00000
(hereinafter referred to as "Optionor") does hereby OPTION AND GRANT
unto
MOSQUITO
CONSOLIDATED GOLD MINES LIMITED
A
British
Columbia Corporation with an office at 301-455 Granville St., Vancouver, B.c.
V6C 1 Tl (hereafter referred to as "Optionee")
1.
An
Option to explore, mine and process minerals from the New CUMO Mining Claims
described in the attached Exhibit "A" (hereinafter referred to as the
"Property").
WHEREAS:
X.
XXXX
Molybdenum Mining, Inc. owns certain un-patented mining claims situated in
Boise
County, Idaho, more particularly described in Exhibit A attached hereto and
by
this reference made a part hereof and hereafter referred to as the
"Property".
B.
Optionor and Optionee desire to enter into an Agreement pursuant to which the
Optionor shall grant to the Optionee an Option to Purchase the Property, on
the
terms and conditions as herein set forth.
NOW,
THEREFORE, in consideration of their mutual agreements and obligations
hereinafter set forth, the parties agree as follows:
1.
Definitions. The following defined words wherever used in this agreement, shall
have the meaning described below:
1.1
"Commercial Production" shall mean the extraction, processing or handling of
Products removed from the Property.
1.2
"
Effective Date" shall mean the date first above set forth.
1.3
"Option Year" shall mean One (1) year period following the Effective Date and
each anniversary
of the Effective Date.
1.4
" Optionor" shall
mean CUMO Molybdenum Mining Inc. and their successors and assigns.
1.5
"Optionee" shall
mean Mosquito Consolidated Gold Mines Ltd. and their successors and
assigns.
1.6
"Products" shall
mean copper, molybdenum, silver, gold or other ores, minerals or metals mined
and processed from the Property.
1.7
“Royalty"
shall
mean the amount owed and payable to the Optionor from Commercial
Production from the Property.
2.0
GRANT OF MINING PRIVILEGE, OPTION AND USE.
2.1
GENERAL: Optionor
and Optionee enter into this Option
Agreement(hereinafter
referred to as the Agreement) for the purposes hereinafter mentioned, and they
agree that all their rights and all of the operations on or in connection with
he Property shall be subject to and governed by this Agreement.
2.2
GRANT OF MINING PRIVILEGE: Subject
to the terms and conditions of this Agreement and to the extent permitted by
applicable federal, state and local laws, regulations and ordinances, Optionor
grants exclusively to Optionee the right to enter upon the Property for the
purpose of exploring for, developing and processing Products from the Property.
Optionee may perform such drilling, blasting, bulldozing, stockpiling and
testing and other work on said mining Property as may be necessary to explore
and develop the Property. Optionee has the privilege, at their election to
construct buildings and to install and operate crushing and processing equipment
in support of any operation.
2.3
REPRESENTATIONS: The
Optionor represents, warrants and covenants to and with the Optionee
that:
a.
it is
a company duly incorporated, validly subsisting, and in good standing under
the
laws of the State of Nevada;
b.
it has
full power and authority to enter into and carry out this Agreement and the
signing, delivery and performance of this Agreement will not conflict with
any
other Agreement.
c.
it is
the registered and beneficial owner of the Property and has good title to the
Property, free and clear of any liens and encumbrances and is not subject to
any
right, claim or interest of any other persons.
d.
the
Property is accurately described in Exhibit A and the Property is in good
standing under Idaho and Federal law.
2
e.
It has
made all taxes, assessments, rentals, levies or other payments relating to
the
Property required to be made to any federal, state, or local governmental
agency.
f.
It has
not received from any government agency any notice relating to any actual or
alleged environmental claims, and so far as the Optionor is aware, there are
no
outstanding work orders or actions required to be taken relating to
environmental matters respecting the Property.
g.
So far
as the Optionor is aware, there is no adverse claims or challenges against
as to
the ownership of or title to the Property, nor is there any basis for any
adverse claim or challenge, and there are no outstanding agreements, to acquire,
purchase or explore the Property, and no other person has any royalty or
interest in production or profit from the Property or any portion of the
Property, other than to Optionor, and
h.
It
will make available to the Optionee all information in its possession or control
relating to exploration work done on or regarding the property.
3.0
RELATIONSHIP OF THE PARTIES.
3.1
NO PARTNERSHIP: This
lease agreement shall not be to constitute any party, in its capacity as such,
the partner, agent or legal representative of any party, or to create any
partnership, mining partnership or other partnership relationship, or fiduciary
relationship between them, for any purpose whatsoever.
4.0
TERM: Unless
terminated earlier, as herein provided, the term of this Option shall be for
so
long as the Option Agreement is in effect and good standing.
5.0
PAYMENTS: In
consideration of the granting of the privileges aforesaid, Optionee has agreed
and herein agrees, during the continuance in effect of this Option, to pay
to
the Optionor the following sums of money and shares on or before the dates
specified:
5.1
MINIMUM ADVANCED ROYALTY AND STOCK PAYMENTS:
|
a.
On
signing.
|
$10,000
USD
|
|
|
b.
After 60 days,
|
$10,000
USD
|
|
|
c.
After 6 months,
|
$5000
USD.
|
|
|
d.
1st Anniversary,
|
$20,000
USD.
|
|
|
$20,000
USD.
|
||
|
f.
3rd Anniversary,
|
$15,000
USD
|
|
|
g.
$15,000
USD every 6 months thereafter for so long as Option is in
effect.
|
||
All
of
the above payments, except for the shares, are to be considered as Minimum
Advanced Royalty Payments to be credited against any Royalty payments owed
to
Optionor in the future.
3
5.2
SHARE
PAYMENTS
The
Optionee shall issue 300,000 common shares of Mosquito Consolidated Gold Mines
Limited to the Optionor as follows:
| a. |
After
60 days, 90,000 shares of Mosquito Consolidated Gold Mines
Limited.
|
| b. |
After
9 months, 90,000 shares of Mosquito Consolidated Gold Mines
Limited.
|
| c. |
After
18 months, 120,000 shares, of Mosquito Consolidated Gold Mines
Limited.
|
This
agreement and the issuance of shares are subject to the approval of the
TSX-Venture Exchange.
| 5:3 |
NET
SMELTER RETURN ROYALTY (NSR):
The Optionee shall pay a Net Smelter
Return Royalty (NSR) of 1.5% (one & one-half percent) to a maximum of
$3,000,000.00 and thereafter a 0.5% (one-half percent) NSR payable
for so
long as the Option is in effect.
|
For
the
purpose of this agreement, a net smelter return royalty (NSR) shall mean the
total gross sale proceeds received by or credited to the Optionee for Products
less only:
| a. |
All
actual costs incurred by the Optionee for transportation of the
Products
to a point of sale including insurance;
|
| b. |
All
sampling, assaying, weighing, treatment or processing, milling,
smelter
or refining charges or penalties which are charged by the purchaser
to the
Optionee except those deducted by the purchaser directly from the
proceeds
of sale; and
|
| c. |
All
taxes levied upon production or severance of the products, or upon
which the sale the net smelter is
computed.
|
Any
payments received by the Optionor payable under paragraph 5.1 will be credited
and deducted from any advance royalty payments due for so long as the Option
is
in effect.
5.4
METHOD OF PAYMENT OF ROYALTY:
All
Royalty payments made by Optionee to Optionor shall be due and payable every
60
days by wire transfer, cashiers check, money order or by cash to Optionor
representative in person or by delivery to Optionor address for notice purposes.
Optionee shall be obligated to deliver only a single check or payment, and
Optionee shall have no responsibility for disbursement or distribution of any
payment after receipt of payment by the payee. Optionee shall deliver to
Optionor a statement showing the amount of production Royalty due and the manner
in which it was determined and shall submit to Optionor data reasonably
necessary to enable Optionor to verify the determination.
5.4
AUDIT:
Optionor or its authorized agents shall have the right to audit and inspect
Optionee accounting records used in calculating production royalty payments,
which may be exercised as to each payment at any reasonable time during a period
of one (1) year from the date on which payment was made by lessee. If no such
audit is performed during such period, such accounts, records and payment shall
be conclusively deemed to be
true,
accurate and correct.
4
6.0 COMPLIANCE WITH THE LAW: The exercise by Optionee of any of any rights, privileges, grants and uses under this Agreement shall conform at all times with the applicable laws and regulations of the state in which the Property is situated and those of the USA. Optionee shall be fully responsible for compliance with all applicable federal, state and local reclamation, statutes, regulations and ordinances relating to such work. Optionee shall indemnify and hold harmless Optionor from any claims, assessments, fines and actions arising from Optionee failure to perform the foregoing obligations. Optionor agrees to cooperate with Optionee in Optionee application for governmental licenses, permits and approvals, the cost of all of which shall be borne by Optionee.
7.0
MINING AND PROCESSING PRACTICES: The
Optionee shall carry out all mining and
processing operations in a good, xxxxxxx and xxxxx like manner according
to
the
rules and customs of good and economic mining and processing and in compliance
with all state, federal and local safety rules and regulations. Optionee will
comply with all Local, State and Federal environmental laws and regulations
during mining and reclamation activities on the Property and obtain all
necessary permits pertaining to these activities.
7.1
KEEPING PROPERTY IN GOOD STANDING AND FREE FROM LIENS, ETC:
The
Optionee shall file Notice of Intent to Hold Claims with the Boise County
Recorder by August 1 of any year and pay Annual Rental Fees (now $125 per year
per claim) to the BLM by August 15 of any year. The Optionee shall promptly
pay
and discharge all liens, claims and demands of laborers and material men, who
may be employed by Optionee on or about the mining premises in transporting
and
handling rock products from the said mining premises and in connection with
mining and processing operations by them conducted thereon, to the end and
purpose that said premises shall be kept free and clear of claims and demands
of
laborer, material men and others who may be employed thereon, or furnish
material or fuel thereon. Optionee further agree that the Optionor may, at
their
option, post or cause to be posted upon the premises one or more notice of
non-responsibility in the manner and form prescribed by law, to the end that
such notices of non-responsibility, with proof of posting, may be recorded
by
Optionor.
7.2
INSURANCE: Optionee
shall keep in full force and effect, at his sole cost and expense, Xxxxxxx'x
Compensation Insurance for protection of all employees, workmen, sub-contractors
and other laborers engaged by him in, on or about the mining premises and/or
in
connection with work, mining and transportation and processing all rock and
rock
products thereon and there from, and that he will further comply with all laws,
rules and regulations of governmental authority relating to or applicable to
operations conducted on the demised property. Optionee shall carry a liability
policy of at least one million ($1,000,000) US dollars to cover all phases
of
operations on the premises.
7.3
TAXES: Optionee
shall, during the continuance in effect of this Option Agreement, pay all local,
state and federal taxes and county assessments on improvements and equipment
which may be levied, assessed or charged against or for the benefit of the
mining
operation and premises which are the subject hereof, and for material extracted
or removed from the premises. Optionor shall pay their taxes on income from
Property.
5
7.4
CROSS MINING:
Optionee
is granted the right to mine and remove Products from the Property through
or by
all means of shafts, openings or pits which may be in or upon adjoining lands
owned or controlled by Optionee. Optionee may use the Property and any shafts,
openings or pits on the Property for the mining, removal, treatment and
transportation of ores or Products from adjoining lands, or for any purpose
connected with such activities. Optionee shall have the right to treat or
process, in any manner, any Products mined or produced from the Property and
from such lands. Such treatment may be conducted wholly or in part at facilities
established or maintained on the Property or on other lands. The tailings or
residue from such treatment shall be deemed waste and may be deposited on the
property on the Property or on other lands and Optionee shall have
no
obligation to remove such waste from the Property nor return to the Property
waste
resulting from the processing of Products from the Property.
8.0
WORK REQUIREMENT:
Optionee will perform at least $25,000 worth of work on the "Property" during
the first year and at least $50,000 worth of work on the property each year
thereafter for so long as the Option is in effect. The dollar value of
production Royalty
paid can be counted as "work”. All monies expended may be credited towards
future years.
9.0
DEFAULT BY OPTIONEE AND SUBSEQUENT /TERMINATION BY OPTIONOR:
In the
event of any default or failure by Optionee to comply with any of the
covenants, terms or conditions of this Agreement, Optioric>r shall give
written notice by certified mail of said default, specifying details of same.
If
such default by Optionee is not remedied within Thirty (30) days after receipt
of the notice, then this Agreement shall be deemed cancelled and terminated
effective on the Thirty First (31st) day after receipt of the notice. In the
case of Optionee failure to pay the minimum advanced royalty or production
royalty payments due hereunder, Optionor shall be entitled to give Optionee
written notice by certified mail of default, and if such default is not remedied
within Twenty (20) days after receipt of the notice, then the Agreement shall
be
deemed cancelled and terminated effective on the Twenty First (21 st) day after
Optionee receipt of said notice. If Optionee refuses to accept certified mail
then automatic termination takes effect based on date of refusal to accept
notice rather then on date of actual receipt of notice.
9.1
TERMINATION BY OPTIONEE:
Optionee may at any time terminate this Agreement by giving 30-day advance
written notice of said termination to Optionor. On or promptly after delivery
of
the notice of termination, Optionee shall execute and deliver to Optionor a
written release of the Agreement in proper form for recording. Optionee
shall
be
required to pay all payments whatsoever owed to Optionor at the time of
termination.
On expiration or termination of this Agreement, Optionee shall surrender and
return the Property in a state of compliance with applicable laws, regulations
and ordinances of any government agency or authority having jurisdiction of
the
Property, and, if Optionee compliance is incomplete at such time, then Optionee
shall diligently take the actions necessary to complete compliance. Optionee
will leave claims in good standing
in regards to paying annual BLM Rental Fees of $125 per claim. Optionee
obligation to perform all reclamation and cleanup work as required by federal,
state and local government regulation, law or statute as a result of its
activities or operations on the Property shall survive termination of this
Agreement.
6
10.0
REMOVAL OF EQUIPMENT: Optionee
shall upon termination of this Agreement, at the request of the Optionor, but
in
any case not later than Six (6) months after termination of this Agreement
remove from the Property all buildings, structures and equipment, and to restore
or diligently act to restore the Property to an environmentally acceptable
state
as may be required by federal, state and local government
authority. Any buildings, structures or equipment including personal
property
of the Optionee, remaining on the Property after the time described in this
section
shall deemed to be owned by Optionor with no further action on the part of
the
parties.
11.0
FORCE MAJEURE: The
respective obligations of either party, except Optionee obligation to pay the
minimum payments and maintain all insurance, shall be suspended during the
time
and to only the extent that such party is prevented from compliance, in whole
or
in part, by war, earthquake, fire, flood, strike and the act or restraint,
present or future, of any lawful authority, statute, governmental regulation
or
ordinance, environmental restrictions or conditions, permit or license approval
or act of God.
12.0
NOTICES: Any
notices required or authorized to be given by this Agreement shall be in written
form by registered or certified mail, addressed to the proper party at the
following address or such address as shall have been designated to the other
party in accordance with this section. Any notice required or authorized to
be
given by this Agreement
shall be deemed to have been sufficiently given or served in written form if
mailed as provided herein or personally delivered to the proper party. Such
notice shall be effective on the date of receipt by the addressee
party:
If
to Optionor: CUMO Molybdenum Mining, Inc.
X.X.
Xxx 000
Xxxx,
Xxxxxx 00000
If
to Optionee: Mosquito Consolidated Gold Mines
Limited
000-000 Xxxxxxxxx Xx.
Xxxxxxxxx,
X.X. Xxxxxx X0X ITI
13.0
BINDING EFFECT OF OBLIGATIONS: The
terms
of this Agreement will "Run With the Land" and shall be binding upon and inure
to the benefit of the respective parties and their successors and
assigns.
14.0
WHOLE AGREEMENT: The
parties hereto agree that the whole Agreement between them is written in this
Agreement and in any memorandum of agreement of even date,
which is intended to be recorded. There are no terms or conditions, express
or
implied, than expressly stated in this Agreement. This Agreement may be amended
or modified only by an instrument in writing, signed by the parties with the
same formality as this Agreement.
7
15.0
GOVERNING LAW:
This
Agreement shall be construed and enforced In accordance with the laws of the
State of Nevada and Province of British Columbia.
16.0
MUL TIPLE COUNTERPARTS:
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed to be an original, but all of which shall constitute
the same agreement.
17.0
SEVERABILITY:
If any
part, term or provision of this Agreement is held by a c6uriq)f competent
jurisdiction to be illegal or in conflict with any law of the USA, or state,
the
validity of the remaining portions or provisions shall not be affected, and
the
rights and obligations of the parties shall be construed and enforced as if
the
Agreement did not contain the particular part, term or provision held to be
invalid.
18.0
ASSIGNMENT:
Upon
providing written notice to the other party in accordance with the terms of
this
Agreement, either party may assign its respective rights and obligations
under this Agreement, provided that the assignee executes an assumption of
all
of
the assignor's obligations hereunder and agrees to be bound by all terms and
conditions of this Agreement. No such assignment shall in any way enlarge or
diminish the right of obligations of Lessee or Optionor hereunder. Upon the
assumption by the assignee of the assignors obligations, the assigning party
shall be fully released from and shall not be liable or responsible to the
non-assigning party in any way for any duties, costs, payments or other
liabilities or obligations that thereafter arise or accrue directly or
indirectly under this Agreement. A fully executed memorandum of assignment
in a
form that can be recorded shall be provided to the non-assigning party by the
assigning party.
| County of Washoe | ) |
| State of Nevada | ) ss |
| USA | ) |
8
On
this
13TH
day of
October, 2004, personally
appeared
before me, a Notary Public, Xxxxx X. XxXxxx and acknowledged that he executed
the above Option Agreement in his capacity as President of
Mosquito Consolidated Gold Mines Limited,
as
indicated above, on behalf of said Corporation and that the Corporation executed
same.
| County of Washoe | ) |
| State of Nevada | ) ss. |
| USA | ) |
On
this
13
day of
October, 2004, Xxxxxx X. Xxxxx personally appeared before
me, a Notary Public, and acknowledged that he executed the above Option
Agreement in his capacity as President of CUMO Molybdenum Mining, Inc., as
indicated above, on behalf of said Corporation and that the Corporation executed
same.
EXHIBIT
"A"
The
Property, which is the subject of the aforementioned Option Agreement, includes
those certain Un-patented Mining Claims situate in Sections 17 & 18, T8N;
R6E in Boise County, Idaho which are owned by the Optionor, more particularly
described as follows:
|
Name
of Claim
|
BLM
Serial #
|
County
Instrument #
|
||
|
New
CUMO # 1
|
IMC
182493
|
171292
|
||
|
New
CUMO#2
|
IMC
182494
|
171293
|
||
|
New
CUMO # 3
|
IMC
182495
|
171294
|
||
|
New
CUMO#4
|
IMC
182496
|
171295
|
||
|
New
CUMO # 5
|
IMC
182497
|
171296
|
||
|
New
CUMO # 6
|
IMC
182498
|
171297
|
||
|
New
CUMO# 7
|
IMC
182499
|
171298
|
||
|
New
CUMO#8
|
IMC
182500
|
171299
|
9
