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 “Exploration Costs” means all costs incurred in or for the purposes of Exploration.

 

“ Feasibility Study” means a detailed study (of a standard normally required by      an international financial institution) to determine the commercial feasibility, viability and bank ability of placing a prospective ore body or deposit of Minerals on any of the Properties into production and includes, but is not limited to:

 

 (a)

the geophysical, geochemical, geological, aerial or other surveys necessary to provide a reasonable estimate of the quality and extent of the deposit;

 

 (b)

the technical or assay reports necessary to evaluate any proposed method of extraction and processing;

 

 (c)

the area required for optimum development of the ore body or deposit;

 

 (d)

a mine construction program setting out the descriptions of the work, permits, equipment, facilities, supplies and mines as required to bring the prospective ore body or deposits into production and sufficient to enable preparation of tender documents, and the estimated costs or a schedule of expenditures by year of the costs necessary to bring the project into production;

 

 (e)

details of a proposed annual program for initial development of the deposit;

 

(f)

a plan for any reclamation of the Property required by law and the estimated costs which may include an approved environmental impact statement if required by the Act;

 

(g)

conclusions and recommendations regarding the economic feasibility and timing for bringing the prospective ore body or deposits into production, taking into account items (a) to (f) above;

 

(a)

other information which banking or other financial institutions familiar with the mining business might reasonably require in order to make a decision regarding the  provision  of debt  funding (whether or not on a limited recourse project financing basis) sufficient to construct and operate the proposed mine; and

 

 (i)

any matters required  by the Mining Code to be addressed as part of Mining Operations.

 

 “Minerals” includes, without limitation, all minerals and all materials and substances capable of being mined or exploited.

 

“Mining Code” means the laws in force in Argentina, whether provincial or federal, regulating Exploration or Mining Operations including the regulation of tenure rights and obligations and related environmental regulations.

 

“Mining Information” means available information about the Contract Area including all surveys, maps, mosaics, aerial photographs, electromagnetic tapes, sketches, drawings, drill cores, logs of such drill cores, geophysical, geological or drill maps, sampling and assay reports, notes, and other relevant information and data.

 

“Mining Operations " means every kind of work done on or outside the Contract Area after a Development Decision to implement that Development Decision including, without limitation

(a)

developing, designing, constructing and equipping any facility and extracting, mining, producing, improving, smelting, treating, refining, transporting and handling of ores and tailings and disposing of tailings and dispatching of gold bullion and other beneficiated products won from the Contract Area;

 

(b)

the construction and relocation of any roads, railway lines, telephone lines, waterways or other natural or man made utilities required in order to facilitate any activity on or in respect of the Contract Area ;and

 

(c)

the restoration of the Contract Area and all other work done during and after the completion of mining activities to comply with environmental and like requirements;

 

“Mining Operation Costs” means all costs incurred in connection with Mining Operations.

 

"Party" means either the Owners or the Company and “ Parties ” means both of same including their respective executors, heirs, successors and permitted assigns in accordance with the terms of this Agreement.

 

Product" means all gold bullion or other saleable beneficiated Mineral products produced from the Mining Area;

 

“Project Completion” means practical completion ( as such term is understood in the international construction industry)  of the project which is the subject of the Development Decision.

 

“Project NSR” means a Net Smelter Return in the terms set out in Exhibit 1 in a Royalty Percentage (as defined therein) of 2,0% (two percent) in respect of Product produced by the Company from any Property following a Development Decision which obligation shall be perfected as an obligation of the Company to the Owners in accordance with the laws of Argentina.

 

"Properties" bears the meaning set out in Exhibit 2 and same includes any titles into which any may be converted, and all titles or interests acquired under this Agreement and all extensions, renewals, conversions, substitutions, modifications, or variations of titles or interests referred to in this definition and any other lease, license, claim, permit or other authority which confers or may confer a right to prospect, explore for, or mine any Minerals in the Contract Area, or any application for or interest which may confer a right to prospect, explore for, or mine any Mineral in the Contract Area held by one or more of the Parties.   Properties are also shown by means of map as Exhibit 3.

 

“ C $” means Canadian dollars

 

“Vendor Payments ” means the payment of the following amounts to the Owners on the following dates to a Bank Account (whether in Argentina or elsewhere) notified by the Owners to the Company;

 

1.

C $ 5,000 (to be paid on the date of signing this Agreement and Power of Attorney in favour of the Company and;

 

2.

C $7,500 on  (1 ^st ) October 2004 (“ the Annual Payment Date)  and

 

3.

C $12,500 on the first anniversary of the Annual Payment Date; and

 

4.

C $20,000 on the second anniversary of the Annual Payment Date; and

 

5.

C $25,000 on the third anniversary of the Annual Payment Date; and

 

6.

C $30,000 on the fourth anniversary of the Annual Payment Date; and

 

7.

C $40,000 on the fifth anniversary of the Annual Payment Date; and

 

8.

C $50,000 on the sixth anniversary of the Annual Payment Date and;

 

9.

C $50.000 on the seventh anniversary of the Annual Payment Date and;

 

10.

C $50,000 on the eight anniversary of the Annual Payment Date and;

 

11.

C $50,000 on the ninth anniversary of the Annual Payment Date and

 

12.

C $50,000 on the tenth anniversary of the Annual Payment Date and

 

13.

C $50,000 on the eleventh anniversary of the Annual Payment Date.

 

 Provided that, upon a Development Decision having been made by the Company, the Company shall not be obliged to make any payment set out above after the date of that Development Decision except as may be required to give effect to Clause 3.10 and the Company’s obligation to make a payment on a particular date may be satisfied by making that payment before that date.   

 

1.2

Singular words include the plural and plural words include the singular.

 

1.3

Reference to any gender shall include the other genders.

 

1.4

Words importing persons include corporations.

 

1.5

The headings do not affect the interpretation or construction of this Agreement.

 

1.6

References to recitals, sections, or clauses by letter or number are references to recitals, sections, or clauses in this Agreement.

 

1.7

References to any law or Code in this Agreement shall include a reference to the law or Code as amended, modified or replaced and includes all orders, ordinances, regulations, proclamations, determinations, rules and by-laws made under the law or Code.  

 

 1.8    All payments to be made by one Party to the other Party pursuant to this Agreement shall be paid in Canadian Dollars

 

SECTION 2: PROPERTIES

Representations as to Properties

 

1.1

The Owners represent, warrant and covenant to the Company that:

(a) the Owners have the full power and authority to enter into and comply with the obligations of this Agreement and any other agreement or arrangement referred to or contemplated by this Agreement;

 

(b) the Owners are the sole and exclusive holders of the Properties, which are free of encumbrances, mortgages, embargo, or levies of any type and that there are no outstanding fees on any of the Properties;

 

(c) there are no other outstanding or current agreements or options related to the exploration or mining operations of the Properties and that all prior agreements or arrangements with any third party have been rescinded and are no longer of any force or effect. To this end, the Owners irrevocably grant the Company the right to register with the relevant Authority, any such cancellation of prior agreements or arrangements in respect of the Properties if not already so done;

 

(d) there are no pending or  presently filed lawsuits, demands, claims, or conflicts related to the Properties, which may jeopardize the title or possession of the Owners or the Company;

 

(e)  the Owners are not  holders, directly or indirectly, of any other right within the Contract Area  nor have they requested, directly or indirectly, to be granted other such rights. If at any time the Owners acquire any other rights within the Contract Area, these rights will be deemed to be part of the Properties;

 

(f) the Owners are not the owners of any surface rights within the Contract Area and that there is no agreement, arrangement or contract between the Owners and any  person who previously conducted any mining or exploration  activity on the Properties or between the Owners and any  prior optionee of any of the Properties; and

 

(g) the Owners have revoked any and all prior Powers of Attorney relating to the Properties.

 

2.2 The Company represents, warrants and covenants to the Owners that:

 

(a) it is a duly constituted corporation, organized and in force in accordance with the laws of the British Virgin Islands with a branch registered in Rca. Argentina and domiciled in Darwin 909, Dorrego – Guaymallén – Mendoza – Rca. Argentina;

 

(b) it has the full power and authority to enter into and comply with the obligations of this Agreement and any other agreement or arrangement referred to or contemplated by this Agreement;

 

(c) it will comply with all the required measures to preserve the rights of the Owners on the Properties as required by the Mining Code  until the Company becomes the exclusive holder of such rights in accordance with this Agreement; and

 

(d) it will not obtain any economic benefit from Mining Operations on any Property before the Company  has made the Development Decision in accordance with this Agreement.

 

Additional Properties

 

2.3  Any authority or title for Exploration or Mining Operations acquired by any Party in the Contract Area after (1 ^st ) October 2003 shall be deemed to be part of the Properties pursuant to this Agreement.

 

Maintenance of Title to the Properties

 

2.4 The Company shall, subject to the Owners complying with their obligations set out in Clause 2.5, use all reasonable endeavours to maintain the titles to all Properties in full force and effect. Such titles shall be maintained in the names of the Owners unless and until the Company acquires the Properties pursuant to Clause 3.1. Each Party undertakes that it will not do anything  which may prejudice the validity, subsistence or good standing of any of the Properties.

 

2.5 If during the term of this Agreement, the Company, any Authority or third party discovers, reveals or shows any type of irregularity or imperfection regarding the titles of the Properties and provided such irregularities or imperfection were in existence or can be proved to be in existence at the time of signing of the Heads of Agreement or this Agreement, the Owners are obliged  to remedy such irregularities or imperfections. If the Owners fail to proceed to so remedy within the 15 calendar days after the day of notification to the Owners by the Company, except in circumstances of Force Majeure, the Company shall then be entitled to take whatever action is necessary to overcome such irregularities, obstructions, or constraints.  The Owners do hereby grant the Company or its nominee, authority including an irrevocable power of attorney to remedy such problem. In the event that there is no possible remedy, the Company is entitled to compensation from the Owners for the damages incurred by the Company.

 

      2.6 The Owners agree to carry out all necessary actions, under instruction from the Company and at the cost of the Company, to maintain the validity of the Properties. For this reason, the Owners shall grant to the Company or to a designated representative of the Company, an irrevocable Power of Attorney to control, act and/or administer the Properties and make all applications judged necessary by the Company including all applications for additional Properties within the Contract Area. This authoriz